§ Mr. Speaker
In view of the delayed start of the debate, I am grateful to the Front-Bench spokesman for saying that they will limit their speeches to 15 minutes each. I understand that the wind-up speeches will be five minutes each to enable hon. Members who have been waiting patiently to speak to do so. I ask them, too, to tailor their speeches to about 10 minutes.
§ The Secretary of State for Employment (Mr. Michael Howard)
At last we come to the event for which I know the whole House has been waiting throughout this long day.
In his Budget speech my right hon. Friend the Chancellor of the Exchequer set out the three essential foundations for the renewed growth in jobs that we all want to see. First, the prospect is for sharply falling inflation—down to 4 per cent. in the last quarter of the year, and even lower in 1992. Secondly, interest rates are coming down—a reduction of two full percentage points since last October. Thirdly, my right hon. Friend predicted that output would stabilise in the next few months and then grow again—by 2 per cent. between the first half of this year and the first half of 1992.
In short, while the immediate prospect is for rising unemployment, the basis is already laid for a resumption in the jobs growth that has been such a remarkable feature of the second half of the 1980s; and for falling unemployment. How quickly unemployment comes down will depend partly on the speed with which pay settlements come down. The latest figures show a small fall in year-on-year average earnings, but that is not enough and it is not happening quickly enough.
Within the exchange rate mechanism, wage negotiators ultimately have no option, if they want to remain competitive, but to bring unit wage costs into line with those of our European competitors. If that lesson is not 489 learnt, more jobs will be lost. In that context, I particularly welcome the measures announced in the Budget to encourage more profit-related pay schemes and to stimulate employee share ownership.
The Government have always attached considerable importance to the financial participation of employees in the companies for which they work. One of the most effective ways of increasing commitment at work is to give employees a direct stake in the ownership and prosperity of the business for which they work. Tax reliefs to stimulate financial participation have been introduced or extended in almost all Budgets since 1979. A number of proposals in the latest Budget continue this process and take financial participation still further.
Those proposals are further evidence of the Government's commitment to financial participation as an important element in employee involvement. They will provide an important strengthening of the links between the rewards people receive and the performance of the company for which they work. They are important further steps on the road to making our pay and rewards systems more responsive to profitability.
However, although the medium-term prospect for jobs is optimistic, I do not underestimate the anxiety and uncertainty of those who are unemployed at the present time about how long they will be unemployed and how quickly they can get back to work. While unemployment remains high, I am determined to ensure that those unemployed people have the best possible advice and support and, where necessary, special help to put them on the road back to a job.
As a result of the measures that I announced a year ago, we already have in place throughout the country a comprehensive package of counselling and job-search advice geared to the specific needs of individuals. The central feature of those measures is an initial interview for all newly unemployed people and an individual back-to-work plan showing how that person can best help himself and how he can be most effectively helped by the employment service.
I announced yesterday that I propose to build on that new counselling framework extra advice and help with job search. I am providing the employment service with £55 million in extra resources for 1991–92 on top of the resources already announced. Of that, some £38 million will ensure that its standards of service to its clients are maintained and, where possible, enhanced. Some £17 million will provide more help for those who do not find work in the first few weeks of unemployment.
As a result, for the first time, every unemployed person who reaches 13 weeks of unemployment and has no job to start will have a guaranteed offer of an interview—an opportunity to review the back-to-work plan and to assess further options for getting back to work.
New jobs teams will be set up to search out jobs that are suitable for those who have marketable skills and to match individuals to jobs.
Jobs seminars will be run to provide extra advice on job search for those who are not seeking work in the most effective way. For those with more intensive problems and needs, who are already eligible to enter job clubs after 13 weeks of unemployment, more job club places will be provided.
490 We are also increasing help to those who have been unemployed for a longer period. In the course of the next financial year, there will be an extra 100,000 opportunities in job clubs and in the new job introduction guarantee scheme. Job clubs work: 66 per cent. of unemployed people leaving job clubs go into work or into training or further education.
Finally, as a result of the further £120 million that I am making available to employment training, up to 245,000 unemployed people will be able to learn skills to improve their chances of getting back to work. That represents the most comprehensive range of help and advice ever made available to unemployed people. It offers some 650,000 opportunities on Employment Department programmes. It provides a wide range of options, so that the available help matches individual needs. It guarantees help to unemployed people at the point at which they need it most. Above all, it focuses on jobs and getting back to work.
Even at a time of rising unemployment, some 450,000 job vacancies are available in the economy now. Almost 300,000 unemployed people leave unemployment every month. Over 50 per cent. of unemployed people find work within three months of becoming unemployed. The help that we are providing and the new help that I have announced today is designed to ensure that everyone has the best possible chance of getting back to work in the shortest possible time.
May I now turn to one of the most significant parts of the Budget speech: that concerned with initiatives to encourage individuals to invest in their own training. It is of particular importance at a time of economic downturn that we do everything possible to sustain both employer and individual investment in training, so that, as jobs are created, there is a ready supply of skilled people.
The foundations have already been laid for a significant improvement in the skills of the work force. There are many positive signs that skill levels are increasing, and that employers and individuals are becoming increasingly aware of the importance of education and training to our future economic well-being. I draw the attention of the House to the clear signs of that improvement.
First, more and more young people, encouraged by the Government's reforms to schools and the further education system, are staying on in full-time education to gain the qualifications that will enable them to progress to higher levels of skill and attainment. Last year, 350,000 16-year-olds chose to continue in full-time education; the percentage staying on has risen by a third over the past decade. The number of young people taking part in full-time vocational courses in further education is also increasing: in England it has doubled in the past 10 years.
