Budget Resolutions and Economic Situation

– in the House of Commons at 4:13 pm on 28th March 2006.

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Photo of Alan Johnson Alan Johnson Secretary of State for Trade and Industry 4:13 pm, 28th March 2006

This year's Budget equips British business to meet the challenges of globalisation—[Interruption.]

Photo of Alan Haselhurst Alan Haselhurst Deputy Speaker and Chairman of Ways and Means

Order. May I ask anyone who has a cell phone still switched on please to switch it off? It is causing disturbance.

Photo of Alan Johnson Alan Johnson Secretary of State for Trade and Industry

The Budget enhances Britain's strong economy, entrenches stability and widens opportunity. Today, there are 105,000 more self-employed people, 575,000 more businesses and 2.4 million more people in work than there were in 1997. Crucial sectors such as the pharmaceutical, aerospace and financial services sectors are thriving. Our scientists are leading the way in areas such as stem cell research and nanotechnology. Last year, our economy grew faster than those of France, Germany and the eurozone as a whole. The Budget builds on that success while meeting the growing challenges of globalisation, including, in particular, the phenomenal growth of China and India.

Raising productivity is central to meeting the challenge. We are now in the longest period of sustained productivity growth since the 1960s. We have closed the productivity gap with Germany, overtaken Japan and halved the gap with France. Britain is the only G7 country to have kept up with US rates of productivity growth, in stark contrast with France and Germany.

Our success is all the more remarkable for having been achieved at the same time as an increase of 2.3 million in jobs. Achieving productivity growth and high employment at once is not an easy trick because one often rises at the expense of the other, but it is the formula for national wealth. We know that we still have further to go to raise Britain's productivity. The Budget enhances the drivers of productivity—innovation, investment, skills, competition, enterprise and investment.

Since 1997, we have invested unprecedented sums in Britain's science base. Funding levels are now double what they were. We also introduced the research and development tax credit and put in place a target to increase the share of national income that we spend on R and D from 1.8 per cent. to 2.5 per cent. by 2014. Today, there are 750,000 more science, engineering and technology graduates than there were in 1997, and the share of firms bringing new products to market is up by 50 per cent. Our world-beating proportion of scientific papers and citations has increased. In addition, the number of university spin-outs has trebled, and they now run at an average of 200 a year. In the past two years, 18 spin-out companies—with a combined value of more than £600 million today—gained listing on the London stock exchange.

The Budget builds on that record and advances the goals of the 10-year science and innovation framework to ensure that we maximise the impact of science funding. Raising levels of business R and D is key to raising productivity. Since 1997, business R and D investment has increased by 20 per cent. in real terms, and the R and D tax credit is driving the new investment that we need. So far, £1.5 billion of support has been claimed, and Deloitte has assessed the UK's R and D tax credit as being among the world's most attractive regimes.

The Budget sets out our intention to extend the higher rate of the R and D tax credit to companies with between 250 and 500 employees. Business lobbied for such a measure and Sir George Cox recommended it in his review of creativity in business. We will also widen the remit of the technology strategy board to stimulate innovation in the areas that offer the greatest scope for productivity improvements. I am delighted to announce today the latest £80 million competition for the collaboration R and D fund under the technology programme. It will help to fund new collaborative research in vital areas underpinning our technology strategy, such as low-carbon energy technologies and innovative manufacturing processes.

To improve productivity, the links between science and innovation are crucial. We have set out plans for a radically simplified allocation of the £1.5 billion a year that we invest in scientific discovery to make the best use of that investment.

Photo of Henry Bellingham Henry Bellingham Opposition Whip (Commons)

Am I right in saying that business investment has fallen to its lowest level for the past 10 years? Does it worry the right hon. Gentleman, as a former higher education Minister, that various university science and chemistry departments have closed recently?

Photo of Alan Johnson Alan Johnson Secretary of State for Trade and Industry

Business investment has grown on average by 5 per cent. a year since 1997, compared with a growth of 3.4 per cent. in the previous 10 years. It was worth £77 billion in 1996, but is now worth £113 billion, and it will rise to £126 billion by 2008. Yes, I am concerned about the closure of chemistry departments—I think that that happened at Sussex—but the hon. Gentleman and I know that universities are independent. If he looks around the university world, he will see good stories from other universities throughout the country.

Photo of Phil Willis Phil Willis Chair, Science and Technology Committee (Commons)

I apologise for arriving just after the right hon. Gentleman started his speech. On research and development and, especially, pulling what I call the basic research out of universities and into wealth creation, why did the Chancellor not examine in his Budget statement putting solid third-stream funding into the research councils and making that available to industry? Without that, surely we will start robbing Peter to pay Paul by taking out basic research money and applying it to knowledge-transfer and third-stream funding systems.

Photo of Alan Johnson Alan Johnson Secretary of State for Trade and Industry

I am coming on to announcements in the Budget on R and D, particularly in the health service, but in terms of our total science base, doubling the amount of money available for science, operating through both the Higher Education Funding Council and the research councils, is the right way forward. We are always willing to consider more investment. It is crucial to get science and innovation into the same place.

The Budget also announced the creation of a single budget—this is pertinent to the hon. Gentleman's comments—for the Medical Research Council and NHS health research, worth at least £1 billion a year. That will ensure a more coherent framework for health research and development. We will now look at the best institutional arrangements to achieve that. We have also decided that the Harwell site, which includes the Rutherford Appleton laboratory, and the Daresbury site should become the Harwell and Daresbury science and innovation campuses respectively. We will develop those campuses to ensure that their facilities are internationally competitive, support world-class science and maximise opportunities for knowledge transfer.

As well as a strong science base, we need to invest in the scientists of tomorrow. Since 1997, the number of new science teachers has increased by 30 per cent., but we must do more, and the Budget includes incentives for more physics and chemistry graduates to move into teaching. We are also giving pupils a right to study three separate sciences at GCSE and increasing funding for after-school science clubs.

We need to improve mechanisms to turn our great science base into greater wealth. Over the next two years, we will put £100 million into the enterprise capital funds scheme to help high-risk, high-growth companies bridge the equity gap—the funding problem that they experience when they are too big to finance from their own resources, but too small to be of interest to venture capitalists. We will also launch a scholarship scheme to help UK science, engineering and technology graduates develop entrepreneurial skills by spending six months in the US with leading universities and enterprises. The scheme will be administered by the National Council for Graduate Entrepreneurship and the Ewing Marion Kauffman Foundation in the United States.

Tackling regulation is vital to the success of enterprise—another key driver of productivity. At the Department of Trade and Industry, we have demonstrated that we are serious, with our £1 billion regulatory simplification plan, which will produce a significant cut in business burdens. The Budget includes further measures, with a commitment to cut the time business spends filling in tax forms and returns, as well as cutting the administrative burdens of tax audits and inspections. We are also putting the recommendations of the Hampton review into law, as well as ensuring more risk-based targeted enforcement at local authority level. That will release the vast majority of honest and compliant businesses from unnecessary and time-consuming interventions.

A number of schemes are in place to support enterprise. We need to ensure that they are accessible, focused and well targeted. At the DTI, we have already reduced more than 100 business support products to fewer than 10, so they are better tailored to customer needs. The Budget extends that principle and aims to reduce the number of business support schemes from 3,000 to 100 by 2010. More than £2 billion a year is spent on business support. The review will ensure that we get value for money.

It is also vital that we examine the effectiveness and efficiency of our regional structures. The regional development agencies were created as a response to global pressures, where local action is often the right response. Our review will ensure that the RDAs have the links, incentive and powers they need to drive economic growth regionally.

We must also improve the way in which we market our strengths abroad and help British business to meet the challenges of globalisation. The new chief executive of UK Trade and Investment, Andrew Cahn, shares that ambition. Before the summer, we will publish a new five-year strategy for UKTI. It will aim to deliver maximum value for business and the taxpayer. We are intensifying our efforts to expand UK trade into India and China. We are also putting £9 million of new investment into a global R and D strategy to attract more business R and D to the UK, and to promote Britain's innovative firms abroad.

Another major challenge identified in the Budget is gender inequality at work, which, according to the women and work commission, costs Britain £23 billion a year in lost gross domestic product and prevents the economy from reaching its full productive potential. Since 1997, a combination of tax credits, the minimum wage and the new deal has made work pay and boosted employment, particularly among women, so that a record 70 per cent. of women are in work and our overall employment rate of nearly 75 per cent. is among the highest in the world. Our aim is to increase it to 80 per cent.—higher than any major economy has ever achieved—so helping more women back to work will play a vital role. The Work and Families Bill, which is proceeding through the House, will help everyone better to balance their work and family responsibilities.

The Budget boosted child care. Today, there are 1.2 million more child care places than in 1997—an increase of 90 per cent. All parents are entitled to help with child care, either through tax credits or vouchers. The Budget helped employers to support parents with child care, both through the tax system and through capital grants to help small and medium-sized employers to establish workplace nurseries. Further help is available for low-skilled women who find it difficult to access the job market and move up the skills ladder. Those and other measures will help to address the issues highlighted by the women and work commission, and they follow last week's announcement of an increase in the national minimum wage to £5.35, which will benefit 1.3 million workers, two thirds of whom are women.

A growing economy depends on safe and sustainable energy supplies, but climate change endangers the very future of our planet. Today, I have published our microgeneration strategy alongside the climate change review. It sets out what more we can do to boost the use of decentralised energy in our homes, schools and businesses, thus taking forward the Budget announcement of an initial extra £50 million for microgeneration technologies, which is additional to the £30 million that has already been announced.

Photo of Edward Davey Edward Davey Shadow Secretary of State (Trade and Industry)

I thank the Secretary of State for giving way. I am sure that my hon. Friends have much better questions than I have, and that he will give way to them shortly. Given the Secretary of State's welcome statement on microgeneration, what is the cost of Budget resolution 47, which is entitled, "Corporation tax (nuclear decommissioning)"? Is it designed to help the proposed sell-off of British Nuclear Fuels Ltd., and why was a press notice not issued giving the details of the tax change?

Photo of Alan Johnson Alan Johnson Secretary of State for Trade and Industry

I do not know whether all three Members wished to ask the same question but, on that resolution, we are the first Government to tackle seriously the problem of nuclear decommissioning. It is an horrendous task, and it is split between various agencies that have such a complicated connection to one another that it almost impossible to explain it on a grid. We must rationalise the issue and ensure that elements in public ownership that do not need to be in public ownership to meet our objectives on decommissioning are put into the private sector. We must ensure, too, that the Nuclear Decommissioning Authority has the right resources to carry out its important task.

Photo of Martin Horwood Martin Horwood Shadow Minister (Environment, Food and Rural Affairs)

The Secretary of State applauded the Chancellor's inclusion of microgeneration budgets for Government buildings, but he was curiously silent about the clear skies programme, which supported household microgeneration but has run out of funds. Will he confirm whether it will be abolished or replaced, perhaps by another scheme to encourage household microgeneration?

Photo of Alan Johnson Alan Johnson Secretary of State for Trade and Industry

The hon. Gentleman was right about replacement, as we have made it plain that the clear skies scheme will be replaced by another scheme. Our microgeneration strategy will help schools and public buildings by removing problems with planning consent and so on. The money that has been provided will be used to encourage householders to become involved in microgeneration. A colleague who is much more deeply involved in microgeneration in his own home than I am has to pay £8 a therm to buy back the energy that he sells to the national grid. Such issues have to be tackled. The strategy is for microgeneration in schools, public buildings and the home.

Photo of Daniel Kawczynski Daniel Kawczynski Conservative, Shrewsbury and Atcham

The Secretary of State is outlining the steps that the Government are taking to reduce CO 2 emissions, and I look forward to his remarks. As the Prime Minister said on Australian television today, Great Britain accounts for only 2 per cent. of CO 2 emissions. China is the main polluter and will continue to be so in the future. What steps is the Secretary of State taking to have discussions with his Chinese counterpart to encourage China to take similar steps?

Photo of Alan Johnson Alan Johnson Secretary of State for Trade and Industry

The hon. Gentleman makes an extremely important point. We cannot solve the problem domestically. The kind of initiatives that we have taken with the G8, which was extended to include Brazil, China, India and other developing countries, are continuing under the Russian presidency of the G8. The hon. Gentleman asks what steps I have taken. At the EU-China summit last year when the UK had the presidency, one of the important objectives of our trip to China was to begin to share with China some of the clean coal technology, such as carbon capture and carbon storage. It is crucial that we do not use the emerging carbon sequestration technologies only in Europe, and that we share our scientific lead with China and India.

Photo of David Howarth David Howarth Shadow Minister (Energy), Trade & Industry

May I bring the Secretary of State back to Budget resolution 47 and ask what precise changes in corporation tax are being proposed for nuclear decommissioning?

Photo of Alan Johnson Alan Johnson Secretary of State for Trade and Industry

I have dealt with Budget resolution 47.

The microgeneration strategy will examine how we can tackle the obstacles to take-up. In particular, we will look at the planning regime, the potential rewards available from exporting electricity back into the grid and the possibility of developing an accreditation scheme, so that people know which products and installations to trust. We will also work with the industry to develop a scheme for installing microgeneration in schools so that we can educate the next generation about the need for energy efficiency and renewables.

It is vital that British business takes advantage of new energy-efficient technologies to reduce its costs and help the environment. Over the next 10 years up to £1 billion will be invested in a new national institute for energy technologies in a 50:50 partnership between Government and business. BP, EDF Energy, E.ON UK and Shell have already expressed interest in taking part.

We will also bring forward a detailed consultation on what more we can do to promote large scale commercial deployment of carbon capture and storage. As the Budget and the current energy review show, we are serious about tackling climate change and will take the tough decisions necessary to deliver real reductions in carbon. We have seized the agenda since 1997. As a result, we have beaten our Kyoto targets.

Photo of Stewart Hosie Stewart Hosie Shadow Spokesperson (Women), Shadow Spokesperson (Home Affairs), Shadow Spokesperson (Treasury)

The Minister says that the Government are serious about reducing carbon emissions and tackling global warming and climate change. Will he give a commitment to the House today to look again at the imbalance in connection charges between the north of Scotland and the south of England—the south of England being subsidised and the north of Scotland being charged about £24 per kilowatt to connect to the grid—to assist in making large scale off-shore wind production financially attractive?

Photo of Alan Johnson Alan Johnson Secretary of State for Trade and Industry

I can give the assurance that in the energy review that is one specific aspect that we will be examining. I agree that the problem needs to be resolved.

The climate change levy package has saved over 28 million tonnes of carbon since it was introduced, and is expected to save a further 6 million tonnes a year, so that by 2010 it will account for 40 per cent. of the UK's total carbon reductions. The Budget announced that from next year the climate change levy will increase in line with inflation. Even after taking into account these increased rates, business will still benefit from the overall climate change levy package. The 0.3 per cent. reduction in national insurance contributions brought in at the same time as the levy saves business £900 million a year, whereas the levy costs about £600 million a year. The Conservative party remains opposed to that progressive measure. If we were to follow its approach, there would be a further 6 million tonnes of carbon a year in the atmosphere, which is equivalent to the combined emissions from Birmingham, Leeds, Manchester and Sheffield.

Climate change is not only an issue for business. The Budget includes measures to insulate a further 250,000 homes over the next two years, bringing forward annual carbon savings of 35,000 tonnes and reducing annual household bills by around £20 million. We will also put £5 million over the next two years into a new large-scale trial of smart metering, which will be matched by private sector funding. That will help us, as consumers, to understand and look harder at our own energy consumption.

In conclusion, this is a forward-looking Budget. It equips today's Britain for tomorrow's vital challenges. It reduces burdens, promotes competitiveness and raises productivity. It is a Budget for business and it is a Budget for industry, and I commend it to the House.

Photo of Alan Duncan Alan Duncan Shadow Secretary of State (Trade and Industry) 4:35 pm, 28th March 2006

I have watched all 10 of the Budgets delivered by the Chancellor, and none of us who has watched him doubts that they are always skilfully honed. He is a master of propaganda rather than enlightenment. We have long since learned that what is in the Budget on the day is not what matters and that most of the pain lies in the small print that is not announced on the day.

All Budgets need time to settle for everyone to digest them. This Budget does not involve great drama, because there is no fundamental restructuring or revolutionary changes of gear. There is no real point in engaging in an auction of hyperbole in which one side says that the Budget is all fabulous and the other says that it is all disastrous. This Budget needs a more dispassionate assessment of the context in which it has been designed. [Interruption.] Even in this House, there are moments to stand back and consider the long-term trends, which is exactly what I want to do today.

I shall admit something else to enliven the House. Some say that the two sides of this House have so converged that one can no longer tell us apart, but they are totally wrong. Labour has had to prove over the years that it understands and embraces market economics, while we have had to reassert our belief in social justice, but what divides us is tax and the power of the state. The Chancellor is inclined to tax anything that moves and do anything that he can get away with; we believe in lowering taxes wherever possible and that any new tax must be justified. The Chancellor believes that state action and centrally directed initiatives are the solution to most national problems; we believe that the creativity and aspiration of the individual, free from state interference, is the greatest engine of progress and improvement. We appreciate more than the Chancellor that only private prosperity can pay for public services—when we think of wealth, profit and prosperity, we say, "Go make it", while he says, "Go take it".

The Chancellor makes much of his fiscal rules: first, that he should balance the budget over the economic cycle, and secondly, that he should borrow for investment, not merely for spending. However, he took some pride in rejecting what he called a third fiscal rule, namely that spending should rise more slowly than growth. Perhaps that policy marks the difference between us, because it contains both a grave admission and the seeds of its own destruction. If spending increases more slowly than growth, then the state takes a smaller proportion of GDP. If spending increases ever faster than growth, which is the opposite of the fiscal rule that he has rejected, then the state takes an ever-larger proportion of GDP, which leads to more spending, higher taxes and greater borrowing—what was 40 per cent. can become 50, 60, 70, 80 or 90 per cent. The effect is a bit like flesh-eating bacteria: it is so self-consuming that if one were to carry the Chancellor's course to its logical outcome, the British economy would disappear up its own origins. But fortunately the people can stop it.

Everything is up against its limits. That is not my opinion, but that of the Minister for Higher Education and Lifelong Learning, Bill Rammell. I have a little clip that states:

"A Government minister who admitted that Labour had taxed people to 'the limit' was rebuked by the Treasury last night"—

[Interruption.] I am told that that was quite right. It continues:

"Bill Rammell, the higher education minister, said, while launching a White Paper on further education: 'We are probably about at the limit of what people are prepared to pay to improve public services.'

The Treasury issued a firm rebuke to the minister".

The Chancellor is running out of tricks and wheezes to expropriate any more revenue, but that admission signifies what is to come. With a majority of only 97 in Harlow, the Minister knows something about being up against his limits.

The danger is that the Chancellor will run out of flexibility. As The Economist said:

"If, for example, the economy runs into trouble later this decade, then his plans for apparently modest public spending growth may yet prove unaffordable, just when they might be most needed. The chancellor was fortunate to inherit a strong economy whose public finances were improving sharply. If Mr Brown's inheritance as prime minister is a weakening economy and a chronic budget deficit, he will have only one person to blame: himself."

This is the Chancellor who has doubled the council tax and destroyed pensions. This is the Chancellor who is guilty of causing the pain of ever-rising council tax and who is guilty of the unforgivable larceny of seeing the best-funded pension provision in Europe reduced to ashes.

It is not the little announcements in the Budget that will be dwelt on, but the underlying trends and pressures that Britain faces. It is not a million quid here or there, but the incidence and burden of tax and our competitive position and skills base that will determine our prospects in the longer term.

Even now we can see that the Chancellor's favoured structures are coming under strain. NHS deficits are a major crack in his ill-crafted model of public services. He can boast about the extra billions, but not only do they have to be paid for, they are not solving the problem. We do not have a perfect national health service: we have deficits, closures and lay-offs. He may well have doubled his spending, but now he will have to double the size of the House of Lords to pay off the deficits.

Competition in the modern world is becoming more and more ferocious. Comparative weakness can be seized on, with the swift transfer of capital to better options. Comparative advantage is more and more difficult to define and retain. Mature economies such as ours, with higher welfare costs and high social standards, carry those costs while having at the same time to compete with the likes of India, China and eastern Europe—all at a different stage of development. Our fortunes will not be shaped in any sudden way by the contents of one Budget. They will be determined by the gradual and continuing force of global competition. Despite what the Secretary of State for Trade and Industry said a moment ago, there are some very worrying trends.

Britain has dropped from fourth to 13th in the World Economic Forum competitiveness table since 1997. Just today, we learn that The Economist intelligence unit survey of how favourable a country is for foreign investment shows that the UK has fallen from fourth to seventh, because of concerns about tax levels, regulation, poor transport infrastructure and low levels of productivity. It is no triumph to be overtaken by Finland, Holland and Ireland.

Productivity growth has slowed under this Labour Government and, last year, it actually fell to zero for a time. Under the last Conservative Government, we were catching up with France and the USA, but under this Government we are losing ground. Last year, business investment, at 9.1 per cent. of GDP fell to the lowest level since records began and the number of new companies registered actually fell.

Photo of Ed Miliband Ed Miliband Labour, Doncaster North

On a point of fact, does the hon. Gentleman accept that annual average productivity growth in this cycle has been 2.3 per cent., against 2 per cent. in the last cycle—[Interruption.] I see that the shadow Chancellor is trying to give the hon. Gentleman the answer, but perhaps he could respond to my question.

Photo of Alan Duncan Alan Duncan Shadow Secretary of State (Trade and Industry)

The hon. Gentleman is always changing the cycle and the base in order to churn out statistics that suit him. We take a broader and more honest view of the figures.

The Chancellor talks a lot about skills. In his Budget, as if it were some communist five-year plan for tractor production, he said of the UK:

"By 2020, it will need 14 million highly skilled workers. And of 3.4 million unskilled jobs today, we will need only 600,000 by 2020."—[Hansard, 22 March 2006; Vol. 444, c. 292.]

The extraordinary certainty with which he asserts those figures is distressing enough, but not all parts of Government share in his enthusiasm for science-based skills. It was staggering to be given a letter that an Ofsted inspector wrote to the children of a primary school in my constituency after an Ofsted inspection—a practice that I do not think is appropriate, particularly when it includes the sentence:

"we think that you ought to spend more time on subjects other than English, mathematics and science."

[Interruption.] I will repeat it for Edward Miliband, if he really thinks that he approves of such a letter. An Ofsted inspector has written to primary school children suggesting that they ought to spend less time on mathematics, science and English. How are we going to reach the required standards in our primary schools if that is the attitude of Ofsted inspectors?

Let me take an article by Sir John Rose from the Chancellor's newly appointed business advisory council, who says:

"The key to competitiveness and productivity is a strong educational base that can create a well-educated workforce."

No one can disagree with that. He goes on:

"In our schools, some of the key, science-based subjects are in decline. The number of sixth-formers taking A-level physics, for example, has fallen 30 per cent. over the past 15 years. More generally, there has been a decline in science and maths as a proportion of A-level passes.

At university level our students are increasingly failing to find engineering-based subjects attractive—the number of electronic and electrical-engineering students has fallen by more that 30 per cent. in the past two years alone. More than half of all engineering doctorates awarded in Britain are gained by overseas students."

At least that is an example of what may be good advice heading in the direction of the Chancellor.

As if the skills problem were not bad enough on its own, we have the added burden of regulations. Every single year, the EU alone issues 100 to 150 directives and 3,500 regulations.

Photo of Anne Main Anne Main Conservative, St Albans

I am sure that my hon. Friend will share my disgust at some of the daft regulations that come out of Europe. Speaking as the Member for the home of the international organ festival, does he share my slight glimmer of hope that there may be an exemption for the pipe industry, and will he urge the Government to press forward with making sure that that industry is exempt from this daft regulation, which may threaten our liturgical music?

Photo of Alan Duncan Alan Duncan Shadow Secretary of State (Trade and Industry)

My hon. Friend is absolutely right. The hazardous waste directive banning the use of lead in new electrical products appears to threaten the restoration and building of church organs. We were partly heartened by the response of the Minister for Industry and the Regions, Alun Michael, in Trade and Industry questions last week. He said that restoration would not be subject to the directive, but he was ambiguous and ambivalent about whether newly built organ pipes would be exempt and said that they would have to apply for an exemption. Will the Secretary of State apply for a general exemption on the industry's behalf, or will each company have to apply for an exemption individually?

Photo of Alan Duncan Alan Duncan Shadow Secretary of State (Trade and Industry)

The right hon. Gentleman declines to tell the House. He should be on top of the issue and able to tell us. The Budget is about the prosperity and success of business, many of them small businesses such as those that make and restore organs. If the Secretary of State is not prepared to tell us whether they are going to be able to survive the regulatory regime that we are discussing, he is not doing his job properly.

I have found no end of examples of directives, many of which would suffice as a paragraph but are, when they come to us, seven, eight or nine pages long. We have the Food (Jelly Confectionery) (Emergency Control) (England) (Amendment) Regulations 2004, which runs to six pages, and the Food (Jelly Mini-Cups) (Emergency Control) (Scotland) Regulations 2004. When I wrote my election address, little did I appreciate that we were so severely at risk from an imminent invasion of jelly cups. Those who show enough enterprise to start or run a business quickly find themselves swimming in treacle. They immediately get an enormous book. We need a "Treacle Swimming Emergency (Britain) Order" to rescue their prospects. Any business person faces an enormous burden and uncertainty under the Government.

The operating and financial review was a sad and sorry tale. Was the Secretary of State told about it before the Chancellor abolished it? [Interruption.] One Minister claims that he was while the Secretary of State shakes his head. The Chancellor abolished the operating and financial review. Companies subsequently said that they would prefer to have it because they had spent all the money preparing for it. The Chancellor then said that we would have it back. A statutory instrument was passed to get rid of it but it remains in the Company Law Reform Bill. That is a mess. Businesses need certainty and consistency so that they can decide how to invest and know how they spend their money.

Photo of Edward Davey Edward Davey Shadow Secretary of State (Trade and Industry)

Does the hon. Gentleman know whether the Department realised that the Chancellor would abolish the home computer initiative? He probably knows that Department officials were being given computers but will now be charged £200 a year because of the Chancellor's decision.

Photo of Alan Duncan Alan Duncan Shadow Secretary of State (Trade and Industry)

The hon. Gentleman is right. The Department website stated:

"One of the most effective ways of realising the potential of the workforce and the organisation is for employers to make computers for home use available to as many employees as possible. Basic computer and technology skills are now regarded as essential for the majority of jobs . . . Home Computing Initiatives . . . are an extremely powerful catalyst for any organisation that wants to exploit the clear and indisputable link between individual learning, workplace productivity and overall competitiveness."

The Chancellor has not only scrapped those initiatives and is sending a bill to many employees, but work-life balance goes out of the window.

There have also been some strange announcements about corporation tax. Two changes were announced. First, the 0 per cent. rate has been abolished—the Institute for Fiscal Studies described that as an "unfortunate experience". The Chancellor made the bizarre claim in the Budget that that "simplification" would save business £9 million. Secondly, thresholds remain unchanged and have not even been uprated with inflation. We now have more corporation tax than Sweden.

Eight years into the Government's tenure, there are 3,000 business support schemes. Every time the Chancellor opens his mouth, he seeks a headline and launches a scheme. Eight years on, there are so many that they are out of control and lack any coherent structure. It is no wonder that the Government have set a new target. They said:

"We will work . . . to reduce the number of business support services from around 3,000 now, to no more than 100 by 2010."—[Hansard, 27 March 2006; Vol. 444, c. 642W.]

The difference between 3,000 and 100 is so massive that it makes one wonder why the Government have not done something about it earlier.

Business likes a stable framework in which it can invest. It does not like erratic public policy. We have had the saga of the operating and financial review and, as Mr. Davey pointed out, we now have the saga of laptops.

During this Parliament, Qinetiq and Westinghouse have been sold. However, we have not had any clear statement of the Government's policy on privatisation and the sale of assets. At least—one might also say, "at last"—the Chancellor has said something in the Budget about his future intentions. If he is to dispose of £30 billion of assets before 2010, I hope that he will at least make some shares available to the general public and not treat them, as his special adviser does, as old grannies in blouses to be contemptuously dismissed as irrelevant to wider share ownership.

The Secretary of State referred to the energy review. Almost all the Government's existing policy objectives have not been fulfilled. Today, we have had the climate change programme review, which shows that we are missing our emissions targets. A second objective was to seek reliability in energy supplies, yet we have recently experienced a gas balancing alert and punitive gas prices. A third objective was to eliminate fuel poverty, but the Government estimate that the number of vulnerable households in fuel poverty is due to rise by 1 million. The climate change levy is a tax on energy, but we need to bear down on emissions. We are taking the energy review seriously, but it seems as though the Prime Minister is semi-detached from his own.

The Chancellor hardly dared to mention pensioners in the Budget. That was hardly surprising, given that what he has not already destroyed, he cannot now afford. At a time when the hard-pressed private sector is carrying an ever-growing public sector, this Secretary of State did a deal. He caved in to the unions over central Government pensions and has thereby enraged those who work in local government. Those in the private sector are working longer and have less pension security, and today we have seen the biggest strike since 1926. One estimate puts the total liabilities in unfunded public sector pensions at nearly £1 trillion. Is the Secretary of State still prepared to claim that he is the Minister responsible for public pensions?

Photo of Alan Johnson Alan Johnson Secretary of State for Trade and Industry

Does the hon. Gentleman agree with the shadow Secretary of State for Health, who said that he thought that that was the right deal to do, and that it was fair to staff who were already in post?

Photo of Alan Duncan Alan Duncan Shadow Secretary of State (Trade and Industry)

I always agree with my Front Bench colleagues, although I have little doubt that the Secretary of State has misinterpreted what my hon. Friend said.

Photo of Alan Duncan Alan Duncan Shadow Secretary of State (Trade and Industry)

No, I will not.

In looking back at the Budget, we need to look at the broad direction in which our economy is heading, and in which it risks heading further. We need an economy with lower regulation and higher skills. We need one with more consistency and less chop and change. We need one with an imaginative infrastructure that extends to areas that, at the moment, are denied the opportunity that they deserve. We need one with people in it whose working life can give them security in old age, and one that has an energy mix that is competitive, sustainable and safe. We lack a Government who actually know something about business. We need a Government who appreciate that without wealth there can be no welfare, without prosperity there can be no attack on poverty, and without a thriving business community we risk decline.

This was a do-nothing, hold-on-for-dear-life Budget. The Chancellor desperately hopes that he will be able to slip in under the wire to No. 10 before he is rumbled. However, the real cost of this Chancellor is hundreds of billions in higher taxes and annihilated pensions. In the years to come, we are all going to pay a heavy price for his stewardship of our economy.

Several hon. Members:


Photo of Sylvia Heal Sylvia Heal Deputy Speaker

Order. May I remind all right hon. and hon. Members that there is a 12-minute limit on Back-Bench speeches?

Photo of Alan Milburn Alan Milburn Labour, Darlington 4:57 pm, 28th March 2006

I refer the House to my entry in the Register of Members' Interests.

It is always a huge pleasure to follow Mr. Duncan, although his speech was somewhat less dispassionate than he had promised. He was obviously in Tiggerish mood, and somewhat less gracious than usual. I would have thought that any right hon. or hon. Member would recognise that to be able to deliver 10 Budgets in a row is a pretty remarkable achievement on the part of any Chancellor of the Exchequer. For those Budgets to have coincided with, and contributed to, our remarkably successful economic climate is without parallel in modern times. So perhaps the shadow Chancellor, Mr. Osborne, will offer a bit less criticism and a bit more credit to my right hon. Friend when he rises to speak later.

