Budget Resolutions and Economic Situation

HC Deb 05 December 1995 vol 268 cc140-265

Madam Speaker

I must tell the House that I have selected the amendment in the name of the Leader of the Opposition to the first Ways and Means motion. It may be convenient if at this stage I also announce that I have selected the amendment in the name of the Leader of the Opposition to the motion on public expenditure which is being debated together with the Budget resolutions.

3.35 pm

The Deputy Prime Minister (Mr. Michael Heseltine)

My right hon. and learned Friend the Chancellor of the Exchequer had three principal objectives in his Budget: first, to maintain the Government's determination to make this country the enterprise centre of Europe; secondly, to enhance still further the priority that we give to three vital public services—education, the health service and the battle against crime—while reducing overall public expenditure as a percentage of gross domestic product; and, thirdly, to pursue the Government's objective to allow people to keep more of their own money through a programme of significant tax cuts. I pay tribute to my right hon. and learned Friend for producing a Budget that achieved all three of those objectives. He has delivered a Budget that will get borrowing down, secure our reputation for governing responsibly and in the national interest, and continue to promote a sustainable, lasting recovery.

I referred to our determination to build in this country the enterprise centre of Europe. We have recognised as a Government—perhaps more frankly than any other Government—that over the past 100 years, our position as a trading nation, from about 1860 onwards, has been one of relative decline. As a Government, we inherited in 1979 an economy heading for still more serious decline—structurally unsound, grossly overmanned, seriously unproductive and ridden with industrial disputes. It was widely acknowledged that in 1979 this country was the sick man of Europe.

Today, we are among Europe's fastest growing economies. The United Kingdom grew faster than G7 average growth in 1993 and 1994, and we are set to do so again this year. The International Monetary Fund expects us to join Germany at the top of the G7 growth league in 1996. The Organisation for Economic Co-operation and Development has praised the change. Its survey of the UK noted:

the UK's sweeping structural reforms are yielding dividends in a more flexible, competitive, and less inflation prone economy.

Mr. D. N. Campbell-Savours (Workington)

The Minister refers to sweeping structural reforms. Has he noted the sweeping structural reform in my constituency, where an American company, Campbell Soups—60 per cent. of its share capital is owned by one family—was able to take a decision which closed one of the most advanced food-producing plants in the country, owned by Home Pride, effectively wiping out 123 jobs at a stroke? Home Pride was profitable last year; it made £4 million. The entire food industry is outraged, and my constituency is outraged, yet the Government stand back and do nothing. Who is going to step in to stop such companies wrecking the local economy in my constituency? If the right hon. Gentleman has any honour, will he stand at the Dispatch Box and join me in appealing to the British people to boycott the products of the company—Campbell soups and Fray Bentos corned beef—so that it knows that we will not stand aside and watch it wreck a constituency such as mine?

Mr. Dennis Skinner (Bolsover)

So much for inward investment!

The Deputy Prime Minister

Of course I do not like unemployment being created in any constituency in any circumstance. I take the point made by the hon. Member for Workington (Mr. Campbell-Savours) seriously. Was he saying that a future Labour Government would become involved in preventing companies from closing down? Would a future Labour Government be prepared to offer subsidies to such a company? Is that one more—

Mr. Campbell-Savours

rose—

The Deputy Prime Minister

No, I will not give way. This is a question not for the hon. Gentleman, but for Front-Bench Members of his party. What faces us today is old Labour anticipating old demands that it will make to a future Labour Government. Perhaps the deputy leader of the Labour party will tell us how much money is tucked away in the coffers of a potential Labour Budget to save jobs in the circumstances that the hon. Gentleman has described.

I noticed another characteristic of old Labour when the hon. Member for Bolsover (Mr. Skinner) spoke against inward investment, cynically attacking one of the most successful aspects of the British economy.

