Budget Resolutions and Economic Situation

Amendment of the Law – in the House of Commons at 12:23 pm on 22nd March 2007.

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Photo of George Osborne George Osborne Shadow Chancellor of the Exchequer 12:23 pm, 22nd March 2007

I of course accept what the Leader of the House has just said about the absence of the Chancellor of the Exchequer. What is slightly more surprising is the absence of any Labour Members in large numbers to defend the Budget —[ Interruption. ] Well, I suppose that there are some here, but not really the quality.

It does not take long for this Chancellor's Budgets to unravel, but even by his standards, this one was a record. It was presented to this House 24 hours ago as a tax-cutting Budget, but it took less than 24 minutes to work out that everything that he was giving with one hand he was taking back with the other. It is here in the Red Book—£8 billion given away by cutting the standard rate, and then £7 billion clawed back by abolishing the 10p rate, which he introduced, and £1 billion clawed back by the national insurance hike. This was not a tax cut: it was a con trick. The public have seen straight through it.

The Chancellor said in his speech that he wanted

"to ensure working families are better off".—[ Hansard, 21 March 2007; Vol. 458, c. 828.]

But when the Institute for Fiscal Studies looked last night at the small print, it was clear that 3.5 million working families mainly the lowest paid, will be worse off as a result of this Budget. Pretty much anyone earning below £18,000 a year will see their income tax bills rise because of the abolition of the 10p rate, which more than cancels out the cut in the basic rate. That is a tax rise on the lowest paid and that lot over there cheered it.

The Chancellor says, of course, "Don't worry, they get the money back in tax credits." Leave aside the sense of taking money in taxes from the wages of low-income families and then asking them to fill a form so that they can get it back, and leave aside the fact that only 60 per cent. of those eligible take up the working tax credit, because it is so complicated and poorly administered—there are still millions of low-income families who lose out. For a start, there are the ones without any children. For example, take a young couple who have not had kids yet, but are wondering how they will ever get on the housing ladder on their salaries. If they are each earning £13,000 a year, their income tax bill just got £224 higher. Then take two-earner couples on lower incomes with kids. Say one earns £7,500 part-time and the other earns £18,000 and they have one child. Even after tax credits, they will be £234 worse off —[ Interruption. ] Well, Labour MPs will have to put that on their leaflets at the next general election.

Photo of George Osborne George Osborne Shadow Chancellor of the Exchequer

Of course. Perhaps the hon. Gentleman will put those details on his election leaflet.

Photo of Jim Sheridan Jim Sheridan Labour, Paisley and Renfrewshire North

I may take that opportunity. Can the hon. Gentleman set the tone for his contribution today—I will be more than happy to put it in my leaflet if he does—by confirming to the House and the wider British public that he will at least match the commitments of this Government?

Photo of George Osborne George Osborne Shadow Chancellor of the Exchequer

There is no tax cut, sadly, and that is the whole point. If one looks in the Red Book, it is not there. If there is a vote on the reduction in the standard rate of tax, which will not take place until after the next Budget, we would be happy to support it. By the way, for those who are wondering how we will vote next week on the second resolution on income tax, which states that for next year the starting rate will be 10 per cent., the basic rate will be 22 per cent. and the higher rate will be 40 per cent., I can confirm that we will vote for it. I wish to put that on the record —[ Interruption. ] That is the present structure of income tax. Mr. Jones laughs: he probably does not realise what the present structure of income tax is.

Photo of Kevan Jones Kevan Jones Labour, North Durham

To clarify the situation, will the hon. Gentleman give a commitment today to the House that the Tories will at least match the spending commitments outlined in the Budget?

Photo of George Osborne George Osborne Shadow Chancellor of the Exchequer

I am happy to match the spending commitments on education because the Chancellor is sharing the proceeds of growth. That is the extraordinary overnight story of this stealthy Budget. The Chancellor taxed the low paid to fund his con trick on middle England. He is, in effect, the sheriff of Nottingham.

Photo of Michael Jack Michael Jack Conservative, Fylde

Did my hon. Friend notice the subtle adjustment in the withdrawal rate of tax credit in respect of increases in income—a fact that the Chancellor failed to draw to the House's attention yesterday?

Photo of George Osborne George Osborne Shadow Chancellor of the Exchequer

My right hon. Friend, who was of course a Treasury Minister, has been eagle-eyed and he is right. The increase in the tax credit withdrawal rate will raise £600 million for the Exchequer. Like him, I missed that in the Chancellor's speech.

As I was saying, the Chancellor taxed the low paid to fund his con trick on middle England. That is how desperate he has become. We can see why. He is attacked by those who have worked closest with him. He is less popular even than this Prime Minister. His tax and spend experiment is now deemed a total failure. If people want to know what this Chancellor would be like in No. 10, they should look no further than yesterday's Budget—stealthy, sneaky and unable to tell the truth. He is not the man who can restore public trust in Government, because he is the reason why people do not believe a word that they say any more.

Photo of Douglas Hogg Douglas Hogg Conservative, Sleaford and North Hykeham

I am grateful to my hon. Friend for reminding me of my status and his. When commenting on the Chancellor, will my hon. Friend remind the House that the Chancellor failed to mention the phasing out of the 10p band, which is just the sort of omission that gave us the dodgy dossier on Iraq?

Photo of George Osborne George Osborne Shadow Chancellor of the Exchequer

My right hon. and learned Friend returns to the familiar theme of Iraq, and perhaps we should save it for a later debate. However, he is right to say that people at home listening to the Chancellor must have assumed that they would be better off as a result of a tax-cutting Budget. What the Chancellor did not tell them was that it was a con trick—that the cut in the standard rate of income tax would be more than paid for by the removal of the 10p starting rate and the increase in the national insurance band. It was a classic stealthy trick.

Photo of George Osborne George Osborne Shadow Chancellor of the Exchequer

I shall give way to Ms Keeble, who has one of the seats that we shall take at the next election.

Photo of Sally Keeble Sally Keeble Labour, Northampton North

The hon. Gentleman will be lucky! This Budget will help me keep my seat. The Chancellor made important changes to the child care element of tax credits, and women will be able to claim probably up to £10 more a week for child care. That will help them go out to work, and it is one of the good proposals that the hon. Gentleman has not mentioned.

Photo of George Osborne George Osborne Shadow Chancellor of the Exchequer

If the people involved earn less than £18,000, their income tax bill will go up when they return to work. Perhaps the hon. Lady will make that point to her constituents at the next general election, because we certainly will.

On Tuesday, Andrew Turnbull, the man who has worked more closely with the Chancellor than anyone else—

Photo of George Osborne George Osborne Shadow Chancellor of the Exchequer

Well, there is no point in the hon. Gentleman sneering at the man who was Cabinet Secretary in the Government whom he has supported for the past 10 years. The former Cabinet Secretary said of the Chancellor that

"he has a very cynical view of mankind".

On Wednesday, we got the proof. No wonder the thinking half of the Labour party is searching for someone—anyone!—who can stop the Chancellor.

Whom are their hopes pinned on? Sadly, they are no longer pinned on the Education Secretary. He had his moment in the sun at the time of the last party conference, but now he has retired to the calmer waters of the Deputy Leader contest. The party's hopes are, of course, pinned on the young Environment Secretary, who speaks to us on Monday. From the very top of the party, they want him to run.

The Environment Secretary admitted recently in a newspaper interview that his friends call him "Brains" after the character in "Thunderbirds". Let me just say that, as he sits on Tracy island, he is leaving it a little late to launch his international rescue of the Labour party.

Photo of Meg Hillier Meg Hillier PPS (Rt Hon Ruth Kelly, Secretary of State), Department for Communities and Local Government

I represent one of the poorest constituencies in the country, where 22 per cent. of the population is under the age of 16. My constituents are benefiting enormously from this Labour Government. Unlike members of the Conservative party, they are not interested in beauty contests for the leadership of any party, or of the country. They want a Labour Government delivering tax credits and benefits for children and families.

Photo of George Osborne George Osborne Shadow Chancellor of the Exchequer

Perhaps the hon. Lady will explain to her constituents that the Budget announced yesterday increases the income tax on the lowest paid people in this country. In a tax-neutral Budget, the Chancellor has redistributed income from the lowest paid to those on middle incomes. That is a con trick, but it is not the impression that people will have got when they listened to the right hon. Gentleman yesterday.

Photo of Andrew Love Andrew Love Labour, Edmonton

Will the hon. Gentleman give way?

Photo of George Osborne George Osborne Shadow Chancellor of the Exchequer

I will, and then I want to talk about the environment.

Photo of Andrew Love Andrew Love Labour, Edmonton

The hon. Gentleman has given a commitment today that he will match the Government's planned public expenditure. His colleagues are going round the country talking incessantly about cuts in taxes of £21.5 billion— [ Interruption. ]

Photo of Andrew Love Andrew Love Labour, Edmonton

Does that mean that there will be an explosion in borrowing in the future?

Photo of George Osborne George Osborne Shadow Chancellor of the Exchequer

To be honest, I did not fully understand that intervention. The hon. Gentleman appeared to be saying that the Opposition have a policy of sharing the proceeds of economic growth.

Photo of Andrew Love Andrew Love Labour, Edmonton

I am talking about borrowing.

Photo of George Osborne George Osborne Shadow Chancellor of the Exchequer

If the hon. Gentleman looked at the spending plans announced by the Chancellor yesterday, he will see that the growth rate of spending has been dropped below the growth rate of the economy. That is something that those of us who turn up for Treasury questions know that the Chancellor has been saying for a year could not be done. However, he did it on Budget day, and I shall deal with his spending plans later.

I turn now to the section of the Budget that talked about the environment.

Photo of George Osborne George Osborne Shadow Chancellor of the Exchequer

I will give way in a little while, but I want to make progress.

It is clear that the Chancellor did not speak to the Environment Secretary when he was putting together the environment part of the Budget, but perhaps that is not surprising. Andrew Turnbull, the former Cabinet Secretary, gave us a bit of an insight into the Chancellor's attitude—

Photo of Bob Ainsworth Bob Ainsworth Deputy Chief Whip and Treasurer of HM Household

The hon. Gentleman should not talk about the environment.

Photo of George Osborne George Osborne Shadow Chancellor of the Exchequer

I am sorry? I thought that we just heard from the Labour Front Bench that we should not talk about the environment. Is that right? I thought that this was the new green Labour party.

The former Cabinet Secretary described the Chancellor's attitude as follows:

"If you want something done about the environment you don't talk to David Miliband."

It is clear that the Chancellor did not talk to the Environment Secretary before putting together the environment part of the Budget. We have the leaked letter that the Secretary of State for Environment, Food and Rural Affairs sent to the Chancellor. Entitled "DEFRA's Priorities for the Budget of 2007", it states that

"market based instruments, including taxes, need to play a substantial role in our emerging strategy to respond to climate change".

I think that we all agree with that. The letter went on to say that

"emissions from aviation are our fastest growing source of greenhouse gas emissions...air travel is lightly taxed...I do not believe we can leave aviation untaxed".

The letter continues with the very compelling submission that

"there is a case to look again at making" domestic

"flights subject to VAT".

Presumably, the Environment Secretary shares my regret that the Chancellor went out of his way to attack DEFRA's idea in his speech yesterday. Of course, when a Treasury official was asked what he thought of the DEFRA submission, he said that the Chancellor receives "many Budget submissions".

The truth is that the Chancellor is not seriously interested in the environment. He never has been: it is all politics for him. The word "climate" hardly appeared in his Budgets until my right hon. Friend the Leader of the Opposition came along. Pretty much the only green things about yesterday's Budget were the endless recycled announcements.

I turn now to the package for business. I welcome the cut in the headline corporation tax rate, which is to be paid for by cutting corporation tax reliefs. I welcome it, because I proposed it. I am obviously having more luck with my Budget submissions than some Secretaries of State.

What is baffling is that, in this Budget, the Chancellor has taken a completely opposite approach to small-business taxation. There, he has increased the tax rate and introduced more reliefs. What has the right hon. Gentleman done in his time as Chancellor with the small companies tax rate? In 1997, he cut it from 23 to 21 per cent. In 1998, he cut it again to 20 per cent. In 1999, he introduced a new 10 per cent. rate, and in 2002 he abolished the 10 per cent. and made it zero.

All that sounds pretty good. Unfortunately, in 2004 the Chancellor put the zero rate back up to 19 per cent. Yesterday, he raised it again to 22 per cent. After 11 Budgets, and six changes in the tax rate, we are pretty much back where we started. The only thing that small businesses have to show for it is a hugely more complicated and burdensome tax system.

It is no wonder that the small business organisations are up in arms about the Budget. Last night, the Forum of Private Business stated:

"The Chancellor has used smoke and mirrors to disguise the fact there is nothing in this Budget to support small businesses", and the Federation of Small Businesses said that it was "very disappointing". They will be even more disappointed when they discover that total business taxes are set to rise by £1 billion next year, and by almost £2 billion the year after. What sort of response to globalisation is that?

Photo of George Osborne George Osborne Shadow Chancellor of the Exchequer

Perhaps the hon. Gentleman will tell me.

Photo of Wayne David Wayne David Labour, Caerphilly

Does the hon. Gentleman accept that the Institute of Directors has welcomed the Budget?

Photo of George Osborne George Osborne Shadow Chancellor of the Exchequer

I shall tell the House what the business organisations have said about the Budget. Michael Saunders is chief economist of Citigroup, and he has said:

"Brown's version of tax cutting...is one that still raises the tax burden. Every much trumpeted tax cut is offset by another tax hike or a cut in allowance."

The hon. Gentleman mentioned the Institute of Directors. Its director general, Miles Templeman, signed a letter that appeared in the Financial Times on Tuesday supporting the policies I proposed for inclusion in the Budget. I am delighted that he was able to do so.

Another thing that the Chancellor did not mention was the fact that the overall tax burden is set to rise to its highest ever level. There it is, buried in table C9 on page 285—the highest tax burden in our history. That is the remarkable thing about the Chancellor's management of the public finances. He came in promising prudence; a decade later we have the highest tax burden in our history and a bigger structural budget deficit than Italy. That is truly incompetent.

Yesterday, the Chancellor had to announce that even the borrowing figures he revised up at the Dispatch Box in December are already wrong and that we are borrowing £8 billion more than he announced before Christmas—not that he spelled it out exactly. Nor did he tell us that he was again revising down the current Budget figures. What he did was to follow our advice and bring the growth rate of spending below the growth rate of the economy. For a year he has been telling us it cannot be done, yet he did exactly that—sharing the proceeds of growth.

Let us have a debate about how the money is spent.

Photo of Barry Sheerman Barry Sheerman Chair, Education & Skills Committee

I did not know it had been announced yet, Madam Deputy Speaker.

I was a Member for the 10 years before 1997 and experienced how Conservative Administrations ran the country. Is Mr. Osborne really saying that the past 10 years do not stand out as an amazingly good experience for most people in this country, compared with the disaster when the Conservatives ruled?

Photo of George Osborne George Osborne Shadow Chancellor of the Exchequer

Yes, I am saying that, because the question the public are asking is: where has all the money gone?

It tells us everything about the Government's failure on public services that in the Chancellor's last Budget—his great swansong as Chancellor—he barely mentioned the national health service. Out there in the country it is the biggest political issue of the day. Pick up a local newspaper almost anywhere in the country and it will be full of articles about hospitals facing closure, maternity wards under threat, nursing posts being axed and junior doctors up in arms, yet the NHS hardly features at all in the national newspaper coverage of the Budget. For the Chancellor, it has become the health service that dare not speak its name. That is because he has no one but himself to blame for the monumental waste of public money and the meddling and interfering that have sent NHS staff morale plummeting, and for the old-fashioned, top-down attempt to control everything from Whitehall that has ended up with a health service in crisis.

The Chancellor could not even give us the spending figures for the coming three years. Why not? We have had the figures for the Home Office, the Treasury, the Department for Constitutional Affairs and, yesterday, the Department for Education and Skills—no doubt the Secretary of State will be talking about that later—so why not the NHS? The Chancellor must have done the sums if he has done them for the other Departments. Presumably he is keeping the NHS figures back only for political reasons, so that he can deploy them later in the year. People who are already struggling with financial deficits in the NHS should have firm financial planning horizons.

One Budget measure that will affect the NHS has not really had an airing yet. It is buried in table A2, on page 210, and is called "Tackling Managed Service Companies". That is Brown-speak for a stealth tax that will raise £350 million next year and £450 million the year after. Will the Secretary of State for Education and Skills confirm that the biggest user of managed service companies in the country is the NHS? Will he explain to the Chancellor that if he puts their taxes up they will put their fees up and that hospital trusts will end up footing the Bill for his entirely self-defeating stealthy manoeuvre?

Of course, the Chancellor talked about education. Can the Education Secretary confirm that despite all the spin in yesterday's Budget statement it is clear from page 139 that education spending growth is set to halve to 2.5 per cent., below the growth rate of the economy? That means that the share of national income devoted to education is set to fall, yet the 2005 Labour manifesto promised:

"We will continue to raise the share of national income devoted to education."

Perhaps the Education Secretary could explain the contradiction between the Budget and the manifesto?

While the Chancellor was talking about how much money he would put into education, he did not say a word about how it would be spent—not an inkling that he understood what a waste it has been to throw money at education without also achieving reform. That was not how it was supposed to be. Earlier this week the Blairites were in ecstasy. They thought they had finally got the Chancellor to sign up to city academies, finally got him to commit himself in public to something that he has spent the past year bad-mouthing in private. Just wait for the Budget, we were told—Gordon's going to commit to education reform—


Would the leaders of both main parties explain where the money has gone from the North Sea Oil revenue and the extortionate levels of taxation during the last twenty years?

Submitted by e daly

Photo of Sylvia Heal Sylvia Heal Deputy Speaker

Order. On more than one occasion the hon. Gentleman has not referred to Members of the House or of the other place in the correct parliamentary manner. Perhaps he would now do so.

Photo of George Osborne George Osborne Shadow Chancellor of the Exchequer

Of course, Madam Deputy Speaker. From now on, I shall refer to Mr. Brown rather than to Gordon.

There was not a word in the Budget speech about education reform, and nothing about public service reform or how the Chancellor will make sure that our tax money reaches the front line. The only mention of city academies in the entire Budget speech, despite the briefing to the newspapers, was the promise to remove VAT restrictions so that their facilities can be used by the community. It is a great idea. We proposed it, and the Chancellor has now accepted it.

Photo of George Osborne George Osborne Shadow Chancellor of the Exchequer

Presumably the hon. Lady welcomed it.

Photo of Kerry McCarthy Kerry McCarthy Labour, Bristol East

Does the hon. Gentleman accept that removing the VAT restriction on city academies will make a huge difference, because their facilities will be available to the community? Does he not welcome that significant move as something for which they have been lobbying for the past few years?

Photo of George Osborne George Osborne Shadow Chancellor of the Exchequer

Of course I welcome it—the Leader of the Opposition proposed it.

Yesterday, the Chancellor began his speech by comparing himself, with characteristic modesty, to William Gladstone, but he said that when he becomes Prime Minister, unlike Gladstone, he will not try to be his own Chancellor. He then spent the rest of his speech writing the Budgets for the rest of this Parliament. The income tax changes we have been discussing will not come into force until April 2008. The rise in national insurance and the top rate threshold will happen in April 2009. The inheritance tax changes take place in April 2010.

The Chancellor has fixed the Budgets of his future Chancellors and given them their marching orders before he has even chosen who will do the job or before they turn up at the Treasury. Perhaps it will be the Education Secretary—who knows?—thrust into a job that the Prime Minister of the day will not let him do, no doubt exposed to death by a thousand cuts from the daily press briefings of the Brownite cabal. That may be the right hon. Gentleman's fate, but what the Budget tells us about the fate of the country is that the Chancellor will not change his ways. We shall have the same stealth, the same spin and the same con tricks. We shall have the same complete contempt for colleagues and belittling of Ministers that the Cabinet Secretary told us about. We shall have the same old-fashioned, top-down Stalinist control that is so out of tune with our times. With his last Budget, the Chancellor has shown us that he cannot be the change the country wants—that he is part of the problem, not part of the solution. One thing is clear from yesterday: if people want change and to restore trust in the political process, we do not just need a change of Prime Minister—we need a change of Government.

Photo of Alan Johnson Alan Johnson Secretary of State for Education and Skills 12:48 pm, 22nd March 2007

That was an entertaining speech from Mr. Osborne, but the public will be looking for the substance and experience that we heard yesterday, rather than the personal attacks and shallow self-regard that we have heard today. Even with all the expenditure on his public school education, the hon. Gentleman cannot manage to be courteous about the Chancellor of the Exchequer. I have to remind Opposition Members that Comic Relief was last week. We also remember when the hon. Member for Tatton wrote all those wonderful jokes for Mr. Hague when he was Leader of the Opposition. The trouble is that he also helped him with the policies—and we all saw what happened there.

We have seen Conservative Back Benchers get over-excited before. We saw it before the 2001 and the 2005 general elections. If we compare the Budget speech yesterday with today's response, it seems to me that Conservative Members have learned nothing from their previous experiences.

We had a Budget yesterday that concentrated on the environment, on science and innovation and on the issues of the 21st century, particularly the policies that we will need—including higher education, which I shall come on to soon—to maintain the economic stability that we have enjoyed over the last 10 years into the new century. Crucial to all that was, of course, education.

Photo of Bernard Jenkin Bernard Jenkin Conservative, North Essex

Will the right hon. Gentleman clear just one thing up? The Red Book shows that the overall tax burden is going to rise to 40.4 per cent. over much of the Budget period. It is not going to decline at all, so does the right hon. Gentleman still insist that this was a tax-cutting Budget?

Photo of Alan Johnson Alan Johnson Secretary of State for Education and Skills

Yes, the hon. Gentleman will not be surprised to know, I do, not least because 15 million gaining households will see a reduction in their direct taxes.

As I was saying, this was a Budget that put education first. What it did was lock in the current record levels of education spending and add additional amounts, compounded year on year, to provide a further £10.7 billion to invest in education by 2011.

Photo of David Heath David Heath Shadow Leader of the House of Commons, Shadow Spokesperson (Cabinet Office)

The one figure that really struck me in what the Chancellor said yesterday was £6,600 as the average per pupil funding for 2010. I have to say that that figure would be totally unrecognisable to schools in Somerset where the current figure is about half that. I welcome the increased expenditure on education, but I wonder when it will be distributed fairly across the country so that poorly funded education authorities catch up.

Photo of Alan Johnson Alan Johnson Secretary of State for Education and Skills

We will indeed spend £6,600 per pupil by 2010 compared with £2,500 per pupil when we took office. The hon. Gentleman raises an important question about the distribution. We understand those issues, which is why we are currently out to consultation on a review of how spending is allocated. The spending per pupil figure that the Chancellor used yesterday was, of course, accurate. We are able to build on the achievements of the last 10 years while increasing our ambitions for the future.

Photo of Graham Stuart Graham Stuart Conservative, Beverley and Holderness

Will the right hon. Gentleman tell the House how it can be a tax-cutting Budget when the Chancellor himself described it as fiscally neutral?

Photo of Alan Johnson Alan Johnson Secretary of State for Education and Skills

Because of the 15 million families that will see their taxes cut and because the overall effect of the Budget will, we believe, ensure that families right across the country have their tax obligations reduced.

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

I know of the Secretary of State's commitment to values that he has upheld for a long time, which I respect, but how can he put forward this Budget as a fair Budget when he knows that it increases tax on the lowest paid?

Photo of Alan Johnson Alan Johnson Secretary of State for Education and Skills

This Budget produces a £2.5 billion cut in personal taxes, which helps the poorest in this country. I noticed that the hon. Member for Tatton did not mention the 200,000 children lifted out of poverty or the extension of in-work credits that will help single parents back to work or the £2 billion in tax credits, which are essential to ensuring that people can move from welfare to work without suffering a reduction in their income.

Photo of Ann Coffey Ann Coffey PPS (Rt Hon Alistair Darling, Secretary of State), Department of Trade and Industry

On the issue of helping disadvantaged young people, I was pleased to hand out awards to young people in Stockport last Friday. The youth opportunities fund provided £500,000 over two years and this initiative has been widely welcomed by young people who can have the projects that they want. If it can be demonstrated, on evaluation, that it has helped to get young people off the streets and, more importantly, helped disadvantaged young people, will the Secretary of State look into finding ways of continuing it? I congratulate the Government on this excellent initiative.

Photo of Alan Johnson Alan Johnson Secretary of State for Education and Skills

My hon. Friend is right to talk about the success of "Youth Matters", not least because we had a wide consultation with young people themselves about how best to spend this money. I will certainly learn any lessons from it and try to take it forward into further policy.

Several hon. Members:


Photo of Alan Johnson Alan Johnson Secretary of State for Education and Skills

I shall give way one more time, but then I want to make some progress.

Photo of Philip Dunne Philip Dunne Conservative, Ludlow

The Secretary of State has just confirmed the Government's intention to increase education funding per pupil to £6,600. Can he elaborate further on how he expects to achieve that in Shropshire, where spending last year was £3,351? Does he mean that Shropshire is going to get double its present funding?

Photo of Alan Johnson Alan Johnson Secretary of State for Education and Skills

Perhaps we will have a teach-in afterwards. I am talking about the average amount of spending per pupil. The hon. Gentleman will find that Shropshire has had a huge increase in spending per pupil since we came into government. Across the country, that averages out at £5,500 per pupil now and by 2010, with an extra £10.7 billion invested in education, it will average £6,600 per pupil.

Photo of Alan Johnson Alan Johnson Secretary of State for Education and Skills

No. I am going to make some progress.

Since we came into office—this is pertinent to previous questions—education spending has more than doubled from £30 billion in 1997 to £66 billion in the coming year. This Budget takes it to £74 billion by 2010. Capital investment has increased eightfold from £1 billion in 1997 to £8 billion today, rising to more than £10 billion in 2011. We now spend on sports facilities alone what the previous Government spent on the whole capital infrastructure of schools.

The extra investment is producing a profound and visible transformation. Every single secondary school in the country is being rebuilt or refurbished. More schools have been built in the last five years than in the previous 25. Schools and colleges are finally getting the books and IT equipment that they require and where teacher numbers fell substantially during 18 years of Tory Government, the number of full-time equivalent teachers is, after 10 years of this Labour Government, up by 36,000 and there are 150,000 more support staff.