The test of whether a modern Budget works consists of three things. First, we must determine whether it provides for sound economic management. Here, my right hon. Friend has again confounded the prophets of doom, including many Conservative Members, who seem to take perverse pleasure in predicting the imminent decline either of the British economy or of the public finances. I have heard much the same speech from the Conservative Front Bench over the past nine years. In the real world, however, I have yet to see any such decline. Who nowadays talks of mass unemployment, sky-high interest rates or out-of-control inflation?

It is true that Britain faces many challenges in the future, and I will come to some of them in a moment. However, credit is due to my right hon. Friend the Chancellor. As the International Monetary Fund put it in December,

"macro-economic stability in the UK remains remarkable."

When the shadow Chancellor gets to his feet later today, I hope that he will have the good sense and good grace to concur with that judgment.

Secondly, however, successful Budgets must look beyond today's achievements and face tomorrow's challenges. In the end, politics is about the future, not the past. Political parties that are wedded to the past tend to remain stuck in it, which is precisely why the Conservatives remain in opposition. Success goes to those who have the strongest claim on the future. Again, in that regard, this Budget has much to commend it—above all, as my right hon. Friend the Secretary of State for Trade and Industry has just said, its commitment to increased funding of education and science as recognition that our country's future competitiveness will rely increasingly on access to skills and technology.

That brings me to the third test of success for any Budget—whether it works politically as well as economically. Here, my right hon. Friend the Chancellor laid down a dividing line in his Budget that caused the Conservative party—I notice that the shadow Chief Secretary has departed—some discomfort, to put it politely. The Conservatives' adoption of a third fiscal rule might have seemed a good wheeze when it was dreamt up, but the Budget has exposed it for what it is. Going into the next election promising cuts in public expenditure, particularly in education, will leave the Conservative party no further forward than it has been at the two previous elections.

I speak with some feeling on that. My party had to learn the hard way during the 1980s that when one gets the fundamentals of tax and spend wrong, one pays a very high political price. Conservative Members might note that former President Clinton is in town today, and we all welcome him. The Conservative party would do well to heed the advice of President Clinton's famous election campaign slogan—it is the economy, stupid, not stupid economics, that wins elections.

When Labour won office a decade ago, the key policy question that faced Britain was how to end the stop-go economic cycle and how to modernise public services. In both regards, although, of course, there is more to do, there is much progress to report. There are new questions today, however, which are different from the old ones. They boil down to this: how can we ensure that our response to globalisation, including increased competitive pressure from India and China, is characterised by the building of a genuinely inclusive society when there are huge pressures going in the opposite direction?

As my right hon. Friend the Secretary of State for Trade and Industry indicated in his speech, globalisation demands many policy responses from Government—fiscal discipline, economic stability, open markets not economic protectionism, a limit on regulation. It also requires investment in skills, technology and infrastructure. In the end, however, important though each of those policies are, the most important policy response is none of those—instead, it is the building of a society in which every citizen gets the chance to contribute and to progress. We now live in a highly competitive world, in which every talent wasted is not just a loss to the individual but a huge economic drag on the country. Britain can succeed economically only if we are mobile socially. Here, bluntly, we have no reason for complacency and much to concern us.

As my right hon. Friend the Chancellor reported, it is true that life is steadily getting better for most people—living standards are rising. We all know, however, that in recent decades birth not worth has become more and more a key determinant of life chances in our country. Social mobility has slowed down when it ought to have been speeding up.

Photo of Stewart Jackson Stewart Jackson Conservative, Peterborough

I am listening with interest to the right hon. Gentleman's homily to the future. Can he explain how, after nine years of Labour Government, the gap between the richest 10 per cent. and the poorest 10 per cent. in our country is wider than it has ever been?

Photo of Alan Milburn Alan Milburn Labour, Darlington

I will come to precisely that. The hon. Gentleman might have read, I think, the most authoritative study on inequality, mobility and poverty by Professor Hills of the London School of Economics. He says that it is likely that in the last two years for which figures are available, the widening of the inequality gap, which widened massively during the 1980s, has been halted. What we know for sure is that poverty has been reduced, particularly among children and pensioners. The truth is, however—we see it in the hon. Gentleman's constituency as much as in mine—that the gap remains stubbornly and persistently wide. While more people are better off, poverty has become more entrenched. There is a glass ceiling on opportunity in our country. We have raised it, but we have not yet broken through it.

There are many welcome measures in the Budget that will help the position. Increasing the value of tax credits is one; yesterday's White Paper, with its focus on skills, is another. But as Amartya Sen, winner of the Nobel prize for economics, has noted, social inequality is best tackled and mobility best advanced if we tackle the root causes, not the symptoms. That must mean moving beyond simply correcting low wages and family poverty after the event, towards policies that spread opportunity and help people to realise their own aspirations for progress.

The biggest inequity today in our country is not between income groups, but between those who own shares, pensions and housing and those who rely purely on wages and benefits. That is why I believe, in common with my right hon. Friend the Chancellor, that the biggest contribution to enhancing social mobility is to establish Britain as an asset-owning democracy. After all, people rarely spend their way out of poverty. It is far better to encourage people to own assets, so that they have a real stake in the future. I therefore welcome the Budget announcement about the child trust fund. I also welcome the extension of home ownership: indeed, I want it to go further. Just as we are extending home ownership, we should seek to extend employee share ownership to give people a greater stake in economic success.

My party won by becoming a party of aspiration. Our means of beating poverty should involve unleashing aspiration. That brings me to another area in which more reform is needed to combine the values that the Labour party, at least, has always supported—social justice and fairness for all—with the modern ambition that people rightly have to progress. I refer to the sensitive issue of taxation.

The Chancellor told the House that he had had scope for tax cuts, but had chosen not to make them. He rightly announced, however, that he was uprating tax credits in line with earnings. In effect he was announcing a tax subsidy for working households, and I welcome that. Tax credits have made a real difference in raising living standards and incentivising people into work. Before their introduction, thousands of low-income families faced marginal tax rates in excess of 70 per cent. Some were even clobbered by rates of over 100 per cent. That meant that for every £1 earned in wages, more than £1 was taken off in tax.

Today, over half a million fewer low-income households face such insanely high marginal tax rates than was the case in 1997. However, as the Red Book itself confirms, the number facing marginal tax rates of 60 per cent. or more has increased by nearly 1 million, largely as a consequence of the workings of the tax credit system. The Institute for Fiscal Studies has warned that, without remedial action, that could worsen work incentives.

I was brought up to believe that hard work and endeavour would be rewarded, not penalised. The tax system needs to reflect those values. On fairness grounds, it surely cannot be right for people towards the bottom of the income scale to face higher marginal taxes than those at the top. It is for that reason that I welcome the Chancellor's plan for a review of the feasibility of aligning income tax and national insurance contributions for low-income families. I believe that the review should consider additional ways of making direct, targeted cuts in the tax burden on low-income families, building on our introduction of the 10p starting rate of tax in 1999, so that we can spring more people from the poverty trap. Such radical action is needed if we are to unfreeze social mobility in our country.

Of course, there is much that this Labour Government have already done of which we can be proud. No Conservative Government would ever have introduced a national minimum wage, made universal child care a new arm of the welfare state, or helped millions of pensioners out of poverty. The Budget is a further step in the right direction, but we need to do more to help more people through that glass ceiling. An 80–20 society, in which 80 per cent. do OK but 20 per cent. are left behind, might be good enough for the Conservatives, but it should not be good enough for us. That is why I urge my right hon. and hon. Friends to keep moving forward with reform. The longer that we are in government, the greater the need to keep on changing to keep pace with the times in which we live.

Photo of Vincent Cable Vincent Cable Shadow Chancellor of the Exchequer 5:09 pm, 28th March 2006

It is a privilege to follow Mr. Milburn, who is a former Treasury Minister and therefore speaks with some authority on these subjects. I was disappointed that he said nothing about a subject that he knows even more about—the national health service, on which the Budget has been remarkably silent—and I want to put a specific question to the ministerial team.

All hon. Members are worried about the implications of the NHS funding crisis, and I want to make a specific point to which the Minister may be able to reply by 10 o'clock. One of the Government's great achievements in health has been the roll-out of cancer screening—a major challenge to which there has been a huge response. The next step, which was to start in three days' time at the beginning of the financial year, was to begin a programme of bowel cancer screenings—something long awaited by people in the cancer campaigning world. Stories have been reported in the press and to me by a leading charity in the field that, at the very last moment, the programme has been pulled because of financial difficulties in the Department of Health. I wonder whether the Minister could set my mind at rest on that issue this evening.

Photo of Phil Willis Phil Willis Chair, Science and Technology Committee (Commons)

Does my hon. Friend share my concern that, at a cancer briefing this morning, the Minister responsible announced that the bowel cancer programme would be rolled out from Rugby, where an existing programme has been in place for the past five years, yet not a single other roll-out place was named? Is that not highly cynical?

Photo of Vincent Cable Vincent Cable Shadow Chancellor of the Exchequer

It is because, as my hon. Friend implies, the pilot schemes have been run already and have proved highly effective, but what had been promised was a universal scheme, which now seems to be in the process of being abandoned.

I congratulate the Conservative spokesman, Mr. Duncan, on his emollient and consensual approach—at least, he started like that. He is someone who describes himself, like some of his colleagues, as a fellow liberal. I am not sure how far up the Back Benches that view is to be found, but it is a good start, and perhaps we saw a new style of debate today, which has been characterised by one wag as the debate between new Labour and blue Labour, although I do not know how the hon. Gentleman positions himself.

The overall Budget debate has been somewhat frustrating, because we are essentially dealing with two different issues, one of which is the Government's overall economic performance and the other is the Budget, which has become a somewhat ritualised event. Most of the decisions have been made in the spending review and the pre-Budget report. The sum total of what is proposed amounts to 45 measures, costing £380 million. That is less than one tenth of 1 per cent. of all Government spending—well within the margin of error of any Government forecast. We are talking about a series of changes—some of which are very welcome and sensible, such as the spending on schools and science—that have absolutely no impact whatever on the overall macro-economy.

On the macro-economic picture, the view that I have taken ever since I took on my current role is to acknowledge the positives, and it is certainly still true that we have steady growth, low inflation, rising employment and fairly low unemployment, although unemployment has now risen for 12 of the past 13 months, which may be the beginning of an ominous trend. However, the Government tend to spoil their own very positive narrative with endless spin, hype and exaggeration. One little phrase always creeps into the Budget statement that reveals a lot: it is a lovely line about how they have the best period of steady growth, going back to 1700, or the Tudors—or the Normans, I am not sure. That nice line is true in one sense, but it is produced by a sleight of hand by using quarterly data.

If we use annual data, we could argue that after 1949, for example, there were 25 years of steady growth. It is worth reflecting back on that period, because many of the strengths and weaknesses of the current long boom were apparent then. As some of us dimly remember from our childhood, it was a period of steady growth and rising living standards. Many of our parents were for the first time enjoying consumer durables bought on hire purchase. It was also a period of low unemployment, low inflation and general optimism; however, there was a fundamental problem that we see reproduced today.

Back then, the structure of the economy and of demand was very unbalanced—it was led by consumption. Of course, in those days such imbalance appeared in the form of crises, because consumption spread over into imports and produced balance of payments crises. That no longer happens because of the liberalisation of capital markets; nevertheless, we have the same problem today. Consumption has grown by 3 to 3.4 per cent. a year since the mid-1990s, while the economy as a whole has grown by about 2.8 per cent. As a result, household savings ratios have fallen from 10 per cent. to less than 5 per cent., and the end product is a growing problem of personal debt. The Minister will have seen this morning's report from the Financial Services Authority—a very conservative regulatory body not given to hype or outrage—which points out that some 2 million families, over and above the 500,000 who have already defaulted on debt, are on the edge and in considerable difficulties in terms of managing domestic debt problems.

Figures published by the Organisation for Economic Co-operation and Development a few weeks ago point out that the comfort that we derive from low interest rates is illusory. Because of low interest rates, people are borrowing very heavily, which means that principal repayments are growing much more than they did in earlier generations. People are also taking on credit card debt, which has to be serviced monthly. The OECD concluded that the share of household income being spent on debt servicing is approaching 20 per cent. The same was true in the early 1990s, when the last economic boom crashed disastrously under the previous Conservative Government. In many respects, the conditions today are very similar, and we can expect a painful correction in the years to come.

The other parallel with that period is also very striking. Throughout the 1950s and certainly in the 1960s, as we moved into the Wilson era, politicians talked endlessly about productivity growth and science, because in comparative terms there was an underlying weakness in the UK economy. That weakness was very apparent, because Germany, Italy, France and Japan were recovering from the wartime period. It is less apparent now because the real breakthroughs are occurring in non-G7 countries, but the problems are still very real.

As quite a few economic analysts have pointed out, in the past few years the British economy's productivity growth has fallen. A report published this morning by the Economist Intelligence Unit shows, for example, that Britain is now the seventh biggest recipient of inward foreign investment; last year, it was the fourth biggest. That is very strange and difficult to explain. Britain has a very open economy—unlike France, Italy and Spain, we have no problem with foreign acquisitions and mergers—yet foreign investors are very reluctant to come here. According to the EIU's analysis, a combination of very complex business taxation—incidentally, the corporation tax threshold was not raised this year, so more companies have been dragged into the higher rates—regulation and poor infrastructure is having a cumulatively damaging effect on the Chancellor's claim that he is overcoming problems of low productivity.

On the Budget's specifics, one has to judge them on whether the Government are meeting their declared fiscal objectives in terms of the golden rule and the debt rule, and the Government themselves say that they are. Sadly, although the fiscal rules were a good idea and a very good way of restoring confidence in public finances, they have been discredited by the Government's marking their own exam papers in a favourable way. I acknowledge that the Government propose to take the big and positive step of introducing legislation to make the Office for National Statistics more independent, but there is another part to all this that is not happening. There should be a much greater degree of independence in the auditing of the Government's own accounts. An independent examination should be made of their assumptions and forecasts, and of whether they have actually met their rules. That would be a small step, but it would do an enormous amount for Government credibility so I cannot understand why they do not take it.

Because the Government have not taken that step, many little details in the Red Book raise suspicions about what they are trying to do; for example, in 2007–08 and beyond there is no contingency fund in public spending. The contingency fund was extremely important for funding the Iraq war, but it now appears to have disappeared, which implies a highly optimistic approach to future budgeting. Perhaps the Chief Secretary can explain what has happened.

There are some optimistic assumptions about the clampdown on tax avoidance. I am all in favour of tougher measures to clamp down on tax avoidance and I wish the Government well in their efforts, but they assume that they will achieve a 100 per cent. success rate and raise an extra £1 billion a year from those measures. Have the proposals been independently audited? Has anyone in the tax industry been able to confirm that the figures are meaningful and sensible?

Items on the spending side need to be questioned, too. During his Budget statement, the Chancellor said that an additional £970 million would be spent on public housing through shared ownership schemes, which at the time I thought was positive and encouraging. However, although I and other people have searched through the Red Book, there is no reference to that sum anywhere. Shared ownership is difficult to operate, but it appears that the figure simply reflects commitments made last year and the year before, so it is not a new commitment at all. Can the Government confirm that?

Various other spending items need some explanation. Perhaps the Chief Secretary can advance it. For example, it is stated there will be a 5 per cent. real cut in the spending of the Treasury, the Cabinet Office and the Department for Work and Pensions. I am all in favour of tightening up discipline in spending Departments, especially if they can reduce headquarters overheads—the principle is splendid. However, when Gershon reported just over a year ago, he argued that any cuts beyond 2 per cent. a year would be likely to result in a deterioration of service provision. How do the Government square that with their proposals?

We already know from our constituents who are grappling with the problems of Jobcentre Plus that when they are put out of work it can take weeks to receive an answer to a call or to regularise their payments. There are already serious problems in the DWP. We know from National Audit Office reports that the Inland Revenue is falling short in its revenue collections by about £3 billion a year because it cannot get codings right. How taking out large swathes of capacity in that department will help is not clear. Where will the real savings of 5 per cent. come from?

I have questions about the £30 billion that the Government plan to raise from privatisation, or asset sales. I have no problem with the principle, but the Government have already experienced considerable difficulty in realising maximum value for the public from asset sales. I closely followed the Qinetiq deal, where clumsy intervention by the Treasury, pushing the Ministry of Defence into selling the assets prematurely, resulted in the taxpayer receiving only a fraction of what should have been achieved by the sale. One has to be a bit sceptical about whether those sums will be realised.

What guarantees will underpin asset sales? One of the biggest sales will be shares in British Energy. In principle, there is no reason why there should not be a private shareholding in the company, but if I were buying a share in British Energy I should want to know about its long-term business. The only way that can be secured is if the company is guaranteed an expanding new nuclear power programme. It is difficult to see how privatisation can proceed without the kind of guarantee about which the Government claim to have an open mind. There is clearly a link between the two.

I have some specific questions about tax measures, one of which has been touched on by my hon. Friend Mr. Davey and relates to the strange events surrounding the tax concession on work-based laptop computers. I quote to the Chief Secretary what his colleague the Chancellor said in 1999, when the measure was introduced. He said:

"We hope this new measure will encourage businesses to loan computers to their employees and that it will be as successful as a similar scheme developed in Sweden, where household computer use increased dramatically as a result. There are real benefits to businesses, employees and the wider community."

Well, why has the measure been pulled? As I understand it, it was pulled at about 24 hours' notice, following warnings from the Revenue about the difficulties. What has happened? Why was there no consultation?

I have just had an angry e-mail from one of my constituents who runs a business in that sector. He writes:

"As a business we have spent months working with other suppliers to set up processes, systems and contracts to help businesses finance this scheme. In fact we had just embarked on a scheme to provide finance for small to medium sized businesses so they would be able to let their employees take advantage of the scheme."

That has been completely undermined by the lack of consultation and by peremptory announcements.

Unfortunately, that follows a pattern. Last year, we had the self-invested personal pensions scheme. Partly as a result of warnings from Liberal Democrat Members, it was clear that the Government were opening the door to all kinds of problems related to giving tax relief on second homes and luxury holiday homes overseas. They had to retreat and did so in an embarrassing way, when people had already invested in the arrangements.

Photo of Helen Goodman Helen Goodman Labour, Bishop Auckland

Surely the hon. Gentleman appreciates that, if there are concerns that tax reliefs are being abused and it is necessary to withdraw them because they are being used for avoidance purposes, it would be totally inappropriate to consult on those occasions.

Photo of Vincent Cable Vincent Cable Shadow Chancellor of the Exchequer

Surely the obvious answer is that it is best to think those things through in advance.

That is not the only example. The film subsidy tax relief scheme had exactly the same problem. Before that, there was company tax incorporation, which had to be reversed, and reversed back again. There is a fundamental lack of thought about the practicalities of many of the schemes, which is ultimately very wasteful.

The main taxation measures that the Government introduced were in relation to the environment. The Liberal Democrats certainly support the principle of environmental taxation and would like to see more active use made of it. However, it was striking that on the day before the Budget, the Environmental Audit Committee, which is an all-party Committee, criticised the Government for allowing environmental taxation to fall as a share of gross domestic product. That is at a time when, as we were reminded this morning, carbon emissions targets are not being met.

Of the specific measures, we support the very modest increase in the taxation of what are called Chelsea tractors. Frankly, the research of the RAC, for example, suggests that, in order to have an impact and to change behaviour, the differential needs to be about £1,000 rather than £200. None the less, the measure is a move in the right direction. We welcome, in principle, the increase in the climate change levy. It is a clumsy tax, based simply on the manufacturing sector. We have argued for a more broadly based carbon taxation system, but since we support the principle of environmental taxation, we do not disagree with what the Government are trying to do.

Given that the Government claim to be really using environmental taxation, I am perplexed about why there is nothing whatever in the Budget on the aviation sector. Interestingly, air passenger duty, which is the one tax mechanism that the Government have, has been frozen. Why is that? There are many ways in which the Government could do something, through environmental taxation, to curb emissions in the aviation sector, but they have done absolutely nothing. The question is, why?

The major weakness of the Budget relates to the big opportunities that were missed. One question—this is a slightly technical point that I raised with the Chancellor in Treasury questions—is why the Chancellor missed the opportunity of the lowest real interest rates for 300 years to refinance large parts of the Government debt. The Government have rolled out a programme—they describe it in the Budget—for more active use of the gilts markets, but reputable economic advisers and former members of the Monetary Policy Committee have pointed out that billions could have been saved if the Treasury had been quicker off the mark in taking advantage of the market opportunities.

A more fundamental point is that there is absolutely no indication of where the Government are heading in terms of the long-term reform of local government finance. That is important because, as we all know, council tax is highly regressive. That completely undermines the basic objective that the Chancellor is trying to achieve: greater fairness and equity throughout the tax system. There is a lot of anger among pensioners about the loss of the £200 rebate, but that, in itself, is a symptom of a bigger problem. The tax is not perceived as fair or legitimate, and it needs to be reformed so that it is linked to people's ability to pay. Moreover, the local government tax system produces only 25 per cent. of local revenue, which is not consistent with the approach of local decentralisation of which the Government claim to be in favour. We have had no indication of where the Government are heading.

The Chancellor also missed the big opportunity of giving us an indication of where the Government are heading on pensions policy. There was a report in the Financial Times on the day before the Budget of a blazing row about the matter that was supposed to have taken place between the Prime Minister and the Chancellor. I do not believe everything that I read in newspapers, but the article seemed singularly plausible because it argued that the Prime Minister had asked the Chancellor what he was doing about the Turner report. The Turner report's key recommendation was on how to create a system with a decent level of state pension to get away from mass means-testing, which has all the disincentive effects at which the right hon. Member for Darlington hinted. Turner offered a way forward, but we know that the Chancellor is passionately opposed to it. There is a fundamental division in the Government on not just pensions policy, but the fundamental question of the best way of dealing with poverty and redistribution. There is a question whether we should use complex benefits, or general measures such as those proposed by Turner on pensions.

I do not doubt the Chancellor's commitment to social justice because he clearly believes in it passionately. However, he has created a highly complex system of benefits that causes big disincentives. At the end of the day, the system has proved to be wholly ineffective because all the evidence about income and wealth distribution suggests that that problem is getting worse and certainly no better.

Photo of Tom Clarke Tom Clarke Labour, Coatbridge, Chryston and Bellshill 5:31 pm, 28th March 2006

Since 1997, the Government's objective has been to build a strong economy and a fairer society with opportunity and security for all. That has been the backdrop of every single Budget that the Chancellor has delivered, including last Wednesday's. I have heard all of them, and before Mr. Duncan leaves the Chamber, may I also say that I heard a number of Conservative Budgets before them? The hon. Gentleman seemed to suggest that there is little difference in the mind of the public, but that is not the perception of my constituents. They recall this Chancellor's contribution and contrast that with Black Wednesday, which, the Treasury estimated, cost £3.3 billion. The then Chancellor, Norman Lamont, raised interest rates during the day from 10 per cent. to 12 per cent. and then to 15 per cent. and authorised the spending of billions in an effort to keep the pound in the range allowed by the exchange rate mechanism. I am not complaining about the hon. Member for Rutland and Melton leaving the Chamber; I am sure that he will read my speech as carefully as I listened to his.

I want to be positive today and highlight the benefits to the economy and my constituents of the past nine years and the measures in the Budget. Inflation is set to remain low and stable. We are entering the 10th year of real growth under this Government, who are the only Government in British history to be on course to maintain 10 consecutive years of uninterrupted economic growth.

The economy has generated 2.3 million additional jobs since 1997. Britain has 75 per cent. of adults in work—a higher rate than those in America and the euro area. There are 170,000 more people in work than a year ago. In Coatbridge, Chryston and Bellshill the number of people out of work is 1,738, and 38,100 people are in work. What a remarkable transformation of employment opportunities! We could only dream of such figures during the years of the Conservative Government. However, even unemployment statistics can mask the personal misery endured by families torn apart and left with no dignity or future, as we saw when unemployment continued in an upward spiral and grew substantially in the '80s. Unemployment has been tackled most successfully, and the Government are now addressing the issue of incapacity benefit claimants.

My constituency is ranked No. 10 in the list of those claiming the most incapacity benefit. The top locations include Lanarkshire and Liverpool, and six of them stretch across south Wales. That should come as no surprise, because those were the heartlands of heavy industry, employing miners, steelworkers, shipbuilders and foundry workers—all doing heavy, dirty and often dangerous employment. In the case of the mineworkers, the Government have almost completed the largest personal injury compensation scheme in the world, yielding £1.8 billion for respiratory disease and £1.2 billion for vibration white finger.

However, the Department for Work and Pensions pathways to work project needs to be sensitive to that historical background and the enormous contribution that many workers from those communities have made to the wealth-creating industries. On Monday 10 October 2005, the Secretary of State for Work and Pensions published the Department's principles of welfare reform, which contain the values and principles that shape the Government's vision of the future welfare state. There can be no quarrel with that considered approach, provided that the principles are maintained and advisers treat incapacity benefit claimants with respect and dignity. It is also crucial to provide skills. A high-skill economy will help to deliver faster productivity and growth and ensure that the UK is well placed to prosper in the global economy. That is our response to globalisation.

The national minimum wage is an important cornerstone of Government strategy, aimed at providing employees with decent minimum standards and fairness in the workplace. Decency and dignity for all employees has replaced the old Dutch auction of employers competing against each other on the basis of who can pay the least to the fewest, which has no place in a fairer, modern Britain. The wealth we were promised in those days never did trickle down, but now we have the Low Pay Commission recommendations in place for the adult rate of the national minimum wage to rise to £5.35p from October 2006. I welcome that.

On health, the NHS budget has doubled since 1997, and will have almost trebled by 2008. The Red Book refers to admirable progress in accident and emergency units. Governments have their responsibilities; so do health authorities. Monklands accident and emergency unit, which serves my constituents, is earmarked for closure. I wholeheartedly support the retention of that vital health service facility. I congratulate my local newspaper, the Airdrie and Coatbridge Advertiser, on its outstanding role in promoting the retention of that unit. Praise is also due to the Kirkintilloch Herald, which has established a reputation second to none for campaigning on health issues. None the less, they also recognise the unprecedented investment in health made by the Chancellor.

The pretentious fury about the Chancellor's speech exhibited by the Conservative Front Bench team was about playing the man, not the ball. The Chancellor's consistent support of the national health service simply proves that actions speak louder than words. The administrators responsible for the provision of our health service have a difficult job—but heavens, how much more money do they want to provide the range of services that we need? The Chancellor has responded, so it is their responsibility to act. [Interruption.] I told the hon. Member for Rutland and Melton that he would enjoy what I said, and I am sorry that Mr. Francois, too, will only have the pleasure of reading my speech.

Trusts should be able to live within their budget allocation and they should accept that priorities are just as important to patients as they are to consultants.

Photo of Martin Horwood Martin Horwood Shadow Minister (Environment, Food and Rural Affairs)

Our primary care trust keeps within its budget. It is a three-star PCT that has balanced the books and broken even in recent years. Why, therefore, have closures of ward and hospitals, as well as the rationalisation of everything from mental health services to obstetrics been announced in Gloucestershire today?

Photo of Tom Clarke Tom Clarke Labour, Coatbridge, Chryston and Bellshill

The hon. Gentleman might be able to catch your eye later, Madam Deputy Speaker. However, if he will forgive me, I have only a short time available so I shall concentrate on my own constituency.

Home owners have benefited from low and stable interest rates, with a current rate of 4.5 per cent. The jewel in the crown of economic success is the lowest mortgage rates since the 1950s, cutting mortgage costs for the average mortgage payer by about £4,000 a year. Scotland's housing market is set for another boom year, with prices rising at twice the rate for the UK as a whole according to Halifax Bank of Scotland, Britain's biggest mortgage lender. Even so, Martin Ellis, chief economist at the Bank of Scotland, has pointed out:

"Scotland remains the most affordable part of the UK."

Coatbridge in my constituency recorded the biggest house price increase in the UK during 2005, with an average rise of 36 per cent.. That is tangible evidence of prosperity across the UK, and not only for the wealthy.

Photo of Andrew Love Andrew Love Labour, Edmonton

On home ownership, my right hon. Friend will know that until a year or so ago, the number of people who owned their own property had increased by 1 million. That figure appears to have increased again to 1.5 million, so can we now call Labour the party of the home owner?

Photo of Tom Clarke Tom Clarke Labour, Coatbridge, Chryston and Bellshill

My hon. Friend is right—the party has truly produced a property-owning democracy.

The Chancellor dealt with overseas aid, and it was significant that the Leader of the Opposition did not think that it was worth dealing with the subject at any length. I welcome what the Chancellor said and did. The House will be aware that the International Development (Reporting and Transparency) Bill, which I introduced, is a small contribution to reducing third-world poverty. More specifically, Parliament and the House must become much more proactive, better informed and far more focused on the huge resources and practical strategies needed to tackle those problems.

I consulted both the Treasury and the Department for International Development, and I record my sincere gratitude to the Chancellor and the Secretary of State for International Development. My approach is founded on the belief that we have obligations to one other beyond our front door and garden gate, and we have responsibilities beyond our national borders. If Governments, business, non-governmental organisations and faith groups work together, this generation, with its energy, technology and global reach, does indeed have it within its power, if it so chooses, finally to free the world from poverty, disease, illiteracy and want. I believe that the Budget contributes substantially to that end.

Photo of Kenneth Clarke Kenneth Clarke Chair, Tax Law Rewrite Bills (Joint Committee) 5:45 pm, 28th March 2006

I draw the attention of the House to my entry in the Register of Members' Interests.

I have not missed many Budgets, if any, since I entered the House, and I have never heard a Budget that had less content than the Budget that was delivered last week. It has already vanished from the newspapers, it contained very few measures, and it did not seem to attract the attention of the Chancellor of the Exchequer very much. He is plainly bored by the job that he holds, which he has held for a long time. He is impatient, we all know, to go to another.

The Chancellor can be a considerable and effective parliamentary debater, but I have never heard him put less effort into delivering a speech, so he gave a very boring speech. As Dr. Cable remarked, searching through it for what we used to regard as Budget measures produces a thin harvest. The Chancellor could not afford to do anything in the Budget, and did not particularly wish to do anything, so there was very little in it.

I am one of those who believe that we need an annual Budget. It is a strange performance that we go through, but the House debates economic policy so infrequently on the Floor that it is valuable to have a five-day annual debate. I do not want to go back to Budget speeches that used to be long, impenetrable, detailed expositions of fiscal and monetary measures, macro-economic indicators and the outlook for the economy, but we need more fact than the political presentation that we get from the Chancellor, and from his colleagues in subsequent days.

It would be nice to have a statement of fiscal policy, a description of all the fiscal measures being introduced that day, including the ones in the press releases, and a more dispassionate outlook as to where the economy is going. Because many of the financial commentators in the newspapers just take the Treasury briefing, if we have a Budget of the kind delivered by the Chancellor last week, we often have a debate about economic policy in the United Kingdom that is not based on a sound factual footing.

I shall try to fill the gap. I have spent a few days trying to work out where we are and what the Chancellor is doing. He deliberately took content out of the Budget by moving the difficult things out. Let me begin with fiscal policy. The Chancellor is raising taxation rapidly and increasing the tax burden, which is going up to levels that we have not seen since the 1980s. He is preparing to restrain spending growth drastically; he just did not want to say so in his Budget statement.