The second clear sign is the success of youth training. The Labour party has a consistent record of opposition to youth training and to the YTS which preceded it. The hon. Member for Sedgefield (Mr. Blair) made a speech in January which set out Labour's supposedly superior alternative to youth training. But, as ever, he had failed to notice what was happening around him. He said that training for young people should lead to jobs or further education and training. Youth training already does that: 88 per cent. of young people who complete their YT course go into jobs, further education or training. He said that training should be based on national vocational qualifications attained, not on time served. Youth training already provides that too: there are no time limits on the training involved, and there is a minimum target level of a 491 national vocational qualification level 2. Already, two thirds of those who complete YT gain a vocational qualification—something which was inconceivable 10 years ago. That number will increase in future as training and enterprise councils ensure that all the training they provide for young people leads to a national vocational qualification.
The hon. Gentleman called for closer integration of education and training. That is also already happening—through the technical and vocational education initiative, through education business partnerships and through the assumption from next month of responsibility for work-related further education by TECs.
The third clear sign of the improvement in Britain's training performance is that the number of employees receiving job-related training has increased by 85 per cent. since 1984—a remarkable testament to the new commitment of employers to upgrading the skills of their employees. The depth of that commitment is underlined by the results of an Industrial Society survey published only this week. Despite the difficult economic conditions, 87 per cent. of companies say that they will either maintain or increase their expenditure on training this year—more than six times as many as those that say that they will reduce it.
Those positive trends are due in no small part to the wide range of steps that the Government have taken over the past 10 years to create an education and training system that is relevant and responsive to the needs of employers and individuals. But of course we are far from complacent; we still have much to achieve. We have set in train the reforms that will ensure that the momentum which has been built up does not diminish.
In the training and enterprise councils and the local enterprise companies in Scotland we now have the means of developing and building on this commitment to training. All 82 TECs and 22 LECs are now in being. More than 1,200 of the country's senior business men and women have committed themselves to providing the leadership needed to develop the skills that industry will need in the 1990s. That leadership has been built not by the regulation and compulsion so much favoured by the Opposition, but through voluntary commitment and willing participation.
Alongside employer commitment we must also stimulate individuals to take responsibility for their own training and development. Again, the way to do that is not by compulsion, but by providing new incentives and widening choice. We have already taken a number of steps in that direction. For 45,000 young people, in 11 pilot areas across the country training credits are only two weeks away. Training credits are a very important development. They offer real purchasing power to the individual and encourage young people to assume, at the very outset of their careers, proper control over their own training and development. If the pilots are successful, training credits will play a major part in transforming attitudes towards training in this country.
Career development loans, which were introduced in 1988, are giving valuable help to individuals who are financing their own training. They have led to a combined investment of £50 million in the training of about 17,000 individuals. Through the TECs, we are ensuring that individuals have access to comprehensive information and advice about training provision in every local area.
492 Finally, we have just announced an important new addition to our well-established national training awards, which give recognition for excellence in training. For the first time, the 1991 awards, for which His Royal Highness the Prince of Wales is patron, will include a new award for individual achievement.
The announcement in Tuesday's Budget of tax relief for individuals' expenditure on training provisions provides another important incentive for individuals to acquire new skills or upgrade existing ones. That sends a clear signal of the Government's support for individual effort and will provide a powerful incentive to those who wish to train, but are deterred by the cost. Tax relief will be given at source for training leading to national vocational qualifications—or SVQs in Scotland—up to and including level 4. The link to national vocational qualifications is essential. The achievement of recognised qualifications, based on standards of competence set by employers, is the best way of ensuring that people have the skills our economy needs.
These developments are all designed to give individuals the information, support and encouragement they need to improve their skill levels and widen the choices available to them. I am confident that they will have a significant impact on individuals' willingness to seek out training opportunities and take responsibility for their own training and development.
The Chancellor rightly referred to his Budget as a "Budget for business". With my special responsibilities for small firms, I take particular pleasure in the substantial additional help for small businesses. Every year my hon. Friend the Minister with responsibility for small firms invites those who represent small firms to put forward their views on what they would like to see in the Budget to assist small firms. We listen to their views and consider with the Chancellor what might be provided.
I am glad to say that this year the process has borne particular fruit with measures that further reduce the tax burden on small enterprises, lift further the bureaucracy and red tape which is the bane of a small firm's life and assist firms having cash flow and liquidity problems in the present recession. I do not propose to list again all the measures that will be of particular benefit to small firms, but I draw the attention of the House to the wide spread of measures.
There are measures which will benefit very small firms. One example is the increase in the VAT registration threshold to £35,000, an increase of 38 per cent. to its highest-ever level in real terms, which will take an estimated 150,000 traders out of the VAT net. A second example is the move from monthly to quarterly payments of PAYE and national insurance contributions for small employers, thereby improving the cash flow for about half all employers.
§ Dr. John Marek (Wrexham)
I shall make a short intervention because I would like to be helpful. Would not it have been useful if postponed accounting had been introduced this year? It will have to come in next year's Budget, and it would have helped small industry if it had been brought forward to this year.
§ Mr. Howard
It is always possible to identify other measures, but I think that the hon. Gentleman will recognise that the combined effect of the package that my right hon. Friend introduced on Tuesday, which has been 493 widely welcomed by small firms' organisations, will go a long way to improving their position and relieving the burdens presently placed on them.
The increase in the threshold for the small company rate of corporation tax and the carrying back of trading losses from one year to three will be of particular benefit to the small incorporated company.
In addition to these, the Chancellor made two important announcements of concern to small firms. As the Chancellor said, there is a case for a more radical simplification of the taxation of the self-employed. The Inland Revenue will therefore shortly be publishing a consultative document outlining its proposals for change.
The Chancellor also announced a review of the serious misdeclaration of VAT penalty, because of complaints that the penalty it imposed was unfair; while the review takes place, the penalty has been reduced from 30 per cent. to 20 per cent.