Photo of Keith Vaz Keith Vaz Labour, Leicester East

Has the Secretary of State had a report from the Minister for Schools about his recent visit to Leicester, where the Building Schools for the Future programme will result in the rebuilding of three of the secondary schools in my constituency—the largest investment ever, with £230 million going into Leicester schools? Has my right hon. Friend received a report of that highly successful visit?

Photo of Alan Johnson Alan Johnson Secretary of State for Education and Skills

I have. Indeed, I am so enthused and excited by that report that I am going to come to Leicester myself, not least to visit New college, which has witnessed an education transformation over the last year. Unprecedented investment matched with essential reforms is bringing about the best results ever.

Photo of Meg Hillier Meg Hillier PPS (Rt Hon Ruth Kelly, Secretary of State), Department for Communities and Local Government

I hope that my right hon. Friend, accompanied by our right hon. Friend the Chancellor, enjoyed his visit to Mossbourne city academy in Hackney. Does the Secretary of State agree that, notwithstanding the slurs of Mr. Osborne, the Chancellor is fully supportive of the massive investment whereby six city academies are being built in Hackney and huge amounts are going into the infrastructure of our primary and secondary schools? That investment has increased results substantially, so that more than half of pupils now gain five A to C grade GCSEs.

Photo of Alan Johnson Alan Johnson Secretary of State for Education and Skills

My hon. Friend is right. I believe she is talking about a tremendous visit to a primary school in her constituency. We found that there was special expertise in language teaching for primary school pupils, resulting in the teaching of Mandarin in that school. Incidentally, according to Mr. Gibb, Mossbourne is the best school that he has ever seen, so I view that as a compliment to Labour party policies.

We have improved results through a combination of additional investment and reforms. Compared with 1997, about 95,000 more 11-year-olds every year now reach the standard expected in English and maths. About 85,000 more pupils get five good GCSEs. When English and maths are included, 62,000 more pupils are making the grade. In 1997, there were 616 schools in which just a quarter of pupils obtained five or more good GCSEs; now, that figure is just 47, and we are determined to drive it down to zero.

City academies have been a powerful force for good in the most deprived areas, bringing about improvements at three times the average, with twice the number of pupils on free school meals. By removing VAT constraints, the Budget provides further support as we move towards our target of 400 academies. Pupils across the nation are doing better, but with Every Child Matters in place, and with technology that is able to provide detailed information on each child's progression, we can move to the next stage and attack the pernicious link between a child's background and their educational attainment.

Photo of Stewart Jackson Stewart Jackson Conservative, Peterborough

Is the right hon. Gentleman embarrassed that, as a result of his Government's policies, thousands of adult education courses have been cut in order to put funding directly into provision for 16 to 19-year-olds? That has happened as a direct result of the fact that, under this Labour Government, so many young people of that age leave school functionally illiterate and therefore need extra help with basic skills.

Photo of Alan Johnson Alan Johnson Secretary of State for Education and Skills

The hon. Gentleman is confusing two different things. First, Skills for Life is dealing with the failures of the previous Tory Government's education policy, and 1.25 million adults who were functionally illiterate and innumerate have now been given those necessary skills. Secondly, we are not cutting funding for adult education at all: we are increasing it. Sooner or later, the Conservatives are going to have to deal with policy. The issue in the 21st century is that we need to focus our resources on longer courses that will give people accredited level 2 and 3 qualifications to equip them for the world of work. That is our absolutely remorseless focus, and Lord Leitch's report agreed that it is the right priority.

I was talking about breaking the link between background and educational attainment. Last year, we published a Green Paper with proposals to improve outcomes for children in care. The consultation has now ended, and we will come forward in due course with a series of measures radically to address the historic systemic failure that lets down the most vulnerable children in our society.

Photo of Helen Jones Helen Jones Labour, Warrington North

My right hon. Friend is right to say that this Government are the first to tackle the national scandal of the education of children in public care. When he looks at that issue, will he also look at the Select Committee's recommendation that city academies should, like other schools, be made to give priority in admissions to looked-after children?

Photo of Alan Johnson Alan Johnson Secretary of State for Education and Skills

My hon. Friend has a great deal of experience in this field, and I defer to no one in my respect for her involvement in education. I have to say to her, however, that city academies are already required to give priority to children in care. Indeed, last week at Mossbourne academy—50 per cent. of whose children are on free school meals, compared with the London average of 20 per cent.—I was told that that myth was being spread about academies; it is absolutely untrue.

Photo of Angela Browning Angela Browning Deputy Chairman (Organising and Campaigning), Conservative Party, Deputy Chair, Conservative Party

I do not disagree with the idea that there should be proper accreditation for courses, but one of the consequences of the focus on accredited courses in further education is that a particular group has fallen through the net, namely, adolescents and young adults with learning disabilities who attend FE colleges not to get a certificate but to attend valuable life skills courses. They have been priced out of the market, and I want to know what the Secretary of State is going to do about it. They are probably among the most vulnerable people.

Photo of Alan Johnson Alan Johnson Secretary of State for Education and Skills

I accept what the hon. Lady is saying. I have heard this from several quarters. I will go back and look at the matter again, and I will deal with any individual problems that she wishes to raise with me. Time and again, we have said that the priority for the Learning and Skills Council must be people with disabilities and special educational needs. Reconfiguring adult education to focus on longer courses that result in qualifications must not interfere with the important work being done with children with special education needs. I will look into that issue.

We reject the view that some children are destined to fail. All too often, bright and talented children simply do not get the support or help that they require. Early years education is vital to a child's progression, and we have invested more than £20 billion in that area. There are now almost 1.3 million child care places—double the number for 1997—and more than 1,100 Sure Start children's centres are providing support to almost 1 million families. With yesterday's settlement, we can guarantee 3,500 Sure Start children's centres—one in virtually every community across the country. We have given every three and four-year-old an entitlement to 12.5 hours free early learning, and 96 per cent. of children have taken that up. We will extend that to 15 hours by 2010.

We do not believe that the benefits of a high-quality education should be restricted to a small elite. Our aim is for the state sector to match the levels of success in the independent sector, even without the harsh levels of selection in public schools. As the Chancellor confirmed yesterday, we are committed to closing the gap on capital funding with public schools by 2010, with a long-term aim to match spending per pupil.

This is not just about finances, however. Our second aim is to ensure that state schools can provide children with the individual attention that they need. We are putting £1 billion into personalised learning this year alone, with much more to come. This will allow us to move forward on the Gilbert review, to ensure extra lessons and increased support for those who are struggling as well as for those with exceptional potential.

Thirdly, we aim to emulate the extra-curricular activities available in private schools, and to provide the kind of sport, music, dance and drama activities that help children to develop confidence and to acquire valuable social skills. We are substantially increasing spending on sport and music. Extended schools offer children the chance to take part in these and other high-quality activities. There are 4,000 extended schools already offering wraparound services from 8 am through to 6 pm. By 2010, all schools will offer extended services.

Photo of Barry Sheerman Barry Sheerman Chair, Education & Skills Committee

Is my right hon. Friend aware of the improvements that have taken place in extended schools? I urge him to tell the House how far those schools will be able, with the new income from the Budget, to expand the programmes that have already proved so successful. Will he also go back to Mr. Jackson, who intervened on him just now? You spread this lie, this absolute lie— [ Interruption. ] It is a lie. I am not saying that any hon. Member is a liar, but I am saying that when people on the Back Benches say that there is functional illiteracy on the levels that the hon. Gentleman suggested, it does damage to the education system and it undermines teachers and students.

Photo of Alan Johnson Alan Johnson Secretary of State for Education and Skills

My hon. Friend is right about extended schools achieving better results. Ofsted has recently produced a report that demonstrates that. I have mentioned that every school will be an extended school by 2010. More importantly, my right hon. Friend the Chancellor of the Exchequer announced yesterday that we will provide free services in those extended schools for children from the poorest families. That combination will be very important.

On my hon. Friend's other point, there is often a misunderstanding about the levels of illiteracy and innumeracy in our society. There was a pretty poor education system in place, roughly between 1979 and 1997, and dealing with the effects of that is an important part of our proposals stemming from the Budget.

Photo of Meg Hillier Meg Hillier PPS (Rt Hon Ruth Kelly, Secretary of State), Department for Communities and Local Government

I fear that my right hon. Friend underplays the benefits of extended schools. In Hackney, one of our extended schools, the Hackney Free and Parochial school, is seeking to let a cleaning contract between 10 pm and 6 am, as those are the only hours when the school is not in use, save for one week's closure in the summer. Hackney schools are genuinely "schools plus", and this hugely benefits Hackney parents. Does my right hon. Friend agree that it also benefits the pupils, who need qualifications but also desperately need that extended education?

Photo of Alan Johnson Alan Johnson Secretary of State for Education and Skills

I am grateful to my hon. Friend for highlighting the importance of this provision, and for describing it much better than I could have done. It is one of the most exciting developments in state schools. In relation to the theme of this part of my speech, the provision that is now available in state schools matches what has always been available in independent schools.

The fourth point is that private schools are free to build links with other organisations and to develop their own ethos. The new trust status makes it easier for state schools to nurture those relationships. I am delighted that we have exceeded our target for schools in trust pathfinders, and I am confident that we will hit 300 by the end of the year. All those measures combined will enable us to make dramatic progress in closing the attainment gap between those from deprived backgrounds and those from more affluent homes.

In the past, education was predominantly a matter of social progress with an economic dimension; now, it is primarily a matter of economic stability with an important social dimension. I have today published a Green Paper setting out our proposals that every child remain in education or training, full or part-time, in school, college or the workplace, until the age of 18. That is an historic proposal in more ways than one. It is a crucial step forward in meeting the challenges of the 21st century, as Lord Leitch so ably identified in his recent report, but the measure has been incorporated into legislation for most of the past 80 years, without being invoked. It was originally included in Foster's Education Act 1918—Foster was a Liberal in the days when Liberals won elections. It was then carried into the great Butler reforms of 1944, before finally being revoked by the Tories in 1988.

Today, the question of staying in education is more pertinent than ever before. In the past, it was possible for millions of school leavers with no qualifications to find work. In the face of increased globalisation, with economic expansion in the east and technological advance in the west, those days are drawing to an end. As Lord Leitch pointed out, there will be only approximately 600,000 unskilled jobs in Britain by 2020 compared with 3.6 million today, and 40 per cent. of jobs in 2020 will require graduate qualifications. Of course, we must ensure that there is an exciting and inspiring offer for each child to pursue in key stage 4.

Photo of Paul Rowen Paul Rowen Shadow Minister, Transport

I welcome what the Secretary of State is saying. What additional investment will be put into the 16-to-18 sector to accommodate the extra students who will stay on?

Photo of Alan Johnson Alan Johnson Secretary of State for Education and Skills

For that aspect, there will be £200 million in capital spend in the run-up to 2015, when we intend to have every child staying on until 18; and there will be £700 million a year in revenue spend to ensure that we have available the capacity and the facilities we need.

Photo of Meg Hillier Meg Hillier PPS (Rt Hon Ruth Kelly, Secretary of State), Department for Communities and Local Government

On a recent visit to Hackney's air cadets, I found that the proposal was not greeted with universal enthusiasm by the young men and women in the air cadets. Will my right hon. Friend reassure them that training in the workplace is a real option, and will he explain that further?

Photo of Alan Johnson Alan Johnson Secretary of State for Education and Skills

I must pay a flying visit to Hackney air cadets. It is important that we engage young people in the discussion—that is why a Green Paper has been published. We are saying that exciting options will be available—I shall describe them later in my speech—and that there will be a personal relationship with trained people to advise and guide young people on which route to take. We must get rid of the mixed message that we send to young people that, on the one hand, it is crucial that they stay in education, but, on the other, that it is okay if they just slip off the radar screens at 16. We have plenty of time to win over Hackney air cadets before the proposals are implemented.

Photo of Michael Jack Michael Jack Conservative, Fylde

Given the importance of the message that the right hon. Gentleman has just articulated, what sort of a message regarding the importance of staying on does he think is sent by the position of those young people who have trained to be doctors? Thirty thousand were persuaded to be trained, but only 22,000 can find work.

Photo of Alan Johnson Alan Johnson Secretary of State for Education and Skills

I shall resist the temptation to deal with that point—perhaps the right hon. Gentleman will raise it in another debate. However, it is important to say that the number of fully trained doctors and nurses, like the number of teachers, teaching assistants and head teachers, has increased enormously since he was in government.

Apprenticeships provide a valuable route for youngsters to take to stay in education or training. In 1966, there were 750,000 apprenticeships available for 16 and 17-year-olds, but by the time we came into power, that number had tumbled to 53,000. We rescued that valuable vocational opportunity from near oblivion. The number of apprenticeships has trebled since 1997 and the Budget settlement will ensure that every young qualified person will have a guaranteed place. For those who do not qualify, we will provide pre-apprenticeship places to bring them up to standard and to ensure that they can take up an apprenticeship place.

Photo of Greg Clark Greg Clark Shadow Minister for Charities, Voluntary Bodies and Social Enterprise

Will the Secretary of State explain whether that settlement has Gershon savings factored into it? How does he take account of the National Audit Office's conclusion that only a quarter of those savings reliably reflect efficiencies made?

Photo of Alan Johnson Alan Johnson Secretary of State for Education and Skills

I shall leave it to my hon. Friend the Financial Secretary to the Treasury to deal with that at the end of the debate. I shall concentrate on our priority of education.

In the past five years, we have also successfully increased the completion rate of apprenticeships. I think that Mr. Willetts mixed up the figures recently announced by the Learning and Skills Council. I saw somewhere that he said that there was a 59 per cent. failure rate in apprenticeships. In fact, we inherited a dire 24 per cent. completion rate and the LSC has recently reported that that rate has increased since 2002 to almost 60 per cent.

Photo of Barry Sheerman Barry Sheerman Chair, Education & Skills Committee

Did my right hon. Friend notice that as soon as he started to talk about apprenticeships, Opposition Members totally lost interest and started to talk among themselves? They have no interest in further education, no interest in vocational education, and no interest in anyone in our state sector.

Photo of Alan Johnson Alan Johnson Secretary of State for Education and Skills

My hon. Friend is right. That is why the Opposition will be serving their apprenticeship for the next 10 years.

Diplomas provide a further important choice by introducing the mix of vocational and academic education that we in this country have lacked for so long. Having the first five diplomas ready for 2008 is an ambitious undertaking, but we are determined to succeed, working closely with the industries that are designing the diplomas and the schools and colleges that will deliver them. The greater availability of the international baccalaureate will provide a further important educational route. All those qualifications will include functional skills in English, maths and ICT.

However, we cannot meet the education and skills challenges of the 21st century by concentrating on schools alone. As Lord Leitch noted in his interim report, 70 per cent. of the 2020 work force have finished their formal education—they are out there in the workplace now. As I mentioned earlier, since 2001, 1.5 million adults have secured essential literacy and numeracy skills through Skills for Life. More than 1 million more adults in the work force have obtained level 2 qualifications since 2002. With this year's settlement, we will ensure that learning and upskilling are at the heart of every workplace as we respond to the Leitch report.

Our solution to tomorrow's challenges is record investment as well as systematic reform. The $64.9 billion question for the Conservatives is whether they would match our investment. Would they break the habits of a lifetime and invest in education? Given that their famous third fiscal rule would take £21 billion from public spending in this year alone, how could they possibly deal with the amount of expenditure that we need in our education service?

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

On the topic of using expenditure to deal with problems, may I bring the Secretary of State to the figures that he announced for dealing with the staying-on problem? I think that he said that there would be £700 million-worth of revenue to deal with the problem. If we assume that there are something like 350,000 young people a year not staying on and we have to cover two years of education or training, does that not mean that he is proposing only £1,000 per young person per year? Is that not too little?

Photo of Alan Johnson Alan Johnson Secretary of State for Education and Skills

No, what the hon. Gentleman has to bear in mind is that we will move from 16 to 17 in 2013 and then from 17 to 18 in 2015. We have already factored in a public service agreement target of a 90 per cent. participation rate by 2015, which means that there is another 10 per cent. to cater for—around 80,000 students.

I want to talk about higher education and to do so in the context of the Conservative party.

Photo of Alan Johnson Alan Johnson Secretary of State for Education and Skills

We know the stance that the Conservatives took— [ Interruption. ] Just a second. Conservative Members should show some manners. I will give way in due course. They should not be so forward and impatient—[Hon. Members: "And pushy!"]—and even pushy. We know the stance the Conservatives took on higher education. One of the greatest economic, let alone educational challenges that we face, is the need to invest in and expand our higher education sector.

Photo of David Willetts David Willetts Shadow Secretary of State for Education

I am grateful to the Secretary of State for eventually giving way. I wanted to ask him about the skills section of his speech. Will he explain to the House why, if things are going as well as he claims, the number of young people not in education, employment or training has risen since 1997 from 1.08 million to nearly 1.25 million? What lessons does he learn from the complete failure of the Government to bring down the number of young people who are NEET?

Photo of Alan Johnson Alan Johnson Secretary of State for Education and Skills

The thrust of my argument is not that everything is perfect. Part of the— [ Interruption. ] I will come back to the point about NEETs in a second. Part of the argument that we are using is that, having come so far and laid the foundations—they were very expensive foundations to lay and they were never even remotely matched by the Conservative party—we can now move on to ensure that we close the attainment gap between children from more deprived backgrounds and children from more prosperous backgrounds.

The number of NEETs has been around a stubborn 10 per cent. for the past 10 years. The number of youngsters in education and training has increased. That is clear. A combination of the introduction of the education maintenance allowance and higher attainment, which encourages youngsters to stay on in school, has led to something like a 5 per cent. increase in participation rates. It is also fair to say and worth pointing out that only 1 per cent. of youngsters who are NEET are not in education, employment or training in each of those years—16, 17 and 18. There is a hard core that we need to address and a lot is going into addressing that.

My right hon. Friend the Chancellor announced yesterday another measure, costing £500,000, to offer youngsters who have dropped out of in-work training to bring them back into education. We have another, similar project going on in 10 local authority areas, to see what we can do to help those youngsters. Some of it is about gap years. Some of it is about the fact that they just want to take time out. A lot of it is about disenchantment with education and being able to bring those young people back into the fold. It is an important problem. We are not saying that we have solved it, but our investment and our measures are capable of resolving it eventually.

Photo of Jim Sheridan Jim Sheridan Labour, Paisley and Renfrewshire North

My right hon. Friend is absolutely right to say that lifting people out of poverty is the best route in terms of education and skills, but, unfortunately, when it comes to the whole question of apprenticeships we still have a male bastion. Will he do all that he can to encourage women to get involved in some of the education and skills schemes, not just to develop their own skills and lift themselves out of poverty, but to address the needs of the country?

Photo of Alan Johnson Alan Johnson Secretary of State for Education and Skills

My hon. Friend raises an important point, but I have good news. There is much more that we need to do, but 48 per cent. of apprentices are now women; 52 per cent. are men. We are getting close to parity. That is a long way from where we were before we undertook several initiatives, in which he has been active, to encourage more young women to come into apprenticeships.

Let us talk about higher education. Variable tuition fees were one of the major policy reforms of recent years—an act of political courage by a Government who could so easily have ducked the issue. It taught us— [ Interruption. ]

Photo of Sylvia Heal Sylvia Heal Deputy Speaker

Order. I ask Conservative Front-Bench Members to come to order.

Photo of Alan Johnson Alan Johnson Secretary of State for Education and Skills

It taught us all that we need to know about the Conservatives. We saw how they reacted when they had to grapple with a genuinely difficult policy issue that affects the future of our country. We rightly gauge the challenge from India and China in terms of the investment that they are making in higher education and the number of graduates that they produce every year. The Conservatives, having presided over a 40 per cent. cut in per capita funding in our universities, were preparing to make a further 6.5 per cent. cut in funding before the British people removed them from office in 1997. Let us never forget that their response to our proposals was to contract higher education down to a 36 per cent. participation rate.

Photo of Michael Gove Michael Gove Shadow Minister (Communities and Local Government) (Housing and Planning)

The Secretary of State referred to the act of courage in introducing variable tuition fees. How does he feel about the fact that Mr. Brown, the namesake and protégé of Mr. Brown, led the revolt against precisely that act of political courage? How does he feel about that infamous treachery from the lackey of his Cabinet colleague?

Photo of Alan Johnson Alan Johnson Secretary of State for Education and Skills

My right hon. Friend Mr. Brown voted for the reform. Opposition Members voted against it in droves. It was one of the most crucial staging posts in how we tackle the economic challenges of the 21st century. Their response was to remove almost £1 billion of higher education funding by removing the existing £1,000 fee, as well as contracting the participation rate to 36 per cent.

Photo of David Willetts David Willetts Shadow Secretary of State for Education

Following on from the previous intervention, what is the Secretary of State's view of the account of events that day from Sir Stephen Wall, who says that on the day of the vote the people inside No. 10 Downing street did not know whether the Chancellor and his supporters would be voting for or against the Government's own proposals? Was that not extraordinary?

Photo of Alan Johnson Alan Johnson Secretary of State for Education and Skills

That is absolute, undiluted nonsense. Let us consider what the hon. Gentleman had to say about the issue. He said that the Conservatives did not support the Government's target for expansion, which was crucial to expand our higher education, and that, as fees are necessary to finance the expansion, if we did not have the expansion, we did not need the fees. I know that the Conservatives flip-flopped on this issue. Mr. Cameron said that fees should be scrapped—that is clear and precise. They flip-flop on the issue, but we cannot allow them to escape. When they had to make a difficult judgment on a difficult policy issue, they chose the route that would have damaged our economy and our country.

We should heed the wise words of a distinguished Conservative former higher education MinisterRobert Jackson, the then Member for Wantage—who said on Second Reading of the Higher Education Bill:

"I will go into the Lobby with the Government with my head held high. The time will soon come when the electorate will ask whether the Conservative party is once again a serious party of government...I believe that the way they have chosen to handle this issue will be remembered and will be held against them."—[ Hansard, 27 January 2004; Vol. 417, c. 231.]

Certainly, as long as we have breath to breathe, that will be our approach.

Photo of Alan Johnson Alan Johnson Secretary of State for Education and Skills

I give way to the hon. Gentleman, who was on the Standing Committee that considered the Bill.

Photo of James Clappison James Clappison Conservative, Hertsmere

While we are on the subject of who said what when, will the Secretary of State just remind us what the 2001 Labour manifesto said about this issue?

Photo of Alan Johnson Alan Johnson Secretary of State for Education and Skills

That is why it was a difficult act of political courage. [ Laughter. ] Absolutely; of course. It would not have been very courageous to do it if it had been in the manifesto. The point is that having introduced the fees at £1,000, we faced a situation in which it was obvious, given globalisation and expansion in China and India, that we needed to go further quickly. That was what we did, and that was why the act was courageous.

Photo of Peter Lilley Peter Lilley Conservative, Hitchin and Harpenden

Is the Secretary of State saying that anyone can keep a promise, but that it requires courage to break it?

Photo of Alan Johnson Alan Johnson Secretary of State for Education and Skills

The right hon. Gentleman is an expert among Conservative Members at breaking manifesto promises. There is a difference between top-up fees and variable tuition fees. However, as Beatrice Webb said about socialism, explaining it would take too many evenings.

Let me point out what happened to the Conservative party's prediction that fees would lead to a collapse in university applications. Indeed, that allegation was also made by the Liberal Democrats. Last month's figures from the Universities and Colleges Admissions Service show that 291,000 students have applied to enter university this year, which is a 7.1 per cent. increase. The social class gap, which widened during the 30 years of post-Robbins free higher education, with generous grants, actually narrowed by almost 0.5 per cent. in the first year of variable deferred fees.

Photo of Sarah Teather Sarah Teather Shadow Secretary of State for Education

To be fair, the largest group in those statistics is made up of people whose parents' backgrounds are unknown. It is a leap of faith for the Secretary of State to say that the policy has made that much difference.

Photo of Alan Johnson Alan Johnson Secretary of State for Education and Skills

If that is the best that the hon. Lady can do to defend her policy of not introducing fees, I do not think that it adds up to very much. I am absolutely convinced that when we come to the review in 2009, we will have a wealth of evidence that might even convince the hon. Lady, who is a fair and open-minded person, to support the policy.

Incidentally, I might as well add to the good news by saying that applications to study physics are up by 12 per cent. Applications to study chemistry are up by 11 per cent. and applications to study maths are up by 10 per cent. The policy was the right thing to do for our country and our education system.

Photo of Meg Hillier Meg Hillier PPS (Rt Hon Ruth Kelly, Secretary of State), Department for Communities and Local Government

We know that there are more young black men in prison than at university. Sadly, the chances of Hackney children going to university in droves are still limited. Is this not a question of priorities? Surely it is right that we have been investing in Sure Start and primary and secondary education. If we have to make a choice, it is best to put the money there than to subsidise perhaps wealthier people to go to university, given that we never subsidise cooks, chefs and people in other trades.

Photo of Alan Johnson Alan Johnson Secretary of State for Education and Skills

My hon. Friend is right. This is not only about the stage of applying to university. The process starts in the earliest years, which is why from Sure Start to adult skills, from improved literacy and numeracy to a thriving HE sector, and from city academies to rejuvenated further education colleges, Britain's education system is attracting the attention of the world.

We have moved from overcrowded classes in crumbling schools with tatty equipment to more teachers who are better trained and achieving better results than ever before. As the Budget demonstrates, from 18 years of the Tories to 10 years of Labour, it is a different class.

Photo of Sarah Teather Sarah Teather Shadow Secretary of State for Education 1:33 pm, 22nd March 2007

The House might be relieved to hear that I will attempt to strike a slightly different tone from the opening speeches. I wish to concentrate on education and to deal with several aspects of that in some detail.

I should say from the outset that I welcome many aspects of the Budget, some of which I will highlight in a moment. However, there were conspicuous absences from it and much lack of clarity. I always fail to understand why, when the Government have good tales to tell, they insist on over-selling their announcements. That is entirely counter-productive and it hands the Opposition a stick with which to beat them.