Mr. Skinner

Why does the right hon. Gentleman not carry out his promise of a short time ago, when he talked at the Tory party conference about intervening before breakfast, before dinner and before tea? Why, in this respect, does he not intervene before the soup?

The Deputy Prime Minister

As the hon. Gentleman knows, I and my right hon. Friends have intervened time and again and the result has been that there have been more than 4,700 inward investments into this country which are creating or safeguarding 700,000 jobs. That is the sort of intervention in which we believe, creating an enterprise economy which is making us the most successful enterprise centre of Europe.

It is interesting that this is the new Labour party. At any sign of success, any inward investment by overseas companies or any decision to cause a redundancy, the Labour party is up in arms with indignation. There is nothing new about the Labour party. Labour Members are the oldest men and women, psychologically, in British politics.

Several hon. Members

rose—

The Deputy Prime Minister

There is no point in my giving way when the Labour party has given way to every intellectual argument that this party has paraded over the past 16 years. Labour Members—the whole lot of them—do not realise that they are intellectually flat on their backs.

The people of this country must make a decision. Do they want this country's economy to be judged by the standards of the Labour party, or by the standards of the men and women running the world's most successful international companies who, in the freedom they enjoy, are choosing to invest in this country—a country that the Tories have made the most successful in Europe? Which is the right judgment? Should people choose Labour's restrictionism, which harks back to yesterday, or the Tory party's bringing the investment that will create prosperity and jobs tomorrow?

Mr. Ronnie Campbell (Blyth Valley)

The Deputy Prime Minister closed the pits and put 30,000 miners out of a job. Why are new mines now being opened in the north-east of England? Why are companies opencasting half my county? Why is that happening when the right hon. Gentleman put 30,000 miners on the dole?

The Deputy Prime Minister

I took that most uncomfortable decision for the same reason as Labour Ministers took exactly the same decisions year after year after year, in the unhappy circumstances when they sat temporarily on the Treasury Bench. They took that decision—as I did—because the industry was uncompetitive. The reason why the hon. Member for Blyth Valley (Mr. Campbell) can point to the fact that new mines are being opened, new opportunities are being created and coal is being exported is that under the private sector, the coal industry is competitive. That is the transformation which has come about.

Mr. William Cash (Stafford)

Bearing in mind the fact that I voted against the coal proposals to which my right hon. Friend has referred, but moving further forward, does my right hon. Friend accept that the Labour party demonstrates its utter hypocrisy by continuing to cavil and complain about how we are running the economy, when the Labour party was behind the exchange rate mechanism and is in favour of further integration into monetary union? Will my right hon. Friend say here and now that the United Kingdom will never go back into an exchange rate mechanism? It is precisely because we are outside that system that we are now competitive and have all the growth to which my right hon. Friend has rightly referred.

The Deputy Prime Minister

Now that my hon. Friend has reminded me of the facts, I recall that he disagreed with me on the issue of the coal mines. But the day when my hon. Friend and I agree on all aspects of policy will be a day for the Tory party to rejoice from one end of the country to the other. I only suggest to my hon. Friend that he should use his considerable rhetorical skills not to attack the record of the Government but to attack the Labour party, which will otherwise take the place of the Government.

Several hon. Members

rose—

The Deputy Prime Minister

I think that it is only fair that the Opposition spokesmen should have a chance to speak in the debate, as opposed to allowing the whole thrust of Labour party policy to be dictated by its Back Benches.

Mrs. Ann Clwyd (Cynon Valley)

Will the right hon. Gentleman give way?

The Deputy Prime Minister

I am being fair to the Labour party because I understand that it cannot make up its mind which way to vote tonight. Perhaps I should give Labour Members more chance to debate these matters between themselves. I will not give way to the hon. Member for Cynon Valley (Mrs. Clwyd); she will forgive me. The fact is that international opinion and world commentators now praise the remarkable changes that have occurred in the British economy. To quote only one, the chairman of BMW said earlier this year:

structural change has made Britain by far the most attractive place to invest in Europe. The fact is that the change is happening in manufacturing, the service industries and in the vital super-highway industries of tomorrow. The people who have to make the judgments upon which so many jobs and so much investment depends know that the British economy under the Conservatives offers the best tax climate, excellent industrial relations, low inflation and a climate of enterprise which the Government are systematically extending and expanding year after year.