The Chancellor got rid of the specific tax measures in the pre-Budget November statement. He got over the humiliation of finally admitting that his growth forecasts were all wrong, but more importantly, he imposed yet more tax burdens on the oil industry, which will raise £2 billion in a full year, and he floated the idea of a development land tax, about which we will no doubt hear more in due course.

In the Budget, the Chancellor has relied on his old weapon of fiscal drag—not raising the thresholds for each level of tax in line with inflation, so as to produce more and more income. That leaves all our constituents baffled about why they feel they are paying more tax, although the Chancellor has not announced any increase in taxation. All Chancellors use it; the present Chancellor uses it every year, and he is using it heavily. The Red Book forecasts that by 2010, compared with the present, another 1 per cent. of national gross domestic product will be taken by income tax and national insurance.

As has already been pointed out, corporation tax thresholds have not been raised at all—not in line with inflation, not at all—so corporation tax take increases as well. The Chancellor is raising his revenue rapidly. He needs to; I shall return to that. He has put off—I do not regret it—the comprehensive spending review a little. I do not know why. It will be completed by mid-2007. He gave us hints of the beginning of that with what has already been described for Her Majesty's Revenue and Customs, the Treasury, the Department for Work and Pensions and the Cabinet Office. Their baseline will be taken down by 5 per cent. per annum in real terms, compared with their baseline for 2007–08. I imagine that the Ministers responsible will think of nothing else, because we have been given no idea how it will be achieved.

The Chancellor forecasts that public spending as a whole will increase by 1.9 per cent. each year between 2008 and 2010, which is less than half the level of recent growth and less than the likely growth rate of the economy. We have no idea where those cuts will be made, and we have no idea how the public services will cope when some of them are in crisis even following the ridiculous largesse since 2000. Unless reform is initiated, this will be a tight public spending round.

Photo of Kenneth Clarke Kenneth Clarke Chair, Tax Law Rewrite Bills (Joint Committee)

The Chief Secretary must deliver the public spending round—I have worked with some tough Chief Secretaries, and I hope that he has got the knuckledusters ready.

Photo of Des Browne Des Browne Chief Secretary, HM Treasury, The Chief Secretary to the Treasury

Like most hon. Members, I have enormous respect for the right hon. and learned Gentleman. However, I do not want him to continue to labour under the misapprehension that the comprehensive spending review 2007 was a Budget announcement. I am sure that he knows that I made a statement to this House in July setting out the fact that there will be a comprehensive spending review rather than a normal spending review. Indeed, I set out all the work streams, some of which are now reporting.

Photo of Kenneth Clarke Kenneth Clarke Chair, Tax Law Rewrite Bills (Joint Committee)

I realise that spending is not usually a matter for the Budget, although I used to include it. However, when one considers fiscal policy, spending is still relevant to the debate. The Government are raising tax and are about to cut spending growth drastically—they argued that we were being draconian when we urged such measures in the past. There are no longer any fiscal rules by which to judge the matter. The golden rule has been discredited since the ridiculous change to the timetable for the cycle. The sustainable investment rule would be sensible, if the accounting devices for Network Rail, unfunded pension commitments and the private finance initiative made any sense. The Chancellor is flying by the seat of his pants on fiscal rules. In its annual country report, the International Monetary Fund recommends that he should start putting in some fresh fiscal rules to correct those discrepancies.

Although the Budget does not contain a Budget judgment, we should know what it is. Chancellors usually loosen policy, tighten policy, try to redress the public finances or feel that they can be expansive. This Chancellor is tightening policy, and he has only just started. He must do so because of many factors that we warned him about, given his years of irresponsibility since 2000.

The real economy is in the doldrums at the moment. Let us not start the fancy swapping of statistics, which involves real-terms figures, cash figures and choosing particular funny years. Everybody knows that the economy is going through a period of marked slowdown, because the 1.8 per cent. gross domestic product growth in 2005 was the lowest since 1992. Why is GDP growth slowing down? It has been based—I refer hon. Members to my previous Budget speeches—on a sea of household debt, and public debt and borrowing, for the past six years. That was not sustainable, and what is not sustainable always stops, which is why GDP growth has started to slow down. There has been a drop in consumer demand and a drop in public investment and spending. Those trends will continue, and will not pick up rapidly.

Last year consumer demand grew by 1.9 per cent.—the lowest growth since 1995. It will not pick up, and I shall briefly explain why. First, household debt is about 150 per cent. of household incomes. People will not add much to absolute debt, so they are not going to spend above their incomes any more. The disposable income of the average household in this country has gone up by only 1 per cent. in each of the past two years. Furthermore, I have referred to the tax burden, and the Governor of the Bank of England mentioned it when he discussed falling demand.

We have rising unemployment—there has been a slight hiccup in unemployment, which has been a good field hitherto—and last month's increase in the claimant count was the biggest since 1992. I am most struck by the fact that next year the percentage of the working age population in employment in this country will be lower than that in the German Democratic Republic. People are more insecure about their jobs than they used to be.

The pensions crisis is making people worried, which will cause the savings ratio to increase, and consumer demand will not come back. When one examines the Chancellor's proposals and considers what the Chief Secretary must do in the public spending round, it is clear that public investment is not going to carry on providing all the growth in the economy in future years.

The economy is slowing down markedly and I cannot see any reason why it should bounce back in a hurry. I think that we could be in for several years of lacklustre performance, and I think that we have got there because the Government took too short-term a view and disregarded the warnings when the Chancellor went in for tax and spend. Since 2000, the Chancellor has made the economy ever more dependent on shoving in demand, either by encouraging consumers to borrow too heavily or having the Government spend too highly. Now, the economy will slow down. I have not even touched on global influences such as oil prices and commodity prices, which still have not had their full effect on our growth potential. There will be no quick bounce back.

I have described where I think that we are, so what are my conclusions? The Chancellor has done nothing of significance in the Budget, except to announce small measures and drift on in the manner that he has already proposed. I would like us to seek to achieve so much more. What economic policy now lacks is ambition. It has become fashionable to talk about the challenge from India and China, and one can add to that Brazil and the entirety of south-east Asia. Globalisation is transforming the world in which we are competing, and the pace of technological change has never been faster, so we must be much more competitive than we ever were.

To make our economic growth sustainable, we need to rebalance it. We will need some years in which growth is led not by consumer demand and public spending, but by investment, trade and productivity, and we must do things to encourage that.

Photo of Andrew Love Andrew Love Labour, Edmonton

The right hon. and learned Gentleman is discussing business investment, which is one way to rebalance the economy. The conditions for business investment could not be better, because the stock exchange is going up and interest rates are low, yet business investment is not happening. In the Budget judgment, the Chancellor suggests that business investment will increase in the next couple of years, but although all the conditions are right, how can we be sure that that will happen?

Photo of Kenneth Clarke Kenneth Clarke Chair, Tax Law Rewrite Bills (Joint Committee)

The Chancellor says that every year, but the record, as the hon. Gentleman has conceded, is dreadful. Business investment in the fourth quarter of last year was 9.1 per cent. of GDP—the lowest figure recorded in this country since records began in 1965. Our business investment record is very poor, and, as hon. Members have said, people are being deterred from investing in this country by high levels of complicated corporate taxation, by rising levels of regulation and by falling or dull demand in this country. We must address why this country is not producing the necessary level of business investment.

Productivity is another area in which our performance has been dreadful.

Photo of Ed Miliband Ed Miliband Labour, Doncaster North

Will the right hon. and learned Gentleman give way?

Photo of Kenneth Clarke Kenneth Clarke Chair, Tax Law Rewrite Bills (Joint Committee)

If I give way again, I will have no more injury time.

Ever since he was shadow Chancellor, this Chancellor has stressed the need to improve our productivity level, but he has a dreadful record on it. The Red Book includes an extraordinary set of international comparisons, which Edward Miliband, who tried to intervene a moment ago, has unwisely used. I refer him to a very good article in last week's Financial Times. The presentation in the Red Book of our productivity record compared with that of the Americans, the Germans and the French is completely bogus, because our record is dreadful. The Red Book uses output per employee, but output per hour is the best measure. Our performance is extremely poor, and it remains miles behind that of the French, the Americans and the Germans, so it is not true that we are closing the gap. Output per hour in this country increased by zero in the year to the third quarter of 2005.

Photo of Kenneth Clarke Kenneth Clarke Chair, Tax Law Rewrite Bills (Joint Committee)

One year—of course! The Red Book uses funny time scales and considers output per man. On all measures of productivity, this country is underperforming.

Photo of Kenneth Clarke Kenneth Clarke Chair, Tax Law Rewrite Bills (Joint Committee)

I am not going to give way.

Productivity in the public sector has been dropping like a stone as huge sums of money have gone into increased payrolls, huge pay rises, reduced work loads and reduced performance in service after service.

We must consider innovation, because our research and development record is extremely poor. As a proportion of GDP, research and development spending in this country is now down by 3 per cent. compared with 1997, when this Government took over, and the burden of taxation and regulation is constantly referred to.

In policy terms, the Chancellor is contributing nothing to that long-term challenge. He is burned out in his current job, and I just wish his successor luck in trying to do something to put some life into his lacklustre legacy.

Photo of Sylvia Heal Sylvia Heal Deputy Speaker

Order. The right hon. and learned Gentleman's time is up.

Photo of Kerry McCarthy Kerry McCarthy Labour, Bristol East 6:00 pm, 28th March 2006

It is slightly daunting to follow a former Chancellor of the Exchequer in a Budget debate. I spent the morning at the Treasury Committee taking evidence from the Governor of the Bank of England. I must say that the Governor's analysis of the current economic outlook bears very little relationship to the scenario just presented by Mr. Clarke.

I welcome the Budget's focus on the economic performance of cities as a driver of regional economic growth, especially the importance placed by my right hon. Friends the Chancellor and the Secretary of State for Trade and Industry on science and the creative industries, which are certainly key to the economic prosperity of Bristol and the surrounding city region. Bristol has been designated one of the first six science cities in the UK and the universities are leading the field in several areas of scientific research. The city is also host to many creative entrepreneurs, especially Aardman Productions, which has just brought back its fourth Oscar from Hollywood.

I wish to talk today about the need to raise levels of enterprise and investment in our most deprived areas if we are to raise overall levels of enterprise and productivity. We know that significant amounts of regeneration funding have gone into those areas, but that alone—welcome though it is—will not deliver fundamental and lasting change: creating thriving and successful business sectors in those communities will.

The Government have introduced a range of initiatives over the years, including enterprise areas, business improvement districts, new entrepreneur scholarships, the Phoenix fund and the business incubation fund. I could go on. I was pleased to see continued support in the Budget for measures such as the local enterprise growth initiative. So far, £126 million has gone into deprived areas and a second bidding round will start soon. I hope that one day my constituency will benefit from that.

Government support is not, in itself, enough. We need a long-term transformation in the business environment in poorer communities, and to achieve that the private sector has to play a part. The Budget included a very useful paper entitled "Financial services in London", which I read with great interest. It rightly focused on the City's internationalism—it was sub-titled "Global opportunities and challenges"—which is, after all, the reason for its past pre-eminence and its continued success and prosperity. However, we also need to look at whether UK financial institutions could do more to help regeneration in our poorest areas.

When the Treasury Committee went to the USA recently—a country with higher productivity than the UK and a much stronger enterprise culture—we visited City First bank in Washington DC, which is a community development financial institution, or CDFI, that serves a community that is 87 per cent. black and 9 per cent. Hispanic. The bank is playing a key role at the heart of its community in cultivating a crop of new entrepreneurs and business that are rooted in their communities, bringing new wealth into them.

The bank's clients also include many customers in the not-for-profit sector, who were not well served by major banks, including day-care centres, homeless shelters, sheltered housing operators, churches and charter schools. Those depositors know that by putting their reserves into City First, at a competitive rate, they are also having a positive impact on the local community. The team at City First act not just as bankers, but as business advisers, working with clients on, for example, drawing up cash-flow projections. They nurture their clients, through good times and bad, and they can do so because they are part-funded by mainstream banks. The mainstream banks benefit from the new markets tax credit, and also meet their obligations under the Community Reinvestment Act—I shall return to that later.

There are, of course, significant differences between the UK and the US banking systems, but we can learn lessons from the US. A vibrant CDFI sector in the UK could help to fill the funding gap that is left by a lack of access to mainstream finance and could act as a bridge between deprived communities and the more successful mainstream economies. It could also improve the sustainability of regeneration funding through increased loan financing, as compared to grant funding.

There has already been some analysis of the need for such organisations in the UK. Bristol city council commissioned some research in 2002 that looked at the support available for local business start-ups. In particular, it looked at Barton Hill, an estate in my constituency that is in a ward ranked 133rd on the national index of deprivation. The estate benefits already from £50 million regeneration funding under the new deal for communities scheme, but that alone is not enough to turn round its fortunes.

The study found that there was no lack of agencies providing enterprise support in Bristol. In fact, there was an over-provision of agencies and an under-utilisation of funds. In some cases, the resources were overlapping, or poorly targeted, or the agencies did not fully understand or meet the needs of micro-entrepreneurs. I very much welcome the decision, highlighted by my right hon. Friend the Secretary of State for Trade and Industry today, to cut the number of business support services from 3,000 to 100 by 2010. Streamlining the support will make accessing it much easier for small businesses.

The Bristol study noted that there was a raft of community finance initiatives, such as a loan guarantee scheme provided in partnership with a mainstream financial institution. But application processes were complex, and they had not been drawn together or developed in the context of an integrated strategy. The study also found that barriers to personal finance, such as the lack of a bank account or the absence of any savings or assets, were also significant barriers to entrepreneurship. We know, however, that mainstream financial institutions are increasingly deserting such communities, to the extent that they no longer even provide cashpoint machines, let alone set up branches.

The Bristol study recommended the creation of a broad-based CDFI, which would bring together existing loan funds; encourage closer partnerships with, and between, credit unions; link in advice services, such as the excellent Bristol debt advice centre in my constituency; and bridge the gap between access to personal banking facilities and enterprise finance. A CDFI in Bristol could also, as in the United States, have a role to play in supporting voluntary sector and not-for-profit groups, of which there are many in my constituency, doing immensely valuable work. They all too often struggle to access funding, can secure only short-term funds, or are hit by cash flow problems as they get caught out by the complexities of endless bidding rounds. A community bank could help them negotiate their way through the maze, by providing loan finance, cash-flowing shortfalls and offering business advice and support.

The Government have already taken some important steps to promote the development of CDFIs in the UK. They have established a trade association for CDFIs—the Community Development Finance Association—and the Bridges community development venture fund has invested £20 million in our most deprived areas. Most importantly, the Government have introduced the community investment tax credit, which gives a tax incentive to investors in accredited CDFIs, and requires them to make onward investments. So far, that has enabled CDFIs to raise some £35 million of new capital for onward lending to small businesses and social enterprises in disadvantaged communities. CDFIs have financed more than 9,500 businesses and individuals, sustained more than 85,000 jobs, created more than 10,000 jobs and leveraged another £160 million in additional funds, on top of the £400 million they already have available to lend and invest.

That represents real progress, but there is still a long way to go before the sector is as vibrant and as much a part of the local economy as it is in the USA. There are three possible ways to encourage our financial institutions to do more to lend and invest in disadvantaged areas, and to support the development of CDFIs. The first is to offer a reward or incentive for investment, through measures like the community investment tax credit, which the Government have already done. The second, which was recommended by the social investment task force in 2000 but has not yet been implemented, is to force disclosure by the banks of the extent of their investment in, and provision of services to, disadvantaged communities. Only one bank, Barclays, does that voluntarily, and I suggest that the time has come to encourage—or perhaps do more than encourage—other banks to follow suit. The third and more radical approach would be to adopt the US approach and legislate to require banks to invest in deprived communities. In the USA, under the Community Reinvestment Act of 1977, deposit-taking financial institutions can choose whether to provide banking services directly to under-served communities, or to invest in CDFIs that do, but they have to do one or the other. That activity is monitored by federal regulators, and taken into account when banks are applying for charters, or for approval of bank mergers, acquisitions and branch openings. At the last audit, only 5 per cent. of banks were judged to have failed to comply with their obligations under the CRA, which has led to a huge growth in the CDFI industry and greatly increased access to capital for low-income communities. The bank that we visited in Washington said that without that legislation they would not exist, and neither would the businesses set up for their customers.

I spoke earlier of the company based in the Barton Hill area of my constituency that has just returned from the Oscars. Who knows what other talent is out there that, if cultivated, nurtured and supported, and if given half a chance and helped by financial institutions, would go on to similar success?

In conclusion, I very much welcome the measures proposed by the Chancellor in his Budget, particularly the focus on support for enterprise investment, and I hope that we can build on those measures for years to come.

Photo of Edward Leigh Edward Leigh Chair, Public Accounts Committee 6:10 pm, 28th March 2006

I hope that Kerry McCarthy will forgive me if I do not follow her remarks, which I am sure were of a very high quality.

I want to deal with a matter that is at the heart of the work that I do in Parliament—efficiency savings. As the parties move closer and closer together ideologically, the debate will increasingly centre on which party can achieve such efficiency savings. The Chancellor claims that through the Gershon review he can save £21 billion. I support that target, which approaches 5 per cent. of Government spending—a worthy aim.

However, there are various problems, the first of which concerns baselines. In our ordinary life, if we are given a utility bill, compare it with last year's and see that we have saved £20 having spent £200, it is clear that we have made a 10 per cent. saving. Unbelievably, in most Government Departments that clear baseline on individual projects is not available. For instance, the National Audit Office found that out of 300 projects that it looked into under the review, 180 had no baseline. How can one make accurate claims if one does not know one's starting point? That is surely the first essential in any walk of life. The situation is not surprising, because although it has been a requirement on local government to have a professionally qualified finance director since 1988, there is no such requirement on Whitehall Departments. As far as I know, no permanent secretary has ever run a project, although they are highly intelligent people.

In the 2005 Budget, the Chancellor claimed that he had already achieved £2 billion-worth of efficiency savings. If one looks in the detail of the Budget report, though, one finds that only £1.2 billion of efficiency savings is listed. So where has the rest gone? The devil is in the detail. To this day, there is still no full NAO access to the Office of Government Commerce breakdown of the £2 billion claim. The NAO has therefore had to conclude that Departments are not sufficiently subject to OGC challenge. The first problem, therefore, is that we do not know the baseline—the starting point—for these efficiency savings.

The second big problem is that of double counting. The vast majority of efficiency savings, which are now the bedrock of successive Budgets, were already under way before the efficiency programme began. In the NAO sample of 20 projects, 17 were initiated before publication of the Gershon review in July 2004. Many efficiency savings are simply added on to existing programmes rather than being new programmes.

The third problem sounds quite technical but is very significant—it is the inclusion of non-cash-releasing schemes. Perhaps the former Chancellor, my right hon. and learned Friend Mr. Clarke, will understand what I am talking about, but I will try to explain. The £21 billion saving includes non-cashable elements. That is where I would claim, as Chancellor of the Exchequer, that I am putting the same inputs into a particular programme—it may be number of cancer operations—but getting significantly enhanced outputs. That is a non-cashable release. The position is much less clear than with cashable releases. The Gershon review claims that two thirds of the £21 billion saved is based on cashable savings, but the pre-Budget report shows that in fact the figure is only 48 per cent.—so where has the rest gone?

I bring those three problems to the House to try to get a more rigorous discussion of what is now a central element of the Budget debate. Let me turn to why they occur. Unbelievably, the accounts of the Department for Work and Pensions have been qualified by the Comptroller and Auditor General for 16 successive years. An army of 115,000 staff is employed by that one Department, most of whom are not delivering money to the poor but working out entitlements. We are buried in a system that is increasingly based on means-testing, complexity and bureaucracy, and riddled by fraud and error. We now see that the Inland Revenue, which has been the most successful and efficient Government department, is being sucked into this vortex. Previously, it very efficiently took money from the middle classes. It is not expert at delivering money back to poorer people, and its reputation has suffered from it.

The Comptroller and Auditor General already audits Budget assumptions. I propose a much clearer audit trail throughout its forecasts and claims, all of which should be independently validated. I say this to my hon. Friend the shadow Chancellor, although perhaps it is too radical a suggestion: why should not the Opposition parties, when they initiate the equivalent of the James review, offer to have their forecasts and proposed efficiency savings audited by the National Audit Office so that we can have an honest debate? I think that that is an interesting idea—I dreamed it up in my bath last night—and I will suggest it to the Comptroller and Auditor General.

As Dr. Cable suggested in his excellent speech, we increasingly have to replace complex, means-tested benefits and tax credits with raising tax thresholds. That is the key, because it can be argued for by compassionate Conservatives who are worried about the fact that as people on lower incomes increase their income, they are paying marginal rates of 60 per cent. tax—far higher than the rich. At the same time, middle class people will work out that as tax thresholds are raised their tax will start to go down. It is a canny thing to do politically—after all, we are politicians—as well as being the right thing to do for the economy and for the poor.

Photo of Charles Walker Charles Walker Conservative, Broxbourne

Does my hon. Friend recognise the huge cost inefficiencies in laundering taxpayers' money back to them? Would not it be simpler if we just raised the tax thresholds at which people start paying tax, and would not that help a huge number of the least-well-off families in our society?

Photo of Edward Leigh Edward Leigh Chair, Public Accounts Committee

I entirely agree with that sensible proposition, which I hope the Minister has noted.

Photo of Edward Leigh Edward Leigh Chair, Public Accounts Committee

Of course I give way to my fellow member of the Public Accounts Committee—a very effective member and former teenage scribbler in the Treasury, according to Mr. Lawson.

Photo of Helen Goodman Helen Goodman Labour, Bishop Auckland

I am most grateful to the hon. Gentleman. I do not think that he was paying attention to the Budget speech last week when the Chancellor said:

"One option would be to raise that personal tax allowance further. But spending £500 million on a family tax cut in this way would give a two-child family on median earnings . . . £22 a year more, or 40p a week. However, using the same resources to raise the child tax credit will give that same family a tax cut worth £140 a year more, over six times as much".—[Hansard, 22 March 2006; Vol. 444, c. 295.]

Can the hon. Gentleman explain how his proposal would be in line with compassionate Conservatism?

Photo of Edward Leigh Edward Leigh Chair, Public Accounts Committee

I just tried to explain it. We can argue back and forth about statistics, but I shall not do that. I simply make the perfectly good point that, in every Budget, tax thresholds should relate to the real world where there is growth and inflation. In a fair Budget, tax thresholds should do that, leaving aside the debate on tax credits.

If we are to have an honest debate and achieve the £21 billion of savings, which is achievable—after all, the private sector regularly makes 5 per cent. efficiency savings—on what could we spend the money? The number of people who pay inheritance tax is rising rapidly. This year, 37,000 people were paying it, whereas in 1996–97, the figure was15,000. The amount paid has doubled since 1997, from £1.6 billion to £2.9 billion. If one is spending £550 billion, one can address that tax. I hope that my hon. Friends on the shadow Treasury Bench will view the matter as a priority. It has a massive impact on behaviour and is not good for the way in which families plan inheritance. It often causes disputes, it raises only £2.9 billion and it should be a priority for a future Government.

We could increase efficiency in so many ways. For example, the Chancellor makes a great song and dance about spending £7.5 billion or more on the skills learning sector. The private sector already spends £20 billion because it reckons that too much public sector investment is academically based and not based on what is useful to business.

A sea change in public opinion may be occurring. New Labour's success was its realisation that it needed to marry its belief in social justice with economic efficiency. That was the headline claim. However, buried in that message was a clear realisation that, however compassionate one wants to be, one cannot win elections in this country if one hammers middle class people. I am afraid that, increasingly, middle class people, who are faced with the largest tax burden ever, are beginning to wake up to the fact that they are being hammered. The inheritance tax that I mentioned increasingly bites into ordinary middle class homes.

Photo of Edward Leigh Edward Leigh Chair, Public Accounts Committee

I am afraid that I cannot because I have had my two strikes. It is a ridiculous way to run such debates but I cannot give way now.

Middle class families pay a ridiculous amount for care homes. The amount of public money spent in Scotland is far more generous. We subsidise that. The average cost of a care home for an elderly relative is approximately £800 a week. People are forced to sell their homes to pay for that and we should examine the matter because it increasingly causes resentment, especially when people realise that there are more generous arrangements in other parts of the United Kingdom. There is, therefore, a sea change in public opinion.

I welcome aspects of the Education and Inspections Bill and some parts of the Prime Minister's objectives as he shepherds a reluctant party into the 21st century, because the only way forward should be based on choice and competition. One cannot achieve one's aims simply by setting new targets and more central direction. In 1999, there were 24,000 managers in the NHS. In 2004, there were 37,000—an increase of 55 per cent. We have reached the limit of what we can achieve through central targeting and Government diktat. In health, funding, directed by the GP, should follow the patient into any hospital in the private and public sector. In education, funding should follow the pupil into any school in the public and private sector. That is my personal view and not yet the view of my hon. Friends on the Opposition Front Bench but I seek to persuade them and I will not waver from that.

In the next 12 months, as my party conducts its policy review, it must provide a careful and rigorous explanation of how it will achieve efficiency savings. It must identify one or two matters, such as inheritance tax, about which there are obvious anomalies. It must base its approach on what Mr. Milburn described as an asset-owning democracy. He has left his place, but that aspect of his speech was wonderful. Why do we believe in an asset-owning and property-owning democracy—the great crusade of the 1950s—if we do not apply that to health, education and pensions? The challenge that faces my party is devising realistic policies to achieve that asset-owning democracy.

Photo of Ed Miliband Ed Miliband Labour, Doncaster North 6:24 pm, 28th March 2006

It is a great privilege to follow Mr. Leigh, who had interesting advice for the Labour party and Conservative Front Benchers. I am not sure whether we or the shadow Chancellor enjoyed it more.

Photo of David Taylor David Taylor Labour, North West Leicestershire

I am keen to make the point that I would have made if Mr. Leigh had given way to me. Did my hon. Friend detect some contradiction between two closely linked remarks? The hon. Gentleman said that inheritance tax raised a small or tiny amount of money but also described it as a swingeing imposition on the middle class. It cannot be both.

Photo of Ed Miliband Ed Miliband Labour, Doncaster North

I agree with my hon. Friend about the contradiction and thank him for the extra time.

It is a privilege to speak in the Budget debate. I watched many Budget debates before I became a Member of Parliament, and it is a privilege to speak in the same debate as Mr. Clarke, the former Chancellor. I may not agree with everything that he said but he spoke with great authority and expertise.

The Budget comes at the same stage of the political cycle—when the Government are nine years into office and the Opposition are, I hope, destined to lose another two general elections—as the 1988 Budget delivered by Lord Lawson. I believe that this year's Budget avoids the macro-economic mistakes of Lord Lawson's 1988 Budget, and we can draw an interesting contrast between them.

The 1988 Budget was based on three underlying assumptions: tax cuts were the best route to economic success; poverty, which was not even mentioned, could be solved by economic growth—the rising tide would lift all boats—and neglect of the public realm was an inevitable price that would have to be paid for private affluence.

In place of those assumptions, the 2006 Budget proposes three alternatives. First, public investment is not a drain on the good economy but a pre-condition of it. Secondly, Government have a specific responsibility to use the proceeds of growth to tackle poverty and not simply let the distribution of wealth and income fall where it may. Thirdly, public splendour, not public squalor should be the counterpart of private affluence in the fourth richest country in the world.

Photo of Ed Miliband Ed Miliband Labour, Doncaster North

I shall give way later, but I want to make some progress first.

I want to say a little about each premise. First, there is a genuinely interesting argument about the right response to globalisation and the balance between tax cuts and public investment. The question is simple: should it be a rule of economic policy that public spending must fall as a proportion of national income to provide room for a falling tax burden? The Budget, with its emphasis on the Chancellor's long-term ambition for education, rejects that premise because Labour Members believe that the right sort of public spending can contribute to economic growth and will not hinder it.

To put the problem in the context of today's global economy, there is what might be called a "race to the bottom" model of economic development, whereby we should try to cut taxes as much as we can to be competitive. The problem with that model is that it cannot answer some basic questions about our country and our economy. For example, business makes representations about transport investment at every Budget. A skilled work force—not only in higher education and schools but level 2 and 3 work force skills—is important, and I welcome the extra money for schools in the Budget. The science base is an essential driver of innovation and enterprise. Again, I welcome the extra resources for science teaching in the Budget. The right policies for welfare to work, as well as child care and parental leave, are vital. I believe that there is now cross-party consensus that the good economy must be about gender equality, too, and that those policies are important.

Photo of Ed Miliband Ed Miliband Labour, Doncaster North

I will give way later, but I want to make some progress first.

We do not need to gaze into a crystal ball to see the effects of saying that public spending must fall as a proportion of national income, because that is precisely what we saw in the late 1980s and early 1990s, including under the stewardship of the right hon. and learned Member for Rushcliffe. By 1996–97, net public investment was just 0.7 per cent. of gross domestic product—£6.9 billion at today's prices, compared with the £27.5 billion proposed for next year. That is the lesson of British economic history. It is public investment that gets cut when a squeeze in public spending happens, because that is where the easy and less noticeable cuts can be made. We end up paying for that in our economy, which will do badly in public infrastructure and basic education, as ours has done for many years. It is completely unclear to me how a small country such as ours—as opposed to the United States—can compete on that basis. That is why the right kind of public investment must be at the heart of our remaining competitive in the years ahead.

Photo of Stewart Jackson Stewart Jackson Conservative, Peterborough

The debate seems to be coalescing around how we can achieve social justice. As we are getting into a history lesson, has the hon. Gentleman ever pondered the fact that his party voted against the greatest transfers of capital to working people in modern times, namely privatisation and the sale of council houses? Has he ever thought that one through?

Photo of Ed Miliband Ed Miliband Labour, Doncaster North

I personally think that that was a mistake, yes, although there was a legitimate issue about the replacement of council and social housing stock, and it remains an issue today.

The second premise set out in my right hon. Friend's Budget was that poverty will not be solved simply by economic growth, and that it needs specific action. Given the increasing returns to skills and qualifications, the global economy has tendencies towards greater inequality. Our choice is either to accept this or to take action. The child poverty figures got a lot of publicity a couple of weeks ago because the Government missed their target of taking 1 million children out of poverty. That is true and it is a matter of regret. It is why we must do more. That is why I welcome the new measures announced in the Budget last week, including the decision to index the child tax credit to earnings.

I appeal for candour, particularly to the shadow Chancellor when he winds up the debate, if we are genuinely to tackle child poverty. The only reason why we have achieved what we have is because, in Budget after Budget, my right hon. Friend has taken specific measures to tackle child poverty. How do I know that? Because the figures show that by relying solely on the proceeds of economic growth and without his measures on tax credits, the number of children in poverty would have gone up by 1.5 million. Instead, as a result of the measures that we have taken, the figure has gone down by 700,000. Child poverty is at it lowest point for nearly 20 years. But hon. Members need not take my word for that. In a recent document published after the latest figures came out, the Institute for Fiscal Studies concluded:

"Child poverty has now fallen in every year since 1998/99, which is the longest period of sustained falls in child poverty since consistent data on relative poverty rate started to be available [in 1961]".

That is, it is the most sustained fall in child poverty for 45 years. But where are the Opposition on all this?