Extra funding is a good thing and we all welcome it, so why cloud the issue by continuing the false spin of raising funding to private school levels? When the pledge was made last year, it was clearly fatuous and intended not to track increases in private school funding, but to be an aspiration of raising funding to 2006 levels for private schools. Even with that narrower definition, at a forecast growth rate of 2.5 per cent. in real terms, the Institute for Fiscal Studies estimates that we would not get there until 2020. Every child in education at the moment will have left education by that stage, even under the Secretary of State's proposals in the Green Paper for young people to stay on beyond the age of 16, so the pledge is entirely irrelevant for any child in school today.

We heard pre-Budget hype about heavy spending on education. The Department for Education and Skills has indeed been one of the greatest beneficiaries of this year's Budget. However, the claim of increasing funding as a proportion of gross domestic product is rather undermined by the fact that the year-on-year percentage increase is less than the projected economic growth. The shadow Chancellor referred to that point at the outset of his speech. The average rate of economic growth cited in the Budget is 2.75 per cent. over the course of the comprehensive spending review period, so, in fact, there is a shrinkage. I do not understand the contradictions in the Red Book, so I hope that the Financial Secretary will give me an explanation when he makes his winding-up speech.

Let me welcome the commitment in principle that has been outlined today to raise the education leaving age. Unfortunately, the Department's rather chaotic withdrawal and replacement of the Green Paper this morning meant that none of us received it in time to go through it in any detail. However, we have made it clear from the outset that we broadly support the initiative. As the Secretary of State said, whether it succeeds will depend on not the strength of the carrots or sticks—or bribes or threats—but whether the proposal includes genuine educational opportunities that are tailored to meet the needs of each individual young person. The success will also depend on how transparent the choices are.

We have one of the worst post-16 staying-on rates in the western world. That matters to the economy and for social justice. Some of the most disadvantaged young people miss out on the opportunities that education offers, and such a lack of education has lifelong impacts on a person's earning potential, life choices and life chances. Sixteen is a critical point. Ninety per cent. of those who stay on in education and do A-levels go to university, but the route back into education is a great deal more difficult for those who opt out.

Making the proposal work will depend on much more than enticing 16-year-olds to stay on. It will also depend on changes much further back in the system. Many young people mentally leave school at 14 or 15 and no carrot or stick will re-engage them. The curriculum is key to keeping such young people interested.

The Secretary of State referred in detail to diplomas as a means for achieving success. However, he has warned of the risk of these diplomas being seen as the secondary modern qualification. That is why I remain disappointed that the Government have not done as Tomlinson recommended and gone the whole hog by scrapping GCSEs and A-levels and introducing a new, modern, British diploma that would be recognised by all and would allow young people to mix academic and vocational learning.

The Secretary of State referred in his speech to the pernicious link between achievement and background. John Smith's commission for social justice pointed to Tomlinson's recommendations as being the key way to break the link with class structure in education and ensure that all young people have the chance to perform. I am disappointed that the Secretary of State has not taken that on board and delivered Tomlinson in full.

A few moments ago, the Secretary of State replied to my hon. Friends the Members for Rochdale (Paul Rowen) and for Cambridge (David Howarth) by citing figures for capital and revenue. The amount cited for revenue was £700 million, but I am still not clear whether that is the amount for each year, or the total spend between now and 2013 or 2015. What does the Secretary of State mean by the £200 million for capital? When will that be delivered? We know that there have been great delays in getting building projects in place under the Building Schools for the Future programme. If we do not start this project now, by the time we change the learning leaving age, we will not have the capacity to deal with the many more young people who will be staying in education. I would be grateful if the Secretary of State wrote to me about that in detail and, perhaps, placed in the Library an answer setting out exactly what he means by the funding, what he proposes to spend it on, and when it will begin.

When the Secretary of State produced his estimates of costs, did he take account of the fact that vocational courses tend to be a good deal more expensive to deliver than others? It is likely that the young people who are not staying on at the moment will be undertaking more vocational courses. What is the rationale for keeping the educational maintenance allowance at the age of 17? It is not clear why the allowance would be kept in the system when it becomes compulsory to stay on beyond the age of 16.

There are several practical steps that the Government should take to make 16-to-18 learning work better. First, they could narrow the gap in funding between colleges and schools, although such a measure was conspicuous by its absence from the Budget. Secondly, they could move 16-to-19 funding from the Learning and Skills Council to local authorities. We could then have some hope of devising a system under which funding would follow the student. The White Paper on further education, published with last year's Budget, promised that a technical funding group would come up with a new funding system. Where is it? Has it finished the job yet, and may we see the new system, please?

It is a long time until 2015, but many young people have already dropped out of the system and need attention now. The training wage for teenagers not in education, employment or training—NEET—is a step in the right direction, but it has been an awfully long time coming. The Government have presided over a 44 per cent. increase in the number of 16 and 17-year-olds in that group. There are 124,000 16 to 17-year-olds in the NEET group, and the pledge offers help for 50,000 of them. How will that help be targeted, and who will be selected for help? In particular, what does the Secretary of State for Education and Skills propose to do about the disproportionate number of teenagers from Pakistani and Bangladeshi backgrounds in that group? The number doubled between 2004 and 2006, and that must surely be of considerable concern. What research has been done on why those teenagers are failed by the system, and how will the pledge be targeted to help them?

The announcement on apprenticeships was much harder to unpick. I am not clear what is meant by "doing more" to double the number of apprenticeships to 500,000. The number of young people on apprenticeships has risen from 165,000 to 188,000 in the past five years. At that rate, it will take another 40 years to meet the target. What exactly is the Secretary of State proposing to do differently to ensure that we reach the target more quickly? I am sure that the personalised learning money will be welcomed by all, but we know that the children with the most severe difficulties need a trained teacher to achieve improvements. It is critical that the money is spent in a way that works. Putting a child with an adult for half a day a week will not work for all children.

Ofsted's report on the foundation stage pointed out that speaking and listening skills were holding back many young children from progressing. No details about that are attached to the proposals for personalised learning. Does the Secretary of State intend to extend that programme? The money for ChildLine and for listening services is very worthy, but will he clarify how much money will be provided? The National Society for the Prevention of Cruelty to Children is not clear about how much money is being given, and for how long it will be available. I hope that the Government's commitment signals a shift towards focusing on the problem of bullying in schools. The Government have poured a great deal of money into initiatives to tackle truancy, but we know that a third of children who truant say that they do so out of fear of bullying. Tackling the problem at source would save a great deal of money and result in a good deal more education being provided.

I have some further queries. Will the Financial Secretary clarify the pledge on VAT for academies? Does it refer to sports facilities, as was said in the statement, or to buildings, as the Red Book says? I hope that it refers to buildings, because the critical problem for many voluntary sector organisations in most areas is a lack of places to meet. If all academy buildings were opened up to the community, it would make a significant difference, but why have academies been singled out in that regard? Sixth-form colleges are caught in exactly the same trap; they, too, have halls and meeting spaces that could be opened up to the community. Will the Secretary of State consider asking the Chancellor for VAT relief for sixth form colleges, too?

Academies were conspicuous by their absence from the Budget. Where is the money to meet the Prime Minister's pledge of 400 academies by 2010? The Secretary of State referred to the pledge again, so it appears that it has not been dropped, but I cannot tell where the money needed to meet the pledge will come from. Is it coming from the total pot for education, or is there specific funding of which we cannot find mention in the Red Book? If the money is to come from the whole education pot, the pledge on per-pupil funding is a bit meaningless, because the funding will obviously be concentrated in very small pockets.

Specialist teachers are also conspicuously absent from the Budget. Last year's Budget contained a pledge to increase the number of science teachers by 3,000: where are they? The only mention that I could find of recruitment of science teachers related to the review that the Prime Minister has commissioned from Lord Sainsbury of Turville, but no details have been given on that point. Where is the extra money for recruiting foreign language teachers, so that the recommendations made in the Dearing report just this month can be met? There are some welcome initiatives in the Budget, but it has been spoilt by over-hype, and there are many conspicuous absences. I hope that, in his winding-up speech, the Financial Secretary can clarify some of the rather obscure aspects of the Budget.

Photo of Keith Vaz Keith Vaz Labour, Leicester East 1:44 pm, 22nd March 2007

It is always a pleasure to follow Sarah Teather, because her constituency is similar to mine in its make-up. When she has had the opportunity to study the Budget in great detail—obviously, it is difficult to have done so a day after it is published—she will see that it will benefit her constituents as much as it will benefit mine.

May I say at the outset how disappointed I was with the speech of the shadow Chancellor, Mr. Osborne? I was disappointed because I rate him as someone who is able to grasp issues effectively. Instead of spending his time talking about the substance of the Budget, he spent much of the early part of his speech engaged in a juvenile attack on the Secretary of State for Environment, Food and Rural Affairs through references to "Thunderbirds" and so on, and on the Chancellor of the Exchequer. That demeaned the hon. Member for Tatton, because I think that he has a great future; he could well end up as the Leader of the Opposition.

I do not understand why the hon. Gentleman both claimed credit for everything that the Government had done in the Budget, and attacked it. Every good proposal made by the Chancellor yesterday the hon. Gentleman said was his idea, or the idea of his buddy, the Leader of the Opposition, but he still ridiculed every aspect of the Budget. I will be interested to see how he and the Opposition vote on various measures next week, because that will be the test of whether they support this tax-cutting Budget. It is the first time in, I think, 75 years that the basic rate of income has been cut, and we should welcome that greatly.

Photo of Keith Vaz Keith Vaz Labour, Leicester East

I will in a moment, but I ask the hon. Gentleman to hang on a minute; I am starting my speech.

Of the 21 Budgets that I have seen in this House, I think that this is the best. It builds on the stability of the past 10 years, and it gives us enormous hope for the future. In my brief speech, I will set out why I think that, but first I give way to the hon. Gentleman on the Front Bench.

Photo of Paul Goodman Paul Goodman Shadow Minister (Childcare), Treasury

Does the right hon. Gentleman deny that he said, a few moments ago—it will therefore be in Hansard tomorrow—that the Chancellor's reduction in income tax, announced yesterday, was the first such reduction for 75 years?

Photo of Keith Vaz Keith Vaz Labour, Leicester East

That is indeed what I said, and we should welcome the reduction, because it benefits people in all our constituencies. The Chancellor has led this country by providing prosperity for our people and the basis for growth, and he is now ensuring progress, especially in health and education.

Photo of Simon Burns Simon Burns Opposition Whip (Commons)

In the past three months, I have, in this Chamber, heard the right hon. Gentleman express concern to the Secretary of State for Health about hospital-building schemes and waiting times in Leicester. Will he pinpoint where, in the Chancellor's speech yesterday, it said that there would be specific help to deal with those problems?

Photo of Keith Vaz Keith Vaz Labour, Leicester East

I will, but I urge the hon. Gentleman to listen to the rest of my speech. I know that he came in late, and therefore—

Photo of Simon Burns Simon Burns Opposition Whip (Commons)

I have been here all the time!

Photo of Keith Vaz Keith Vaz Labour, Leicester East

I am very pleased. I did not see the hon. Gentleman—

Photo of Sylvia Heal Sylvia Heal Deputy Speaker

Order. If there are to be interventions, may we follow the usual rules of debate?

Photo of Keith Vaz Keith Vaz Labour, Leicester East

Madam Deputy Speaker, I am sorry. I did not particularly look for the hon. Gentleman earlier; I apologise if he was here for the whole debate. My attention was, of course, on Front Benchers. Next time, during the Front-Bench speeches, I will look in his direction to make sure that he is here. Oh, now he is leaving the Chamber. That is why I was confused—he keeps changing his position. He needs to have a fixed position, not just in the House, but on issues.

I will come to my point about health and education in a moment, but first let me say that the Budget will be warmly welcomed, because it will build on the stability of the past 10 years. We should thank the Chancellor for what he has done. This will obviously be his last Budget, because he will be a candidate in the leadership elections, and I hope very much that he will take over as Prime Minister; he certainly has my support. We would then know that, over the next few years, we will continue to have stability.

Let us look at health, because Mr. Burns, who was a Health Minister in the last Conservative Government, mentioned it. We have benefited a great deal in Leicester from a huge injection of cash. Some £760 million will go towards our new pathway project. Leicester general hospital will be rebuilt and changed substantially, and Glenfield hospital and Leicester royal infirmary will benefit, too. Three brand-new hospitals will benefit the people of Leicester, East. Only a few weeks ago, the Minister of State, my hon. Friend Andy Burnham, visited my constituency to launch the new local improvement finance trust centre in Charnwood, which has received £12.8 million. Another centre is being built in the Humberstone and Hamilton area of my constituency, which did not exist when I became a Member of Parliament 20 years ago, because it is new build. There is a centre, too, in Belgrave in the heart of the inner city of Leicester, East.

That shows a real commitment to the health service. Of course, I have raised concerns in the past, and I did so two weeks ago, as one of my constituents, Mark Golding, had waited for four months for a double hernia operation. I understand that it is a very painful condition. The hon. Member for West Chelmsford nods—he may well have suffered from it himself. Mr. Golding was in great agony, and he had to wait, which is wrong. We have spent a great deal of money on the health service, so why should people have to wait so long for operations? Lo and behold, after I raised the matter in Health questions, the next day, Mr. Golding received an appointment for a hernia operation. Obviously, we do not want people to keep writing to us all the time. [Hon. Members: "Oh!"] We want to them to write to us with their concerns, but we do not want them to believe that just by our raising the matter on the Floor of the House they can get their operation, as there is a system in place. I am making the point that a lot of cash has gone in: what we need to look at is the delivery of services, which is up to the local primary care trust, not the Secretary of State for Health. I do not expect her or her junior Ministers to conduct those operations, but I do expect them to set the overall framework so that the local delivery of health services is as effective as possible.

Photo of John Baron John Baron Shadow Minister (Health)

The right hon. Gentleman made a point about hospital waiting lists. Despite the doubling of the money spent on the NHS under the Government, why have hospital waiting times, as measured by hospital episode statistics, fallen by only five days in the past 10 years from 11.8 weeks to 11.1 weeks? Does he accept that that clearly shows that the money has not been well spent, and is not getting to front-line services?

Photo of Keith Vaz Keith Vaz Labour, Leicester East

I do not. The hon. Gentleman has a great deal of knowledge as a shadow Health Minister, so he knows much more about the economics of those issues than I do. We are meeting our targets, and the people who come to us are exceptions. Mr. Golding was the first case with which I have dealt in the past year of a constituent who is concerned about the delay—we would know if there were other such urgent cases, because people would contact their MPs—so matters are progressing, and I welcome that. The money has gone to front-line services, and it has improved our targets, which is to the benefit of our constituents, but of course it is important that we look at the way in which services are delivered locally by officials.

I agree that there are too many managers in our local health service, which is why I welcome the meeting that I held last Thursday with Tim Rideout, the new chief executive of Leicester PCT, who told me that a tier of management will be removed in Leicester, so even more money will be spent on local services. Mistakes have been made. One PCT would be sufficient in a city such as Leicester, so goodness knows why we had to have two. Such decisions must be looked at very carefully indeed, as we are dealing with public money, but I am pleased with the large investment in the health service in Leicester. The Under-Secretary of State for Education and Skills, my hon. Friend Mr. Dhanda, is in the Chamber, so I hope that he will tell his colleagues how pleased we were to receive a visit from the Minister for Schools. Sadly, when he came to Leicester to meet the leader of the Liberal Democrat council, I could not attend, because it was a mid-week visit, but he looked at Judgemeadow community college, which will be completely rebuilt, and St. Paul's—not that St. Paul's, but another one in Leicester—a Catholic school, which the Minister opened, which has received public funding to build a new performing arts centre. Our schools are going to rebuilt, as a result of the largest investment by any Government in education in Leicester. Some £230 million is going into the local education system, which we should welcome enormously. The Opposition chant, "Where has the money gone?", and the answer is that it has gone on local services, to improve them and provide benefits for our constituents, which is why they are happy with what the Government have done, and why they elected them three times in a row with large majorities.

I turn to Britain's position in the world and the way in which the Budget helps us to build on our achievements in Europe. I am glad that the Chief Secretary to the Treasury is in the Chamber, because he has performed many excellent ministerial roles in the past 10 years, including negotiating with our European partners. Tomorrow is the seventh anniversary of the adoption of the Lisbon agenda. I had the privilege of serving as Minister for Europe at the time, and I saw the way in which the Prime Minister negotiated a set of benchmarks for the European economy, if I may put it like that. For the first time ever at a European summit, we put in place a set of benchmarks against which the European economies would be measured, to see whether they were successful. It was not the usual warm words that are spoken European summits, where everything is wonderful and everyone is happy with everything that Europe has done.

Those benchmarks were revisited two years ago on the fifth anniversary of the Lisbon agenda—the Kok report, too, looked at the success of European economies after Lisbon—so we can determine how well we have done against the Lisbon criteria. There has been growth of 25 per cent. in the past eight years and, moreover, we are the fourth-best performing economy on criteria in the Lisbon agenda. We are the best of the big European economies, and that is because of the Government's policies. If we want to turn the European Union into the most dynamic and knowledge-based economy in the world, and if the competition is the United States, as it always is, we can see that the benchmarks set at Lisbon have made an extremely important contribution to what our Chancellor and the Treasury team have achieved in trying to move the agenda forward. That agenda has not only provided a strong economy, but has created jobs.

There was a great deal of concern among Opposition Members about the arrival of our fellow citizens from eastern Europe when the A8 joined a few years ago. They voiced criticism and, in fact, the then Leader of the Opposition, Mr. Howard, was going to go to Luton airport to judge how many EU citizens were coming to work in this country. Enlargement, however, has been an enormous success, and the Government, the Prime Minister and the Chancellor have led the process of enlargement. The combination of enlargement and the Lisbon agenda means that the citizens of the A8 who have come to the UK have produced huge benefits for our economy. Their taxes have benefited the economy, and their hard work and dedication have helped us to keep our place, which is why the Germans and the French must regret very much failing to do what we did two years ago, when we allowed the A8 citizens unfettered access to the UK.

I was disappointed that on 1 January this year we did not extend that unfettered access to the Romanians and Bulgarians, as I believed that allow such access would further help the economy and make it even stronger. However, a review has been promised by the Home Secretary, and I hope that my right hon. Friend the Chief Secretary to the Treasury, who knows those reports and the statistics, will tell him that the enlargement of the European Union and our success on the Lisbon agenda have provided a huge boost to our economy.

Photo of Peter Lilley Peter Lilley Conservative, Hitchin and Harpenden

Does the right hon. Gentleman accept that, even if there are the advantages in labour market terms that he suggests from the employment of the huge influx from the eastern European countries, it must also have had an effect on the housing market? Would he like to speculate how many houses are required to house 600,000 people?

Photo of Keith Vaz Keith Vaz Labour, Leicester East

I know that the right hon. Gentleman poses those questions sincerely. I have had no evidence at my surgeries or any anecdotal evidence at meetings that the A8 citizens are putting pressure on our housing market. He may have evidence, but I have none. If they contribute through their taxes to the British economy, they are entitled. The right hon. Gentleman is a former Secretary of State for Social Security. Very few of the A8 citizens have claimed benefits. The Minister, I know, will have the figures at his fingertips. A tiny proportion—145 was the last figure that I heard—of the hundreds of thousands who have come into the country have claimed benefits. If they come to the UK, pay their taxes, are not exploited and are paid the minimum wage, that is how they contribute to the economy, and it is up to local authorities to make up the difference. Any Member who represents an inner-city area knows that that is the case. That has been the magnet for people to come to this country.

I shall make two final points. The first concerns the GE factory in my constituency, which is about to close with the loss of 287 jobs, despite the booming economy. I have had meetings with the Minister for Industry and the Regions about that. The factory has been in existence for over 60 years, and was originally owned by Thorn. It used to make the majority of the light bulbs for the whole of Europe—the lights in Europe started in Rushy Mead in Leicester—first for Thorn and then for General Electric, the second largest company in the world. GE has decided to close the factory, against my wishes, against the wishes of local people and against the wishes of the council.

Sadly, the Budget—the reduction in corporation tax, which I welcome, and the reduction in personal income tax, which I mentioned—comes too late for the factory and the work force. As I was pressed by Mr. Goodman, I am happy to clarify that that will be the lowest level of tax for 75 years. I am happy to put that on the record, before he jumps up at the end of the debate and starts accusing me of a lack of knowledge of economics. Although I did economics at A-level, I plead guilty to the error and I am happy to put the record straight.

I wish the factory could have remained open. My constituents have worked in Rushy Mead all their lives and now they have no jobs to go to. That is the problem with globalisation, which the Chancellor is good at talking about because of his visits to China and India. He has spoken about globalisation and the need to make our economy competitive. The GE jobs are going initially go Hungary and eventually to China, so we need to find a way of retraining our people so that they get they skills that they need.

Finally, I am glad Mr. Lilley is present, as I have some nice things to say about him. Sixteen years ago the Bank of Credit and Commerce International closed, on 5 July 1991. I have raised with the Treasury, and it may well be in the Red Book, which I have not yet seen, the issue of BCCI and how helpful the right hon. Gentleman was to me and to those who lost their deposits, their homes and their jobs 16 years ago. He was the best Secretary of State to have dealt with the matter over the past 16 years.

How sad it is that after 16 years BCCI is still in liquidation, with the liquidators still bleeding the bank, or what is left of it, with their huge fees. How sad it is that a Labour Government, after 10 years, have not put sufficient pressure, through the Treasury and the Department of Trade and Industry, on the Insolvency Service, which is part of Government, to put pressure on the liquidators to close the liquidation. If my right hon. Friend the Chief Secretary or the Financial Secretary gives the Governor of the Bank of England a ring about BCCI, he will hear how sad and how angry the Governor is about the fact that the Treasury still has not sorted the matter out. He and former Governors have had to go to court because the liquidators sued the Bank of England and have had to settle out of court.

I should like to hear in the winding-up speech whether the liquidators have paid the costs of the case over to the Bank of England. I want to ask the Chief Secretary—I know he is not the Minister with responsibility for banking—to say to the Minister with responsibility for banking, "Yet another Budget where we should have made provision for BCCI, yet no solution. Why is it that all the senior partners of Touche Ross over 16 years have dealt with the matter and have all become multimillionaires, and still there is money in the bank that has not been paid out?"

I was very nice to the former Secretary of State, the right hon. Member for Hitchin and Harpenden, but it was a Conservative Government who closed BCCI with the words of the then Prime Minister and the then Chancellor of the Exchequer, Lord Lamont, that there was no money in the bank. That was what he said when he was Chancellor. Only 80 per cent. of the money has now been paid back. Please, under this Government, let us do the decent thing and close the liquidation. The Treasury must talk to the DTI to try to resolve the matter.

Those final points were my only mild criticism, not of the Budget, which is a splendid Budget, but of the way in which we are progressing these matters. The Budget will be warmly welcomed in Leicester, East and the people of my constituency want to thank the Chancellor for what he has done.

Photo of Michael Jack Michael Jack Conservative, Fylde 2:06 pm, 22nd March 2007

I am grateful to be called to speak in the debate. I remind the House of my declaration in the Register of Members' Interests. I shall comment on the Budget and the Government's record of stewardship of Treasury matters. I shall say something about tax simplification, inflation and monetary policy, and I shall conclude with some observations on inheritance tax and the environmental element in the Budget.

The Budget was difficult to judge because part of the picture was missing—that is, the now receding outcome of the comprehensive spending review, originally scheduled for this summer, and now forecast in detail for the autumn. Until we can put the tax raising and spending parts of the economy together, it is difficult to know how good are the claims made by the Chancellor were yesterday. We know that effectively there will be a squeeze on public expenditure, and if the Government will not pay for certain services, individuals may have to provide those themselves. That, from their standpoint, would be the equivalent of a further tax.

The Chancellor was also silent on one tax rise that we know is definitely coming and that will arrive from 1 April—the likely 5 per cent. increase in council tax across the United Kingdom. Many hard-working families will see a real departure of money from their balance before any of the changes announced by the Chancellor can affect their personal budgets. This has been the silent tax throughout the time the Labour Government have been in power, in that above-inflation increases in council tax have happened year in, year out. Not just hard pressed families, but many pensioners are struggling to pay their council tax. And they will have had little relief from the telephone directory-size-Lyons report.

Another element was missing from the Red Book and I hope that the Financial Secretary will give some thought to remedying that in future. Over the Chancellor's period in office, there have been many, many changes to the tax system, but no evaluation is ever provided as to whether they have produced any net benefit to the economy. For example, the Government have spent over £1.5 billion on reliefs to the British film industry. When I tabled parliamentary questions asking for some kind of evaluation, I was referred to the film industry's own reports on its overall progress. We have no indication from the Treasury of how many starts on new British films have occurred as a result of the umpteen tax changes that have affected the film industry. With £1.5 billion of taxpayers' money put into one industry alone, I should have thought that some kind of assessment should be available.

I remember a small tax change some years ago whereby the rate of VAT on children's car seats was reduced, with the claim that that would somehow improve children's safety. I applaud that aim, but where was the evaluation of whether the expenditure of £5 million of the public's money ever gave us anything by way of improved safety?

A more controversial area is the ending of the payable tax credit as regards pension provision—a major change during this Chancellor's stewardship of Treasury matters that was initially a £5 billion reduction in the amount of money going into pension funds. There has been much debate and argument about it. I, for one, would be interested to see a Treasury appraisal of that major change in the way in which pensions are funded, but nothing has appeared. If I had time, I could go through nearly every tax change that the Chancellor has made, for which there has been no impact study or evaluation to find out whether it worked.

Yesterday, the Chancellor patted himself on the back in relation to his own perception of his economic stewardship. Before we consider his latest Budget, we should reflect for a moment on his track record. Personal tax allowances—much has been said about the personal tax content in this Budget—have, by and large, been increased by the rate of price increases, not earnings. As a result, the Chancellor has accumulated the equivalent of another 7p in the pound in tax take—an increase in revenue equivalent to £29 billion during his lifetime as Chancellor. That fiscal drift has also meant that another 1.5 million people are now in a higher-rate tax bracket. I acknowledge that economic growth and increasing earnings account for part of that, but an awful lot of it has to do with fiscal drag. As for the tax bill for households, in 1997 the average household spend was 33.6 per cent. of income; now, it is 38.3 per cent.

