Budget Resolutions and Economic Situation

HC Deb 18 March 1993 vol 221 cc414-500

[Relevant documents: European Community Document No. 4683/93, the Commission's Annual Economic Report for 1993, and the draft Decision adopting the Report.]

3.58 pm

The Secretary of State for Employment (Mrs. Gillian Shepherd)

I greatly welcome the Chancellor's statement. He produced a Budget for recovery and for jobs. It will bring help and hope for individuals and for industry. Above all, it restores confidence, which is the key to recovery.

I shall return to the Budget later—

Madam Speaker

Order. It was remiss of me, but I should have pointed out that many hon. Members wish to speak in the debate today, and I shall have to limit speeches between 6 and 8 pm to 10 minutes.

Mr. Dennis Skinner (Bolsover)

Where are they all?

Mrs. Shephard

As the hon. Gentleman says, they are not immediately apparent; no doubt they will drift in later.

When I return to my right hon. Friend's Budget later, I shall provide more details, but I can say now that the new measures announced in the Budget will help unemployed people back into work.

This has been a good week for Britain. On Monday, we had improved manufacturing output figures; on Tuesday, we had a first class Budget for recovery; on Wednesday, we had improved retail sales figures; and only this morning I was able to announce that seasonally adjusted unemployment had fallen. These figures are welcome because they offer hope for what people want: real and lasting jobs.

I should like to set out the background to economic recovery. On Tuesday, my right hon. Friend announced his Budget, which is a Budget for recovery because the necessary economic framework for that recovery is already in place. In Britain, we have the lowest interest rates in the European Community. We have a competitive exchange rate. We have the lowest inflation for 25 years. We have the lowest corporation tax in the developed world. Our unit wage costs in manufacturing are rising more slowly than those of Japan or Germany. Our labour costs are 61 per cent. of those in Germany, and we have record productivity. We have low burdens on industry, and fewer strikes than at any time in our history.

We also have the people. We have the most flexible work force in Europe—a work force so productive that Britain now exports cars to Japan. We have a better educated work force, a society in which more than 90 per cent. of 16-year-olds are in education or training. Our work force are willing to go it alone. Nearly 3 million people work for themselves, creating new businesses and new enterprises, which in turn will create new jobs for others. This is the right framework to enable Britain to compete.

We should not forget the good news. Exports of manufactured goods are at record levels, up by 11 per cent. outside the EC in the year to January. Consumer credit is up; consumer expenditure is up; investment is up; export volumes are up, and at record levels; business confidence is up; car sales are up; retail sales are up 0.2 per cent. in February to their highest volumes ever; and, as announced on Monday, manufacturing output was up by 0.8 per cent. in January.

Mr. Tony Banks (Newham, North-West)

It is good to hear all this good news, because we all want this country to succeed, but I suspect that the Secretary of State is using sophistry. She is giving us a litany of things that are up without telling us what they are up from. If she would give us a base year, we might get a more accurate picture of whether investment is truly up. It may be up compared with last year, but it is most certainly not up compared with 1979.

Mrs. Shephard

I would have put money on something else being up—the hon. Gentleman in this debate. He might like to know that manufacturing investment has been up for three successive quarters. As the Chancellor said on Tuesday, all independent forecasters—the Confederation of British Industry, the Institute of Directors, the Organisation for Economic Co-operation and Development, and the European Commission—predict a resumption of growth this year. Indeed, the Commission expects growth in the United Kingdom to exceed that of any of our European partners, as Monday's output figures confirm.

Now to the best news of all. Today I announced that seasonally adjusted unemployment fell by 22,000. That is good news for unemployed people, and for us all. A fall in unemployment, especially so early in the recovery cycle, will of itself help to boost confidence.

As I have said before, however, and as I shall certainly say again, we must be careful not to place more weight on one month's figures than they will bear. In that, the hon. Member for Holborn and St. Pancras (Mr. Dobson) and I are, for once, at one. None the less, the latest figures provide some reason for optimism.

The number of unemployed people placed into new jobs by the Employment Service is up on last year. The number of people becoming newly unemployed and joining the register is down. I am talking about one month's figures, but they provide news that I welcome, as I am sure does the whole House.

That is the background against which my right hon. Friend the Chancellor of the Exchequer produced his Budget. It is a Budget for recovery and jobs. It will ensure a lasting recovery. It is a Budget for business. It will reduce tax and regulatory burdens on small firms, reform advance corporation tax, improve export credit insurance and permit entrepreneurs to reinvest their capital gains. Small wonder that it was widely welcomed by all the business organisations that my right hon. Friend the Chief Secretary to the Treasury quoted yesterday. All these reforms will create jobs as businesses expand.

Mr. Skinner

The Secretary of State could make a great difference to the unemployment figures if she and the rest of the Government did a couple of things during the next month. For example, the Government are in control of 100,000 jobs in the pits and in coal-related industries. There are 30,000 jobs in the pits and 70,000 in manufacturing and service industries.

If the Government decided to save the 31 pits over which there is a question mark, there is just half a chance that the unemployment figures would be announced during the next six months. If the Government saved jobs in local government and in hospitals during the course of the year, they would be on the verge of saving 300,000 jobs. It is no use blaming private entrepreneurs all the time. It is no good the right hon. Lady claiming credit for unemployment falling when the figures have been fiddled. The truth is that the Government never take the blame for all the misery they cause.

Mrs. Shephard

As the hon. Gentleman knows, we await the outcome of the pit closure review. I am sure that he is awaiting the outcome as anxiously as we all are.

The hon. Gentleman will know also that local authorities have had a real increase in funding of 3.1 per cent. That increase enables them to retain their work forces or to expand them, as Conservative-controlled Hampshire county council is doing, to the tune of 800 extra jobs with effect from April.

I also draw to the hon. Gentleman's attention the rather good example set by Sheffield city council, Sheffield being quite close to his constituency. It has made good management decisions to retain its work force in a cost-effective and efficient way. I can see that that does not commend itself to the hon. Gentleman, but that is no surprise.

The hon. Gentleman talks of what the Government can do. Jobs will be created directly by the construction of the Heathrow Express line, an investment of £300 million. The line is due to open in 1997. It will create 2,000 jobs during construction. Jobs will also be created by the construction of the channel tunnel rail link, which involves investment of £2.5 billion. As the House heard earlier, details of these projects will be announced by my right hon. and learned Friend the Secretary of State for Transport next week.

The reaction of Opposition Members, as ever, is predictable. They want extra resources here and extra expenditure there, but they always oppose every proposal for raising the necessary additional revenue. Fortunately, no one takes any notice of them. That is at least partly because they are all preaching different messages.

The hon. Member for Holborn and St. Pancras continues to want to impose a tax on jobs. The hon. Member for Dunfermline, East (Mr. Brown) claims to be the friend of the small business man. The right hon. and learned Member for Monklands, East (Mr. Smith), the Leader of the Opposition, has not yet felt able, alas, to welcome the fall in unemployment announced today.

The Budget will help to create what unemployed people want—real and lasting jobs. It will encourage inward investment such as that by Toyota in Derbyshire, the biggest single Japanese investment in Europe, which will create 3,000 jobs, and by Kimberly-Clark in Humberside, the largest United States investment ever in the region, which will create well over 700 jobs.

Last week, we had an interesting little debate about Opposition Members' attitudes to inward investment. I was delighted to have the position clarified once and for all by the hon. Member for Livingston (Mr. Cook), who had the courage to follow the example of Mr. Gavin Laird, of the Amalgamated Engineering and Electrical Union, who condemned the TUC's description of inward investment as "negative and racist", and he was right to do so. I am delighted that the hon. Member for Livingston was finally smoked out, although not his hon. Friends, in condemning that particular description.

Mr. Eric Illsley (Barnsley, Central)

Does the Secretary of State realise that, since October, when the President of the Board of Trade announced the programme of colliery closures, my constituency alone has lost 1,000 jobs? Over the next few months, we are likely to lose a further 6,000. How does that compare with a couple of hundred jobs at Toyota or Kimberly-Clark?

Mrs. Shephard

The hon. Gentleman is an expert in coal mining matters, and I know, because he is a sensible man, that he understands that, as in every other industry and with every other business, if the coal industry cannot sell its product, there has to be change. I also know that the hon. Gentleman is awaiting the outcome of the pit closure review, and that he will welcome the investment by the training and enterprise council and the Employment Service in his area, which are helping to create jobs, regenerate the economy and help those who are currently out of work.

The Budget will provide direct help for unemployed people. My job and that of my Department is to give that help, to renew people's confidence, and, above all, to give people the help they need to get back to work. That is my top priority.

It is sad that some Opposition Members like to give the impression that a person who has lost his job will be out of work for ever. They have tried over recent days to perpetuate the myth that there is only one job for every 27 unemployed people. That ignores two things. First, for every job notified to jobcentres, many others are not notified—jobs which are filled by other means such as advertisements or private agencies.

Secondly, that calculation is based on the number of vacancies that remain unfilled. It ignores the much larger number of vacancies that jobcentres have filled—filled with unemployed people. Last year, the Employment Service placed 1.5 million people into jobs.

I shall tell the House how, with our help, unemployed people are getting back into work. Every month, hundreds of thousands of jobs become vacant. Only this morning, I published the figures for February. In that month alone, 160,000 vacancies were notified to jobcentres—only a third of those actually becoming vacant.

People are taking up those vacancies. In February alone, again as I announced this morning, almost 400,000 people left unemployment—one in eight of the total. That happens every single month.

Most people leave unemployment very quickly—one quarter within a month, more than a half within three months, and two thirds within six months. That is the message that we should get across to people who have lost their jobs. It is a clear message that there are jobs out there—real jobs—and that TECs and jobcentres are there to help people to get back to work.

The range of help already available to unemployed people is considerable. The Employment Service has a staff of nearly 50,000 and a budget of over £1 billion. Day in, day out, the Employment Service helps people find new jobs. Last year, it found new jobs for 6,000 people each and every working day.

It is a pity that the hon. Member for Holborn and St. Pancras hates employers. He has made that clear; he never misses an opportunity to run them down. But I live in hope that one day I shall persuade him that there is a connection between employers and jobs.

Perhaps the hon. Gentleman would like to look at what employers are doing through training and enterprise councils and local enterprise companies. They now comprise 104 different sets of employers, business people, working in their own local areas to help unemployed people. The hon. Gentleman might disapprove of what TECs are doing, but the unemployed people they help approve, as do local Members of Parliament—on his own side as well as on this—and those trade unionists who sit on TEC boards.

I will give a few examples of what TECs are doing. Durham TEC is providing 100 engineering apprenticeships for young people. Northumberland TEC is sponsoring 160 students from firms in the region to undertake Open university management courses. Surrey TEC is working closely with the health authority to help 10 adults with Down's syndrome; all have been found work placements, and three are likely to be offered permanent jobs. I could give scores more examples. With the Employment Service and TECs, the framework is there, and so are the opportunities.

Our plans in the autumn statement already provided for 1.5 million opportunities—more than have ever been provided before. Those opportunities are targeted on those who need them most: the longer-term unemployed, the people most in need of help; people who have difficulty getting employers to give them an interview and who can now benefit from the job interview guarantee scheme, which has placed over 100,000 people in jobs; the disabled, who can get a three-week work trial with an employer; and job clubs, which improve by 50 per cent. people's chances of getting new jobs. Those programmes help unemployed people to get back to work, and they will help more people get jobs as the economy recovers.

In the new measures that we announced on Tuesday, we have responded to what unemployed people tell us about the help they want. They tell us that they want opportunities which are good for them and which represent a lasting investment in the economy and in their local community. The Budget will provide the framework for recovery, for growth and for new jobs. To make sure that unemployed people get those new jobs, we have listened to what they tell us and have responded.

That is why we announced on Tuesday an additional 100,000 opportunities, costing £230 million. That should be welcomed in all parts of the House. Above all, it will be welcomed by the individuals who want those opportunities and have asked for them.

The new package will provide 30,000 opportunities through learning for work, to finance unemployed people to pursue full-time courses of education—perhaps to learn a language, which would be a useful additional skill in a nation of exporters, or to acquire skills in business administration, catering or engineering. All these are skills which will improve people's job prospects.

The new measures will provide 60,000 opportunities under community action to enable people to do part-time voluntary work while continuing active job search—work such as restoring heritage buildings and inner-city sites, and work with elderly people, the infirm, the young, or the mentally handicapped, and to improve the environment.

There will also be 10,000 extra places on the business start-up scheme to provide financial support, training and advice to enable unemployed people to start their own businesses: businesses such as Elliot's in Leicester, where a family business has been created by unemployed people; or Thomas Ferguson Print Finishing in Accrington, which now employs 25 people; businesses which employ 83 additional people for every 100 self-employed individuals.

The package also contains TEC challenge, a fund to which TECs will bid competitively to develop new, innovative ways to help unemployed people into work and to create new jobs; and it contains workshop pilots—four in different parts of the country—to test how effective it is in encouraging the recruitment of long-term unemployed people by paying a temporary subsidy to employers.

This package, building on those opportunities already available, will help unemployed people to take advantage of the recovery and of the many thousands of jobs that become available each and every day.

Mr. David Nicholson (Taunton)

My right hon. Friend will be aware that nobody on this side of the House believes that it is possible to absorb the vast numbers of unemployed people simply by throwing money around, which is what the Opposition appear to think. If that were possible, it would have been done before, under Governments of either party. Is my right hon. Friend aware that some people have suggested that these measures are cautious and have limited scope? Could she say why the measures do not go further than pilots, when we have had so much experience of employment and training schemes over the past 10 years?

Mrs. Shephard

The measures should be seen in the context of the 1.5 million opportunities—a record number—that we have already provided and that will come on stream in April. Perhaps I could remind my hon. Friend of what I said when introducing the measures—that they will enable an investment in the people, in the economy and in local communities.

In addition, the workstart pilots are intended to test other approaches, so that we can see what might be of particular help to unemployed people and so that we can take the lessons and build on what we learn from those pilots. That is the essence of a pilot scheme.

Ms Angela Eagle (Wallasey)

Is the Minister aware that Professor Snower, the originator of the idea, apparently believes that a subsidy of £150 a week is the only way to create new jobs? Why are the Government offering only £60?

Mrs. Shephard

I note that Professor Snower, whose work I greatly respect, has claimed ownership of the idea. The hon. Member for Birkenhead (Mr. Field), who is sitting next to the hon. Lady, might also claim that he had some interest in the idea, which has been discussed for quite some time by all those people interested in helping the long-term unemployed. I note Professor Snower's comment. We feel that the basis of the workstart pilot is correct, and that the subsidy given to employers is real and will be helpful, but we shall continue to see how the schemes develop, because, as I told my hon. Friend the Member for Taunton (Mr. Nicholson), they are in the nature of pilots, and we wish to learn from them.

Mr. Frank Field (Birkenhead)

As the Minister has commented about people who have also submitted ideas to her on the workstart proposals, will one of the four pilot schemes be testing the idea that I put to her?

Mrs. Shephard

I have not quite finished the design of the individual pilots, and the hon. Gentleman will understand why. On Tuesday, I shall be meeting heads of TECs and the Employment Service to discuss a whole range of measures, including the design and location of the individual pilots, so perhaps the hon. Gentleman will be able to accept that the final design is not yet ready.

Mr. Field

If the TECs say that people should be able to keep the whole of their benefit for a year, provided that employers meet a certain wage level, will the Minister be prepared for all four pilot schemes to take that form if the TECs say that it would be the most marketable scheme?

Mrs. Shephard

No, I cannot reassure the hon. Gentleman in that way: we are basing the schemes on a flat rate payment, because that is simple to administer and enables us to achieve a standardised arrangement which we can test. However, as I have already said, these are pilots and we shall have to see how they go. I shall keep a watching brief, and no doubt the hon. Gentleman will do exactly the same.

What is most damaging to confidence is when Britain is talked down by Front-Bench members of the official Opposition. We are trying to bring hope and confidence. It was extremely sad last week to have to listen to the speeches of the hon. Members for Livingston and for Holborn and St. Pancras in the Supply day debate. Joined by several of their hon. Friends, they sought to deny the achievements of manufacturing industry. Sadly, speaker after speaker rose from the Opposition Front Bench to deny the facts.

They denied that exports are at record levels. There was not a word from them about the chemical industry, a net exporter; not a word about pharmaceuticals, also a net exporter, with exports growing 17 per cent. in 1992; not a word about the fact that car exports have doubled since 1986; not a word about the fact that Britain is a net exporter of television sets; not a word about the record export performance of British industry; not a word about the fact that, in the year to January, British exports outside the EC were up 11 per cent.

There was not a word about those achievements. There was not a word of encouragement to the men and women in industry who produce our manufactured goods and our services. There was not a word about those who sell them in tough export markets. There was not a word about the success of British industry brought about by policies aimed at encouraging enterprise, providing incentives, sweeping away unnecessary regulation and reducing burdens on business—policies which were greatly furthered by my right hon. Friend's Budget. There was not a word about the trade union reforms which have made industrial relations in this country the best in Europe.

In last week's debate, we heard speeches deploring the decline of Britain from the hon. Members for Livingston and for Birmingham, Yardley (Ms Morris), and from the right hon. Member for Halton (Mr. Oakes). Today, unemployment fell in all those areas. That is good news.

It is a shame that the official Opposition spokesman on employment, the hon. Member for Holborn and St. Pancras, cannot contain his hatred of employers. Indeed, last week he added to them bankers and financiers, accusing them of being incompetent financial institutions, on the make and exhibiting short-sighted stupidity. That is quite something for an hon. Member who represents a constituency in the heart of the world's major financial capital.

Last year, we heard much about Opposition Front-Bench spokesmen scurrying round the City, downing prawn cocktails in ever-increasing quantities, in an attempt to show that they and their party believed in capitalism. How many more prawns will have to be sacrificed to put right the words of the hon. Member for Holborn and St. Pancras? Instead of encouraging enterprise and business, instead of helping employers, Labour would introduce job destruction policies.

Mr. Frank Dobson (Holborn and St. Pancras)

Does the Secretary of State say that Barclays bank has been well managed since Nigel Lawson joined it? If so, why is it running at a loss?

Mrs. Shephard

That is a cheap comment, even from a prawn.

The Opposition would introduce a national minimum wage; how many jobs would that destroy? At a time of high unemployment, they would sign up to the social chapter which the Prime Minister rejected at Maastricht; how many jobs would that destroy? As an incentive to training, they would put a training levy on employment; how many jobs would that destroy? Their latest idea is to subsidise jobs by taxing the utilities. That is not a positive message to business. Every time success was made of an enterprise, it would be taxed. How many jobs would that destroy?

Those policies are in complete contrast to the policies of the Government. The Labour party has never learnt that Governments do not create jobs, despite the fact that business, employers and industry tell it so all the time. Only businesses can create jobs, through producing goods and services that people want, on time and at a competitive price.

In this House we have, sadly, had to get used to Opposition Members running Britain down. They were running Britain down in last week's Supply day debate. They ran Britain down in Tuesday's debate on the Budget. No doubt they are longing to run Britain down today.

In commending this Budget to the House, I agree with the Opposition that some things in Britain are down. Inflation is down; interest rates are down; unemployment is down; and the Labour party is down—and out. But confidence is up; output is up; retail sales are up. Above all, Britain is on the up.

4.30 pm

Mr. Frank Dobson (Holborn and St. Pancras)

I welcome, without reservation, the reduction in the jobless total that has been announced today. Like all Opposition Members, I am delighted if there are fewer people officially out of work. It is undoubtedly the only bit of good news on unemployment in the last three years, and it is welcome news. We hope that it will continue in future months and years, but we fear that it is a freak. If I have read the right hon. Lady's press statement correctly, she fears that it is a freak, too, because she says that we should not attach too much importance to it.

There are many, not just among the Opposition, but around the country, who will also fear that, besides being a freak, the reduction may be another of the Department of Employment's statistical fiddles. I plead in justification of that remark the fact that the Department of Employment has already done 27 fiddles, all of which have reduced the unemployment total. It may be that there is no fiddle this time, but if this is the start of a trend it had better be an accelerating trend because, if the total is to fall by 22,000 a month, it will take 11 years before all those out of work are back in work.

The Department of Employment also published today its labour force survey, headed "Key Results for Autumn 1992". One of the items, highlighted even by the Department, reads: 66,000 more people were unemployed on the ILO definition than the average monthly number of claimants of unemployment-related benefits in Great Britain during the period September to November 1992. In other words, by that international definition, 66,000 more people were out of work than the Government were acknowledging.

That is not all, of course. As you, Madam Deputy Speaker, know and as I, the Secretary of State and, I am sure, her statisticians know, there are, using the old definition, 4 million people out of work. Nevertheless, we welcome the reduction and hope that it is the start of a trend.

Harold Wilson said that a week is a long time in politics. Certainly 48 hours appears to be a long time when it comes to Budget debates. Things move rather quickly. The Guardian carried a headline after Tuesday's Budget which read: Lamont's stock riding high with Tory MPs. By today, however, Tory MPs, according to The Guardian, are in revolt about the imposition of VAT on fuel for pensioners. Sadly, it is nothing new these days for The Guardian to be outflanked in concern by Tory MPs. Not long ago, the spineless leader writers on The Guardian welcomed the Prime Minister's workfare proposition, only to see it, to their embarrassment, dropped by the Government—at least for the time being.

This week The Guardian, in its response to the Budget, mocked my right hon. and learned Friend the Leader of the Opposition for objecting to the blatant Tory betrayal of election promises and the imposition of VAT on fuel, which will impoverish millions of badly off pensioners and families. Perhaps The Guardian will no longer run such moving articles about people dying from hypothermia.

Mr. Skinner

I do not think the paper's man is in the Press Gallery. He has probably gone to Cheltenham.

Mr. Dobson

That could well be. On the other hand, my hon. Friend is probably being unfair. I believe that the paper is represented.—[Interruption.] Surely The Guardianis not sold by newsagents. Newsagents sell the tabloids.

According to most commentators, the Tories won the general election of 1992 by managing to turn it into an election about tax. The commentators said: Labour lost because Labour said that tax would have to go up"— that is, Labour told the truth— and the Tories won because the Tories said that tax would not have to go up. In other words, the Tories told lies. It may seem harsh to accuse the Tory party of telling lies.

Mr. Nigel Evans (Ribble Valley)

rose—

Mr. Dobson

I shall give way in due course, but I want to make some progress.

There are two possible explanations of what various leading lights in the Tory party said in the run-up to the general election. Either they were lying or they were ignorant and incompetent. All the time, Ministers had access to Treasury figures. They had all the official information at their disposal. The Prime Minister told the House that the Tories had costed their programme. Treasury officials had been used in the exercise. He said that they has also costed our programme. Well, the costing was rather strange. Having costed our programme, the officials said that it could be paid for only by tax increases. When the self-same officials costed the Tory programme, they said that it could be paid for without tax increases. There seems to be something wrong, either with the officials or with those who draw on their work.

Nevertheless, the Prime Minister told us that he had no plans and no need to extend the scope of VAT. He said: I have no plans to raise…the level of national insurance contributions."—[Official Report, 28 January 1992; Vol. 202, c. 808.] For good measure, the Chancellor of the Exchequer said: We will not have to increase taxes. I cannot see any circumstances in which that will be necessary. The Prime Minister said: We have no need and no plans to extend the scope of VAT. If that was not lying—and, under the rules of the House, it cannot be lying—it must have been an admission of incompetence on a monumental scale. If leading Conservatives were called to any court to answer the charge that they had lied to the electorate, they could plead incompetence. In doing so, they could call upon a considerable body of evidence that they are, and always have been, incompetent. They could probably call character witnesses to demonstrate long-term incompetence in handling economic affairs. They could reasonably claim that everything they said before the election was consistent with their usual behaviour. They could, indeed, ask that other offences over 14 years be taken into account.

Mr. Nigel Evans

Does the hon. Gentleman accept that one of the major reasons for the Conservative party's victory in the general election of 9 April 1992 was that the electorate listened to what the Labour party had to offer and heard what it and its leader had to say, did not like what it heard and went to the polls to vote Conservative?

Mr. Dobson

In reply to that, I can only say, "It wasn't what you said at the time, sunshine."

For the past 14 years, the Tories have been running the British economy into the ground. When they came to power, there was a trade surplus in manufactured goods. Now, despite the benefits of North sea oil, we have had trade deficits averaging £16 billion for the last seven years in succession. Now, despite the benefits of North sea oil, under this collection of clowns we have a trade deficit even in the fuel trade. When they came to power, just over 1 million people were out of work. Now, for the fifth time in 14 years, there are 3 million people out of work officially and 4 million people out of work in reality. That is despite the 27 downward adjustments carried out by statisticians at the Department of Employment in response to pressure from Ministers.

When the Government came to power, 7,300,000 people were working in manufacturing industry, making things for people here and abroad to buy. Now, there are scarcely 4 million people working in manufacturing industry, and it is clear that soon there will be more people out of work than working in manufacturing industry. After 14 years in power, putting their economic theories into practice, the Tories have got us to the top of the European unemployment league. We have the most people out of work—we are the only country with more than 3 million unemployed—and we have the fastest rising rate of unemployment.

Despite all that, the Chief Secretary had the gall to tell the House yesterday that the Tory party is the party of economic competence. He also spent a considerable amount of time talking about the public sector borrowing requirement, so let us consider the sacred PSBR under this Government. I refer specifically to this year's borrowing requirement.

The Tories, the self-proclaimed paragons of economic competence, have made six successive estimates of the PSBR. I remind the House that the latest estimate is £35 billion. The first estimate was that we would not have a PSBR but a surplus of £3 billion. That estimate was made by Chancellor Lawson. The second estimate, by the then Chancellor Major, was, again, that there would be no PSBR although, to be fair, he did not say that there would be a surplus. He had obviously turned himself into the Polonius of 11 Downing street: Neither a borrower, nor a lender be He said that there would be a balance, and hon. Members might recall—

Mr. Barry Legg (Milton Keynes, South West)

rose—

Mr. Dobson

No, wait until I have read out the quotation.

Mr. Legg

rose—

Madam Deputy Speaker (Dame Janet Fookes)

Order. The hon. Gentleman should know well enough by now that if the hon. Member who has the Floor does not give way, he must resume his seat.

Mr. Dobson

In his one and only Budget statement, the right hon. Member for Huntingdon (Mr. Major), who is now the Prime Minister, said: For decades, successive Governments had spent more than they were prepared to raise honestly from taxation and they made up the shortfall by borrowing."—[Official Report 20 March 1993; Vol. 169, c. 1014.] At that point, the PSBR for this year was estimated to be nil; under his premiership it has shifted to £35 billion. It has reached that point by way of a third estimate of £12 billion, a fourth estimate of £28 billion, a fifth estimate in the autumn statement of £37 billion, and the latest estimate of £35 billion. We have moved from a surplus of £3 billion to a PSBR of £35 billion under a Government who claim to be economically competent.