Photo of Greg Clark Greg Clark Conservative, Tunbridge Wells

I commend the hon. Gentleman on his very thoughtful speech, but is he aware that that same report from the IFS makes it clear that, on the Government's present spending plans, they will not only miss their child poverty targets but slip even further behind them? So why has the Chancellor not committed more resources, if this is so central to his ambitions?

Photo of Ed Miliband Ed Miliband Labour, Doncaster North

If the hon. Gentleman is saying that we should make it a priority to put money into tackling child poverty as resources become available in the years ahead, I completely agree with him, and I am sure that the shadow Chancellor will have heard his representations.

But where are the Opposition on this issue? The policy chief of the Conservative party, Mr. Letwin, gave a surprising interview to The Daily Telegraph on 23 December—it positively interrupted my pre-Christmas present buying—in which he said:

"Of course inequality matters. Of course it should be an aim to narrow the gap between rich and poor".

He went on:

"It's more than a matter of safety nets . . . We should redistribute money."

So presumably the Conservatives support the measures that we have taken. In fact, the shadow Chancellor has never, to my knowledge, said anything positive about tax credits. Indeed, he has spent most of his time saying we should cut tax credits. Of course, tax credits alone will not solve the problem. Active labour market policies, Sure Start and greater educational opportunities matter as well. It is fine to have a policy review, as the Conservatives are doing, but I do not see how anyone who genuinely cares about poverty can say in advance—before their policy review concludes—that public spending must fall as a share of national income. How can they make that decision before the conclusion of their policy review, if they care about poverty?

Finally, I want to talk about how we can match growing private affluence with a strong public realm. In 1958, in "The Affluent Society", J.K. Galbraith wrote about the coexistence of private affluence with public squalor. It surely must be an aim of one of the richest countries in the world to show that this is not inevitable, and to create a public realm of which we can be proud.

The figures on schools investment given last week by my right hon. Friend the Chancellor are striking in that regard. Capital investment in schools was about £600 million in 1996–97, when the right hon. and learned Member for Rushcliffe was Chancellor; it has risen to £6 billion today, and it will rise to £8 billion by 2010–11. Let us be honest: that £600 million was nowhere near what was required to prevent the condition of our schools from getting worse, let alone to improve them. I believe that we can see the difference that higher capital spending is making in all our constituencies.

This Budget opens important new fronts in the Government's mission to rebuild the public realm. For example, I care a lot about the long-neglected issue of youth spaces, youth clubs and youth institutions. We will never succeed in our campaign for respect among young people unless we give them decent spaces to which they can go. That is why I very much welcome the plan for a 10-year strategy for youth services. Of course that strategy must involve the voluntary sector—something that the Conservatives care a lot about these days. It must also reform the youth service, and draw in resources from the private sector. However, it is simply folly to pretend that these services can be built without public investment. I give the Opposition credit for saying that they care about these issues, but I say in all honesty that if they will the ends, they must also will the means.

Is not the Conservatives' problem that, in 2006, their heads tell them that the philosophy of the Lawson Budget of 1988 is no longer what the public want, and that they must bury it, while their hearts tells them that they must not? Fifteen years after Margaret Thatcher went, they still do not know whether to bury Thatcherism or to praise it. These are the contradictions that we now see exposed in their response to the Budget.

There are big questions to be answered about the condition of our country, about the challenges of globalisation, and about how to tackle poverty and strike the right balance between tax and spending. They are difficult questions, but last week my right hon. Friend set out a clear and principled course, and Labour Members can look forward to the arguments in the months and years ahead.

Photo of George Young George Young Chair, Standards and Privileges Committee 6:37 pm, 28th March 2006

It is a pleasure to follow Edward Miliband, who made a thoughtful speech emphasising the steps being taken to alleviate child poverty. He took us back to the Lawson Budget. I remember that Budget: the top rate of income tax was reduced to 40 per cent., and I think that I am right in saying that there was some movement in the House when that announcement was made. If anyone had said at the time that, nine years into a Labour Government, the top rate of tax would remain at the level fixed by Nigel Lawson, nobody would have believed them.

By committing themselves not to change the standard rate—or, indeed, the top rate—of tax, the Labour Government have got into tremendous difficulties. They have increased expenditure but, instead of raising taxes to meet that expenditure in a fair way, they have put increasing emphasis on taxes that are either regressive—such as the council tax—or difficult to collect, or that have damaged our international competitiveness. I believe that there are many hon. Members sitting alongside the hon. Member for Doncaster, North who would have preferred an honest Labour approach of funding increases in public expenditure by increasing personal taxation, which is a progressive, open, honest and cheap way of funding a Labour programme.

Photo of Greg Clark Greg Clark Conservative, Tunbridge Wells

Did my right hon. Friend notice that, in recalling the Lawson Budget, Edward Miliband made no reference to another of Nigel Lawson's principles, namely tax simplification? It was his ambition to abolish a tax in every Budget, but the ambition of the present Chancellor seems to be to add a new tax at every Budget. Does my right hon. Friend agree that that is the wrong direction to take?

Photo of George Young George Young Chair, Standards and Privileges Committee

Yes, indeed. There is one minor modification, which I shall come to in a moment, involving a tax that the Chancellor introduced relatively recently and has just abolished in haste.

I agree with those who say that if one considers the conventional economic indicators—growth, inflation, numbers of unemployed—one gets the impression of a benign economy. But I also agree with those like my right hon. and learned Friend Mr. Clarke and Dr. Cable, who say that if one looks behind that, there are some worrying signs. For example, much of the current growth is funded by either private borrowing or high public spending, neither of which is sustainable in the longer term. One would have hoped for measures in the Budget to replace those engines of growth with other more sustainable ones, promoting an export-led recovery, private sector investment and an increase in private disposable incomes through productivity. When the hon. Member for Twickenham spoke about an adjustment in a few years' time, when the current engines of growth prove to be unsustainable, he put his finger on one of the more worrying long-term trends in the economy, which, in my view, the Budget did not address adequately.

I agree with the comment of my hon. Friend Mr. Duncan that if one wants to understand the overall impact of the Budget, the best thing to do is not to listen to it but to read the economic press about two days later, which gives a much better picture of what is going on. Any Chancellor must make a balanced decision between two imperatives: on the one hand, a pulverising if partial interpretation of the Budget to satisfy the audience in the Chamber, and on the other, a calmer more balanced interpretation from the wider world. We have moved too far towards the former. The selective presentation in Budget speeches is one contributory cause of the public's growing cynicism towards politicians, about which we are all concerned.

Yesterday, that point was well made to the Treasury Committee by Robert Chote of the Institute for Fiscal Studies. He rightly identified 45 policy decisions listed in the Red Book on pages 188 and 189. Seventeen of those were listed in the Chancellor's speech. Those 17 total £553 million, either in spending increases or tax reductions—good news. Twenty-eight, however, were either not mentioned or mentioned in passing, and those, totalling £780 million, were the bad news. I want to return to one or two things that the Chancellor did not mention.

When my hon. Friend Mr. Osborne winds up, I hope that he will say that my party will vote against resolution 26 on income tax and computer equipment, which withdraws the tax allowance to encourage employees to work from home. In the Red Book, that change appears under "modernising the tax system". I am not sure why it appears in that category. If one wanted a justification of the accusation that the Chancellor was an analogue politician in a digital age, the withdrawal of that form of relief would be it. The relief was introduced only three years ago by the Chancellor, and it hits a number of buttons. It promotes a better work-life balance, reduces the need to commute and travel into the office, and promotes a wider understanding of IT through having more equipment in the home. I cannot understand why, at two weeks' notice, against a background of the Department of Trade and Industry promoting the scheme on its website, it is suddenly to be withdrawn. I hope that there might be second thoughts, and perhaps a postponement of the scheme for two years to allow the benefit to filter through.

I want to focus on one of the items not mentioned by the Chancellor in his speech—the cancellation of the pensioner council tax rebate. That has saved the Government £1 billion, but one will not find that figure in the Chancellor's speech or the Red Book. In the section, "Fairness for Pensioners", I read:

"The Government is committed to tackling pensioner poverty and rewarding saving, and to enabling people to meet their retirement income aspirations in an ageing society."

There is no mention of the cancellation of the rebate in that section, but it does mention the continuation of the winter fuel payments, which are of roughly the same value, and highlights free bus travel. I find it amazing that the Budget decision that perhaps has the greatest impact on the highest number of people was mentioned neither in the Budget speech nor in the Red Book. It seemed to me that the withdrawal of £200 from every pensioner household not on benefit might be worth just a passing reference under "Budget measures and their impact on households", on page 11 of the Red Book, but it is not there. It is glossed over in paragraph 1.36, which looks back to 1997 to give a slightly different perspective of what has happened to pensioners, in contrast to an earlier paragraph on families with children, which compares the position this year as against the previous year.

What has happened since last year for the Government to change their view on the pensioner rebate? In the pre-Budget report before the last election, the Chancellor said:

"A society is judged by its generosity to its children and the elderly, who have served the community all their lives."

He went on to say:

"This Pre-Budget Report therefore announces that, in addition to these existing measures"— the winter fuel payments—

"the Government will make a payment of £50 to households with someone over age 70 in 2005."

In the 2005 Budget, however, he increased that sum. On 16 March 2005, he said:

"In 1997, there was no winter fuel allowance. This autumn, we will again pay a £200 winter fuel allowance for pensioners—£300 for the over-80s. In the pre-Budget report, I announced a £50 council tax refund. Today, with the resources now available, I can announce that we will pay to every pensioner household, 65 and over, paying council tax, a refund not of £50 but a council tax refund of £200—a measure that is fairer and worth more to more pensioners than all other proposed schemes."—[Hansard, 16 March 2005; Vol. 432, c. 269.]

The Budget 2005 Red Book made it absolutely clear that that was to help with the council tax:

"The Government understands the position of older people on fixed incomes facing pressures such as council tax bills."

The Chancellor went on to announce the additional item.

Last year, council tax had increased by £525 since 1997, when the Government took office. Against that background, it was worth introducing additional help of £200. This year, the council tax has increased by £579 since 1997, but that extra help is suddenly no longer available. The Government boast that the average council tax has gone up by £54, but not if one is a pensioner—for a pensioner, it has gone up by £254. That wipes out the increase in the state retirement pension for a large number of people. People wonder why there is any cynicism in politics. The most cynical decision that the Government have taken is to spend £800 million last year, just before a general election, on a £200 pensioner rebate, and a year later, when the council tax is even higher, to withdraw it and not even announce it in the Budget and the Red Book.

Will the Chief Secretary answer two questions? First, when the Deputy Prime Minister agreed with the Chancellor the sum for block grant for local authorities last December, did the Chancellor tell the Deputy Prime Minister that he planned to withdraw the £200 rebate and therefore make the presentation of the council tax even more difficult? Secondly, was it not the case that, if the council tax was about to be replaced, the Treasury might have been able to afford the rebate for another year or two? It has now realised that the council tax will not be replaced, probably for the lifetime of this Parliament, and for that reason has decided that it simply cannot afford to carry on with the £800 million or £1 billion cost of the scheme.

When the Chancellor gives his next Budget—I think that he will give another one—I hope that it will include a measure to deal with the issue that I have talked about, and to deal with the more strategic issue of what will replace the council tax in the longer term, and how we will come up with a fairer system of funding local government.

Photo of Michael Meacher Michael Meacher Labour, Oldham West and Royton 6:49 pm, 28th March 2006

The main Opposition speech today came not from their Front Bench but from the former Chancellor, Mr. Clarke. He was at his most recklessly expansive, making Cassandra-like prophecies of doom. Many of his comments, however, were a bit rich coming from him. He said that the reduction in the growth of spending in future had not been made clear. In fact, it has been announced repeatedly that, after 2008, there will be a slowdown in the growth of spending after an unprecedented surge of spending over many years. He talked of fiscal drag, but fiscal drag has been used by all Chancellors, not least the right hon. and learned Gentleman.

The right hon. and learned Gentleman said that spending Departments would have to make significant cuts in future years without knowing where the money would come from, but efficiency savings were imposed year after year after year by Tory Governments without Departments having any idea of where the savings were to be made. He referred to low growth of 1.8 per cent. What he did not say, of course, is that that follows an unprecedented and unbroken run of high growth for eight years previously. He made several comparisons with 1992, saying that the level of this or that was lower than it had been then. I remind the House that 1992 is a very significant date: during that year, the Tory Government was unceremoniously pitched out of the exchange rate mechanism.

The right hon. and learned Gentleman said that he did not know how the economy would bounce back. None of us can know, but we have heard the same thing time and again, and on each occasion the pessimism has turned out to be unjustified.

After all that rumbustious, knockabout criticism, which I suppose we are meant to enjoy, the only remedy that the right hon. and learned Gentleman could come up with was his proposition that we did indeed need improvements in productivity and investment. Of course we all agree on that, but it is exactly what this Government have been doing for years, not least in the Budget.

Let me now turn to a slightly more sober assessment of the Budget—

Photo of Kenneth Clarke Kenneth Clarke Chair, Tax Law Rewrite Bills (Joint Committee)

Of course there are years in which growth in spending must be constrained below the growth of the economy, and the beginning of the 14 years of growth that we have enjoyed was accompanied by a long period of that kind, for which I was responsible. What I do not understand is why the Government put that in the Red Book and then deny that it is what they are doing, and why they attack the Conservative party vigorously every time we suggest that there is an urgent need to restrain the growth of public spending, as if we were doing horrendous damage to public services. The Chancellor is actually preparing to reduce growth in public spending below the likely rate of growth in GDP for several years following 2008, to remedy the problems that he has got into and the damage that has been done to the public finances since 2000.

Photo of Michael Meacher Michael Meacher Labour, Oldham West and Royton

We should certainly see what happens after 2008, but I do not think that we need any lessons from the Tory party about the level of public expenditure. If the right hon. and learned Gentleman could give the Government credit for achieving a much higher run of public expenditure over many years than we have had before, his prophecies of doom might carry rather more credibility.

The Budget contained many excellent provisions, not least on education, but, surprisingly, one foundation of our national prosperity was not much mentioned. I refer to the state of our manufacturing industry. Prominent attention was given to knowledge-based services, but they account for only a fraction of total export earnings—less than a third of the earnings from the export of manufactured goods. They pay for only a quarter of the expenditure on manufactured goods that we want to buy. Yet our manufacturing base, which is the lifeblood of the country, is in long-term decline, and that continues. Output continues to fall and we are losing 100,000 jobs a year, without any prospect that the services sector will ever be large enough to compensate for the weakness of manufacturing. The facts are stark, and not just one Government are responsible. The position dates back over many decades. The share of manufacturing in total UK output has almost halved since 1979.

That is serious enough, but in recent years it has been accelerating. In 1970, fewer than 10 per cent. of manufactured goods sold in the UK were imported; now the proportion is 60 per cent. Whereas in other developed countries manufacturing output has been growing—although, admittedly, less than the services sector—the key point is that in Britain there has been not just a relative but an absolute fall in manufacturing in recent years. I do not think it an exaggeration to say that if those trends continued, manufacturing in Britain could almost face extinction within 30 years or so.

I am well aware that the decline in manufacturing jobs is seen in some circles as a sign of healthy efficiency rather than failure. Despite the avalanche of Chinese-made goods that is hitting western shops, the free trade lobby draws attention to the continuing expansion of manufacturing output in most developed countries. It recognises that jobs have been lost, but claims that that is because workers are replaced by new technology to boost productivity, while labour-intensive sectors such as the textile sector have given way to higher-tech ones such as IT and pharmaceuticals. Low-skilled jobs, they say, have moved offshore, while higher-value-added research and development, design and marketing have prospered at home.

There are several things wrong with that argument. First, China and India are not dominant merely in low-tech sectors. They are turning out a third of a million new engineers each year, and are rapidly entering high-tech and service areas such as design, software and digital technologies. Moving upstream—the current conventional wisdom—will not escape Asian competition at cut-price rates.

Secondly, where new jobs have been created in Britain over the past decade they have been largely low-paid, low-skilled and often part-time jobs in retail, catering, entertainment and care services.

Thirdly, there is a regional mismatch. Manufacturing jobs have been lost largely in the north, while the expansion of business and financial services has been skewed to the south. There is a danger that continuing manufacturing losses, combined with the lack of any effective regional industrial strategy—which we have seen in this country for about 30 years—will leave large swathes of the country outside the south and the south-east increasingly denuded of highly paid and attractive jobs.

It is also worrying that Britain has been hit harder than other developed economies. After the oil shock of 1973, US manufacturing output has grown by about 120 per cent. Ours has grown by 15 per cent. US companies now achieve more than twice the production level since then with the same number of workers, while British companies produce about the same as they did before with almost half as many workers. Productivity here has been almost exclusively at the expense of labour-shedding, and I think that that is perhaps the biggest failing of the British economy over the past quarter of a century.

How can that endemic failure be addressed, and how can de-industrialisation be halted, as I believe it must be? I think that the Government were absolutely right to identify the key problem as the well-documented gap between the productivity of the UK and that of its major competitors such as France, Germany and the United States. They have genuinely tried to raise Britain's traditionally low levels of skill, investment, research and development and innovation. Statistics show that over the past quarter of a century the UK seems to have closed the skills gap between us and the US, but there is still a significant skills gap between us and European countries such as France and Germany. Interestingly, in higher skills—at university levels—we just about match those countries, but we are still far behind when it comes to intermediate skills, by which I mean technical qualifications such as higher national diplomas. Many experts say that those represent the hinges of economic performance, and I think that they require more attention.

Another area of chronic UK weakness that still remains is investment. Despite all the Government's efforts—they have put in a great deal of effort—Britain has performed significantly worse than all its main competitors in terms of capital investment per worker hour. A recent cross-national study found that German, French, US and Japanese levels were no less than one third to two thirds higher than the UK level. That is a massive gap.

I accept that the UK record has strengthened markedly in the last decade. The quality of capital has also improved, which is important, and the impressive growth in information and communications technology investment has begun to have an impact on output growth. However, getting UK plc to invest adequately is still a big problem.

Britain also continues to lag badly in R and D expenditure. Again, many studies have shown that such expenditure contributes significantly to productivity growth. Despite the Government's welcome and substantial encouragement of business R and D, not least in the Budget, Britain still spends far less of its GDP on R and D—as much as 45 per cent. less than Japan and the US. Moreover, it is a serious weakness that British R and D, such as it is, has been much too heavily concentrated on two industries—defence and pharmaceuticals—instead of being cascaded across industrial sectors, where technological capability is now more important than price competitiveness.

Another factor is almost wholly ignored, which the Government should take on board. As the London McKinsey strategy consultancy recently commented, many UK manufacturers fail to implement management methods, including involving shop-floor workers in improving production, that rivals abroad have recognised produce results and have therefore taken on. Improving people management and working practices should be central to the Government agenda, rather than being treated as subsidiary to investment, innovation, skills and competitive labour and product markets.

Another worrying point is particularly disturbing at present: Britain's current manufacturing weakness, combined with the Government's neo-liberal ideology, has exposed some of Britain's most prized industrial assets—P&O, BAA, Standard Chartered Bank, Centrica, BOC and Pilkington—to foreign takeover. There is absolutely nothing wrong with the occasional foreign takeover, but industrial jewels such as those have been auctioned off—thus gaining, in effect, subcontractor status—to pay off very large deficits. Losses of that scale at the highest reaches of industry need to be stemmed if Britain's overall national manufacturing capability is not to be irredeemably mortgaged beyond democratic control.

Above all, if we think that market forces are paramount, let us look at the US. The US record has been built on not only unalloyed market forces, but on heavy R and D expenditure, channelled through the universities; on military Keynesianism; on Government procurement, as a protagonist for US industry; on a resort to protectionism, where foreign pressures become too great; and on a low dollar exchange rate to assist exports. If that is market ideology, we need more of it here.

Photo of Adam Price Adam Price Spokesperson (Defence; Transport; Economy & Taxation; Miners Compensation; Regeneration; Trade & Industry) 7:02 pm, 28th March 2006

It is always a pleasure to follow Mr. Meacher and to hear in his speech echoes of what, in my youth, we used to call the alternative economic strategy, which is much needed even today.

I was struck by something said by Mr. Clarke. Of course, it is true that economic policy has become slightly boring under this Government, although that could be to the Chancellor's credit. Balance of payments crises were enlivening, but that was of little cheer to the people who suffered as a result. Not even the Chancellor, with his considerable reserves of self-belief, would argue that he has abolished the business cycle. Crises may not be as cyclical as they were under previous Governments, but they are structural, sectoral and spatial.

I want to talk about the pensions crisis, future and present, the manufacturing crisis, past and present—it may not have much of a future, as the right hon. Gentleman has argued—and the energy crisis that is looming on the horizon. I also want to talk about the north-south divide, which can hardly be called a crisis because it has been with us so long. Certainly, in Wales, we can trace it as far back as the collapse in coal prices in 1924. Despite its long pedigree, it is no less serious, and it has worsened under the Government's charge.

Let me take pensions first. I am not referring to the looming deficit in the public sector pensions, which is obviously very much in the forefront of our minds today; I am talking particularly about the problem of deficits in the corporate sector that have clearly caused 85,000 workers to lose their pensions over the past few years. Sadly, they have not been recompensed in full by the Government. There is a huge problem with pension liabilities in the private sector, and more and more companies are being pushed into bankruptcy, which is causing massive job losses. As a result, companies are increasingly diverting some of the money that would have been available for capital investment—we have heard about the downward pressure on business investment—to their pension schemes because of those liabilities.

A large part of the problem is of the Government's making—it is within their control—and I am talking about gilt yields, which have reached absurdly low levels under this Government. Of course, the lower the yield with gilts, the bigger the pension fund deficit. Long-term index-linked bond yields are now at 0.75 per cent. Although that is ridiculously low, it is, of course, very good news for the Government's Debt Management Office, but bad news for virtually everyone else: bad news for pensioners and for the companies that are facing huge problems.

Of course, the Government argue that there is no clear evidence that increased pension contributions have significantly affected business investment in aggregate, according to the Budget statement. They argue that there is record profitability in the corporate sector, so it should have the resources even to cope with those higher demands. The problem is that profitability is uneven in the corporate sector. Many of the companies, particularly in the manufacturing sector, that have final salary schemes and are therefore coming under the greatest pressure do not have the profitability that is evident in, for example, the banking sector. That argument simply does not hold.

The reasons for the problems with gilt yields relate to the fact that the Financial Services Authority has changed the rules on solvency for insurers, forcing them to hold more gilts, as a result of its interpretation of the bear market, and particularly to the introduction of the Pension Protection Fund, which, given the risk-based levy, is creating a huge incentive for pension funds to take on more long-term bonds, which are lower earning but lower risk. As a result, we have the bizarre position that the pensions industry is driving up the price of gilts, thus leading to lower yields.

Of course, the pensions industry will suffer more than any other because of falling yields. We have a vicious cycle. The Government are not issuing enough bonds. Promises were made. The industry was expecting £70 billion in extra bonds, but got only £63 billion. The analysis of most independent observers is that there is a structural deficit of long-term bonds running into hundreds of billions of pounds, given the need of pension funds to take on Government securities.

There is an insatiable demand, which will drive down gilt yields even further—thus driving more companies out of business, causing more pension fund deficits and possibly overloading the Pension Protection Fund, behind which the Government have so far refused to stand in the event of a major crisis. I hope that the Chancellor is not doing that because it is a source of long-term cheap finance. That would be an incredibility short-term policy, especially as the current position is not sustainable.

The manufacturing position has been well outlined by the right hon. Gentleman, and I need not support his comments further. We have experienced a serious fall in the growth of business investment, as well as in spending on R and D. The Government have said that one of the key long-term determinants of productivity growth is the amount of capital investment per worker. As has been argued, there has been a sustained, long-term failure on the part of the UK business sector to invest capital. I was interested to hear in the Budget statement the figures on business investment, which now include private finance initiative capital investment. Previously, expenditure on the health and education infrastructure would have been included under Government investment; now, it is included under business investment. If one removes that element from the figures, it is clear that business investment growth is even worse. We need to be absolutely clear that the £10 billion extra that is being included next year will distort the business investment figures.

In addition to problems with manufacturing and the poor record on business investment, the transport infrastructure is very poor. Incredibly, this week's official figures show that on average—I do not exaggerate—roads in Wales are resurfaced every 97 years. That is incredible. I can think of no other country in western Europe, let alone one in eastern Europe, that is in such a position. Moreover, there is the ongoing tale of UK workers with very low skills levels, problems with basic literacy and numeracy, and the problem of rising energy costs.

All of that feeds into the growing north-south divide. Kerry McCarthy referred to the Government study on English cities, published at the time of the Budget, which itself pointed out that the "industrial powerhouses" of the past—Liverpool, Sheffield, Newcastle—have found that

"the transition to a knowledge-led service-based economy has not been easy".

That is an understatement, if ever there was one. The report goes on to show that the problem is the "over-dominance of London" in the UK economy. We have been making that point ad nauseam for many years. Cambridge Econometrics' figures, published this week, show that the situation is getting worse under this Government. According to its report, growth in the past nine years has been slowest in Scotland and in the north of England, where gross domestic product rose by 6 per cent., rather than by the UK average of 24 per cent., over the same period. That is a huge divergence in economic performance. It is only because of the downturn in the London financial services sector in the past three years that the divergence has not worsened.

So what do we get? Because of recent problems with London's financial services sector, we get a report on the problems of London's financial services sector. Where was Government leadership on the problems of the manufacturing-based economies of the west and the north of these islands? We in Wales have experienced a net loss of 72,000 manufacturing jobs since this Labour Government took office. Indeed, under their policies there has been a net loss of 7,000 manufacturing jobs in the past year alone. They should not be sanguine about unemployment. Unemployment in Wales is rising twice as fast as in the rest of the UK—a pattern that we will begin to see in all the regions in which manufacturing is still the economic base. Of course, the intermediate business services that serve that sector are also vital to our economies.

Under this Labour Government, there are even 11 UK localities that have seen a real-terms decrease in gross value added per person. That is incredible: 11 localities are actually going backwards in real terms under a supposedly socialist, redistributionist Government. Four of the five localities at the bottom of that list are in Scotland and Wales. The stark message is that we will have less of the policy-based evidence-making that we have seen too much of under this Government. The UK's regional, local and national economies have become more divergent, more quickly, than even under the Government of Mrs. Thatcher.

Photo of Iain Wright Iain Wright PPS (Ms Rosie Winterton, Minister of State), Department of Health 7:14 pm, 28th March 2006

It is a pleasure to follow Adam Price, whose technical expertise in these matters is obviously very great. I want also to pay tribute to the speech from my hon. Friend Edward Miliband, who unfortunately is no longer in his place. He took us back to the year 1988, which I remember very well. That year, I did my GCSEs, left school and met my future wife—so it was not all good.

I want to concentrate on how the broad macro-economic factors mentioned in the Budget will impact on my region of the north-east. With that in mind, I was particularly pleased that my right hon. Friend Mr. Milburn contributed to this debate, and I believe that my hon. Friend Helen Goodman is also hoping to catch your eye, Mr. Deputy Speaker.

I warmly welcome the Budget's emphasis on addressing the drivers of productivity: improving competition, promoting enterprise, supporting science and innovation, raising skills levels and encouraging investment. Addressing these issues is a prime concern in my region. We in the north-east have reason to be optimistic, and given that it is my right hon. Friend the Chancellor's 10th Budget, it may be worth pointing out that in the past 10 years we have seen a 10 per cent. increase in the number of jobs in the region. The number of business start-ups is increasing and more young businesses are surviving—at a better rate, in fact, than in any other region. However, we need to address the long-term structural weaknesses in the north-east's economy and our economic performance in relation to the rest of the country.

Despite improvements, far too few people in our region are in employment. For example, unemployment in my constituency has fallen from 9.9 per cent. in 1996 to 4.6 per cent. now, but that is still too high. Although the north-east has broadly the same ratio of working people to the total population as the national average, some 11 per cent. fewer are economically active. It has been estimated that if the north-east raised the proportion of people in work to 80 per cent.—the Government's medium-term target—its output would increase by some £12 billion. That would have a tremendous impact on the UK economy, but more importantly, it would transform the lives of the people of the north-east.

Our skills profile is also relatively low. Despite real improvements since 1997, our region still suffers from appalling disadvantages at the lower end of the skills sector. More than a third of the working population have either no qualification or are qualified below level 2—four to five percentage points below the rest of the country. As my right hon. Friend the Chancellor has rightly identified, globalisation and intense competition from the likes of China and India will make it increasingly difficult for those with low skills to be part of our economy. For economic reasons, but also for social and moral ones, we as a country need to move away from low-paid, low-skilled work. On reading yesterday's Hansard, I was particularly struck by the comments of my hon. Friends the Members for Coventry, South (Mr. Cunningham) and for Burnley (Kitty Ussher). I agreed with everything that they said in promoting manufacturing in the north-west and the midlands.

The north-east still has a relatively high proportion of manufacturing industries and jobs. Speaking as a Member who wants the north-east to retain and build on its reputation as an area of excellence in manufacturing, I believe that the threat from China and India means that we will have to be even more innovative, and provide the world with higher value-added manufacturing goods. The region therefore has to be even more determined to improve its skills base, and to do so faster than other parts of the country.

The third structural weakness is that our region's culture suffers from a relative lack of enterprise. Despite recent success, our region has significantly lower business start-up rates than other parts of the country. Both public-funded and privately funded research and development is disproportionately concentrated in the south of England. However, I hope that the expansion of R and D tax credits for small and medium-sized enterprises announced in the Budget will help matters.

The culture to which I refer goes back decades. The north-east has suffered greatly from the legacy of heavy manufacturing decline. In the 20th century, towns such as Hartlepool did not have the cultural identity to encourage enterprise. Men such as my grandfather were part of a mass work force in the shipyards, steelworks and factories. Tens of tens of thousands of men—they were predominantly men—were employed to do the same thing, often for years at a time. Innovation, enterprise and creativity were not encouraged because they were not considered necessary.

When decline came in the 1970s and 1980s, exacerbated by the policy decisions of the last Conservative Government, we saw mass unemployment and the subsequent social problems that accompany it. Culturally, the collective psyche of Hartlepool and the north-east found it understandably difficult to move on from the safe, risk-averse feeling of being part of a large work force to being risk-aware, innovative and ambitious, so I welcome the Budget announcements to encourage enterprise and instil a culture of entrepreneurialism. I agree with the excellent points in a similar vein made earlier by my hon. Friend Kerry McCarthy.

A local enterprise growth initiative—or LEGI—was announced in last year's Budget, to provide substantial sums to the most deprived areas to stimulate economic activity and productivity. The first round of successful applicants was announced recently and I was disappointed that Hartlepool was not included, although as my speech is about the north-east economy, I congratulate my right hon. Friend the Prime Minister and the Minister of Communities and Local Government, my right hon. Friend Mr. Miliband, who secured LEGI funding. I hope that Hartlepool will be more successful in the second round of LEGI funding in 2007–08, because I genuinely believe that my constituency, which has some of the most deprived areas in the country, requires that investment to boost activity, performance and productivity.

I welcome the moves in the Budget towards enterprise education: the creation of the schools enterprise education network, the establishment of enterprise summer school pathfinders and the launch of the United States enterprise scholarship scheme for undergraduates. The argument that enterprise can be learned in a classroom may be sneered at in some quarters, but such schemes play a large role in embedding a can-do attitude and fostering an enterprise culture that provides young people with the confidence to start their own business or to suggest innovations in the workplace. In the long term, that must be good for the productivity of our economy.