The Budget will help training and businesses, especially small businesses, and will help to foster and create jobs. The Government will continue to create jobs to fuel growth and to raise the prosperity of our people. That is why we shall win the next election and many after it.
§ Mr. Tony Blair (Sedgefield)
This is probably the first time that an opening speech has been made at a time normally reserved for the replies. That is a telling sign of the Government's incompetence. In the midst of the worst recession for a decade, with unemployment rising and output falling, the Budget will be remembered not for what it did for the economy but for the poll tax.
The poll tax, like some virulent contagious disease, is contaminating everything with which it comes into contact; no aspect of local or central government appears immune. On Tuesday, it infected the Budget with deadly results.
§ Mr. Blair
In a moment, please.
From now, every time that we make a purchase—a new video, television, car, suite of furniture or clothes, buy a meal, take a holiday, go to the cinema and in every aspect of pleasure or business—we shall have a reminder in perpetuity of the most foolish measure introduced in modern times.
§ Mr. Howard
All the Budget did for local government finance was to shift the proportion financed locally to central Government. Is the hon. Gentleman saying that the Labour party opposes that shift, or is he saying that it would have financed it in some other way? If so, perhaps he will be kind enough to tell us how.
§ Mr. Blair
We would not have introduced the poll tax and be in this mess. I remind the Secretary of State that he was the Minister responsible for introducing the poll tax, but now he is going to stand on his head and tell us that he regretted it.
The Budget should have included, as we demanded, not a partial but the full restoration of the training cuts and made proper provision for a temporary work programme to assist unemployed people. Instead, the training concession, which is the only measure in the Budget on 494 training or unemployment, is costed at £20 million—barely one third of the extra cost of resubmitting poll tax bills after Tuesday's announcement. Can there be any clearer sign of the Government's priorities or any better proof of their failure?
The real casualties of the Budget are all too clear. Unemployment is rising faster than at any time since the early 1980s—the worst recession on record—and 370,000 people were made redundant or have lost their jobs in the past few months. Twelve thousand jobs have gone since Tuesday's Budget. Almost 100 constituencies, three quarters of which are represented by Conservative Members, have suffered a rise of more than 1,000 in unemployed people. In the south-east, unemployment has risen by 50 per cent.; in the south-west by 47 per cent.; in East Anglia by 45 per cent.; and in the midlands by more than 20 per cent. Areas such as north Wales and Scotland, where the rise has been slower, are starting to rise inexorably from a much higher base.
The recovery for which the Government have striven so hard has been put at risk. In every constituency, there are closures, redundancy and short-time working. In every affected family, there is worry about paying the mortgage, meeting household bills and, above all, about how to get back to work in a labour market that is shrinking daily.
In every part of Britain, every sector of industry and every occupation in the workplace, the recession has taken its toll and is the direct responsibility of Ministers. They say that the recession is biting worldwide, but that is palpably untrue. No main European country is set for any fall in growth in 1991, let alone to register negative growth of 2 per cent. In Japan, growth will be 3.5 per cent., in Germany 2.5 per cent., in France 2 per cent. and in Italy 1.5 per cent. In the third and fourth quarters of 1991, we will be the only main economy in the world that will suffer falls in growth.
Moreover, it is not that we are first in and first out; we are first in and last out. Growth predictions for 1992 show that we shall grow more slowly than any other OECD country. We are worse off in another respect: in 1991, business investment will grow in Japan, Germany, France and Italy but plummet by almost 10 per cent. in Britain. Billions of pounds of investment are going to German, French, and Japanese firms from United Kingdom industry. Although, as the Secretary of State said, we do not have the highest absolute rates of unemployment in Europe, we have the fastest-rising unemployment anywhere in the OECD.
Against that background, we look at the Budget and the Department of Employment. In 1989, when unemployment stood at 1.8 million, the budget for employment training was about £1.5 billion. In 1990, when unemployment stood at 1.6 million, it was well over £1 billion. In 1991, when unemployment is topping 2 million, how can the figure of £850 million—a cut of almost half what it was two years ago—possibly be justified? If the money in 1989 was barely adequate for unemployment, then how can it be adequate now when unemployment is higher? The omission from the Budget of any proper measures for the unemployed is the most telling expression of the Budget and the Government's priorities. A clear and cynical calculation has been made that 2 million or more unemployed is electorally tolerable. I do not believe that the Government are right in thinking that, but even if they 495 are and it is electorally tolerable, it should not be tolerated by any Government who have proper respect for the society in which we live.
Our criticism, however, is not just of the Budget's failure to announce new measures to assist the unemployed but of its failure to correct past mistakes. Even now, because of the cuts in the budget of the Department of Employment, chaos and confusion are being caused across training provision in Britain, as hon. Members must know from representations that they have received. If we have received those representations, the Department of Employment must have done so, too. Our office has been inundated with scores of complaints that in every part of Britain training schemes are closing, trainers are being made redundant and training places are being lost. Many of those places are for the most disadvantaged people in our community. For some, employment training, with all its faults, offered their only lifeline to self-improvement. Many have written to us—some from high technology schemes for the long-term unemployed, some who are handicapped and some young people whose only opportunity that was to get back into the job market.
We come to the one measure in this year's Budget that is remotely concerned with employment or training—the tax relief on training fees. Anything that assists training is welcome. The great problem with tax relief is dead weight—in other words, those gaining the tax relief may have undertaken a course anyway and many of the poorer and unskilled will be unlikely to gain by the proposals. Having said that, it is clearly right that anything that assists training deserves our support. When we put that against the scale of Britain's training deficit and realise how far behind we are, can it be said that this sole measure in the Budget that assists employment and training really faces up to the scale of the problem?