To cut back on the deficits which have accumulated, apparently by accident and against the Government's intentions, we are faced with massive tax increases and massive cuts in public services, not to invest in the future, not to put right the structural faults in the British economy and not to re-skill our people; the cuts will repay the debts piled up by a Government who, to use the Prime Minister's words, were not honest enough to raise the money by taxation earlier. That is what has happened under this incompetent Government.

Mr. Peter Ainsworth (Surrey, East)

It is abundantly clear that the Opposition do not like the Budget, but it is less clear what measures they recommend to enhance the recovery which is already under way. The debate has already lasted for more than two days, but we have not heard a single positive suggestion from the Opposition about what they would do. Are we to hear one from the hon. Member for Holborn and St. Pancras (Mr. Dobson) this afternoon, or are we to continue to wait in vain?

Hon. Members

Who was that?

Mr. Dobson

If anybody had asked me at the door whether the hon. Gentleman was a Member, I should not have recognised him. He clearly adorns our debates extremely infrequently. He will have to learn that, like Conservative Members, we make speeches that we want to make and do not take orders from those across the Floor.

Conservative Members should listen to this. The worst charge of incompetence against the Government is that they have squandered the benefits of North sea oil. Over the past 14 years, the Government have been blessed with the one-off bonus of North sea oil which could have helped the balance of trade, which it did, and could have helped to fund investment but it has not been used for that. It gave a massive lift to Government revenues. One hundred and thirteen billion pounds has been raised from the North sea and every penny has been frittered away. The rest of Europe cannot believe what the Government have done with that one-off bonus. Every penny of revenue from North sea oil has gone either to pay for the costs of unemployment and in tax cuts for the rich in the 1988 Budget or to ease the pain of the poll tax.

Mr. Jacques Arnold (Gravesham)

Will the hon. Gentleman give way?

Mr. Dobson

No, I shall not.

There is not a penny left for investment in plant and machinery or research and development, and there is not a penny left for investment in education and training.

Mr. Arnold

rose—

Mr. Dobson

No, I shall not give way.

What I have outlined is incompetence on a grand scale. If the Tories are accused of lying, we can see why they would find it easy to counter the charge with a plea of incompetence, but we cannot allow them to get away with it. At the previous election, the Tories cruelly misled the British people and never stopped trying to do so. However, it is getting more difficult for them, and their excuses are getting more threadbare.

It is now almost exactly three years to the day since the present Prime Minister presented his Budget as Chancellor of the Exchequer. Since that Budget, unemployment has risen in every single month save this one, rather like the trade deficit most months and the PSBR, as far as I can see, every month. It is no good the Prime Minister telling The Independent that he blames his predecessors for what he inherited. During his Budget speech, when he was Chancellor, he said of his predecessor, Nigel Lawson: He has left the public finances stronger than at any time in living memory".—[Official Report, 20 March 1990; Vol. 169, c. 1010.] That is what he said and he meant it. He went on to describe that as an enduring record. With this lot in office, it is likely to endure as a record for a very long time.

Since the Prime Minister became Chancellor, manufacturing jobs have been lost at a rate of 255,000 a year. Since he became Prime Minister, manufacturing jobs have gone at a rate of 312,000 a year. Since he became Prime Minister, the number of people in work has fallen by one million three hundred and sixty odd thousand. Since the Prime Minister's one and only Budget, unemployment has risen by 87 per cent., more than 1,200,000 people have been thrown out of work and 9,500,000 of his fellow citizens have experienced the pain and shock of being out of work.

What has the Prime Minister done to help? Scarcely anything at all. Let us consider the Government's spending on training. When the Prime Minister took over, it was £2.4 billion. It fell to £2.1 billion, it stayed at £2.1 billion, it is planned to stay at £2.1 billion next year and is set to fall after that. In other words, as unemployment has gone up by 87 per cent., measures to help the unemployed have fallen away. This year, spending is down £300 million on 1990–91.

When the Prime Minister became Chancellor, there were 430,000 trainees on employment training. This year, there are 210,000. Spending on ET is down from £1.2 billion to £883 million—and that includes employment action. Even the Secretary of State must realise that employment action and employment training are not working, because she is wrapping them up and amalgamating them into one outfit called training for work. One can reasonably say that only the names have been changed to protect the guilty. The coming year's budget for the new combined training for work arrangement will be less than the budget for this year. There will be 210,000 trainees and a budget of £874 million.

When employment training was originally announced by the right hon. Member for Sutton Coldfield (Sir. N. Fowler), who is now the chairman of the Tory party, he promised with a great fanfare of trumpets—it was a Tory promise, so we could tell what would happen to it—600,000 places on employment training and a budget of £1.5 billion. What we got was one third of the number of trainees that he had promised, and half the budget. In other words, there is a massive difference between what was promised. and what was delivered. The unemployed were betrayed by the breaking of that promise.

Another Tory promise was the youth training guarantee. Apparently every young person of 16 or 17 who was not in work or education would get a YT place. The numbers have fallen from 347,000 for 1990–91 to 233,000 for the months of this year for which the places have been counted. But the Unemployment Unit, which generally speaking is more reliable than the Department of Employment, estimates that there are 111,000 16 and 17-year-olds who are not in education, not in work and not in training. Another promise has not been kept, and our young people have been betrayed by the Government and by the Department of Employment.

We need to look at that history of broken promises when we examine what the Chancellor promised on Tuesday, and what the Secretary of State said at her press conference, at which she admitted that the additional money resulting from the Budget would be only £125 million at most—less than £1 per week for every person who is out of work. I should describe that as not a lot, but the Secretary of State refused to accept that it was "a piddling sum". It all depends on how one judges a piddling sum—certainly it would not make much of a splash. Set against the needs of the 3 million unemployed it is a piddling sum. Set against the £27 billion cost to the taxpayer of keeping all those people out of work, the 780 million working days lost because of mass unemployment, and the £50 billion worth of lost production of goods and services, it is a piddling sum. That seems to me a perfect description.

The Government claim—let us accept their claim for a moment—that 100,000 people will benefit from what was announced in the Budget. In view of the long history of Government announcements followed by failure to deliver, it is reasonable to assume that what will happen will be less favourable than what was announced. But even if we accept their estimate that 100,000 people will be helped, that means that out of every 30 people out of work, 29 will get not one shred of help from the budget announced by the Secretary of State.

I should like the right hon. Lady to clear up one point now. Is the £125 million really an increase? Is it additional money from the Treasury or money shifted from within her existing budget?

Mrs. Gillian Shephard

There is £230 million in extra money that my Department would not otherwise have had.

Mr. Dobson

The Secretary of State said in her press release on Tuesday that, after the estimated benefit savings, the net cost would be £125 million. She cannot claim that the benefits that people will receive are part of her spending—that is absurd. The figure is £125 million. She acknowledged that on Tuesday, and she cannot change her mind today.

There are other questions for the Secretary of State to answer. What about all those leaks about the brilliant new schemes that she would introduce? There were all sorts of stories being circulated. The 21-hour rule for education and the availability for work rule were both to be relaxed. Massive new programmes were to be introduced to match the scale of the unemployment problem. What went wrong? Why has the right hon. Lady not delivered?

The next question is, as one of the Secretary of State's hon. Friends asked her, why did the unemployed have to wait all that time for what she has now announced? Could not the schemes have been implemented as soon as they were worked out? Why have people had to wait until the Budget? The right hon. Lady has been telling people for months—since July and August last year—that the Department is working on those schemes. Why have people had to wait for the Budget? Was it because that was the only bit of good news that we would get in the Budget? We do not think that provisions for the worst off of the unemployed should be used simply as a propaganda exercise for a Tory Chancellor in trouble.

There are 1 million long-term unemployed people, and many of them would like to do further education courses, but many are prevented by the availability for work rule and the 21-hour rule. The Secretary of State has not changed those rules. All that she has said is that 30,000 of the 1 million long-term unemployed will be able to have places on her new scheme—one place for every 33 people suffering from long-term unemployment.

The Secretary of State has also held forth at great length about how wonderful the business start-up scheme is. Sometimes it is; it does some good work. The right hon. Lady intends to provide 10,000 extra places, but she did not mention that when she has done so there will still be 30,000 fewer places than there were on business start-up schemes in 1989, when fewer than 2 million people were out of work.

The Secretary of State talks about the TEC challenge. That is brilliant—£25 million. Even by the Secretary of State's definition that must be a piddling sum. All the TECs are supposed to compete for the £25 million, and we can safely bet that most of it will be eaten up by TEC and Department of Employment bureaucracies, as bids are submitted, assessed and argued about, and awards are finally made. Furthermore, we know that in the end awards will be made not on the basis of the merit of the application but according to where the Department thinks that it would be best for the Secretary of State to turn up for a photo opportunity—for the county council elections, say.

Then there is workstart. That may be a good idea. Perhaps some of the ideas suggested by my hon. Friend the Member for Birkenhead (Mr. Field) would be a good thing. But the best that we can say about workstart at the moment is that it has not started and that nobody is sure whether it will work. Of the four pilot schemes, two will be run by the TECs, which were originally to be trusted with everything, and two will be run by the Department of Employment, which apparently no longer trusts the TECs with everything.

As my hon. Friend the Member for Birkenhead has always realised, but as Ministers do not seem to realise, the great danger of workstart is job substitution. That is what happens when somebody moving into a job with a big subsidy is cheaper for a firm than keeping on somebody who already works there, so that person gets pushed out to make way for a new cheaper, subsidised worker. That problem must be tackled and the Secretary of State has not yet done so.

The proposal for community action—voluntary work, part time—is certainly not up to scratch compared with the old community programme. It is to he carried out part time and on the cheap.

We recognise that the situation is so desperate that anything seems better than nothing, even when what the Government propose is next to nothing. Nothing is being done to help to create real jobs; the schemes are geared more to knocking people off the unemployment figures than to getting them back to work. That is a betrayal of the people who are out of work.

The jobless have been betrayed, their families have been betrayed, the country has been betrayed and Tory promises have been betrayed. In 1979, the Tories promised to get Britain back to work. Since then, they have failed to get the unemployment total down to the level that they inherited. At the general election, they promised that there would be no tax increases and no cuts in services—now they are to increase taxes and cut services, and they have virtually ignored all those who are out of work.

Labour Members recognise how painful, harmful and hurtful it is to be out of work and that is why we welcome even today's small decrease in the unemployment total. A person who is out of work loses a sense of purpose because, for many people, what they do is what they are. If one asks a child "What are you going to be when you grow up?", the answer is some sort of job. When people lose their jobs, they feel that they are nothing and have lost their place in society. [Laughter.] If the witless loons on the Tory Benches do not understand my point, I shall make it again. It may be that such a question is not asked in the middle-class homes of Conservative Members, but Labour Members are all familiar with the aunt, uncle or neighbour who asks a child, "What are you going to be when you grow up?" The answer given is some sort of job. Children want to be teachers, miners, engine drivers or nurses, because that is how people perceive themselves in our society—by how and where and when they work, and by the status that goes with that work. People who lose their jobs lose their status and that sense of belonging and contribution. They also lose money because when they lose their jobs, they lose their pay, and benefits do not make up for that.

The Government have also been harmful for many of our people. Before the present unemployment crisis began, those policies saddled tens of millions of people with personal debt with which they now find it difficult to cope. When this collection of people who claim to be economically competent took power in 1979, the total personal debt was £74 billion, or 52 per cent. of individuals' disposable income. The latest figures show that people in this country now owe £487 billion, or 109 per cent. of disposable income. It is against that level of debt that people are losing their jobs, so to lose a job now is more hurtful and harmful than it was in the past.

Unemployment is bad for health and even increases the rate of cancer. It increases the rate of suicide, and the likelihood of violent death. A middle-aged man who loses his job has double the chance of dying within the next 10 years. I apologise to anyone who may ask why I do not know the figure for women. Such a figure is not available. However, there is no doubt that unemployment increases illness and premature death, and the country has a Chancellor of the Exchequer who states that unemployment is a "price well worth paying".

Unemployment breaks up family relationships and leads to homelessness, to vandalism, to theft and to violence. It impoverishes whole neighbourhoods and it is the greatest enemy to our democracy. It impoverishes the country as a whole. The Secretary of State has admitted that it costs £9,000 to keep somebody out of work for a year—£27 billion for the country as a whole. In terms of lost production, 780 million working days a year are lost with the present level of unemployment. Unemployment is ruining the lives of 3 million people and their families. It is shackling the economy. Of all the Tory betrayals, the worst is throwing 3 million or 4 million people out of work and then doing nothing to help them.

The whole country is paying the price of mass unemployment, but that is not how the Government see it. To them, it remains a price well worth paying, as the Chancellor said. It is not; it is far too high a price. People want the chance of a job and when they get that job, they want to be paid enough to be able to bring up their families without depending on benefits or handouts from anybody. People do not want a Britain on benefits; they hope for a Britain at work. The Budget betrayed their hopes.

Madam Deputy Speaker

Before I call the next speaker, I remind hon. Members that, although the odd sedentary intervention may be acceptable, repeated sedentary interventions are not. I shall count them as if they were a speech.

5.4 pm

Sir Rhodes Boyson (Brent, North)

All hon. Members know that unemployment is disastrous for the individual and for society. What surprised me about the speech of the hon. Member for Holborn and St. Pancras (Mr. Dobson) was that he did not propose one policy about how to solve the problem. We do not disagree with the last five or six pages of the hon. Gentleman's speech; we all know that. I grew up in Lancashire in the 1930s, in a town where unemployment was higher than it was in Jarrow. Unemployment destroys people. The hon. Member for Holborn and St. Pancras made no suggestions, apart from the growth rate, for doing anything.

There is also no doubt that the deficit, which concerns us all, is linked to unemployment. It costs £9,000 for each person who is unemployed. Getting people back into work is the main concern of everyone in the House. We want the policy that will achieve that in the long term by providing continuing arrangements. The hon. Member for Holborn and St. Pancras said nothing about that.

I welcome the fall today in the level of unemployment. The hon. Member for Holborn and St. Pancras was gracious enough to say that as well. We trust that this is a sign of better times to come in the employment ratio. We shall have to wait for two or three months, but at least the sign of better times to come is there. One swallow may not make a summer, but it is better than having a swan.[Laughter.] I made that up as I went along, and it was not very good. As is usual in my case, I did not know at the beginning where I would finish up, but at least I got to the end of the sentence.

I especially welcome the commitment to the channel tunnel train link coming into London. That will provide employment and will give better services in London and elsewhere. Similarly, I welcome the Heathrow fast link and the fact that, within 15 minutes, it will bring people into London. That will encourage tourism and travel, and will increase employment. I wonder why we are not taking more such decisions. It is almost like the 1930s, although this work needs doing in any case. Perhaps we should make it a proviso that the people taken on should come off the unemployment registers. If we bring people in from outside, we shall do nothing to reduce unemployment.

I wish that there had been a bigger commitment for the crossrail line and for the extension of the Jubilee line, because we need far better public services in London. If we are to have such services, the time to work on them is at a time of unemployment, when we are back to public works. We are all turning into semi-Keynesians who remember the 1930s and the Tennessee Valley Authority. There is nothing wrong with that. Most Conservative Members are very intelligent; if we see that a policy is not working, we change it. I offer such a policy to the Opposition.

In our debates on the Budget, several hon. Members have mentioned people who have been unemployed for two years. The critical time is six months. If people are on the register for more than six months, the day on which they do not get up at their usual time but instead stay in bed is the day from which it will then be difficult to get them properly back to work. We should concentrate on that six-months figure, although I know that there are difficulties.

My next point is not over-cheerful. To enable us to pull out of the recessions of 1929–31, of 1974–75 and of 1980–81, the real interest rate had to be negative or very low indeed. Interest rates in Britain are still too high. That causes us great difficulty in pulling out of the recession. I realise why they are kept at their present level, and the difficulty of reducing them. Let us examine the three previous recessions. Between 1929 and 1931, there were also times when public sector pay increases were negative. We must watch the interest rate if we are to pull out of the recession.

I want now to refer to London. I am a Lancastrian who has lived in London for 30-odd years—an adoptive Londoner. Many people in Britain are not aware how serious the position is in London compared with that in other areas, and I wish to draw the attention of the House to it. Certain parts of London may soon need assisted area status if they are to get through the present recession.

It is my reckoning—the figures are agreed by the London Boroughs Association—that the council tax takes about £200 million out of London and £175 million out of the rest of the south-east. London is treated as a milch cow which makes money for the rest of the country and which can remain for ever a milch cow.

Let us examine the unemployment figures. In my constituency in December 1991, unemployment was 9.7 per cent. In December 1992, it was 12.9 per cent. Unemployment among males aged 20 to 24 is 26.2 per cent., or more than one in four. Brent as a whole had a rate of unemployment of 16.8 per cent. at the end of last year.

If we compare those figures with the figures for the rest of the country, we realise the position that London is in. The comparable figures for unemployment are: Scotland 9.9 per cent., Wales 10.3 per cent., Northern Ireland 14.6 per cent., and the north 12.2 per cent. Yet we are switching money from London to the rest of the country.

Let us take one example. East Kilbride development corporation is advertising in London to persuade employers to move from London to East Kilbride. Unemployment in East Kilbride is 8.7 per cent., while in London it is 11.6 per cent. There is something ridiculous about using Government money to persuade people to transfer their businesses from London, where there is high unemployment, to East Kilbride, which has lower unemployment. I ask my right hon. Friend the Secretary of State for Employment to examine that policy.

Sometimes policies become historic policies which continue until someone puts up a red signal and says, "Hang on, do we know what we are doing and where we are at the present time?" I fear that the pick-up in London may not be as fast as in the rest of the country, because London's industries, especially the financial services industry, will never employ the number of people that they employed in the past. The prosperity of London and certainly of my constituency, which lies within 20 to 25 minutes travelling distance of the City, was built on such industries. For that reason, I should like the extension of the Jubilee line and the crossrail link to be built to bring help to London.

I should like to make a suggestion. I do not know whether it is possible, but one of the privileges of being a Back-Bencher is to suggest things and then blame other people if they do not do them. We must have some privileges from time to time. I wonder whether we could make docklands into a freeport area. To my mind, docklands is the best construction in London since the second world war. If it took off and we got it right, it could almost pull the rest of the country with it.

One must have a sense of confidence when things are built. That confidence can permeate society. We could make docklands the Hong Kong of Europe. I do not refer to the present events in Hong Kong, and I do not suggest that Mr. Patten should be its governor, but we could make docklands a special area. I am worried about the future of docklands. It will be a depressing area of London if we do not get it going faster than at present.

Mr. Tony Banks

I come from the east end, and I am not altogether sure that I would want docklands turned into Hong Kong. I certainly would not want Chris Patten coming back to run it. Could the right hon. Gentleman put some pressure on his colleagues? He and I agree on this point. There is a good case to be made for assisted area status in London. He makes that case, too. He should put pressure on his Front-Bench colleagues. I understand that there are some differences between the Secretary of State for Employment and the President of the Board of Trade. Is the right hon. Gentleman prepared to join all the rest of us in London in making our case to the Government so that we can achieve the assisted area status which he and I support?

Sir Rhodes Boyson

There is no doubt in my mind that the Secretary of State and the Paymaster General are listening carefully. What is the point of asking for a delegation if one is putting one's case on the Floor of the House, where these things should be said? I welcome the fact that the hon. Member for Newham, North-West (Mr. Banks) agrees with me on this point. I always pray for his salvation. We are both Londoners. I spent my first headship in the east end and lived there for a time.

Mr. David Nicholson

On assisted area status, does my right hon. Friend agree that one of the achievements of the recent economic difficulties has been effectively to abolish the north-south divide, and that therefore the massive regional subsidies, which sadly were necessary when the recession hit the north so badly, are no longer necessary? Will he also reflect on the knock-on effect on neighbouring areas of designating certain areas for assisted area status? Such areas may lose investment and jobs as a result.

Sir Rhodes Boyson

My hon. Friend makes shrewd remarks. The risk of all Government intervention is that it will improve one area and make the rest worse. However, at present other areas have assisted area status and London does not, and, to reply in an east end fashion, we want some of the gravy. Otherwise, we shall lose employment. I do not want my businesses to go to East Kilbride. I am sure that it is one of the nicest places in the world—the fact that I have a Scottish wife shows my belief in Scottish blood—but my businesses should not be tempted away to the north

Mr. Geoffrey Clifton-Brown (Cirencester and Tewkesbury)

I can illustrate the point about assisted area status graphically to my right hon. Friend. A firm in my constituency has recently made 350 people redundant, because it has been tempted by assisted area status money amounting to £1 million to move to Wigan. What is the point of putting that number of people out of work in one area merely to put people to work in another?

Sir Rhodes Boyson

My hon. Friend makes a similar case to mine. I am sure that my right hon. Friend the Secretary of State and others are listening carefully, and that, later tonight or tomorrow, they will have meetings about the matter. So we are having a good debate, as we always do in the Chamber.

I do not like big government—that is why I am a member of the Conservative party. When people use their own money, they are much more likely to get it right than a Government committee which goes home and sleeps content because there is no penalty clause if its decisions are wrong.

The percentage of gross national product which goes to the Government has increased from about 39 per cent. to 45 per cent., depending which calculations one uses. I wonder whether we should set a target of reducing Government spending by 1 per cent. every two years to bring it back to its previous level. I am a great believer in targets which can be achieved. It is no good saying that we could do it in a year. But before Government spending runs away with itself, we should set a target of bringing it back in future years to 40 per cent. or 39 per cent.

My next point is a personal one. I do not like the exchange rate mechanism. It was a glorious day when we left the ERM on 16 September. I know that it is the desire of the Government to keep me happy. Obviously, I vote with them more when I am happy. One of the happiest days of my life will be when I hear a commitment that we shall never re-enter the ERM. I am quite prepared to buy a drink for every member of the Cabinet to achieve that. As that might be considered bribery, perhaps I had better take it back. As a Lancastrian from near the Yorkshire border, I would not want to be tempted too far. If that pledge is given in the reply, a great cheer will go up in the English land and unemployment will undoubtedly go down by 1.5 per cent. tomorrow.

Many people have expressed opinions on the application of value added tax to fuel. The Government have to raise money, as they are in a difficult position. I accept that there is VAT on fuel in other countries, and those people who receive social relief of one sort or another will be covered when that is upgraded. Those of us who can pay our bills easily will not be bitter about the increase, but I am concerned about the people in between. I shall describe them in Webbian terms, so that even the Labour party cannot object: they were known as the frugal poor in the 19th century. I am concerned about the people who want to pay their bills—the 1 million people who do not claim, and who were mentioned at Prime Minister's Question Time today.

One cannot meet everyone's needs, but the retirement pension should be upgraded to deal with the increase, as pensioners are at home for most of the time and need the warmth. Many pensioners will pay the full council tax and all their bills, but they have to do so out of a narrow income. I am concerned about the peope who have about £4,000 or £5,000 in the bank, and who hold the old working class belief that one should be able to afford to pay for one's own funeral and to have a decent funeral.

The pension should be upgraded next April and in the statements sent out in October. Many pensioners are in the Conservative heartlands and therefore on political grounds—because I like the Conservative party, including myself, to win elections—and for equity, an increase in the pension should be considered. Upon that matter, I shall retire for today.

5.21 pm

Mr. Jim Cunningham (Coventry, South-East)

First, I must pull up the Secretary of State for Employment on several matters. In answer to an intervention by my hon. Friend the Member for Holborn and St. Pancras (Mr. Dobson), who asked about additional moneys for her Department, she mentioned £200 million. She did not completely answer the question, however, because no one from the Government Front Bench has told us where that £200 million will come from. It sounds to me rather like borrowing from Peter to pay Paul; if that is the Government's intention, they will find themselves in trouble with the Budget straight away when they start to deal with some of the underlying problems in this country. The Secretary of State should clarify that when she replies.

Any dip in unemployment must be welcome but—I hope that the Secretary of State will take note of this "but"—whether the figures increase or decrease depends to a large extent on the success of the Budget and on the decision about the closure of 31 pits. As some of my hon. Friends have said, 30,000 miners' jobs are at stake as well as about 70,000 jobs in industries servicing coal mining, which means that 100,000 jobs are at risk and we must therefore offer a word of caution.

I would never be reluctant to welcome any assistance to the business community, whether to large or small businesses, if it helped to create jobs. Opposition Members have a cautious welcome for measures to help businesses because we want something to happen to unemployment.

Questions should be asked about some of the slogans coming from the Government Benches. Conservative Members keep firing back the question, "What would you do?" This is not a general election; it is the policies and programme that the Government fought the election on that are at issue. Part of their programme was that there would be no increases in taxes or extension of value added tax—so two of those promises have already been broken.

The question of talking Britain down must be dealt with. We are not talking Britain down, but questioning the Government and calling them to account. That is the right of Parliament. We are questioning the Government's handling of their stewardship of the British economy. That is the issue that must be nailed in this debate.

The Budget must be judged against a background of 14 years of ups and downs and "stop-go" policies which were supposed to be coming to an end in 1979 when Lady Thatcher became Prime Minister. In 1979, the Tory party started this country down the road and it has never recovered. Where have those 14 years got Britain? We have just under 3 million unemployed, and as the basis for the figures has changed we do not know the real figure.

Since 1979, the Government have found every excuse under the sun when they have run into trouble. During the 1979 election campaign there was no world recession, but after the Conservatives had won the election they suddenly discovered one. World recession is once again their reason for breaking their promises to the electorate. We know that there is a recession. No one would deny that, but we disagree with the way in which the Government are handling it and about the measures necessary to get us out of it. That is how the Budget will be judged.

The money lenders, who finance the Government, are asking whether it is about time that the Government started to pay some money back before they are given any new borrowings. That is why the Budget will produce about £17.5 billion in taxes during the next two years to start to pay the debt off.

I have listed some of the issues that must be dealt with and for which the Government must be held to account. Despite the late conversion of the Prime Minister to the cause of manufacturing industry, between 1979 and the present we switched investment from manufacturing to the service industries, which were good for a quick return on investment; if one invests in a company such as Rolls-Royce it sometimes takes many years to get a return on the investment. As a result, we lost considerable numbers of jobs in manufacturing industry as we moved into service industries.

Mr. Oliver Heald (Hertfordshire, North)

Last Friday, Labour Members tabled a motion suggesting a cut of £7.5 billion in defence spending. How would that affect Rolls-Royce workers and workers in my constituency who rely on the defence industry? Is that investment in British industry?