Closely linked to the enterprise culture is the need for high skills in the workplace. The Chancellor's emphasis on education in his Budget statement was absolutely right. Education is the route out of poverty and the real way to transform lives. The opportunity to receive a good education should not be based on who a child's parents are or how much money they have. My right hon. Friend was right to point out that increased investment in education makes a real difference. We need only look at my constituency to see that.

In Hartlepool, we have doubled spending per pupil since 1997. We have increased the number of teachers and doubled the number of classroom assistants. As a result, Hartlepool has achieved the fastest improving education results in the country over the last few years. The percentage of 11-year-olds achieving the accepted level or above in English has risen from 48 to 79 per cent. The percentage of 14-year-olds achieving the accepted level or above in maths has risen from 47 to 75 per cent. In 1997, only 30 per cent. of children left school with five GCSEs at grades A to C; now, the figure is 53 per cent. More students than ever are going on to study A-levels and going to university. So it is quite insulting that on the day of the Budget the shadow Chief Secretary said, on "BBC News 24", that increasing state school spending was "not the answer".

My concern about those real improvements in education is that well-educated young people are moving away to university and being sucked into the economic powerhouses of London, the south-east and other cities, which means that towns such as Hartlepool are losing their foundation for ongoing economic success. A sense of place is vital to boost productivity and prosperity in deprived areas such as mine, and I hope that the initiatives announced in the Budget will do more to encourage people to stay in the north-east and grow businesses.

Obviously, there is more to do, but I am encouraged by the progress made so far and feel passionately that the Chancellor's announcements last Wednesday will improve matters still further.

Photo of Daniel Kawczynski Daniel Kawczynski Conservative, Shrewsbury and Atcham 7:24 pm, 28th March 2006

During the general election campaign, quite a few senior citizens in Shrewsbury told me that they were tempted to vote Conservative but would actually vote Labour because of the £200 grant that they would receive towards their council tax. They were under the impression that the Labour Government would help them with council tax and they were grateful.

Photo of Daniel Kawczynski Daniel Kawczynski Conservative, Shrewsbury and Atcham

Leo Blair is one of my constituents, but I did not discuss that matter with him.

It now transpires that the £200 grant will be taken away. In Shrewsbury, council tax is due to rise by about 4 per cent. this year, which will add £50 to the bill for an average band D property, so senior citizens in Shrewsbury will have to find an extra £250 towards their council tax bills compared to last year. That is a disgrace. How does the Chancellor expect senior citizens in Shrewsbury miraculously to find an extra £250?

The Chancellor said a great deal about how he will help with concessionary travel, but Shrewsbury council officers say that the Government are not giving them enough money to provide it—there will be a shortfall of at least £200,000. That will have to come from the local council, which will have to raise taxes to meet it. On the one hand the Government take great credit for providing incentives, yet on the other, they shove the responsibility and cost of providing the services on to local authorities.

I feel passionately about the Royal Shrewsbury hospital, which I have described in the past as my beloved hospital. It is £30 million in debt, with a strong possibility of 300 job cuts there and at neighbouring Telford hospital in the coming year. I find that absolutely petrifying, as do my constituents. There are also threats to services.

There was nothing about health in the Budget and the Chancellor has let the problem of NHS deficits go to the wall. He does not seem to want to take responsibility for them. In March 2005, when I was a Conservative parliamentary candidate, a delegation from the hospital visited me. It included senior consultants, doctors and medical practitioners, who told me, "We are extremely concerned about the forthcoming financial deficits, but we are not allowed to raise our concerns publicly. We have been told that in the run-up to a general election we are to keep our mouths shut."

Photo of Ed Miliband Ed Miliband Labour, Doncaster North

Did those nurses and doctors say whether they thought the NHS was better than it was in 1997?

Photo of Daniel Kawczynski Daniel Kawczynski Conservative, Shrewsbury and Atcham

I think they said that some things were better but that other things were far worse.

We managed to highlight the problem in the local papers in March 2005, but a year later nothing has been done to address it. I am about to say something controversial—nobody has said this so far: we are all passionate about our country and we all want our Olympic contestants to do extremely well in the games, but when the Royal Shrewsbury hospital is £30 million in debt, my doctors and nurses face the sack and we have a crisis in the national health service, the Chancellor should not be giving £200 million to the Olympic team. Controversial. But that is how passionately I feel about the Royal Shrewsbury hospital.

My second point is about carbon dioxide emissions. I am a member of the Select Committee on Environment, Food and Rural Affairs, which is looking into our obligations on CO 2 emissions. The Chancellor has imposed a tax on 4x4 vehicles and the Lib Dems have repeatedly campaigned about them, saying that they will tax 4x4s until the pips squeak. They fail to realise that many people in rural constituencies, living in villages such as Cardington, which is perched on top of a large hill, or running farms, need a 4x4 to get around. So, the Chancellor is penalising hard-working farmers and families who live in rural areas. By imposing the tax, he is certainly not going to stop super-rich people in Westminster from buying those large vehicles. Why is he using a blatant tool such as this to punish people who live in rural communities?

Photo of Martin Horwood Martin Horwood Shadow Minister (Environment, Food and Rural Affairs)

I note that the hon. Gentleman was casting some aspersions about the commitment of the Liberal Democrats to rural areas. Does he agree with my hon. Friend Chris Huhne when he said:

"The restructuring of vehicle excise duty is welcome but will not go far enough . . . The cost for gas guzzlers will be less than one full tank of petrol and brings with it no protection for the small number in rural areas who have a genuine need for four-wheel drive vehicles"?

Does he accept that that is actually our position?

Photo of Daniel Kawczynski Daniel Kawczynski Conservative, Shrewsbury and Atcham

All that I know is that a lot of people in my constituency—farmers and people who live in rural areas—will be adversely affected by the tax.

I was visited by 45 ladies from the Shropshire women's institute. We had a splendid afternoon together.

Photo of Edward Leigh Edward Leigh Chair, Public Accounts Committee

I hope that they kept their clothes on.

Photo of Daniel Kawczynski Daniel Kawczynski Conservative, Shrewsbury and Atcham

Well, we discussed a range of issues. Many of them live in very rural communities and they highlighted their anger about the tax.

The Chancellor of the Exchequer spoke about the moves that the Government are making to reduce CO 2 emissions and meet our Kyoto targets. As he knows and as the Prime Minister said on Australian television today, Great Britain accounts for only 2 per cent. of CO 2 emissions. I would have been far more impressed with the Chancellor if he had managed to bring to the House an agreement with the Chinese Finance Minister, Mr. Jin Renqing, and if he could convince him to take the matter seriously and to reduce China's CO 2 emissions. If the Chancellor could present the House with a treaty that the Chinese had signed to reduce CO 2 emissions, that would impress me. He is doing very little to make the Chinese more obliging on this matter.

There was no help for public sector workers. As has been mentioned already, today we have had the largest strike since 1926. Many public sector workers in Shrewsbury are striking today and feel very concerned about the fact that their pensions are going to be changed. They believe that some of the things that are happening in relation to the pension changes are contrary to the law of the land. I am sure that those things will be tested through the courts. What a shame that that the Chancellor did absolutely nothing in the Budget to help those people. I recently saw a delegation of such people in Shrewsbury. Some of them are strong Labour voters, but they informed me that they will never vote Labour again, which greatly encouraged me.

I do not think that farmers have been mentioned today, but, as I represent an agricultural constituency, I wanted to raise the issue. In particular, I want to talk about dairy farmers. I am so concerned about dairy farmers that I am setting up an all-party group on the issue. Some 70 Members have joined from all sections of the House. I am glad that the Chancellor has just entered the Chamber. What a shame that he failed to say a single thing about our farmers and the crisis that British agriculture is facing. He is so obsessed with Labour strongholds that he fails to remember the crisis of our rural community. There was not a single extra penny for that, in a week when there have been calls for the resignation of Lord Bach, who has appallingly mismanaged the single farm payments scheme, which has had appalling ramifications for Shropshire and Shrewsbury dairy farmers. In fact, I know of only one farmer who has received his single farm payment so far. We were promised that the bulk of our farmers would receive their payments by the end of March. It is now the end of March and next to none of them have received their payments. Before the Chancellor leaves the Chamber, I hope that he takes on board my strong concern—[Interruption.] No, he is not taking it on board; he is leaving—as usual. But I hope that, in the future, he does take on board the concerns of Shrewsbury dairy farmers.

Lastly, I will talk about something close to my heart. Today, I held a Westminster Hall debate on the provision of money to senior citizens who are in care homes or nursing homes. Unfortunately, not a single extra Member of Parliament attended my debate, which I was very disappointed about. However, the issue is huge and affects a lot of people in Shrewsbury. I have many people coming to see me who have had to sell their parents' home to pay for long-term care for them. I know that my generation will not be able to rely on the state to provide such care, which is why we will have to take out insurance policies to look after our parents, but members of this generation believe that it is the responsibility of the national health service and the state to provide long-term care in nursing homes. So I am very regretful—[Interruption.] Edward Miliband is making hand movements at me. I am not quite sure what he is trying to say.

Photo of Ed Miliband Ed Miliband Labour, Doncaster North

The point that I was making is that, listening very intently to the hon. Gentleman's speech, I have heard lots of proposals for tax cuts and lots of proposals for more spending. I wonder whether he thinks that those two things add up.

Photo of Daniel Kawczynski Daniel Kawczynski Conservative, Shrewsbury and Atcham

I have the benefit of not being on the Front Bench, so I can say what I like, quite frankly. On that note, I will conclude my speech.

Photo of Helen Goodman Helen Goodman Labour, Bishop Auckland 7:36 pm, 28th March 2006

I am pleased to take part in the Budget debate and to follow Daniel Kawczynski, who seemed not to acknowledge that spending on the NHS is now at a record high and that we are going to have an increase of £6 billion next year. He displayed the attitude to climate change that Labour Members are becoming used to hearing: he willed the ends, but not the means. Indeed, from what he was saying about China, he seemed to be looking urgently for a translation from Shrewsbury to Shanghai. I am also pleased to follow my right hon. Friend Mr. Meacher, who spoke about manufacturing, which is a concern in my constituency, and my hon. Friend Mr. Wright, whose seat is in the north-east and who spoke eloquently and with compassion about the needs in the north-east.

Last November we held a conference in Bishop Auckland to examine the needs of the local economy, which is largely manufacturing based. We brought together small and large businesses, trade unionists, academics and policy makers to consider how to develop our manufacturing sector in an economy increasingly dominated by services and threatened by low-cost competition, and how we will ensure that workers have the skills needed to innovate and encourage entrepreneurship.

I believe that active government can make a difference to local economic success. In the north-east we should resist the temptation to engage in special pleading based on relative economic weakness. Instead, we must focus on using the potential of local people, too many of whom are still workless and, as my hon. Friend described, lack the skills and confidence to succeed. We need to create a framework that encourages businesses to innovate, invest and grow. That cannot be achieved through a laissez-faire approach that assumes that the market will take care of everything. It requires active intervention by Government agencies to embed skills in the work force, develop transport and communications infrastructure, and strengthen business networks.

At the conference, Professor Ian Stone of Durham university business school pointed out that 100 years ago the north-east economy had all the qualities that we need now: leading edge sectors, a strong demand for products and services, high levels of innovation, dynamic industrial clusters, a skilled work force, high productivity and growth, and net inward migration of skills. Of course there are examples of that today, such as NETPark, on the border between my constituency and the Prime Minister's. It is a partnership between the local authority, the university and the private sector to promote new technology. None the less, we need to strengthen such qualities.

George Cowcher of the North East chamber of commerce undertook an interesting survey of what manufacturing companies in my constituency wanted. Their priorities were work force skills, better transport infrastructure, less red tape, better business support and access to finance. Tommy Brennan of the GMB called for support for manufacturers and environmentally friendly technologies. I shall assess the Budget against those demands.

First, on work force skills, the Chancellor of the Exchequer is surely right to increase resources in our schools. There has been a tenfold rise in schools investment since 1997, and the 50 per cent. rise in schools investment next year will make a huge difference. For example, there will be a completely new school in the village of Byers Green, where teachers and pupils are now struggling in a 1915 building. The extra money for science teachers and new science clubs will be welcomed both in the Glaxo plant in Barnard Castle in my constituency and in Bishop Barrington school, which I visited recently. The school has had one new lab, but needs another one. The Chancellor's approach will build on collaborations such as that in the north-east process industry cluster, which provides visits and science training for local schools.

The new entitlement to, and grants for, further education for people up to 25 will have a significant impact in my constituency. Bishop Auckland college is now getting a completely new building to accommodate the 60 per cent. rise in students in the past five years.

On transport infrastructure, County Durham needs better roads going south and north. The extra £800 million outlined in the Red Book is enabling the A66 between North Yorkshire and County Durham to be dualled, which will both improve safety and cut business costs.

As someone who used to run a small voluntary organisation, which is a sort of small business, I am sympathetic to calls from business for less red tape. I am sure that business will benefit from the new code for risk-based regulation and the proposals to introduce that in Europe, too.

Manufacturers in my constituency said that they wanted business support and more streamlined one-stop shops. The growing role of the manufacturing advisory service, and a smaller number of business services offering more targeted support, represent the right way to go. There are young entrepreneurs in the north-east who will benefit from the national enterprise network of 200 summer schools. Accessing finance for small and growing businesses can be hard, so the proposal to expand the R and D tax credit, the new tax relief for investment in venture capital trusts and the £100 million of new money to double enterprise capital funds are all welcome.

The Chancellor of the Exchequer's proposals to support our renewables and energy efficiency industry will achieve three objectives—our climate change targets, our obligations to the developing world, and the sustainable development of our manufacturing base. The new environmental research institute and the seed-corn finance for the first enterprise capital fund for the environment demonstrate the Government's commitment to action, which contrasts sharply with the position of Opposition Members. In addition to the 5 per cent. biofuels quota, the increase in the duty differential for biofuels will be of particular benefit to Farmway—a farmers co-op in my constituency engaged in its manufacture.

As my hon. Friend the Member for Hartlepool said, in the north-east, labour market participation is below the national average. Sue Stirling of the Institute for Public Policy Research north believes that if we could get recipients of incapacity benefit into work, we would close the gap. There is already a successful pilot at the Bishopgate medical centre to support people back into work, so the proposals to reform the linking rules for incapacity benefit, which discourage some people from experimenting with taking jobs, are very welcome.

Before the Budget, I met members of the Wear Valley pensioners association. One of the things that they most wanted to see was the extension of free bus passes nationwide, so I am sure that they welcome the £250 million that the Chancellor is providing for free bus travel nationwide next year. Such travel will be available to all 17,600 pensioners in my constituency.

In February I visited Mr. and Mrs. Hodgson, who had benefited from a Warm Front grant. Improving energy efficiency is the best way of tackling fuel poverty and meeting our climate change objectives, so I am especially pleased that the Chancellor has increased the number of households that will benefit by 250,000 over the next two years.

The people of Bishop Auckland are not focused on their own interests alone, however. During Fairtrade fortnight, many of them signed a petition calling for the Government to keep their promise to raise aid to 0.7 per cent. of GDP, so they will be pleased by the increase in development aid set out by the Chancellor.

Opposition Members simply fail to understand the significance of the Government's successes and long-term strategy for the British economy. Since 1997 unemployment in my constituency has fallen by 41 per cent., and it has fallen by 11 per cent. in the country as a whole. Prudent fiscal and monetary frameworks have brought new stability to the British economy, and low inflation and interest rates enable businesses to plan and invest. That has allowed a steady programme of investment in public services. The Conservative party is committed to cutting public spending as a percentage of GDP, irrespective of need or circumstances. However, it will not tell voters which services it would cut. People need to know, because those public services not only improve our quality of life, but provide the skills and infrastructure for our long-term economic success.

Photo of Stewart Jackson Stewart Jackson Conservative, Peterborough 7:47 pm, 28th March 2006

As I rise to challenge the received wisdom that we are living in a land of milk and honey, I confess that I am gatecrashing the Chancellor's glee club on the other side of the Chamber. I have unashamedly looked at the Budget through the prism of the way in which it will affect my constituents and my constituency. There is a chasm between the Chancellor's rhetoric and the situation in the real world for business and the public services, which I shall touch on later in my speech. Such rhetoric includes:

"Britain is better placed than ever to be the global economy's success story" and

"Preparing Britain for 21st Century—Challenge of Globalisation".

I find it hard to reconcile those comments with a Chancellor who is imposing a social market model on this country and squandering the golden economic legacy that was left by my right hon. and learned Friend Mr. Clarke.

People have eschewed facts today, but facts are important, so let us consider the statistics. The tax take this year is £490 billion. Public expenditure is up by £207 billion since 1997. If one adds tax credits, as de facto welfare payments, into expenditure, 39 per cent. of our GDP is going on public expenditure. There will be £73 billion of public borrowing over the next two years, and tax will be up to 41 per cent. of GDP by 2011, or the equivalent of more than £7,000 a family.

Businesses have been much lauded by the Chancellor, but business investment is at its lowest for 41 years in cash terms. This country is 5 per cent. worse off for capital equipment than Germany and the United States. Output per worker has gone up by just 1.6 per cent. in the past nine years, which is well behind the figure for the United States of America. We know that the Chancellor has had to downgrade his growth forecast constantly, but we should also remember that he has got the tax-take projections wrong in the last six financial years. As my right hon. and learned Friend the Member for Rushcliffe pointed out, growth per output since 1995 has, according to the university of Groningen, fallen behind France and Germany. We are something like fourth or fifth in the list of output and productivity in the G7.

The Budget is also marked by a sleight of hand. We have heard nothing about the private finance initiative and the £60 billion that is off-balance-sheet debt. As my right hon. Friend Sir George Young said, we have heard nothing about the council tax bribe of £200—an urgent issue in 2005 before the general election, which is suddenly less urgent this year. We are constantly told by Labour Members that this is a Budget for the future that tackles the big issues, yet we have heard nothing about the Turner report or the structural reform of pensions. We have heard nothing except briefing in a turf war by the Treasury against Lord Turner and others.

Let me give one simple example of how the Government have done nothing for the most needy people in our society. The Alzheimer's Society has written that carers save the Exchequer £57 billion, but there is nothing for them except a slap in the face. They have been ignored.

Photo of Martin Horwood Martin Horwood Shadow Minister (Environment, Food and Rural Affairs)

Does the hon. Gentleman agree with the policy of the Alzheimer's Society, and of the Liberal Democrats, to implement the recommendations of the royal commission on long-term care?

Photo of Stewart Jackson Stewart Jackson Conservative, Peterborough

A policy review is being undertaken by my party. We have a realistic chance of being elected to government, unlike the hon. Gentleman and his colleagues.

There are other gimmicks, too. The planning gain tax will be organised on a regional basis. Does that mean that my constituents in Peterborough, where there is high growth and lots of house building, will suddenly find that tax going to Thurrock, Great Yarmouth or other Labour-voting areas?

There was nothing about manufacturing in the Budget. I pay tribute to Mr. Meacher, who has 30 years' experience in this place, and Helen Goodman for talking about manufacturing. In my constituency, in a city famous for its railways and engineering, 4,500 people have lost their jobs. Employment is down by 28.7 per cent. Under this Labour Government, whose members constantly attacked the Conservatives throughout the 1980s for their record on manufacturing jobs, we have seen a reduction from 15 per cent. of the economy to 12 per cent. of the economy. That is not a record to be proud of.

On the stamp duty threshold, even the Council of Mortgage Lenders has said that the policy will not work, because the threshold has not gone up in line with inflation and price rises. House prices in my constituency have risen by 100 per cent. in the past five years.

Reference was made to the impact of tax credits on the poorest in our society. There still is a 60 per cent. marginal tax rate. If someone on the minimum wage has the tax credits taken away when he works, the basic rate of income tax and the tax credit removal, combined with national insurance contributions, will mean that he pays a 60 or 70 per cent. real marginal rate of taxation. That is not good enough.

Yes, I pay tribute to the Government for at least trying to do something about child poverty, but the Chancellor should not forget the overall tax burden that falls on ordinary working families, not just the rich people in Chelsea tractors. I notice that the Chancellor paid tribute to the class war, keeping the "red in tooth and claw" leftist battalions on the Back Benches happy, but it was meaningless. It was student union gimmick politics—I am not referring to Harry Cohen.

I shall concentrate on two areas. We hear a lot about health and how health spending is the great panacea that will solve the problem of the NHS and the infinite demand for health care, but there was not a word about health in the Budget. Health is now embarrassing. The Secretary of State for Health said just two months ago that the deficit was unlikely to be more than £200 million. That is typical of this Labour Government: they are only out by a factor of five, because by the end of the financial year the figure is more likely to be £1 billion.

After nine years of the stewardship of the Chancellor, my constituency is losing 185 NHS jobs. Decent, hard-working and professional people are being thrown on the scrapheap. We have a cumulative budget deficit of £10 million over two years. Three wards are closing. That does not take account of the crisis in NHS dentistry in my city. Older people, children and young families are all being denied preventive dental treatment. We know that the Chancellor is keen on dentistry. He can get his teeth fixed at extremely high cost as part of his Trinny and Susannah-style makeover in preparation for moving next door to No. 10, but unfortunately my constituents cannot.

It is no good talking about gimmicks, such as paying consultants only a 1 per cent. increase in salary. The Chancellor knows full well that there are only 34,000 consultants, which is a drop in the ocean compared with the increase that he is paying to other health care workers. Together with things like the working time directive, "Agenda for Change" and the botched GP and consultant contracts, which overran by £390 million, that has brought a structural deficit to a majority of trusts. We need not even mention manipulation of the national tariff. I, and probably other hon. Members, cannot remember the last time the NHS so mismanaged the national tariff that it had to withdraw it and bring it out again.

David Howarth will no doubt speak eloquently about the cuts in mental health services in Peterborough and Cambridgeshire. Those are the most destructive cuts. Many of the young people affected by the cuts are vulnerable and need help. Their services are being cut hugely.

Photo of Ivan Lewis Ivan Lewis The Economic Secretary to the Treasury

Will the hon. Gentleman give us a comparison of the year-on-year increases in NHS expenditure under the Government whom he loyally supported with the year-on-year increases that we have seen in the NHS?

Photo of Stewart Jackson Stewart Jackson Conservative, Peterborough

Delighted to; obviously the hon. Gentleman has not been reading Hansard. For every year of the Conservative Administration, between 1979 and 1997 we spent 64 per cent. above the rate of inflation, and for every week that we were in power we spent £1 million on a new capital project. He will have to ask a trickier trick question next time. [Interruption.] Those are the figures, if he wants to check them.

On crime and policing, the Chancellor talks about police community support officers, but those are not fully trained policemen and women. They are decent civic-minded people who will do their best, but they are not policemen. We also hear about the regional forces that are being forced on our constituencies, allegedly costing more than £550 million, according to the Association of Police Authorities. The Government are going to fund that policy, possibly to the tune of £150 million, although no one wants it. It is a top-down approach. The police and local people are against it, but the Government have an arrogant disdain for local views and will go ahead with it anyway. As a result, we have to find £400 million from the council tax in my area and throughout the country—£400 million that is not being spent on crime fighting or tackling drugs, violent crime or antisocial behaviour, because it is being spent instead on new badges, new buildings and new management structures. That matters.

Let me give the detection rates for my basic command unit, the northern division of Cambridgeshire. Some 53 per cent. of sexual offences are detected, which means that 47 per cent. are not solved; 15 per cent. of burglary cases are detected, so 85 per cent. are not solved; and 20 per cent. of vehicle thefts are detected, which means that 80 per cent. are not solved. That is after nine years of a Government who came to power saying that they were tough on crime and tough on the causes of crime.

The Chancellor of the Exchequer is an old man in a hurry. Last week's Budget was a "cones hotline" Budget. It had no vision, it was full of bombast and hyperbole, and it was empty and vacuous. I note that the Prime Minister, even 12,000 miles away, has got his betrayal in first, so the Chancellor may not move next door very quickly. The Budget is full of gimmicks, and although it does not have any price tags or time lines, it includes the much vaunted reannouncement of education spending. It fails the people of my constituency and, above all, it fails the country.

Photo of Harry Cohen Harry Cohen Labour, Leyton and Wanstead 8:00 pm, 28th March 2006

I am grateful to Mr. Jackson for referring to me as a class warrior. If that means that I battle for hard-working people to be better off, and for public services to be improved substantially, I am proud. I congratulate the Chancellor on another effective Budget that will keep the economy stable while boosting public services. I very much appreciate the extra £585 million that will be made available to schools by 2007 in direct payments. I am keen, too, to thank the Chancellor for £100 million to facilitate safer neighbourhood teams in wards throughout the country. In my constituency, for example, Grove Green, Forest and Snaresbrook wards will have safer neighbourhood teams from the beginning of next month, so I thank him for reducing the wait they would otherwise have had.

I am pleased that the Budget contains measures to tackle climate change, including an increase in line with inflation of the climate change levy from April 2007, the introduction of a new zero rate of vehicle excise duty for the small number of cars with the lowest carbon emissions, and a new top band for the most polluting new cars. It is incredible that the Conservative party, given its talk of consensus and its desire for green credentials, cannot embrace the levy, which is one of the biggest efforts in this country to tackle climate change. If the Conservatives think that a voluntary agreement would work, they are living in cloud cuckoo land. I urge them to get real and support the climate change levy.

Photo of Martin Horwood Martin Horwood Shadow Minister (Environment, Food and Rural Affairs)

The hon. Gentleman is a sincere supporter of green taxation, which Liberal Democrats support, too. Does he not think that it is rather disappointing that green taxes in total have fallen from 3.6 per cent. of national income in 1999–2000 to just 3 per cent., which is even lower than it was when the Conservatives were in power?

Photo of Harry Cohen Harry Cohen Labour, Leyton and Wanstead

The gist of my speech is the measures needed to tackle climate change. At least the Chancellor has moved in the right direction, given the measures that I have already mentioned. It would certainly be a retrograde step if the Conservatives had their way with a so-called voluntary agreement instead of the climate change levy.

Aviation tax could be even more important than the levy. Figures from 2003 on carbon dioxide emissions from fuel combustion show that international aviation and marine bunkers were responsible for 3 per cent. of the world's total carbon emissions, or 223 million tonnes. That figure has since increased substantially. I shall return to aviation tax later, but I wish to deal with the taxation of oil companies, which is a complex issue and is not often raised unless the Chancellor refers to it or it is mentioned in the Treasury Committee. My perspective, however, is different. One of the Chancellor's greatest achievements was the introduction in 1997 of a windfall tax on oil companies that raised £5.2 billion, which was invested in the new deal—an employment strategy that put many young people into work. The new deal adopted four different approaches including, crucially, skills training. It transformed employment in this country and it was a great success.

Oil prices have gone through the roof, as have oil company profits. I tabled a question to the Treasury asking the Chancellor to

"assess the merits of introducing a windfall tax on oil company profits".

A ministerial reply on 28 February said that in last year's pre-Budget report there was a package of changes to North sea oil taxation, but that

"the Chancellor committed to no further increases in North sea oil taxation for the lifetime of this Parliament".—[Hansard, 28 February 2006; Vol. 443, c. 680W.]

I thought that that was strange, given that there have been record increases in oil company profits. Indeed, although the new deal is still in place it has diminished, and we need to make a new effort on skills training, which is the biggest priority in the field of employment. The Government have delayed the introduction of a new approach called BoND—building on new deal, but another windfall tax could be utilised for that purpose.

I undertook some research in the Library. As I said, the windfall tax produced £5.2 billion in 1997. The pre-Budget report shows that the Chancellor will receive £6.5 billion from the continental shelf oil companies in the North sea over the next three years. However, in the pre-Budget statement the Chancellor pointed out:

"Our economy has had to withstand an oil price rise from around $25 to a current price of around $55, which is also close to the level of almost all future projections. Returns in the North sea"— this is a key point—

"are now nearly 40 per cent. on capital, compared with ordinary returns of 13 per cent."

There is therefore scope for more taxation on oil companies. Indeed, the Chancellor told the Treasury Committee:

"The oil taxation change is on the basis that we expect oil prices to remain higher than what has been the previous range. The previous range was $22 to $28 and, even if the oil price was higher, OPEC expected oil to go back to between $22 and $28. We are now in a situation where at the beginning of the year it was $40, at one point it went to $70; it is now back to about $55. Our assumption is about $55 over the course of the next year."

There is therefore scope to increase oil company taxation by about another £1.5 billion quite comfortably over the lifetime of this Parliament. The windfall tax represented 10 per cent. of the taxes of those continental shelf companies. With the changes, we will get 8 per cent., but we could have got extra money from them. Their profits went up from £14 billion in 1997, which was a good year, to £21 billion per annum. We could have used the extra tax on their profits to improve skills training.

Aviation kerosene is duty-exempt. The Prime Minister has said that it might be included in a new emissions trading scheme as a first step. That is welcome, but the Chicago convention makes it illegal to tax fuel for international flights. The crisis is great. On 2 March The Independent reported:

"The boom in European air travel generated by cheap carriers is already threatening to wreck our attempts to bring climate change under control. Britons are forecast to take 101 million foreign trips by 2020", with

"a corresponding increase in carbon emissions."

The article continued:

"A tax on airline fuel is the obvious solution. That fact that the airline industry has been allowed to operate for so long paying no tax on their fuel is a scandal."

Oxfam has stated:

"Although aviation currently accounts for only 3.5 per cent. of total greenhouse gas emissions, it is one of the fastest growing sources of greenhouse gas emissions; because aviation also has the highest growth rate as a mode of transport, emissions from air travel are projected to increase five-fold by 2050."

Photo of Charles Walker Charles Walker Conservative, Broxbourne

Does the hon. Gentleman agree that one good way of reducing emissions in the long term would be to stop building additional runways for budget airlines?

Photo of Harry Cohen Harry Cohen Labour, Leyton and Wanstead

The hon. Gentleman makes a good point. Government policy must deal with aviation in the round.

According to the Library,

"Domestic aviation (to and from UK airports only) accounts for 0.4 per cent. of UK emissions. Only domestic aviation is included in target figures but if international aviation were to be included the figure would rise to 5.7 per cent. of UK emissions", and

"one fifth of all international passengers are travelling to or from a UK airport."

Photo of Geoffrey Clifton-Brown Geoffrey Clifton-Brown Shadow Minister (Foreign and Commonwealth Affairs)

The hon. Gentleman has just defeated his own case. If the United Kingdom imposed an aviation duty unilaterally, that would affect only domestic flights. Airlines would get their fuel from other countries. How would he propose to deal with that?

Photo of Harry Cohen Harry Cohen Labour, Leyton and Wanstead

As I pointed out, we are in a position of leverage because such a high proportion of airlines use the UK. We would be a big player in that argument.

The Government will not say how much would be raised by an aviation tax, but in an answer in 2003 they stated that introducing duty at the ultra low sulphur diesel rate would raise £5.8 billion and at the heavy diesel duty rate, £6.6 billion, so in addition to the environmental effects the Exchequer could raise a lot of money by that means.

A number of steps should be taken. First, we should threaten to leave the Chicago convention and use that as leverage to renegotiate it. It is ridiculous that there is a convention preventing taxation on international flights. We should press for renegotiation. Secondly, the Budget refers to the continental shelf oil companies and the taxation regime is directed at them, but all oil companies are making huge profits on all their activities. An excess profits tax could be imposed on them without the petrol price having to be raised. If we do nothing with regard to aviation, we should do more in respect of individual travellers, based on the price of a ticket so that the rich pay more. There should be more tax on cheap tickets as well.