There can be no clearer indication of the success of our policies—it is one that was at the heart of the Labour party's preoccupation—than the fact that unemployment has fallen by almost 750,000 over the past two and a half years. The United Kingdom now has more people in work than any other major European Union economy.

I shall expand on some aspects of the Government's continuing agenda of competitiveness, to which the Chancellor referred in his speech. I shall start with the deregulation initiative and the burdens on industry. After the outstanding work of the task forces, first under Lord Sainsbury and now under Francis Maude, far more than 1,000 regulatory provisions have been earmarked for repeal or amendment. Some 500 will have been dealt with by the end of this month, and many more are in the pipeline.

We are now saving companies hundreds of millions of pounds per annum, which of course feeds through into enhanced competitiveness, investment and jobs. Out of the hundreds of regulatory provisions, I shall give the House three examples. First, merely by simplifying the food temperature control regulations, the Government will have helped save industry about £40 million a year. Secondly, we have increased the proportion that charities can invest in equities from 50 to 75 per cent. On the charities' own estimates, that could increase their investment returns by some £200 million a year. Thirdly, the simplification of trade marks legislation is already generating savings of some £30 million a year.

I am pleased to announce today the progress that we have made on a major area of regulatory concern—bringing in greater joint working by the Inland Revenue, the Contributions Agency and Customs and Excise to make dealing with Government more straightforward and less burdensome for business. Anyone in business will know that every year, two heavy documents arrive, one explaining the tax system, the other explaining the national insurance contribution system: two systems, two organisations, two sets of inspectors, two documents.

Today, Peter Wyman, senior tax partner of Coopers and Lybrand and a member of Francis Maude's task force, has agreed to oversee and drive forward the project of joint working between the Inland Revenue and the Contributions Agency and to ensure that this delivers real early benefits to business. We are talking about concrete things that really matter to people who run businesses: like having just one initial audit visit covering both PAYE and national insurance; like a single telephone help line to deal with queries and to cut out the duplication of paperwork. Peter Wyman will bring exactly the external experience and perspective that we need for this task.

I referred earlier to our inward investment. One third of all inward investment in Europe is now based here. Forty per cent. of all American and Japanese investment in Europe is here—world-class companies transforming management practices, our employment prospects, our research expertise and our export markets. This investment from overseas, together with very optimistic forecasts for domestic investment, is helping the transformation of our economic prospects. But there is more to it than that.

Mr. Ian Bruce (South Dorset)

Does my right hon. Friend believe that if the Government were to sign a sweetheart deal with BT allowing it to compete against the new entrants into the cable market, we would get the information super-highway built quicker? Would that have the effect of cutting off inward investment from such companies?

The Deputy Prime Minister

I would be grateful if my hon. Friend would bear with me. I had it in mind to return to that subject a little later in my speech.

This is not just about our industrial and commercial base. Britain is being modernised and rebuilt in what will be seen in perspective as the greatest period of urban renaissance since the 19th century. None of this is luck; it is as a deliberate consequence of the strategies that the Government have pursued.

First, trade union reform and the privatisation of our nationalised industries played a critical part in restoring the wealth-creating ethos in this country. They have become established here despite the in-built resistance at every stage of the Labour party, which is characterised now only by its abject surrender on all those major issues of principle for which it fought so hard in the 1980s.

Mr. William O'Brien (Normanton)

Will the right hon. Gentleman give way?

The Deputy Prime Minister

No, we know into which Lobby the hon. Gentleman went all through the 1980s. We know the record.