Mr. Cunningham

Opposition Members were suggesting that some of the money for defence could be used for diversification into new technological industries. I am sure that if the hon. Gentleman talks to his colleagues and to the President of the Board of Trade and the Minister for Industry he will find that trade unions have made many representations to the Government on the subject of diversification now that the Russian threat seems to be in abeyance, so I shall not fall for that one.

To return to some of the major issues for manufacturing industry, the west midlands, which was the powerhouse of the British economy, has between 11 and 12 per cent. unemployment and some of the old industries have vanished during the past 14 years, especially the "metal-bashing" industries—as we would describe them on the shop floor—such as those which produce motor cars or steel. The Government have been reluctant to do anything to assist Rolls-Royce and Leyland DAF.

Although the Budget contains some measures to assist development and help with development costs, it contains nothing major to assist our manufacturers to develop either new projects or projects that they already are working on. Anybody who knows anything about manufacturing industry knows that a good percentage of costs, outside of wages, are incurred by development projects.

Coventry, the west midlands and the rest of the country are suffering from the "accumulative factor"—the problems that come with high unemployment. I have already said that the unemployment rate in the west midlands is about 11 per cent. Coventry has been saddled with high unemployment—in a city to which, 30 years ago, people came from all parts of the country and the world for employment and it was able to absorb them. Today the population has dropped from 350,000 to 300,000, which reveals the flow of people from the city because of lost job opportunities.

Coventry has lost 50 per cent. of its manufacturing industry. Household names in the motor industry, such as Standard Triumph, Rolls-Royce and GTP, are running down their operations and have made systematic redundancies. The Government have done nothing to help them.

Our assisted area status is under threat. We shall not know its fate until the outcome of the President of the Board of Trade's review of the mining industry is known. Again, the Government are taking money from Peter to pay Paul. That is an issue of great concern to the local people.

The Budget does nothing to address the plight of the homeless and old age pensioners, who need approximately £200 a week to live on. The right hon. Member for Brent, North (Sir R. Boyson) mentioned the 1 million frugal poor, to use the Webbian expression. Those people and old age pensioners in their twilight years deserve a certain level of income to survive and should not be subjected to means tests by the Department of Social Security. There are problems with disablement benefit for those pensioners who are disabled. These people need assistance with their fuel bills.

One-parent families and those in employment whose income does not entitle them to receive extra assistance are the people who will be affected by the extension of VAT, and they will struggle.

It is interesting to note that the Budget signals the extension of the imposition of VAT. There is no doubt about that. In the next few years, pay-as-you-earn will be phased out and VAT phased in by the Government. We have had another signal—although the Prime Minister denied it today—that assistance with mortgages is to be phased out. People should have no illusions about that.

As a result of the Budget, the urban aid programme will be cut, which will lead to the loss of 30,000 jobs throughout the country and 200 jobs in Coventry. That programme trains people and it helps community relations by helping the ethnic minorities either to start their own businesses or to apply for jobs. Such help will be hit badly in inner cities as a result of the Budget. The safer cities initiative will also be abandoned. That suggests to me that areas such as my constituency—with high unemployment among young and middle-aged people and many one-parent families—will be abandoned. They will have fewer employment prospects and the opportunity to improve their quality of life will diminish. One-parent families in inner city areas will suffer most because they will be deprived more.

I have considered the economy and how it will affect our manufacturing base. We know that the Government will be remembered for the Budget. It has nailed the lie that they are the party of low taxation and low unemployment. In reality, they represent the extension of taxation, high taxation, new taxation and high unemployment. They are the party who claim to support industry but, when it comes to demonstrating it in the Budget, they give it very little support, as witnessed recently by the great industries of Coventry and the west midlands which are being run down because they have been denied Government assistance.

5.35 pm

Sir Michael Grylls (Surrey, North-West)

The speech by the hon. Member for Coventry, South-East (Mr. Cunningham)—bearing in mind his constituency—understandably, and rightly, centred to some extent on manufacturing industry. There would be no difference between hon. Members on both sides of the House that that is a vital part of our economy. The criticism and implications, however, about a massive retraction in manufacturing industry almost suggest that people are living in an isolated state, locked up in a box and cut off from the rest of the world.

If one is honest about our own country, we have seen our manufacturing base get narrower over the past 100 years. That started to happen almost immediately after the industrial revolution, and it was quite natural, because other nations wanted to build things for themselves. We could not for ever be the workshop of the world.

That process of retraction has occurred in other countries. In the United States, service industries account for nearly 70 per cent. of the economy, in Germany and France they account for more than 50 per cent. and 40 per cent. respectively. In Britain, those industries account for 60 per cent. of our economy. That trend has affected the older workshops of industrialised countries, because other countries want to make their own things.

Such changes present us with massive challenges. This debate rightly has focused to a large extent on jobs. The big worry shared across the House—it should not be a party issue, but, as my right hon. Friend the Member for Brent, East (Sir R. Boyson) said in his excellent speech, it should be bipartisan—is, how do we create the jobs? How do we help the private sector to create jobs? The challenge is that there are very few things we make in this country—or, for that matter, in any of the G7 countries—that cannot be just as well made in India, China and Vietnam, where the average wage is about $50 a month.

The challenge is how we compete with such economies, unless we are prepared to live in a box and see ourselves living in a lovely country while doing no trade. That would not be practical. How do we maintain employment? The transformation in manufacturing industry—this applies to the other G7 leading industrial countries—has meant that each country has focused on what it does best.

I am sure that the hon. Member for Coventry, South-East will agree that our car industry has expanded recently. It was run down in the 1970s, and it is now having a renaissance. We are now building 300,000 more vehicles a year than we were five years ago, but the companies are employing 100,000 fewer people. In the United States, Motorola has doubled its business but halved its work force. There is nothing essentially British about this problem. It is worrying, but the challenge—which is better than worrying about it—is how we deal with it. We can only deal with the challenge by being the best in a smaller number of industries than we had 130 years ago. We are the best in pharmaceuticals; we are a leading country in chemicals and in aerospace. We now have massive motor car production that we did not have a few years ago. The balance of trade in television sets is now in our favour—we are exporting a great many of them. We are good at all sorts of other high-technology industries.

I can remember when, in the mid-1970s, British Steel, then a nationalised company, came before a Committee of the House to announce that it was losing £500 million a year. It was a disaster. Then it was privatised and turned around. Until the economy started turning down two years ago, British Steel was making nearly £500 million a year profit and paying about £200 million a year into the Exchequer in corporation tax—to pay for important things such as social services.

We have a great many success stories but—we must face the truth and deal with it—on a much narrower front than ever before. Now we must build on that.

This is not actually a debate about manufacturing industry; it is a debate about the Budget, so I shall return to that. I have been struck by the fact that some people rejoice in picking out negative elements. They are the sort of people who refer to traffic lights as stop lights. I refer to them as go lights. Perhaps hon. Members think that I have flipped my lid by using that expression, but it is certainly more positive. Let us concentrate, therefore, on what has been positive in this Budget.

First, the Chancellor has rightly and determinedly set about dealing with the deficit. That cannot be done without considerable pain. Certainly, some people will not like the additional payments that they will have to make over the next few years to help to get the Budget into balance again—but there is no gain without pain. Let us face that fact and try to be positive about it.

My right hon. Friend the Chancellor has been more unfairly criticised than any Chancellor I can remember. I would only remind him that we never put up statues to critics. Walking around London, we observe that the statues are put up to the doers and the achievers. I believe that our Chancellor has achieved a great deal. He has set in train tough policies to resolve the temporary problem of the deficit.

It is childish to debate whether someone said that we had no plans to increase indirect taxation or VAT. That is so idiotic as to bring politics into disrepute. Governments are in place to deal with challenges, not to worry about trivial debating points which have no bearing on anything.

Mr. Jim Cunningham

There is nothing childish about it. The British people are being taxed to the tune of £17 billion to claw back the money that must be borrowed. Why were the British people not told that before the election? Does the hon. Gentleman agree that the Government obviously knew it then?

Sir Michael Grylls

The hon. Gentleman is clearly more perspicacious than any Government, and can see around every corner. After Governments are elected, events happen. What are they to do then—sit on their hands and claim that they did not say in the election that they might have to put up VAT? Should they disclaim responsibility for the problem?

Mrs. Anne Campbell (Cambridge)

During the election campaign, the Chancellor said on "Channel 4 News': We will not have to increase taxes. I cannot see any circumstances in which that will be necessary. Does the hon. Gentleman agree that that was a very firm statement?

Sir Michael Grylls

I do not want to be discourteous to the hon. Lady, who has made a fair point according to her lights, but she is being a little nit-picking. No one—certainly no one in the Labour party, and no economic pundit—knew how long the recession would last. What was the alternative? Would she have liked the Chancellor to tell the House that, because he had said two years ago that he had no plans to increase VAT, he would not do anything now—that he would let the deficit rise, the currency fall and inflation start again? I believe that the Chancellor did the honourable and right thing for the country: that is what he is there for—

Mr. Illsley

He should resign.

Sir Michael Grylls

That is ridiculous. He is there to serve the country and to do what is best for it. He is there to solve problems, not to throw up his hands and ignore them.

Mr. Clifton-Brown

Does my hon. Friend recognise that even the Clinton Administration, so revered by Opposition Members, have had to revise their taxation and spending plans in the light of the current and worsening economic situation in which they find themselves?

Sir Michael Grylls

That is certainly true, but I fear that you, Madam Deputy Speaker, would quickly admonish me if I started discussing the Clinton Administration.

The strategic point that our party has always made is that we believe in indirect taxation, not direct personal taxation. That is what the Chancellor has done. Although he has had to put up some indirect taxes, for reasons that I have tried to outline, he has also managed to reduce direct personal taxation for 1 million people who really need help, and I honour him for so doing.

Mr. Heald

Does my hon. Friend agree that one circumstance that has changed since the election is the Government's commitment at the Rio conference to spend considerable amounts on improving the environment? That was not known at the time of the election, but it has to be paid for. Is it correct that, today, the hon. Members for Islington, South and Finsbury (Mr. Smith) and for Peckham (Ms Harman) both refused to say that they would remove the extended VAT? Those remarks were made in the course of media interviews.

Sir Michael Grylls

I hear what my hon. Friend says, and it is a good point—but I am being tempted now in all directions. Forced to choose between the United States and Rio, I would prefer to go to Rio, on balance.

An outstanding feature of the Budget that has not had nearly enough attention was what it did for small independent businesses. This really was a five-star Budget for owner-managed businesses, which are the lifeblood of our country, as 90 per cent. of our firms come under that heading. The Chancellor's substantial changes will be extremely helpful.

There have also been changes in the Government-backed loan guarantee scheme. When it was introduced in the 1980s, it was not a perfect scheme, but the Chancellor's changes will make it much more effective. He has raised the limit to £250,000 to bring in more medium-sized firms, and he has reduced the premium to 0.5 per cent. The old scheme offered only expensive money, and in addition there was a 2.5 per cent. premium, which will be reduced to 0.5 per cent. Obviously it will be much less expensive for firms to borrow.

It is important that we give support through such schemes to smaller or medium-sized firms. It should be understood that, as the economy begins to grow, those firms will need extra money to buy stock, to expand, to innovate and to service their customers. If the banks cannot provide the necessary moneys, smaller or medium-sized firms will not be able to respond to growth within the economy.

It is encouraging that there are positive comments about the Budget. The chief executive of Midland bank, Mr. Pearce, has said that the extra support available through the loan guarantee scheme will further help banks to support economic recovery and create jobs in industry. Midland bank has provided about £150 million to about 7,000 firms since the scheme started. There has been a similarly positive response from Mr. Wanless, the chief executive of NatWest bank. It is encouraging that the banks are reacting positively to the extension and improvement of the scheme. It is one of the most important features of the Budget.

Similarly important is the removal of capital gains tax for entrepreneurs who want to leave one business and go into another. They are locked into their businesses with 40 per cent. CGT. That meant that, if they sold up, they had only 60 per cent. of the proceeds to put into a new business.

Many people in Britain, as in America and other developed countries, enjoy building a business but do not enjoy so much the running of it. They like to create a business and build it up, and then let someone else take on the running of it. They then move on and start another business. We must not have a tax system that deters such people from taking that course. After all, they are the creators of wealth and jobs. It is extremely important that my right hon. Friend the Chancellor has removed CGT for those people.

When more money is available to enable us further to reduce taxes, I hope that, within the lifetime of this Parliament, we shall see the abolition of CGT. Like most capital taxes, it distorts business decisions. In a proper free market enterprise economy there should be no place for such a tax. Let us say thank you for the progress that has been made.

I know that my right hon. Friend the Secretary of State for Employment will appreciate from her experience as a Minister and as a Back Bencher that, all too often, value added tax enforcement officers adopt an overbearing attitude. That has been a real cause for complaint for millions of self-employed people and for those running small businesses. They have been chased around for trivial sums. They have made small, genuine mistakes; they have not tried to cheat the Exchequer. Those who cheat must be chased, but I am talking about those who make genuine and perhaps simple mistakes while trying to run their businesses. In other words, they have to do everything.

There is no doubt that the VAT enforcement procedures in the United Kingdom are much tougher than elsewhere. I hope that the review that my right hon. Friend the Chancellor has undertaken will bring us in line with other countries. We do not necessarily want to be as loose as some, but in France, for example, business people are not chased around for trivial sums. I hope that the changes that will be made after the review has been completed will be helpful.

Another deregulatory measure is the proposal to abolish the statutory audit for small firms. There never was a real argument for it. I know, of course, that some bureaucrats approved of it. Some officials in the Inland Revenue and the Treasury liked it. It has been convenient for them, but that is not the way in which the Government should run things. We must consider what is best for the customer, which in this context means the small firm.

My right hon. Friend the Paymaster General, who is on the Government Front Bench, was a distinguished Minister with responsibilities for small businesses. He did a wonderful job in that office. I think that he will recognise that the abolition of the statutory audit can do nothing but good. An accountant will often charge about £1,000 for the audit, and that money will be much better spent in obtaining consultancy advice on how a firm can be run more efficiently so that more wealth can be created.

Important also is the freezing of the uniform business rate. There is no doubt that the UBR has borne heavily on smaller firms during the downturn in the economy. We know that the reform was important, and I believe that it was right. It had to happen. However, when demand dropped, the going became extremely tough, because everything happened at the same time. The freeze will generally be welcomed. I believe that it will help about 800,000 small firms. That is a big feather in the Chancellor's cap.

This is a five-star Budget for smaller firms. It will give great relief and encouragement. The loan guarantee scheme will prepare the way for firms to prosper and grow as the economy grows, and I view it with great optimism. I hope that others will throw away their negative approach and take account of the positive features of the Budget, which will help the country enormously.

Several hon. Members

rose—

Madam Deputy Speaker

I remind the House that between 6 pm and 8 pm there will be a limit of 10 minutes on speeches.

5.56 pm

Mr. Matthew Taylor (Truro)

Less than 24 hours after the Chancellor of the Exchequer's Budget statement I had a phone call from Cornwall. I was told that the old, the poor and the sick were calling at a drop-in centre in floods of tears as a result of what they had heard about the rise in fuel bills following the imposition of value added tax. I was told that they did not know how they would meet the extra charges. Those people are among the most vulnerable in our society. They are the people who have been most betrayed by the Budget, which breaks promise after promise that the Conservative party made when it fought the general election only a year ago.

The hon. Member for Surrey, North-West (Sir M. Grylls) spoke about a five-star Budget for business. I shall present another response to the Government's economic record from someone who ran a small business that had been in the family for many years. It employed many people in my constituency. I received the letter in the second post today and I opened the envelope shortly before I entered the Chamber to participate in the debate. I shall not reveal the name of the person who wrote the letter. However, she said that she wanted her concerns highlighted. Part of the letter reads: It has taken the receiver appointed…just four weeks to finish us. I have to accept the fact that the Company has gone, a lifetime's work and what have they gained? The stock half sold off, the rest going to auction… We had never laid off a single employee, one was retiring due to age, but I prided myself on the fact that I worked hard to keep everyone going… We are looking for a small shop to rent or lease. That is for the son, who had 25 years of employment in the company. I understand from the letter that he is at risk of losing his home. That is in addition to the fact that he has lost his profession and the family firm. The letter continues: But of course to stock it"— that is, the shop— would cost an awful lot of money and I have literally lost all mine. I realise now that I was silly to put so much into the business but I had so much confidence in the coming year being better and the future being brighter for all… I shall take a back seat now, it's all been too much for me. I am puting my house up for sale". That is the reality of the background to the Budget. That is the reality for businesses as well as for individuals who have been hit by tax increases. The letter makes it clear that part of the problem is that only 11 months ago, during the general election campaign, the Conservative party talked of recovery that was in place, not one that was to come. It fooled many people, especially those in business, and, as a result, they took decisions that have led to situations of the sort that are described in the letter that I have quoted.

That is the background against which we debate the Budget—not the City's reaction, not what the pundits say, but the hard reality for ordinary men, women and families who are being asked to pay for the Government's mistakes. This is a Government who do not blush to say one thing, when they want to win an election, and do quite another when they are back in government.

It is extraordinary that, today, as in the past couple of days, Conservative Members have repeatedly justified the Chancellor's position by claiming that he did not say what we all know he said during the general election campaign. Had they apologised, the British people might have understood, but they cannot understand a Government who pretend that they did not say what the British well remember being told at the time of the general election.

There are two great tests of the Budget—how well it faces up to the needs of the British economy and the British people, and how it matches up to the easy promises of the Conservative manifesto. Despite the pledges that Conservative Members have made year after year about reducing taxation, the reality of the Budget is increased taxation—not just the extension of VAT to fuel and power, hitting worst the old, cold and poor, but the increase in national insurance, which is nothing less than an increase in the effective rate of income tax, and hits those on low incomes most and those on high incomes least.

How does the Budget stand up to the first test? The proposals have done nothing to encourage consumer confidence. They are likely to make many people worse off and to discourage precisely the spending that is needed to get us out of the recession. Many of the plans are not to be implemented for a year, but that will make precious little difference to families who are struggling now. They will simply realise that they are likely to be struggling even more next year.

Mr. Nigel Evans

As the hon. Gentleman started his speech before 6 o'clock he will have a few more minutes in which to speak than most of us in the Chamber. Will he do something for the House today that the Labour party has signally failed to do, and that is to tell the House something about the policies that his party would have introduced had it been in power?

Mr. Taylor

I shall be saying something about our policies and it will be the same as we said at the general election. We can say with some pride that we told the truth at the general election, whereas the hon. Gentleman and his colleagues did not. I shall be contrasting those positions.

Great swathes of the Conservative party manifesto in 1992 were about the priority of low taxation. It proclaimed: A lightly taxed economy generates more economic growth". It also said: High taxes kill the goose that lays the golden eggs. That goose was pretty well laid out before the high taxes were introduced. Goodness knows what the Conservatives who fought on that manifesto think is the position now that taxes have been increased in the Budget.

That was in 1992. In 1993, the view seems to have changed. Apparently, economic recovery is achieved through higher taxes. The Chancellor claims that a Budget that increases tax is a Budget for recovery.

In some parts of the country the position is even worse. Already, in Cornwall, consumers pay electricity bills 8 per cent. above the national average and rising at a faster rate than the national average. That situation will be worsened by plans for regional discrimination in electricity charges, with consumers living further from generating stations paying more. As if that were not enough, there will now be the added blow of VAT, making the price differential even greater.

Every time that I write to Ministers about regional pricing policy for electricity and gas, they refuse to meet me and local business representatives, saying that it is not their responsibility because the electricity and gas industries have been privatised. But who privatised the industries? It was none other than the Conservative Government and Conservative Members. Who approved the regulations that led to the price increases? It was none other than the Conservative Government and Conservative Members. The Conservatives were happy to promise that privatisation would be in the consumers' interest, but they wash their hands of the matter when it turns out to mean higher bills.

The Government cannot wash their hands of the VAT plans. They will not be allowed to, certainly not by people in my area, the poorest county in the country, who are backing the Liberal Democrats' Fair Deal campaign which is campaigning for fair water and electricity prices for Cornwall, let alone cuts in the national average.

It is not as if VAT on fuel and power would do much to help the environment—the great justification that we heard from the Chancellor. He is putting VAT not on pollution, but on all energy. It does not matter whether it is from a coal-fired power station or from one of the wind farms in Cornwall. Nor is the tax imposed on the fuel that an individual consumes; otherwise there would not be the VAT imposition on the standing charge. There is no way that that can be sending a message to cut back on the use of polluting energy sources.

The west country has also seen huge increases in water charges, way above the national average, so that 3 per cent. of the national population has to pay for one third of the country's coastal clean-up programme. That is nothing other than a tax. It happens to be a selective tax, imposed on some of the poorest people in the country, to clear up a national asset. Without privatisation, that would more clearly have been a tax. It is another way in which the Government's policies are imposing a greater burden on those whom I represent.

Throughout the general election campaign, I and fellow Liberal Democrats were attacked by Conservatives for our plans to increase petrol prices. Conservative leaflets and Conservative canvassers frightened voters by saying that Liberal Democrats planned huge rises in petrol prices. They did not mention that we planned to phase the increases or that we proposed compensation for people in rural areas and extra investment in public transport. Those were our policies on which we were proud to fight. We told the truth about what they would cost and we explained our reasons and how we would help people with the burdens.

Meanwhile, Conservatives campaigned against the increases that they are now introducing in their Budget only 11 months later, and they offer no help to rural areas and no investment in public transport in rural areas. It is all take and no give with this Conservative Budget. Most significantly, at no point in the last election did any Conservatives mention that they would increase petrol prices by more than we proposed in our manifesto.

We also campaigned honestly on mortgage interest tax relief. We said that it needed reform in order to give more help to first-time buyers and people who are renting in the private sector, and less to those who already have a lot and are simply looking to move up the market, buying ever-larger houses with help from the taxpayer in the process.

Again, Liberal Democrat plans for reform were attacked by the Conservatives at the election. But now, rather than reform the system, they just cut mortgage interest tax relief from 25 to 20 per cent. So much for encouraging growth in the housing market. So much for the Conservative party arguing that Liberal Democrats would hit mortgage payers, when the truth was that only 11 months later it was the Conservative party which would introduce a cut in mortgage interest tax relief.

One year after the Conservative election victory, we are confronted with the betrayal of their promises on taxes on income, on increases in VAT, on petrol prices and on mortgage interest tax relief. What hypocrisy. What deceit of voters who must be left wondering who they can trust. I am sure that in the county elections in May and in the Newbury by-election it will be clear that the last party that voters are prepared to trust ever again is the Conservative party.

6.10 pm

Mr. David Lidington (Aylesbury)

I am grateful to you, Madam Deputy Speaker, for allowing me to make a short contribution, particularly on a day when we have learnt that unemployment in my constituency of Aylesbury has fallen by nearly 3.5 per cent. That is very welcome news because, although in my constituency the rate of unemployment is below the regional and the national average, it is higher than the rate to which local people have been accustomed in recent years. If I agree with nothing else in the speech of the hon. Member for Holborn and St. Pancras (Mr. Dobson), I agree with his analysis of what to be unemployed means for the individuals and families directly affected.

I welcome the measures in the Budget because I believe that they provide the right framework for the creation of permanent jobs and sustained economic growth. I particulary welcome the employment package that my right hon. Friend the Secretary of State dwelt on in her speech today. Representing a constituency which relies on small and medium-sized employers, I give as warm a welcome as did my hon. Friend the Member for Surrey, North-West (Sir M. Grylls) to the measures on the value added tax threshold, capital transfer tax relief, the way in which Customs and Excise deal with VAT defaults and the other measures aimed at supporting and assisting small business to get on with generating wealth and creating new jobs.

I believe, though, that to bring unemployment down to what any hon. Member would regard as anything like an acceptable level will not be an easy task which can be quickly accomplished. That is partly for reasons which my hon. Friend the Member for Surrey, North-West spelt out. We are seeing a shift in the international patterns of industry and trade. Within this country and the rest of the industrialised world, technological advance will mean a demand for different sorts of skills. Large companies, in particular, are approaching their business in a different way, contracting out many of the functions that they once carried out in-house.

None of these long-term and, I believe, irresistible changes in the international economy can be ignored. I was therefore very glad to see that my right hon. Friend's employment package gave considerable weight to the idea of training and retraining people who have become unemployed. Only if we have a skilled, flexible and adaptable work force shall we be able to help people into more permanent employment.

I found the vision of the hon. Member for Holborn and St. Pancras so out of date when he talked in that rather moving, grandfatherly fashion about the ambition of a young boy to become an engine driver, or a doctor. In my case it was a zoo keeper initially, and some people might say that I was on the verge of achieving my ambition.

The truth is surely that in an economy, both global and national, which will be subject to rapid and frequent change we have to say honestly to people that they must expect to have to change not just jobs but career paths at different times in their lives, and that for some people the pattern of the future may be not to have one job from 9 am to 5 pm five days a week, but to have perhaps a portfolio of two or three part-time jobs. We must therefore adjust our social policies and our policies regarding tax and benefits accordingly.

I support the words of some of my right hon. and hon. Friends earlier in the debate, in particular the remarks of my right hon. Friend the Member for Guildford (Mr. Howell) earlier this week, when he said that we would have to keep the unemployment figures announced this week under review to see whether they should be extended to greater numbers of the unemployed in the future. As I have said, I do not believe that this problem of unemployment is capable of quick or easy solution, and I believe that that is the realistic view of most of the British public, too.

Referring briefly to a constituency interest, I warmly endorse the remarks made by my right hon. Friend the Member for Brent, North (Sir R. Boyson) about the crossrail project. I, too, feel that I can give two cheers at the Government's announcement, but I wish that a firmer commitment had been given. I believe that Aylesbury's recovery from the recession is under way, although it is fragile, but every analysis carried out by local authorities in the area or by the local business community points to the urgent need for improved transport communications as a condition for getting that recovery fully under way and enabling my constituency to compete with other industrial towns in the south-east, such as Wycombe, Banbury and Reading.

Crossrail will not benefit my constituents alone; it is an important connection between the channel tunnel link running into Stratford and the rest of the railway network. Now that the Government have decided that private sector money should be involved, I hope that they are prepared to be more ambitious even than under present plans. Let us look at extending the new electrified high speed line beyond Aylesbury to Milton Keynes, and perhaps to Birmingham and further north. That would be a project of which the country and the Government could be proud and which would not only provide many jobs for people who now lack them but contribute in the medium term to the greater prosperity of the country.

My right hon. Friend the Chancellor had a difficult balancing act to carry out this year. The initial reaction to the Budget that I have been picking up from businesses in my community is that he has struck the right balance and taken the necessary action to correct Government over-borrowing while at the same time, through micro-economic measures, ensuring that the incipient economic recovery is not just allowed to continue but is sustained and encouraged.