Finally, there are still great emissions and energy wastage from buildings—in London, for example, as much as from cars. The Government need to address that in their taxation regime. We need to tackle climate change and promote environmental protection. The Budget has made a start, but we need to do more.

Photo of Martin Horwood Martin Horwood Shadow Minister (Environment, Food and Rural Affairs) 8:15 pm, 28th March 2006

The Budget claimed to be a Budget for education and a green Budget, but as my hon. Friend Dr. Cable pointed out, there were disgraceful omissions from the Budget in those respects and also in respect of the NHS. I shall take each of those in turn.

Education takes many forms, including the learning of IT skills. I am pleased that in the debate many hon. Members have mentioned the home computing initiative. There is a long history of using computers in my family and my constituency. My father, Don Horwood, helped to build the very first programmable digital computer, Colossus, during the 1940s at Bletchley Park. Bletchley Park became GCHQ and moved ultimately to Cheltenham, so there is a good connection.

Many families are excluded from the IT revolution that took place during my father's lifetime, sometimes because of their low incomes and sometimes simply because of inexperience in IT. The home computing initiative was a valuable programme not only because it gave access to IT equipment, but because it improved the employment prospects of those on low incomes and their families, and increased the overall set of IT skills of the nation, thereby increasing our productivity—another Budget theme.

It is disgraceful that the home computing initiative was abolished in the Budget. That was not flagged up in the Budget statement, of course, but was buried in the small print. The home computing industry was not consulted or informed beforehand, despite the existence of an industry body, the home computing industry alliance. I have had angry e-mails from constituents who are in the industry and who are appalled that that was done at such short notice and in such a sneaky back-door way. It is a very unfortunate cancellation of a valuable scheme.

Support for the NHS has been identified by other hon. Members as a subject that was not mentioned in the Budget speech. It is an outrage that it did not rate even a mention at a time when the NHS is in financial crisis. I do not represent one of those legendary 6 per cent. of areas that are in deep financial crisis. I speak for an area represented by Cheltenham and Tewkesbury primary care trust, which, as my neighbour, Mr. Clifton-Brown knows, has been in financial balance. It is a three-star primary care trust. We have an acute trust, Gloucestershire Hospitals Trust, which is a relatively low cost provider of services, doing exactly as the Government wanted it to do. We even have a mental health partnership trust, which is a three-star trust hoping to apply to be one of the first partnership trusts to gain the much-vaunted foundation status. That is precisely the kind of area that should not be in crisis.

Why, in that case, was it announced today that Battledown children's ward in my constituency will close as a 24-hour in-patient facility, despite pledges from all three primary care trusts and the acute trust last year that it would stay open? Why will St. Paul's maternity wing close in due course, and why will the Delancey rehabilitation hospital probably close? Why are adult mental health services to be rationalised, and a range of other services that were provided in both Cheltenham and Gloucester to be provided in only one place? I suspect that my neighbour, the hon. Member for Cotswold, will be considering community hospitals and local NHS services in his constituency with some trepidation given the overall package.

Why has that devastating news been delivered to the people of Cheltenham today? The answer is that the Department of Health got its sums wrong. Initiative after initiative, contract after contract and target after target have been inadequately funded by the Department of Health. The result has been the requirement for some £29 million of savings across the three PCTs in Gloucestershire and £10 million lost to Gloucester Hospitals NHS Foundation Trust, even if it stands still on its current activity. That is an unacceptable attack on front-line services, and I agree with my hon. Friends that it could cost lives.

I am grateful to you, Madam Deputy Speaker, for allowing me to leave the debate to meet the Secretary of State for Health tonight. I asked her why a PCT that is in balance and that has a low-cost acute trust provider is facing such cuts. She said, "We can't take funds other than from the NHS to bail out the overspending PCTs." "Can't"? The Chancellor keeps telling us that he has 10 years' experience. Why "can't" the political will be found to protect services, even in the areas of the NHS that have been in balance and that have done everything that the Government have asked of them? Furthermore, those events are taking place while the threat of pandemic flu hangs over the NHS—this is the very time when we should be looking at increasing capacity in the NHS, not cutting it.

Finally, the Chancellor claims to have produced a green Budget, but it is a very pale green. For all the Government's protestations, the simple fact remains that CO 2 emissions are going up, not down. Today's conveniently delayed climate change review—it is a shame that there was not enough time to produce it just before the Budget speech—makes it clear that the climate change levy has been frozen since its creation and that it will be increased only in line with inflation from 2007. Let us hope that climate change itself proceeds only at the rate of inflation with six-year pauses, although that is unlikely because, as the evidence shows, while the Government are slowing down, climate change is speeding up.

It is also disappointing that the Chancellor has only partially implemented Liberal Democrat policy by placing higher vehicle excise duty on the most gas-guzzling vehicles and introducing a zero rate for those vehicles that are the lowest consumers. However, the rate is feeble, and, as Conservative Members have pointed out, there is no protection for rural farmers who genuinely need such vehicles. Instead, the owner of a Porsche Cayenne, which the Environmental Transport Association lists as one of the worst offenders and which costs between £30,000 and £50,000, now faces an extra bill per annum of £30, which is rather less than the cost of one Porsche Cayenne windscreen wiper.

At this point in my speech, I must declare an interest because, like Mr. Cameron, I have got the builders in to plan an extension to my house. I plan to install a mini-wind turbine, a combined heat and power boiler and solar panels, but I was surprised to discover that some of the grants that I was hoping to take advantage of under the clear skies programme seem to have run out. There is no provision in the Budget, not even in the small print, on householder microgeneration. On an MP's salary, I may be able to afford to go ahead, but many others will not. Earlier in the debate, the Minister gave me a disingenuous answer on that point, because, although he discussed supporting microgeneration for the Government's own buildings, he made no firm commitment on householder microgeneration. Microgeneration has huge potential to reduce emissions and fuel poverty, to lower fuel bills for a wide section of the population and to more than fill the gap left by the nuclear industry were we to decide—rightly—to decommission it completely.

The truth is that the Budget has failed to support education and productivity, to save the NHS from financial crisis and to protect the environment. Unless the Chancellor fails with his next job application, it will go down as his greatest missed opportunity.

Photo of Joan Walley Joan Walley Labour, Stoke-on-Trent North 8:23 pm, 28th March 2006

The contributions to tonight's debate have been detailed and far ranging, and they show the in-depth interest and attention that all hon. Members pay to every single aspect of the Budget. So many themes have come out of the debate, but I want to concentrate on my concern about the Budget.

I want to make a plea to the Treasury, the Chancellor and the Department of Trade and Industry to deliver a cross-cutting Budget. We should examine how the different measures in the Budget can be joined up across Departments and linked to partners on the ground. We have heard so much about issues such as social justice and child poverty, but we need the capacity on the ground to make the measures in the Budget a reality. That is my plea to Ministers tonight.

It is a privilege to take part in this debate. This is my right hon. Friend's 10th Budget and many other hon. Members have commented about how the public finances are now on a level playing field. It is so important to take that forward. I am a member of the Environmental Audit Committee which has examined the pre-Budget report and other Budgets for their green capacity. The Committee's reports always seem to conclude that the Government should do more, but that is true no matter how much Governments do. However, we should give the Government credit for the real step change in the Budget, especially in the chapter on protecting the environment.

I welcome the progress on environmental issues. As the climate change review published today shows, there is still so much more that could be done. It is up to all of us to work collaboratively, whether through environmental improvements to our own homes, informing our constituents or getting our local authorities to adopt a leadership role on environmental issues. The Budget provides the foundations for real progress on environmental issues, not least in respect of microgeneration, at work, in schools and in all the public finance undertakings.

The Environmental Audit Committee is cross-cutting in looking at all Departments, and I want to look at some of the Budget measures in the same way, especially those that will have a real impact on my constituency. I hope that Ministers will work with north Staffordshire MPs to ensure a joined-up approach from the Department of Trade and Industry, the Office of the Deputy Prime Minister, the Department for Environment, Food and Rural Affairs and the Treasury. Unless we have that commitment, we will be unable to deliver services in north Staffordshire as we should.

I was interested in the remarks by my right hon. Friend Mr. Meacher about the loss of manufacturing jobs. I wish to flag up our heartlands, especially north Staffordshire, where heavy industry is bearing the brunt of the globalisation that many other hon. Members have mentioned. It is vital that we do everything in our power to create new jobs, to support those who have already lost their jobs and to retrain and give new skills to those in low-paid jobs and who wish to move on. It is important that the review of Advantage West Midlands and the other regional development agencies that my right hon. Friend the Secretary of State for Trade and Industry mentioned earlier looks at what manufacturing needs. We have the wonderful example of the Ceramic Industry Forum, which is looking in an innovative way at what needs to be done. The education maintenance allowance, which was piloted in Stoke-on-Trent, is another wonderful example, and it has now been rolled out across the country. I hope that other schemes can be piloted in Stoke-on-Trent and used to maximum effect across the country.

This is a Budget for the regeneration of the UK's towns and cities. I declare an interest because my constituency includes Burslem, the mother town of the Potteries. The £65.5 million announced this week by the Office of the Deputy Prime Minister for Renew North Staffordshire will give us unprecedented levels of investment in housing, and I hope that it will unlock many different opportunities for jobs and retraining. It will give us an opportunity to have sustainable methods of construction and to implement on the ground the warm homes policy that was again mentioned in this Budget. If the Government take a cross-cutting approach, this will all add up to a complete transformation of homes and jobs in our area.

I am pleased that the Lyons review was mentioned in paragraph 6.15 of the Budget. Some 7,800 jobs of the 20,000 proposed have already been moved out of London and the south-east, so there are still 12,000 to go. We have a site in north Staffordshire that could be used for relocation purposes under the Lyons review. It is a stone's throw away from the priority housing market renewal area, which would link up to Burslem. If the Government have the will, we can make it happen on the ground. The job losses that we face in north Staffordshire could give rise to opportunities for the innovative relocation of public services that would allow us to be a true engine of growth. That is the agenda that north Staffordshire wishes to convey to Ministers.

We have a wonderful resource centre that was originally launched by the Ceramic and Allied Trades union—now Unity. It has a proud record of upskilling and retraining the work force in north Staffordshire, and has had European funding. The education maintenance allowance offers the Government a model for ways of dealing with those in the traditional manufacturing areas who are losing jobs. They need only look at this gem to see how such projects can be rolled out still further.

It will come as no surprise to my right hon. Friend the Minister for Industry and the Regions to know that I cannot miss this opportunity to lobby yet again on the LEGI—local enterprise growth initiative—fund, phase 2 of which is on offer under this year's Budget. I say categorically to my right hon. Friend that we need that funding for north Staffordshire. If we need extra assistance and capacity in building a project that will meet the criteria, I ask for an assurance that the Government will work with us to ensure that it will be in place as soon as phase 2 gets under way.

I wish briefly to refer to the Budget information on private finance initiatives—"PFI: strengthening long-term partnerships". We need firm commitments from the Government about the way forward for the public services. Some changes to health service funding are directly affecting the deficits that are occurring in primary care trusts and health trusts around the country. In north Staffordshire, we have a private finance initiative that is nearing the stage of closure. I acknowledge all the welcome investment in research and development in the health service and all the extra resources that the Government are putting in, but my plea is for Ministers to look closely at box 6.1 in the PFI information. I hope that, in the winding-up speech, the Chief Secretary can assure north Staffordshire Members that we can have some certainty about the PFI for the new hospital.

We currently have two hospital sites, which means all sorts of extra costs that make it difficult to deal with the current position and the huge scale of job losses. Above all, we need certainty and joined-up thinking from the Treasury and the health service that the PFI can go ahead.

Photo of Nick Hurd Nick Hurd Conservative, Ruislip - Northwood 8:35 pm, 28th March 2006

I refer hon. Members to my declaration in the Register of Members' Interests and place on record my great pleasure at following Joan Walley, a fellow member of the Environmental Audit Committee, who spoke with her characteristic sincerity and commitment to her constituents.

I do not know about other new Members, but I was thoroughly looking forward to my first Budget. After all, they used to mean something. However, now I am not so sure. With the big decisions increasingly taken elsewhere, the annual event appears reduced to the theatre of gesture politics. As my right hon. and learned Friend Mr. Clarke observed, it is increasingly thin gruel, as last week showed.

As a new Member, I applied three tests to the Budget. First, is it relevant to my constituents? Secondly, does it recognise what is needed to shore up the competitiveness of the British economy in a changing world? I speak as someone who has experienced trying to run a business in Brazil, one of the emerging giants that is set to change the global economy. Thirdly, does the Budget demonstrate that the Treasury is showing sufficient urgency in the face of climate change? I speak as a member of the Environmental Audit Committee, which placed on record only last week our concern about the possibility of institutional inertia in the Treasury in the face of the scientific evidence.

On the first test, there are things to welcome, including more investment in reassurance policing, increased focus on youth services and increased investment in child care. There are local concerns about the long-term funding behind that package, but there are things to welcome. However, they are overwhelmed by two key omissions.

First, there is bafflement in the local community at the silence about the national health service. Our local context is that we have two, much-admired hospitals, which have performed extraordinary feats at the cutting edge of cardiac care and cancer treatment. They are Harefield hospital and Mount Vernon hospital. Both face genuine uncertainty about their long-term future against the background of an overriding strategic imperative to cut beds in north-west London. Our primary care trust has a deficit of £30 million and the community is braced for announcements about real labour cuts that will cut deep into the local health community. Hillingdon residents are gradually realising that they can no longer rely on NHS dentistry, with the news that seven out of 10 Ruislip dentists intend to quit the NHS.

Financial crisis in the NHS underlies that theme, at a time of unprecedented investment. My constituents ask where the money has gone, who is responsible for the mess, who will sort it out and how that will be done. Was it unreasonable of them to expect the Chancellor of the Exchequer, the man with his hands on the levers of power, who expects to become Prime Minister, to explain at the Dispatch Box how the problems will be solved? He was quick to take the credit but reluctant to step up to the plate when the going gets tough. It is a test of leadership for a man who aspires to be Prime Minister, and he failed it.

A second concern is a failure to tackle a growing sense of insecurity in the community, especially among elderly people. Anxiety about the value of pensions is wrapped up in that but it is linked with concern about the rising costs of living, especially those associated with people's houses. Much has been made of the council tax, which is biting deeply, but rising utility bills and the costs of energy in the home are being talked about more loudly. Linked to that is confusion about the signals that the Government send about the need to set aside money for long-term savings. There is no more guilty agent of confusion in that mess than the Government's system of pension credit.

I am genuinely surprised at the Government's complacency in the face of the collapse of the savings ratio. I have even heard Treasury Ministers argue that that is a symptom of economic success. My concern arose when I visited the local headquarters of one of our main high street banks to find out what consumer attitudes were to pensions and savings products, and I was told, quite calmly, "We no longer bother to sell them. The public don't want them. They aren't interested, and we don't make any money out of selling them." That is where we have got to. That is the culture, the language and the atmosphere around savings in this country, and I would suggest that it represents a structural problem in the economy that requires more attention than simply chucking some money into child trust funds, however welcome that might be. It is in the Budget's failure to address the two key concerns of health and attitudes towards saving that it fails the first test of relevance to the concerns of my constituents.

The second test is to determine whether the Budget recognises what is needed to shore up the competitiveness of the British economy. It is generally accepted that that competitiveness has in the past been based on low levels of tax and flexible labour markets. It is becoming increasingly clear, however, that the management of the economy is now resulting in significant risks being taken with those advantages, the effects of which we might have to live with for some time.

Other speakers have been more eloquent than I can be in pointing out the fault lines that are becoming increasingly evident: in terms of growth, we are at the bottom of the EU pack; our productivity growth rates are at their lowest levels since 1990; and our business investment is down to 9 per cent. of gross domestic product.

Photo of Andrew Love Andrew Love Labour, Edmonton

Does the hon. Gentleman accept that the biggest factor in the competitiveness of the economy is the exchange rate? Given that we are running an enormous trade deficit at the moment, and that the exchange rate has not depreciated, would that not appear to be a reflection of international confidence in our economy?

Photo of Nick Hurd Nick Hurd Conservative, Ruislip - Northwood

I accept that exchange rates are a factor in the competitiveness of an economy, but I would suggest that the more important factors are the levels of taxation and the flexibility of the labour markets. That has been proven over time.

When the hon. Gentleman intervened on me, I was going through a checklist of the fault lines in the economy. We must recognise the indisputable fact that we are now living with the highest burden of taxation for 20 years. It is not only the scale of the taxation but its incredible complexity that concerns my constituents. I understand—my Front-Bench colleagues may correct me on this—that some 3,500 pages have been added to the Yellow Book since 1997, which is the clearest possible evidence of the instinct to tinker and to add to complexity. The bottom line is that, when I hear the Chancellor speak, I do not believe that I am listening to someone with any real understanding of what it is like to run a business or to take risks in the pursuit of prosperity and the creation of wealth. That is also the growing view of businesses in my constituency. Another test failed.

The third test involves examining the sense of urgency, and the sense of ambition, shown by the Treasury in the face of climate change risk. This ought not to be in doubt, because I do not think that anyone doubts the Chancellor's sincerity in his mission to reduce poverty in Africa. He must therefore be aware that the biggest risk to that agenda will be the impact of climate change on the poorer regions of this earth. As I have said, the Environmental Audit Committee is concerned about the institutional inertia and lack of momentum at the Treasury, particularly in recent years.

The Budget has not won the Chancellor any new friends among the green movement. Friends of the Earth called it "utterly inadequate", adding that its measures would

"collectively only make a small impact on emissions".

I happen to think that that judgment might be a little harsh, but I have no doubt that we are right to be concerned about the Treasury's lack of urgency and momentum, set against the backdrop of rising carbon emissions in this country.

Climate change presents an immense challenge, and the attitude of the British Government is enormously important, not least in regard to the international process that is key to finding a solution. The problem with that incredibly complex process is that it is going too slowly, and that it is being held back by concerns about the cost of mitigating climate change. In order to accelerate that dialogue, progress and momentum, we need proof that we can grow our economy and reduce carbon emissions at the same time—that we can green and grow. That is the key for harnessing support for these measures in the developing world.

Britain continues to have an historic opportunity to take the lead in making that case, but we need the will to accelerate the technology to deliver a sustainable low-carbon future. A modern, forward-looking, digital Government would be alive to the prospect of being in the vanguard of economic opportunity. They would recognise that the twin concerns of energy security—now very real—and the trend of fossil fuel prices reinforce that imperative. That requires real leadership and clear policy making to send the long-term signals that business men and our fellow citizens need.

Photo of Des Browne Des Browne Chief Secretary, HM Treasury, The Chief Secretary to the Treasury

I am listening carefully to the hon. Gentleman, who clearly has an extensive knowledge, no doubt developed from his Select Committee membership. Given the demonstrative leadership role that he wishes the Government to take, can he indicate to the House how he personally will be voting tonight in relation to the revalorisation of the climate change levy?

Photo of Nick Hurd Nick Hurd Conservative, Ruislip - Northwood

Personally, I am a supporter of the revalorisation of the climate change levy—

Photo of Nick Hurd Nick Hurd Conservative, Ruislip - Northwood

I know what the answer is. I happen to believe that the climate change levy has played a role. The Government are deluding themselves, however, if they think that that is the main piece on the chessboard and the bellwether with regard to climate change.

In the context of real leadership and clear policy making, we need long-term signals. Instead, we get muddled reviews—the climate change review announced today, an energy review over the next few months and, perhaps most importantly, the Stern review on the economics of climate change at the end of the year. We get incompetent management of key processes such as the definition of the national allocation plan in the first phase of the European emissions trading system. We get tolerance of inefficient taxation such as air passenger duty and a drift from the impressive momentum that the Government showed in terms of developing environmental taxation in their first Parliament between 1997 and 2001. All that drift, muddle and incompetence has served to undermine the credibility of the Government, who are increasingly seen as being good at words but having real problems, and struggling, with delivery. The test is not words but action. To be fair, the test is not the Budget but the reaction of the Treasury to the Stern review later in the year, which will set out what is possible for a brave Government prepared to show real leadership.

The second test is the inevitable row over the national allocation plan for the second phase of the EU emissions trading system and the age-old dialogue between the priority given to sustainability and the priority given to the arguments of competitiveness. That will tell us the reality of this Chancellor and his aspiration and commitment to preserving and enhancing our natural resources—the natural capital, which is an indispensable pillar of our global system of capitalism, and which we can no longer take for granted. Whether he passes that test or not, the Chancellor and I are at least agreed on one thing—we both hope that last week's Budget was his last.

Photo of Charles Walker Charles Walker Conservative, Broxbourne 8:47 pm, 28th March 2006

I thank you, Madam Deputy Speaker, for calling me to speak in the first Budget debate that I have attended. I hope that I do not have to listen to 10 more Budgets from the Chancellor, but I listened closely to the one that he gave, I think, last week.

I was going to bring my worst instincts to the Chamber and talk about the fact that there was nothing in the Budget on pensions, as many of my constituents live in fear of their future—both those who are saving for retirement and those currently in retirement. There was nothing on council tax—a hidden stealth tax that goes up year on year, causing great distress to young and old alike in my constituency. I was going to talk about the problems with transport funding and the fact that my constituents are packed on to trains early in the morning on the One railway franchise as the Treasury pockets £50 million a year in franchise fees and fails to invest that money on the network. But I say, "Get behind me Satan," because I want to be positive this evening, on issues that matter to everyone in the House, including Edward Miliband.

I was absolutely delighted to hear the emphasis placed on education in the Budget. I have had the great privilege of visiting my primary and secondary schools in Hoddesdon, Cheshunt, Broxbourne, Waltham Cross and Northaw. It is the head teachers who make a difference in those schools. We are lucky and blessed to have excellent head teachers in my constituency. They work extremely hard for a great deal less money than I earn, put in a huge number of hours and are a credit to their schools and the community that they serve. On that point, I welcome the additional funding going directly to head teachers to spend on the things that really matter to them—IT, books and additional teaching resources. That money is very welcome, and I have to say that things have improved since Labour came to power nine years ago. Admittedly they should have improved, as Labour has spent a lot of money. When I visit my schools I see whiteboards and projectors, all of which have added to the educational experience of young people in my constituency. Nevertheless, that has created problems in itself, although I know that the budget was not there to deal with those problems. People are moving out of north London and gangs are regularly attacking our schools, stealing much of the equipment and creating a very hostile environment for young people. Perhaps that is happening in other Members' schools, and perhaps we could consider securing additional funds somewhere down the line to improve school security and the environment in which young people are educated.

One thing that I have noticed when touring my constituency—

Photo of Des Browne Des Browne Chief Secretary, HM Treasury, The Chief Secretary to the Treasury

I am glad that the hon. Gentleman gets around to touring his constituency. May I allow him an opportunity to welcome comprehensively the Chancellor's announcements of further investment in his constituency? Given his recognition of the need for further investment in the security of our communities, I am sure that he will wish to add a welcome for the investment in community support officers that the Chancellor also announced.

Photo of Charles Walker Charles Walker Conservative, Broxbourne

Of course I welcome additional investment in my constituency, if indeed it turns up. It is interesting that the Chief Secretary mentioned community support officers. I am working with a consortium of schools in my constituency, considering the possibility of part-funding CSOs to provide evening cover so that people who congregate around schools, wishing them harm and causing vandalism, can be moved on. I welcome any additional resources that we can find to finance community support officers.

As I was saying, one thing I have noticed is that the greatest difference between the private and public education sectors is class size. I believe that many of our public schools now have extremely good IT equipment and teaching facilities, but class size seems to be one of the key determinants of performance. I would welcome any measures introduced by the Government—or by our Government, when we win the next general election—that reduced class sizes and gave children from some of the most deprived parts of my constituency an even greater chance of achieving success. I do not believe that that wish is party political; I believe that it is shared by all the parties. We want the very best for our young people.

Having got that off my chest, however, I would like to be party political. Like many other Members—again, across the Chamber—I was extremely disappointed that the health service did not get a mention in the Chancellor's Budget statement. We have huge funding shortfalls in Hertfordshire, caused by and large by Government mismanagement. There is, for instance, the mismanagement of GP and consultant contracts, as a result of which too much money has been given in return for too little. Of course I want GPs and consultants to be paid properly, but the money should have been based on an increase in output and productivity.

What concerns me about Labour Members is all the chest-beating about the fact that they are spending more money. They are like the great apes that leap in, bang the ground and bang their chests. It is not about spending more money; it is about a return on investment. It is about output exceeding input. On that score, the Government have some work to do. Yes, they are spending more money, but are they securing a proper return on their investment for taxpayers across the country and in my constituency?

In the health service, we face significant front-line cuts throughout my constituency and across Hertfordshire. As I have said, we have huge deficits in our hospitals, but what concerns me most are the cuts in mental health services that affect the most vulnerable people in my community.

A health care professional asked me, "Why are you showing so much interest in mental health? As you'll find out, Charles, there are no votes in mental health." That is completely wrong, and I am sure that most hon. Members think so, too. Of course, I want outcomes for breast cancer and heart disease to improve, but people with mental health problems need a strong voice as well, and it is incumbent on hon. Members to give them that voice. I urge the Chief Secretary to look at NHS funding. I appreciate that there is no bottomless pit, but the £800 million shortfall is damaging the most vulnerable people in our society. They are not responsible for the problem, but they will pay the price. That causes me great concern.

So I come to a solution. May we perhaps consider clawing back some of the money that we will give to the European Union in the years ahead? I understand that we will make additional contributions to fund the lifestyle of French farmers. I love France; I love French markets, but given the fact that our health service is in financial crisis, is it really justifiable to give more money to the EU and to some of the richest countries in Europe? That is a hard sell in my constituency, and I imagine that it might be quite a hard sell in other hon. Member's constituencies. So thank you, Madam Deputy Speaker, for allowing me this canter through the sunlit uplands of Broxbourne. I have thoroughly enjoyed it. I hope that I have not upset too many people.

Photo of Phil Willis Phil Willis Chair, Science and Technology Committee (Commons) 8:56 pm, 28th March 2006

Mr. Walker has given us a real insight into his constituency, and the idea that lots of people are running away from those schools with whiteboards under their arms is a fantastic one to envisage.

Photo of Charles Walker Charles Walker Conservative, Broxbourne

It is a very serious problem. My children's school has been hit twice in three weeks. Almost a dozen schools in my constituency have been raided repeatedly and their IT equipment has been taken, and it does the hon. Gentleman no service to make light of that in the debate.

Photo of Phil Willis Phil Willis Chair, Science and Technology Committee (Commons)

I feel utterly chastised, and I apologise.

I left the debate earlier this evening to attend a reception with Mr. Blunkett and Lord Crathorne. We are working with a group of young people who are blind. Most of them are also deaf, and many of them also have physical impairments. Returning to Budget debates should make us recognise the fact that the reality of what we are debating is an attempt to make people's lives better in our communities, wherever they are. I pay tribute to the Economic Secretary, who is sitting next to the Chief Secretary, for the support that he gave to Henshaw's college when he was a Minister in the Department for Education and Skills. I thank him for delivering on a promise that the Government made to put about £2 million into that project, and I do so with great sincerity.

I should like to concentrate my brief remarks on science. This was a Budget for science. Whatever we might think of other bits of the Budget, science came out of it very well indeed. The additional supply of science teachers, the offering of pure sciences to more young people, new support for carbon capture and storage, replacing the research assessment exercise system and extending R and D tax credits were all things that I support, and my Committee—the Science and Technology Committee—was very supportive of those things, too.

This was a somewhat unusual Budget. I, for one, was surprised by the extent of the changes in the Budget, and the associated "Science and innovation investment framework 2004–2014: next steps" reads more like a science White Paper than a Budget document. I do not think that I was the only person who was surprised by the announcements. They came as news, for instance, to organisations that will be affected by them. It appears that the Particle Physics and Astronomy Research Council, the Medical Research Council and even some parts of the Office of Science and Technology were informed of the changes announced in the Budget only the day before. It seems that the Chancellor cannot wait to put his plans for science and technology into action and that he has even taken responsibility for reorganising the research councils. So if the Chancellor is now running science policy, I wonder what the Minister for Science and Innovation and the Office of Science and Technology have left to do.

However, the real issue behind some of the changes announced in the Budget is: who in the Government is monitoring the UK's science capacity, and where and how? In the past couple of weeks, we have been debating the closure of the chemistry department at the university of Sussex and the loss in the past two years of four major chemistry departments, which produced the very chemistry graduates who will be among the 3,000 such teachers in our schools in a few years' time. I wonder who is monitoring the situation. It certainly is not the Higher Education Funding Council, which told my Committee last night that it had absolutely no plans to intervene in what is clearly a dire situation.

We recognise the huge investment that has been made in science—the £10 billion provided in this comprehensive spending review is massive additional funding—but although the money is going in, there remains a Luddite approach to many of our world-class science facilities. The Silsoe research institute, which has world-class expertise in agricultural engineering, and the Hannah research institute, which deals with nutrition, will close this Friday. Four Centre for Ecology and Hydrology institutions will close next year, at a time when environmental science should be at the heart of our agenda, instead of being trimmed at the margins. In the past 10 years, one in three science posts in publicly funded institutions have gone. I hope that the Minister will explain in his wind-up who is doing the planning for science. Who is pulling it all together and looking at a strategic science base for the UK?

I do not dispute the right of research councils to say that we do not need a particular element of science in this or that institute; nor do I question the fact that at times institutes will have to close. What I do question is the complete lack of a science plan outlining the capacity that we need in the coming years.

The replacement of the RAE system was a welcome announcement. It was handled well and I compliment the Government not only on getting rid, eventually, of the RAE system, but on introducing the new metric system and running the two systems side by side. However, what our universities do not want—I hope that the Minister will take this point on board—is to be running a full RAE system in 2008 and a full new metric system at the same time. Frankly, that would simply undermine much of what has to be done.

The really interesting announcement in the Budget was the reorganisation of research institutes. We Liberal Democrats and my Committee are pleased that the wealth of information in the NHS database will be used for research purposes, but where did the announcement on combining the Medical Research Council and the NHS database come from? Who will lead the organisation? Will it be Sir Colin Blakemore, or somebody brought in through open competition? What resources will the organisation have? The Chancellor mentioned a figure of approximately £1 billion, but the amount spent on the MRC and on the NHS database combined comes to £1.3 billion. So does this constitute a cut in medical research funding? It would be interesting to have an answer to that.

Finally, will the Minister say what is happening with the restructuring of this country's eight research councils? It seems that the Treasury is doing something that nobody else knows about. It is proposing that the Particle Physics and Astronomy Research Council surrender its grant-giving duties to the Engineering and Physical Sciences Research Council, and that it then merge its facilities with the Council for the Central Laboratory of the Research Councils, creating a new "large facilities council". Whatever the proposal's merits—I accept that there are some—surely Research Councils UK should be doing such planning, not the Chancellor sat in the Treasury. Perhaps the Minister can reassure us on this issue.

Overall, however, this is a Budget for science that is to be welcomed, and it certainly will be appreciated in the science community.

Photo of Iris Robinson Iris Robinson DUP, Strangford 9:04 pm, 28th March 2006

I apologise for not being in the Chamber for the whole debate, Madam Deputy Speaker; as you know, the Northern Ireland Grand Committee met this afternoon at 4.30.

In the limited time available, it is difficult to highlight the most important aspects of the speech I had prepared. Many thousands of manufacturing jobs have been lost in my constituency, but I want to flag up the serious situation of the multimillion pound fishing industry.