One can go on looking at other areas. For example, while house prices have doubled, stamp duty thresholds, with the exception of the lower band, have not changed. The revenue from that area has increased by a staggering 582 per cent. In terms of investment in the economy, the percentage of gross domestic product invested in pensions when this Government came to power was 6 per cent.; now, it is significantly lower. The savings ratio has fallen from 10 to 5.3 per cent. Total debt in the economy is up by 160 per cent., at £1.3 trillion. Public spending as a share of GDP has, over the lifetime of the Government, increased from 34.7 to 44.9 per cent.—an increase of 7.5 per cent. In the United States, our economic rival, public expenditure has increased by 2.4 per cent.; in Germany, the figure is 1.7 per cent. The cost to business of compliance with the multiplicity of the Chancellor's tax changes since 1997 is estimated by the British Chambers of Commerce at an additional £40 billion.

In 2001 the Chancellor announced that Government debt over the next five-year period was to be £28 billion; by 2006, that had risen by an additional £129 billion—a £101 billion overspend. Now this Budget, by contrast with the situation that was announced in the pre-Budget report for borrowing, contains a further £8 billion. I would say to the Financial Secretary that Treasury forecasting is very much in need of a review as regards its accuracy. If we go back through the Red Books, we see an increasing difference between what was promised and what was delivered, particularly on the key measure of Government borrowing.

Having given a different perspective on the Chancellor's tax record, I turn to some specific issues. Let me first acknowledge the activities of one person who was not mentioned in the Chancellor's plaudits yesterday—the Paymaster General, who is continuing to provide support for the tax law rewrite exercise. That started during my time in the Treasury, and I am pleased that the Government have continued it over the past 10 years. The Treasury has also introduced some important anti-avoidance measures whereby those who wish to avoid tax must get Treasury approval in the first instance.

Against that more open and transparent operation of the tax system, may I say to the Paymaster General, through the Financial Secretary, that perhaps the time has come to start learning some of the lessons that have come out of the tax law rewrite exercise? I have been involved in its steering committee for the past 10 years. Many good ideas about sensible reforms in the operation of the tax system have come out of that exercise, but sadly its remit does not allow those measures to be implemented because they would require a change in tax law.

Photo of Stephen Williams Stephen Williams Shadow Minister (Education)

I, too, have taken an interest over many years, from a professional point of view, in the tax law rewrite. Does the right hon. Gentleman agree that we also need a tax law commission so that new proposals to reform our ever-burgeoning burden of tax legislation could be discussed by the profession and then enacted by Parliament with an informed viewpoint?

Photo of Michael Jack Michael Jack Conservative, Fylde

I am grateful for the hon. Gentleman's observations. We do not necessarily need another commission, but the rewrite exercise's remit needs to be expanded to take account of his thought process by allowing for the expertise of the tax industry, which has been devoted selflessly and tirelessly to the rewriting of our tax law in plain English. The lessons that have come out of that should be developed, in partnership with the Treasury and Her Majesty's Revenue and Customs, into an exercise to improve and simplify the operation of our tax system without putting revenue raising at risk.

For 70 or 80 per cent. of the population, what they pay every month in their mortgage has a more profound effect on their financial well-being than a penny or two off the basic rate of tax. On the basis of the average mortgage—£123,000, according to the Council of Mortgage Lenders—a quarter of a point change in the Bank of England's base rate would cost people £25 a month or £300 a year extra. That has a far more profound importance as regards their personal budgets than the relatively small changes in the tax system that were discussed yesterday. That puts particular emphasis on the continuing importance of monetary policy.

I have been worried for some time that the United Kingdom may be running unnecessarily high interest rates because of structural problems in our economy. I asked the Library to provide me with a comparison between average prices, GDP growth rates and interest rates in the UK and the United States over the period 1998 to 2006. In the UK, interest rates were 5 per cent., price changes based on the consumer prices index were 2.9 per cent., and growth was 3.1 per cent. In the United States, interest rates were 3.64 per cent., price changes were slightly below, at 2.9 per cent., and growth was 3.5 per cent. I conclude from that that this other open, free market economy has some advantage allowing it to run lower interest rates than we can, and we should explore why. A recent International Monetary Fund report clearly identified the difference between the inflation rate in the manufacturing and service sectors:

"While goods price inflation has generally been below service price inflation in all three"— the euro area, the United States and the United Kingdom—

"in the United Kingdom, this has been significantly more pronounced with goods price deflation offsetting strong and fairly stable inflation in services prices".

There is a case for examining whether further structural reform is needed in the economy, particularly in the service sector, to ensure that it is efficient and not unnecessarily driving inflation. That was borne out in the same IMF report in relation to labour productivity growth in tradeables—as it calls the manufacturing sector—in the United Kingdom between 1995 and 2004. A 2.93 per cent. change is quoted, with a 1.4 per cent. increase in productivity for non-tradeables. In the United States, however, the figures are 3.5 per cent. versus 1.99 per cent. That difference needs to be looked at, and I hope that the Financial Secretary will agree that a consideration of the structural side of the economy has some merits.

In previous speeches on the Budget, I have commented on the subject of inheritance tax. Originally, I advocated its abolition, but I recognise that anyone who says that a tax should be abolished must tell the Government, or the Opposition, of the day where the money will come from. Given that more estates are now being drawn into inheritance tax, I decided that an alternative approach was merited. Older people who want to pass on the fruits of their labour have a considerable worry that house price inflation will draw them into the complex web of inheritance tax, with its 40 per cent. marginal rate. There is now a case to re-examine that tax.

I posed to the Library of the House the following question. If the inheritance tax threshold remained where it is now, and if all inheritance tax exemptions were removed, what rate of inheritance tax would be necessary to maintain the current yield? The answer that came back was a marginal rate of 10 per cent. If we modified that proposition by continuing the exemption from inheritance tax for the surviving spouse, a rate of 12.5 per cent. would result. With a simpler, more straightforward inheritance tax with low marginal rates, we might not have the situation in which avoidance was the privilege of the rich and sophisticated. That analysis shows that there is a case for re-examining the way in which inheritance tax operates.

From the same analysis, I also discovered that if we removed ways of avoiding inheritance tax, and had a threshold of £750,000, we would still be left with a 40 per cent. marginal rate. We can play tunes with the inheritance tax system, and the time is now right for a thorough review to remove complexity and try to introduce a lower marginal rate.

I want to conclude my remarks on the environmental element of the Budget. As the Minister will know, I chair the Environment, Food and Rural Affairs Committee, which has been doing considerable work on the citizen's involvement in climate change and on bioenergy.

The way in which the Budget dealt with some environmental challenges was disappointing, although it would be churlish not to put on record my appreciation of the £50 million to be spent on preserving rain forests, a move that I wholly applaud. I also applaud the extra £6 million for the low-carbon buildings programme. A time will come, however, when grant subsidy by the Government will not be sufficient for the introduction to the United Kingdom of alternative, sustainable ways, with low greenhouse gas emissions, of generating heat and electric power. I recommend to the Financial Secretary that the energy review include some analysis of adopting the system in Germany, where the buy-in tariff on self-generated electricity provides a return to the individual of four times the price paid for purchasing electricity centrally. That system has dramatically increased the amount of power generated by renewables sources to 10 per cent., at no cost to the German Government and with no grants. The better buy-back price guaranteed for a period of 20 years, with the cost spread out among all electricity users, means that the average German household spends only €2 extra on their electricity bills, while still delivering a 10 per cent. renewable rate. Neither this country's renewables obligation certificate, nor Ofgem's proposals for consultation on the removal or replacement of the current ROC system, replicate the German success, which has led to widespread localised electricity generation through photovoltaic cells, wind or combined heat and power.

Communities in this country are anxious to get involved in reducing greenhouse gas emissions. Again, Germany provides substantial examples of local investment by local people in combined heat and power schemes, thus removing the burden from Government but ensuring that the community has the right conditions to fund effectively their own environmental programmes. Will the Financial Secretary consider a third way in the range of individual savings accounts provided to encourage personal and private investment in energy-saving projects? Either personal involvement in an ISA dedicated to that purpose or changing the operation of venture capital taxation to encourage more investment in localised schemes, coupled with improved buy-back prices for electricity, could radically transform the opportunities for localised power and heat generation.

The Financial Secretary should also consider the derogation on duty for biofuels. When the price of oil went up, the numbers wishing to invest in biofuels production substantially increased. It has become clear during the Select Committee's inquiry, however, that some producers reduce production as the price of oil decreases, as it is no longer profitable, and the duty derogation does not provide an effective subsidy to cover the additional costs. Is it not possible to vary that subsidy according to the price of hydrocarbon fuel, so that the amount of money going back to a biofuel producer when the price is $80 or $90 a barrel is considerably more than when the price decreases to $50 or less? Take-up of the Government's help to the second-generation biofuels industry needs further encouragement if we are to sort out the food-fuel paradox, because such investment is slower in this country than in continental Europe.

I am surprised that those on both Front Benches have shown so little imagination in regard to aviation emissions. They could have come up with better ways of drawing to passengers' attention the carbon implications of their journeys. I would favour not a tax but a carbon offset scheme, enabling people to know how much carbon their journeys were costing. Some of the work of the CarbonNeutral Company, for instance, could help to identify the carbon cost of journeys. Most important, the money raised could be put in a pot and help to fund carbon dioxide-reducing activity. Perhaps there could be a special lottery fund for localised and community-based activity, or a fund to give further support to projects such as the low carbon buildings programme.

BP has developed a carbon offset programme allowing motorists to offset with money the carbon in the fuel that they buy. The company tells me that the results of its customer survey convey the clear message that customers want the money to be spent locally rather than remotely. The time has come for more imaginative offset programmes. It must be made clear to people that the money they have to pay as a consequence of their carbon expenditure can be spent on reducing carbon in their areas and communities.

Budgets are like Chinese meals. This Budget is certainly like that. You noticed it on the day, but you woke up the following day wondering what it really was that you ate. I know from my time as a Treasury Minister that this will turn out to be rather a disappointing Budget. The cheers on Budget day collapsed very quickly as people saw the true meaning of the so-called 2p off tax. What it really means is a tax take from the less well off: a reduction in payable tax credit. Disappointment will be inevitable, and the forthcoming attraction is a public expenditure round that will squeeze the amount available for the provision of Britain's vital and valuable services.

In the light of the observations of the shadow Chancellor, my hon. Friend Mr. Osborne, I look forward to a real change of tenure at both No. 10 and No. 11 Downing street.

Photo of Helen Jones Helen Jones Labour, Warrington North 2:31 pm, 22nd March 2007

It is a pleasure to follow Mr. Jack, who always has something interesting to say in debates such as this—although both he and I often find ourselves addressing a half-empty Chamber on Thursdays.

I shall concentrate on the education implications of the Budget. My right hon. Friend the Chancellor made it clear that we would continue to invest in education, and my right hon. Friend the Secretary of State for Education and Skills described some of the effects of that this afternoon. It is a policy that the Government have espoused throughout their term in office, and their investment has produced spectacular results. Standards of literacy and numeracy have risen dramatically in our primary schools, and the key stage 3 strategy is improving results in secondary schools. More young people are obtaining five good GCSEs than ever before, and we ought to recognise and celebrate their achievements, because they are too often denigrated when the results are published. There are many hard-working young people who are achieving very good results.

Nevertheless, as we all know, under-achievement and inequality remain in the system. The Select Committee on Education and Skills has drawn attention to that in a number of reports. The way in which we tackle inequalities is crucial to education spending. There is still too wide a gap between our best schools and the schools that are struggling. It has been a scandal for many years that young people can leave school at 16 and be given no further education or training, and it was good to hear the Secretary of State commenting on how we propose to tackle that in the future.

It is also true that a young person's chances of proceeding to higher education are still overwhelmingly determined by the social class into which he or she is born. That inequity must give Ministers sleepless nights, but the social and economic consequences are also potentially catastrophic. We know—we heard it again this afternoon—that the number of unskilled jobs in the economy is set to decline, and that the number requiring higher-level skills will rise. If we do not tackle educational low achievement and under-achievement, there is a risk that a section of our society will not be able to obtain jobs and that the gap between the haves and the have-nots will increase, with consequent damage to civic society. That is how high the stakes are in respect of education, because what is at stake is the kind of society that we produce, not only in economic terms but in a host of other areas as well.

The Government have taken steps to tackle under-achievement. There have been valuable initiatives such as those to do with children's centres and extended schools, but many such initiatives attempt to tackle the problem through making changes to the structures of the school system, and I have concerns about how well that works, because I think that the jury is still out on a number of them. First, there is doubt about how well some of the initiatives gel with what the Government are trying to do in other areas—making schools the focus of their community, for example, or having extended schools. There is also an issue to do with dynamic leadership, which we talk about often in terms of education. That is important, but unless such dynamic leadership feeds through to improvements in teaching and learning—unless it is embedded in the system—when the leader moves on, the school might decline again. We should focus our education spending much more on developing the curriculum and improving teacher training. Those are the keys to improving education.

The results of some of the initiatives that have been taken are difficult to interpret at this stage—and the evidence is sometimes contradictory. Ofsted has so far inspected only nine academies. My hon. Friend Meg Hillier talked about Mossbourne community academy, and the more I have read about it the more it has become clear that it is a very good school—in fact, I learned more this afternoon about education in Hackney than I have for a long time. Of the nine academies inspected, overall effectiveness was judged to be good in three, satisfactory in five and inadequate in one. That shows that the performance of academies differs; some are very good, while others have not achieved good results. It is too early to say how this programme will work through.

Photo of Greg Mulholland Greg Mulholland Shadow Minister (Education)

Although we agree that there are some positive spending measures in the Budget, does the hon. Lady also agree that it contains nothing that suggests that the Government will reach their target of having 400 academies—that is the new target, which is double the original 200 figure?

Photo of Helen Jones Helen Jones Labour, Warrington North

The Government's target is to get good schools, which is the right target. Parents want a good local school—whatever title we give it. That is why I want to focus on teaching and learning.

Some academies are very good, but the intake of some academies is very different from that of their predecessor school. That is a plus in one sense, but it also makes it extremely difficult to compare results because we are not comparing like with like. Some academies have a very high expulsion rate—much higher than that of the local authorities in which they are situated. If difficult and challenging children are moving to other schools in the system, that also makes comparing results difficult, because the challenges presented by such children are not tackled, but moved somewhere else.

There has also been the specialist schools programme. The Education and Skills Committee—and that Committee in its previous incarnation as the Education Committee—has made it clear that there are varying assessments of that programme. It is undoubtedly true that many specialist schools have improved their results and that they have offered further opportunities to many children, but let us look at last year's results. The average point score at GCSE in specialist schools increased by 10.5 per cent. but it increased throughout the secondary school maintained sector by 10.8 per cent. It is therefore very difficult to draw conclusions from those results at these early stages.

It sounds confusing, but education can be confusing, because it is very difficult to establish control groups when starting new things. To make matters more confusing, in some areas certain things have worked and Government interventions have been very successful. For example, in 1997-98, 45.9 per cent. of schools in the most deprived wards were in special measures; by 2004-05, that figure had fallen to 28.8 per cent. Primary schools with the highest number of children on free school meals—a good rough index of deprivation—had narrowed the results gap on schools with a smaller proportion of children on free school meals.

Photo of Kevan Jones Kevan Jones Labour, North Durham

Does my hon. Friend agree that a key issue in raising standards in schools is leadership, and that investment in head teachers is helping to drive up standards in the most deprived parts of constituencies? That is certainly true in my constituency.

Photo of Helen Jones Helen Jones Labour, Warrington North

I agree with my hon. Friend—that is a very important point. What seems to have worked in the primary schools that I am referring to is a combination of rigorous focus on the curriculum—including literacy and numeracy—better support for teachers, better materials and better overall support. However, it is important to recognise that, although good management of a school is important in itself, we must ensure that it feeds through into improvements in teaching in the classroom. Ofsted's report on academies found that although leadership is a strength for most academies, that has as yet led to minimal improvements in teaching in the classroom.

If we are to tackle this problem, our education spending must in future focus on the curriculum, teaching and improving teacher training. Alongside that is the question of how we get our best and brightest teachers into our most challenging schools. The biggest single indicator of low educational achievement in this country is not ethnicity or gender, but poverty: the simple question of whether a child is born poor. Of course, that does not mean that all poor children are destined to fail—some schools prove triumphantly that that is not so—but it is more likely to happen.

So in making our spending decisions, the first question that we need to ask is, what do we do about the curriculum? What do our children need to flourish in the 21st century? The problems that they will face are quite different from the ones that we have had to face. They are growing up in a world of vast movements of people. They will indeed be global citizens, and many of them will work abroad at some time in their lives. Families are scattered and communities often fragmented; schools have a role to play in dealing with that. Most of all, our children are growing up in an age of mountains of information: in a multi-media age in which, at the touch of a button, the internet can provide information—some good, some bad—on every subject under the sun. Unless we teach them to deal with that information overload, we will not be preparing them adequately for the world in which they will grow up.

I accept that we in this country are not good at talking about the schools curriculum. We tend to assume that we know what everyone should learn, and usually, it is what we ourselves learned. As a result, our curriculum is still based on a 19th-century curriculum. It has been tweaked here and there and bits have been added and subtracted, but it is recognisable as the same curriculum. That is not good enough for the 21st century. We need to ask much closer questions about what our children learn. If we all accept, as I assume we do, that the building blocks of the curriculum are literacy and numeracy, because they are the foundation of all other learning, we have to ask, "What next?". I wish to make a few suggestions. They are not prescriptive or even a full list, but they are suggestions that we should debate—

Photo of Sylvia Heal Sylvia Heal Deputy Speaker

Order. I wonder whether the hon. Lady, when she makes her suggestions, will be able to link them to the comments in the Budget speech that the Chancellor made.

Photo of Helen Jones Helen Jones Labour, Warrington North

I will try to do so, Madam Deputy Speaker. My argument is that our money should be spent on developing the curriculum and on training teachers to deliver it. That is the key to improving teaching and learning.

My first suggestion is that our children should learn about their own country, its history, traditions and culture. That is easy to say, but it takes a lot of thought and spending to develop that curriculum. If there are two historians in a room, they will have three different views on how to deliver the history curriculum. English teachers will argue for a long time about what children should be reading.

I suggest that we need to be guided by two points: we need to prepare our children for work, but we also need to prepare them to live. Education is about living well, and the decisions that we make about the curriculum, and the money that we put into it, should be guided by the desire to ensure that our children have access to the best. We should educate them for leisure, as well as for work.

Secondly, children need to learn about at least one other culture. Culture is accessed through language, and we have heard the comments in Lord Dearing's report on the teaching of languages in primary schools. What he said was largely correct, but it still raises questions about how the money can be provided for developing the materials that will be needed to teach languages in primary schools and to train teachers to deliver that curriculum.

There is also a question about which languages should be taught. Traditionally, in this country, most people have learned French or German at school. If we are to move to teaching other languages, developing the staff to deliver them will have major implications for public policy and finance. It is right that we should do so, but long-term financial decisions have to be made about how to spend our money.

The third point is about science education. The Secretary of State said in his opening remarks that we are now getting more maths and physics teachers into our schools and more people are taking those subjects at university. But it is vital that children leave school with some basic scientific literacy—an understanding of scientific methods and of how science has shaped our world.

Children also need to leave school with certain skills. When the Education and Skills Committee considered citizenship education, for example, it found that we need to encourage active citizenship in our young people. They need to learn how to take responsibility and about the need to take part in their community. We need to consider whether all young people should undertake some community service as part of their progress towards leaving school. Perhaps an over-arching leaving certificate should include some such service—

Photo of Helen Jones Helen Jones Labour, Warrington North

I will give way as the hon. Gentleman is a member of the Committee.

Photo of Stephen Williams Stephen Williams Shadow Minister (Education)

The hon. Lady attended the Committee yesterday when we heard evidence from the University of Manchester that it now requires all its undergraduates to do 60 hours of community service a year. Perhaps that model could be replicated in schools, even if not for so many hours.

Photo of Helen Jones Helen Jones Labour, Warrington North

The hon. Gentleman makes a fair and reasonable point, if we want to produce rounded citizens, but the question is how we direct our public spending to free up teachers to carry out such projects. Long-term decisions need to be taken. We need special people to deliver that. We need teachers who can inspire young people, and access the support that they need for learning. That is much more difficult than it ever used to be. We live in an age of internet chatrooms: everyone's opinion is considered to be equally valid, regardless of their knowledge of the subject, so it is very difficult to inspire respect for learning.

The Select Committee looked at various subjects, and we found time and again that there were deficiencies in teacher training—for instance, in respect of identifying special needs, or in teaching citizenship or reading. Yesterday, the Chancellor announced that there was going to be much more funding for one-to-one tuition. The changes in personalised learning will mean that we need to look carefully at how we train teachers in the future.

The demands of personalised learning, and the classroom changes that will follow as a result, will require much higher levels of skills in planning, assessment and classroom management. We need to look closely at the curriculum that trainee teachers undertake, and take account of the need for continuing professional development.

For example, there are real questions about whether one year's postgraduate training is enough. If we decide that it is not, there will be major implications for where we direct our investment in higher education. If we choose not to put money into higher education directly, we must answer questions about how we ensure that teachers get continuing professional development. For example, should teachers be required to do compulsory continuing professional development units? If so, how do we finance that?

Another problem has to do with how we secure investment in the most challenging schools located in our most deprived areas, and how we make sure that they get the best teachers. Some of the teachers who work in the most challenging circumstances are inspiring and dedicated, but they are the minority. My suggestion for how public finances should be used may not be universally welcomed, but it is that we should train an elite corps of teachers for our most challenging schools.

We should recruit the best and brightest graduates. We should support them while they are in training, and also put in the funding needed to ensure that they are supported when they are at work. If we want them to stay in those difficult schools for some time, they should be given further mentoring and extra support at work, and further training as they proceed. Those teachers should become the best in the profession: they should be recruited by competitive entry, and fast-tracked for promotion. We should pay them more, and demand better results from them.

At the moment, the pay structure means that teachers prefer to work in nice schools with well-motivated children. That is just human nature, and only exceptional people choose to work in difficult and challenging schools. We should refocus our public finances on those areas where we need to make progress.

Such long-term decisions about where we should put money are difficult, but they will have to be made. As we move to personalise the curriculum so that young people are able to make different choices, we will also have to consider ways to ensure that young people must attain minimum entitlements, at a speed that suits them. There are fine judgments to be made about education spending, but what is clear is that we are making them in an atmosphere of rising spending and better provision; we are no longer in the era of cutbacks. When I was teaching, two or three children had to share a textbook. Now, the finances are available and we can make decisions. The consequences if we do not will be serious both for our economy and for our society as a whole.

Photo of Michael Fallon Michael Fallon Chair, Treasury Sub-Committee 2:55 pm, 22nd March 2007

I remind the House of my interest, which is recorded in the register.

My right hon. Friend Mr. Jack has already told the House that a Budget cheered on the day quickly loses its shine. However, I cannot recall a Budget that has disintegrated quite as rapidly as this one. The Chancellor's speech yesterday, which I understand was a record in terms of time, was itself a guide. He seemed quite unaware of the fact that after the speech anybody outside the House could go on to the web, turn up pages 208-09 of the Red Book and discover that, although they were being offered a tax cut next year of £8 billion, £7 billion and other bits and pieces would be taken away from them. It is a strange Chancellor who does not understand that our constituents, who are already faced with an increase in air passenger duty, who will be faced in October with significant increases in fuel duty, and who will be faced this year and next year with council tax increases in the order of 5 per cent., will not suddenly fall over in gratitude at a reduction of merely 2p.

There are a number of tables in the Red Book, and if the Chancellor is to claim the credit for cutting tax for a significant number of people, it would have been more honest if he had published in the Red Book the table that is now beginning to emerge, and shown exactly who the winners and losers in that exercise would be. Given that the Financial Secretary is going to the trouble of making our statistics service more independent, perhaps the new statistics board could undertake to ensure that the Red Book at next year's Budget is accompanied by a proper independent assessment of who the winners and losers are by category, so that the Chancellor will be unable to throw up smoke and mirrors in the immediate aftermath of the Budget.

Photo of Paul Goodman Paul Goodman Shadow Minister (Childcare), Treasury

Did my hon. Friend hear the economics editor of the BBC observe last night that although the Treasury was able to give him a list of winners it was, for some reason, unfortunately unable to give him a list of losers?

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

I did not, but the BBC's economics editor made that point in a BBC broadcast in which I participated, because he was searching for the information at the time. It is extraordinary that economic commentators, our research teams and the Library will all have to spend the next two or three days discovering information already held in the Treasury about who the winners and losers are. It looks as though single people will be losers from the changes announced yesterday. Young, professional single people—perhaps working in the public services—may find that they are worse off, not better off, as a result of what was announced yesterday.

I want to consider the economic position in respect of the public finances. The Chancellor did not quite have time in his speech to apologise for the fact that he has yet again overestimated the amount of tax revenue that he was supposed to gather in. I think that this is the sixth year running when he has wrongly forecast the tax revenues on the wrong side. As a result, the deficit is widening and he will have to borrow more than he originally forecast. The public finances have worsened.

In the private sector, the economic stability about which the Chancellor boasts depends very much on who one is. The stable economic framework that he claims to have created is not particularly attractive to a potential first-time buyer, struggling for a foothold on the housing ladder, or to a pensioner, struggling to make ends meet on a fixed income and confronted with retail prices inflation which is much higher for the pensioner community than the 2 per cent. figure the Chancellor talks about.

We have a very lop-sided economy now, in which home owners—those already on the housing ladder—enjoy year-by-year huge rises in their capital assets, while those outside the housing market find life harder and harder. I suggest to my hon. Friend Mr. Goodman, who is participating in our work on policy formation, that we need to look again at the housing market and perhaps find new ways of helping young couples. If we do not, home ownership will slowly and steadily become predominated by the wealthy and the middle aged.