For those reasons, I shall be glad to give the Budget my support in the Lobby.

6.17 pm

Mr. Jim Dowd (Lewisham, West)

The two sounds that were heard most clearly on Tuesday when the Chancellor was making his statement were the sound of hon. Members dozing off in all parts of the House and the sound of chickens the size of jumbo jets coming home to roost.

When I heard the Chancellor, or somebody sounding very much like him, on the "Today" programme yesterday morning saying again—and I am assuming that he was reading—that the Conservative party is the party of sound finance and balanced books, I could barely credit my ears. Towards the end of the interview, when asked whether he was doing the best he could for the British people by being Chancellor of the Exchequer, he said that that was his duty: to serve his country. Then we came here yesterday and heard the Chief Secretary speak at one stage about the duty of responsible government. Obviously, the Government disinformation machine theme for the day was duty. When I reflected upon that, I thought of something that Bernard Shaw once said: when a stupid man is doing something of which he is ashamed, he proclaims it to be his duty.

We have had for the past 15 years an unabashed, unalloyed spate of irresponsible government. We have had an economic miracle, we are told. I will not go over the ground covered by my hon. Friend the Member for Holborn and St. Pancras (Mr. Dobson) concerning North sea oil, because it would pain Conservative Members too much, and the truth has a limited effect upon them; they cannot quite see it.

The waste of over £100 billion in North sea oil revenues pales into insignificance beside their real failure. They really are economic idiots of quite supreme proportions. That is evident from what they have done with the proceeds of privatisation. I am not arguing about the rights and wrongs of privatisation, but I must stress to the imbeciles on the Government Benches that every organisation, large or small, public or private, will inspect its capital portfolio to ensure that it is working to the benefit of the organisation.

Mr. Lidington

On a point of order, Mr. Deputy Speaker. Is the word the hon. Gentleman used in his last sentence parliamentary?

Mr. Deputy Speaker (Mr. Geoffrey Lofthouse)

It is not out of order, but I would advise the hon. Gentleman that it would be wise not to use such words in the Chamber.

Mr. Dowd

I certainly accept your guidance, Mr. Deputy Speaker. I reassure you that it is a word much used in south London, particularly when talking about the Government, but none the less I apologise.

The Government's most elementary mistake was to use the proceeds of capital sales to fund revenue. Everyone knows that that is the path to bankruptcy. The figures now emerging on Government borrowing show what is happening. Today's papers show that the Chancellor has not even covered his current spending commitments with the tax raising that he announced yesterday. It is the first time in British history that our affairs have been so chronically mismanaged.

A local authority would be prevented from attempting such a strategy, and a commercial organisation would be prosecuted for attempting to trade while insolvent. That is the strength of the Government's addiction, like junkies, to selling off public assets and using the money to fund revenue.

Last month's PSBR was the second worst monthly figure in history. It was managed only by the proceeds of privatisation. Again the Government were selling off capital to fund revenue—the economics of idiocy. Now that they have to face the consequences, they are looking for any possible opportunity to sell off their remaining BT shareholding, and even the national picture collection is under threat.

What happened to the marvellous vision of the Lawson years when we had PSDR—public sector debt repayment? We had got into a virtuous cycle in which the Government could do no wrong because, as they understand it, they had transformed economic law. However, the way in which they understood was not how the rest of the world understood it. They were deciding how much of the public debt they were going to repay each year, and they thought that they had structured the finances and affairs of the nation so well that it would go on indefinitely.

I remember some of the financial journalists, who are the alleged experts on these matters, writing articles saying that the Government's choice for the 1990s was how they would dispense all that largesse and what they would do with the phenomenal surplus that had been achieved. But it was all an illusion. The Conservative party did not know the difference between a vision and a mirage, but pursued it nonetheless.

Let us look at the Government's recent experience. We are now told repeatedly about lower interest rates and the competitive exchange rate. Although the pound goes up and down week by week, the exchange rate is declining. If lower interest rates and a competitive exchange rate are such marvellous attributes of the British economy, why did the Chancellor and Prime Minister spend billions of pounds of public money and a great deal of time and effort attempting to prevent them from happening? They did not have a clue what economic policy they were following then, and the same is true now.

What is the Prime Minister's response? He says that we are talking Britain down. That ludicrous notion is an example of the Government blaming the messenger because they do not like the message. The Prime Minister must understand that an inane grin and a puerile cliché cut no ice with people who have been hurt by the impact of the recession. Although he and his toadying colleagues on the Back Benches may readily parrot such claptrap, it cuts no ice and although they may have a capacity for self-defence that knows no bounds, it is not shared by the British public, who know exactly who to blame.

The central theme missing from the Budget is unemployment. I speak on a day when, for the first time, unemployment in my constituency has risen to more than 7,000—and ours is by no means the most deprived part of south London, or of London in general. Some 17.5 per cent. of all the economically active adults in my constituency are unemployed.

I received a letter from a woman in Catford saying: This letter is about a problem shared by thousands of parents. Our eldest daughter is coming to the end of her three-year degree course in geography. Despite numerous applications, she has no hope yet of any kind of employment. My constituent wrote that her daughter applies for jobs but she has no experience, and because she has no experience she cannot get a job, so she cannot break the vicious circle. The only thing that has been recommended to her is a postgraduate course entirely at her parents' expense, but that is totally beyond them, as they have three younger daughters to provide for. The situation is depressing and upsetting the family.

I wrote back to my constituent, and I wrote to the Secretary of State for Employment, enclosing a copy of the letter and saying: I would be most interested in your response, and any suggestions you may have to assist Mrs. Scutt's daughter to make the best use of the expensive education which she has acquired. I received an answer from Viscount Ullswater. I do not know who the superannuated peers are who do correspondence for Secretaries of State, but I suppose that it keeps them off the streets. However, if I had wanted to write to Viscount Ullswater, I would have written to him and not to the Secretary of State. The reply stated: Viscount Ullswater has asked me to thank you for the letter to Mrs. Shephard enclosing correspondence. As the matters raised fall within the responsibility of the Employment Service, which is an agency, I have passed on your letter to the Chief Executive. The Secretary of State had no idea how to respond, and could not care less. The response to my letter represented a total abdication of political responsibility, for which the Government have shown such scant regard recently.

Unemployment is not simply cutting people off, as my hon. Friend the Member for Holborn and St. Pancras said. It not only undermines people's ideas of their self-worth; it is also the most important part of the engine of wealth distribution in Britain.

I shall draw my remarks to a conclusion. Although I am sure that Conservative Members would like me to go on all evening, I shall resist the temptation—

Mr. Deputy Speaker

Order. Mr. Peter Ainsworth.

6.27 pm

Mr. Peter Ainsworth (Surrey, East)

This is an encouraging day for jobs. It is a good Budget for jobs and it is good for the economy as a whole. I fear that it is a bad day for the Opposition, who have yet to produce one positive idea about what they would have done if confronted with the problem that faced my right hon. Friend the Chancellor of the Exchequer as he was preparing his Budget.

The key problem was clear and substantial—how to recognise the twin imperatives which in economic terms confront Britain's economy at the end of this most difficult recession. Those imperatives are the need to foster recovery and economic growth and the need to address the budget deficit, which in the medium to longer term represents a major threat to economic stability and to confidence in Britain at home and in the international markets.

I am convinced that my right hon. Friend has reached the right solution. He has, in effect, given precedence to growth. The onus of the tax increases announced by my right hon. Friend will fall substantially in 1994–95 and beyond, at a time when all leading economists, including those in the European Commission, are expecting a more vigorous growth trend to be established. The impact of the tax increases will then be more easily absorbed.

Some, including my predecessor in Surrey, East, my noble Friend Lord Howe, have argued that more immediate action to reduce the deficit was required, both in terms of increasing taxation and reducing public expenditure. I shared that view, which was put forward earlier in the debate by my hon. Friend the Member for Esher (Mr. Taylor). Having had time to study my right hon. Friend's Budget, however, I have reconsidered the point.

The prime objective for this Government, as for any Government, must be economic growth. Economic growth underpins the ability to pay for our public services, such as schools and hospitals; it enables businesses to invest and prosper; it stimulates new jobs and underpins the ability of my right hon. Friend the Secretary of State for Employment to introduce the package of measures which form part of the Budget.

It is not taxation which does those things. Taxation merely redistributes money which other people earn. It may be argued, however, that the ability to tax is dependent on economic growth, so my right hon. Friend the Chancellor is right to adopt a neutral fiscal stance for the coming year and to build on the series of measures in his autumn statement aimed at fostering the economic recovery which is taking place even now, as recent evidence from industry and the retail sector illustrates.

Although there is mounting evidence of a more prosperous economic climate, to which my right hon. Friend the Secretary of State for Employment referred in her speech, imposing a significantly heavier tax burden in the coming year could have stifled recovery and been profoundly counter-productive. My hon. Friend the Chancellor has performed a finely poised balancing act and has built in additional flexibility and room for manoeuvre if circumstances turn out, as they have a habit of doing, to be different from those expected.

On that point, provided that a firm grip is kept on public sector spending, my right hon. Friend and his advisers in the Treasury may be under-estimating the extent of the recovery in the medium term, and may be erring on the side of caution in respect of the public sector borrowing requirement deficit in future years. Let us hope so, for at 5.5 per cent. of gross domestic product in 1995–96 the forecast PSBR burden is still daunting. Indeed, looking over the next four years, the total PSBR is forecast to be £86 billion higher than the total projected last year for the same period. Therefore, let no one underestimate the difficulties that we face.

As I have said, however, I believe that that forecast may be unduly pessimistic. First, it is conceivable that growth will exceed expectations. For example, the growth forecast for 1992, made by my right hon. Friend as late as his autumn statement, has already proved to be 0.5 per cent. too gloomy. Secondly, we have every reason to be confident that my right hon. Friend the Chief Secretary, in his review of public spending, will not baulk at taking the difficult decisions which circumstances demand. That will be vital to underpin the restoration of a sound and balanced economy.

On a specific point, I give an especial welcome to my right hon. Friend the Chancellor's proposals to reform advance corporation tax. I detected the fluttering of eyelids as my right hon. Friend moved into that part of his speech on Tuesday; none the less, his proposals represent a significant and welcome reform. The present system, which has caused British-based firms with substantial overseas earnings frequently to end up with an ACT bill on their dividends greater than their entire United Kingdom corporation tax liability, has caused justified resentment for some years. More importantly, it has had the effect of exporting important areas of activity, such as research and development, and with them jobs.

I know of a number of international companies with head offices in Britain which were seriously, albeit reluctantly, considering relocating elsewhere, especially within the European Community, because of problems with ACT. The measures announced by my right hon. Friend will enable them to stay. That will be as much a relief to them as it will be to all who care about retaining employment in this country and in particular about bolstering London as one of the world's great financial centres.

The eventual 5 per cent. reduction in the rate of ACT payable on dividends is also welcome. It represents a redistribution of moneys from gross investment funds into corporate management, which will provide a significant cash flow advantage to business of around £1 billion next year. I hope that business managers whose companies will benefit will resist all temptations, as well as pressures, simply to use the extra moneys to top up their dividend payments. United Kingdom dividend yields are already substantially in excess of those in other developed countries, notably Germany and Japan.

The provisions on ACT, and the extra boost to help export markets, which are welcome and important, will benefit principally large firms. I am glad that my right hon. Friend continues to recognise the vital importance of small firms in generating economic activity and jobs. Small firms have been among the hardest hit during the recession, although there are many more in business than there were only a few years ago, but it will be small firms which will be in the front line of economic recovery. As my hon. Friend the Member for Surrey, North-West (Sir M. Grylls) has said, this is a five-star Budget for small businesses.

My right hon. Friend's finely judged and thoughtful Budget will help foster recovery in the year ahead and beyond. In the medium term, his tax proposals will blend with economic recovery to deliver a sure underpinning to prosperity. I welcome the Budget.

6.36 pm

Mr. John Garrett (Norwich, South)

I want to spend a few minutes on budgetary reform, an important but arcane subject which does not interest many hon. Members. Anyone who goes on about it tends to be thought a crank, so I shall be brief on the subject.

I am pleased that this is the last of the March, traditional, taxation-only Budgets and that in future taxation and public spending measures will be presented together in December. The integrated Budget is a reform which I and others have advocated for many years—not that it will be all that it is cracked up to be. The estimates for Government spending will still be presented in March, so we shall not be able to link the spending of individual Departments with the taxation proposals required to fund that spending.

In addition, while taxation is presented through a Finance Bill, which will be examined for weeks in Committee, changes in social security and other benefits will be introduced through statutory instruments, which are hardly discussed at all and are unalterable. Minor taxation is discussed at length, but the huge sums involved in social security expenditure and the massive changes in entitlement to benefit are often debated for only an hour and a half or less, and nothing can be done about them.

We also have the problem of a flood of financial and statistical data—one cannot call it information—from Departments and agencies. All that is presented on bases that cannot be compared. There is no indication of the supposed result of spending. So, as I have said before in the House, we are continually told what we are spending, but we are not told what we are buying. In other words, the Government tell us what the inputs are, in terms of funding and programmes, but not what the outputs are, so we can never establish the effectiveness of Government spending. That is a great weakness of our system.

Spending programmes are not related in any way to targeting improvements in health, environmental protection, crime and all the rest. That is not surprising, because the Government do not expect improvements. All the same, we are entitled to better information. Spending is not considered adequately, even on the Floor of the House. Very few Select Committees examine it; to do so they would need much larger staffs. Much reform is needed in the examination of Government accounts and the results of spending programmes. Although the subject interests very few people, it is of great importance.

We have heard that this was a Budget for jobs. In the Norwich travel-to-work area, there are 14,700 unemployed. In the area covered by Norwich city council, there are 8,500 unemployed. In my constituency, the unemployment total is up from 3,300 in 1990 to 5,600. That is a record for what was a prosperous area a few years ago. As my hon. Friend the Member for Holborn and St. Pancras (Mr. Dobson) said, this "Budget for jobs" provides only £125 million in new money that can be used to put people back to work. It amounts to less than £1 a week for each person who is out of work. Only one in 10 of the long-term unemployed and only one in 30 of all unemployed will be helped by the Budget proposals on business start-ups, learning for work and the community action programme.

That has to be set against the huge cut in vocational training places since the Chancellor of the Exchequer took office. The fact is that there are 80,000 fewer vocational training places than when the Chancellor came to office. There has been a 14 per cent. cut in Government spending on training from 1990–91 to the present financial year, while unemployment has risen by 87 per cent.

In 1989–90, employment training had 430,000 trainee starts. Last year that number was down to 210,000. It has been more than halved. Spending on employment training and employment action—a scheme which is apparently designed to augment employment training—has fallen from £1.2 billion in 1990–91 to £883 million. The new training for work scheme, which is supposed to roll these two programmes together, involves an even lower level of spending. It has gone down by £87 million on last year's £883 million.

A recession, as we have all learnt since the 1930s and before, is the time to invest in training. We suffer from a massive lack of skills compared with our competitors, a point which is easily verifiable. This is a huge missed opportunity. Look at the difficulty that a mature entrant to, say, a college has in obtaining funding—which is almost invariably discretionary and which, in my case, is from the shire county—for vocational skills training. It is almost impossible to obtain funding for both maintenance and tuition.

We have heard about recovery from the recession. We know that there is a time lag between recovery from a recession—which I assume is shown by an increase in output for three quarters in succession—and a fall in unemployment. I am a member of the Treasury Select Committee. For the last two years at least, the Chancellor of the Exchequer has come before that Committee and said in public that there were green shoots of recovery, that recovery was round the corner and that the conditions for recovery were in place. But there is little evidence of it. Next year, according to the Red Book, growth in gross domestic product is forecast to be 1.25 per cent., which is so low that a further increase in unemployment is inevitable. Unemployment is forecast to increase by 200,000.

Investment in either the private or the public sector will barely increase. The forecast for the public sector borrowing requirement, two years on, is £30 billion, even after a £10 billion increase in taxation. In 1992, the trade deficit was £12 billion, and the forecast is that it will be £18.5 billion in 1994. That adds up to a description of an economy that is in a desperate situation. We know from the leaked but now stifled Department of Trade and Industry report on Britain's trading position that we have a long-standing crisis in investment in skills and in research. Even when recovery comes, unemployment will still be over 3 million, even on the cooked figures that we have been given.

The infrastructure is collapsing. We only have to look around London, eastern England and the south-east to see that. Housing is in a desperate state. I represent a city which was the best housed city in the country. The Chancellor did nothing to ease the housing problem. Norwich has over £30 million locked up in receipts from the sale of council houses which it could put to use tomorrow to build more council houses.

House building is a classic way in which to begin to get out of a recession. It puts people back to work. The skills are available. There is a very low import content. It works quickly; it gets people earning quickly instead of drawing the dole.

The Chancellor of the Exchequer appears to be a late convert to the views of Keynes, for he announced some large public works projects, but two out of three of those projects depend on unnamed private participants. Furthermore, all those projects are in the south-east of England, so the impact on the rest of the country will be very slight.

As for the social impact, the Budget hits the poorest hardest, particularly those just above benefit level. Even if the Government compensate those on benefit, those just above that level will have no prospect of an increase in their income to cover the announced tax and VAT increases. The £6.5 billion tax increase in 1994–95 and the £10.5 billion tax increase in 1995–96 represent the biggest tax increase ever dropped on this country by a party whose constant pledge and whose one claim has been to reduce taxation. The Budget does not meet the needs of the time. It is the product of a fundamentally dishonest Government.

6.45 pm

Mr. David Nicholson (Taunton)

This is my first speech on economic policy since I was elected in 1987, so the House will understand if I refer occasionally to some of the tendencies that have led to the present situation. The Budget and our debates upon it show the very great problems and costs—I emphasise costs—which flow from economic stagnation and recession.

I welcome the signs that this country may at long last be moving out of recession—before and ahead of European countries which are deep in recession, as I reminded the shadow Chancellor of the Exchequer, the hon. Member for Dunfermline, East (Mr. Brown) yesterday.

I welcome the fall in unemployment announced today. I welcome the measures announced by my right hon. Friend the Prime Minister today relating to value added tax. I also welcome the measures announced today by my right hon. Friend the Secretary of State for Employment and her explanation to me earlier in the debate of their piloting and explorative scope. They are in addition to the very large measures which have already been taken to increase training.

I note that no Liberal Democrat Member is in the Chamber at present, but the hon. Member for North Cornwall (Mr. Tyler), who is normally a vigorous critic, is reported in The Western Morning News, which is always accurate, as describing those employment measures as being "quite clever."

Much use has been made of the Chancellor's remark some time ago about unemployment being a price worth paying. I believe that, on reflection, my right hon. Friend probably regrets having made that remark. I do not believe that it has helped him in coping with the recent slings and arrows of political fortune. However, I believe that the view of the vast number of Conservative supporters and activists in the constituencies and of the vast majority of my hon. Friends—indeed, the common-sense view—is that high unemployment is morally offensive, socially damaging—although it can never excuse crime—and, most relevant for our Budget debates, financially very expensive indeed.

Having said that, I welcome the skill that my right hon. Friend the Chancellor of the Exchequer has shown in his various Budgets since he became Chancellor and also his autumn statement last year. I welcome the measures which, albeit cautiously, will assist British industry and commerce to move towards recovery—in particular the measures relating to export credits and the uniform business rate. I welcome also the measures—these are particularly relevant to my right hon. Friend the Paymaster General—relating to VAT penalties, and the small firms package which my hon. Friend the Member for Surrey, North-West (Sir M. Grylls) described as a five-star package. I welcome, too, the expansion—again cautious—of the 20 per cent. income tax band.

There are two lessons to be learnt from the recent management of the economy, both of which need to be considered not just by Ministers but by Treasury mandarins, economic advisers and forecasters and the whole financial establishment.

First, there was the rapid credit boom of 1987 to 1989, which I criticised in the House and in my constituency and which I believe is now seen as having been a source of grave economic weakness. In view of the consequences of that boom and, indeed, of what my right hon. Friend the Chancellor is doing in relation to mortgage interest relief, I do not think that there is a danger of a return to the sort of property market which distorts investment. The distorting of economic development by diverting investment resources into property has been a feature and a weakness of this country since the early 1970s.

The second weakness was the continuation—in my view, long beyond the need to cure the previous credit boom—of the policy of high interest and exchange rates. As I pointed out to the hon. Member for Dagenham (Mr. Gould) during a very interesting speech that he was delivering last. Friday, that was not simply a reflection of the exchange rate mechanism—we can argue about the principle of the ERM—but resulted from the level at which we went in to the system and the level that we sustained. British industry has been damaged by high exchange rate policies on at least four occasions this century. It is relevant to point out that those policies were pursued in the past not just as a method of political and economic management but also almost as a religious and moral crusade. That happened under Governments of both parties. It happened in the period 1979–82, under a Conservative Chancellor, as it had happened under Lord Callaghan, a Labour Chancellor in the 1960s. The classic period, of course, was that of the man who was to become our greatest Prime Minister but who, as Chancellor, was very variable indeed. I refer, of course, to Winston Churchill, who was supported by Philip Snowden between 1925 and 1931.

As my right hon. Friend the Member for Westmorland and Lonsdale (Mr. Jopling) pointed out in a powerful speech yesterday, the prospects with regard to Government borrowing are worrying. That ought to underline, above all, the need in present circumstances to maximise growth and to avoid, remove or change policies damaging to industry, enterprise and jobs. This is so whether the policies concern exchange rates or interest rates, to which I have already referred, and which, happily, have now been removed, or whether they concern regulation, be it from Brussels, Whitehall or local government. Such policies have undoubtedly weakened small businesses and cost jobs. These are matters to which we must apply ourselves.

The Department of Trade and Industry must also take a more active role in enabling industry and enterprise to take advantage of the export and import substitution opportunities created by last September's devaluation of sterling. Situations have been pointed out to me, in my own constituency and elsewhere, in which business depends on imports of semi-manufactured goods because this country does not have the production facilities or the quality to provide certain important materials. That is a weakness in our economy, and it is vitally important that it be tackled. We are running a massive and worrying trade deficit in the middle of a recession, and it is vital that our industry and commerce be enabled to address those weaknesses.

It is the view of some of my hon. Friends and of The Sun newspaper that the borrowing to which I referred earlier could be reduced by repeated cuts in the budgets of Ministers, as though expenditure on ministerial cars, red boxes and paper clips accounted for the main part of the problem. As a member of the Public Accounts Committee, I can confirm that there are opportunities to remove waste and inefficiency and that there is fraud in the social security field. However, the notion that we could resolve our borrowing and spending problems by being beastly to new age travellers—although that is very desirable—is extremely naive. There is a limit to the amount of fat that can be removed from public spending. One soon gets to the red meat and bone of valuable spending programmes, which are not only used by readers of The Sun but are also used and valued by their children and their grannies.

With regard to those expectations, we have to be cautious. I will give an example. In recent months, combating crime has become a very serious issue, not only in the inner cities but also in parts of rural and semi-rural England, such as my constituency and the rest of Somerset. That problem will not be solved on the cheap. We need more police in the inner cities and in rural areas.

My final point concerns the most controversial issue in the Budget—the proposal to extend VAT. This can be justified as a special environmental measure, although we may debate the details. I welcome what the Prime Minister said at Question Time today. We must also bear down on the charges of the electricity and gas industries, whose current profit levels indicate that that ought to be possible. However, I warn my right hon. Friends not to regard the hoped-for acceptance by the House of this special VAT extension to fuel and power as a bridgehead for extension into other zero-rated areas. I do not perceive acceptance of the idea of multi-rate VAT in Government circles. I might consider the idea of a 5 per cent. VAT rate, but I warn that a further extension would be resisted by me and by other hon. Members.

6.55 pm

Mrs. Anne Campbell (Cambridge)

The last time inflation was at its current level was in 1967. We had a Labour Government, the economy was growing at a rate of 2.2 per cent., we had a manufacturing trade surplus, and the number of people unemployed was less than 350,000.

Mr. Dobson

Those were the days.

Mrs. Campbell

Indeed, those were the days.

This is a Budget of missed opportunities—a missed opportunity to put Britain back on the road to prosperity and growth; a missed opportunity to put British people back to work; and a missed opportunity to correct some of the unfairness of the last 14 years and give back to those on lower incomes what previous Chancellors took away. In fact, the Chancellor has made life worse for those on low incomes and pensions, and the unfairness will continue and worsen.

I welcome the dip in the unemployment figures. I sincerely hope that it is a long-term trend and not a short-term spurt of hope. However, my constituency has record unemployment. More than 4,000 people are unemployed for the first time, and male unemployment stands at over 15 per cent. But the Chancellor has not done anything that will help. What he has done for some small businesses amounts to no more than tinkering. These measures will not help capital investment; they will not help to improve skills and technical expertise; and they will certainly not help the transfer of technology from academia to industry which is absolutely vital to the future prosperity of our country.

In yesterday's Financial Times the director-general of the Engineering Employers' Federation complained of the apparent lack of understanding of the role of capital allowances in stimulating investment. Last week, I had the great privilege of going to Germany with the Select Committee on Science and Technology to look at the way in which the German Government help industry there. We saw a whole raft of measures. For instance, the Max Plank institutes are engaged in first-class, high-powered technical innovation and world-class research. We saw the work of Fraumhofer institutes which take the ideas that come from the Max Plank institutes and the universities and turn them into research in technological innovation and engineering skills. We saw also the work of the Steinbeiss foundation, which takes ideas and problems from industry and helps to solve the problems. These institutions do not exist without Government help. In fact, they receive a great deal of Government help—assistance which is totally lacking in the British economy. The Chancellor has tried to cure toothache when the patient is suffering from cancer. I say that in all seriousness because I believe that the problems facing our economy could be terminal.

In East Anglia, 87,000 people are unemployed. When the Prime Minister loses his job and moves back to Huntingdon, he will have to compete with 28 other people for every job vacancy. If he moves to King's Lynn, he will compete with 322; in Cromer he will compete with 246, and in Great Yarmouth with 149.

In the face of overwhelming evidence of manufacturing decline, what action does the Chancellor take? Well, he allows people to assess their own tax; he makes minor modifications to the small firms loan guarantee scheme—

Mr. Heald

I am sorry to interrupt because I know that time is short. As unemployment in Huntingdon has fallen in the past few months, and as the Prime Minister will be in his job for many years to come, does the hon. Lady agree that her calculation might not be correct?

Mrs. Campbell

I am sure that the Prime Minister would not anticipate a second period of unemployment but, judging by what he said last May, he did not anticipate that the Government would have to increase VAT, so it would be difficult—

Mr. Garrett

We cannot rely on his judgment.