The fact is that our reforms in the restructuring of our economy and the privatising of our industries have become so entrenched here that they are the subject of intense investigation across the world. There is virtually no country today that is not exploring and experimenting with the ideas that we developed in the 1980s. They are established here and admired across the world. The fact is that we are moving on to new ideas that again will become part of the world culture change.

Mr. Tony Marlow (Northampton, North)

Talking about new ideas, or perhaps rehashed old ideas, my right hon. Friend has been discussing regulation and competitiveness. I understand that there are one or two parties in the House—or even three—that have a proposal for a Scottish Parliament. What would that do for the competitiveness of industry and deregulation in Scotland? My right hon. Friend may intend to deal with that later, but if he does not, perhaps he could tell the House what he thinks about it.

The Deputy Prime Minister

It is difficult to be sure how much extra tax it would lead to because I would have to know how much extra tax was going to be imposed by a future Labour Government across the national economy. As I understand the specifically Scottish dimension, the cost of an assembly in Scotland would be of the order of 3p. That, I think, is the tartan tax. That, broadly, would be the sort of cost that the people of Scotland would have to pay. The effect on inward investment in Scotland would be dramatic, but it would, of course, be hugely advantageous to England, Northern Ireland and Wales, because we would get the inward investment that socialism in Scotland would deter from going there. Those are the obvious consequences of a Scottish assembly, and that is why I do not expect to see it happen.

We are now pioneering further developments that will affect the culture of public and private sector co-operation on a world scale. The first of those is the progress and vast potential of the private finance initiative. The Chancellor of the Exchequer and the Secretary of State for the Environment made it clear last week that we will also be extending the reach of another Government innovation—challenge funding. In many ways, the cultural shift implied in challenge funding is among the most pervasive and ambitious of our proposals.

I well remember, 15-odd years ago, the hostility that greeted the concept of the urban development corporations, the enterprise zones and the urban grant. But once again, as in so many other areas where we have pioneered, others have been forced by events to follow the lead that we set. We have seen, and will see through regional challenge, city challenge and the fund for the single regeneration budget, billions of pounds of investment from the private sector being levered in by the stimulus of public money to regenerate and revitalise our inner cities.

No one who has any experience or understanding of east London, Tyneside, Clydeside, the Tees, Merseyside, inner Birmingham, central Manchester or Cardiff bay can question that it is Conservative policies which have transformed those formerly dispirited urban areas. They have done that by creating a genuine public-private partnership, which has added hugely to what the public sector could ever have been able to afford.

We have not just created a physical renaissance—we have changed the culture of co-operation at local level. We have forced the inward looking, self-serving local Labour authorities to work effectively in partnership with their local communities, which they have been elected to serve.

Challenge funding has brought the Government, local authorities, training and enterprise councils and the private sector together. Regional challenge involves the European Commission in the same process. As a consequence of such partnerships, those involved have overcome differences and worked together for the benefit of the entire community. In order to win the competition for challenge funds, local authorities must now consult and involve their local communities. They must talk to tenants, teachers, the police and the industrial and commercial communities as they develop their plans and their priorities.

That is the politics of progress. That is how one truly builds the concept of one nation in the most deprived parts of our country. That change has been brought about because the Government have changed the assumptions that local authorities can simply expect to use taxpayers' money to finance irresponsibility and dogma.

The Secretary of State for the Environment has now proposed an expansion of challenge funding in local authority capital programmes. Shortly, the President of the Board of Trade will announce the result of the competition for the £160 million available under the regional challenge, which we have run with European funds.

Mr. Terry Lewis (Worsley)

Bingo and scratch card economics again.

The Deputy Prime Minister

I cannot help but notice the continuing murmuring of anti-enterprise slogans from the Labour party. The most interesting thing about sitting on the Conservative Benches is to note that the only thing that ever excites the Labour party is yesterday's slogans. The more the leadership of the Labour party talks about new Labour, the quieter the Labour party becomes. The more it lapses into yesterday's jargon, the more hysterically reminiscent it becomes of the old Labour party I know and love. [Interruption.] I should have thought that with so much self-evident success, benefiting the Labour constituencies of this country—[Interruption.]