Secondly, we need to do more to protect pensioners from council tax increases that well exceed the money that they are paid through various fixed incomes. At the moment, the Chancellor tries to protect them by one-off measures—pre-election bribes—that are introduced one year, then withdrawn the next. We need to look again at our council tax system. An increase of 5 per cent. in one year may be sustainable, but year after year, for a pensioner on a fixed income facing high utility costs, it is a very serious matter indeed.

I would like to deal now with the tax burden, and the element that I particularly want to concentrate on is the business tax burden. The Library tells me that of all the taxes garnered in 2005-06, business taxes account for some 27 per cent. of the total burden. I have to say that a corporation tax rate of even 28 per cent. still looks very high compared with our Organisation for Economic Co-operation and Development competitors. We are now slipping into the bottom half of that table, as we see other competitor countries—sometimes neighbouring countries such as Ireland—with much more attractive rates.

My right hon. Friend Mr. Redwood mentioned yesterday that we are seeing the slow but steady movement of multinational headquarters away from London. As I understand it, there are no statistical tables available yet to provide the evidence, but there is a worrying trickle of members of the Institute of Chartered Accountants and the CBI reporting in their surveys that firms with headquarters in London are now assessing every couple of years whether they should retain their headquarters here in London. HSBC, for example, conducts such an assessment every two years. In 1993, the answer was a categoric yes—London was the place to do business. Now, it is reported, the answer is much less clear cut. That is extremely important, because 1993 was the year in which HSBC chose to move to London. It could have chosen elsewhere. That is a reminder that, if we are to continue to attract and retain in London the headquarters of these larger companies, we need to get the tax and regulatory regimes right.

Photo of Kevan Jones Kevan Jones Labour, North Durham

Does the hon. Gentleman agree that, whoever is in power, the Government will increasingly have to review competitiveness, perhaps on a monthly as well as a yearly basis, in the light of the emerging economies across Europe and the world? If we do not do that, we could find ourselves quickly disadvantaged in some of the emerging markets.

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

I certainly agree with that. We all, across the House and across government, ought to be more aware of just how mobile company headquarters are. We hear people in the City talking rather grandly about the City of London being like Wimbledon, in that we put on the best tournament in the world and all the foreign banks and companies want to come and play here. However, the analogy that I would commend to the House is that of Silverstone. We do not have to have a grand prix in this country. If it becomes too expensive, Mr. Ecclestone can move it somewhere else. There are plenty of other people who want to put on a grand prix. The hon. Gentleman's point is extremely well made: if the burden of tax or the regulatory framework enveloping some of these successful financial services companies becomes too great, London could lose them.

I want to make several points about the spending side of the Budget. The first relates to the curious claim that the Chancellor repeated yesterday—he has probably inserted it into almost every Budget speech that I have heard him make—that he has abolished boom and bust in the economy. So far as the private economy is concerned, we will be able to test that claim only when the present house price boom finally runs out of steam. The Chancellor has, however, created boom and bust in the public economy, through the way in which he has organised public spending.

At first, public spending was tight, then we had the splurge, and now it looks as though it is going to be tight again. Indeed, having studied the detail of the numbers that were announced yesterday, I am worried not only that it will be tight but that there will be a sudden change that will affect some of the smaller spending programmes as well as some of the long-term programmes that are vulnerable to sudden changes because of the way in which they are planned and organised. Research spending at the universities is one example, as is the work of the British Library and the British Museum. I understand that both those organisations have been asked to consider illustrative cuts—cuts, not freezes—of 5, 10 or 15 per cent. in their budgets as part of the work leading up to the spending review in the autumn. It is those smaller essential longer-term programmes that need protection from this sudden feast and famine in our public spending.

My second point relates to the NHS. As others have already noted, we did not hear an awful lot about the NHS yesterday. It is my view that the NHS is still in turmoil. We have seen the extraordinary upheaval in manpower planning, with a number of young doctors now struggling to find positions. We have also seen endlessly overlapping reorganisation at every level of the health service, and we are now seeing very real job cuts in some of the non-medical professions.

I should like to give the House an example. Well over a year ago, the community hospitals in my constituency were being reviewed by the former South-West Kent primary care trust. The review, involving all the staff and services at those hospitals, has now been continued and widened by the new West Kent primary care trust, which took up its role in October. That review, which will determine how many and what kind of services should be provided by the community hospitals, will itself be overtaken by the more general fit-for-purpose exercise being conducted by the strategic health authorities. The result is that staff are demoralised and the future of the Sevenoaks and Edenbridge hospitals still swings in the balance.

Furthermore, the Government have still failed to decide on the key issue of resource accounting for the trusts' deficits. All three of the trusts that serve my constituency—the West Kent primary care trust, the Maidstone and Tunbridge Wells NHS trust and the Dartford, Gravesham and Swanley primary care trust—have been struggling with deficits. Because of the way in which resource accounting has been applied, they must balance their books each year, but if they fail to clear the historic deficit, its effect is doubled in the subsequent year. As a result, trusts up and down the country are scrambling to make last-minute economies. In fact, the Maidstone and Tunbridge Wells NHS trust wrote to all its staff inviting them to work a day unpaid to help to clear the deficit.

The Audit Commission reported last July that the resource accounting rules were simply incompatible with the way in which NHS spending has been conducted, yet there has been no decision, either in the Budget or from Health Ministers, on whether that will be corrected in time and the NHS will be released from those obligations from the beginning of the new financial year—1 April. If the Financial Secretary to the Treasury has time, I would be grateful to hear whether resource accounting is to be abandoned for the NHS trusts in time for the new financial year. The way in which it is being applied now seems to be extraordinarily arbitrary and is undermining the staff and public support that the trusts need if they are to serve their public.

As for jobs in the NHS, in 20 years as a Member of Parliament I have never seen job cuts on the scale that we are now seeing across our local NHS. Physiotherapists coming out of training who were promised jobs are now being denied them and have to consider alternative careers. Health visitors are being told that their services are no longer required, and midwives are being made redundant. In all those professions the number of posts is being reduced. Those people decided to go into the public service, but now their career aspirations are being shattered. If the Government were going to cut NHS jobs on such a scale, they should have been more honest at the start.

Finally on the spending side is the voluntary sector. It ought to have been encouraged to come forward in support of the state, but the sector is now crippled by new legislation of all kinds and the excessive application of regulations on money laundering and criminal records, which are worth while in other fields but which are now applied to the very smallest, most local charity that is never likely to have been involved in money laundering or anything like it. In addition, grants to voluntary sector organisations are beginning to be cut.

Let me give the House the example of Dorton college of further education, which is one of the few institutions in this country that serves blind and visually impaired people. It has been told that its work retraining funding grant of £250,000 a year is to be halved; as a result, fewer blind people will be able to attend the college from next September. That sort of yo-yo public funding for voluntary organisations and charities working in support of the state is no way to organise public spending.

The tax cut with which the Chancellor somewhat theatrically ended his Budget statement yesterday may well have fooled some of the City commentators, forecasters and analysts who were supposed to have predicted what he would do, but it certainly has not fooled my constituents and I believe that, when the time comes, it will not have fooled the country.

Photo of Richard Spring Richard Spring Vice-Chair, Conservative Party 3:14 pm, 22nd March 2007

If we look back on the past 10 years, we see that the Chancellor has consistently said that the economic situation is unparalleled in our history. If we look at actual performance, however, we see the truth—that the growth rate has been approximately 2.8 per cent. If we look beyond that to the post-war rates, we see an average increase of 2.5 per cent. The performance over the past 10 years has been achieved in what is generally accepted as having been one of the most benign economic environments and world conditions imaginable.

The idea that there has suddenly been a step change in the economic growth performance under this chancellorship in the last 10 years is simply not a sustainable argument. We should remind ourselves that, when the Chancellor came into office in 1997, the International Monetary Fund described the situation as a golden economic scenario. In one of the biographies of the Chancellor it is alleged that, when it was pointed out to him what a fantastic inheritance he had, he said something along the lines of, "Am I expected to write a thank-you note?". The difference is this. Many of the essential reforms that were vital to secure greater economic stability and better British economic performance, such as trade union reform, reform of the closed shop, dramatic cuts in personal taxation, privatisation and the big bang, were opposed by the Labour party—totally incorrectly at the time.

As we look back over the last few years, we can see that much of the feel-good factor has been generated by rising house prices. As we heard the other day from the former Governor of the Bank of England, much of that arose because of concerns about a recession. The way in which the Bank of England reacted was to ensure that there would be a greater housing boom, despite the potential consequences.

Looking beyond the figures that were produced in the Budget report, one of the key indicators of economic success is the improvement in living standards. Figures from the Office for National Statistics tell us that the average weekly gross income per household in 2001-02 was £600. It rose, in real terms, to £616 last year—a compounded growth rate of just 0.5 per cent. The real weekly disposable income per household rose in real terms by only 0.35 per cent. per year. So, for all the headline growth rate increases, the net effect in terms of household incomes tells a different story.

Photo of Kevan Jones Kevan Jones Labour, North Durham

Does the hon. Gentleman agree that one of the things that contributes most to making people feel good is the fact that they have a job? In my constituency of North Durham, since 1997 unemployment has come down by 65 per cent. and youth unemployment has come down by over 90 per cent. Does he not think it is worth giving a least some credit for that achievement?

Photo of Richard Spring Richard Spring Vice-Chair, Conservative Party

I accept that there has been a growth in employment. That is true in almost all industrialised countries. However, in fairness to the hon. Gentleman, if he looks at the pattern in the last year, he will see that it has begun to reverse itself quite dramatically, compared with other major industrialised countries.

If we look at the difference in household incomes between the richest 20 per cent. and the poorest 20 per cent. in 1997 and today, we can see that it is 10 times. The amount is identical. There has been no change. According to the same Office for National Statistics data, the lowest-income households are paying a higher share of tax and receiving a lower share of benefits than they were in 1997.

That has come about at a time of a massive increase in public expenditure. That expenditure has not, of course, resulted in a transformation of public services. That is at the heart of the criticism of the governance of this country. People are asking, "Where has all the money gone?". The truth is that the Chancellor has not taken anything like the tough and radical decisions of his predecessors, which were often controversial and sometimes, indeed, divisive. The Chancellor has poured money into the public sector and has swollen public sector employment, but without effective prioritisation and consultation to achieve measurable better outcomes. I am afraid that, as we now know, that is coming to an end, because the rate of growth in public expenditure is going to be less than the rate of growth in the economy overall. Of course, the Chancellor had no alternative but to do that, so the bonanza in public expenditure is about to end without the reforms that were necessary to produce a massive increase in the quality of our public services.

There have been three main factors behind the economic growth that has occurred under the Chancellor. I have touched on the massive increase in public expenditure. We have also seen the trebling of house prices, so this is growth led by consumption. Household debt in 1997 was 100 per cent. of disposable income, but it is now more than 160 per cent., and the figure is rising. There has also been a substantial increase in the population of this country.

Productivity has not matched economic performance to the extent that it should have done. We are suffering the highest current account deficit in our entire history, with a third of that figure being filled by our service industries. We are hugely and increasingly dependent on our financial services sector. As my hon. Friend Mr. Fallon pointed out, however attractive London has been as a centre for the financial services industry, the mobility of that sector is much greater than that of manufacturing, so we must watch with great concern the burden of taxation and regulation.

Productivity was considered to be one of the most demanding issues for the Chancellor when he assumed office, but our productivity is less than that of France, Germany and the United States, partly because of the huge expansion of the public sector. Indeed, one in four of the new jobs that have been created in this country has been in the public sector, and our tax burden has risen appreciably under this chancellorship—it is certainly higher than that in the United States, Germany and Japan. Much of our lack of performance on productivity has come about because of poor performance in the public sector. The International Monetary Fund describes what the Chancellor has done as the

"most aggressive fiscal expansion of any G7 country".

The heart of the problem is that expenditure on the public sector has cost the taxpayer a staggering amount, yet the functional mismanagement in the public sector has, at times, been absolutely grotesque—we only have to look at the mismanagement of our health service and the financial difficulties that have resulted to realise that. If one is the guardian of the public purse, one is entitled to invite Cabinet Ministers with departmental responsibilities to ensure that the management of such huge sums is appropriate.

Let me relate my experience during my time as a Member of Parliament. When I was first elected in 1992, we had the West Suffolk health authority. We were then told that we needed a pan-Suffolk health authority. More latterly, we were told that economies of scale and management were not the important thing and that we needed the management of health to be close to communities. We thus got five primary care trusts, which became three primary care trusts, and now we are back to having a Suffolk-wide health authority all over again. The cost of that has been grotesque and the events have ill served the people who depend on the health service.

Photo of Kevan Jones Kevan Jones Labour, North Durham

I agree with the hon. Gentleman about the fiddling around with health authorities. In Durham, for example, we went from having one area health authority to having seven, yet now we are back to where we started. However, does he agree that that has gone on under previous Governments, although that does not excuse what has happened? Perhaps we have tried to change the management of the health service in the expectation that that will deliver results. Rather than concentrating of delivering front-line services, management changes have been put in place.

Photo of Richard Spring Richard Spring Vice-Chair, Conservative Party

I am glad that the hon. Gentleman accepts that errors have occurred. I dare say that management has never been perfect in the health service. However, the changes of the past few years have been extremely dysfunctional. The difference is that the salaries paid to the senior people who run health services are equivalent to those of Cabinet Ministers and the Prime Minister. The cost of the massive managerial overheads, the salaries and the consultancies has been a damp hand on the provision of good and decent health care. We see the problems now: the difficulties faced by our junior doctors, the sacking of nurses, and the closure of wards and everything that goes with that. The chief executive of the NHS recently said that

"some of the policies that we have implemented had not been properly costed. That is absolutely true."

The Public Accounts Committee talked about the "weak control" of finances. As we know, there is a shortage of midwives, and junior doctors, to whom I have just referred, have been protesting. Huge deficits have grown up in the NHS, despite the massive increases in funding that the Chancellor has made in our health service, and that situation will continue for at least another year.

At the heart of the problem is disgraceful managerial dysfunction. The Chancellor is the guardian of our finances, but a lack of consultation and prioritisation has resulted in our wholly wasting, in many respects, the huge sums that have been given to the NHS. That is an increasingly common view among our constituents. Where, indeed, has the money gone?

I should like to draw the Financial Secretary's attention to another point: one of the most bizarre aspects of yesterday's Budget was the treatment of small businesses. When he gets back to his office, he should expect a huge volume of letters and e-mails, sent to the Treasury by business people in the smaller and medium-sized business sector who simply cannot believe that taxation for the sector has gone up, as was announced yesterday. I draw his attention, as my hon. Friend Mr. Osborne did, to the fact that there has been a series of changes in taxation in the sector since 1997, with rates of tax going back and forth. In 2005, small business tax rates were 20 per cent. First-year capital allowances were then introduced, and now the small business tax rate has gone up to 22 per cent.

Although it is true that the headline rate of corporation tax has gone down from 30 to 28 per cent., smaller companies that have profits of up to £300,000 will see taxation rise from 19 to 22 per cent. Of the £985 million that the Treasury is expected to reclaim from the corporation tax system, no less than £820 million will come from small businesses. That will help to offset the corporation tax reduction for larger firms. If we consider the pressures on small companies, which include local taxation and the business rate, we see that 10,000 local shops have closed since 1997. Corporation tax, despite the new rate announced yesterday, is now higher than when the Chancellor came to office in 1997.

The capital allowances in the Budget are allegedly an offset against the higher level of taxation, but the truth is that many of our acorn, smaller and most dynamic businesses do not have high capital expenditure. They are in the creative industries and in the knowledge-based economy that we keep hearing about. They will not be beneficiaries of those allowances. It is astonishing for a Chancellor who talks about the need for entrepreneurial activity, and to encourage new business investment and new start-ups, to increase taxation as he has done. I hope that we can get a satisfactory explanation from the Financial Secretary, but I cannot imagine what it might be.

Photo of David Gauke David Gauke Conservative, South West Hertfordshire

My hon. Friend makes an important point. I do not know whether he noticed the Chancellor's curious phraseology yesterday; he raised the rates, but then stated that the extra revenue would be recycled to

"legitimate small businesses investing for the future."—[ Hansard, 21 March 2007; Vol. 458, c. 820.]

The implication is that businesses that are not "investing" as such are somehow illegitimate.

Photo of Richard Spring Richard Spring Vice-Chair, Conservative Party

I am afraid that the Chancellor's Budgets are always rather mysterious and arcane, and it takes great armies of accountants, tax advisers and lawyers to establish what he means. My hon. Friend will agree that there is outrage in the smaller business community at what happened yesterday, and an explanation from the Government is urgently required.

The Financial Secretary dealt with the subject of energy security and the taxation of North sea oil in an Adjournment debate, and I have read the Treasury discussion paper on that hugely important matter. The reaction to the Budget demonstrates that there is genuine concern about the declining base in the North sea. The Chancellor has spoken at length about the vulnerability of our energy security in an era of geopolitical instability. Natural hazards, too, are a difficulty, as well as the technical problems that arise in this area. UK domestic fuel sources have been depleted, and we are moving inexorably from being a net exporter to being a net importer. Objectively considered, some countries that supply our energy are not among the most stable in the world. The capacity for production is at the upper limit—the oil supply from OPEC is often at full capacity—so any hint of instability in the middle east means a sharp rise in prices. Indeed, the middle east accounts for 65 per cent. of the world's oil reserve, and in periods of instability we have seen the consequences for oil and energy prices, and have experienced the impact in the UK on prices, inflation and the consumer. The issue is therefore hugely important, given the nature of the world and, indeed, terrorist activity.

We are very much beholden in Europe to Russian supplies, particularly for natural gas. Many people have asserted that Russia will exploit its ability to supply Europe with energy, and use its influence to make political decisions about that supply. There have been instances of such behaviour in the past 12 months in eastern Europe, and the director of the strategic studies centre at the Russian Academy of Sciences said:

"What has changed is that Russia has begun using energy as a political tool".

That is important from Britain's point of view. The pattern of production in the UK demonstrates that there are huge questions about the future viability of production in the North sea. Oil and gas remain vital to the UK for the foreseeable future, and account for 75 per cent. of the UK's primary energy supplies. The UK oil and gas industry has spent more than £370 billion—all of it private capital—to recover the nation's offshore hydrocarbon reserves, and it has generated huge sums of money for the Treasury, so it is in everyone's interests, not only geopolitically but economically, that production is sustained and encouraged.

We remain a significant oil and gas producer, but the United Kingdom Offshore Operators Association has repeatedly said—indeed, it stressed this after the Budget—that high-cost inflation, combined with typically small opportunities and increased tax rates make it harder to attract investment into the North sea. Margins are shrinking, and some of the fields are becoming quite old. In neighbouring countries such as Norway, a different, more competitive tax regime has emerged.

Yes, the oil and gas industry is an important contributor to our economic life and to the Treasury coffers. It is hugely important for our geopolitical stability, but the real shock, if there was one, in the Budget presentation was the decline in revenues from North sea oil. There is one thing that I do not understand, and I hope the Financial Secretary will be able to explain it to the House. The Government have known for some time the pattern that is emerging. The current situation is one thing; looking down the track the situation is extremely serious for us, yet what we have is yet another discussion paper. All the right questions may be there and it is a complicated tax matter, but urgent action is required. It is a matter of great disappointment that all we get is more talk on the subject. I hope the Treasury will be provoked into taking sharper action.

We have seen a massive increase in public expenditure, which is beginning to tail off. Parallel with that there has been a huge increase in the monstrous bureaucracy in the public services. It affects the morale of teachers, the numbers who wish to retire early, and the turn-over of young teachers who come into the profession wanting to teach but are twisted up in form-filling and bureaucracy. There are only a small number of police officers on patrol at any given time, and they all say that they are caught up in a web of bureaucratic interference by Government that makes their jobs impossible. I have touched on the situation in the health services.

We must understand that unless we get a grip on the environment of regulation and interference overtaking our country that the Chancellor has allowed to happen, however much money we pour into the public services, we will not get a commensurate improvement. That is the Government's legacy—a huge increase in taxation to the highest levels ever, a massive increase in public expenditure, and public services that have not improved remotely as much as they should have.

Photo of Kevan Jones Kevan Jones Labour, North Durham 3:37 pm, 22nd March 2007

It is a pleasure to follow Mr. Spring, but I think he lives in a parallel world—a different world from many of my constituents, who have benefited over the past 10 years from the stable economy that we have become proud of in this country. I joined the Labour party in the dark days of the early 1980s, and I well remember people writing pamphlets about the unelectability of the Labour party. One of the key issues on which they did not trust the Labour party was the management of the economy.

How things have changed over those 20-odd years! Not only have we proved that we are able to run the economy and invest in public services,—something we can rightly be proud of,—but we are leading, as Mr. Fallon said, in an increasingly competitive and changing world, from which we cannot insulate ourselves, no matter what anybody in any political party says. It is no good turning our backs and hoping that emerging international markets will go away if we do not believe they are there.

Levels of national debt are down to record levels. According to the Chancellor's statement, national debt is down to 38 per cent., compared with the euro zone, where it is 50 per cent., the USA where it is 44 per cent. or the staggering height of debt in the great dynamic economy of Japan, where it is 92 per cent. We ought to be proud also of the levels of capital investment that the Government have made, which is up from £18 billion in 1997 to over £43 billion now.

In his opening remarks today, Mr. Osborne, who entered the House, as I did, in 2001, said in response to a question that the past 10 years had been worse than the 10 years before 1997. Again, the hon. Gentleman seems to live in a universe parallel to the one in which I and many of my constituents live. It is worth remembering those years, when we had inflation of more than 10 per cent., interest rates that hit a record 15 per cent., and unemployment of 3 million-plus. That had a dramatic effect in constituencies such as mine. The economic heart of many of those communities was ripped out overnight, with no protection or investment afterwards. Now, house prices are rising, but we do not have the cancer of negative equity, which affected 1.5 million people.

Another achievement since 1997 is the fact that net borrowing, which had hit a record of more than 8 per cent., is now predicted, as the Chancellor said yesterday, to be down to 2.7 per cent. and, in future years, 1.4 per cent. Borrowing is not intrinsically bad—it is a question of what is done with the money that is borrowed. The important thing is that we are no longer borrowing to invest in unemployment.

The Government can be rightly proud of the record levels of employment, with more than 2.6 million extra jobs—a record in the G7 countries. Reference has been made to quality of life. Having a job is a basic thing in most people's lives. It gives one dignity and a reason to get up in the morning—what I always call a place in the world.

Photo of David Gauke David Gauke Conservative, South West Hertfordshire

Despite the number of extra jobs that the hon. Gentleman mentions, does he accept that it is disappointing that the number of people on out-of-work benefits has fallen relatively little, by about 300,000?

Photo of Kevan Jones Kevan Jones Labour, North Durham

There are a record number of jobs in the economy. There is a hard core that we have to tackle; I have it in my constituency. It will take time and effort to get to people who have been written off and consigned to incapacity benefit, for example. I agree with the hon. Member for Sevenoaks that that is a challenge that we cannot ignore. In an ever-developing world, it is important to get record levels of employment higher and to ensure that we get the most out of the individuals in our economy.

Youth unemployment used to be a scourge in many areas. My constituency is not an inner-city constituency; I have often described it as a rural constituency with urban problems. It has pockets of high deprivation in former mining communities whose economic reason for existence has gone. Since 1997, youth unemployment in my constituency is down by more than 90 per cent.—I will return to the issue of 16 and 17-year-olds who are out of education and unemployed, which was tackled in the Budget—and long-term unemployment is down by more than 65 per cent.

The Government have achieved that not by waving a magic wand but by trying to reward work. The Budget increased the working tax credit threshold by £1,200. I welcome that. The gloom and doom merchants complain about how the tax credits system has been administered. The Paymaster General, who is on the Front Bench at the moment, knows that I have not been uncritical of the way in which her Department has administered the system, causing hardship to some of my constituents. However, we should look at the bigger picture and think about the support that it has given to many families in my constituency, where it is making a real difference.

This Labour Government must be proud of the national minimum wage. During the 1997 general election, when I was a trade union official, the Conservatives told us that it would create mass unemployment and be bad for the economy. It has done exactly the opposite. It has helped to raise people out of poverty and removed the absolute disgrace, in a decent society, of people working for £1.50 an hour or less. There was the famous occasion when a security guard at a jobcentre was being paid £1.50 an hour and had to bring his own dog to guard the premises. We have a proud record on employment, which we should not stop championing.

Is everything perfect? No, it is not, and the test for the Government now is to help those in every constituency, including mine, who have been on long-term incapacity benefit and need assistance to get into work. The change since 1997 is that jobcentres are not trying to get people into any job, at any cost, just to manipulate the figures downwards. For example, Stanley jobcentre in my constituency has dedicated workers who advise clients and support people, who often have serious health issues, into work. There are those who say that people are being forced into work who should not be, but it is good for a lot of those people to access work and to gain the place in the world to which I have referred.

Yesterday's Budget also reflected our proud record on pensions and pensioners. It is repeatedly pointed out to me that those pensioners who were the poorest in 1997 are now better off than they have ever been, certainly in my constituency. For example, Annie Bell from Waldridge, who unfortunately died last year at 85 years of age, had campaigned for a free bus pass all her life. When we announced the free bus pass for pensioners, she said to me, "Kevan, this will change my life." More importantly, because she was on a basic state pension and had no savings, she had never been better off. At her funeral, her daughter said that the last few years of her life had been changed by the fact that she was not scrimping and saving and suffering poverty in old age.

There are some, however, who have worked hard throughout their lives to have small occupational pensions and are then hammered by income tax. I am therefore glad that the increase in the income tax threshold was announced yesterday. The announcement that, from April 2011, those over 65 years of age will pay no tax on income under £10,000 will also be welcomed.

We should also be proud of the protection that we have offered to those hard-working people who have paid into pension schemes and lost their pensions through no fault of their own. That is a credit to the campaigning work of my hon. Friend Kevin Brennan, now sitting in silence as a Whip on the Front Bench, who highlighted the issue when he was a Back Bencher. The extension of the financial assistance scheme yesterday from £2 billion to £8 billion will support those who have lost their pensions through no fault of their own. I listened to someone say on television last night that that was not good enough. Well, it is a damn sight better than we have had in the past, and the Government have recognised the injustice done to those people. That and the Pension Protection Fund will provide a safety net that will rightly protect such people from poverty in old age.