Mrs. Campbell

As my hon. Friend says from a sedentary position, we cannot rely on his judgment.

Are these the measures which will transform the British economy? I think not, because they are a gross underestimation of what our real problems are and what the solutions should be.

I deal now with broken promises, the increase in the cost of heating fuel, the imposition of value added tax and the way it will affect pensioners in my constituency. I have good reason to believe that the Budget will mean a choice between heating and eating for many pensioners in my constituency. Last March, I was privileged to visit many pensioners in their own homes. I clearly remember one pensioner in particular. He was in his early seventies and lived alone. I stayed in his house for about half an hour and he told me of the difficulties he was experiencing. He said that he was no longer able to run a small car to get around. He had stopped buying meat every day and bought it only twice a week. When I stood up to leave, I realised that I was very cold because his heating had been so low that it was not comfortable to sit there for any length of time. Many pensioners are in that position, and the Budget will make things even worse. Many will die of cold or starvation—what a terrible choice to have to make.

We have heard some facile comments from Conservative Members who tried to justify the imposition of VAT on domestic fuel by saying it is a green measure which will reduce carbon dioxide emissions into the atmosphere. I do not believe that because people whose heating is determined by cost already have their heating so low that it is not practicable or feasible to turn it down further.

If we really want to take effective green measures, we need to insulate homes. Why did the Chancellor not move in that direction? Why did he not encourage investment to stimulate the building and construction industries and get people to insulate their homes? Such measures would pay for themselves through genuine reductions in heating costs. My constituents will be extremely dismayed by the lack of such measures. We face the prospect of heating bills increasing steadily in the next two years and people being unable to pay them.

The rise in petrol duty has also been heralded as a green tax. In my part of the world it will be seen not as a green tax but merely as a revenue-raising tax. I and my family have been fortunate enough to be able to manage without a car for the past five years. We have done so by using bicycles, our feet and public transport, but many people in my part of the world do not have a choice because transport is not available. People need transport to get to work every day and, for many, the only option is to use a car. Therefore, the measure will not be effective in reducing CO₂ emissions but it will be effective in raising revenues because people have no choice.

The Budget is a disaster. It does nothing to deal with the underlying problems of the economy; it will make people on lower incomes even poorer; and it will do nothing to put the unemployed back to work or to improve the economy.

7.5 pm

Mr. Iain Duncan-Smith (Chingford)

I am pleased to have the opportunity to follow, at some point, the excellent speech by my right hon. Friend the Secretary of State for Employment. She outlined all the relevant facts, and I shall not repeat them. It is a measure of the importance that the Government place on matters within their brief, such as employment, that the skills and talents of my right hon. Friend and her team have been deployed in this instance.

The Chancellor spoke of jobs coming from the private sector, which is an aspect on which I shall concentrate. I listened with great care and interest to the hon. Member for Holborn and St. Pancras (Mr. Dobson) and other hon. Members, and I was amazed by their lack of understanding of how employment is created. Before I came to the House, I used to run a company and was involved in manufacturing industry. It is perhaps relevant to describe to some hon. Members how jobs are created.

Jobs are created as a result of successful enterprise. I know of no business that has been set up solely to create jobs. Businesses are established as the result of an idea or the perception of a gap in the market. People provide goods and services, and jobs flow as a consequence. To listen to Labour Members, one would think that it was the other way round, that the jobs existed and someone looked for something to fill people's time. It is the ideas, drive, perseverance and determination of individuals which create jobs and get the economy going.

I remind the House that, during the 1980s, about 1 million new jobs were created on the basic principle of enterprise and filling a gap in the market. The Opposition still labour under the old idea, which I thought had died in the 1960s and 1970s, that the Government create jobs, that they can then pick winners from industry and decide who is to succeed at home and abroad. That idea failed, and it is time the Opposition realised it.

Throughout the 1980s, the Department of Employment focused consistently on training, retraining and re-skilling. It is important that the Budget placed great emphasis on such issues. The Budget was announced against a backdrop of about £2.5 billion spent on training, which is about two and a half times as much as was spent in 1979.

I was especially pleased by three aspects of the Budget, which I shall highlight. First, I was pleased by the emphasis on training, vocational education and enterprise which will supplement other measures that we have introduced and which should result in about 100,000 more unemployed people being helped.

Secondly, I was pleased to learn that a community action programme is to be established, which will provide for 60,000 long-term unemployed people to take on voluntary projects. A new project will be set up for 30,000 people, who have been unemployed for six months or more, to be taught new skills. Those two measures are important and should be applauded.

Thirdly, I welcome the fact that the business start-up scheme is to be expanded.

VAT is a subject of particular concern, and in Chingford many people with small businesses have come to see me about it. I was interested to note that my right hon. Friend attacked that subject with gusto, and has introduced some crucial reforms. I was especially interested to find that the VAT threshold is to be raised to £37,600, which I applaud, and that the turnover ceiling for VAT cash accounting schemes is to be raised to £350,000—that subject has been raised with me and, I am sure, with other hon. Members on both sides of the House.

I am pleased, too, that there will be some relief on bad debts. Now they can be reclaimed only when they have been outstanding for a year, but my right hon. Friend has reduced the period to six months, for which he should be applauded. In addition, the misdirection penalty is to be replaced, interest chargeable is to be capped, and VAT penalties for misdirection will no longer be automatic. I wish to highlight all those excellent reforms, which were long overdue.

Underlying the speech of the hon. Member for Holborn and St. Pancras was a little row that seems to be going on between him and the shadow Chancellor, the hon. Member for Dunfermline, East (Mr. Brown). On 14 February the hon. Member for Holborn and St. Pancras spoke on "The World This Weekend" about several expensive programmes that he would launch into if he were in power. He talked about saving 100,000 jobs here' and 20,000 there, and about stopping various job losses in the public sector. He then refused to cost any of the programmes, saying that that was irrelevant.

However, his hon. Friend the shadow Chancellor says that the PSBR is already too high, and that Labour would not raise taxes—so clearly, they would not be able to introduce the measures mentioned by the hon. Member for Holborn and St. Pancras. There seems to be a schism between the two hon. Gentlemen. First, they talk about spending, spending, spending, and then they say, "We cannot raise taxes, and we have some responsibilities." It is high time that they got their act together and approached the subject in a logical and reasonable fashion that the public can understand.

The simple fact is that Labour has no policies. We have listened to the speeches, and not once have we heard one policy from Labour Front-Bench spokesmen. They have not said what they would do were they in power. That clearly shows that they see their role at this point as solely to attack Government policy, and put nothing in its place—[Interruption.] Opposition Members will have a chance to speak later, so I shall press on.

Another important factor in the background has been missed—the minimum wage. Opposition Members all signed up to it, and some time ago the hon. Member for Kingston upon Hull, East (Mr. Prescott) said: I knew the consequences were that there would be some shake-out—any silly fool knew that. For those hon. Members—especially Opposition Members—who do not know what a shake-out means, I shall tell them: it means job losses. On top of that, the Opposition would pile more job losses, because it is clear that they would not now be able to raise the money to spend on all their programmes. It is the same old deal—they would tax, tax, tax and then spend, spend, spend, and ignore the sort of budget that was needed.

The Opposition have no policies. They offer nothing and could produce nothing for us when and if—God help us—they were ever in power. I therefore support the Budget that my right hon. Friend presented in such an excellent speech; it is an excellent Budget for jobs.

7.13 pm

Mr. Eric Illsley (Barnsley, Central)

For the benefit of the hon. Member for Chingford (Mr. Duncan-Smith), I tell the House that we understand perfectly well how jobs are created. The hon. Gentleman does not understand that a Government can assist by providing contracts and projects for enterprise to take on, so as to produce employment. A Government can also produce available markets, as with the coal industry.

We have been told that the Budget was supposed to nurture the recovery. We have heard about that recovery for the past two years, yet I still see no sign of recovery, and nor do the people at Leyland DAF or Rolls-Royce. Will we see any next week, when we hope that the White Paper on the future of the energy industry, especially the coal mining industry, will be published?

This was a poor Budget for the unemployed. The Chancellor missed the opportunity to put something back into the economy to encourage recovery and reduce unemployment. As we have already heard, it was not a Budget for jobs. We are told that tax increases now would hinder any sign of recovery, yet in a three-year programme the Chancellor has taxed everything, through 1994–95 and even 1996, to ensure that the Government reduce the public sector borrowing requirement.

So confident is the Chancellor of that recovery of 1 per cent. or so that he has already put the taxation measures in place, just in case it does not appear, as it has not done over the past two and a half years. Clearly, people will be worried about their job prospects and the extra costs that they will face next year. That will not stimulate demand and, therefore, the recovery for which the Chancellor hopes. We must also bear in mind that there may be more such measures in November. I dare say that we shall see more tax increases and more promises broken when the next Budget arrives later this year.

The March Budget has been totally regressive. Everything in it affects the poorest tenth of our society, while the richest tenth have fared quite well. Why do the poorer sections of our society have to provide the recovery from a recession started in the late 1980s by Chancellors giving tax cuts to the very well off? We have heard that the Conservatives are the party of indirect taxation—and thereby they are the party of inequality. One of the basic rules of taxation is fairness, yet the Government have turned their back on that.

One of the most unfair measures was that involving VAT. That regressive measure will impose VAT on heating and power, which will hit the poorest sections of society—people on low pay, pensioners and other people caught in the poverty trap. The Government have again sought to attack pensioners and the poorest groups. We have been told that people who receive income support will get extra help, but so far we have not heard whether they will be fully compensated for the extra VAT that they will have to pay.

I remember a similar argument being advanced on poll tax. We were told that income support would be increased to help people pay the extra money, but in the end they received an average sum—nowhere near the full amount that they had to pay.

The hardest hit will not be people on income support but people in the poverty trap—those who earn slightly too much to be able to claim income support or other benefits, yet who cannot be classed as anything like well off. Those people will suffer greatly because of the decision to impose VAT on fuel.

We heard earlier that fuel bills had decreased. Where is the evidence for that? Coal prices have fallen every year since 1985, and the price to the generators will fall by 20 per cent. this month. But we have never seen a corresponding fall in the prices that the generators charge the consumer. Instead, the generators' profits have increased. Power workers have been offered a 12 per cent. pay rise this week, when everybody else gets either a pay freeze or 1.5 per cent. The generators are awash with money and are offering pay rises of four times the norm. Why do we not tax the generators on their profits with a windfall profits tax, as the Opposition have suggested? The generators must have the money, or they would not be waving 12 per cent. pay rises about.

The Chancellor is clearly desperate to bring in revenue, and he has decided to raise it in the easiest way—to extend VAT and hit the people who cannot avoid paying it. The "green" argument is that the extension of VAT is a way of reducing CO₂ emissions, so the decision arises from the Rio summit. Why has there been no consultation with the energy industry or the energy efficiency organisations? Why has there been no consultation paper on how to reduce carbon dioxide emissions? All of a sudden, we simply have an increase in VAT. It is not a green measure—far from it. There has been no assessment of the impact. The Rio summit did not decide to reduce carbon dioxide levels through increasing hypothermia—nothing of the kind.

Next week, next month or the month after, we are supposed to receive an energy White Paper. Why did the Chancellor not wait until the White Paper was produced before starting to talk about green taxes on heating and power? Surely the Department of Trade and Industry has some input on this in the White Paper. Let us discuss how we can juggle our generating capacity to try to reduce carbon dioxide. Forget it: it is not a green measure, but simply a revenue-raising measure.

The idea is that the poorest sectors of our society will have to contribute to the greening of the environment. I quote from yesterday's newspapers: Taxes dressed up as green need also to be justified on distributional grounds or the poor will pay disproportionately for the greenness of the rest of us. For green taxes to be fair they must be accompanied by measures that redistribute resources to those on low incomes. That was said by the director of the microsimulation unit of the department of applied economics at the university of Cambridge. That will do for me; it is a fair enough quote. The measure is unfair and it is not green. It is a measure aimed simply at hitting the poor to raise revenue.

In March 1992, we heard that there were no plans to extend the scope of VAT. The Chief Secretary now says, "We said that when we were not facing a £50 billion public sector borrowing requirement. We are now." Is that not the real reason? Surely the Chief Secretary is saying that it is not a green measure. He is saying that we have a £50 billion PSBR, which is more than we had in 1992, so the Government must impose VAT on fuel and power to meet that revenue requirement. The Chief Secretary said nothing about it being a green measure. He said that it was simply a measure to increase revenue. Either way, the country knows that it is being lied to, and it knows that it can never trust the Government again on any matter relating to taxation.

We have heard that we should not jeopardise the recovery with tax increases, but the Budget taxes almost everything. Tax increases will be in place until 1996. Tax allowances have been frozen, so more people have been brought into the tax brackets. More people will pay proportionately more tax. National insurance contributions have been increased again. That is a regressive tax which also hits the lower paid. Excise duties have been increased on everything except whisky. Petrol duties have been increased. Surely the increase in petrol duty is a cost to business and a cost to employers. Surely that will come through when they look at their costs at the end of the year. They will see that their transportation costs have increased, and that increase will be passed on to consumers, resulting in job losses. Mortgage interest relief is to be restricted to 20 per cent. All those measures mean that people will pay a lot more tax even before the VAT increases are taken into account.

What is there for employment? What is there to get us out of the recession? The channel tunnel rail link will come into St. Pancras now and not into King's Cross. The northern part of the country is left out yet again. There is nothing in the Budget for employment. There is nothing for recovery. The Chancellor should think again in November and should come back with a Budget for jobs.

7.23 pm

Mr. Oliver Heald (Hertfordshire, North)

I am glad to have the opportunity to speak in this debate, especially as my last speech, in a debate last Friday, lasted 30 seconds. I do not promise to be as good as that this time, although I hope that hon. Members will be heartened by that news.

I welcome the news today of a fall in unemployment, in my constituency and in the country generally. That is good news for a constituency that has been hit hard over the past two years, and I hope that the trend will continue. Much of today's debate has centred on the extension of the VAT base, which is not the subject on which I had intended to speak. However, I make the point that it is easy to look at statements made more than a year ago and to ignore what has happened in between. We cannot ignore what happened at the Rio summit, when the Government pledged themselves to a range of environmental measures which have a cost.

It is wrong for Opposition Members to say that such measures do not have to be paid for. Of course they have to be paid for. We need to hear their proposals before we hear their criticism of extending VAT. At the Rio summit, we were pressed to go further, yet we are now told that, in paying for the measure, we are not following a proper path. That is a false approach to the debate.

The hon. Member for Truro (Mr. Taylor) talked about the housing market. It was ridiculous for him to compare the position a year ago with the position now, without mentioning that mortgage interest rates have fallen by 4 per cent. Over the pasts two years, the cost for mortgage payers has halved. It was ridiculous for him to ignore that.

I shall deal with jobs and with the measures in the Budget.

Mr. Illsley

Will the hon. Gentleman give way?

Mr. Heald

I will not, because I have only 10 minutes. If the hon. Member for Cambridge (Mrs. Campbell) wants to intervene, however, I shall return the compliment she paid me.

The hon. Member for Birkenhead (Mr. Field) wrote an article in The Guardian on Monday which contained one or two statements with which I entirely agreed. It is right that politicians on both sides of the House should have full employment as their goal. I do not necessarily agree with the hon. Gentleman about the way in which to set about that, but I agreed with some of his comments.

He is right to say that getting interest rates down is important, and I hope that he recognises what has been achieved in that direction over the past few months. He is right to say that mortgage interest tax relief should be reduced, as the Chancellor has announced. The hon. Gentleman would go further, but he has made a useful contribution to the debate. He is right to say that it is necessary to widen the VAT base or to increase VAT. Again, I have no argument with that. He is right to say that we should encourage realism in wage bargaining and that the future of this country depends on growth. He is also right to say that that is the province of the private sector and of individual firms.

When I went through the article, I thought, "Gosh, there will be something here soon with which I shall not agree." I sometimes wish that such sensible and thoughtful contributions to the debate came from Labour Front-Bench spokesmen rather than from Back-Bench Members.

Mr. Frank Field

Will the hon. Gentleman give way?

Mr. Heald

No. The hon. Member for Cambridge can be the hon. Member's proxy. I owe her one—[Laughter.]

Mrs. Anne Campbell

I am grateful to the hon. Gentleman for giving way. Perhaps he will tell us whether he will vote with us at the end of our debate.

Mr. Heald

I was rather hoping that the hon. Member for Birkenhead would vote with us. One of the problem with the Opposition is that Front-Bench spokesmen come forward with one policy and Back-Bench Members with another. I am reminded of last Friday.

Mr. Duncan-Smith

What policy?

Mr. Heald

I am not saying that there is one policy; there are at least three or four. Last Friday, the Labour party proposed to cut defence spending by £7 billion. My constituents rely on defence expenditure for their export industries, so they do not welcome that proposal at all.

There are three ways in which full employment can be achieved. The first is a range of employment measures, and I welcome the announcements in the Budget. My constituents have written to me and I have a letter here. The letter makes a number of points, including the point that people who are unemployed should be given the opportunity to start up in business. I welcome the extra 10,000 business start-up scheme places which have been made available.

The second measure suggested by my constituent, who wrote his letter before the Budget, is a scheme under which the unemployed are given vouchers, which they could take to their future employers. I support such a measure for the long-term unemployed. I welcome the workstart pilot scheme, which will achieve just that.

My constituent went on to say that many socially useful jobs could be done by the unemployed. The community action programme and TEC challenge give people the opportunity to do such tasks. Although I believe that, over a period of years, growth will be the main answer to unemployment, it would be wrong for the Government not to take measures such as they have taken to help people now. Taken together with the meaasures announced in the autumn statement, 600,000 people now have more hope than they had some months ago.

I agree with what my hon. Friend the Member for Chingford (Mr. Duncan-Smith) said about the role of entrepreneurs in creating growth. It is vital that business men should lead the way in establishing businesses which succeed for Britain. In looking at what has happened in the past 10 or 15 years, we should recognise that businesses have specialised more, and that we have businesses in Britain which can take on the best in the world and succeed. We should not always run Britain down and pretend that that is not the case.

Such businesses are capable of challenging the three major trends in the world economy which need to be addressed, and, because they have become efficient and productive, they can meet the challenge of the newly industrialised countries. The efficiency of our businesses, the clustering of businesses in western Europe, their good connections in the far east, the type of help that was announced in the Budget under the export credits guarantee scheme and the help of our Foreign Office, which has so many trade missions across the world, will allow our companies to take on the challenge of the newly industrialised countries.

It is wrong to say that the impact of new technology will be death for jobs and that that is the end of the story. The impact of new technology has made the companies which have introduced it more efficient and productive than before. Some of the businesses which have lost a great deal of labour in the past 10 or 15 years are those which are now capable of exporting products for Britain and taking on the best in the world.

I believe that growth will come from that change in technology. The newly industrialised countries may be competitors, but they also provide markets for Britain. If we have the new technologies in place, we will be productive and efficient, and we shall be able to go into the new markets which are opening up around the world. That will create growth and new jobs.

In Britain, we must face the fact that there is a battle in Europe for inward investment and for the investment of our own companies in our country. The evidence given to the Employment Select Committee in the past few months, when it was investigating the issue, has shown that we must treat competition for investment as European competition. Companies with investment to make look to see whether Britain is at the centre of Europe. I believe that it should be and I hope that the Maastricht treaty will soon be in place so that we can move forward.

Companies want a willing and capable work force. We have that and good industrial relations and improved training. I wish to make two more points, Mr. Deputy Speaker.

Mr. Deputy Speaker

Order. I call Mr. Geoffrey Hoon.

7.33 pm

Mr. Geoffrey Hoon (Ashfield)

I am delighted to follow the hon. Member for Hertfordshire, North (Mr. Heald). He has clearly come a long way since our days studying law together. Certainly he was a lot less weighty in those days, had much more hair and was a good deal more radical.

The Budget must be measured against one crucial test—whether it will encourage or increase confidence. Confidence is crucial in any recovery. People must have confidence in their employment prospects and their ability to maintain their present employment and standard of living. A typical family or household must have confidence in its ability to pay its bills, rent or mortgage.

People will obviously have welcomed recent cuts in exchange rates after such a long period of sustained high repayment rates. However, as yet there is only patchy evidence that interest rate cuts are leading the country out of recession. Instead of spending on new goods and homes, families and individuals are seeking to restore stability in their finances by repaying debt such as hire purchase commitments, credit card debts, mortgage commitments, and debts built up when the Government encouraged spending before the general elections of 1987 and 1992.

Moreover, in considering the confidence of a typical family or household, it is necessary to consider the impact of the tax increases announced in the Budget. Disposable income for almost every family in the country will be significantly reduced.

From April 1994, a married couple with one earner will have to pay more than £7.50 a week more if that earning amounts to more than £14,000 per year. If it amounts to £19,000 per year, they will have to pay £8.50 a week more. If it amounts to £28,000 a year, they will have to pay £13 a week more. That is a significant reduction in people's ability to spend their way out of recession, if that is what the Government are aiming at.

Above all, the fear of unemployment will remain the key factor which will limit confidence. In December 1992, the Trades Union Congress commissioned an independent poll of working adults. It established that 45 per cent. of people in work thought that it was very or fairly likely that there would be job losses at their workplace in 1993. That is hardly surprising, given the present state of the economy.

The British economy is in the deepest and longest recession since the war. It has been in recession since the second quarter of 1990. It has had three years of decline. Unemployment has increased in that period from 1.8 million to 3 million. There has been an increase in unemployment in each and every month since the right hon. Member for Huntingdon (Mr. Major) became Prime Minister.

More than 1,000 jobs have been lost every day over and above the unemployment which existed at the time of the general election. We have a lack of confidence throughout the economy. Investment is down 13.3 per cent. since 1989. It is just 17 per cent. of the gross domestic product. That is 3.5 per cent. below the Organisation for Economic Co-operation and Development average, and 13 points below the rate in Japan. The 1992 rate was 17 per cent. below the rate for 1989 and 6 per cent. lower than in 1979. The result has been unemployment across the range of economic activity.

In the year to September 1992, 260,000 jobs were lost in manufacturing industry; 320,000 jobs were lost in services; 90,000 jobs were lost in construction. The pit closure programme may add another 80,000 jobs to those totals. An unknown but perhaps comparable number of jobs may be lost in the public sector.

Recent large-scale redundancies have all too often been in the very areas and industries which we shall need if any recovery is to be permantent and sustained into the next century. There have been high-tech redundancies at Rolls-Royce, GEC and IBM. Like the Government-inspired recession of the early 1980s, this Government-inspired recession is precisely in the areas we desperately need if Britain is to remain competitive into the next century.

What strategy do the Government reveal in the Budget to deal with the recession? What solution do they propose in the longer term? What overall economic strategy is revealed by analysing the Chancellor's Budget? It seems to me that the Government's policy is still based on a single club. Admittedly, it is a different club: instead of the interest rate policy pursued until black Wednesday in September, our economic policy is apparently based on chronic and persistent devaluation.

In September, the pound was worth DM2.95. The Chancellor was apparently happy with that level. It is now 20 per cent. below that level, and the Government have not said how far they are willing to allow the pound to fall.

What has changed since September? Was the Chancellor right before September or is he right now? In effect, the pound is in free fall. Compared to its value in 1980, the purchasing power of the pound is just 45p, according to the calculations made by Barclays bank. Howard Davies, the director general of the Confederation of British Industry, who is not someone I quote regularly, said recently: Half the world thinks we are now hooked on a policy of competitive devaluation, which is dangerous and could be self-fulfilling. What are the consequences of that policy? In the short term, British goods are certainly more competitive—no one can argue against that—but how long will they remain so? Inflationary pressures will be increased by continued devaluation and will raise the price of imported goods and services, which account for about 30 per cent. of our national consumption.

How quickly the increases will feed through into the economy remains a matter for debate. For the moment, the market is so fragile that there is a significant element of discounting, but experience suggests that, as prices become firmer, the full inflationary effects of devaluation will begin. Increases in inflation are likely to offset devaluation in three to five years.

It seems that the 20 per cent. devaluation since September may take as long as five years to increase inflation by 20 percentage points above what it would otherwise have been. How will the Government fit that in with their medium-term inflation target of between 1 and 4 per cent.? They have no mechanism or strategy for achieving that target, other than a continuation of the present recession, or perhaps a return to their previous policy of raising interest rates.

Essentially, the Government are staggering from one economic policy to the next, as they stagger from one economic crisis to the next. This country needs stability and confidence, which are crucial to recovery. We need interest rate and currency stability, as they are an important starting point for any economic policy. That would allow families to plan carefully and thoughtfully for their futures, knowing how much they have to spend and what their expenditure is worth.

Precisely the same considerations apply to businesses, which want stability to plan economic strategy. If they are exporting, they want to know what contracts are worth at the time that they sign them, and that those prices will remain consistent in the longer term.

The Government must assist in the creation of that stability by encouraging investment in industrial capacity and the skills of our people. They must finance research and development, and help marketing and design.

Conservative Members have been asking Opposition Members to set out what should be the objective of economic policy. The primary objective was set out by the Government in 1944 in a White Paper entitled "Economic Policy": the maintenance of a high and stable level of employment. That is something that we should be seeking to establish.

A fundamental change in the Government's attitude is the most important factor in creating a high and stable level of employment. The Government must recognise that they have a crucial role to play in establishing the right conditions to allow that stability. It is a case not of picking winners, as the hon. Member for Chingford (Mr. Duncan-Smith) suggested, but of creating the right conditions.

The Government are fond of citing illustrations—there have been a number in this debate—of Japanese companies investing in the United Kingdom. Instead, why do they not cite the fact that the Japanese Government are prepared to spend £40 billion on a reflationary programme to ensure that Japan remains competitive? That is the sort of stability, strategy and imagination we need, and there is little evidence of it in the Chancellor's Budget.

7.43 pm

Mr. Nigel Evans (Ribble Valley)

I am delighted to follow the hon. Member for Ashfield (Mr. Hoon) who, unfortunately—unlike my hon. Friend the Member for Hertfordshire, North (Mr. Heald)—was hardly radical enough.

I am conscious of the extremely difficult task facing the Chancellor of the Exchequer and our industrialised partners because of the problems caused by a deep world recession. The Chancellor has the task of introducing a Budget to assist a sustainable recovery without strangling it at birth and he achieved that with admirable skill on Tuesday.

As well as having a small business I am vice-chairman of the Small Business Bureau. Many small businesses have weathered the current recession with great difficulty, but with resilience. I am conscious of the fresh start-ups, which have been referred to today. Since 1979, there has been a net increase of more than 30,000 new small businesses starting up in the north-west. In 1991, there were 1,500 start-ups.