Northern Ireland fishermen have been told that they will receive no moneys for the 11-week closure of fishing in the Irish sea, pursuant to the cod recovery scheme, which is now in its seventh year and runs from mid-February until the end of April. As the House will appreciate, that announcement caused much alarm to fishermen, processors and their families and to local communities that rely on the fishing industry. Council regulation (EC) No. 2792/1999 governs the payment of compensation, and aid was paid under it in 2004 and 2005.

This year, we pressed for the renewal of aid to fishermen in Northern Ireland, and on 31 January 2006 my colleague Jim Allister, MEP, received from the Minister with responsibility for agriculture and rural development a letter indicating that payments beyond two years were prohibited by EU regulation. My colleague disputed that and invited Commissioner Borg to give the Commission's view about the regulation. On 8 March 2006, Dr. Borg wrote to our MEP saying that although the regulation capped compensation at a cumulative total of 12 months, in Northern Ireland payments had been made only for five months so seven months' compensation was still payable by the national Government, and could be spread over several years. Will the Government consider the modest request that £800,000 be allocated to allow suffering Northern Ireland fishermen to survive?

Martin Horwood referred to the home computer initiative. I received a letter from a constituent, Philip Norton of Ballygowan, who said:

"By scrapping the Home Computing Initiative—a tax incentive introduced in 1999 and further clarified and enhanced in 2003 to enable greater take-up of PCs in the home—the Chancellor has removed one of the most popular and successful initiatives he has created in his time in power, and one that is still running in several countries throughout Europe."

He pointed out that only 10 days were left to sort out the matter, and he would appreciate it if the decision could be reconsidered and, if possible, reversed, as it will have a huge impact throughout the United Kingdom.

I welcome the planned reduction in the number of health trusts and boards in Northern Ireland under the public administration review. I hope that will result in the release of moneys that can be ploughed into front-line services. I have some real concerns about whether the changes can be rolled out without too much upheaval for staff and patients, but time alone will tell.

For a change, I want to record my delight about recent announcements about additional moneys for Herceptin for women suffering from breast cancer and the additional £2 million for beta interferon for multiple sclerosis sufferers, to end the postcode lottery among the Province's health boards. The latest announcement about anti-TNF drugs is a life-saving decision for many sufferers of rheumatoid arthritis, which is a crippling disease. We need ring-fenced funding for those drugs, so that no one who needs them loses out in future. In the past, people have been denied them simply because of where they happened to live.

With nine other MPs from across the UK, I had the pleasure of participating in a meeting with rheumatoid arthritis sufferers to help to compile a book highlighting their experiences with and without anti-TNF drugs. I met a young woman, Hazel Mark, who started showing symptoms of rheumatoid arthritis at the age of 11. She is now in her late 20s or early 30s and has been on Remicade for approximately one year. The transformation in her life has been miraculous. The things that we all take for granted, such as opening cans, lifting a baby and just being able to get out of bed, are now possible for Hazel. On behalf of people suffering from rheumatoid arthritis, I thank Ministers for the welcome news about anti-TNF drugs.

I also want to place on record my thanks for the additional £14.6 million, which the Minister for social development in Northern Ireland has made available for community funding. I had a meeting with him yesterday in my constituency. The news is welcome to the various women's groups throughout Northern Ireland, which will now be in a position, at last, to try to draw down that much-needed funding. The women's centres have been the sticking plaster of local communities throughout the years of the troubles. They do an amazing job in relation to education, preparing women to go back into the workplace, providing crèche facilities and so on. I pay particular tribute to the Ballybeen women's centre, which has done such sterling work over 20-odd years. I am glad that it will not have to go cap in hand looking for funding from various sources, but can avail itself of that much needed money to secure the work that it does in my constituency and throughout the Province.

Photo of Sammy Wilson Sammy Wilson Shadow Spokesperson (Communities and Local Government), Shadow Spokesperson (Education) 9:11 pm, 28th March 2006

Since there appear to be no more Labour Back Benchers waiting to speak—indeed, the Chancellor has not been praised for the past half an hour or so—I suppose that I should start by giving some praise to the Chancellor for the work that has been done over the years. It would be churlish not to say that, in Northern Ireland, we now have the lowest rate of unemployment and are the fourth fastest growing region in the United Kingdom, and that there have been economic successes. I am not looking for a job, so I can say that without anybody saying that I have an ulterior motive.

I fear, however, that the tightening that is hidden behind the Budget will affect that situation. Already we see the fiscal grip tightening on Northern Ireland. Regional rates have gone up, water charges are to be introduced and we are to have a charge for policing. Much of the economic success will be badly affected by the hidden tightening in the Budget. The Budget shows that the Government will face difficulties in the years ahead.

Let us consider the meaning of the Budget for the United Kingdom as a whole. Perhaps the clue was in the give-away line when the Chancellor compared himself to Nicholas Vansittart. He may well have been looking back longingly to the days when that Chancellor was able to get 39 resolutions through without any opposition. There were no Back-Bench revolts and there was nobody on the other side opposing the resolutions. On the other hand, Nicholas Vansittart was known for increasing the tax burden, complicated financial schemes for hiding the size of the national debt, paying considerable attention to affecting supposed economies and, of course, privatising naval and military pensions. Perhaps that is the real picture that we get from the Budget and the real picture of the current Chancellor.

I want to make three brief observations. Amid the financial machine-gun effect, with £100 million here, £20 million elsewhere, £15 million for microgeneration of energy, new boards for technology, and enterprise networks—those things will be rolled out—there are a number of worrying messages in the Budget.

The first message is that when the Chancellor says that he gives, it does not necessarily mean that we receive. He announced that there will be more direct payments to schools, with the money for primary schools going up by £13,000 a school and money for secondary schools increasing from £98,000 to £152,000. He said that the same increases would be announced for schools in Scotland, Wales and Northern Ireland, but when the Secretary of State made the announcement for Northern Ireland, we found that a sum of £16 million would be spread among nearly 1,000 schools, but that does not work out at £13,000 a primary school and £54,000 a secondary school. I suspect that there is a lot of spin in the Budget and many initiatives that are simply regurgitations of money that has already been spent, and I could give further examples of that.

Secondly, more money does not mean better services. I heard Labour Members taunting Opposition Members who wanted tax cuts by asking how they could have tax cuts without cutting services. The fact of the matter is that since the Government came to power in 1997, with "education, education, education" as their agenda, there has been a 47 per cent. real increase in education spending, yet the Chancellor lamented in the Budget that there are still underachieving schools, people leaving school who need a second chance to get further education and A-levels and schools in which there are insufficient science teachers. Spending money has thus not necessarily improved services. In many cases, spending money has simply bloated bureaucracy. If the structures are right, it is of course possible not to take more in tax, yet still improve services. We had this debate on education the other week. If the right structures are in place, improvements can be made to services, even with less money.

Thirdly, if problems are identified, it does not mean that answers are given. The Chancellor talks about the need for enterprise and a competitive economy. We know that in Northern Ireland because we are heavily reliant on the public sector. We have an open and small economy that does not have internal economies of scale, so we have to export and thus must be competitive. During the years of the troubles, entrepreneurs were forced out by gangsters and so on, so we lost the enterprise culture. The problems have been identified, but I do not see much in the Budget to address them. If anything, the enterprise culture will not be stimulated, and let me give one example to explain why. The tax burden on local companies will increase. The Chancellor could have considered reducing corporation tax—we have seen the success of that elsewhere—but he did not, even though there was consensus about it and evidence that it could have led to an improvement.

I know that my time is nearly up, so I will conclude by saying that the Budget is not expansionary and will not address the problems that the Chancellor identified. Other hon. Members have pointed out that he has walked away from the great problems that face us, such as pensions and health. Many of the burning problems that the Government should be addressing have not been dealt with in the Budget, so although I accept that there have been successes, I have no hesitation in saying that this is not the Chancellor's best Budget. The Budget will not address the problems that face us.

Photo of George Osborne George Osborne Shadow Chancellor of the Exchequer 9:19 pm, 28th March 2006

Mr. Milburn urged me to be generous to the Chancellor, even if he is not here. Let me begin by congratulating the Chancellor, in his absence, on the delivery of his 10th Budget. It is an undoubted achievement. He has beaten a record set by Lloyd George in a week in which the Prime Minister has returned us to the politics of Lloyd George.

We have had a good final day's debate, although I am sorry that Labour ran out of speakers about halfway through. The Secretary of State for Trade and Industry, who is not here now either, trotted out the Chancellor's litany of bogus statistics on investment, research and development, and productivity, and my right hon. and learned Friend Mr. Clarke and my hon. Friend Mr. Duncan comprehensively demolished each one of them in their robust contributions.

How on earth can the Chancellor claim that research and development is going up when the day after the Budget figures are produced showing that R and D levels are down? How on earth can he claim that business investment is up when his own Red Book revises down the forecasts for business investment and when business investment levels are at a record low? How on earth can the Government claim seriously that productivity growth is up when everyone knows that it has slumped?

There was an argument about which measure we should use for productivity growth. I am happy to use the one that the Chancellor himself used in 1998, based on output per worker, when he said that it was the

"fundamental yardstick of economic performance".

On that yardstick, he has fundamentally failed. Productivity growth is one fifth the level that he inherited. That must in part explain the sluggish growth that my right hon. and learned Friend talked about. [Interruption.] I welcome the Chancellor to his place. The 1.8 per cent. growth last year was below the EU average, the Organisation for Economic Co-operation and Development average and the G7 average.

We had other good contributions. I enjoyed those from the hon. Members for East Antrim (Sammy Wilson) and for Strangford (Mrs. Robinson). My hon. Friend Mr. Leigh has been Chairman of the Public Accounts Committee for years, and I was one of his underlings on that Committee. He described how impossible it is to measure the Government's claims on Gershon, and the National Audit Office report on that is striking. My hon. Friend proposed getting the Comptroller and Auditor General to audit Opposition efficiency plans. I am happy to consider the idea, although I suspect that Sir John has his work cut out trying to get to the bottom of the Government's efficiency plans.

My right hon. Friend Sir George Young drew attention, as my hon. Friend the Member for Rutland and Melton and others did, to the decision to abolish the scheme that has given 500,000 people computer laptops. My right hon. Friend described it as the action of an analogue politician—a very good phrase. We will vote against that measure. Perhaps the Minister for Industry and the Regions, who was in the Chamber earlier, will join us, because only a few weeks ago he said that the scheme was a great example of what can be done when the Government and industry work together. If he works with us, we can stop it being abolished.

My hon. Friend Daniel Kawczynski gave a spirited defence of his beloved Royal Shrewsbury hospital, and dairy farmers, in the presence of the Chancellor himself. I understand that my hon. Friend Mr. Jackson pointed out that there was nothing in the Budget speech for carers or manufacturing. My hon. Friend Mr. Hurd gave an excellent speech on the Government's failure to address the seriousness of the environmental challenge that we face. Of course, when we look in the Red Book we see that the proportion of taxes raised through environmental taxation will fall as a result of the measures introduced by the Chancellor. My hon. Friend Mr. Walker became almost religious in his enthusiasm for his constituency, but he also drew attention to the serious problem of crime against schools.

I hope that I shall not offend my right hon. and hon. Friends when I say that the most interesting speech was made by the right hon. Member for Darlington. He chose not to talk about the 700 job losses at the County Durham and Darlington Acute Hospitals NHS Trust announced last week. Instead, he focused his fire on the Chancellor's poverty policies.

The right hon. Member for Darlington is a practised assassin. He began by covering his tracks by lavishing praise on the record of the Chancellor, then he stuck the knife in. He called for "direct targeted tax cuts for low-income families"—but he knows that that is exactly the opposite of the strategy pursued by the Chancellor of the Exchequer, who explicitly rejected tax cuts in the Budget. He knows that his speech will be seen alongside that of his colleague, Mr. Byers, who attacked the Chancellor's extension of means-testing in yesterday's Budget debate. He hopes that his speech will be reported in the press tomorrow, because he was circulating it to the press lobby before he delivered it in the House. I am not a Kremlinologist, so I can only guess what those two arch-Blairites are trying to achieve.

All is not well in the state of the Labour party, and the most charitable view is that, like the Minister for Higher Education and Lifelong Learning, they believe that taxes are so high that

"we are probably at the limit of what people are prepared to pay".

Bang goes his job in the next Administration.

Photo of Brooks Newmark Brooks Newmark Conservative, Braintree

He will lose his seat as well.

Photo of George Osborne George Osborne Shadow Chancellor of the Exchequer

Yes, the hon. Gentleman will lose his seat at the election. However, he is right: we have a record tax burden, higher than at any time in our history. It is higher than the last time we had a Labour Government, when half the country was on strike. Instead of following the advice of the right hon. Member for Darlington and reducing taxes, the Budget increases taxes still further. Some £4 billion of taxes on businesses and North sea oil were pre-announced in the pre-Budget report, the zero per cent. corporation tax rate that the Chancellor himself trumpeted in his 2002 Budget has been abolished, and there are iniquitous retrospective changes to inheritance tax. All those tax changes, and 25 others, were absent from the Budget speech, as my right hon. Friend the Member for North-West Hampshire pointed out, but they will all add to the complexity of the tax system.

Despite that considerable tightening, to which my right hon. and learned Friend the Member for Rushcliffe drew our attention, the Chancellor is still running a budget deficit. It is an extraordinary achievement to have record taxes but still run a budget deficit—and it is getting worse. In the Budget, the Chancellor doubled his estimate for next year's budget deficit from the one that he made just three months ago. He confirmed that he is set to borrow £175 billion over the next six years. He has mortgaged not just today's taxpayers but tomorrow's, too.

Hon. Members:


Photo of Sylvia Heal Sylvia Heal Deputy Speaker

Order. It is for Mr. Osborne to decide whether to accept an intervention.

Photo of George Osborne George Osborne Shadow Chancellor of the Exchequer

I am afraid that Ed Balls has not attended today's debate, and he has not given a speech in the Budget debate. I will accept an intervention from the organ grinder, but I will not take one from the monkey.

Hon. Members:


Photo of Sylvia Heal Sylvia Heal Deputy Speaker

Order. May I remind all hon. Members, before they become overexcited, that good temper and moderation are the hallmarks of parliamentary language?

Photo of George Osborne George Osborne Shadow Chancellor of the Exchequer

No one doubts that the Chancellor has spent a great deal of other people's money, but the question is: where has the money gone? The Chancellor may not have wanted to talk about the NHS on Budget day, but the rest of the country was doing so. On the same day as he delivered the Budget, the Royal Free hospital announced 500 job losses; the day after, Darlington hospitals announced another 700 job losses. A total of 4,000 NHS job cuts have been announced in just three weeks. In public the Chancellor blames just a few bad mangers, but everyone knows that in private he and his cabal blame the Health Secretary.

Photo of George Osborne George Osborne Shadow Chancellor of the Exchequer

If the hon. Gentleman will confirm that point I will happily give way to him.

Hon. Members:


Photo of Sylvia Heal Sylvia Heal Deputy Speaker

Order. Perhaps the hon. Gentleman can reply.

Photo of Edward Balls Edward Balls Labour, Normanton

Can Mr. Osborne confirm that he proposed to undermine the independence of the Bank of England and of the Governor by making Bank of England executives a minority on the Monetary Policy Committee? Why would he undermine the Governor of the Bank of England?

Photo of George Osborne George Osborne Shadow Chancellor of the Exchequer

I support Bank of England independence and, like the Chancellor, I am looking at ways to entrench it still further. I enjoyed the New Statesman interview with the hon. Member for Normanton, in which he described himself as a socialist. He said that the finances of the Secretary of State for Culture, Media and Sport were baffling, and that the Secretary of State for Education and Skills had not handled the Education and Inspections Bill very well. I suggest that he spend more time trying to win friends among those on the Labour Benches than trying to intervene on us.

The situation in the NHS is not the fault of the Secretary of State for Health. The fault lies at the Treasury. The Chancellor of the Exchequer provided the money, but he blocked the reform that would have made the money count. NHS productivity has fallen year on year. Three quarters of the money has disappeared in cost pressures. Now we have close to £1 billion of deficit and thousands of job losses.

The NHS is not the only thing missing from the Budget. There is not a word on the pensions crisis brought about by the Chancellor's £5 billion pension tax and his extension of means-testing. I hope that he reads the speech made yesterday by the right hon. Member for North Tyneside, who said in the House:

"I do not think that, when we come to consider a new regime for pensions, we can continue as we have since 1997."—[Hansard, 27 March 2006; Vol. 444, c. 613.]

Does the Chancellor agree with his former Chief Secretary? We do not know.

As my right hon. Friend the Member for North-West Hampshire pointed out so powerfully, there was no mention in the Budget speech or the Red Book of the decision to cancel the £200 council tax rebate. My right hon. Friend is right. The Chancellor talks about restoring trust in politics and gives speeches on the subject. How much more dishonest can one get than announcing before an election that pensioners will get a £200 cheque, then withdrawing it without a word of explanation after the election? I guess it is just the Chancellor's own special way of helping the Prime Minister with his local election campaign.

The Chancellor should at least tell Labour councillors what he is up to. This weekend, after the Budget speech, the leader of the Labour group on Lambeth council wrote to a Mr. Patrick McLoughlin of Kennington Park road, London. A copy of the letter has mysteriously fallen into my hands. It comes with a glossy leaflet—it is interesting that the Prime Minister's picture does not appear on such leaflets any more. Under the heading "What will Labour do?" it states:

"We will:

Press the Government to provide more help for pensioners to pay their council tax bills."

No doubt the leaflets are being pulped as we speak. Labour says one thing in the Chamber and another thing outside. It makes the Liberal Democrats look like amateurs—which is not very difficult with the new leader of the Liberal Democrats.

Of course, the Chancellor did mention education. It is striking that hardly a single Labour Member who spoke today mentioned the great pledge to raise state school spending to private school levels. That was supposed to be the centrepiece of the Budget, but where is the timetable? How much will it cost? Over what level is spending to be increased? The Chancellor never told us that the Prime Minister made exactly the same pledge five years ago. There we have it—the first great statement of what a Brown premiership would do, and it turns out to be a reheated broken promise from the high days of the Blair premiership. I have a depressing feeling that this is the shape of things to come.

Photo of Ian Austin Ian Austin Labour, Dudley North

I noticed that in the interviews that the hon. Gentleman gave, responding to the Budget last week, he refused to say whether he would support our pledge to increase spending on the state education sector. Does he agree with the shadow Chief Secretary, who admitted on Budget day that the Conservative spending plans would "certainly" mean spending less than Labour, and that more spending is not the answer?

Photo of George Osborne George Osborne Shadow Chancellor of the Exchequer

If the hon. Gentleman is going to take a hand-out question, he should pick a better one.

The Chancellor does not understand that education is about not only additional money, but reform. [Interruption.] We have matched the additional spending next year, and we have matched the capital spending, which is nothing like the £34 billion figure that the Chancellor has mentioned; according to the Institute for Fiscal Studies, the figure is more like £1 billion. We want to see education reform, and we now know that it can be delivered only with the support of this side of the House.

While we are on the subject of education, why did the Chancellor not tell us more about his youth national community service scheme? For some reason, he did not find time during his one hour at the Dispatch Box to mention the fact that he has just appointed a new chairman of the scheme, so I shall make the announcement for him. The new chairman is a Mr. Rod Aldridge—a well-connected individual. In fact, he is so keen to get on with the job that he resigned from Capita the very next day.

Six years ago, the Chancellor embarked on his great experiment of abandoning prudence. He decided to increase public sector spending hugely, while blocking the reforms that were necessary to make sure that the money got to the front line. Six years later, if you want to see the result of what has happened, Mr. Deputy Speaker, listen to the Prime Minister's own special adviser on public services, who has worked at the heart of No. 10. When he was on "Panorama" two weeks ago, he said this:

"We're pouring money into the health service. We're pouring money into the education system. But we are not getting the quality of services that we expect. I think we're in a pretty disastrous situation".

That is the next door neighbours' verdict on the record of No. 11—which is, of course, the subtext to the whole Budget.

This is a battle over who is in charge of Labour's sinking ship. We have a Prime Minister on the other side of the world who admits that he was wrong to say that he was going, and we have a Chancellor who hardly dares leave the country in case he misses his chance again. So the Chancellor sits there reannouncing old promises on education, taxing more and spending more, painfully aware that so much money has been wasted.

We are told that, unlike the Prime Minister, the Chancellor and his cabal are keen on establishing clear dividing lines with their opponents. Well, those dividing lines are emerging. We have a Chancellor who is addicted to taxation, and a growing consensus—which includes Mr. Milburn—that higher taxes undermine aspiration and damage Britain's ability to compete. We have a Chancellor whose answer to everything is to spend, and a growing consensus that money alone is not the answer. We have a Chancellor who opposes reform, and an alliance in this House that will vote reform through. We have a Chancellor who describes himself as "a socialist", and a country that knows that a return to tax and spend socialism would bring this country to its knees. This Budget should have prepared Britain for the new global economy. Instead, we have a Chancellor who is stuck in the thinking of the past, when the country needs a modern, compassionate Conservative party, changing to meet the challenges of the future.

Photo of Des Browne Des Browne Chief Secretary, HM Treasury, The Chief Secretary to the Treasury 9:38 pm, 28th March 2006

We have had four days of comprehensive and informative debate—at least until the last 20 minutes. It is a pleasure to respond to the debate, and I shall endeavour to deal with as many points raised by hon. Members as I can in the time left to me.

Last Wednesday, my right hon. Friend the Chancellor stood here and spoke for an hour or more on the specific policy implications of the Budget. He was responded to by the Leader of the Opposition, who shouted from the Dispatch Box for all of eight minutes. As I sat here—

Photo of Des Browne Des Browne Chief Secretary, HM Treasury, The Chief Secretary to the Treasury

Perhaps I should—[Hon. Members: "More, more!"] It appears that both Chief Whips and shadow Chief Whips sometimes do not know when to keep quiet—[Interruption.] Perhaps the shadow Chief Whip could moderate his tone.

The Budget debate will be remembered by many as the one in which the contributions from Back Benchers, even when limited to 10 or 12 minutes were longer than the total contribution by the Leader of the Opposition. So there was to be no more Punch and Judy politics. As we have learned over the last few days, old Tory traits have not gone away. Disappointingly, we have had more of that today from the shadow Chancellor, Mr. Osborne. But perhaps I should not have been disappointed by the lack of substance from him. Over the weekend I took the opportunity to read his diary in The Observer. I learned that in the week of the Budget he did several things. He spent considerable time with his children, for which I commend him. He was also reminded that he spent his teenage years watching sumptuous E.M. Forster adaptations, among other things. However, I scanned his contribution in The Observer carefully for the day of the Budget and found nothing, apart from the fact that he sat beside the Leader of the Opposition, who was assailed by a wall of sound.

This has been a revealing debate and I especially welcome the shadow Chief Secretary, Mrs. Villiers to her place. I feared last week that she had done a Letwin—I beg your pardon, Mr. Deputy Speaker, I mean I feared that she had done a right hon. Member for West Dorset (Mr. Letwin)—by exposing Tory cuts and then disappearing into the ether. Despite her absence, she certainly made a contribution to the debate, not least on the matter of our investment in education. As she has been reminded more than once, when asked on "Sky News" last Wednesday whether her reaction to the Government's spending meant that the Tories would be spending less, she replied, "It would, certainly." Later that day, when challenged by my hon. Friend Ed Balls to match our Budget commitment on education spending, the shadow Chief Secretary refused and replied, "That's not the answer."

The Opposition were on a roll, because the shadow Chancellor, in interviews, then refused to support her announcements on capital spending and on state school spending. Later that evening, on "Newsnight", he could not mention any measure in the Budget that he supported. The next day, Mr. Goodman, the shadow Minister for child care, said:

"Of course we support the goal".—[Hansard, 23 March 2006; Vol. 444, c. 508.]

Better yet, the shadow Secretary of State for Education and Skills said yesterday

"we accept the increase in school spending and the capital spending pledge."—[Hansard, 27 March 2006; Vol. 444, c. 649.]

It is flip-flops all round. First, they want cuts, then they are confused, then they do not want cuts and finally they support our spending plans. What does the shadow Chancellor say now, when offered the opportunity to support our plans? He is unable to answer the question—[Interruption.]

Let us look at climate change. For the past six years the Opposition have refused to support the climate change levy, which has cut carbon emissions by 28 million tonnes—[Interruption.] Today, they announce—

Photo of Michael Lord Michael Lord Deputy Speaker (Second Deputy Chairman of Ways and Means)

Order. The House must listen to the Minister who is responding to the debate.

Photo of Des Browne Des Browne Chief Secretary, HM Treasury, The Chief Secretary to the Treasury

Thank you, Mr. Deputy Speaker. Today, they announce that they will not vote against the Budget measures on the climate change levy—they have changed their mind and are flip-flopping again.

However, I wish to be fair. The Opposition have one economic policy that we know of, and that is their third fiscal rule. It is that over the economic cycle, and regardless of the needs of the economy or the country, public spending and investment must, as a matter of principle, always rise slower than growth. Indeed, today Mr. Duncan described our rejection of the third fiscal rule as the dividing line between us. He is correct about that, because it would mean public spending £17 billion lower in the coming year and £16 billion lower in the year after. It would mean cutting spending in schools, cutting it in hospitals for doctors and nurses, cutting it in our transport system, and cutting our ability to invest in science and innovation. On the day after the Budget, the shadow Chancellor even said—on GMTV, no less:

"When there's a general election we will start reducing the share of national income taken by the state."

We know what that means—cuts.

Photo of Daniel Kawczynski Daniel Kawczynski Conservative, Shrewsbury and Atcham

Some of us who actually participated in the debate raised serious issues to do with our constituents, particularly farmers in Shrewsbury and senior citizens. Will the Minister talk about the problems that our constituents are going to face instead of just criticising Tory shadow Ministers?

Photo of Des Browne Des Browne Chief Secretary, HM Treasury, The Chief Secretary to the Treasury

Of course, the hon. Gentleman, like many of his hon. Friends, made a bid for more money. I have to say that those bids for more investment were completely ignored by his Front Benchers. Of course they were, because how can they offer him more investment for his farmers or anybody else when they are planning cuts in public spending? That is the important point. They are planning cuts in public spending while every other Conservative Member, for one reason or another, calls for increases in spending.

Several hon. Members:


Photo of Des Browne Des Browne Chief Secretary, HM Treasury, The Chief Secretary to the Treasury

Let the House have no doubt that this Budget sets out how we on the Government Benches will equip Britain for the future. It sets out how, building on a platform of stability and growth, we can invest in the skills and services—

Photo of Michael Lord Michael Lord Deputy Speaker (Second Deputy Chairman of Ways and Means)

Order. Hon. Members must not keep standing if the Minister is not going to give way. It is for him to decide whether he is going to do so, and it would be helpful if he would indicate that.

Photo of Des Browne Des Browne Chief Secretary, HM Treasury, The Chief Secretary to the Treasury

I am not going to give way at the moment, Mr. Deputy Speaker.

We can invest in the skills and services that we need to face the challenges and to grasp the opportunities of our global economy. This Budget is not about the past—it is about the future and long-term British success. It is about our clear ambition for Britain for success built on economic stability and growth. We have had 54 quarters of consecutive growth. I might remind the House that we have had the longest expansion in British history, with inflation at a 2 per cent. target, interest rates at a sustained low, and stable growth enabling British business to expand, leading to record employment, with some 2.3 million more jobs since 1997.

This Budget equips our country for the future, investing in education, science and enterprise, and facing up to the global challenge of climate change. It is our approach, based on economic stability, with the proper balance between spending and borrowing, that is the right way to go. The Budget takes the right decisions to equip Britain for the future.

Photo of Des Browne Des Browne Chief Secretary, HM Treasury, The Chief Secretary to the Treasury

After I have taken an intervention from the hon. Gentleman, I will come to some of the individual points made during the debate.

Photo of Bernard Jenkin Bernard Jenkin Deputy Chair, Conservative Party

Can the right hon. Gentleman explain why it is possible for countries such as Ireland and Denmark to reduce public spending as a proportion of national income and to continue increasing public spending in gross terms, whereas it is impossible for that to be achieved in this country?

Photo of Des Browne Des Browne Chief Secretary, HM Treasury, The Chief Secretary to the Treasury

We are in this country increasing spending and investment, and both are generating growth in the economy. I have to say that the people of Denmark and Ireland did not have 18 years of Tory Government and a lack of investment in the infrastructure of the country to contend with.

As I said at the outset, we have had a comprehensive, informative and wide-ranging debate. It ranged from the customary prophet-of-doom contribution that Labour Members have come to expect from Mr. Clarke, who has predicted imminent recession in this country yearly since we came to power, to the enlightened and positive contribution of my hon. Friend Edward Miliband, who set a series of challenges for the shadow Chancellor, all of which he signally failed to answer. My right hon. Friend Mr. Clarke eloquently expressed support for disabled people and the poor of the world. He has supported those issues for many years.

Daniel Kawczynski sought the safety of the Back Benches from which to make a significant number of calls for further public spending in his constituency. I am sure that the shadow Chancellor took note of that. However, it was not nearly as damaging a contribution from the Back Benches as that of Mr. Leigh, who gave the game away in a sedentary intervention. As the hon. Member for Rutland and Melton sought to set a clear dividing line on tax, the hon. Member for Gainsborough interrupted and suggested that his Front-Bench spokesman meant tax cuts.

In their individual ways, several hon. Members recorded genuine improvements in their constituencies, including my hon. Friends the Members for Hartlepool (Mr. Wright), for Bishop Auckland (Helen Goodman), for Stoke-on-Trent, North (Joan Walley) and Sammy Wilson. They acknowledged the opportunities that my right hon. Friend's Budget gave their communities.

Much has been said in the debate about productivity and competitiveness, not least in the contributions of Dr. Cable. Business in the UK needs stability above all. My right hon. Friend the Chancellor has delivered stability that the International Monetary Fund described as "remarkable". The Organisation for Economic Co-operation and Development has already noted that UK has the lowest barriers to entrepreneurship of any major economy. The Budget does even more to support business, not least the 575,000 more small and medium-sized enterprises that have been founded in the UK since 1997.

UK Trade & Investment will promote the United Kingdom abroad. We will establish a new business advisory council and enshrine in law the Hampton code of deregulatory practice. There will be specific budgets for Her Majesty's Revenue and Customs to reduce the burden on business. We will extend the research and development tax credits.

We have half the productivity gap of France. We have closed the gap with Germany, we are ahead of Japan and we are keeping up with the United States. It is remarkable—[Interruption.]

Photo of Michael Lord Michael Lord Deputy Speaker (Second Deputy Chairman of Ways and Means)

Order. Conversations are breaking out throughout the Chamber. We must listen to the Chief Secretary, who is now winding up the debate.

Photo of Des Browne Des Browne Chief Secretary, HM Treasury, The Chief Secretary to the Treasury

We have not only improved productivity but done that while creating 2.3 million new jobs. Labour Members can be rightly proud of that achievement because we have presided over the longest period of sustained employment growth since the 1950s when records began.

Photo of David Gauke David Gauke Conservative, South West Hertfordshire

The Chief Secretary says that the Government have improved productivity. Will he explain precisely how he calculates that? According to witnesses to the Treasury Committee yesterday, any attempt to describe productivity as improving is "misleading".