On health, the hon. Member for West Suffolk asked where all the money had gone, as though some great black hole or vacuum were sucking it all in. I shall tell him where it has gone in my constituency, which I accept is very different from his. When I was elected in 2001, it was a disgrace that the Chester-le-Street district hospital was a former workhouse, over 100 years old, had leaking roofs and damp carpets, and had had no investment for many years from the Conservative Government. At the Dryburn hospital, where some members of the present Prime Minister's family were born, the maternity unit was in portakabins in the hospital grounds. We now have two brand new hospitals. Next year a brand new mental health hospital will open just over the border in the City of Durham. Four new doctors' surgeries will be built in my constituency in the next two years. A brand new £11 million health centre is coming to Stanley, replacing outdated surgeries.

Photo of Kevan Jones Kevan Jones Labour, North Durham

That is where the money has gone—into bricks and mortar.

Photo of Richard Spring Richard Spring Vice-Chair, Conservative Party

The hon. Gentleman has implicitly highlighted the huge differentials in per capita spending in different parts of the country that have grown up in the last seven years. I would guess that if my constituency benefited from the same per capita NHS spending as the hon. Gentleman's, we would not be experiencing the massive crisis that we are experiencing in Suffolk, with the closing of wards, the sacking of nurses and a huge financial deficit.

Photo of Kevan Jones Kevan Jones Labour, North Durham

My heart bleeds for deprived Suffolk, but health inequality is an issue in this country. Is the hon. Gentleman really suggesting that when a constituency has chronic levels of industrial disease and health inequality, money should be pushed towards communities that do not need it at the expense of those that need it desperately? That was the Tory approach in the 1990s.

Photo of Paul Rowen Paul Rowen Shadow Minister, Transport

I am sure the hon. Gentleman agrees that there are many similarities between his constituency and mine. Today the Pennine Acute Hospitals NHS Trust, which covers Oldham, Rochdale, Bury and North Manchester, announced the closure of 220 beds. That is a great investment by this Government!

Photo of Kevan Jones Kevan Jones Labour, North Durham

It is, actually. When I was elected in 2001, my constituents had to wait at least two years for orthopaedic operations. Many of them needed such operations, because they had worked in the mining industry. Now the waiting time is down to less than three months, and those who go on to the emergency waiting list can be operated on within weeks.

There are challenges in Durham, and I would be the first to criticise the Government for the reorganisation of primary care trusts, which has sucked out money that should have gone to patients. Let me give the hon. Gentleman a positive example, however. In 2001 the new University Hospital of North Durham was completed, and was seen to have fewer beds than its predecessor. There was a big hue and cry about there not being enough beds, but over the past five years waiting lists have shortened, and the number of beds is now about right. In fact, we may have a few too many. Part of the success story of shorter waiting lists is overcapacity in certain areas. The alternative is to leave things the same and never change anything, but that means wasting money, which is what the Opposition—notably the Liberal Democrats, on many occasions—accuse us of doing.

Southmoor hospital in my constituency closed recently. It was an old cottage hospital which was no longer needed, dating back to 1920. Next year, we will replace it with the new Stanley health centre, which will have X-ray facilities and new treatment rooms. It will be able to do a hell of a lot more with modern rather than outdated facilities—although it would have been easy enough for me, as a constituency Member, and for others to campaign to keep open a hospital that was not fit for purpose and had seen better days.

Where is all the money going? I can see where it is going in Durham. I freely admit that there have been problems with the way in which it has been administered at times. For instance, PCT reorganisation irritated me like hell: it did not add anything to health provision. But we cannot escape the fact that the health service in my constituency is a hell of a lot better than it was when I was elected in 2001, the year in which the hon. Member for Tatton was also elected.


Does the member for North Durham have to swear so much? Can he please remember that to many people Hell is a real place where real people will spend an agonosing eternity. We all have momentary lapses, but three mentions in as many minutes is loss of control.

Submitted by Roger Taylor

Photo of John Baron John Baron Shadow Minister (Health)

I accept that things may be going very well in Durham, but I suggest that one reason why people are becoming increasingly discontented with the way in which the national health service is operating is the time for which they are having to wait for operations. I refer the hon. Gentleman to the figures for average waiting times. Despite a doubling of the NHS budget, the figures clearly show— [Interruption.] Cries are coming from the Government Front Bench, but Government hospital-episode statistics show that average waiting times have fallen by only five days—from 78 days to 73 days—in the 10 years they have been in power. Does the hon. Gentleman not accept that as there has also been a doubling of the budget, a lot of inefficiency is still built into the system?

Photo of Kevan Jones Kevan Jones Labour, North Durham

No, I do not. Back in 2001, I regularly had letters in my postbag and people coming into my surgery asking, "When can I get my operation done?" That no longer happens. Instead, I now hear from people who receive their treatment very quickly. Let me tell the story of a funny recent case. A lady came to my surgery and said, "I went into hospital and had only a three-week wait from diagnosis to treatment for a hip replacement", but she then said that she wanted a second opinion, as she thought that that was too quick. That story highlights that we are a million miles from where we were in 2001. It is easy for the Conservatives to talk of doom and to paint gloomy pictures in broad brush strokes, but the facts on the ground are clear.

Photo of David Anderson David Anderson PPS (Bill Rammell, Minister of State), Department for Education and Skills

Does my hon. Friend agree that, regardless of where hospitals or services are located, nurses are finally getting paid the money that they should be paid, and also that there is no longer the sin of ancillary workers—such as those whom my hon. Friend and I used to represent—being paid slave wages under compulsory competitive tendering? They are now paid at least the minimum wage. That is in part what has led to the doubling of the budget, and it has led to a better service for people in hospital.

Photo of Kevan Jones Kevan Jones Labour, North Durham

My hon. Friend and constituency neighbour makes the point well that we have got rid of the poverty wages that were paid in the health service in the 1990s. I am sure that we are now all getting letters about nurses' pay, but we should be proud of what the Government have done on nurses' pay in real terms since 1997.

On compulsory competitive tendering and dirty hospitals, my hon. Friend and I both know from our experience of local government that there were pressures to ensure that the priority in terms of local hospitals was not quality but price. Price was the priority not because there was a desire to bring about a more efficient service. The concern about price led to a lower quality of service and to the major element of every single contract being the price of labour, which was pushed down.

I welcome the commitment in the Budget speech to an £8 billion investment in education. In my constituency, we can be proud of our record on education; there are new buildings and there is the commitment to continue to replace buildings, and standards are rising, too. They have risen in terms not only of GCSEs, but of the general quality of education. I was proud that Stanley school of technology, which is under the great leadership of Janet Bridges, was in the top 10 most improved schools under the new indices. It is in one of the most deprived communities in my constituency. The teachers there do a sterling job. They do it for two reasons: because they are dedicated to their profession, and because they have support from the Labour Government and money going into their school.

I and teachers in my constituency are concerned about 16, 17 and 18-year-olds who have fallen out of the education system and out of the employment market; I have raised this matter before. Those people are seldom represented in any statistics. That is why I was pleased by yesterday's announcement that we will make it compulsory—that might be too emotive a word to use—to be in education until the age of 18. A teacher came to my surgery a few weeks ago and asked, "Does that mean that we will force people to do A-levels?" No, that is not what it means. It will force people to take part in training courses and apprenticeships, and it will ensure that they have basic numeracy and literacy skills. That is vital. In many constituencies, entire groups of young people aged 16 to 18 are being left out. Unfortunately, a lot of young people drop out of the education system at 14 and never really get back into it.

Photo of Helen Jones Helen Jones Labour, Warrington North

Does my hon. Friend recall that when the school leaving age was raised from 15 to 16, exactly the same fears were expressed then as were expressed when it was raised from 12? This announcement is consistent with that, and no one would go back to what we had then.

Photo of Kevan Jones Kevan Jones Labour, North Durham

I agree with my hon. Friend; indeed, this is a great opportunity for schools. Schools and further education colleges are up for the 14-to-19 agenda; however, it is not just about putting young people through GCSEs. I must agree that this Government's method of measuring success just through GCSEs has sometimes been a bit crude; we must also look at apprenticeships, and make sure that employers play a part by providing training places. The hon. Member for Sevenoaks mentioned globalisation. If young people do not drop out of the education system at 16 but continue and get the skills and training that they need, that will make this country competitive. Young people who drop out of the education system can also be led into crime, for example; moreover, it is a wasted opportunity. Given the right opportunities, most go on to be productive members of society. Importantly, they have a job, a place in the world and a reason to get up in the morning, as I said earlier.

The Chancellor referred yesterday to the proposal to impose a 17.5 per cent. tax on internal domestic air travel, which has been put forward by some of the "green Taliban" in the Conservative party. I am glad that he rejected that proposal. We need to take a more sensible view of air travel. We must recognise that airports such as Newcastle's—I was, but no longer am, a director of it, so I need not declare an interest—are an important economic driver in regions such as the north-east. Taxing people and effectively saying to them, "You cannot travel by air", would not improve the environment substantially, as was proved by the figures that the Chancellor announced yesterday. It would also inhibit economic growth in such regions. If we are going to consider green tax proposals, we need to find more sophisticated, less blunt methods.

Certain people in the green lobby, including Conservative Front Benchers, seem to be saying that the only way to achieve this aim is to hammer the airline industry, but it produces only 2 to 3 per cent. of this country's carbon emissions. We need to find ways to incentivise the industry to buy aircraft that are more efficient, and to invest in the more efficient use of fuel. We could also consider simple steps such as reducing the amount of fuel used when taking off and landing at airports. Such proposals need some work, but I want to highlight the importance of regional airports. If we make ourselves uncompetitive in a globalised world by imposing an arbitrary green tax, our example will not be followed by certain of our European counterparts, and certainly not by India, China and other such places.

This is the Chancellor's eleventh Budget, and it builds on the stability that we have enjoyed since 1997. Irrespective of what the doom-mongers in the Conservative party and others say, the people out there realise that our economy is productive and a leading world economy. They realise that their mortgage rates are low, that employment is secure and that this Government are committed to investing in the public services that they value. Interestingly, when I asked the hon. Member for Tatton whether he would match our spending commitments, he said yes. I hope that over the next few weeks, as we get a new spending commitment every week, they will add to his announcement today. Thanks to this Budget and the continuing economic stability that we have come to enjoy, this country can go from strength to strength over the next 10 years.

Photo of Paul Rowen Paul Rowen Shadow Minister, Transport 4:05 pm, 22nd March 2007

I am grateful for the opportunity to speak on the Budget resolution and I wish to pick up on some of the points that other hon. Members have raised, especially about education. First, however, I wish to comment on some of the broader aspects of the Budget.

The first aspect is the proposed changes to income tax. As my right hon. and learned Friend Sir Menzies Campbell correctly spotted—although the Leader of the Opposition did not—the 2p reduction in income tax is to be funded by the abolition of the 10p rate. That will have a detrimental effect on many poor people in my constituency and elsewhere. Other hon. Members have mentioned the fact that the tax credit is not universally taken up, and I know why, from many people in my surgeries. Many people on low incomes have unstable incomes that change rapidly—

Photo of Dawn Primarolo Dawn Primarolo Paymaster General (HM Treasury)

I think that the hon. Gentleman will find that his point does not bear scrutiny. If he looks at the take-up of the child tax credit for families on incomes of £10,000 or less a year—we would all class them as low-income families—it is 97 per cent. That is hardly a low take-up.

Photo of Paul Rowen Paul Rowen Shadow Minister, Transport

I am grateful to the Paymaster General for making that point, but I correctly said working tax credit, rather than child tax credit. It is a fact that the take-up of working tax credit is much lower than the take-up of child tax credit. From talking to many of my constituents, the reasons for that are clear. They have low incomes that often fluctuate. Because of that and the way the system works, they end up owing thousands of pounds, through no fault of their own. When they get—

Photo of Dawn Primarolo Dawn Primarolo Paymaster General (HM Treasury)

If the hon. Gentleman looks at the take-up of working tax credit, he will find that it is higher than any of the predecessor benefits offered to that group. I agree that it is not as high as I would like it to be, but it is still considerably higher than the take-up of the predecessor benefits.

Photo of Paul Rowen Paul Rowen Shadow Minister, Transport

Notwithstanding that point, with a 10p rate of income tax, people automatically keep the money, depending on what they earn, without having to rely on the bureaucratic strictures of Her Majesty's Revenue and Customs to claim it, which results in many of them—through no fault of their own, as I said—owing thousands of pounds. The tax cut relies on a bureaucratic system. Instead of letting people keep the money in their pockets, they have to claim it back, with all the problems that result.

Photo of Greg Mulholland Greg Mulholland Shadow Minister (Education)

I wish to give my hon. Friend a figure that will emphasise the point that he is making. A single parent earning £15,000 a year—hardly a huge amount—will be £40 worse off a year. My hon. Friend makes the point strongly that it is ridiculous to take people's money and require them to claim it back through that costly system.

Photo of Paul Rowen Paul Rowen Shadow Minister, Transport

That is very true. When the figures were published, the examples given were all positive, but the real detail was not provided. We will get that in the next few weeks and it will show who will be worse off. Single people will suffer most, and it is single pensioners with a small occupational pension who fall just outside the £9,700 limit about whom the Chancellor is talking. My mother is one of those people and she already complains that she never gets anything, even though she worked all her life. The change to the 10p rate means that she and many like her will pay more in tax than they paid before. That change should be linked with the Lyons report, which was also published yesterday.

Photo of Kevan Jones Kevan Jones Labour, North Durham

I am interested in what the hon. Gentleman is saying. Will the Liberal Democrats therefore vote against the 2p cut in income tax?

Photo of Paul Rowen Paul Rowen Shadow Minister, Transport

Our policy is clear: we would cut the 10p rate to zero, and the 22p rate to 20p. We would fund that by introducing environmental taxes, something that the Chancellor has done very little about.

Photo of Dawn Primarolo Dawn Primarolo Paymaster General (HM Treasury)

Does the hon. Gentleman expect his party's environmental taxes to work? If they do, and people's income goes down as a result, how will his party fund the income tax cut then?

Photo of Paul Rowen Paul Rowen Shadow Minister, Transport

The Minister could apply the same argument to the taxes on tobacco or alcohol. They are consumption taxes, and people make a choice about buying items—or using modes of transport—that are subject to such taxes. The figures may change eventually, but they will not do so in the initial stages.

I am glad that the Chancellor intends to legalise his approach to air passenger duty, as no order was made to authorise the tax when it was introduced in February. I am grateful that that problem is to be rectified.

The Government have missed a golden opportunity with the Lyons report. Pensioners have suffered considerably from the rises in council tax. The Lyons report proposes introducing two new bands, but they will not be implemented until after the next general election, and local councils will not have an opportunity to introduce an additional business rate.

That approach is indicative of the Stalinist way in which the Chancellor kicks proposals into touch, and he did the same with last year's Stern report. The shadow Chancellor was right to say earlier that there is very little in the Budget that deals with environmental taxation, and that is very disappointing.

What the Budget did not say about health spending is also pertinent. We have not yet been given the figures for total NHS spending, but the health trust that covers my constituency today announced 220 bed closures—real cuts that result from the trust's £26 million overspend this year. The closures are not welcome in Rochdale, north Manchester, Oldham or Bury. No one can argue that those areas are the leafy suburbs of the south: they are as deprived, and in as much need, as anywhere else.

Mr. Jones mentioned occupational pensions. I welcome the Chancellor's belated recognition—

Photo of Paul Rowen Paul Rowen Shadow Minister, Transport

The hon. Gentleman disagrees with me, but the matter has been the subject of reports from the pensions ombudsman and from the Public Administration Committee, of which I am a member. The Government had to be dragged to the High Court before they did something.

Photo of Kevan Jones Kevan Jones Labour, North Durham

This Government are the only one ever to have introduced a pension protection plan. Before that, there was no safety net at all for people who lost their occupational pensions. I am not going to apologise for that, and neither should the Government.

Photo of Paul Rowen Paul Rowen Shadow Minister, Transport

I have acknowledged that the pension protection plan is welcome, but I am talking about people who, for reasons of mis-selling or poor advice, took out occupational pensions that up to now have paid them no money. I welcome the Government's belated recognition that those pensioners have a fair case, although the amount is not enough.

I welcome both the consultation on looked after children carried out by the DFES earlier this year and the Budget provisions for additional funding in that sector. Provision for looked-after children is extremely poor at present. I am due to meet the Minister for Children and Families after Easter to discuss a private sector company, Green Corns, which runs homes and provides education in several areas. In my view, the company's staff are inadequately trained and supervised, so in the Government's response to the consultation I look forward to proposals for tightening up that sector to ensure that looked-after children have the education and support they deserve.

I welcome the commitment the Secretary of State gave earlier about adults and young people with special needs. Whatever the Government may have been saying for the past few months, the Learning and Skills Council, in its drive to ensure that most of the money for adult education goes to courses that provide accreditation, has failed to take into account the fact that young adults with special needs often need different provision. They do not progress at the same rate as other people and courses for them have been lost. At my local college, the number of places for those young people has been halved and the situation is similar at Oldham college. There is a lack of support and provision for young people with special needs, so I welcome the Secretary of State's commitment to look into the matter. I hope that later in the year there will be concrete proposals to ensure that they have the education they deserve.

The Budget and the Green Paper published today include commitments for 16 to 19-year-olds, which I very much welcome. The measures on the statute book go back to 1918 so it is good that at last they will be implemented. My hon. Friend Sarah Teather questioned the Secretary of State about the figures. Clarification is important. What will the capital investment of £200 million deliver and what is the time frame? The same questions apply to the £700 million. From the revenue figures we have seen, those amounts are nowhere near adequate to deliver the commitments.

I hope that the Secretary of State will implement in full the Dearing review recommendations about courses. If more young people remain in education and training, there must be appropriate provision. I have been involved in introducing diplomas. Back in 1992, when the Conservative Government allowed schools to introduce BTECs, my school was one of the first to do so. I greatly welcome the use of diplomas and other vocational education and training, but there must be proper funding and, as Dearing recommended, there must be a continuum so that young people can move from and between various forms of education, otherwise the whole system will fall down.

Over the past 10 years, Rochdale council has been Liberal Democrat, Labour, Liberal Democrat and Conservative working together and is now Liberal Democrat again. Nevertheless, there has been a strong commitment throughout that period to improve education. When this year's results came out, I was delighted to see that Rochdale, building on our earlier success at key stage 3 and key stage 4, topped the league for key stage 2.

One area where we have not performed so well— there remains a huge amount to do—is in post-16 provision. I met representatives from the Aimhigher consortium from Greater Manchester last week. They produced figures on the number of young people in Rochdale going into higher education. Despite seven years of Excellence in Cities and Aimhigher funding, numbers in the Heywood and Middleton constituency went up by only 5 per cent. and those in the Rochdale constituency by only 10 per cent. That 10 per cent. means only an extra 50 young people going on to higher education, which is not good enough.

One of the first things I did when elected two years ago was to meet the Learning and Skills Council to see whether we could develop better sixth-form education in Rochdale. I was delighted when a consultation exercise was carried out last year, with the majority of people saying that we needed a brand new sixth-form college. A scheme was put out to consultation and has now been evaluated. It will mean improvements at Hopwood Hall college as well as the building of a brand new sixth-form college. It will cost upwards of £75 million, which is why I asked earlier for clarification of what exactly the £200 million was for. If Rochdale is to perform as well as other constituencies and districts, I believe that investment is vital, so I hope that the Minister will give an assurance that we will see the right level of investment.

Rochdale was also successful this year in securing Building Schools for the Future funding for our secondary schools. Ministers are making massive claims. Yes, the £150 million is very welcome, but it will not rebuild every secondary school in the borough of Rochdale. It will carry out a partial rebuild of some schools, but it will not compete the job. It is welcome, but people should not run away with the thought that everything is developing as we want.

I hope that Ministers will also be able to begin to address the backlog in primary schools. Probably like many authorities, Rochdale has more than its fair share of Victorian primary schools. Although we have been able to refurbish some through a private finance initiative agreement, we have not gone far enough.

In conclusion, as usual with this Budget and this Chancellor, the devil is in the detail. The Chancellor has wasted opportunities to tackle some of the problems that he spoke about. I referred earlier to environmental taxation, but very little has been done about that. We have had a broad commitment to tackle Government waste, but why for goodness' sake could we not do something about getting rid of the number of targets that the health, education and other sectors have to meet? Then there are schemes for ID cards, Trident and nuclear power that will all suck in vast sums of money, which cannot then be spent on improving core services.

I welcome some of the commitments in the Budget, but if this is an indication of what new Labour is likely to be like under Gordon Brown, I am not impressed and we should be quite worried.

Photo of David Gauke David Gauke Conservative, South West Hertfordshire 4:24 pm, 22nd March 2007

Yesterday we heard what we all assume will be the final Budget from the current Chancellor. I thought that it would be worth while in examining it to look back to his first Budget in July 1997, to assess what progress has been made on the various items that he identified in his opening remarks on that occasion. He identified what he perceived as four weaknesses within the British economy: instability, under-investment, unemployment and waste of talent. It would be fair to say that unemployment and waste of talent were closely linked—indeed, he dealt with them together in his speech—so his very first statistic in his very first Budget speech should probably have referred to three weaknesses instead of four. Perhaps he was setting the tone as far as numbers were concerned.

The first weakness that the Chancellor identified was instability. He referred to the independence of the Bank of England, which, even at the time, I supported. It has undoubtedly been a success. He also referred to public finances, stating how important it was that they should be sustainable. In our debates yesterday and today, we have heard how there have been three phases for the Chancellor. From 1997 to 2000, he was fiscally prudent, conservative and careful, and he reduced the budget deficit substantially. From 2000 to 2006, however, we saw a sharp deterioration in public finances. Public spending took off dramatically, while tax revenues at times disappointed. We have seen a sharp tightening since the 2005 general election, and we saw further evidence of it yesterday with the announcement of the public spending plans—the envelope, as it were—for the next few years.

In assessing the Chancellor's record as a whole in this area, it is worth citing the findings of the Institute for Fiscal Studies, which noted some improvement over the past 10 years but made an international comparison: of the 22 countries for which comparable data are available, 17 improved their structural budget balance by more than the UK. We have been living through a time in which the budget balances should have been getting better, yet the Chancellor's record is not all that impressive. Indeed, he has been able to recover a degree of sustainability in the public finances only by means of a rather sharp slow-down in public spending, in which we have seen spending falling as a percentage of national income.

During the last general election campaign, my party put forward proposals in which public spending would rise in real terms but fall as a percentage of gross domestic product. The Chancellor's response to our proposals was that they would result in £35 billion of public spending cuts. Applying the methodology that he used to reach that conclusion to yesterday's spending announcement, the Institute for Fiscal Studies has made it clear that the Chancellor would yesterday effectively have announced £8 billion of cuts by 2010-11, or £10 billion worth by 2011-12. The methodology is absurd. What the Chancellor announced yesterday were not really spending cuts in the normal sense of the word. If he is to be consistent in his choice of methodology, however, that is precisely what he did.

As a member of the Treasury Select Committee, I had the opportunity after the pre-Budget report to ask the Chancellor how he would define a cut in public spending. He evaded my question, saying that we would have to wait and see what the public spending envelope looked like. That was no answer; we do not have to wait and see at all. I had another go at the question when I asked the Chief Secretary to the Treasury what constituted a cut, and he said that it was in the eye of the beholder. We are in the rather curious position of having a new irregular verb, as far as the Chancellor is concerned: "You cut spending. I demonstrate fiscal discipline while increasing real-terms spending."

One innovation in the 1997 Budget was the introduction of the fiscal rules, and they have served a useful purpose. We all know, however, that the golden rule that current spending must be met by taxation over the economic cycle has largely been discredited by the various changes to the economic cycle, which have always made the Chancellor's job somewhat easier. The Chairman of the Treasury Committee, John McFall, raised one or two concerns about the golden rule and the economic cycle yesterday. I intervened on him yesterday, and I have an opportunity today to raise with the Financial Secretary my concern about what one might call a fiddle.

In the past, the last year of an economic cycle has always been treated as the first year of the next, and it so happens that those last years have always been surplus years. Yesterday the Chancellor said that the current economic cycle will finish in early 2007, which I think probably means within the 2006-07 financial year, so my question is: will the 2006-07 financial year, which is a deficit year, be treated as part of the next economic cycle? The question seems fairly straightforward, and if the answer is yes, that would be a continuation of the policy that has applied in the past. However, when asked the question, Treasury officials before the Treasury Committee were unable to give an answer, and no answer has been given in response to parliamentary questions that I have tabled. When he winds up the debate, I hope that the Financial Secretary will clarify whether the last year of one economic cycle will continue to be the first year of the next. As far as I can see, the Government will meet the golden rule for the next economic cycle either way. According to their current projections, there is no reason why not. None the less, it is important to have consistency if the golden rule is to have any sort of credibility.

The second weakness that the Chancellor identified was under-investment. As my right hon. Friend Mr. Cameron pointed out yesterday, the savings ratio has halved since 1997. In addition, business investment in this country is less than 10 per cent. of GDP and has averaged a smaller proportion of GDP than in France, Germany and the United States since 2000. A matter raised in 1997 that is topical again this year is the rate of corporation tax. In 1997, the Chancellor reduced the mainstream rate from 33 to 31 per cent.; he subsequently reduced it to 30 per cent. and, of course, yesterday he reduced it to 28 per cent. In 1997 he boasted that our rate was lower than our competitors' and that we had a competitive advantage, which would help both inward and domestic investment. However, that competitive advantage has been allowed to slip in the succeeding 10 years.

It would be churlish not to welcome the change in mainstream corporation tax. It is right to lower the rate and to simplify the system by having fewer allowances, exemptions, reliefs and so on. That is to be welcomed. The change was foreshadowed in the report produced by the Tax Reform Commission chaired by Lord Forsyth, and the shadow Chancellor was advocating that approach only this week. In fact, the tax cut can safely be said to be the first of many tax cuts initiated by my hon. Friend Mr. Osborne.