There are almost 3 million small businesses in this country and on Tuesday, when the Chancellor referred to them as "leading the growth", he was absolutely right. They employ one third of all private sector employees. Small businesses took on 1 million extra employees during the 1980s, forcing the pace and driving the expansion and profitability of UK plc. In the 1990s, we must look to them to create the jobs necessary to help to expand our gross domestic product and profitability and to reduce social security liability and bring dignity to those seeking work. We must remember that half of the people who become unemployed find work within three months. We must look to them to create jobs to raise the total tax intake to pay for our record amounts of essential spending on education, schools, welfare, health care, law and order and spending in other important areas.

Since the Budget, Opposition Members with their negative rhetoric have given this country no hope. The most that can be said of the Leader of the Opposition's offering was that his speech was mercifully short. But it was short in all the wrong areas—short in ideas, in vision and in solutions to the economic problems facing the industrial west. His speech was full of pomp and platitudes and empty of content.

This afternoon I waited three and a half hours to hear policies from Opposition Members, but we have not heard one policy from them. We have as much hope of hearing policies from Opposition Members as we have of hearing a genuine welcome for the reduction of 22,000 in the unemployment figures today. It is not so much a case of holding our breath to listen for that welcome, but of holding our noses because there is a funny lingering smell in the Chamber today. The Opposition, who seem to speak about creating jobs, by their actions and promises would do the opposite. The Opposition would impose a minimum wage, inflict on us the social chapter and saddle us with an employment training tax, all of which would increase unemployment.

Last Friday in the Chamber I listened to some Opposition Members talking about cutting defence expenditure. British Aerospace is in my constituency and I can tell Opposition Members that I shall fight hard to ensure that we maintain those jobs in my constituency and neighbouring constituencies.

The business aspects of the Budget have been welcomed by many leading industrialists, but I do not have time to name them this evening. The hon. Member for Cambridge (Mrs. Campbell), who is not in the Chamber, described the £1 billion kick-start as mere tinkering. I have a list of 10 suggestions from the Chancellor. If I had the time I would talk about all of them, but I will pick some of the juicier suggestions made last Tuesday. First, there is the onslaught on red tape, which strangles many of our small businesses. I am delighted that action has been taken to ensure that that is cut away. It does not matter where the red tape comes from—whether from Brussels, Westminster or local authorities—it needs to be cut.

On the review of statutory audits, which act as a tax on many small businesses, I am delighted that action is to be taken to consider ways to remove that from many of them. The increase in the value added tax threshold will release many small businesses from registration and allow Customs and Excise officers discretion in the way they deal with many small businesses who have problems filling in some of the extensive forms required for their VAT returns. That measure will also cut to six months the time that many small businesses have to wait before claiming VAT back on some of their bad debts. That is extremely helpful. I hope that the Chancellor will be able to ensure in future Budgets that some larger businesses will pay smaller businesses well within time.

The freezing of the unified business rate is welcome—800,000 small businesses will be welcomed, to the tune of £320 million. That will ensure that some left-wing councils are not allowed to heap misery on small businesses, because their UBR will be frozen to manageable levels and to levels that they will know.

The fact that 100 per cent. of the capital gains tax that would be charged on selling a business can now be reinvested in new businesses will create the new jobs that we all want. The increase in the small firms loan guarantee scheme to £250,000 will give small businesses the opportunity to get the money that they need from banks to expand and create extra jobs. I also welcome the other tax changes that will assist small businesses.

It is excellent that today the unemployment rate has fallen by 4,100 in the north-west.

Mr. Andrew Mackinlay (Thurrock)

It has not fallen in the south-east.

Mr. Evans

Even so, we must welcome that fall in unemployment. I accept that the unemployment rate may be volatile in the months to come, but today's fall in unemployment shows that we are moving in the right direction.

One of the new schemes announced in the Budget will allow those who have been unemployed for longer than two years to be employed. The money that would have gone to them in income support will be used by their employers to subsidise their wage. I hope that we shall be able to attract one such pilot scheme to the north-west, because many constituencies—not my own, which has one of the lowest unemployment rates in England—would find such schemes attractive.

I was delighted to hear from the Government today that they will ensure that those on low incomes will be protected against the imposition of VAT on domestic fuel bills. I hope that we shall also be able to assist those who just fail to be entitled to income support—for example, some of our pensioners on fixed incomes who have been extremely careful throughout their working lives to save money. I hope that they will be given some assistance.

The extension of the 20p income tax rate from £2,500 to £3,000 is excellent news. An extra 1 million people will now be paying only 20p in the pound on their income. That still represents just one fifth of the working population, however, and I hope that as a result of future Budgets we shall be able to extend that rate to many others. Many people still remember the basic rate of 33p set by a Labour Government, and they will not forget it.

The conditions are now in place for recovery—a recovery made all the easier by the changes announced in the Budget. Lower interest rates, lower inflation, lower wage inflation and competitive exchange rates will lead industry in the right direction. Confidence is returning and I trust that all hon. Members will do their utmost to avoid jeopardising that recovery.

7.52 pm

Mr. Frank Field (Birkenhead)

I welcome the hon. Member for Surrey, North-West (Sir M. Grylls) back to the Chamber because he gently, but firmly, chided the Opposition for not praising success when we see it. I agree that there is something about the British character that likes to wallow in failure and not prize success. Sassoon, writing during the first world war, said that if the English were promoted from the inferno to paradise they would still gather round and talk about the good old days. Because one despises that side of our national character, however, that does not mean that we should go overboard and declare success when there is little to declare. The sense of unreality surrounding the debate comes from the feeling that I get when I listen to Conservative Members.

We have a huge tide of unemployment, which is devastating the lives of those who must bear it. Equally, it is catastrophic for our country. The Budget must be judged on how it will help to achieve four objectives.

First, how will it help those who have suffered worst from unemployment—those who are literally destitute and sleeping on the streets of many major cities? Secondly, how will it help share the burden of unemployment by getting those in the queue for the longest to the front of it? Thirdly, as the hon. Member for Ribble Valley (Mr. Evans) said, how will it affect confidence and therefore help to return the economy to one of fuller employment, at least to the level that existed before the current recession or slump? Finally, the most important challenge is how the Budget will help to return the economy back to one of full employment.

Beatrice Webb, at the end of her long life, said that the most significant change that she had seen in Britain was the absence of beggars from the streets. Under the Government, however, begging is back in force and, sadly and appallingly, it is one of our growth centres. Those beggars have been made destitute by the rising tide of unemployment. To what extent will the Budget return us to a state where, whatever else is happening, people are not reduced to sheer destitution? The Budget is silent on that.

What will the Budget do to ensure that those who have borne unemployment longest have a chance to get to the front of the queue? The Secretary of State for Employment and others are right to say that some jobs are available. It is crucial that those who have been out of work the longest stand the best chance of getting those jobs. Some pilot schemes have been announced by the Government, but one that I have proposed to them is the simplest of all. I hope that it will not only run in one centre, but will be adopted generally. Those who have been out of work for five years, or even 10 years—many of our constituents have been out of work that long—should be able to keep their benefit for a year if they are able to get a job and earn a minimum of between £50 and £60 a week.

My proposal is simple, it requires little policing and it would make those who have been in the dole queue the longest that much more attractive to employers. It has the edge over the scheme that the Department of Employment is currently favouring, presumably because of pressure from the Treasury.

One of the advantages of my proposal is that it would save the Exchequer some money, because I believe that the benefit and the wages should be taxable. The cost of unemployment would, therefore, be reduced by a small amount. My proposal would bring people to the front of the queue. It would make them attractive to employers and give them the chance of entry into work. It would give them the chance to hear about jobs and at the end of that trial year they might remain in the labour market.

Even if my scheme did not achieve that, it would allow the rest of the family to work without the loss of any income. It would give them the chance to reduce some of their debts and it would restore some hope to those people who have been crushed by the year upon year upon year burden that they have borne for us as we fight inflation by making people unemployed. On that front, the Government have some credit from the Budget.

Will the Government sustain that credit and will the Budget get the recovery under way? We all hope that the strategy will be successful, but I fear that it will not be. We have a Chancellor who has an extraordinary gift of announcing measures in a way that does least for confidence rather than boost it.

We have had dribbling cuts in interest rates, instead of bold, imaginative moves to try to convince people that we have turned the corner. We are now faced with a VAT increase which will come into force next year, whatever happens. I propose that we should have a VAT increase when unemployment has fallen below a certain level, which would mean that people had an incentive to spend now. That would reverse the increase in the savings ratio, which has bedevilled an immediate recovery.

The fourth test by which we need to judge the Budget is how effective it will be in returning the economy to full employment. I congratulate the hon. Member for Hertfordshire, North (Mr. Heald) who mentioned full employment as an objective. My hon. Friend the Member for Wallasey (Ms Eagle) pointed out that the Department of Employment did not set such an objective in its annual report this year. She also warned that the hon. Member for Hertfordshire, North will probably be taken outside and done over by his colleagues for even mentioning such a heresy as full employment.

In a previous Budget debate, I mentioned that it was crucial for the Government to maintain their stance on the GATT round. Given how dependent our economy is on world trade, the worst that could happen to our constituents who are in work, let alone those who are desperate to work, would be for trade barriers to go up. There might be short-term gains, but the long-term costs would be enormous. It is, therefore, important to support the Government on this point.

Secondly, there are huge markets in eastern Europe and Russia that do not have much purchasing power. The Marshall plan played an important part in ensuring that western European economies moved toward and maintained full employment after the second world war, and we need to be as economically bold as the Americans were then. That means giving people in these areas the chance to buy our goods and services and cementing friendly relations with them. If we cannot do that for good economic or sound moral reasons, we should do it for strategic reasons.

There has been an outbreak of tribalism in much of Europe. Some of those tribes are hungry; others possess nuclear weapons. It is now a much more dangerous world than it was before the Berlin wall fell. For reasons of survival, if nothing else, we should take that course.

I want to offer one last idea about full employment. If we are to move back to it, we must begin thinking the unthinkable. There is an employment cartel to which most of us belong. We take measures that make it difficult for those outside it to join. I know that the world is not quite as simple as this, but I suggest that if those of us in work were prepared to accept wage cuts of 12.5 per cent. and those wage cuts were translated into new jobs—assuming all went smoothly—everyone who wanted a job would have one. We desperately need a Government who will pressurise those of us fortunate enough to be in full-time jobs throughout all recent recessions to hand those outside the employment cartel a chance. Unless we are prepared to do that, all that the Budget will do—if it is successful—is push unemployment down, possibly to 2.75 million. That is a worthwhile objective, but many people whose lives have been devastated by unemployment, and who have borne that unemployment for up to 15 or more years, will have no prospect of a job in their lifetimes unless we begin to entertain thoughts the like of which we have not had before or uttered in this Chamber.

8.2 pm

Dr. Liam Fox (Woodspring)

It is a pleasure to follow the hon. Member for Birkenhead (Mr. Field), whose thoughtful style and good grace in recognising good news when he sees it are a great joy. I pay tribute to the good work he has done for many of my constituents who are Maxwell pensioners—it is much appreciated by large numbers of people.

It gives me great pleasure to welcome the Budget, which I regard as excellent, timely and perhaps a little overdue. It gives rise to two questions whether a recovery is under way, and what our long-term strategy for the economy and employment should be. When the Chancellor made his famous remark about the green shoots, I think that he was probably correct. The economic indicators suggested that growth was imminent at that point, but there was one complicating factor—our membership of the exchange rate mechanism. Furthermore, no one could have foreseen the effects of the reunification of Germany and its economic domino repercussions.

I hope for the sake of future generations that we have learnt some powerful lessons from this experience. Currency stability is desirable, but not at any price. Strong currencies do not make strong economies, but strong economies can lead to strong currencies if low inflation and the value of money are maintained. When our party came to power in 1979 we used phrases like "honest money", "real value", "honest savings", and so on, far more than we do now, so I was delighted to hear the Chancellor return to using many of those phrases in recent weeks.

We have also learnt that Governments cannot fix exchange rates in the modern world. We do not have the cash to enable us to take on the currency markets and win. There is no inherent value in either a strong or a weak currency. It is merely one economic variable; sometimes a currency at a different level is relevant to a country's economic circumstances. Our currency at present is more realistically valued, I believe. It is false to talk of revaluation and devaluation when it is clear that the markets regard the currency now as slightly undervalued, and as a result of the Budget it is appreciating. The hon. Member for Ashfield (Mr. Hoon) seemed to fail to understand that, just as he failed to understand the fact that unemployment has fallen.

The ERM was supposed to be a semi-fixed mechanism with variable exchange rates. That was what the present Prime Minister and Lady Thatcher believed it to be when they took Britain in, but during the time of our membership the system was hijacked and became what was supposed to be the precursor of a single currency. As a result of Labour policies and of our experiences of nationalisation, we above all people should recognise that economic decisions made for political reasons will always end in tears. If we go along with proposals to move to a single currency which does not evolve naturally but is forced on us by means of an artificial political timetable, we shall live to regret it.

I believe that a recovery is under way, as witness the surge in mortgage demand, the cuts in interest rates and the fall in underlying unemployment. I welcome the fall of 2,900 in the west country—the first fall in unemployment for three years in an area hard hit by changes in the defence industry. Its plight, however, has been nothing to what it would have been if Opposition Members had been allowed to make the cuts of £7 billion about which they told us last Friday. Having supported that proposal for huge defence cuts, they are hardly in a position to tell us about job losses in defence industries in the west country.

The Chancellor was left with a difficult balancing act. If the recovery was indeed under way, when should we increase revenue and balance our public finances? There are Conservative Members who say that raising taxes will not harm the recovery if monetary conditions are right. I have some sympathy with that view, but it takes no account of the fact that confidence has been knocked hard by the length of the recession. The Chancellor was thus absolutely right not to raise taxes this year and to go for a neutral Budget but to increase taxation as economic growth gets fully under way. That is a responsible attitude.

The final confirmation that this was the correct course was given to me by my London cab driver this morning, who said that, although he might not have done well out of the Budget, it was not going to do the recovery any harm—and was not that what counted at the end of the day? Looking around for advice, one can always do worse than take a ride in a London taxi. Perhaps some of the drivers would like to stand for safe Labour seats and inject some sense into the Opposition for future Parliaments.

Our primary duty is to provide sound money. That was why the Conservative Government were elected in 1979. Tax cuts, low Government spending and low borrowing are at the heart of our philosophy, and every Conservative Member would like to cut taxes and Government spending and borrowing—if all these things were possible in a perfect world. Unlike the Labour party, however, we do not occupy office for short periods at a time. We are a great national party and we have to look to the long term because we tend to be in Government for rather long periods. At the moment we are at the beginning of one of our longer periods. Therefore, it cannot be enough for us to ask ourselves, "What would be a quick fix for the coming year and what will make us popular this year?"

We must look to the longer term with a view to establishing sound Government finances so that the generation coming after us do not have to take on the burden of debt that the Labour Administration left to the incoming Conservative Government. Of course, we repaid that debt to a great extent during the economic growth that took place in the 1980s. The Opposition tell us so often that we have been in office for 14 years and that we are responsible, but during the 1980s the Government repaid a greater amount of national debt than anyone believed was possible. It was the greatest amount ever to be paid back in our history. That is what economic growth and success can enable us to achieve.

The holy grail of a longer-term strategy has always been sustainable non-inflationary growth, but that is not so easy to achieve. Lord Lawson, who was one of the most important reforming Chancellors since the second world war, was wrong to believe that any Chancellor or any Government could perform an economic miracle. The battle against inflation is never won. Inflation, like sin, is always waiting round the corner to tempt anyone who might be susceptible. The battle against inflation must never be stopped. In other words, we must always be on our guard.

If we are to have sustainable growth, the economy must be based more on exports, both of goods and of services, and less on domestic consumer demand. I applaud my right hon. Friend the Chancellor for taking the far-sighted view and taxing consumption rather than income, encouraging exports and providing further supply side reforms. At last we have been presented with a Budget with a vigour and vision reflecting the early Budgets of Lord Howe when he occupied 11 Downing street.

In the late 1980s, we abandoned our monetary targets, we had too much domestic consumption and there was too little export growth, though it must be said that there was a remarkable export performance during the late 1980s. If there is too much domestic demand and too little export growth, we shall be on the road to a balance of payments deficit and inflation. That is why the measures outlined by my right hon. Friend the Chancellor are to be welcomed.

There has been a continuing fall in interest rates—not a small trickle, as the hon. Member for Birkenhead suggested, but a huge fall in interest rates over a relatively short period, which has provided massive stimulation for business. A realistically valued currency is helping our exporters. In addition, there is the announced increase in export credit. As my right hon. Friend the Chancellor said, there must be a two-pronged attack. Export credit can be extremely expensive, so we must try to reduce the subsidies given by our competitors while we expand our own export credit. Recognition must be given both to the Treasury and to the Department of Trade and Industry for the efforts that they have made in that area. Until our subsidies are reduced by our competitors, we must help our domestic industries. That, in effect, is what my right hon. Friend the Chancellor announced when presenting the Budget. We welcome reduced premiums as we welcome the fact that by 1995–96 the allocation of Export Credits Guarantee Department cover for certain markets will have increased by 75 per cent. Those will be important markets such as China, Indonesia, Malaysia and Mexico.

We are surely right to continue to press for increasing liberalisation of world trade, and the commitment of my right hon. Friend the Prime Minister to achieve a successful resolution of the current GATT dispute cannot be overestimated. It is extremely important for the entire world—for all developed and developing countries—that we achieve a resolution of the dispute.

My right hon. Friend the Chancellor has recognised that to allow the public sector borrowing requirement to continue on its present path would threaten our long-term non-inflationary objectives. He is undoubtedly correct. However unpopular the moves may be in the short term to correct the course of the PSBR and to ensure that it shrinks as a proportion of gross domestic product in coming years, they must be made. My right hon. Friend is correct to stress that we must export to survive. He is also correct to say that we cannot spend what we do not have and that we need sustainable, non-inflationary, long-term growth. We have a Chancellor with the right philosophy and the right Budget. I urge him to keep faith and to keep us free.

8.14 pm

Mr. Harry Barnes (Derbyshire, North-East)

The hon. Member for Chingford (Mr. Duncan-Smith) took the Opposition to task for not understanding the nature of successful enterprises. Presumably we must have a system in which there is entrepreneurial zip. No doubt profitability must be greatly increased. I suppose that stroppy labour must be pushed down so that businesses can develop vigorous virtues that lead to people standing on their own two feet, or on the feet of others, to make their way in the world.

The arguments that are advanced about the European Community seem, strangely, not to coincide with the philosophy of market economics. In the context of the EC, we are told that there will not be fair competition. Instead, there is to be fixed competition so that 11 nations will operate under the social chapter while we, the United Kingdom, shall be allowed not to be part of it. It seems that the normal rule that everyone starts from the same position is not to apply and that we, the United Kingdom, are to have some special privileges.

If the development of successful enterprise and entrepreneurial zip that the Government have been following for the past 14 years has been doing so well, why are we in such a mess? I am not allowed to explain what the mess is because that would be talking Britain down. I know that the markets will he much concerned with what I say in the House at 8.15 pm, so I must not say anything that is critical of the Government's actions. If I were to engage in such criticism, there would no doubt he a further collapse in share values and the strength of the pound. I would be talking Britain down.

Accordingly, I shall not explain what all the problems are and I shall not go into the details of unemployment, deprivation and homelessness that others have mentioned. Instead, I shall concentrate on the position in which we find ourselves.

We are told that the public sector borrowing requirement is to increase from £35 billion to £50 billion. At the same time, little has been done to advance the position of the economy. That has been put off until the time when money will begin to be recouped to pay off the debt that will be incurred by increasing the PSBR.

Before I develop my argument, perhaps I should say something about growth and development, while cautioning that entrepreneurial zip, private enterprise and the market might not be the be-all and end-all. The Government have siad that they are not to blame for the mess in which we find ourselves because it is the result of the international situation. That, of course, has been influenced considerably by the extension and development of Thatcherite ideals. The entire world was beginning to take up the British revolution in terms of the market, private enterprise and privatisation. Perhaps it was somewhat successful. Indeed, it has been so successful that it has been fed back to us. That has helped to put us in the mess in which we now find ourselves.

The alternative to possessive individualism is collectivism and collective provision. There is the approach that markets should be limited to the places where they operate well. There are, for example, the markets that operate in all or most towns. The system works effectively as the public move from stall to stall. Something approaching perfect competition can operate in those circumstances. That is because the public can check prices between stalls. That system does not operate in the context of monopoly capital and large firms, but it is one which should be nurtured for small businesses. That means that there should be more controls over larger firms and other large influences. We know that there is considerable exploitation if they are allowed to let rip. I am not talking about a command economy or about massive bureaucratic domination within an economy. The corrective is democratic involvement and participation with collective decisions being made about the areas in which improvements and advances should be made.

Mr. Nigel Evans

Which of the 47 industries that have been privatised since 1979 would the hon. Gentleman bring directly back into public control?

Mr. Barnes

It is difficult suddenly to produce such a list. For one thing, we are in a mighty economic mess with a public sector borrowing requirement of £50 billion. If industries were taken back into public ownership, the resultant compensation would impose an extra burden. However, some public utilities could begin to be returned to public control. They are natural monopolies which capitalist economists such as Marshall at the back end of the 19th century used to describe as requiring a great deal of public regulation in their operation. That principle should be put back on the agenda as an advance of collective provision.

It is interesting that the public sector borrowing requirement is to be allowed to let rip during the next year and is to be tackled only in the subsequent two years. During the first year, some extra moneys are to be collected for distribution in different areas. Those extra moneys are to come from the freezing of allowances, not just this year but in the subsequent two years. According to the Red Book, the freezing of allowances at the level determined by the Budget is to become permanent.

Excise duty provisions also have a knock-on effect. The increase in petrol prices has an impact on almost everything that depends on transport, such as food prices. Income from that and from the change in mortgage interest tax relief will go towards meeting the cost of widening the 20p band, which will take place this year and in the two subsequent years. That will result in more money being collected through income tax than would otherwise be the case, because allowances for each of the following two years have been frozen while a £500 band has been added to the 20p provision.

Many people who were paying tax at 25p in the pound and would have been taken out of tax if no change had taken place other than the development of the thresholds will find themselves having to pay 20p which will be pushed down further year by year.

The Financial Secretary to the Treasury (Mr. Stephen Dorrell)

I am sure that the hon. Gentleman does not want to mislead the House. I can confirm that, in all the revenue projections in the Red Book in respect of 1994–95 and beyond, the assumption underlying those figures is full indexation in accordance with the statute.

Mr. Barnes

The figures on allowances and basic rate limits which are frozen show an income this year of £660 million, in the following year £920 million and in the year after that £960 million. It is now said that in the last two years such sums will be indexed. However, even allowing for that and the omission of indexing this year, the extension of the principle about which I am talking remains, even if the details need to be adjusted.

This year, another £300 million will be collected as a result of the freezing of the allowances and the 20p band provision. Next year, it will be £210 million and the year after that it will be £110 million. Therefore, more money will be collected through the income tax provisions than previously and there is a knock-on effect from year to year, despite the Minister's clarification of the figures in the Red Book.

Other measures include VAT relief on bad debts and cuts in business tax and rates, but the biggest changes are to be left until the following years—most significantly, the massive VAT increase on domestic fuel, and the national insurance contribution increases.

We may need some more statistics to check out the point that I am about to make, but if we take into account the amounts of money that will have to be paid in the next two years by consumers, who are also, in different ways, earners, in the form of income tax contributions, VAT payments, excise duties—which continue during the subsequent two years—and national insurance contributions, the amount of money raised is equivalent to an increase of 4p on the basic rate of income tax in 1993–94 and almost 6p—5.66p recurring—in 1995–96.

Not only is that a massive amount to be taxing people, but it is being done in a most regressive way. It is not done by extending income tax by way of a progressive increase in the number of bands, but in a way that continues the principle of the poll tax—the most regressive form of taxation that could be imagined—and extends regressive provisions. All that is done without any investment or improvement in the economy.

Only the Heathrow Express, crossrail and the channel tunnel provisions were mentioned earlier. They may be important projects, especially for London and the south-east of England, but where are the equivalent measures that will spread through the rest of the economy? Such projects were supposed to trigger developments throughout the nation. There was supposed to be some sort of ripple effect. Some stones need to be thrown into the pool elsewhere so that the ripple effect reaches other areas of the economy.

Mr. Tony Banks

If those transport infrastructure decisions go ahead rapidly, as I hope that they will, there will be a big spin-off for manufacturing industry in parts of the country other than in London—for example, those manufacturing rolling stock.

Mr. Barnes

I was not arguing against the plans and provisions. I was saying that this is all that we get in terms of investment, despite the fact that we move from deficit of £35 billion to a deficit of £50 billion. Surely what we wanted was the expansion of such arrangements to ensure growth in the economy and so that the knock-on consequences could be taken into account.

Some of us should start a campaign for fair taxation. The anti-poll tax campaign had a "Can't pay, won't pay" slogan. We should have a "Can pay, want to pay" slogan for the fair taxation campaign. The equalising impact of income tax should be taken into account when determining areas of expenditure. No fairer tax has been devised. All other forms of taxation are regressive. The whole package should be considered to see whether it is progressive or regressive.

In recent years, we have moved rapidly under this Government away from fair forms of taxation towards unfair forms of taxation. That development should be changed. Fair taxation to make the resources available for growth of the economy needs be be put in the forefront.

Mr. Lidington

Would the hon. Gentleman care to tell the House, since he has obviously given a great deal of thought to the tax structure, how many bands he would introduce, at what levels they would start and at what levels they would end? Would we eventually get back to the good old days of socialism, when we had a top rate of 98p in the pound on unearned income and 83p on earned income?

Mr. Deputy Speaker (Mr. Michael Morris)

Order. I hope that the hon. Gentleman will not be tempted down that route. A number of hon. Members wish to speak this evening.

Mr. Barnes

I was preparing to finish when the hon. Gentleman intervened. When I am Chancellor of the Exchequer and allowed a two-hour introduction, I will certainly spell these things out in great detail. One of the worst things that occurred in terms of the high band of taxation was when we had a Budget that changed the level from 60 per cent. to 40 per cent. That was an absolute give-away and a disgrace, while other areas of our economy were being hit very hard. Provisions to take into account such a top rate need to be reintroduced.

8.32 pm

Mr. Geoffrey Clifton-Brown (Cirencester and Tewkesbury)

I rise in a totally confused and bemused state.

Mr. Tony Banks

He should be the Chancellor.