The Secretary of State said that more companies were training, and we welcome that. There are signs that they are. However, the right hon. and learned Gentleman should read the Industrial Society's report much more carefully before drawing his conclusion in quite such a black-and-white way. More companies are training in Germany, Japan and France, and to higher levels and more qualifications. The idea that they are standing still while we are catching up is nonsense. They are moving ahead, too. When we agree that Britain needs a training revolution, when we must accept that we have more unskilled employees than any other main European competitor, when we languish far behind Germany and France in skills for technicians, textile workers, shop assistants, engineers and computer programmers—almost every sector of the economy, whether services or manufacturing—and then we compensate for five years of cuts totalling £1 billion in Government funding with one tax concession worth £20 million, the notion that we are preparing ourselves adequately for the future is an affront to our common sense.
The tax concession is not unwelcome, but it is a sop—a political nod in the direction of a serious issue, made without any credible intention of addressing it. It would have been far better to adopt the proposals that the Labour party advanced in our Budget submission, not only for the restoration of money lost through training cuts and the establishment of a good temporary work programme for the unemployed, but for a new special skills fund of £300 million-adequately financed, in other 496 words—to allow us to provide access to those who want to obtain skills for the first time and to those who want to improve their skills.
This tax concession—this sop—reveals the nature of the present Government. They are a Government with no purpose except to be in government. They are a Government with no coherence, no commitment, no passion and no understanding of the needs of the country. A Government who were concerned for Britain in the middle of a recession would have produced a Budget for Britain—a Budget for employment and training. If the Government can find £4.5 billion to salvage the wreckage of the Tory party over the poll tax, why cannot they find £200 million to help training for the unemployed? The reason is simple: they are more concerned about the jobs of 370 Tory MPs, at risk from the electorate, than about the 370,000 people made unemployed since the recession began.
On Tuesday we had a Budget that ignored the problems of the real economy. Today we had a poll tax announcement whose shambolic incompetence defied belief. It has been a fitting end to a farcical week. Contrary to what we were told by the Secretary of State, when the next election comes, this will be remembered as the week that saw the beginning of the end not just of the poll tax and the mismanagement of our economy but of the party responsible for both.
§ Mr. Michael Jopling (Westmorland and Lonsdale)
I hope that the hon. Member for Sedgefield (Mr. Blair) will forgive me if I do not follow him in detail. He spoke about the next election. I can only say that his speech did not impress me. On the contrary, it increased my conviction that, after the next election, I shall be greeting my eldest son and not the hon. Gentleman as the Member for Sedgefield.
I suppose that, following the Chancellor's statement on Tuesday, there can have been no prizes for guessing that all the headlines on Wednesday would be devoted to the increase in VAT and the £140 reduction for every community charge payer. In my view, that was not the most important lesson to be learnt from the Budget. The Budget was living proof that the Chancellor had refused to succumb to the many temptations that must have surrounded him in recent weeks to relax the stern and strict measures taken with the economy and to return as soon as possible to expansion and a period of lower inflation and interest rates. I was enormously relieved that the prospect of an election some time in the next year did not lead my right hon. Friend into irresponsibility. I am sure that siren voices must have tried to tempt him into taking steps that would not have been wise, and I congratulate him on having resisted that temptation, which must have been great.
My right hon. Friend referred to the prospects for the next year. With regard to economic growth, he said that we should return to an annual rate of 2 per cent. in the year to the end of the first half of 1992; that we can now see the prospect of the end of the current recession; and that, as we have already got two percentage points off the level of inflation, there are prospects of inflation falling to below 4 per cent.
Many people would have said that it was understandable had he succumbed and let off the brakes to the extent 497 of producing a Budget that was not prudent. I was especially struck by the Chancellor's repeated statements that a tight economic policy will continue. It is true that, nowadays, the room for manoeuvre by any Chancellor of the Exchequer is considerably reduced by Britain's membership of the exchange rate mechanism of the European monetary system. I believe that that is a good discipline for all Chancellors. If, by any chance, we were at any future time to find ourselves with a Labour Government, the discipline of the exchange rate mechanism on that Government's Chancellor—history has shown that Labour Chancellors have always been much more tempted, and have always reacted by moving into the realms of imprudence—would be much greater than is necessary on a Conservative Chancellor.
I was very pleased to hear that it remains the firm intention of the Government to move to the narrow exchange mechanism band as soon as that is prudent and possible. That is good news. Before the Budget, I worried that elements of imprudence might creep in. My worries are considerably abated. I believe that the battle to conquer inflation has not been diminished in any way and that the struggle to preserve honest money is being continued. I welcome the Chancellor's statement that the intention is to achieve a balanced budget over the period of the 1990s. That is certainly good news.
I have always measured Budgets by the reactions of my constituents. I am sure that the people in my constituency will be hugely pleased by the changes in the community charge and by the evolution from the Chancellor's speech about which we heard this afternoon—the creation of a system which, I am sure, will seem fairer to the huge majority of people in this country. I was glad—and I am sure that my constituents will be glad—that the new proposals for the raising of money for local government will continue the concept that everybody should pay something. If we are to switch the raising of funds from local to central revenues, it is far better that that should be done through value added tax than through income tax. Many constituents have written to me saying that there should be such a switch. The great advantage of raising extra revenue centrally through VAT is that it achieves what many of my constituents want—a system that reflects ability to pay. Because of the zero rating of food, rent and fuel, which represent such a high proportion of the expenditure of people on lower incomes, the VAT system gives a good deal of protection to those who are worst off.
My constituents will welcome the community charge changes. Because the proposed system is fairer, the taxes will be easier to collect, and there should not be repetitions of the absolutely outrageous behaviour of various Labour Members of Parliament, as well as Labour party supporters and others throughout the country, who have demonstrated that they have scant respect for the rule of law.