Madam Speaker

Order. I refer to Mr. Campbell. I will have some order now from the Opposition Front Bench below the Gangway.

The Deputy Prime Minister

I am referring to falling unemployment, which now creates derision among the Opposition. I am talking about inward investment in their constituencies and the hon. Member for Bolsover (Mr. Skinner) sneers. My right hon. Friends spend hour after hour trying to persuade companies to come here instead of the south of Ireland, Germany, Holland or anywhere else and all that we get from Opposition Members is sneering at the results that bring jobs to their constituencies.

That is characteristic of what we know about the Labour party. They are never happier than when they are talking Britain down. The Labour party has latched on to the 1995 world competitiveness report. It is a report in which Chile comes top for having corporate boards which safeguard proper practices and Peru is thought to be the second most likely country in the world to have a low inflation rate in the next 12 months, despite the fact that the present inflation forecast for Peru in 1995 is 20 per cent. To cap it all, it is a report in which public confidence in financial intermediaries in Colombia surpasses that in all G7 countries except Canada.

Not content with that piece of fantasy, the Opposition turn desperately to some of the OECD figures that the Government used in the competitiveness White Paper. The OECD figures do not help them enough, so what do they do? They stick Hong Kong and Singapore into the OECD league tables of GDP per head and select the position just above the United Kingdom in which to put them. They have no idea as to whether they should put them there, so they do whatever suits their political propaganda.

The Opposition are not comparing like statistics with like, but that does not matter. It may not fit the facts, but it serves the narrow, knocking purpose of the Labour party. They leap about and start crowing that the United Kingdom has apparently slipped from 13th position in 1979 to 16th now and when they include Hong Kong and Singapore, it is 18th. However, they overlook inconvenient facts, as they always do. We might explore whether the Opposition are prepared to get rid of the unemployment benefits and the welfare benefits that we have here but do not exist in Singapore in order to raise the investment levels in Britain to those in Singapore. Perhaps that is new Labour policy, and that is how Britain's competitiveness is to improve, but we might be let into the secret this side of a general election campaign. Perhaps they have it in mind that people should live in conditions characteristic of those in some of the fastest growing economies of the far east. If they would be prepared to allow those housing conditions to exist here, people should be entitled to hear about it.

Mr. John Prescott (Kingston upon Hull, East)

This is absurd.

The Deputy Prime Minister

I am not absurd; it is absurd that the Opposition are attempting to compare Britain with those two economies for their own narrow, selfish party purposes, although they were not included in the OECD figures.

Even if one were talking about the events of the 1980s and 1990s, and considering the countries that were included, in 1979 we were the sick man of Europe. Nobody seriously argues with that. I cannot believe that the Opposition would defend it; that would imply that they wanted to go back to it. They certainly would go back to it, but they do not want to imply that intention.

In 1979 we inherited the disasters of restrictive practices, rampant inflation and soaring debt. Thanks to that legacy I concede at once that we slipped to 19th place in 1981. I wholly fail to understand how anybody can imagine that in the immediate aftermath of the winter of discontent we could have seen anything other than the deterioration of the British economy. Where the whole game plan comes unstuck is that from 1981 onwards, we have worked painstakingly and steadily to right the effect of those years of decline. We have achieved something that the socialists opposite never achieved—real, lasting success. While Labour fiddles with statistics, we have been tackling the competition head on.

Mr. Prescott

It is not us who have been doing the fiddling, such as on the unemployment statistics.

The Deputy Prime Minister

Use the word "fiddle" and the deputy leader of the Opposition wakes up. That is his stock in trade, and he is expert at it. I suggest that he calms down because I shall be coming to the deputy leader in a few minutes. Give me a minute or two to deal with the facts before we get to the right hon. Gentleman.