Mr. Clifton-Brown

I have listened to the whole debate today, and have tried to secure some clarity and light from the Opposition Benches. It was not until I saw the hon. Member for Newham, North-West (Mr. Banks) climbing up in the rafters, trying to find the metaphorical light switch, that I suddenly realised that the hon. Member for Derbyshire, North-East (Mr. Barnes) was telling us it all. He was telling us really good, old-fashioned socialism—clause 4, renationalisation, a centrally planned economy, the lot. It was no longer a socialist dream of reform coming to fruition; it was back to the old nightmare.

I watched with interest the recent television programme in which the hon. Member for Holborn and St. Pancras (Mr. Dobson) was busily telling us how he would save 20,000 jobs in the defence industry. I am very interested in employment in the defence industry because in my constituency it is of key importance. I studied his last election manifesto with great interest, and I seem to recall that it told us that he would reduce expenditure on defence to the lowest level among our European allies. I believe that that would involve a cut of some £7 billion in our defence budget, which would mean the elimination of the Air Force, the Army or the Navy.

I congratulate my right hon. Friend the Chancellor on an excellent Budget. It meets his twin objectives of a continuing recovery this year and a return to sound public finances within the economic cycle. It is a very ingenious Budget; it is a big Budget that contains a great deal. It sets the trend for fiscal and monetary measures over the next two to three years, and for the next autumn statement, when I hope that my right hon. Friend will take the opportunity, as the Chief Secretary to the Treasury is doing at the moment, to make a thorough review of public finances and see where we can hold them to their present level.

We have three ways of reducing our public sector borrowing: we can—as is undoubtedly happening with the increase in employment prospects and the reduced interest rates from the Bundesbank—encourage the recovery which has already started and which will bring in large extra tax receipts; we can reduce public expenditure; and we can raise more money. I hope that my right hon. Friend will do all three, as he has done by producing a fiscally neutral Budget this time, looking forward to raising £6.5 billion next year and £10.5 billion the year after.

It was interesting that, on Tuesday, my right hon. Friend projected a growth rate of 1.25 per cent. this year and over 3 per cent. next year. If that happens—I have no reason to doubt it—we will have one of the highest growth rates in the industrialised world. We have heard a lot from Labour Members about creating employment, but the only true way to create employment is to encourage growth in the economy. If it was a question of spending more money, we would have the highest rate of employment in the western world, because our public sector borrowing requirement as a percentage of gross domestic product is rising far faster than it should. That is why my right hon. Friend has taken the measures that he has.

I want to comment on one or two of the fiscal measures in the Budget that even Labour Members might have been magnanimous enough to admit have some merit. There cannot be an entire Budget that takes two hours to introduce without a single measure that they might consider had some merit.

In my bemused and confused state, there was just one chink of light, and that was cast by the hon. Member for Birkenhead (Mr. Field). I first met the hon. Gentleman when I was lying next to him in a Blue Circle cement bag, when we were sleeping out on the tiles. It was a cross-party venture. I was rather sorry when the hon. Gentleman said that we were not doing anything for the homeless, because, as he knows only too well, we have introduced a huge range of measures on their behalf—rough sleepers initiatives, initiatives to help the non-governmental organisations, rents above shops initiatives, rents to mortgages initiatives, and many others.

The hon. Gentleman had some very good ideas, and I am sure that one thing of which he would approve in our Budget is the arrangement to take people out of the tax net altogether. Of course, the former Chancellor, Lord Lawson, started this process by taking 3.5 million people out of the tax net, and my right hon. Friend the Chancellor continued this process last year by introducing the new 20 per cent. tax band.

The extension of that tax band this year will benefit some 4.9 million taxpayers, and I calculate that next year, with the further extension, it will benefit 1 million taxpayers. These are very large numbers of people at the lowest income level who will benefit by not having to bear such a high burden of taxation as hitherto.

The principle of widening that 20 per cent. band is fundamentally right. My hon. Friends believe that distorting tax reliefs should be gradually reduced. Therefore, I thoroughly welcome my right hon. Friend's measures to limit mortgage interest relief at source to the 20 per cent. tax band. It will raise a very useful sum of money to be deployed elsewhere. I also thoroughly welcome the reduction of the married person's allowance to the 20 per cent. tax band.

One of the most far-reaching reforms that my right hon. Friend announced concerned the self-regulation and current year basis of assessment for the self-employed. He has introduced a truly visionary measure which follows his consultation paper which, as I told him at the time, I greatly welcome. I urge him to examine the American system carefully. It could be a complicated system to introduce, but it could benefit 8 million self-employed people, so it is extremely important. The American model is simple to operate. Let us face it. We want the self-employed people out there earning a living and benefiting the country and the system will be of no benefit if it is too complicated for them to operate.

I ask my right hon. and hon. Friends to consider the following bold initiative to encourage self-employed people to take up the new system. As the new system will save civil servants in the Inland Revenue a great deal of time, my right hon. Friend might offer people an incentive to use the system. How about offering a £300 reduction to anyone who is prepared to change to the new system? That would be worthwhile in terms of the administrative costs that the Inland Revenue will save in sorting through the tax returns of 8 million people.

Other measures might have been welcomed by Opposition Members, such as those relating to gifts to charities. The reduction in the gift aid to charities from £400 to £250 a year seems thoroughly worthwhile and we now have the equivalent of the old covenanting system. There are other measures to help charities, such as the increase in the payroll giving scheme from £600 to £900 a year. As we gradually reduce our tax take as the economy recovers, and as prosperity returns to Britain, we need to encourage individual responsibility, which certainly includes giving to charities.

There was one measure to encourage self-reliance that I regret my right hon. Friend did not introduce. I am sorry that the hon. Member for Birkenhead is not in the Chamber, as I agree with him about pensions. We need to reduce reliance solely on the state pension and encourage occupational and private pension schemes. I am sorry that my right hon. Friend did not choose to increase the cap on earnings-related tax relief on private and occupational pensions. I hope that he will consider that in the near future.

I now move on to measures for businesses. We have had a thoroughly worthwhile Budget for businesses which will encourage small, medium-sized and large businesses to succeed. My constituents will welcome in particular the increase in stamp duty and another year of freezing the uniform business rate. They will particularly welcome the increase in the turnover limit for the cash accounting system for VAT purposes from £500,000 to £350,000.

I am a business man, and I understand these matters only too well. After the Keith report—here I am a little critical of my right hon. and hon. Friends—Customs and Excise were given quite unnecessarily draconian powers as regards penalties. I very much welcome the changes that have been introduced.

During my right hon. Friend's speech I was looking carefully around the Chamber and I noticed right hon. and hon. Members on both sides of the House nodding off during the complex provisions on advance corporation tax. I welcome those provisions, not least the reduction from 25 per cent. to 20 per cent. on dividends paid which will increase the cash flow of British industry by £2 billion. That is a significant amount of money.

I had hoped that, as well as limiting the amount of income tax that can be reclaimed from the 20 per cent. band, my right hon. Friend would have left it at the 25 per cent. band as that would have been simpler to administrate. As the measure raised only £200 million, my right hon. Friend could have raised the money more easily elsewhere.

In conclusion, much has been made in the past few days of the imposition of VAT on fuel and energy costs. I know only too well that after the Rio summit containing the convention on climate change we have to stabilise our emissions of carbon dioxide and other greenhouse gases at the 1990 level by the year 2000. That is an extremely tough target.

If we are to meet our international treaty obligations—Opposition Members always play green until it comes to hitting their pockets and then they are not quite so keen —we have to introduce severe measures. Energy is one of our industries with the highest emissions of those gases. If we can encourage people to insulate their homes better and use less energy sensibly we shall go a long way towards meeting our Rio targets.

Opposition Members moan and groan, but if my right hon. Friend the Chancellor had really wanted to be unkind he would have imposed the 17.5 per cent. VAT from midnight on Tuesday and given people no time to adjust. He has been extremely generous in giving everybody plenty of time to plan. There are generous insulation grants available and people can move to more energy-efficient ways of heating their homes. By imposing an 8 per cent. tax next year and a 17.5 per cent. tax the year after, my right hon. Friend has given everyone plenty if time to adjust. I am sure that Opposition Members would have squealed and moaned just as much had he imposed VAT on newspapers, sewage, books, children's clothes or food.

We have to be prudent about the economy and raise a substantial amount of money to reduce the PSBR. I believe that we have had an excellent Budget. It was a Budget for growth, for exports and for allowing us to take the maximum advantage of the single market. Above all, it was a Budget for jobs. I want to create jobs just as much as any Opposition Member and I believe that the Budget will put us on course for recovery and creating as many jobs as we can in the western world.

8.47 pm

Mr. Tony Banks (Newham, North-West)

It really is a bit much for the hon. Member for Cirencester and Tewkesbury (Mr. Clifton-Brown) to try to dress up a tax on the poor—which is precisely what a 17.5 per cent. VAT charge on fuel, albeit delayed, actually means—as though it was an environmental measure to be applauded. One can only assume that, if he wanted to go a bit further, logically, too many people are breathing too much air and no doubt the hon. Gentleman could come up with a very good scheme to stop them doing so.

The hon. Gentleman went out of his way to praise former Chancellors who took 3.5 million people out of tax. He could have congratulated the present Government on taking another 4 million people out of tax by rendering them unemployed.

I have many criticisms of the Budget, but who does not? All honest people will have criticisms to make. That is not to say that there was nothing good in it, and I pay tribute to all those good things now and move hastily on to the main part of my speech.

I am grateful that this is the last time that we will have a great Budget setpiece, now that the Government are moving towards a unified statement. At least that will mean that future Chancellors will have to eat their words only once a year rather than twice a year.

I found it offensive from the Chancellor's statement onwards to hear the accusation that, when we criticise the Government's economic policies, we are somehow running Britain down. Such accusations are wholly unprincipled: they represent the last refuge of a scoundrel.

The Government have dragged Britain down. When we say so, we are merely attacking the incompetence of the Conservative Government, and we are certainly not criticising or running down the country in which we live and suffer the incompetence of the Government's economic policy, along with so many millions of our fellow citizens. The country deserves something better than an ideologically fixated Government, made up of economic illiterates, but I am afraid that the country will have to wait for the change that only a general election can bring.

I have to confess that I have a grudging liking for the Chancellor of the Exchequer. I try to dislike him, but I find it difficult. I like him; it is rather like having Arthur Daley in charge of the Treasury. He is a likeable rogue. I would regret it, but I fully expect one day to wake up and read that he had been nicked around midnight, halfway up a drainpipe, probably at the back of Kensington palace, clutching a bottle of champers, 20 fags and a box of Cadbury's Milk Tray. He will no doubt give us a good laugh when he goes. In the meantime, he is giving us a lot to think about, and much misery to be shared round.

I will not begrudge the Chancellor today's glimmer of good news that unemployment has fallen by a few thousand. That is true for the country as a whole, but not for the capital city. Unemployment in London has gone up. We are still inexorably heading towards 500,000 unemployed in the capital. The right hon. Member for Brent, North (Sir R. Boyson) was right to argue the case for London having assisted area status.

I understand that the Secretary of State for Employment, who is in her place, has supported that case. I am going only by newspaper reports, but it seems that there has been an argument about it in Cabinet between her and the President of the Board of Trade. It will not be much use to the right hon. Lady to have my support, but she should know that among Conservative and Labour Members, and among Conservative and Labour councils in London, there is unanimity about assisted area status.

We have an unanswerable case. We have the largest concentration of unemployment in the country. If we use the labour force survey, which the Secretary of State seems to prefer, London has the largest number of unemployed and the highest percentage rate of unemployment in Britain. In areas such as Hackney, Haringey, Lambeth, Newham, Tower Hamlets and Southwark, unemployment rates are well in excess of 20 per cent. and have been for a considerable time. If one becomes more particular in the examination and starts looking, for example, at unemployment among black males between the ages of 20 and 24, the unemployment rates are up to 70 per cent.

Unemployment is a big problem in London, and anything that the Secretary of State for Employment can do to bring relief will be much appreciated. In two and a half years, London has lost over 250,000 jobs. There are 56 people, twice the national average, chasing every job vacancy in London. Our case for assisted area status is overwhelming and it has all-party support.

Other hon. Members want to speak, so I will not delay the House, but I want to concentrate on one aspect of the Budget speech which had particular reference to London—the transport element. The Heathrow-Paddington link is to go ahead. That is good news. It is noticeable that that is a straightforward partnership scheme between the British Airports Authority and British Rail. They were able to get their act together, probably because the Government were not much involved. That is the way it should be.

When we come to transport infrastructure decisions in which the Government are integrally involved, we run into difficulty. We were promised that public money had been earmarked for crossrail. We understood that the project was secure, but now it is to be pushed on to the back burner as the financial package is re-examined. One way to finance crossrail would be to dump the M25 widening scheme in Surrey and transfer the money to the crossrail project. I believe that the sums involved are almost exactly equal. That would be good for the environment and much better for the south-east than widening the M25.

As to the channel tunnel fast link—some fast link. We are not sure where the link will end, and we do not know how it will be paid for. As to the route, I have been given by my hon. Friend the assiduous Member for Thurrock (Mr. Mackinlay) a copy of tomorrow's Thurrock Gazette, which announces the line of the route. I understand that the Kent Messenger has also leaked the route.

My hon. Friend the shadow Secretary of State for Transport, the hon. Member for Kingston upon Hull, East (Mr. Prescott), is at the moment doing his head-butting thing outside, in an angry mood, because newspapers and television companies apparently have got information about the route before the House has had an opportunity to discuss it. That is shameful. The Secretary of State for Transport is to make a statement some time next week, but as the information has leaked into the public domain, it would be only decent if a Minister came to the Dispatch Box to make a statement.

My hon. Friend the Member for Derbyshire, North-East (Mr. Barnes) asked why we should concentrate on transport decisions affecting London and the south-east. I pointed out to him that they are not of importance just to the south-east. There will be an enormous spin-off for manufacturing industry throughout the country if the decisions are made speedily. It would mean more rolling stock and investment in manufacturing output other than in London. London's industrial base has fallen dramatically. London used to have one of the great concentrations of industrial employments; now it has one of the smallest concentrations in the European Community.

We are still waiting for the Jubilee line extension to the east, again mentioned by the Chancellor, by the Minister for Transport in London and by the Secretary of State for Transport. How many times will it be announced as something the Government favour? When will we see a sign of the scheme going ahead? It is a strange way to run a railroad. When the line is started eventually, we should call it the green shoots railway because it is always being promised but it never turns up.

If investment decisions are good, they are good investment decisions, period. They are as good for public investment as for private investment. Recession is the time to make those decisions, because investment decisions on transport infrastructure will help advance the upturn in the economy; they will prepare the way. They would form the basis for the prosperity that we hope will return one day to manufacturing industry and the economy generally.

We need speedy decisions on such projects. We do not want to have the Government launching and relaunching them all the time while there is no apparent move to get the railroads built and the rolling stock ordered. We must prepare the way for economic recovery through these decisions. They would provide valuable public assets for the 21st century. We want no new excuses or delays from the Government: we want action.

8.57 pm

Mr. Jacques Arnold (Gravesham)

I have been in the House on and off throughout the debate. I listened with a twinge of sympathy to the speech of the hon. Member for Holborn and St. Pancras (Mr. Dobson). It was obvious that he had prepared a speech with his characteristic polish. It was to be a long, self-indulgent gloat over the inexorable rise in unemployment, so we can imagine his feelings when he heard of the welcome drop in unemployment, down nationally and down in Gravesham, to the pleasure of my constituents. In his characteristic style he must have expressed his feelings with a cry of "We woz robbed". Instead, at such short notice, he has had to rely on the immature scribbles of a research assistant to prepare his speech.

Our debates have been a feast of words, but there has been a ghost missing from the feast. There has been almost a conspiracy of silence among the party leaderships on that ghost, the exchange rate mechanism. The ERM was doubtful at the best of times. It became even worse when it was used to fix exchange rates. It might have been good at the time the exchange rate was fixed, but within days it all came out of line with the relative performances of different economies and, therefore, their currencies, thus putting pressure on the exchange rate. It was like a pressure cooker whose vents had been stopped up: it was bound to explode.

That pressure was added to by the thoroughly irresponsible way in which the German Government carried out reunification and absorbed and converted the ostmark into the deutschmark. The consequence was that German economic policy required higher interest rates which, in turn, were inflicted upon Germany's ERM partners. Since golden Wednesday we have been out of the ERM. We have been free. We have set our own economic policy. The others remain trapped. The high interest rates imposed because of German policy have led to their economies being crucified. If we want to see real difficulties, let us look at the economies of France, Spain, Italy, and so on—the countries which remain within the exchange rate mechanism.

This debate has a whiff of hypocrisy about it. If the Government favoured an exchange rate mechanism which had that impact, so did the Opposition. I remember hearing in this House the Leader of the Opposition taunting the Government, saying that the Government believed that we should be in the ERM wide band but that the Labour party believed that we should be in the narrow band and that, with its socialist comrades on the continent, it would adopt the single currency. The leader of the Liberal party was not far behind. I could quote what he said, which was exactly the same thing.

A fashion was created for high interest rates. That fashion created the recession. We now have the freedom to set our own exchange rates and to lead our own destiny. The fact that we are leading our own destiny is leading to lower interest rates, growth and the good news today on unemployment.

The results of our ERM policy, supported by the Opposition, inevitably created a large deficit. On Tuesday we heard my right hon. Friend the Chancellor of the Exchequer courageously plan to eliminate the deficit. It is hypocritical of the Opposition not to address the problem of how to cope with that deficit. We have heard not a word about that from those who sit on the Opposition Front Bench.

There is one aspect of closing the deficit gap by increasing taxes to which I intend to refer—the imposition of VAT on domestic fuel bills. In June last year this country signed the United Nations framework convention on climate change. It commits all developed countries which are party to the convention to take measures aimed at returning their emissions of carbon dioxide and other greenhouse gases to 1990 levels by the year 2000. What are we doing about that? The objective is to reduce the emissions of carbon dioxide by 10 million tonnes.

Steps are already being taken by industry, commerce and the motor industry, not least through fiscal encouragement. They have already resulted in the elimination of 7 million tonnes of emissions. The task must now pass to domestic households to make up the missing 3 million tonnes. The announcement of the imposition of VAT on domestic fuel from April 1994 provides a lead time within which individuals can prepare to save energy by the more efficient heating and insulation of their homes. The minor works assistance scheme, available through local councils, will help people to do that. The Government also have time to prepare for the protection of the less well off and the elderly who will face higher bills. That is why I welcome today's clear commitment by my right hon. Friend the Prime Minister.

There is much good news in the Budget. In particular, I welcome the measures to improve the Export Credits Guarantee Department. The cut in ECGD insurance premiums is very welcome. Also welcome is the £1.3 billion increase in ECGD capacity. I noted in particular the statement of my right hon. Friend the Chancellor of the Exchequer about limiting that increase to what he termed the fastest growing and most important markets around the world. It will not surprise my colleagues on the Treasury Bench if I draw attention to the fast-growing markets in Latin America. The economies of the Latin American countries rose, on average, by 3 per cent. in both 1991 and 1992. That growth rate is accelerating. An Organisation for Economic Co-operation and Development report on the economic outlook published in December 1992 showed that last year both Argentina and Chile were likely to exceed 7 per cent. growth, Mexico and Colombia 2 per cent. growth, and Brazil was expected to have a trade surplus of 15 billion US dollars. There are big opportunities for British exporters. Let us back them up with the proper application of this increased ECGD capacity.

After the Chancellor's major trailer for the high-speed rail link through Kent one assumed that the announcement of the route would follow very quickly. It was therefore with some disappointment that we found that the statement was to be made not on Wednesday but next week, which is the last week before the deadline. It is becoming apparent why the statement was not made on Wednesday. In a very busy Budget week, the Government had apparently pencilled the statement in for Wednesday; in accordance with the usual channels practice of the House, they advised the main Opposition party so as to enable it to field its spokesman. That is a normal courtesy, but what happened? Thinking about the fancy speech of its Treasury spokesman and about the importance that the Labour party attaches to Kent, the Opposition said, "No, we will not have it on Wednesday."

The hon. Member for Kingston upon Hull, East (Mr. Prescott) said recently on Radio Kent, "Quite clearly, if the Government hadn't aborted the statement on Wednesday, the Labour party would have withdrawn normal co-operation and gone in for trench warfare." What is the consequence of that? The hon. Member for Newham, North-West (Mr. Banks) has referred to his hon. Friend the Member for Kingston upon Hull, East, Labour's transport spokesman, as being outside, head-butting with the media. What is the hon. Gentleman head-butting about? He is head-butting about so-called leaks of the route—leaks which may or may not be true—but he is head-butting the people of Kent, the people who are worried about the rail link.

What we want is a definitive announcement from the Secretary of State. We could have had a statement on Wednesday but for the action of the Labour party. As a result not least of a question that I put to the Leader of the House earlier today, we are to have it early next week, as originally planned. The Labour party should not be playing party political games with my constituents. Next week the Secretary of State will be here to answer questions put by Kent Members. What happened today was quite shameless.

The Budget contains much that is painful and some good news. Above all, however, it indicates plenty of courage. It tackles the problems of Britain today—something that the Opposition have patently failed to do—and deserves our support.

9.7 pm

Ms Angela Eagle (Wallasey)

Listening to the Chancellor's ponderous and technical speech on the Budget, I was reminded of two Tory election posters. The first appeared on the streets in 1979. It depicted a long dole queue and carried the words "Labour isn't working". Let me remind the House that that was a time when unemployment stood at just over 1 million—a level to which it has never returned in the 14 years of the Tory party's stewardship of the economy, though the figure has often been 3 million. Then there was the Labour tax bombshell poster of the 1992 election campaign. When I was reminded of those two posters, I realised that I was listening to a Chancellor from a political party which is prepared to devalue the political currency as much as he has devalued the pound.

On Tuesday, the right hon. Member for Shropshire, North (Mr. Biffen) said: I…stand here, shamelessly, as a taxing Tory."— [Official Report, 16 March 1993; Vol. 221, c. 202.]

I was driven to wondering whether the right hon. Gentleman had done the same in April. Certainly the Tory party did not. The voters will remember for a very long time the Government's cynical and shameless Budget and their behaviour surrounding it. It is the equivalent of George Bush's, "Read my lips: no new taxes", and it will come back to haunt them.

Lord Gilmour, in his hook Dancing With Dogma, summed up the Government's stewardship of the economy in the past 14 years in a way that I cannot better. He said: The Thatcher era saw a grim failure of economic management. The two worst slumps and the most irresponsible boom since the war is a record nobody should be proud of. As my hon. Friend the Member for Holborn and St. Pancras (Mr. Dobson) said so well, billions of pounds of North sea oil revenue have also been squandered to finance mass unemployment as our industrial base has been sacrificed on the altar of monetarism and Thatcherite orthodoxy by a Conservative party in thrall to the City. Also thanks to their free market dogma, we have seen the deregulation of credit, which unleashed a massive credit boom and caused household debt to rise from about £10 million in 1979 to a staggering £52,894 million last year. That represents £l2,300 for every household in Britain. There will be no recovery of confidence or anything else as long as there is such a massive debt overhang and the constant threat of unemployment, which stifles our prospects for recovery.

The Tory Government's monumental irresponsibility and economic incompetence seem to be matched only by their capacity for self delusion or deliberate deception, one of which they have practised on a grand scale. Even Lord Lawson, now safely retired and out of the way, refutes his own ludicrous claims of an economic miracle, which he attributes to rather too good a dinner one night before he returned to the Chamber. I note that he now has the dubious pleasure of being the latest in a long line of scapegoats paraded to explain the Government's colossal economic failure.

The truth is—and the Budget proves it in no uncertain terms—that the failure is a Tory failure, caused by dogma and incompetence. As yet, there is no sign of an end to it. The scale of the failure can be summed up by the three structural deficits revealed in the Red Book. The first is the public sector borrowing requirement, estimated at £35 billion this year and set to rise to a massive £50 billion next year.

The second is the balance of trade, £17.5 billion this year rising to £18.5 billion next year. In the depth of a continuing recession, that is quite unprecedented. The third is unemployment which hovers between 3 million and 4 million, depending on whether one believes the real figures or the Government's altered statistics. In any event, the figure represents 10 per cent. of the work force. That is a triple whammy if ever there was one.

Unemployment is not only a symptom of recession and economic failure but is a contributory factor to that failure. It is a scourge which must be eliminated, but, unfortunately, as today's debate has proved, we have a Government who, during their long and disastrous management of our economic affairs, have scarcely even bothered to pay lip service to the view that unemployment should come down, let alone targeted it as a problem to be solved.

I believe that the Government decided early on that they could get away with mass unemployment and not be punished by the electorate. They have shown no concern. Despite billing the Budget as a Budget for jobs, they have done nothing. The costs of unemployment to the economy are considerable. Three million unemployed, or 10 per cent. of the work force, cost about £27 million—or £9,000 per person on the dole—in lost tax revenues and increased social security payments. As for the gross domestic product, unemployment costs up to £66 billion in lost production. If we had that production, the deficit—massive as it is—would disappear.

In the north-west, 334,700 people are out of work. The cost to the Exchequer of unemploymnent in that region alone is £3 billion. The social costs are incalculable, and the personal tragedy involved has been referred to many times, at least by my colleagues. Unemployment is economically inefficient and morally unjustified. Unlike the Government, we believe that it is a legitimate concern of Government to minimise it, so was the creation of employment at the core of the Budget's strategy? I looked and looked, but, it must be said, it was not.

We had to wait until the Chancellor was well over an hour and a half into his speech to hear employment referred to for the first time. The Government's so-called employment package consists of two measures. At the micro-economic level, there is supply-side tinkering, involving five new initiatives, but not one job has been created. At the micro-economic level there is nothing but forecasts of a continuing rise in the number of jobless. The Red Book's unemployment forecast says: The rate of increase should start to slow down again as the economy recovers; though since the level of unemployment typically lags behind the cycle in activity it will be some time before it starts to fall again. The detail in the Red Book reveals that despite the supply-side measures, which must be welcomed, although they are minuscule compared to the size of the problem, the forecast is that an extra 200,000 people will be unemployed by the end of the year, and that the level of about 3 million will persist for the next two or three years.

The projection for growth this year—1£25 per cent.—is not enough to prevent a continuing rise in unemployment. The only other policies designed to create employment are essentially indirect, such as the deregulation and general freeing up of business taxes that have often been mentioned by Conservative Members. However, there is no guarantee that deregulation will create more jobs. Those policies could lead to an increase in profitability or dividends—we have seen that British business likes to pay increased dividends rather than create more employment. There is no guarantee that there will be any more employment as a result of that side of the Budget.

The overall expenditure on supply-side measures is a paltry £125 million. We lost £5 billion in an afternoon to try to save the Chancellor's face, yet all that we can spare for the tragedy of the 3 million unemployed, many of whom have been on the dole for a long time, is £125 million. One speculator made £1 billion in one day last September. The level of waste in which the Government indulged during that folly puts the employment measures, trumpeted though they are, and welcome though some of them are, in the perspective that they deserve.