I am pleased that the new arrangements for the community charge will maintain the capping system to control extravagant local authorities that have been holding their charge payers to ransom. In Cumbria we have a grossly extravagant county council, run by a Labour-Liberal consortium, which escaped capping last year by the skin of its teeth but which is still holding the people to ransom by its various extravagances.
498 Not enough of my constituents have yet understood the pleasant surprises that are in store for them. When they receive their community charge bills for the coming year, they will see the considerable reductions in the charge as a result of the announcements of two months ago. Those reductions will especially help people living in houses which were previously on low rates. They will be even more surprised when they realise that a further £140 will be knocked off their bills.
The Budget's accent on industry will please those people even more. Most of my constituents never forget the role of industry in creating the wealth of the nation, on which everything else depends. The Secretary of State referred to the measures applying to small businesses. I shall not repeat them, except to point out that my constituents have been looking for such action for a long time. I refer to the reduction in tax rates, the help with VAT, the threshold exemption, the relaxation on capital gains tax and the new pay-as-you-earn arrangements. They are all welcome.
I congratulate the Chancellor on having achieved low taxation rates for industry which make this country the most attractive for overseas investors. We now have the lowest taxed industry in the European Community and the United States. As a result of the Budget, the powerhouse of the economy—British industry—will have tremendous opportunities in the coming years to expand and prosper and, as that happens, the nation will expand and prosper.
§ Mr. Ron Leighton (Newham, North-East)
This truncated debate has been overshadowed in more ways than one by the poll tax debacle—the biggest fiasco in modern political history and a U-turn of staggering proportions. A proud flagship has gone for ever, yet we still have to hear a word of apology or contrition from the Treasury Bench. Any Government with an ounce of shame or decency would have resigned. There is much that I could say about the poll tax, but because of the shortage of time I will leave the matter there and deal with the Budget and the state of the economy.
The Tories have had 12 years in which to implement their policies. After all that time, we are plunged into the depths of an appalling recession with an explosion of mass unemployment. They have had 12 years to get things right—all those years of North sea oil, of £100 billion revenue and selling off state assets—but it has all been squandered. Where is the economic miracle they used to talk about? Where are the apologies to the unemployed? There were 86,500 more out of work last month—86,500 more tragedies.
We were told that inflation was to be the Government's judge and jury and that their aim was to achieve zero inflation. When inflation began to rise, we were told that it was just a blip. It has been blipping ever since. The Government have strangled the economy and brought it to a standstill in an effort to deal with inflation.
We have a record trade gap. When the trade gap went to £1 billion in one month the Government said that it was a freak. It has been a freak ever since. We have record bankruptcies, the highest interest and mortgage rates, the highest house repossession rates, unemployment surging, output down 2 per cent. this year on the Chancellor's own admission, manufacturing output down 5 per cent. this 499 year, and investment—the seed corn—down 10 per cent. It is an abysmal catalogue of failure. In no other country in Europe is the same thing happening.
The Tories used to talk about the Labour party being a party which might borrow. We have not heard much about that today. This year the Government are borrowing £8 billion and next year they propose to borrow £12 billion. If the Labour party had suggested borrowing that amount, we would have heard more about it. That money is not for investment, but to pay for unemployment and to balance the books. If the Government had restored child benefit to its proper level, they would have had to increase it by £2.30 instead of just 25p for the second and subsequent children.
The Government are a complete failure, not just at the margins but in all important essentials. We have a Government of incompetence and bungling. They should not be allowed to stay in office a moment longer. We need an immediate election to cleanse the country of so abysmal a regime.
I want to refer to some of the evidence taken by the Select Committee on Employment in the past three weeks. There was much else that I wanted to say, but there is not time. Last week the Confederation of British Industry told the Select Committee that unemployment would continue to rise all through next year, reaching at least 2.25 million. The CBI also told us that unemployment would go up for the whole of the following year. So unemployment will be rising for two more years, as far ahead as can be foreseen and certainly up to the next election.
Yesterday the Institute of Directors appeared before the Select Committee and told us that last year it had tried to be optimistic but that it no longer could. I will quote the exact words:Since 1984 the IOD has done its own bi-monthly survey of member opinion including asking members what their expectations are about economic developments. The February 1991 results are the worst in the life of the survey.The right hon. Member for Westmorland and Lonsdale (Mr. Jopling) mentioned Europe. In the IOD paper there is a passage on the impact of European Community membership going back to 1970. Hon. Members will recall that in 1970 a White Paper said that the effect of entry on the balance of payments would be positive and substantial. I quote the words of the IOD:Over the period of 1970 to 1988, UK manufactured exports to the EC rose by 210 per cent. in volume, but imports from the EC grew by 640 per cent. The impact on Britain's trade balance was adverse and severe. Membership of the EC was accompanied by a turnaround in UK manufacturing trade from a surplus in 1970 of £16.2 billion at 1988 prices to a deficit in 1988 of £15.7 billion.So during that period there was a turn around of £32 billion. The IOD said that the position is worse because in 1970 there was no North sea oil. The IOD also said:Although many jobs are created by trade within Europe, it is clear from the figures above that more jobs have been lost. This effect has had an impact on most industries in the UK. There is no reason to believe that 1992 will not accelerate this process.In other words, the Institute of Directors thinks that it will all get worse. In the next paragraph the IOD says:There is a strong likelihood of a painful period of adjustment to the UK's entry into the ERM".It also said that European monetary union could exacerbate what it called the marginalisation of the United Kingdom economy.
That is what we were told yesterday by the Institute of Directors, and it came out in the discussions and evidence 500 that to the extent that our inflation, our productivity and our containment of unit labour costs do not converge with those of Germany—in other words, are not so good as Germany's—we lose competitiveness from day 1 of exchange rate mechanism entry. The IOD fears that our trade deficit unemployment will grow and drew our attention to the experience of East Germany, which changed its currency to the deutschmark but without the same level of productivity and cost as West Germany, leading to the collapse of industry and mass unemployment.