Photo of Kevan Jones Kevan Jones Labour, North Durham

I have been listening carefully to the hon. Gentleman and I find what he just said and what Mr. Osborne said very strange. Their argument seems to be to claim credit for everything in the Budget, but then to go out to the television studios and elsewhere to condemn the Budget. Is not that a bit schizophrenic of them?

Photo of David Gauke David Gauke Conservative, South West Hertfordshire

There were some good bits—or perhaps one: the cut in corporation tax. Of course we take some credit for a measure for which we campaigned, but that does not mean that every single aspect of the Budget was correct. Let me give another example. The Chancellor's position on mainstream corporation tax is to reduce the reliefs, allowances and so on, but to reduce the rates as well. That is entirely sensible, but for smaller companies, he has done quite the reverse: increased the rate and increased additional allowances. That seems an illogical, and perhaps unfortunate, position. Perhaps there is an explanation that we have not heard. I raised a point earlier about the curious phrase "legitimate small businesses". There may be an explanation there. [ Interruption. ] The reference was to "legitimate" businesses, as if those businesses that did not invest were somehow illegitimate, but I do not intend to pursue the point.

Also on investment, we have the abolition of tax credits for pension funds—the most notorious aspect of the 1997 Budget. Curiously, in 1997, that was justified as helping investment. The Chancellor referred yesterday to the 125,000 people who lost their work pensions through no fault of their own. He was absolutely right: it was not their fault. That is more than can be said for the Chancellor, whose tax raid has contributed to some of the difficulties with occupational pension funds. However, the Chancellor made an announcement yesterday about the financial assistance scheme.

Photo of Kevan Jones Kevan Jones Labour, North Durham

Is it not a fact that, in addition to the changes in corporation tax, many of those companies and pension funds did very well out of that change? Some companies then took pensions holidays and did not put any of the money into their pension schemes. Is it not wrong for certain companies to cry wolf and blame the Chancellor, when a lot of them did very well but chose not to put extra money into their pension schemes during the good times for the bad times that came along later?

Photo of David Gauke David Gauke Conservative, South West Hertfordshire

That was the justification that the Chancellor used at the time for the abolition of tax credits on pension funds. However, with the benefit of hindsight, actuaries calculate that the cost to pension funds has been something like £100 billion since then. Clearly, some occupational funds have been severely affected.

The hon. Gentleman raised the point about the financial assistance scheme. He welcomed what was said. The issue is important for Members on both sides of the House. I represent former workers of Dexion who have been left without their occupational pensions. There has been widespread concern about the plight of those people as a consequence of their occupational pensions no longer being available to them. A lot of us have worked, campaigned and raised the profile of this issue.

Many of us have worked with Ros Altmann, a former Treasury adviser who has won the respect of pensioners and MPs on both sides of the House. I spoke to her last night about her assessment of the announcement of £8 billion extra for the financial assistance scheme. She pointed out that no new money was identified in the Red Book for that. It is going to be paid for a long time in the future. No additional funds have been allocated to it within the Department for Work and Pensions budget.

There is a reference to getting 80 per cent. of the core pension. A core pension is a concept that has been created by the Government. Essentially, we are talking about only 60 per cent. of the expected pension. The FAS pays out only from the age of 65, whereas many people were looking to retire at 60, and would like to be able to do that. There is no inflation linking. All FAS payments will be taxed, although to some extent perhaps the tax changes announced yesterday will be of some assistance. There is no tax-free lump sum. Widows lose out significantly. On the basis of Ros Altmann's comments—we should at least respect what she has to say—it seems that what the Government have done has not been quite as generous as it first appeared. Indeed, the word used by Ros Altmann was "spin".

Photo of Kevan Jones Kevan Jones Labour, North Durham

It is worth nothing that when the hon. Gentleman's party was in power it did nothing at all to protect occupational pensions. I know that he does not speak for the Conservative Front-Bench team, but is he suggesting that the Government should underwrite completely every single private pension scheme in this country? If he is, that is certainly a huge spending commitment that will not fit in with the spending plans with which the shadow Chancellor said this afternoon he agreed.

Photo of David Gauke David Gauke Conservative, South West Hertfordshire

I am not suggesting that. However, the Government have lost a case on the basis of maladministration, although they are appealing, and certain legal obligations might thus be forthcoming. This is not a question of underwriting every single private pension in the country, but we must consider what happens when people have been misled, which is the case in the example that I am citing. We need to look carefully at the matter, and I am not sure that the Chancellor's announcement succeeded in dealing with the problem.

Let me move on to the third and fourth elements of what the Chancellor said in 1997 that remained current yesterday. Welfare reform was at the heart of the 1997 Budget and, to some extent, the 2007 Budget. Mr. Field, who was the Government's first welfare reform Minister, has said:

"Labour's hugely expensive welfare reform programme has largely failed."

Aspects of the programme clearly have failed. I do not want to enter a long debate about the new deal, but yesterday we seemed to have the new new deal. Should anyone want to examine the arguments and evidence, I recommend the pamphlet "Reforming Welfare", which was written by Nicholas Boys Smith and produced by the think-tank Reform. It lists a range of areas in which the new deal has failed and identifies what should be done about it. It is striking that the Freud report, which was commissioned by the Department for Work and Pensions, comes up with almost exactly the same prescriptions as Mr. Boys Smith: more emphasis on outcomes, not procedures; greater involvement of the voluntary and private sectors; and greater conditionality.

It is also worth considering lone parents. Again, the Chancellor stressed his desire to improve the employment rate for lone parents. There has been an improvement since 1997, but our rate of 56 per cent. is still the lowest such employment rate of any major European country. The Chancellor's proposals—whether in 1997 or 2007—appear to be a form of gentle encouragement, but they do not seem to be working especially well. One can sense the frustration of the Secretary of State for Work and Pensions, who perhaps looks at these things from a slightly different perspective, when he says that we ask very little of lone parents. The Secretary of State's emphasis is on conditionality, whereas the Chancellor has avoided conditionality when addressing welfare reform as a whole.

Hon. Members on both sides of the House agree that we want to encourage more lone parents to work. However, I think that most Conservative Members hold the view, although it is not necessarily shared by Labour Members, that the best environment in which a child can be brought up is within a marriage, or at least by two parents in a stable relationship. The system has created difficulties because, while the DWP's figures show that a couple needs more to escape poverty than a lone parent might receive, the levels of tax credits do not necessarily address that adequately. On last night's "Newsnight", Stephanie Flanders made the point that one group of beneficiaries of the Budget would be out-of-work lone parents.

Photo of David Gauke David Gauke Conservative, South West Hertfordshire

I understand why the hon. Gentleman says that, but if we are trying to encourage lone parents into work, or to encourage couples to stay together, it does not seem sensible to have a fiscal or benefits policy that works in the opposite direction.

Photo of Helen Jones Helen Jones Labour, Warrington North

There are two issues that the hon. Gentleman needs to address. First, does he believe that couples stay together merely because of the tax system? Secondly, what does he believe the aim should be: to subsidise couples, or to prevent poverty among children? They are not necessarily the same thing.

Photo of David Gauke David Gauke Conservative, South West Hertfordshire

If the hon. Lady is asking whether I think that the tax and benefits system—it is important to add the "benefits" part—can contribute to keeping couples together, the answer is yes. To be honest, I suspect that the issue is more to do with the carrot of favourable tax arrangements than the stick of unfavourable arrangements, and that is more beneficial for lone parents. That is an important point.

Photo of Helen Jones Helen Jones Labour, Warrington North

So wedding vows should be changed to "to love and to cherish, till death us do part, or till the tax system changes"?

Photo of David Gauke David Gauke Conservative, South West Hertfordshire

I find it surprising that hon. Members do not think that there could be any way in which the tax and benefit systems might have an impact on people's domestic arrangements.

Photo of Dawn Primarolo Dawn Primarolo Paymaster General (HM Treasury)

I listened carefully to what the hon. Gentleman said. He implied that the way in which tax credits and the tax system are constructed discourages partners from staying together, but where is his proof?

Photo of David Gauke David Gauke Conservative, South West Hertfordshire

The evidence that I would cite for the Paymaster General is a paper that Donald Draper produced in September 2005 for the Institute for Fiscal Studies. It makes my point with much greater clarity. I will certainly send her a copy, if that will be helpful to her.

Photo of Dawn Primarolo Dawn Primarolo Paymaster General (HM Treasury)

Perhaps the hon. Gentleman could give us just one point in that paper that demonstrates that people are discouraged from staying together as a couple by the tax system.

Photo of Dawn Primarolo Dawn Primarolo Paymaster General (HM Treasury)

I have read the whole thing, and I am waiting for Mr. Gauke to give one point that proves his argument.

Photo of David Gauke David Gauke Conservative, South West Hertfordshire

I will give one point: the Department for Work and Pension has assessed the weekly income that is required for a lone parent with children if they are to escape poverty, and for a couple with children if they are to escape poverty, and those figures are adjusted for rent. The second figure is higher than the first figure, in terms of what the couple and the lone parent would get from tax credits. If I may press on with the subject of tax credits—

Photo of David Gauke David Gauke Conservative, South West Hertfordshire

That was the point; the amount required for couples, under the tax credits system, would be greater than the amount required for lone parents. If I may move on in my remarks on tax credits—

Photo of David Gauke David Gauke Conservative, South West Hertfordshire

No, I have given way. I wish to conclude with this point on tax credits: another clear difficulty with them is that although they try to address the poverty trap for people entering employment, there has been difficulty with people in low-paid employment who move up, whether they are earning more or whether they are moving from part-time to full-time work, because of the very high marginal rate. According to one figure that I have seen, since 1997, the number of people facing a marginal rate of 50 per cent. or more has increased by 874,000. I think that the Government tried to address that yesterday, to some extent, by raising the threshold of the working tax credit, but I would be grateful to learn whether more people will be caught by the higher marginal rate. I do not know whether an analysis of that has been done, but there is concern that more people might be caught. I do not wish to dwell on the administrative difficulties with the tax credits system. I am sure that if I did the Paymaster General would intervene frequently—

Photo of David Gauke David Gauke Conservative, South West Hertfordshire

Indeed; the Chancellor certainly would not. None the less, there are administrative difficulties, and an official from Her Majesty's Revenue and Customs who gave evidence to the Treasury Committee last week said how difficult it was for forms to be completed. I am concerned, too, about the greater user of tax credits, which the Chancellor has promoted. There is a tendency for more people to pay tax, then receive a cheque later, so there are concerns that a greater dependency culture may result. I am conscious of time, so I shall conclude.

Yesterday, the Chancellor sought a short-term tactical advantage, but he may well have made a strategic mistake in associating himself with what was essentially a con trick. His record on the substance is not as impressive as is often claimed. He has been inconsistent on public spending, he has been incoherent on welfare reform, and on pensions he has been incompetent. The question that the country must ask is whether, given the fact that the problems that he identified in 1997 still remain in 2007, the Chancellor is the right person to tackle them. The country must face that choice in the not too distant future—the Labour party must face that choice in the very near future—and I am not convinced that he is the right man for that challenge.

Photo of John Baron John Baron Shadow Minister (Health) 4:52 pm, 22nd March 2007

This is an interesting Budget, if only because there is a dispute about whether it is a tax-cutting Budget. The Secretary of State for Education and Skills, who opened the debate, certainly found it difficult to justify the Chancellor's claim that it is indeed a tax-cutting Budget. Most independent economists believe that there is nothing in the Budget to correct the fact that tax freedom day—the day British taxpayers stop earning money for the Government and start to keep the money themselves—has gone from 25 May in 1997 to 2 June last year. All the evidence suggests that small business taxation has increased as well.

Let us assume for a moment that the Chancellor is right, and that this is a tax-cutting Budget, although most of us doubt that. The Budget is interesting, because we have been told for the past year that we cannot share the proceeds of growth. The Chancellor has confirmed in the Budget that we can do so—we can increase public expenditure but, at the same time, if we believe him, we can have a tax-cutting Budget. Let us at least hope that that has moved on the debate about sharing the proceeds of growth, and that we do not hear any more nonsense from the Government on the issue.

In the past 10 years, the Government have taxed too much and thrown money at unreformed public services, and that has not resulted in the improvements that we all desire. There is little doubt that the growth in public expenditure as a proportion of gross domestic product has increased—up from 37 per cent. in 1999-2000 to an estimated 42 or 42.5 per cent. this year. Extra money for public services is good in principle—I do not think that anyone would disagree with that—but not enough of those resources have reached the doctors, nurses, soldiers and police on the front line. Too much of the extra money has been soaked up without improving productivity, and Ministers cannot dispute that the cost of inflation in the public sector is running at twice the rate in the private sector.

We have heard about the good progress by the NHS. Let us not be churlish about it—in 10 years, there have been improvements, just as there were improvements in the previous 10 years. However, I would contend that, given the amount of money that has gone into the NHS, we have not seen the improvements that we should have seen. That is confirmed by statistics that clearly show that three quarters of the NHS spending increases have been spent on cost pressures, rather than on improving front-line services. As a result, productivity in the NHS has fallen by up to 1.5 per cent. in each year since 1997. Labour Members might question those figures but the Chancellor himself, I am led to believe, has similarly been questioning why productivity has fallen in the NHS and has held meetings at No. 11 to discuss the matter. That proves that there is an acknowledgement, even in the Government, that productivity improvements have not been forthcoming, and that that is a concern, given the amount of money that has been put into the NHS.

Photo of Helen Jones Helen Jones Labour, Warrington North

A number of the pressures to which the hon. Gentleman refers relate to improving wages for NHS staff and to implementing "Agenda for Change". Is he suggesting that that should not have happened?

Photo of John Baron John Baron Shadow Minister (Health)

If one speaks to the Royal College of Nursing, one realises that it is not a happy organisation. The hon. Lady is aware that the RCN is campaigning vigorously against the latest wage increase, which seems to have been staggered and is below the rate of inflation. [Interruption.] The hon. Lady can intervene if she wishes. The facts do not confirm her argument that all is well with regard to salary increases. The badly managed introduction of some contracts has made for financial mismanagement as well.

Photo of John Baron John Baron Shadow Minister (Health)

I will be generous and give way a second time.

Photo of Helen Jones Helen Jones Labour, Warrington North

That is very kind of the hon. Gentleman: I am grateful. I was referring not just to this year's pay rises, but to pay rises over the 10 years of the Labour Government, especially the implementation of "Agenda for Change", which gave many staff in the NHS much better pay and career opportunities. I would be grateful if the hon. Gentleman answered the question. Does he think that those pay rises should not have taken place?

Photo of John Baron John Baron Shadow Minister (Health)

The hon. Lady knows the answer to that question already. The point that I am trying to make, which I suggest she is ignoring, is that the NHS should be to the benefit of patients, not just to the benefit of the staff. There is team work involved. However, the bottom line is, yes, there should have been salary increases, but productivity has fallen in the NHS.

If the hon. Lady wants an example, we need only look at NHS waiting times. Yes, the longer waits have been eliminated, but that has created a bulge in the middle, to the extent that despite the amount being spent on the NHS having more than doubled average waiting times have fallen by only five days over the past 10 years. These are not statistics spun out of central office but hospital episode statistics produced independently, and they confirm that average waiting times have dropped from 78 days to 73 days over the past 10 years.

Perhaps more worryingly, median waiting times have increased from 5.7 weeks in 1997 to 7.3 weeks last year. Clearly, once the layers of Government spin have been peeled away, the extra money has not delivered the improvements that we all hoped to see, and that should have been delivered, given the amount of money that has been put into the NHS.

Let me put to rest the argument that is continually rolled out at the Dispatch Box that because we have seen such a good decline in cancer mortality rates, that is living proof, so to speak, that all that money is having a beneficial impact. That decline has occurred over the past 10 years, but it continues the decline in the preceding 10 years. In other words, it has made no significant improvement to the long-term decline in cancer mortality rates that has been evident for the past 20 to 25 years.

That argument needs to be challenged time and again. The statistics are available for everyone to see. If we look at the mortality rate for cancer among people under 75, we see that the proportion dying from cancer fell by 12.5 per cent. in the seven years after 1997. The comparable fall in the seven years before 1997 was 12.6 per cent., so all the extra money that has been put in has not made a discernible difference to the long-term trend in declining mortality rates.

Let me turn to taxation in general. It is evident that the Government simply do not accept the case for lower taxes. We have had 11 Budgets in which, broadly speaking, the tax take by the Government has gradually increased. Only 10 years ago, the UK's tax burden was close to the Organisation for Economic Co-operation and Development average of about 39 per cent. of gross domestic product. Since then, while across the rest of the OECD the burden has fallen to an estimated 38 per cent., in Britain it is forecast to rise to 42.5 per cent.—its highest since 1986. The Government seem to take the view that public services should be micro-managed and that they know how best to spend people's money—that is why the tax take has gone up so much.

There is a strong case—indeed, almost a moral case—for lower taxation. Evidence the world over has shown that where Governments reduce the tax burden on their countries, over the medium and longer term that increases the prosperity—the growth rate—more than making up for the short-term shortfall in receipts through the initial tax cut. Hon. Members, especially my hon. Friends, must not be afraid to make the case for lower taxes. Tax cuts create a bigger economic cake from which the Government can take their honest share and help the less fortunate in society. I am sure that we all want to achieve those ends, but it is a question of how we do it. I suggest that the best way of creating increased prosperity—the bigger economic cake—is to lower taxes.

As I said, there is evidence across the world for that, but to find it we need only look across the Irish sea. Throughout the 1990s, liberalisation of the corporation tax laws in Ireland created a huge economic dividend that cannot be ignored. There we have a concrete example of a country making a determined cut in its tax rates and increasing prosperity over the medium to longer term. Real national income per head rose from less than 65 per cent. of the EU average at the beginning of the decade to rough parity by the end of it—a phenomenal achievement. During that period, unemployment tumbled from a high of 17 per cent. to about 4 per cent. The Irish Republic massively increased its share of inward investment from the EU and from US companies, while the UK's share remained about the same. This is not just wishful thinking—there is concrete evidence to suggest that cutting taxes can create that bigger economic cake over the medium to longer term for the benefit of the whole of society, especially its more vulnerable elements.

At the moment, we have a British Government who are going the other way. In the past 10 years, they have marched in the wrong direction against the trend of lower taxation that has been evident across much of Europe as a whole. There is no shortage of statistics in this regard, and I suppose that one can always bend an argument to one's own way of thinking by choosing the right ones. Nevertheless, the bottom line is that if we are to reach a relatively independent assessment of the tax burden on individuals in this country, a good and objective measure is tax freedom day—the day each year on which the average British taxpayer stops working for the Government and starts working for himself. Back in 1964, tax freedom day fell on St. George's day, 23 April. In 1997, it had reached 25 May. Last year, it was 2 June, and our forecast suggests that by next year it could be as late as 3 or 4 June.

Perhaps most worrying of all is the increasing burden of corporation tax. I accept that there has been a 2 per cent. cut in the main headline rate, but I am fearful of the effect that the Budget will have on small businesses. There is little doubt—and there can be little disagreement—that the tax take from small businesses under this Budget has increased. The increase from 19 per cent. to 22 per cent. by 2010 for small businesses gives the lie to the Chancellor's claim that this is a Budget for enterprise and prosperity.

The importance of small businesses to the UK economy should not be underestimated. More than 4 million small businesses make up over 99 per cent. of all enterprises in the UK. The Small Business Service has estimated that small businesses provide 47 per cent.—nearly half—of UK non-government employment, and 38 per cent. of the UK's turnover. Meanwhile, research by the Federation of Small Businesses shows that small firms created a phenomenal number of jobs—550,000 or over half a million—in the second half of the 1990s, compared with just 200,000 jobs created by large companies. These people are not fat cats or multinational businesses. Mostly, they are entrepreneurs who have an idea and are willing to risk their own money to get it off the ground. Small businesses are often the lifeblood of our local communities and high streets in constituencies up and down the country. Over time, many of them grow and contribute even more to the economy.

Were the Chancellor really determined to encourage prosperity and enterprise, he would not target tax increases on small businesses. He has claimed that the £50,000 capital allowance will result in many small businesses paying less tax, but we simply do not know whether that will be true. Many small businesses will not be able to take up that allowance, particularly in the service sector, which has done so much for the economy in the past. Many economists are still crunching the numbers, but the early indications are that netting off the introduction of a capital allowance will still mean that the Treasury takes hundreds of millions of pounds away from small businesses and into the Exchequer.

Nor should we forget the effect of bureaucracy. Allowances and credits might be good for business but they also generate more bureaucracy for firms. It is far simpler to give companies a cut in the tax that they pay, and let them make their own decisions about investments in research and development. According to the Federation of Small Businesses, the average small business already spends about 28 hours a week filling in forms for the Government. The Budget will add to that while increasing the burden of direct taxation. When I am out and about in my constituency, I am told by entrepreneurs that that is a growing problem, and that they have to spend a disproportionate amount of time filling in forms rather than concentrating on running their businesses. That bugbear has just been increased further by the Budget.

All parties might claim to be the party of small business, but the important thing to entrepreneurs is hard cash. It is easy to talk about cutting bureaucracy, but hard to do something about it. Entrepreneurs are fed up of hearing both main parties simply talking about cutting bureaucracy; they want hard evidence that the Government are serious about helping small businesses. Small businesses are fed up to the back teeth of the Government claiming to be the party of small business but failing to deliver and only increasing the tax burden.

I would like to hear a promise of tax cuts for small businesses. My back-of-an-envelope calculations suggest that if a Government promised a 1 per cent. cut in small business corporation tax for each year of a term, by the end of the five-year term a 5p cut in small business corporation tax would cost the Exchequer only about £1.2 billion. In the great scheme of things, that is not a lot of money, but it would create such good will for the Government of the day.

This was a disappointing Budget. Whether or not it is tax-cutting is disputable: only time will tell. What we do know is that too much money is going into unreformed public services, and that small businesses will suffer as a result of the Budget. That will be to the long-term detriment of this country.

Photo of Peter Lilley Peter Lilley Conservative, Hitchin and Harpenden 5:10 pm, 22nd March 2007

I apologise for having been absent from the Chamber for a while. I had to attend a meeting of the trustees of the Parliamentary Contributory Pension Fund—on behalf of Members who are present, of course.

It is a pleasure to follow my hon. Friend Mr. Baron. I am indebted to him, as is the whole House, for the devastating figures that he gave showing that, after 10 years and a doubling of public expenditure, the waiting time for operations in the national health service has declined by only five days—from 78 days to 73—and that the median waiting time has actually increased. I predict that those figures will not be mentioned in the winding-up speeches, but I hope I am wrong.

The newspapers told us that this would be the last Brown Budget. In fact, it was the first instalment of the first Osborne Budget and the last instalment of the last Lawson Budget. It was the first instalment of the first Budget of my hon. Friend Mr. Osborne because it was he who advocated the cut in the corporation tax rate which the Chancellor has made, and it was the last instalment of Nigel Lawson's last Budget because he set out his ambition to establish a simple two-rate taxation structure with a top rate of 40p and a bottom rate of 20p.

As you will remember, Mr. Deputy Speaker, when Nigel Lawson made that announcement in his Budget speech it produced uproar. For the first time in history, the Budget debate had to be suspended by your predecessor and could not continue until Labour Members had calmed down, such was their horror at the prospect of an income tax system with just two rates, 40p and 20p.

I wonder whether those who were so appalled then were among those who cheered yesterday when their own Chancellor announced, rather implausibly, that that had been his long-term ambition too. Perhaps they dwelt on the subject overnight. That may explain why only one Labour Back Bencher is present today to support the final instalment of Lord Lawson's Budget, which—in that respect, at least—Conservative Members welcome.

In short, this sounded like a Conservative Budget with Conservative tax cuts, coming from a tax-raising Chancellor. Let us be clear about this, however: Conservative Budgets cut not only the rates of tax but the burden of tax, and this Budget increased the burden of tax. We should take account not just of the measures on page 209 of the Red Book—Budget measures which themselves increase the overall burden of taxation—but of those on page 210, which show all the measures introduced since the last Budget but not included in this Budget. Then we see that the total burden of taxation is rising by £2.5 billion this year, and by £3 billion in the subsequent year. This was a tax-raising Budget of the sort that we have come to expect from a Chancellor who taxes by stealth.

The Chancellor has achieved the illusion of cutting taxes while increasing the overall tax burden— largely by scrapping measures that he himself introduced. He introduced the 10p starting rate; now he has scuppered it. He said that he was halving the rate of tax imposed on the working poor; now he has doubled it. He reintroduced allowances on capital expenditure; now he is reducing them. He reduced the corporation tax rate on small companies; now he is raising it.

The Chancellor of the Exchequer spent his first four Budgets marching his troops up the hill towards a 10p tax band, a 20p small business rate and capital allowances for manufacturing. Now he has marched them back down again, leaving all that behind. He has been described—by my hon. Friend the Member for Tatton, I think—as the Prince of Wales waiting to be King. Actually, he is the Duke of York, who marched his troops to the top of the hill and marched them down again.

Loyal readers of my pamphlets will know that I have previously accorded that title to the Prime Minister, as in his first Parliament as Prime Minister he abolished grant-maintained schools, downgraded city technology colleges, scrapped GP fundholding and ended patient choice; he then spent his subsequent Parliaments reintroducing grant-maintained schools, which were renamed foundation schools, city technology colleges, which were now called city academies, GP fundholding, which was called practitioner commissioning, and patient choice—which, because the Government could not think of another name for it, they have reintroduced as patient choice. Therefore the Prime Minister has been a Duke of York and will be remembered, primarily, as that.

That point helps to answer the central question behind the Budget: where has all the money gone? Reorganisations—especially pointless and unnecessary ones which reverse previous reorganisations—are hugely expensive. Palms must be crossed with silver, as Nye Bevan remarked when he introduced the reforms that led to the creation of the national health service. Vested interests must be bought off. In every change, bureaucracy and unions find opportunities to boost pay, reduce work loads, increase the number of posts and reduce overall productivity.

That is one reason why so much money has been spent to so little effect, but the Budget speech highlights a second reason why this Chancellor has wasted money on an industrial scale, as my right hon. Friend Mr. Cameron said. A Chancellor who measures success by how much money he spends, rather than by the results achieved, ends up spending a lot and achieving very little. The Chancellor set himself the wrong measure of performance, and as a result he has succeeded only in spending money and not in improving services.