Like my hon. Friend the Member for Birkenhead (Mr. Field), I was amazed when I examined the strategic aims of the Department of Employment and found that no mention was made of full employment, merely of creating a flexible and efficient work force. It is not good enough for the social fabric of the country if that is all that the Department of Employment exists to do. The references to the unemployed said simply that the Department would provide training to give people a better chance of getting jobs.

That deals only with the supply side. There is almost nothing to stimulate demand. In Wallasey we have almost 6,000 people unemployed, and only 75 notified vacancies. People can be trained until they are blue in the face, but the vast majority of them still will not succeed in getting jobs, because the jobs are not available. There must be measures on the demand side to create employment

I welcome the Budget promises, such as they were, about the great capital programmes for south London. If they actually happen, if the famed private finance actually shows up, jobs will be created—but we must do much more. There is much wrong with our infrastructure after 14 years of total neglect. There is much wrong with our roads, our schools and our hospitals, and many skilled construction workers are on the dole, waiting to work. It is not beyond the wit of the Government, or any Government, to introduce employment-creating measures that will improve the infrastructure, and to spend public money on them. It has been done in the past.

At least the Government have done us a favour, in that they have proved that we can never trust a Tory promise at a general election. That has been demonstrated so starkly that I believe that the electorate will never forget it. The Government are incapable of an imaginative response because of the dogma that has tied them up for the past 14 years, so they condemn 3 million people to more years of idleness. Instead of tackling the cause, they plan to cut welfare even more to pay for the hole that they have created in the Budget.

The Budget is shameless and cynical, full of broken election promises and huge tax increases, and it will do nothing for the unemployed.

9.19 pm

Lady Olga Maitland (Sutton and Cheam)

I very much welcomed the Budget and today I especially welcome the news announced by my right hon. Friend the Secretary of State for Employment that there has been a 22,000 drop in the number of unemployed. The suggestion made by the hon. Member for Wallasey (Ms Eagle) of Conservative neglect was wholly wide of the mark. If we had been so neglectful, how could we have been elected for four terms on the run? I found it rather unworthy of the hon. Member for Holborn and St. Pancras (Mr. Dobson) that he almost choked on the news of the drop in unemployment and that he tried to dismiss it as a freak. We should study the matter in its real context.

Mr. Dobson

Were you here?

Lady Olga Maitland

I am very much here.

This is a Budget for jobs and I congratulate the Government on the many employment initiatives. All told, Government spending on employment initiatives now amounts to £2.5 billion, which is not inconsiderable. It takes considerable vision to keep up the momentum with five new initiatives which could provide at least another 100,000 opportunities for individuals.

The initiatives are timely. I agreed with the hon. Member for Birkenhead (Mr. Field) when he said that it was painful for people to lose their jobs. Losing a job is devastating—I could not agree with him more. His comments were sensitive, correct and appropriate. I have seen what a shattering experience losing a job can be for those of my constituents who have never been out of work before. It is hard on their dignity because the vast majority of people want to work. We are not basically a nation of whingers and whiners.

The good and interesting news is that growth is already beginning. It is beginning quietly and it is beginning in a way that makes me feel comfortable because it will be sustained. There are examples of that growth in my constituency. The evidence shows that people are getting back to work far more quickly than ever before. As has been said in many ways today, one quarter of those who are unemployed find work within a month, one half find work within three months and two thirds find work within six months. It is also worth bearing in mind the fact that last year, in any six-month period, 4 million people moved in and out of work. The unemployment figures are not static; there is constant movement.

I give the example of the experience of the Sutton enterprise agency. It has found that the range of middle and senior management seeking work has stabilised since January. It has noticed that last year seven PhD postgraduates and any number of graduates came to it for help. So far this year, there has been none. The Sutton enterprise agency finds that the most positive programme is the business start-up scheme. The success rate is high. About 75 to 80 per cent. of the companies that are started under the scheme are still trading after two years, which is slightly better than average for small businesses.

As time is short, I shall deal with one area that has not been especially mentioned. I congratulate my right hon. Friend the Secretary of State on her initiative in introducing the workstart pilot schemes. I believe that it is appropriate that we should pay a lot of attention to helping unemployed people who have been out of work for two years. Such people lose heart and they lose the habit of work. They find that they lose morale and that it affects their family life. It is appropriate that we should seek every possible way to place them back into the system.

I understand that work start has taken its inspiration from workfare in America. It is an enterprising way to move forward. I pay tribute to my hon. Friend the Member for Norfolk, North (Mr. Howell), who opened up the debate initially. The programme is still in its infancy and I wish my right hon. Friend the Secretary of State well with the talks with the TECs next week.

There is a great deal of work to be done. Businesses need an incentive in taking on people. The scheme will take a great deal of structuring. We shall want to know precisely who will be taken on, by what kind of companies and for how long. It will require careful monitoring. None the less, workstart will be of tremendous benefit to the long-term unemployed. It will help to break the vicious cycle of lack of confidence and help people to get back into the workplace. There are high hopes that, by getting the habit of working, people will in turn be taken on for work.

9.25 pm

Mr. Andrew Smith (Oxford, East)

The tragedy of the Budget and the failure of the Government is that at a [...]time when Britain needed a Budget for jobs, the Tories gave [...]us a Budget for tax increases costing the average family £8.50 a week. Where we needed a Budget to reverse economic decline, the Chancellor delivered one which will deepen it. Where the Budget should have been fair, it hit viciously those on average and below average incomes.

In the Budget the Prime Minister was tested against his general election promises and was seen by everyone throughout Britain to have broken them. On 27 March last year he said: We have no plans and no need to extend the scope of VAT". On 31 March last year the Chancellor said: We will not have to increase taxes. I cannot see any circumstances in which that will be necessary. The Prime Minister said: I have no plans to raise the top rate of tax or the level of national insurance contributions."—[Official Report, 28 January 1992; Vol. 202, c. 808.] None of the Conservative Members who have spoken today has apologised for the breaking of those promises. Indeed, the hon. Member for Surrey, North-West (Sir M. Grylls) said that they were a trivial and nitpicking matter. Of course, all Conservative Members said in last year's general election campaign, "Vote Conservative on Thursday and the, recovery will continue on Friday."

We must ask what happened to that recovery. Since 9 April last year, more than 40,000 families in Britain have lost their homes. More than 60,000 people have lost their businesses. Broken promises. Some 300,000 people have lost their jobs. More broken promises. Today, even on the Government's figures, and even with the small welcome improvement in the unemployment total, there are 3,042,614 people unemployed. That is not the mark of a successful Government or effective policies.

Last Thursday, recoiling from the onslaught of my right hon. and learned Friend the Member for Monklands, East (Mr. Smith), the Prime Minister, in one of those unwise, unscripted rejoinders which he occasionally gives, said: If France is so successful, why are there 3 million unemployed there?"—[Official Report, 11 March 1993; Vol. 220, c. 1102.] It is interesting that the Prime Minister is finding time to reflect on the problems of France. But is there not a more important question that he ought to think about? If his Government here in Britain are so successful, why are there 3 million unemployed people here? Of course, the answer is that the Government have failed to invest in industry, in our economic and social fabric and in skills. As a result, Britain's production of goods and services lags woefully behind that of our competitors. The consequence of that is the mounting unemployment, the suffering of individuals and families and the grotesque waste which diminishes the lives and living standards of us all.

Mr. John D. Taylor (Strangford)

While I agree entirely with the hon. Gentleman's analysis of the current recession, does he agree that it has been caused by the high interest rates which occurred as a result of our membership of the exchange rate mechanism? Will he say that the Labour party would not join the ERM?

Mr. Smith

The extent of unemployment has been caused by the Government's failed policies. They have failed to invest in the British economy as our competitors have invested.

Some of my hon. Friends suggested measures that the Government could take to arrest the rise in unemployment and to reverse it. My hon. Friends the Members for Barnsley, Central (Mr. Illsley) and for Coventry, South-East (Mr. Cunningham) said that the Government could act, could keep the pits open and could save 100,000 people from joining the dole queues. The Government could act to meet the needs of manufacturing industry.

Yesterday, the Financial Secretary to the Treasury issued a challenge to Opposition Members on industrial production. Let me give him the figures during the years of Conservative government. Since 1979, manufacturing output has grown by 25 per cent. in Germany, 36 per cent. in the United States, 50 per cent. in Japan and 4.7 per cent. in the United Kingdom.

Mr. Dorrell

Just for the sake of completeness, will the hon. Gentleman also tell us what happened to manufacturing output during the years of the last Labour Government?

Mr. Smith

Let me tell the Financial Secretary that we advance our economy and create the prosperity that we all need through investment in manufacturing. Let us compare that investment now with when the last Labour Government left office. The answer is that manufacturing investment has fallen in the United Kingdom by 6.3 per cent., and during the same period it increased by 53 per cent. in Germany and by 128 per cent. in Japan. That is where we find the roots of our economic failure and national decline.

As my hon. Friends the Members for Lewisham, West (Mr. Dowd) and for Newham, North-West (Mr. Banks) said, when we point out such matters, Conservative Members claim that we are talking Britain down. We are not talking Britain down, but the Government are doing Britain down. It is not those people who call for action who are doing Britain down, but those who have failed to take the necessary action to secure economic prosperity.

On Tuesday, the Chancellor claimed that his proposals would help business and promote employment. What is the reality? What is the judgment of key industries affected by the Budget? The director-general of the Engineering Employers Federation said: This Budget does nothing to bring about the massive switch from consumption to investment which is essential for lasting recovery. The Machine Tool Technologies Association said: We were disappointed that little emphasis was placed on improving investment in high technology. My hon. Friend the Member for Cambridge (Mrs. Campbell) pointed out that nothing was being done to assist technology transfer, which we so desperately need.

If there is no Government action to allow British shipping to compete fairly, it faces extinction and there will be a loss of 20,000 jobs and a net loss of £2.3 billion to our balance of payments. Mr. Edmund Vestey, the president of the Chamber of Shipping, said of the Chancellor's Budget: it is extraordinary that he has ignored the shipping industry. This is a missed opportunity for Britain. I promise the Government and Conservative Members—some of whom have expressed concern on such matters—that during the passage of the Finance Bill we will provide ample opportunities for them to join us in the Lobby to vote for effective measures to promote crucial national industries. Those industries are all the more crucial because of the startling deterioration in the balance of trade referred to by my hon. Friend the Member for Wallasey (Ms Eagle). The current level of the deficit, although alarming, is not the only disturbing factor, because the forecast is shifting and is becoming worse. A £9 billion deficit was forecast for 1993–94, but it is now forecast to be £17.5 billion. There could be no surer measure of the Government's failure to enable Britain to pay its way in the world.

What of the measures of which the Chancellor and the Secretary of State for Employment have boasted to help the unemployed? In common with my hon. Friend the Member for Birkenhead (Mr. Field), I believe that we need a measure to help those—to use my hon. Friend's striking phrase—who have been in the queue longest to get to the front of it. That is why we proposed in our budget for jobs that national insurances rebates should be given to employers who are prepared to take on people who have been unemployed for more than a year.

If we consider all the measures in the Budget, it is clear that they are too little, too late, too poorly financed and will have too little impact when set against the £1.2 billion cut in the value of the schemes for the unemployed that has been imposed since 1990.

Of course it is good to help those who want to start up their own businesses, but does the Chancellor not realise that, to succeed, those businesses need customers? Of course it is good to let unemployed people study vocational courses, but why is that good for just 30,000 people? What about the many students who cannot undertake such courses because they cannot gain the discretionary awards to which my hon. Friend the Member for Norwich, South (Mr. Garrett) referred?

I accept that there is much work that needs to be done in the community, but, instead of introducing schemes with allowances barely above benefit levels, why are the Government not prepared to pay a proper rate, offer schemes that include proper training and create proper jobs? How on earth have the Government decided on the number to whom those schemes apply? Why did they choose 100,000 people? Does that stand for one in three of those who have lost their jobs since the election or the one quarter of those who face losing their jobs next year? Whatever the answer, the Government's proposals are a colossal betrayal of unemployed people, especially the long-term unemployed, who should have a right to quality when they train and a right to proper payment when they work. The Budget has also missed other opportunities to help the unemployed.

Real programmes for environmental action and improvement could and should have been used to generate jobs. The Government's attempts to dress up their punitive extension of VAT to domestic fuel and, for that matter, the increase in petrol duty as green measures are utterly unconvincing. Greenpeace rightly called the VAT proposal a setback for the environment.

If the Government wanted to help the environment by saving energy they would expand investment in rail and public transport and widen the differential between leaded and unleaded petrol. It would have been better if the Government had provided money for insulating pensioners' homes properly rather than inflating their fuels bills. They should have followed the national energy efficiency plan proposed by the Labour party. That would cut four times as much in CO₂ emissions as the Government claim will result from the VAT imposition. Our proposals would not simply save energy but create jobs.

The true recycling in the Budget was that done by the Chancellor when he recycled construction projects that had been announced before. It is high time that we had less of Ministers mincing their words and more of construction workers mixing cement. The question is when those projects will start. The Chancellor announced that crossrail would be subject to further delay. How do we know that that will not be an indefinite one? The Jubilee line project, which the Chancellor trumpeted in the autumn statement, is now subject to further problems. The north-south Thames 2000 link has also been postponed.

How can we have any confidence in the Chancellor's vague promise of a channel tunnel rail link by the end of the century, given the Government's previous mishandling of the scheme, which was described by the president of the European investment bank as a "disaster"? Alastair Morton, the chief executive of Eurotunnel, has described the scheme as a tragicomedy in umpteen acts. When the channel tunnel opens within the next year, the Government will have left the country with the French end of the tunnel linked to the European high-speed rail network and the British end plugged into Network SouthEast.

Above all, and as many of my hon. Friends have argued, why do not the Government even now allow the accelerated release of accumulated local authority capital receipts so that homes can be built and a start can be made on getting the 400,000 construction workers on the dole back to work?

If action is to be taken for jobs, we also need to look to international action. In his Budget statement the Chancellor welcomed, as we all do, the re-emergence of growth in the United States—a ray of light, he called it. But he failed to acknoweldge the limited extent to which such growth in the United States will have an impact in the United Kingdom. Analysts Phillips and Drew put the ratio at eight to one vis-à-vis the EC. A 5 per cent. increase in United States demand raises Europe's GDP by only 0.5 per cent. and that of the United Kingdom by only 0.3 per cent. Does not that show that much more effective and urgent international co-ordination is needed to secure expansion, including the sort of measures for eastern Europe to which my hon. Friend the Member for Birkenhead referred?

Why did Downing street dismiss Jacques Delors' call for an emergency G7 summit to consider urgent action on unemployment? When I tabled a parliamentary question about that, why did the Government refuse to commit themselves to such a summit? Will they give such a commitment this evening?

By making only contemptuous references to the European Community in the Budget speech, did not the Chancellor signal not merely the fact that he needs to cultivate the Euro-sceptics on the Tory Benches but his wanton disregard of the importance for jobs of urgent and co-ordinated European action for economic recovery? Christophersen, the Commissioner for economic policy, is calling for further measures—he has said that much more than what was agreed at Edinburgh needs to be done. He expects that the Danish presidency will propose as much. I challenge the Government to tell us their intentions. Do they believe that further measures should be taken? 'What are they; and will they give the urgency to this matter which they so signally failed to do during the British presidency?

Will the Minister apologise to the House for the fact that the Government forced out of the Edinburgh summit, despite the commitment to it of the other 11 member states, a £160 million programme for training for those who had lost their jobs or whose jobs were at risk?

There may be another reason for the Chancellor's contemptuous references to the European Community. Conceivably, he wanted to throw some of his hon. Friends off the scent of what was, at least to them, an important issue. The Chancellor said of carbon taxes: Tax policy should continue to be decided here in this House, not in Brussels."—[Official Report, 16 March 1993; Vol. 221, c. 182.] However, if the right hon. Gentleman is allowed to proceed with the 8 per cent. and then the 17.5 per cent. rates of VAT on domestic fuel, under the terms of the 1991 and 1992 European agreements this House would never again be able to levy a zero rate of VAT on fuel. I challenge the Paymaster General to make the Government's position on that clear tonight. Do they concede that what I have said is true?

Will the Government answer a question that they have so far failed to answer—the one put to them by my hon. Friend the Member for Barnsley, Central? Will pensioners be compensated in full for the extra costs of VAT on domestic fuel? I challenge Conservative Members—the right hon. Member for Brent, North (Sir R. Boyson) for one, since he expressed his concern on this point—to join us in the Lobbies on Monday to honour their election promise and defeat this extension of VAT, to afford some protection to pensioners and others on low incomes by not proceeding with this disastrous and punitive measure.

Far from being the Budget for jobs that Britain needed, this was a Budget for tax increases, for lengthening dole queues and for more broken promises and wrecked lives—from a Government who can no more be trusted with the economy than they can be trusted with their own words to the British people.

Mr. Frank Field

On a point of order, Mr. Deputy Speaker. I ask you to draw Madam Speaker's attention to the fact—this applies to right hon. and hon. Members on both sides of the House—that most of those whom she called to speak earlier in the debate have not had the courtesy to stay to the end. She might bear that in mind when she is next drawing up a list of speakers.

Mr. Deputy Speaker (Mr. Geoffrey Lofthouse)

It has been noticeable for a few weeks that the courtesies of the House, which have been observed over many years, are being overlooked. I hope that hon. Members will take note. I will draw the matter to the attention of Madam Speaker.

9.44 pm

The Paymaster General (Sir John Cope)

I am delighted to commend the Budget to the House. It sets out the strategy to give confidence to the economy. My right hon. Friend the Chancellor of the Exchequer has managed to show—despite all the comments that were made in advance of the Budget—how we shall tackle the deficit without damaging the recovery. Those are a difficult pair of aims to pull off at the same time, as all the comments before the Budget made clear. Nevertheless, that is what my right hon. Friend has been able to achieve. He has done it by setting out further ahead than usual what we shall do, and planning to legislate for that as far as possible. I have found during the day or two since the Budget statement that this has been welcomed by businessmen, who themselves have to plan ahead. That is why the Budget is so important for confidence in business.

It is, of course, businesses that create jobs. I know that some Opposition Members find that difficult to accept, but it is a fact. We need sustained growth with low inflation, and that is what the Budget will achieve. That is the primary reason why it is good for jobs, as my hon. Friend the Member for Hertfordshire, North (Mr. Heald) said. The hon. Member for Wallasey (Ms Eagle) spoke as though only infrastructure or spending on training by the Government would create jobs. That is a simplistic approach.

I shall respond to some of the arguments which have been advanced and draw particular attention to two important features of the Budget. First, there are the measures to help small businesses. Secondly, there is the impact of the single market. After all, this is the first Budget of the single market.

My hon. Friend the Member for Surrey, North-West (Sir M. Grylls), who for so long and so diligently has championed the cause of small businesses, correctly said that this is a five-star Budget for small businesses. My hon. Friends the Members for Ribble Valley (Mr. Evans) and for Taunton (Mr. Nicholson), and others, supported that assertion. It was important that it should be a Budget for small businesses because they are capable of creating the jobs that we need. Stan Mendham, the active boss of the Forum of Private Business, said yesterday that small businesses created about 1 million jobs in the 1980s and could do the same again in the 1990s. I am proud of the Conservative party's record, and that of the Government, on small businesses and of the contribution that those businesses have made to the economic life of the country. It is one of the great changes that we have seen since the socialist years, when large centralist organisations—preferably nationalised—were in fashion.

At first, efforts were directed to help small businesses start. All these schemes were focused on start-up. We are still concerned to foster new businesses, but at a time of recession we need to help existing businesses. Much of the help comes from the things which help every business—interest rates, confidence and other general considerations. There are, however, specific proposals for small businesses in the Budget. My hon. Friend the Member for Surrey, North-West mentioned especially the loan guarantee scheme. Like him, I am a strong supporter of the scheme. It makes bank finance possible for those who could not otherwise get it due to lack of security to put up to secure a loan or because of an inadequate track record. That is important.

My right hon. Friend the Chancellor of the Exchequer announced that the premiums would be lowered and, in particular, that they would be a ½per cent. only on fixed rate lending. That is valuable encouragement to this finance—which is important to small firms. Following the Budget, we are to discuss with the banks increasing the guarantee from £100,000 to a maximum of £250,000—a major increase—and increasing the proportion guaranteed from 70 per cent. in most cases to 85 per cent. There is also a further cut to a 00BD; per cent. in the premium for loans in inner cities. London has been mentioned a number of times in the course of the debate in that context, although most attention was obviously on the large infrastructure projects. However, it is important in this context too.

My hon. Friend the Member for Surrey, North-West quoted two leading bankers who are in favour of the loan guarantee scheme. As Minister with responsibility for small firms, I know from personal experience of the difficulty of selling the loan guarantee scheme to local bank managers, who are not always keen to take it up. Therefore, my advice to small firms is to ensure that they ask for the scheme, that they press for it if it is the right one for them, if necessary by going to a higher level within the bank, or for that matter by going to another bank. It is not always easy to persuade a local bank manager to go in for the scheme.

There are many other changes to help small firms—in particular, to value added tax. A couple of weeks ago, with our European Community partners, we negotiated a special agreement to raise the maximum for the cash accounting scheme to £350,000 turnover—by far the highest in the EC. In the Budget, my right hon. Friend announced that that is exactly what we are doing. This is a useful scheme, particularly for small businesses which have bad debts or are worried about bad debts. I urge all those firms who are eligible to consider joining if they have not done so already. We are also making it easier to join the scheme and consulting about simplifying the scheme altogether. In addition, we have cut the time limit for all firms for bad debt relief to six months. The need for that came out strongly in discussions with small firms—and large ones, too, for that matter—and their organisations.

We have also improved the VAT penalty regime, as several hon. Members have remarked. We have attempted to keep a balance between the necessity to collect the revenue and the need to recognise the problems that firms, particularly small firms, may have. The VAT penalty regime has to balance the necessity to collect the revenue with a realistic attitude to firms' difficulties. Hon. Members see in their constituency postbags, and from time to time send to me, hard cases of firms with difficulties of that sort. Sometimes one can assist, sometimes not. But most businesses pay promptly and properly and they have a right to expect that we will also collect the proper tax from those who are reluctant. The revenue cannot stop trading with someone it regards as being a doubtful debt in the way that a trader can. That is why we need penalties. We are not relaxing our duty to collect the tax, but we are introducing, for example, flexibility to mitigate penalties, as my right hon. Friend the Chancellor announced, something which was much requested by business organisations.

Another important deregulatory measure which has been mentioned this afternoon is the reform of the system for assessing the self-employed personal tax. Some small firms worried that we were passing over to the self-employed work currently done by the Inland Revenue, making them do more of the work. In fact, self-assessment will be voluntary. It will be able to be on the pay-and-file basis—to borrow a phrase from corporation tax—but the self-employed will also be able, if they wish, to fill in a return and let the Inland Revenue send the bill as happens at present.

My hon. Friend the Member for Cirencester and Tewkesbury (Mr. Clifton-Brown) made an entertaining and vigorous speech in which he referred to some of this. He did, however, leave one big unanswered question, which perhaps he will deal with at some point—how on earth he and the hon. Member for Birkenhead (Mr. Field) came to be wrapped up in cement bags. He never got around to telling us how that came about, but perhaps he will do so at some later stage.

There were many other measures in connection with small firms which I have no time to go into at the moment. There was the unified business rate, affecting 800,000 properties. Again, in London, 40,000 small shops and 40,000 other business premises will benefit from what my right hon. Friend announced. There were also the prompt payment measures, the capital gains tax scheme, and so on. It is truly a five-star Budget for small firms.

This is the first Budget in the single market and I realise that many people are worried about the effects on trade of the opening up of markets, particularly trade in goods subject to excise duty. Our value added tax is below average in the Community, but our excise duties are higher than most, though not all, in the Community. Every member state has different rates, and that is exactly how it should be. Our rates are fixed here in this country by the House.

We have a land border between Northern Ireland and the Republic and that, of course, is where the problem is, or could potentially be, most acute. Our excise duties and VAT are very similar to but just below those of the Republic for the most part, so cross-border shopping where it is easiest is least distorted with the rates previously and the rates as proposed by my right hon. Friend in the Budget.

With regard to the sea border between this country and the continent, the position is, of course, different. Most of our neighbours there have lower excise duties. That means that, when it comes to personal shopping, there is an incentive which we have always recognised and which was taken into account by my right hon. Friend in making his judgment on fixing excise rates in this Budget.

I will say only two things about this at the moment. First, it is not only the duty but, as far as the customer is concerned, the price that matters. Over the last 10 years the proportion of the retail price of beer and whisky, and for that matter wine, represented by the tax has come down by 10 per cent. and 20 per cent.

Mr. Andrew Smith

I appreciate that the hon. Gentleman's time is short, but can he answer the questions put by me and my hon. Friends? First, will he reimburse in full the cost to pensioners of the extra VAT on domestic fuel? Secondly, can he confirm that the British Parliament would not be able to return to a zero rate on that fuel under the European agreement?

Sir John Cope

On the first point, I have nothing whatever to add to what my right hon. Friend the Prime Minister said earlier, what my right hon. Friend the Chancellor said in his Budget speech, and what other Ministers have said in the course of this debate. On the second point, under the agreement made by the last Labour Government, it is true that we should need to renegotiate that in order to lower the rate. That is something which will no doubt be discussed in Committee as we go through these proposals.

Before the hon. Gentleman cut in, I was talking about cross-border shopping. People are concerned not only about personal shopping but also about potential bootlegging—people bringing back and re-selling here goods on which duty has been paid in the Community. These are early days, but the Customs have already caught quite a number of people and there are some prosecutions coming forward. Anyone who thinks of going in for bootlegging should remember that the penalties are severe—seven years imprisonment at the top, but also the duty, plus a fine, while the goods and their vehicles are subject to confiscation. If a pub or an off-licence re-sells bootleg alcohol or cigarettes, those concerned risk losing their licence. The penalties are very heavy and they will be imposed, so those who contemplate going in for it should make sure that they understand exactly the risks that they are taking.

We have had a wide-ranging discussion today. I have not had time to report to my right hon. Friend the Chancellor that the hon. Member for Newham, North-West (Mr. Banks) confessed to liking him. I have to tell my right hon. Friend, when he comes to read it in Hansard, that it was wrapped up a little and was rather a back-handed compliment. The hon. Gentleman was in the course of praising my right hon. Friend for introducing the unified business rate—

It being Ten o'clock, the debate stood adjourned.

Debate to be resumed tomorrow.