The Select Committee has been interested in the effect on employment of joining the exchange rate mechanism. When we asked the Secretary of State what research had been done on this in the Department, he replied with a letter in which he quoted a memorandum from the director general of the National Economic Development Council and the November 1990 issue of the National Institute Economic Review. That was very worrying because it told us that ERM membership cost France 700,000 jobs and Italy 1 million jobs. Those facts ought to be brought to the attention of the British public rather more widely.
The current issue of CBI News has an article by Professor Douglas McWilliams, the CBI's chief economic adviser. Speaking of the effect on the French economy, he says:How has the French economy performed since the start of serious EMF membership of 1983? The initial effect was slow growth. French GNP rose by below trend for five consecutive years from 1983–87 with a cumulative shortfall of 4.5 per cent. of growth compared with productive potential. The main feature of this recession was that output was depressed for an unusually long period …The article went on to say that wages were reduced. It continued:Nevertheless, reducing inflation still required rather slow growth associated with rising unemployment—a rise in the number of jobs lost of approximately half a million.
His last paragraph is very revealing and worrying, and all hon. Members should be concerned about it. He says thatthe French experience suggests that if British membership of the ERM is successful in reducing inflation it is likely that unemployment will rise to about 500,000 above its 1990 level at some time before 1994. And if Britain is unsuccessful the rise in unemployment could be substantially more than this—perhaps as much as a million or more.The Institute of Directors told the Committee that the most important thing was training and that the responsibility for training the unemployed and paying for it was with the Government. A fortnight ago our witness was Mr. David Dickinson, the chairman of the group of 10 of the TECs who negotiates with the Government. He said thatthe TEC movement appealed very, very strongly to the Secretary of State in the run-up to the last Autumn Review, in that the level of funding should be maintained at last year's level in real terms, and that this should be maintained at least three years to allow the TEC movement to get up and running. In fact, we saw a reduction overall … in the region of 20 per cent. and notably 36 per cent. in money terms in ET, which has given the TECs a major problem. So we think that it is sending the wrong message to the world, to have major cuts in budget.Mr. Dickinson referred toa most Draconian average cut of 45 per cent. in real terms … in their adult training budgets.He then said:There is a Budget coming up very shortly, and it would be one of the most powerful things for this country if the 501 Chancellor were to reinstate the training and enterprise budgets at last year's level throughout, which would be three steps similar to the one that has just recently been taken.The Secretary of State will remember that he recently announced a budget increase of £120 million. Mr. Dickinson told us that the Secretary of State had previously made a cut of £365 million and that the increase announced was only one third of that previous cut. Mr. Dickinson wanted the remaining two thirds. He said:I think that would be one of the most powerful things to ensure the success of the TEC movement.That is what the TECs were waiting for and expecting from the Budget, but they did not get it.
What is the result of the TECs being underfunded? Mr. Dickinson said:Many ET providers will be virtually idle in the second half of 1991 due to the cuts in their funding.I asked him:What are we to make of that? What is the significance of that? Do you think that is right? Should we be worried about that?Speaking on behalf of the TECs, Mr. Dickinson said:I certainly think the TECs and the Employment Committee and the Government should all be worried about it.Therefore, not only are workers becoming unemployed, but the trainers are being put on the dole. That is the criticism that the TECs are making of the Government.
We heard evidence yesterday from Judith Donovan—the only female chairperson. She is the chairperson of the Bradford TEC. She said:In the early days of getting TECs on the road—less than a year ago—the dream was that TECs would negotiate a budget based on what they proposed to deliver in response to local needs. How the mood has changed! We now see a reduced national budget allocated to TECs and scope for negotiation almost nil.The 30 per cent. cut on employment training budgets announced in January 1991 appears cynical when one looks at the way unemployment has increased within the previous two or three months.That is the evidence that the TECs and the TECs' chairmen are giving to the Select Committee on Employment. [Interruption.] I have just quoted Judith Donovan, the chairperson of the Bradford TEC. The previous evidence was from David Dickinson, the chairman of the group of 10.
§ Mr. Howard
The hon. Gentleman is wrong. Mr. Dickinson is the chairman of one TEC, which is not yet operational. He is not chairman of the group of 10.
§ Mr. Leighton
I suspect that the Secretary of State is probably misleading and confusing himself. Is Mr. Dickinson a member of the group of 10?
§ Mr. Howard
I am always happy to enlighten the hon. Gentleman. Mr. Dickinson is a member of the group of 10, but he is not its chairman. He made it perfectly plain when giving evidence to the Select Committee, which is chaired by the hon. Member for Newham, North-East (Mr. Leighton), that he was giving evidence in a personal capacity. He holds no representative position.
§ Mr. Leighton
We have to be a little cautious before we denigrate or speak ill of a chairman of a TEC.
§ Mr. Leighton
I shall give way in a moment.
502 The Select Committee on Employment is interested in TECs. We want to be of assistance and we are taking evidence from the TECs. We heard evidence from Mr. Dickinson, the chairman of the east London TECs and a member of the group of 10. He negotiates on behalf of the TECs with the Secretary of State. He is a bona fide witness.
The second person I quoted was the chairman of the Bradford TEC. I hope that the Secretary of State will take notice of those people. Even if he does not listen to me or my hon. Friends, he should listen to the chairmen of the TECs who are complaining about their budgets.
§ Mr. Howard
Will the hon. Gentleman withdraw his wholly unfounded suggestion that I was either denigrating or speaking ill of Mr. Dickinson for whom I have the greatest respect? I merely sought to point out that the hon. Gentleman had described him inaccurately and was attributing to him a representative capacity that he does not possess. Will the hon. Gentleman now withdraw his remark?