Photo of Des Browne Des Browne Chief Secretary, HM Treasury, The Chief Secretary to the Treasury

The only years when productivity fell in the United Kingdom were Tory years. I do not know if the hon. Gentleman was in his place at the beginning of the debate but, as my right hon. Friend the Secretary of State for Trade and Industry said when he opened it, over the economic cycle, which is the proper measure of productivity, there has been 2.3 per cent. growth compared with 2 per cent. in the previous cycle.

The hon. Member for Rutland and Melton, joined by Sir George Young and Martin Horwood mentioned the home computer initiative. The changes have been made to ensure better targeting of resources to meet the Government's objective of improving access to technology. The home computer initiative was never intended to subsidise those who can already afford computers. Exemptions were being used, contrary to the original intention, for second personal computers and, indeed, for games consoles. There has been a huge fall in computer prices since 1999, and the Government want to focus resources on those who would not otherwise be able to gain access to a computer to increase their IT literacy skills. In addition, computer ownership has risen from 28 per cent. to 60 per cent.—[Interruption.]

Photo of Anne McIntosh Anne McIntosh Shadow Minister (Work and Pensions)

I am most grateful to the right hon. Gentleman for giving way. The Secretary of State for Trade and Industry prides himself on the number of new jobs that have been created. Of the 3.2 million that have been created in the public sector, how many of the women in the civil service earn exactly the same as the men? Is the right hon. Gentleman concerned that they earn 25 per cent. less than their male equivalents?

Photo of Des Browne Des Browne Chief Secretary, HM Treasury, The Chief Secretary to the Treasury

I am grateful for the opportunity to remind the House that, since 1997, women's wages have increased twice as fast as men's wages. I recognise that there is still a gap between the two, but we are narrowing that gap, and that is a record of which we can rightly be proud.

A number of Conservative Members have alleged that the tax burden is now the highest in history. That is of course dependent on the most spurious of all calculations of the tax burden, and it is completely wrong. The tax burden is actually lower now than it was for the entire period between 1981 and 1988 under Margaret Thatcher, and well below the peak tax burden in 1984. According to the experts at the Organisation for Economic Co-operation and Development, the net tax burden on the average working family is half what it was when we came to power. As a result of all the tax and benefit changes that we have introduced, the average household will, from next month, be £950 a year better off in real terms than it was in 1997. According to Ernst and Young, the effective rate of corporation tax on British businesses is well below historic highs, down from 14 per cent. in 1997 to below 10 per cent. today.

Of course, the amount of tax collected rises fastest when the economy is doing well—when business, the City, the housing market and retailers are doing well, and when there are more people in work, paying tax and moving up the earnings scale. The lowest tax burden of the past 30 years was in 1993–94, when the economy was barely growing, unemployment was above 3 million, millions of families faced negative equity and wage settlements were at a 25-year low.

This Budget illustrates the gap between the Government's responsible preparation for global change and the instincts of the Conservative party, which would leave us all woefully unprepared for the future.

Photo of Des Browne Des Browne Chief Secretary, HM Treasury, The Chief Secretary to the Treasury

I will not give way now.

Underneath it all, no matter now compassionate their rhetoric, the Conservatives still have the desire to cut. We could do that too, of course, but it would be the wrong thing to do, and the Conservatives know it. We cannot face global competition with one hand tied behind our back. Instead, we will have spent some £5.4 billion a year on science by 2008. This year alone, we have invested more than £2.6 billion to renew UK university research infrastructure. This Budget adds to that by creating a single £1 billion a year health research fund. It also simplifies research funding arrangements and expands R and D support for medium-sized companies.

Our drive is to improve the UK's position as the best location for inward investment, and that means strengthening our reputation as one of the world's finest locations for higher education. It also means promoting London as the world's leading centre for financial and business services. This is a Budget for the future, and for a strong and strengthening economy. I commend it to the House.

Question put and agreed to.


(1) That it is expedient to amend the law with respect to the National Debt and the public revenue and to make further provision in connection with finance.

(2) This Resolution does not extend to the making of any amendment with respect to value added tax so as to provide—

(a) for zero-rating or exempting a supply, acquisition or importation;

(b) for refunding an amount of tax;

(c) for any relief, other than a relief that—

(i) so far as it is applicable to goods, applies to goods of every description, and

(ii) so far as it is applicable to services, applies to services of every description.

2. Rates of tobacco products duty



(1) For the Table of rates of duty in Schedule 1 to the Tobacco Products Duty Act 1979 there shall be substituted—


1. Cigarettes An amount equal to 22 per cent of the retail price plus £105.10 per thousand cigarettes.
2. Cigars £153.07 per kilogram.
3. Hand-rolling tobacco £110.02 per kilogram.
4. Other smoking tobacco and chewing tobacco £67.30 per kilogram.

(2) This Resolution shall have effect as from 6 o'clock in the evening of 22nd March 2006.

And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.

3. Rate of duty on beer



(1) In section 36(1AA)(a) of the Alcoholic Liquor Duties Act 1979 for "£12.92" there shall be substituted "£13.26".

(2) This Resolution shall have effect as from midnight on 26th March 2006.

And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.

4. Rates of duty on wine and made-wine



(1) For Part 1 of the Table of rates of duty in Schedule 1 to the Alcoholic Liquor Duties Act 1979 there shall be substituted—

Part 1

Wine and made-wine of a strength not exceeding22 per cent

Description of wine or made-wine Rates of duty perhectolitre
Wine or made-wine of a strength not exceeding 4 per cent 53.06
Wine or made-wine of a strength exceeding 4 per cent but not exceeding 5.5 per cent 72.95
Wine or made-wine of a strength exceeding 5.5 per cent but not exceeding 15 per cent and not sparkling 172.17
Sparkling wine or sparkling made-wine of a strength exceeding 5.5 per cent but less than 8.5 per cent 166.70
Sparkling wine or sparkling made-wine of a strength of 8.5 per cent or of a strength exceeding 8.5 per cent but not exceeding 15 per cent 220.54
Wine or made-wine of a strength exceeding 15 per cent but not exceeding 22 per cent 229.55

(2) This Resolution shall have effect as from midnight on 26th March 2006.

And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.

5. Hydrocarbon oil etc (rates and rebates)


That provision may be made amending rates of duty and rebate in the Hydrocarbon Oil Duties Act 1979.

6. Hydrocarbon oil etc (road vehicles)


That provision may be made enabling amendment of the definition of road vehicle in the Hydrocarbon Oil Duties Act 1979.

7. Amusement machine licence duty


That provision may be made amending provisions of the Betting and Gaming Duties Act 1981 relating to amusement machine licence duty.

8. Vehicle excise duty (rates)



(1) Schedule 1 to the Vehicle Excise and Registration Act 1994 shall be amended as follows.

(2) In paragraph 1(2), for "£170" there shall be substituted "£175".

(3) For paragraph 1B there shall be substituted—

" 1B The annual rate of vehicle excise duty applicable to a vehicle to which this Part of this Schedule applies shall be determined in accordance with Table A, where the vehicle is first registered before 23rd March 2006, or Table B, where the vehicle is first registered on or after that date, by reference to—

(a) the applicable CO 2 emissions figure, and whether the vehicle qualifies for the reduced rate of duty, or is liable to the standard rate or the premium rate of duty.

Table A: Vehicles first registered before 23rd March 2006

CO2 emissions figure Rate
(1) (2) (3) (4) (5)
Exceeding Notexceeding Reducedrate Standardrate Premiumrate
g/km g/km £ £ £
100 120 30 40 50
120 150 90 100 110
150 165 115 125 135
165 185 140 150 160
185 180 190 195

Table B: Vehicles first registered on or after 23rd March 2006

CO2 emissions figure Rate
(1) (2) (3) (4) (5)
Exceeding Notexceeding Reducedrate Standardrate Premiumrate
g/km g/km £ £ £
100 120 30 40 50
120 150 90 100 110
150 165 115 125 135
165 185 140 150 160
185 225 180 190 195
225 200 210 215

(4) In paragraph 1C—

(a) for sub-paragraph (2) substitute—

" (2) Condition A is that the vehicle—

(a) is constructed—

(i) so as to be propelled by a relevant type of fuel, or so as to be capable of being propelled by any of a number of relevant types of fuel, or

(b) is constructed or modified—

(i) so as to be propelled by a prescribed type of fuel, or so as to be capable of being propelled by any of a number of prescribed types of fuel, and complies with any other requirements prescribed for the purposes of this condition.", and

(b) after sub-paragraph (5) there shall be inserted—

" (6) In this paragraph—

"bioethanol" has the meaning given in section 2AB of the Hydrocarbon Oil Duties Act 1979,

"relevant type of fuel" means—

(a) bioethanol, or a mixture of bioethanol and unleaded petrol, if the proportion of bioethanol by volume is at least 85%, and

"unleaded petrol" has the meaning given in section 1(3C) of the Hydrocarbon Oil Duties Act 1979.

(7) The Secretary of State may, with the consent of the Treasury, by regulations amend sub-paragraph (6)."

(5) In paragraph 1J(a), for "£165" there shall be substituted "£170".

(6) In paragraph 1K(a), after "1st March 2003" there shall be inserted "and before 1st January 2007".

(7) In paragraph 2(1)—

(a) in paragraph (b), for "£30" there shall be substituted "£31",

(b) in paragraph (c), for "£45" there shall be substituted "£46", and

(c) in paragraph (d), for "£60" there shall be substituted "£62".

(8) In Schedule 2 to the Vehicle Excise and Registration Act 1994, after paragraph 24 there shall be inserted—

"Light passenger vehicles with low CO 2 emissions

25 A vehicle is an exempt vehicle if—

(a) it is a vehicle to which Part 1A of Schedule 1 applies, and the applicable CO 2 emissions figure (as defined in paragraph 1A(3) and (4) of that Schedule) for the vehicle does not exceed 100 g/km."

(9) Paragraph (8) shall come into force on 23rd March 2006; but nothing in that paragraph shall have the effect that a nil licence is required to be in force in respect of a vehicle while a vehicle licence is in force in respect of it.

(10) The rest of this Resolution shall have effect in relation to licences taken out on or after that date.

And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.

9. Value added tax (gaming machines)


That provision (including provision having retrospective effect) may be made amending section 23 of the Value Added Tax Act 1994.

10. Value added tax (buildings and land)


That provision may be made for, and in connection with, conferring power on the Treasury—

(a) to substitute Schedule 10 to the Value Added Tax 1994 for the purpose of rewriting that Schedule with amendments, and

(b) to amend Group 1 of Schedule 9 to that Act.

11. Value added tax (works of art, antiques, etc)


That provision may be made amending section 21 of the Value Added Tax Act 1994 in relation to works of art, antiques, collections and collector's pieces.

12. Value added tax (missing trader intra-community fraud)


That, for the purposes of value added tax, provision may be made for, and in connection with, securing that—

(a) supplies of goods made to persons carrying on businesses are treated for the purposes of Schedule 1 to the Value Added Tax Act 1994 as their taxable supplies made in the course or furtherance of their businesses, and

(b) taxable persons carrying on businesses to whom supplies of goods are made by other taxable persons account for and pay value added tax on those supplies.

13. Value added tax (face-value vouchers)


That provision may be made amending, or making amendments connected with, Schedule 10A to the Value Added Tax Act 1994.

14. Income tax (charge and rates for 2006–07)


That income tax shall be charged for the year 2006–07, and for that year—

(a) the starting rate shall be 10%;

(b) the basic rate shall be 22%;

(c) the higher rate shall be 40%.

And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.

15. Corporation tax (charge and rate for 2007)


That corporation tax shall be charged for the financial year 2007 at the rate of 30%.

16. Corporation tax (small companies' rate and fraction for 2006)


That for the financial year 2006—

(a) the small companies' rate shall be 19%, and

(b) the fraction mentioned in section 13(2) of the Income and Corporation Taxes Act 1988 shall be 11/400ths.

17. Corporation tax (starting rate and non-corporate distribution rate)

Motion made, and Question put,

That provision may be made for, and in connection with, the abolition of—

(a) the corporation tax starting rate,

(b) the relief from corporation tax under section 13AA(2) of the Income and Corporation Taxes Act 1988, and

(c) the non-corporate distribution rate.

The House divided: Ayes 325, Noes 259.

Division number 199

See full list of votes (From The Public Whip)

Question accordingly agreed to.

18. Group relief (corporation tax)


That, for the purposes of corporation tax, provision may be made (including provision having retrospective effect) in relation to group relief.

19. Tax relief for R&D expenditure of small or medium-sized companies


That provision may be made in relation to relief under Schedule 20 to the Finance Act 2000.

20. Tax relief for R&D expenditure of large companies etc


That provision may be made in relation to relief under Schedule 12 to the Finance Act 2002.

21. Tax relief for expenditure on vaccine research etc


That provision may be made in relation to relief under Schedule 13 to the Finance Act 2002.

22. Films and sound recordings


That provision may be made about the taxation of activities in connection with films and sound recordings.

23. Charities (relief on income tax and corporation tax)


That provision may be made amending and supplementing sections 505 and 506 of and Schedule 20 to the Income and Corporation Taxes Act 1988.

24. Gift aid (payments by companies)


That provision may be made amending section 339 of the Income and Corporation Taxes Act 1988.

25. Income tax (mobile telephones)



(1) In section 266(2) of the Income Tax (Earnings and Pensions) Act 2003 there shall be inserted at the end "or

(d) section 319 (mobile telephones)."

(2) In section 267(2) of that Act there shall be inserted at the end "and

(g) section 319 (mobile telephones)."

(3) For section 319 of that Act there shall be substituted—

" 319 Mobile telephones

(1) No liability to income tax arises by virtue of section 62 (general definition of earnings) or Chapter 10 of Part 3 (taxable benefits: residual liability to charge) in respect of the provision of one mobile telephone for an employee without any transfer of property in it.

In this section "mobile telephone" means telephone apparatus which—

(a) is not physically connected to a land-line, and

is not used only as a wireless extension to a telephone which is physically connected to a land-line, or any thing which may be used in such apparatus for the purpose of gaining access to, or using, a public electronic communications service.

In this section the reference to the provision of a mobile telephone includes a reference to the provision, together with the mobile telephone provided, of access to, or the use of, a public electronic communications service by means of one mobile telephone number.

For the purposes of subsection (2) "telephone apparatus" means wireless telegraphy apparatus designed or adapted for the primary purpose of transmitting and receiving spoken messages and used in connection with a public electronic communications service."

(4) The amendments made by this Resolution shall have effect for the year 2006–07 and subsequent years of assessment.

(5) But the amendment made by paragraph (3) shall not cause any liability to income tax to arise in respect of the provision of a mobile telephone for an employee, or a member of an employee's family or household, if the mobile telephone was first provided to him before 6th April 2006.

And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.

26. Income tax (computer equipment)

Motion made, and Question put,


(1) Section 320 of the Income Tax (Earnings and Pensions) Act 2003 shall be omitted.

(2) This Resolution shall have effect for the year 2006–07 and subsequent years of assessment.

(3) But this Resolution shall not cause any liability to income tax to arise in respect of the provision of computer equipment by making it available to an employee, or a member of an employee's family or household, if the computer equipment was first made available to him before 6th April 2006.

And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.

The House divided: Ayes 325, Noes 259.

Division number 200

See full list of votes (From The Public Whip)

Question accordingly agreed to.

27. Chargeable gains


That provision (including provision having retrospective effect) may be made amending, or making amendments connected with, the Taxation of Chargeable Gains Act 1992.

28. Income tax (interest relief: film partnership)


That provision (including provision having retrospective effect) may be made restricting the relief available under sections 353 and 362 of the Income and Corporation Taxes Act 1988 in respect of certain loans to buy into partnerships carrying on trade in relation to films or other recordings.

29. Transfers of income arising from securities


That provision (including provision having retrospective effect) may be made amending section 730 of the Income and Corporation Taxes Act 1988.

30. Stock lending


That provision (including provision having retrospective effect) may be made for the purposes of income tax and corporation tax—

(a) in relation to stock lending arrangements, and

(b) for and in connection with treating arrangements which are not stock lending arrangements as if they were such arrangements.

31. Loan relationships etc


That provision may be made for the purposes of corporation tax in relation to—

(a) loan relationships, and

(b) other relationships where a company stands, or is to be treated as standing, in the position of a creditor or debtor in relation to a debt.

32. Derivative contracts


That provision may be made for the purposes of corporation tax in relation to derivative contracts.

33. Intangible fixed assets


That provision (including provision having retrospective effect) may be made amending Schedule 29 to the Finance Act 2002.

34. Controlled foreign companies


That provision may be made amending section 90 of the Finance Act 2002.

35. Transfer of assets abroad


That provision (including provision having retrospective effect) may be made amending, or making amendments connected with, Chapter 3 of Part 17 of the Income and Corporation Taxes Act 1988.

36. Income tax (benefits received by former owner of property)


That provision (including provision having retrospective effect) may be made amending Schedule 15 to the Finance Act 2004.

37. Leases of plant or machinery


That, for the purposes of income tax and corporation tax, provision (including provision having retrospective effect) may be made in relation to leases of plant or machinery.

38. Corporation tax (companies carrying on leasing business)


That, for the purposes of corporation tax, provision (including provision having retrospective effect) may be made in relation to any company carrying on (whether alone or in partnership) a business which consists of or includes leasing plant or machinery.

39. Insurance companies


That provision (including provision having retrospective effect) may be made about insurance companies.

40. Income tax (settlements)


That provision may be made in relation to settlors, beneficiaries and trustees of settlements.

41. Investment reliefs (limits on value of gross assets of issuers of shares etc)



(1) In section 293(6A) of the Income and Corporation Taxes Act 1988 ("ICTA")—

(a) in paragraph (a), for "£15 million" there shall be substituted "£7 million", and

(b) in paragraph (b), for "£16 million" there shall be substituted "£8 million".

(2) In paragraph 8(1) of Schedule 28B to ICTA—

(a) in paragraph (a), for "£15 million" there shall be substituted "£7 million", and

(b) in paragraph (b), for "£16 million" there shall be substituted "£8 million".

(3) In paragraph 22(1) and (2) of Schedule 15 to the Finance Act 2000—

(a) in paragraph (a), for "£15 million" there shall be substituted "£7 million", and

(b) in paragraph (b), for "£16 million" there shall be substituted "£8 million".

(4) Paragraphs (1) and (3) of this Resolution have effect in relation to shares issued on or after 6th April 2006, subject to paragraphs (5) and (6) of this Resolution.

(5) Neither of paragraphs (1) and (3) of this Resolution has effect in relation to shares issued on or after 6th April 2006 to a person who subscribed for them before 22nd March 2006.

(6) Paragraph (1) of this Resolution does not have effect in relation to shares issued on or after 6th April 2006 to the managers of an investment fund approved for the purposes of section 311 of ICTA by the Commissioners for Her Majesty's Revenue and Customs if—

(a) the fund was approved before 22nd March 2006,

(b) investments in the fund have been accepted before 6th April 2006, and

(c) the shares are issued to the managers as nominee for an individual who has (whether or not before 6th April 2006) invested in the fund.

(7) Paragraph (2) of this Resolution has effect in relation to relevant holdings issued on or after 6th April 2006, subject to paragraph (8) of this Resolution.

(8) Paragraph (2) of this Resolution does not have effect for the purpose of determining whether any shares or securities acquired by a company ("the trust company") by means of the investment of protected money are, for the purposes of section 842AA of ICTA, to be regarded as comprised in qualifying holdings of the company at any time.

(9) In paragraph (8) of this Resolution "protected money" means—

(a) money raised by the issue before 6th April 2006 of shares in or securities of the trust company, or

(b) money derived from the investment by the trust company of any such money.

And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.

42. Venture capital trusts (relief from income tax)


That provision may be made amending Schedule 15B to the Income and Corporation Taxes Act 1988.

43. Venture capital trusts (meaning of"investments")


That provision may be made amending the meaning of "investments" for the purposes of approvals, and withdrawals of approvals, under section 842AA of the Income and Corporation Taxes Act 1988.

44. Securities and securities options



(1) Section 420 of the Income Tax (Earnings and Pensions) Act 2003 shall be amended as follows.

(2) In subsection (1)(f), at the beginning there shall be inserted "options and".

(3) In subsection (5)(e), at the beginning there shall be inserted "securities".

(4) In subsection (8), in the definition of "securities option", after "acquire securities" there shall be inserted "other than a right to acquire securities which is acquired pursuant to a right or opportunity made available under arrangements the main purpose (or one of the main purposes) of which is the avoidance of tax or national insurance contributions".

(5) The amendments made by this Resolution shall have effect in relation to options acquired on or after 2nd December 2004; but paragraph (4) shall also have effect in relation to an option acquired before that date where something is done on or after that date as part of the arrangements under which it was made available.

And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.

45. PAYE (retrospective notional payments)


That provision may be made for and in connection with facilitating the operation of pay as you earn in relation to notional payments treated by any Act as made before the date on which the Act is passed.

46. Alternative finance


That provision may be made—

(a) amending, and permitting amendment of, Chapter 5 of Part 2 of the Finance Act 2005, and

(b) about the treatment of alternative finance arrangements as loans to employees.

47. Corporation tax (nuclear decommissioning)

Motion made, and Question put,

That provision may be made amending Chapter 1 of Part 1 of the Energy Act 2004.

The House divided: Ayes 320, Noes 73.

Division number 201

See full list of votes (From The Public Whip)

Question accordingly agreed to.

48. Securitisation companies


That provision (including provision having retrospective effect) may be made about the taxation of securitisation companies.

49. Real Estate Investment Trusts


That provision may be made enabling companies which carry on property rental business to acquire a status that provides certain exemptions and liabilities (in relation to companies and shareholders).

50. Oil (market value)


That provision may be made in relation to the market value of oil (within the meaning of Part 1 of the Oil Taxation Act 1975).

51. Oil (nominated contracts and blended oil)


That provision may be made—

(a) for allocating blended oil to different fields for the purposes of section 2 of the Oil Taxation Act 1975, and

(b) amending section 61 of and Schedule 10 to the Finance Act 1987.

52. Ring fence trades (rate of supplementary charge)

Motion made, and Question put,


(1) In section 501A of the Income and Corporation Taxes Act 1988, in subsection (1), for "10 per cent" there shall be substituted "20 per cent".

(2) The amendment made by paragraph (1) shall have effect in relation to any accounting period beginning on or after 1st January 2006 (but see also paragraph (3)).

(3) For the purpose of calculating the amount of the supplementary charge on a company for an accounting period (a "straddling period") beginning before 1st January 2006 and ending on or after that date—

(a) so much of the straddling period as falls before 1st January 2006, and so much of the straddling period as falls on or after that date, shall be treated as separate accounting periods, and

(b) the company's adjusted ring fence profits for the straddling period shall be apportioned to the two separate accounting periods in proportion to the number of days in those periods.

(4) The amount of the supplementary charge on the company for the straddling period shall be the sum of the amounts of supplementary charge that would, in accordance with paragraph (3), be chargeable on the company for those separate accounting periods.

(5) In the case of a company's straddling period—

(a) the Instalment Payments Regulations shall apply as if the amendment made by paragraph (1) had not been made, but

(b) those Regulations shall also apply separately, in accordance with the following paragraph, in relation to the increase in the amount of any supplementary charge on the company for that period that arises as a result of that amendment.

(6) In that separate application of those Regulations as mentioned in paragraph (5)(b), those Regulations shall have effect as if, for the purposes of those Regulations,—

(a) the straddling period were an accounting period beginning on 1st January 2006,

(b) supplementary charge were chargeable on the company for that period, and

(c) the amount of that charge were equal to the increase in the amount of the supplementary charge for the straddling period that arises as a result of the amendment made by paragraph (1).

(7) Any reference in the Instalment Payments Regulations to the total liability of a company shall, accordingly, be read—

(a) in their application as a result of paragraph (5)(a), as a reference to the amount that would be the company's total liability for the straddling period if the amendment made by paragraph (1) had not been made, and

(b) in their application as a result of paragraph (5)(b), as a reference to the amount of the supplementary charge on the company for the deemed accounting period under paragraph (6)(a).

(8) For the purposes of the Instalment Payments Regulations—

(a) a company shall be regarded as a large company as respects the deemed accounting period under paragraph (6)(a) if (and only if) it is a large company for those purposes as respects the straddling period, and

(b) any question whether a company is a large company as respects the straddling period shall be determined as it would have been determined if the amendment made by paragraph (1) had not been made.

(9) If the Instalment Payments Regulations—

(a) apply in relation to a company's liability to supplementary charge for the deemed accounting period under paragraph (6)(a), and

(b) would (but for this paragraph) treat any instalment payment in respect of that liability as being due and payable on a date falling on or before 22nd March 2006,

those Regulations shall have effect as if the payment were due and payable instead at the end of the period of 14 days beginning with that date.

(10) In this Resolution—

(a) "adjusted ring fence profits" has the meaning given by section 501A of the Income and Corporation Taxes Act 1988,

(b) "the Instalment Payments Regulations" means the Corporation Tax (Instalment Payments) Regulations 1998,

(c) "supplementary charge" means any sum chargeable under section 501A(1) of the Income and Corporation Taxes Act 1988 as if it were an amount of corporation tax.

And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.

The House divided: Ayes 320, Noes 75.

Division number 202

See full list of votes (From The Public Whip)

Question accordingly agreed to.

53. Ring fence trades (exploration expenditure supplement)


That provision (including provision having retrospective effect) may be made amending Schedule 19B to the Income and Corporation Taxes Act 1988.

54. Inheritance tax (rates and rate bands for years 2008–09 and 2009–10)


That provision may be made for successive substitutions of the Table in Schedule 1 to the Inheritance Tax Act 1984.

55. Inheritance tax (rules for trusts etc)


That provision may be made—

(a) amending provisions of the Inheritance Tax Act 1984 relating to settled property, and

(b) amending, in connection with cases where a person's interest in settled property has come to an end, provisions relating to property that, for purposes of that Act, is property subject to a reservation.

56. Inheritance tax (purchase of interests in foreign trusts)


That provision (including provision having retrospective effect) may be made amending section 48 of the Inheritance Tax Act 1984.

57. Pension schemes etc


That provision may be made in relation to pension schemes and similar schemes under which benefits are provided to or in respect of employees or former employees.

58. Stamp duty land tax (thresholds)



(1) In section 55 of the Finance Act 2003 in subsection (2), in Table A, for "£120,000", in both places, there shall be substituted "£125,000".

(2) In Schedule 5 to the Finance Act 2003, in paragraph 2(3), in Table A, for "£120,000", in both places, there shall be substituted "£125,000".

(3) The amendments made by this Resolution shall have effect in relation to any transaction of which the effective date (within the meaning of Part 4 of the Finance Act 2003) is after 22nd March 2006.

And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.

59. Stamp duty (thresholds)


That the following provisions shall have effect for the period beginning with 23rd March 2006 and ending 31 days after the earliest of the dates mentioned in section 50(2) of the Finance Act 1973—

(1) In Schedule 13 to the Finance Act 1999, in paragraph 4, for "£120,000", in both places, there shall be substituted "£125,000".

(2) The amendment made by this Resolution shall have effect in relation to instruments executed after 22nd March 2006.

And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of section 50 of the Finance Act 1973.

60. Stamp duty land tax (leases)


That provision may be made amending Schedules 5 and 17A to the Finance Act 2003.

61. Stamp duty land tax (unit trust schemes)



(1) Part 4 of the Finance Act 2003 shall be amended as follows.

(2) Section 64A shall be omitted.

(3) In section 101—

(a) in subsection (1) for "provisions" there shall be substituted "provision", and

(b) in subsection (7) the words from "section 53" to "companies), or" shall be omitted.

(4) This Resolution shall have effect in relation to any land transaction of which the effective date is, or is after, 22nd March 2006 (but see paragraphs (5) and (6)).

(5) This Resolution shall not have effect in relation to—

(a) any land transaction which is effected in pursuance of a contract entered into and substantially performed before 2 p.m. on 22nd March 2006 ("the relevant time"), or

(b) any other land transaction which is effected in pursuance of a contract entered into before the relevant time and which is not an excluded transaction.

(6) For this purpose, a land transaction effected in pursuance of a contract is an excluded transaction if—

(a) any provision of the contract has effect by reference to a unit trust scheme and the scheme is not established before the relevant time,

(b) at or after the relevant time the contract is varied in a way that significantly affects the land transaction (see paragraph (7)),

(c) the subject-matter of the land transaction is not identified in the contract in a way that would have enabled its acquisition before the relevant time,

(d) rights under the contract are assigned at or after the relevant time,

(e) the land transaction is effected in consequence of the exercise, at or after the relevant time, of any option, right of pre-emption or similar right, or

(f) at or after the relevant time there is an assignment, subsale or other transaction (relating to the whole or part of the contract's subject-matter) as a result of which a person other than the purchaser under the contract becomes entitled to call for a conveyance to him.

(7) For the purposes of paragraph (6)(b) the contract is varied in a way that significantly affects the land transaction if (and only if)—

(a) it is varied so as to substitute a different purchaser in relation to the land transaction,

(b) it is varied so as to alter the subject-matter of the land transaction, or

(c) it is varied so as to alter the consideration for the land transaction.

(8) Expressions which are used in Part 4 of the Finance Act 2003 and in this Resolution have the same meaning in this Resolution as in that Part.

And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.

62. Stamp duty land tax (alternative finance)


That provision may be made amending and supplementing sections 71A to 73 of the Finance Act 2003.

63. Rate of landfill tax



(1) In section 42 of the Finance Act 1996, for the amount specified in subsection (1)(a), and the corresponding amount specified in subsection (2), there shall be substituted "£21".

(2) This Resolution shall have effect in relation to taxable disposals made, or treated as made, on or after 1st April 2006.

And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.

64. Climate change levy (rates)


That provision may be made substituting the Table in paragraph 42(1) of Schedule 6 to the Finance Act 2000.

65. Climate change levy (abolition of half-rate supplies)



(1) For the purposes of climate change levy, no supply made on or after 1st April 2006 shall be a half-rate supply.

(2) Paragraphs (3) to (6) shall have effect for determining when a supply is to be regarded as made for the purposes of paragraph (1).

(3) A supply—

(a) of electricity, or

(b)of gas that is in a gaseous state and is of a kind supplied by a gas utility,

is to be regarded as made at the time when the electricity or gas is actually supplied.

(4) In the case of a supply of a taxable commodity not falling within paragraph (3) by a person who is resident in the United Kingdom—

(a) if the commodity is to be removed, the supply is to be regarded as made at the time of the removal,

(b) if the commodity is not to be removed, the supply is to be regarded as made when the commodity is made available to the person to whom it is supplied.

This paragraph shall not apply if paragraph (6) applies in the case of the supply.

(5) In the case of a supply of a taxable commodity not falling within paragraph (3) by a person who is not resident in the United Kingdom, the supply is to be regarded as made—

(a) when the commodity is delivered to the person to whom it is supplied, or

(b) if earlier, when it is made available in the United Kingdom to that person.

This paragraph shall not apply if paragraph (6) applies in the case of the supply.

(6) In any case where, by virtue of paragraph 23(3) of Schedule 6 to the Finance Act 2000, a person is, for the purposes of that Schedule, deemed to make a supply to himself of a quantity of a taxable commodity—

(a) which he has produced, and

(b) which does not fall within paragraph (3),

the supply is to be regarded as made at the time when he produced that particular quantity of the taxable commodity.

And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.

66. Relief from tax (incidental and consequential charges)


That it is expedient to authorise any incidental or consequential charges to any duty or tax (including charges having retrospective effect) that may arise from provisions designed in general to afford relief from taxation.