Since 1981, we have seen a significant recovery in this country's status as a world economy because we have systematically put in place the conditions for competitiveness. Although Labour has changed its language, it has changed none of its instincts or ambitions. Labour in the end is the party of the producer, not the consumer. It is the party that will always serve the interests of organised labour as opposed to the interests of the market place. In the end, the Labour party will put its interests above those of the nation at large.

If anyone wants to understand how little Labour has changed and how little it understands of the responsibilities of government—and of how one does not fiddle in Government—consider the point raised by my hon. Friend the Member for South Dorset (Mr. Bruce). The leader of the Labour party stitched up a deal with BT, which he announced with maximum publicity at the Labour party conference. If we in Government behaved like that, we would be in the courts for abusing our legal restraints. No wonder the right hon. Member for Sedgefield (Mr. Blair) has been spending his time ever since trying to persuade the cable companies, which we encouraged to invest billions in Britain, that he had not done a deal with BT. The right hon. Gentleman cannot have it both ways. Either he has done a deal with BT that no one in the Government could do within the constraints of the law, in which case the right hon. Gentleman does not have any idea of the responsibilities of government, or he has not done a deal—in which case he deceived the British people into believing that he did. With the Opposition, if votes are for sale the price is of no regard.

One of the responsibilities of my right hon. Friend the President of the Board of Trade is to preside over the regulatory climate and to operate, objectively and on advice, within the law. I have received a letter from the hon. Member for Sheffield, Central (Mr. Caborn), who is an Opposition spokesman and could find himself in a responsible position and required to study evidence and listen to advice, in taking a wholly analytical and detached view of problems put before him—for that is the job that the hon. Gentleman shadows. Before the hon. Member for Sheffield, Central received any independent advice or heard what the regulators had to say, he wrote to me:

Bskyb is abusing its market position by restricting consumer choice and disabling potential competitors. I read in the newspapers that the deputy leader and the Leader of the Opposition ordered the hon. Member for Sheffield, Central to withdraw that letter. After all, what is the point of flying all the way to Australia to suck up to the executives of the Murdoch empire if one's official spokesman back home is trying to carve up one piece of that empire at the same time as one is trying to win votes in Australia? I will give Mr. Murdoch a simple word of advice. Before he listens to the organ grinder, he should keep his eye on the monkeys back home. Nothing shows more clearly what Labour would be like in power and that it has no idea of the responsibilities within which a Government must operate. Labour is not fit to govern.

Mr. Richard Caborn (Sheffield, Central)

rose—

The Deputy Prime Minister

Of course I will give way to the hon. Gentleman. I will get the letter.

Mr. Caborn

While the Deputy Prime Minister is getting the letter, I can tell him that legal advice was taken on the BT deal by the Select Committee. In fact, we took three sets of legal advice. We were told that the proposals in the Select Committee report were attainable, and that is what my right hon. Friend the Leader of the Opposition said.

I suggest that the right hon. Gentleman might do better in government if he did some of the things that he suggested when he was in opposition. I also suggest that if he revisited his book "Where There's a Will", he might gain more backbone to take on the Treasury—as he said that he intended—and that might be helpful in the future.

The Deputy Prime Minister

I am glad that I gave way. I read the Financial Times and—

Mr. Caborn

We have read the book.

The Deputy Prime Minister

If the hon. Gentleman had read my book, he would not have made such inane observations.

If the BT deal announced by the Leader of the Opposition in his bravura performance was real and of value, why is he now telling the cable industry, to quote the Financial Times—[Interruption.] I shall give way if anybody wants to tell me that what the Leader of the Opposition told the Financial Times is not true.