§ Mr. Leighton
From the evidence given to the Select Committee, I understand that there is a group of 10 and that that group liaises—even negotiates—with the Secretary of State. It told me that it was to have a meeting with the Secretary of State on 18 March. I do not know whether the meeting took place. I have seen reports in the Financial Times, which is usually accurate, stating that the group could not agree with the Minister about the agenda because a new programme was being suggested—a sort of "make work" programme, a resuscitated community programme, a blotting paper exercise to soak up all the extra unemployed. The Secretary of State did not want that on the agenda. I read in the press that, as a result, the group of 10 might not be having a meeting with him. I do not know whether it did.
The Secretary of State must agree that the group of 10 is a bona fide body. Mr. Dickinson described himself as the chairman of that group and it is for the group to decide who is its chairman. However much the Secretary of State shakes his head, Mr. Dickinson is a chairman of a TEC. I have quoted two chairpersons of TECs. It may interest the Secretary of State to know that another panel of three TEC chairmen will appear before the Select Committee. It is right that the House and the country should hear what the TECs are saying. They are criticising the Secretary of State and he knows that. Before the autumn statement they asked him not to cut the budget. It was cut and they asked him to make good the cuts in the Budget, but that has not been done. It is no good the Secretary of State sitting there shaking his head and squirming—he knows that he is on a bad footing.
§ Mr. Andrew Rowe (Mid-Kent)
I am glad to follow the hon. Member for Newham, North-East (Mr. Leighton). I am always glad to follow him because, whatever I say, I am bound to appear more optimistic. His gloom—especially over the European Community—shows how essential it is to reduce inflation and to boost savings. The Budget has set out to do exactly that.
I am also glad to follow the hon. Gentleman because he is the only member of the Labour party present who has any chance of remembering what it was like when Labour was last in office. In its last year in office, it spent two and a half times less on training in real terms than the 503 Government are spending now. It is also worth remembering that the Labour party has difficulty with the whole business of training.
The hon. Member for Sedgefield (Mr. Blair) complained that the Budget did not contain initiatives to help the young or to help older workers who are unemployed, especially those with a lower level of skill. Yet it is interesting that when the youth training programme was introduced, Labour Members opposed it root and branch. Whenever they speak about it in the House, they give examples of how it is not working. The employment training programme was designed specially to help to bring those people back into the employment market. Perhaps it is not surprising that the present Labour party opposes the introduction of the employment training programme at every possible opportunity. I am not sure what the Labour party wants, although I know what some Labour-controlled local authorities want. No fewer than 13 Labour authorities have withdrawn altogether from the employment training programme.
We know that the Labour party wants a comprehensive system of vocational qualifications. One of the most encouraging features of training now is the move towards national vocational qualifications. An enormous amount of work has already been done and there is a huge amount still to do. I must tell my right hon. and learned Friend the Secretary of State that the National Council for Vocational Qualifications needs to be a little careful about the elaboration with which it defines some of its competencies. It is putting a huge burden on many hard-working people and we may not need to be quite so refined.
The main point about the NCVQ and its work is that, for the first time, we have a way in which to find equivalence in the vast jungle of qualifications, which go from the bottom to the top of the training ladder. By the end of 1992, such qualifications will cover 80 per cent. of the work force. The national vocational qualification is the best instrument that this country has ever had for destroying the peculiarly British disease which rates academic learning higher than vocational learning. The universities already accept people on the basis of their national vocational qualifications. I want that to be carried through so that it covers everyone. We should then achieve the parity of esteem between academic learning and technological and vocational learning which is long overdue.
The Labour party also wants local training consortia. I am not quite sure what they are, but they sound quite like the training and enterprise councils. I am delighted that we are ahead of the Labour party and I am sure that it is pleased, too.
The Labour party also wants a 59 per cent. top rate of income tax—undoubtedly a tremendous stimulus to the economy. It also wants a minimum wage. The issue that has put this country further behind in the training stakes than almost any other is the fact that the money that young people with no qualifications get is far too high a percentage of the money that those who have qualifications can achieve. The Labour party wants to enshrine that for ever by insisting on a minimum wage.
We should talk a little more about the good news. Yesterday, in the Palace of Westminster, I had the honour to give certificates to a number of key trainees who had been successful on employment training and on youth training courses. Their delight at having got their 504 qualifications and their tribute to the course that had taken them through were a welcome corrective to the rubbish on employment training and on youth training which is spoken in the House day after day by Opposition Members. If I am not mistaken, the Labour party's contribution to youth training would be to abolish it.
We also need to praise the provision in the Budget that has given tax relief to people who buy their own training. That change is long overdue. For far too long, individuals have regarded training as something that should be provided for them by the employer or by the state. Everything that we can do to encourage people to take individual responsibility for that is essential.
As my right hon. and learned Friend would expect, I must tell him that I am disturbed by the threat hanging over some high quality provision from voluntary organisations. I hope that even at this late stage more can be done to help.
The young homeless need to be helped back to work. I ask my right hon. and learned Friend whether there is any scope for using the employment offices to which such people go as their accommodation address. It is nonsense for young people to find themselves caught because they have no address and can get no benefit. If they can get no benefit, they find it difficult to get a job because they do not have an address. That is bureaucratic nonsense and we must be able to overcome it.
§ Dr. John Marek (Wrexham)
We have had a short and truncated debate, but one that was worth having. The statements made before the debate arise out of the Budget and the country will be able to judge the Government's inadequacies as a result of those statements and this debate. I pay tribute to my hon. Friend the Member for Newham, North-East (Mr. Leighton) who, while not being as succinct as he usually is, this evening spelt out what the Confederation of British Industry and the Institute of Directors told the Select Committee. What they said is completely different from what the Government would have us believe that these bodies think about the economy.