The third reason why there is so much waste is that the Chancellor has a centralising nature. That is not only because he is a Stalinist—he is a believer in the central doctrine of Stalinism, which is bureaucratic centralism—but because he is new Labour and new Labour has a preoccupation with tomorrow's headlines, as he has demonstrated. New Labour is preoccupied with wrong-footing the Opposition, spin and media manipulation. In order to do such things, it is necessary to centralise. If what is wanted is a continual flow of news manipulated from the centre, the decisions must be made at the centre; it is necessary to indulge in micro-management, setting targets, ring-fencing budgets, detailing regulations and having detailed management controls in the public sector. The Government have, of course, done all that.

Let me give an example that comes from my own experience of visiting a national health service hospital. Hon. Members will recall that the Government got a good headline when they announced their waiting list target. They got another good headline when they announced ring-fenced waiting list budgets for every hospital. They got yet another good headline when they announced that waiting list managers would be appointed to every hospital. So they got three good headlines, but the consequences in the hospital I visited were as follows. The waiting list manager spent his ring-fenced waiting list budget on carrying out operations on Sundays in order to get the waiting list down. It might be thought that that was an expensive way of doing that, as higher rates had to be paid to locum surgeons, but one would expect more operations to be done and waiting lists to be reduced. However, at the end of Sunday all the equipment needed to be sterilised and it was impossible to employ spare sterilising teams on Sunday. Therefore the equipment had to be sterilised on Monday, which meant that no operations could be carried out on Monday. The money for that did not, however, come from the waiting list manager's budget; his budget was ring-fenced. It came from the budget of the rest of the hospital, so he did not worry. As a result there were no extra operations and no other achievements, but a vast sum of money was spent.

That was a waste of money, which is bad enough, but there was a second consequence which was worse. A surgeon to whom I spoke had established a dedicated open-wound operating theatre and a ward served it that was kept scrupulously clean to avoid any risk of contamination by methicillin-resistant staphylococcus aureus—MRSA—or any other infection. However, the waiting list manager had to manipulate the waiting list, and some patients were getting dangerously near one of the thresholds, which meant that he might not meet a particular target. So he insisted on dumping some of his patients on that ward, including one with MRSA, another with a liver infection, and a third with another such problem.

My consultant informant said that he could not operate in those circumstances. He was told by the hospital authorities that he must—they had targets to meet. He said that that would put the health of his patients at risk. He was told that this was a P60 matter, and that he would have to think about it hard. Happily, he has a private income from a medical invention of his, so he was able to call their bluff. He simply gave all the patients a form, saying that if they wanted to go ahead with the operation immediately, they should fill it in and remove any liability that he might have—but that he could advise them to do that only if they were feeling suicidal. So none did. No operations were carried out and their lives were saved.

This is the implication of detailed micro-management—waste and reduction in quality, instead of improvements and enhancement of quality. Nothing that we heard in this Budget suggests that the Chancellor or the Government have learned the lessons of 10 years of spending and wasting. The Budget is a Budget for short-term headlines and long-term waste. It is a Budget of Conservative appearance, but socialist substance. It is a Budget that cuts rates, but increases the burdens on the British people. It will be remembered for the latter.

Photo of Paul Goodman Paul Goodman Shadow Minister (Childcare), Treasury 5:21 pm, 22nd March 2007

It is a pleasure to speak in this second day of the Budget debate, and it is an equal pleasure to follow my right hon. Friend Mr. Lilley who, at the beginning of his remarks, made a point that had been very much on my mind this afternoon. Yesterday, when the Budget statement was delivered, the Government Benches were packed with Labour Members and they cheered the Chancellor to the echo, but today, only three could be bothered to turn up to speak on the Chancellor's Budget.

Photo of Paul Goodman Paul Goodman Shadow Minister (Childcare), Treasury

Indeed. Could it be that they have worked out something about the Budget that the Chancellor did not tell them yesterday? I suspect that the answer is yes, and I shall come to that point later.

However, we have had some good speeches. As one would expect from a member of the Education Select Committee, Helen Jones—the only Labour Member who is actually here—made a detailed speech on education. She said that spending should be focused on the curriculum and teachers; we will doubtless all agree with that. She also said that poverty can be a greater barrier to progress in schools than ethnicity. To judge by my own constituency experience—I have the largest number of Muslim voters of any Conservative Member of Parliament—she is absolutely right.

Mr. Jones, who is not in his place, gave us a tour of his constituency, where all appears to be well in the national health service. I have to say that that is not my and my hon. Friends' experience, nor was it the experience of Paul Rowen. In a short speech, Keith Vaz paid a gracious tribute to my right hon. Friend the Member for Hitchin and Harpenden and touched on one of his passions: the European Union. I do not know whether he is still an enthusiast of the euro, but if he is, the Chancellor will doubtless enjoy the opportunity to talk to him about it.

My right hon. Friend Mr. Jack made—as one would expect from an ex-Treasury Minister and the Chairman of the Environment, Food and Rural Affairs Committee—an expert speech. He discussed in some detail his own research into the Treasury's lack of assessment of the value of its tax cuts, and his research into mortgage rates in Britain. If he wants to speak to me about his ideas on taxation and air travel, I will be very happy to listen. I will now commit my colleagues, without having consulted them, and say that if he wants to talk to any of them about inheritance tax, they will see him. I am sure that they will be pleased to hear that.

My hon. Friend Mr. Fallon, as one would expect from a member of the Treasury Committee, concentrated on the state of the NHS, as did my hon. Friends the Members for West Suffolk (Mr. Spring) and for Billericay (Mr. Baron). The latter made an interesting point about waiting times and used a particular statistic to which I intend to come later. My hon. Friend Mr. Gauke gave us a forensic analysis of the Chancellor's record, and I am sure that the Chancellor will enjoy discussing that with him when my hon. Friend questions him in the Treasury Select Committee. We all know that the Chancellor looks forward to those occasions very much indeed.

This is the Chancellor's 11th and final Budget. He wishes to be Prime Minister—an honourable aim. He wants to take the country in what he genuinely believes is the right direction. We can all surely agree on what the right direction means—improved competitiveness, better productivity growth, a manageable tax burden, borrowing that is under control, strong savings and value for money in the public services. We need all those things if the British economy is to flourish in the competitive and globalised world economy of this 21st century. For after all we must not, amidst all the headline-grabbing frenzy of yesterday's Budget statement, forget the starkness and seriousness of the international challenge that confronts the British economy. We must at least try to raise our eyes from this debate and look ahead and look abroad.

By 2050, it is estimated that China's share of world trade will have risen from roughly 18 per cent. to 24 per cent., but North America's will have fallen by 2 per cent. to 23 per cent. The EU's is set to fall by almost half, from 22 per cent. to a mere 12 per cent. So the choice is clear. Even to maintain our position—to keep up with US rather than EU growth rates—we have to compete to prosper, if we are to meet the challenge of the 21st century. The economy must travel in the right direction.

So we need improved competitiveness. However, according to the World Economic Forum, since 1997 we have dropped from fourth place in the competitiveness league to 10th. Nor is that a one-off. The Institute for Management Development's global competitiveness survey tells the same story. In it, we have dropped from ninth to 21st. Eleven Budgets on, the Chancellor has taken our competitiveness in the wrong direction.

We need better productivity growth. From 1992 to 1997, our annual productivity growth was 2.6 per cent. Between 1997 and 2001, it fell to 2.1 per cent. and between 2001 to 2005 it fell again, to 1.5 per cent. Eleven Budgets on, the Chancellor has also taken productivity growth in the wrong direction.

We need an overall tax burden that is going in the right direction, but our tax burden is—hon. Members have guessed it—going in the wrong direction. In 1997, it was £270 billion. Eleven Budgets on, it is £517 billion, a rise of no less than 41 per cent. in real terms—the highest tax burden in the history of the British economy. Business taxes alone have risen by £50 billion since 1997 and this year's Budget will take them up again, by an extra £1 billion next year, as my hon. Friend Mr. Osborne said earlier, and by £1.8 billion the year after.

With all that tax, one would have assumed that borrowing was under control. But we look at the Red Book and see that over the next five years the Chancellor is planning to borrow another £153 billion. Each year he will borrow more than the entire budget for schools. Let us not forget that the £153 billion figure is only the Chancellor's forecast. This Budget is actually the seventh one running in which he has had to come to the House and admit that his Budget borrowing forecast was wrong.

Photo of Michael Jack Michael Jack Conservative, Fylde

Did my hon. Friend, when he was crafting his excellent remarks, ponder the fact that the Chancellor made much of the level of growth that he anticipated in the British economy and that one would have expected in the circumstances that money would be repaid, not borrowings increased?

Photo of Paul Goodman Paul Goodman Shadow Minister (Childcare), Treasury

I was pondering that point not only while I was crafting my remarks but while I was listening to the opening speeches this afternoon. One would certainly have expected that, and one would also have expected the Chancellor to admit to the House yesterday that, in growth terms, Britain comes in at 22nd out of the EU's 27 members. Instead, he referred only to the G7.

We need strong savings, and the Chancellor is especially culpable in that regard. In opposition, he told pensioners:

"I want the next Labour Government to achieve what in 50 years of the welfare state has never been achieved: the end of the means test for our elderly people."

So what happened to means testing? When we left office, 37 per cent. of pensioners were means tested; now, the proportion is 45 per cent., and climbing. What happened to saving? Since 1997, the personal savings ratio, as set out on page 255 of the Red Book, has fallen by half. No wonder Mr. Field has said:

"When Labour came to office we had one of the strongest pension provisions in Europe and now probably we have some of the weakest."

Above all, as so many Conservative Members have said, we need value for money in our public services. We do not dispute that we have had the spending: an extra £175 billion since 1997. Money has been poured into the health and education budgets, but where has it all gone? Staggeringly, and according to the Treasury's public finances databank, out of every £10 that the Chancellor has spent, only £1 has gone on investment.

Let us take the NHS. The Chancellor scarcely mentioned it yesterday, and he certainly did not announce his comprehensive spending plans for it, so I shall do so today. As my hon. Friend the Member for Billericay said, only a quarter of the Chancellor's NHS spending has gone on improving front-line services. Productivity in the NHS has fallen during each year since 1997.

"Given the record levels of public investment, our public services should now be reaching world-class levels—we shouldn't be seeing only incremental changes."

Those are not my words: they are the words of another of the Chancellor's close friends, Mr. Byers.

So after 11 Budgets, the Chancellor has given us competitiveness that is not better, but worse; productivity growth that is not higher, but lower; a tax burden that is not lower, but higher; borrowing forecasts that are discredited, and a golden rule that is now completely derided. Above all, his mania for means-testing has delivered lower savings, with over £100 billion missing from pension funds since his raid on them during his Budget of 1997, 10 long years ago.

The Chancellor would have hoped, 10 years on, to present this Budget ahead in the polls. Instead, he is behind in the polls. So what does he do? Well, with his borrowing forecasts missed, his spending out of control, his tax burden rising and his popularity falling, he has been forced to take a last, desperate gamble.

The Chancellor hopes that, if he says that he will cut one income tax after raising over 100 others, he will fool the voters into thinking that he has somehow been transformed from Stalin into Milton Friedman—that he has somehow turned into a tax-cutter. However, as we all know only too well, what this Chancellor gives away with one hand—I will not say one "clunking fist", as that is the Prime Minister's language—he grabs back with the other.

There will be a cut in the standard rate—if it happens—next year, but there will also be a stealth tax on lower earners as the Chancellor scraps the 10p band and leads them deeper and deeper into the tax credit maze. There will be the raising of the top tax threshold, but also a hit on professionals, such as doctors, as a result of the rise in the national insurance ceiling.

The Chancellor got the media headlines on Budget day, but a hangover the day after as it emerged, as my hon. Friend the Member for Tatton noted earlier, that 3.5 million families will lose out. He hopes that people will notice the tax cut but not the tax rise. We feel that that approach is—to borrow another term from 10 Downing street—"psychologically flawed".

For the truth is that the British people have seen through this Budget already. It was not a tax cut Budget, but a tax con Budget. Perhaps we should not complain. After all, in his final Budget, the Macavity of Downing street is paying us the ultimate compliment. He has no option. If he is to rein in his spending and borrowing, he has no choice but to tread the path that we have already marked out for him. We told him to remove the VAT restriction on academies. Only a few weeks afterwards, in the Budget he was forced to follow our lead—Conservative policy.

Photo of Paul Goodman Paul Goodman Shadow Minister (Childcare), Treasury

We told the Chancellor radically to reform corporation tax. Only a few days afterwards, in the Budget he was forced to follow our lead—Conservative policy again. We certainly congratulate him on that. We told him to grow his spending slower than the economy. In his Budget, he is finally sharing the proceeds of growth—Conservative policy. [ Interruption. ] I can tell the Government deputy Chief Whip that if the Chancellor keeps following Conservative policy, we shall of course congratulate him.

As the Chancellor has paid us such a tribute by borrowing a few of our clothes, perhaps we should be a little generous. After all, he is fully entitled to argue that having failed to take the economy in the right direction as Chancellor now, borrowing our approach to get him on track, he will take the country in the right direction as Prime Minister. He is fully entitled to claim that he can rise to the challenges of the 21st century and that the Budget will allow him to turn over a new leaf—greeting his colleagues with a cheerful smile and a listening ear, winning the trust of his most senior civil servants and bringing about a new open style of government, in which decision making is a shared responsibility animated by a generous spirit of give and take.

I do ask the House to listen not to the views on that matter of a mere Opposition spokesman, but to those of the Chancellor's colleagues—and not just the right hon. Member for Birkenhead, whom I mentioned earlier; and not just the right hon. Members for North Tyneside and for Darlington (Mr. Milburn), who collaborated last year to sabotage the Chancellor's Budget. I bet the Chancellor cannot wait for them to turn up this year.

Photo of Paul Goodman Paul Goodman Shadow Minister (Childcare), Treasury

My hon. Friend is ahead of me. Their accomplice, the right hon. Member for Norwich, South described the Chancellor as "deluded" and said of him:

"It's a controlling thing. He thinks he has to control everything".

I have still not finished with the Chancellor's colleagues—there are so many. What about the Secretary of State for Work and Pensions, whom the Chancellor could not even bear to name-check in his Budget speech? The Secretary of State said that the Chancellor would make "a—blank—awful Prime Minister". It is not just all those colleagues. No less a person than the former Cabinet Secretary and head of the civil service said of the Chancellor—well, he said many things but I shall quote just one—that he has

"a very cynical view of mankind and his colleagues...The surprising thing about the Treasury is the more or less complete contempt with which other colleagues are held."

We are of course all waiting for the Home Secretary to come to the House to dispute that version of events.

The cynic of today cannot be the change we need tomorrow. The dealer in contempt cannot be the bringer of optimism and hope. The grim-faced commissar in the Treasury cannot be the wave of the future. If the British people want the economy to go in the right direction, if they want to share the proceeds of growth, if they want Conservative policies, they will vote for the real thing.

The Chancellor could have gone so much further. He could have made it a Budget for the NHS. He did not. He could have made it a Budget for marriage. He certainly did not. He could have made it a Budget for raising green taxes as a proportion of tax. He did not. He did none of those things. This was the Budget in which the Chancellor ran out of ideas and time. If he wants a general election, we say—bring it on.

Photo of John Healey John Healey The Financial Secretary to the Treasury 5:38 pm, 22nd March 2007

I welcome the fact that we have had a full debate today. It is the first of at least two more days on the Chancellor's Budget.

The debate has been interesting. I understand why the tax changes caught the eye yesterday and dominated the debate today, but an important part of any Budget is the Chancellor's update of the state of the British economy. This afternoon, only the contribution of my hon. Friend Mr. Jones fully recognised how substantial and significant the change in Britain's economic fortunes has been over the past decade, directly as a result of many of the fiscal and monetary policies introduced by my right hon. Friend the Chancellor.

The British economy is now growing faster than that of other G7 countries. It has a higher proportion of men and women in work than America, Japan and all our European neighbours. The productivity gap with Germany and Japan is now closed, the gap with the US is narrowing and the gap with France now halved. Inflation in the British economy over the last decade is half that of the previous decade; while interest and mortgage rates are half the 11 per cent. averaged in the 20 years before. The British economy now has the platform of investment, stability and employment to enable us to equip the British people with new skills for the jobs of the next decade and beyond, and to equip British firms with the new skills, markets, investment and innovation that they need to compete successfully and to generate jobs and wealth for the next decade and beyond.

Let me deal with the contributions to the debate. I shall start with those of the Front-Bench spokesmen. I have to say that Mr. Goodman, along with his hon. Friend Mr. Osborne, struck a very different note from their leader's response to the Chancellor's Budget statement yesterday. Mr. Cameron started by saying:

"Well, the Chancellor has finally given us a tax cut."—[ Hansard, 21 March 2007; Vol. 458, c. 829]

Perhaps he did not fully understand what he had heard from the Chancellor, but that is not surprising, as he was getting feverish and whispered advice from Mr. Letwin. Mr. Lilley said this afternoon that this was not a tax-cutting, but a tax-raising Budget, while Mr. Baron said that he was not sure, as there was a dispute about whether it was tax-cutting or tax-raising.

Several hon. Members:


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

It seems that, 24 hours after the Budget, the Opposition still cannot get their act together— [Interruption.]

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

The hon. Gentleman has not been in his place for much of the debate and did not contribute, though I appreciate that he was here at the start.

Photo of George Osborne George Osborne Shadow Chancellor of the Exchequer

Will the Minister give way to me, then, as I was here at the start?

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

I will give way later, but Opposition Members are asking me, "Which is it?" The Chancellor could not have been clearer in his Budget statement, so let me refer Conservative Members to column 819 in yesterday's Official Report. The Chancellor said:

"Let me be absolutely clear: with the economy now growing strongly, faster than any other major economy, this is not a time for a fiscal loosening, and the changes that I make today will be broadly neutral for the public finances and overall, which is the right decision for Britain at this time in the economic cycle."—[ Hansard, 21 March 2007; Vol. 458, c. 819.]

The Chancellor could not have been clearer, even if Conservative Members, and particularly the right hon. Member for Witney, did not hear him.

Photo of George Osborne George Osborne Shadow Chancellor of the Exchequer

The Minister is making a valiant attempt to pretend that the Chancellor did not present his Budget as a tax-cutting Budget. As often happens, the Institute for Fiscal Studies has looked into the figures, and it has confirmed that it is a very substantially tax-raising Budget. Will the Minister now confirm that the IFS is right?

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

No. I think that the hon. Gentleman should do his own work. If he looks at table 1.2 on page 14 of the Red Book, he will see precisely the net result on tax take of all the policy decisions in the Budget.

Photo of Peter Lilley Peter Lilley Conservative, Hitchin and Harpenden

Will the Minister confirm that he is talking about the decisions in the Budget, which excludes all the revenue raised by decisions taken since the last Budget—they do not appear in this Budget—as shown on page 210 of the Red Book? They amount to the best part of £3 billion.

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

I am making the point—in order to clear up what is clearly a great deal of confusion among Conservative Members—that in broad terms, this was a fiscally neutral Budget, just as the Chancellor made clear yesterday afternoon.

Photo of Michael Jack Michael Jack Conservative, Fylde

Will the Minister confirm that there is column in the Red Book for the financial year 2008-09? At the bottom, where all the pluses and minuses of the Budget are summed up, there is a plus £280 million additional tax take for the Treasury. That is in the Red Book. Will he confirm that?

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

The right hon. Gentleman has been a Treasury Minister. He will also have seen in the Red Book that the total spend for this coming year is £550 million—Hon. Members: Billion. Billion—thank you. In that context, the figures in table 1.2 that I have mentioned mean that the Chancellor is absolutely correct: this is broadly a fiscally neutral Budget.

Several hon. Members:


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

I must make some progress; I want to respond to the other contributions that have been made today.

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

I am going to deal with some of the comments that the hon. Gentleman made during the debate. If he will forgive me, I shall ask him to wait until then, because I particularly want to talk about the NHS, about which he was concerned.

Sarah Teather talked about education, as did my hon. Friend Helen Jones. Contrary to the argument put forward by the hon. Member for Brent, East, the Department for Education and Skills will be one of the greatest beneficiaries of yesterday's settlement in the next spending review period. She asked about the significance of the 2.5 per cent. real-terms increase over the comprehensive spending review. When we do our public finances, we take a cautious view, based on below trend growth. That means that we take a base view of the public finances at 2.5 per cent., which means that education funding over this next period will continue to grow in line with gross domestic product. So, instead of education funding being 4.7 per cent. of GDP, as it was in 1997, it will be 5.6 per cent. during this comprehensive spending review period.

Education will also take an increased share of the CSR increases. In the past five years, education took 13.3 per cent. of the cash increase in the total managed expenditure. In the coming CSR period, it will take 14.4 per cent. In other words, education will take a greater share of the new public spending in this spending review period than it has in the past five years. This is a very good settlement for education. It will mean, just as it has over the past 10 years, big improvements in all our schools: more equipment, more computers, more books, more teachers and supply staff, and more students making the grades that we expect them to. We have also seen more schools rebuilt in the past five years than in the previous 25. As the Secretary of State said earlier, we have seen essential investment over the recent period, accompanied by important reforms.

The extra investment will allow us to do still more. There will be one-to-one teaching for 600,000 students, the number of apprentices will double to 500,000, and we will increase the number of higher education students by another 60,000. Every school will become an extended community school.

Photo of Sarah Teather Sarah Teather Shadow Secretary of State for Education

I understand the answer that the Minister gave me earlier; I was expecting him to say that. Nevertheless, his response contradicts the figures in the Red Book, which give an average projected economic growth rate of 2.75 per cent., not 2.5 per cent. as he has just said. I understand that the Treasury has its own special figures, but will he explain the contradiction between his statement and the figures in the Red Book?

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

I do not want to repeat myself, but I will explain that, although the trend rate of growth is 2.75 per cent., we take a cautious baseline view of public finances, using 2.5 per cent., and that is what we base all our public spending decisions on.

I turn to the personal taxation changes. The purposes of the package of reforms are varied. They include: a desire to cut the basic rate of income tax by 2 per cent. for all; taking 600,000 pensioners out of taxation altogether by increasing the age-related allowances; providing direct support for families with children, taking another 200,000 children out of poverty; improving the incentives to work by raising the value of the working tax credit; and simplifying the personal tax system so that we have two rates and two thresholds, by aligning the national insurance contributions upper earnings limit with the higher rate threshold.

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

If the hon. Gentleman will forgive me, I want to respond to the hon. Members who have made contributions to the debate, and who have been in here for longer than he has.

We are able partly to pay for the package by abolishing the 10p starting rate, but by taking action to increase the child tax credit, the working tax credit and pensioner allowances, we are able to target the resources more directly on our three priorities: families with children, pensioners and work incentives. Despite what the hon. Members for Tatton and for Wycombe and others have said, the results of the package of reforms are that a single-earner family with two children on median earnings—about £27,000—will be £500 a year better off by 2009; four fifths of families will be better off or see no change; households with children in the poorest fifth of the population will be £350 a year better off, on average; and 6.4 million households in the bottom half of the income brackets will gain an average of £4 a week.

Mr. Fallon has an established interest in the independence of statistics, which he mentioned today. I wish to make sure that he has seen on page 42 of the Red Book the box headed "Independence for statistics", which covers the reforms that we are making. It also confirms that the budget for the next five years for the statistics board and the statistics system will be £1.2 billion. That will allow the new board to be established and to deliver on its new functions, as well as deliver a high-quality census in 2011.

The hon. Gentleman and Mr. Spring voiced concerns about the business taxation changes and in particular about the competitiveness of our rates and regimes with those of other countries. I should have thought that they would welcome the changes that the Chancellor announced yesterday. By cutting the main corporation tax rate from April next year from 30p to 28p, the rate in the UK will be lower than those in America, Germany, France, Japan and all our major competitor countries.

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

The hon. Gentleman has moved. I give way because he is most persistent.

Photo of Greg Clark Greg Clark Shadow Minister for Charities, Voluntary Bodies and Social Enterprise

I am grateful. Will the Minister confirm that there is a provision in the Chancellor's Budget statement to which he did not draw attention, which is that the changes to the tax system will cost charities an extra £70 million a year through the loss of gift aid? The Chancellor did not mention that in his speech. It is a huge blow to every charity in the country. Why did he conceal it from the House when he made his speech?

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

The Chancellor is to take a look at the gift aid regime to see how we can improve what it can deliver for charities, and he said clearly that the business tax reform package, which I am about to explain, would not apply to charities.

The package constitutes the most extensive reform of investment allowances since the 1980s. There will now be two rates for capital allowances: 20 per cent. for short-life assets and 10 per cent. for long-life assets, with no allowances for property. As a result, there will be fewer tax-driven distortions in the system and incentives will be more properly aligned with economic depreciation.

Several speakers have commented on the matter of legitimate small businesses. Part of the reason for staging the increase in the small companies rate is that we estimate that the majority of those currently paying that rate were advised to incorporate from employment or self-employment in order to be able to take their labour income as dividends and, as a result, artificially avoid the tax that they should pay. All the revenue raised from the increase in the small companies rate will be recycled back to legitimate small businesses in the form of support and investment incentives, and the new annual investment allowance of 100 per cent. up to a limit of £50,000 will be available to all companies, incorporated and unincorporated. [ Interruption. ]

The hon. Member for Tatton seems perplexed that such allowances should matter to small companies. I point out that hauliers can use the allowances for their lorries, a service or IT worker can claim for his computer or office equipment, a restaurant can claim for its fridges, tables and ovens, and so on. The hon. Gentleman should not confuse small companies with small businesses. The present system of capital reliefs is not necessarily available in full to unincorporated businesses. The new annual investment allowance will be open to all those, including the self-employed, and they will also benefit from the personal tax changes that we are making.

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

Forgive me, I will not. I have referred to the hon. Gentleman and I will do so again if I have time.

The hon. Member for Sevenoaks asked a question about the resource accounting issues in the NHS. The Department of Health is looking seriously at the case for reversing the past impact of the resource accounting and budgeting deductions from trusts and the future of the application of that accounting system. Once that assessment has been completed, decisions will be announced without delay.