I listened to the Secretary of State for Employment in amazement because what he said was "Through the Looking Glass" stuff. Everything in the garden is lovely, there is more training than ever before and more jobs, we are facing the problems of success—where have we heard that phrase before?
§ Dr. Marek
Yes, he may have been biting the wrong mushroom.
We should look at last year's Red Book to see the forecast. These figures have been given before, and I make no apology for repeating them. Last year growth was estimated at 1.5 per cent. in the first half of 1991, but now the forecast is for a fall of 2 per cent. Last year, the Red Book forecast an increase in manufacturing output of 0.75 per cent.; the latest forecast is that it will fall by 5 per cent. Last year, fixed investment was forecast to decline, but not 505 by much—0.75 per cent.—and now the expectation is of a decline of 9.75 per cent. This is the second worst recession since the war.
No amount of gloss from Ministers will convince one of my constituents that the Government have got it right. Every day, the evening newspaper sets out job losses, losses in training places, general gloom and despondency. Until interest rates fall and the Government do something for employment, as opposed to saying that they will do something while in practice doing little, my constituents will remain unconvinced.
The training programme has been cut by £240 million. At some time in the future, £20 million will be returned, as a result of the Budget, but everyone in my constituency knows that there have been cuts. Great publicity has been given to the difficulties of students who have been on courses. To be fair, the training and enterprise councils are saying that the courses are finished, and that is a good thing, but many trainees do not know if they will get qualifications or whether they will be able to continue their courses.
I have a serious point about this Budget that is exemplified by an article on the front page of The Times today, which is headed:No tax cuts for four years, Lamont hints.The Conservative party is keen to tell us that it has been cutting taxes ever since it came into office, but what it means is that income taxes have been cut. Ten or 11 years ago, income tax rates were higher, with a basic rate of 33p.
§ Dr. Marek
The Secretary of State knows perfectly well that Labour party policy is to have a range of income tax rates based on the amount of money that people earn. That is a fair principle that has somehow escaped the Conservative party in relation to the poll tax until, miraculously, this afternoon.
Taxation as a percentage of gross domestic product has been consistently higher under this Administration, since 1979, and it will continue to be so.
Under the previous Labour Government it was only about 33 or 34 per cent.—quite a low figure. As soon as the Conservative Administration came into office, the figure shot up to 38 or 39 per cent. The people of Britain will now realise what we mean by the phase, "taxation as a percentage of gross domestic product", because VAT will increase from 15 to 17.5 per cent. Traders will put prices up and the excuse will be that VAT has risen.
If the article in The Times reported the Chancellor of the Exchequer correctly, there is no prospect of taxation being brought down. The Conservative party is a party of high taxation. [HON. MEMBERS: "No."] Yes, it is. The forecasts are that taxation as a percentage of GDP will remain at 37 per cent. in the next year. Of course, the poll tax will not have helped in any way. That is why at the next general election the Conservative party will be seen by the electorate for what it is. It is empty of promises, incompetent—as the poll tax farrago has shown—and it will be turfed out justifiably.
§ The Minister of State, Treasury (Mrs. Gillian Shephard)
This has been an interesting, if somewhat abbreviated, and intimate debate. I should have liked to comment on the speeches of my right hon. and hon. Friends, but clearly there is no time. I reiterate that the Budget, which is designed to help business, has been warmly welcomed by the Confederation of British Industry, the National Federation of Self Employed and Small Businesses, the Association of British Chambers of Commerce and the Institute of Directors. They all made the point that the Chancellor had listened to what business had to say.
The Budget also helped families by increasing child benefit and it helped the community charge payer. For the information of Opposition Members, a couple receiving the full relief—a total of £280—on community charge would need to spend £13,000 on standard VAT-rated goods to be worse off.
In debates on the Budget attention has rightly been concentrated on major matters and there is no time to speak about the many imaginative measures in the Budget, including the training measures which add to the £2.7 billion already being spent by the Government on training, the £20 billion being spent by employers and the new measures announced by my right hon. Friend the Chancellor, on which I congratulate him. There is no time to go into all those measures.
I wish to make one brief announcement which will be welcomed by the House about help for the disabled with their transport needs. It affects coach operators who have responded positively to the needs of disabled persons by fitting up their coaches to carry wheelchairs. Such operators sometimes laid themselves open to a tax penalty because their vehicles no longer had sufficient seats to avoid paying VAT and car tax. I am delighted to be able to say that not only will such operators no longer have to pay car tax and VAT where only the provision of wheelchair space made them liable but that Customs will consider claims for refunds from operators who have been caught and still have the vehicle.
Opposition Members have convenient memories. In their doom-laden comments they forget that while there is, indeed, a recession it comes after a period of unprecedented growth and that in the three years to 1989 business investment rose by 43 per cent. They forget that from 1981 to 1990 the United Kingdom economy grew by almost 30 per cent. and that in the same period unemployment fell by 1.5 million and jobs increased by 3.25 million. They forget that more people of working age are at work in the United Kingdom than in any other European Community member state. Moreover, they forget that unemployment increased under each and every Labour Government since the war.
Last night we were treated to an impressive and enjoyable display of the operatic knowledge of the hon. Member for Brent, South (Mr. Boateng). We were all greatly impressed by the extent of his knowledge. But tonight the utterances of Opposition Members reminded me of quite another song—Noel Coward's "There are bad times just around the corner".
The Budget has helped business, families, the community charge payer, the disabled and the environment, and it means that good times are just around the corner for Britain and for the Government. The bad times 507 round the corner will be for the Opposition. They long for an election, but so do we, because when it comes we know that the electorate will see the Opposition's outworn and unconvincing policies for what they are.
§ Debate adjourned.—[Mr. Boswell.]
§ Debate to be resumed tomorrow.