The Opposition cannot have it all ways. What the Leader of the Opposition said at the party conference was designed to give the impression of a deal that would change the world. What he said today to the cable companies "at a private meeting"—not on the platform at the Labour party conference, not at a great gathering of the Labour party and with no trade unionists there to check the minutes—was

that BT would only be allowed access to the market after 1998 if it presented a detailed programme for the construction of a nationwide "broad-band" cable network—the so-called information superhighway.

Mr. Caborn

That is what the Select Committee said.

The Deputy Prime Minister

We are talking not about what the Select Committee said, but about what the Leader of the Opposition tried to con the British people into believing at the Labour party conference. Obviously, he was trying to have it both ways. If the right hon. Gentleman had been in government, he would have been in the courts—and the Opposition know it.

The Budget debate has had the flavour of the old Labour party. One after another, Opposition Members have been demanding higher levels of public expenditure. The hon. Member for Merthyr Tydfil and Rhymney (Mr. Rowlands) wanted a community action programme. The hon. Member for Falkirk, West (Mr. Canavan) demanded investment in the construction industry. The hon. Member for Bradford, South (Mr. Sutcliffe) wanted —20 for the disabled. The hon. Member for Cambridge (Mrs. Campbell) wanted more family credit. The hon. Member for Edinburgh, Leith (Mr. Chisholm) wanted regional development agencies.

Opposition Members want policemen, money for roads, housing benefit, money for education, investment, money for lone parents and more overseas aid. Their wishes were all summed up by the hon. Member for North-East Derbyshire (Mr. Barnes) when he said:

Greater expenditure is justified in many areas."—[Official Report, 29 November 1995; Vol. 267, c. 1283.] All that at 10p in the pound income tax!

I am not surprised that the hon. Member for Dunfermline, East (Mr. Brown) cannot answer the questions that have been put to him by my right hon. and learned Friend the Chancellor and other colleagues. One after the other they have intervened, but they have received no answers. Not only is the Labour party not fit to govern, but its sums do not add up.

Mr. A. J. Beith (Berwick-upon-Tweed)

Will the right hon. Gentleman answer a question that will be in the mind of a typical teacher in his constituency? "If I am to get £9 more a week out of the Budget, I would need a pay increase of 4 per cent. If I got a pay increase of 4 per cent., schools would not get another £848 million because that entirely depends on the teachers' pay settlement being much lower. Which do I take?" Surely the same Budget cannot offer both.

The Deputy Prime Minister

The right hon. Gentleman is perfectly capable of understanding the Chancellor's language. My right hon. and learned Friend referred clearly to the average income rising by £9 a week next year. He said time and again that that increase takes into account a range of factors, such as wage settlements, bonuses and overtime earnings, which will vary as between companies, employees and industries. That is bound to be the position, and everybody understands it, but the fact is that we have a conflict: a shadow Labour Chancellor who cannot answer any of the questions, and a Labour party that is determined to try to seek increased expenditure in programme after programme.

I was interested to see a question that was tabled by the hon. Member for Edinburgh, South (Mr. Griffiths), which read:

To ask the Chancellor of the Exchequer what would be the cost in a full year of introducing a new 30 per cent. tax band on £3,000 of income above the basic rate band; and what would be the yield from introducing a 60 per cent. upper rate at a 40 per cent. rate limit of (a) £50,000, (b)£70,000 and (c)£100,000."—[Official Report, 2 November 1995; Vol. 265, c. 426.] If that was an idle question from some relatively new and inexperienced Labour Back Bencher, I doubtless would do my best to draw that to the attention of the House, but it may not have quite the credibility that it has when it comes from a Labour Front Bench spokesman. What possible interest has a shadow Treasury spokesman of the parliamentary Labour party in asking the Treasury to calculate the product of a 60 per cent. upper rate tax band? Is it idle curiosity, or is it to help with the arithmetic? If it is the latter, it would help the shadow Chancellor to answer the questions, but at least we should know that this side of a general election campaign. [Interruption.] I read out the question. I did not get it wrong. [Interruption.] The hon. Gentleman is a Front Bench spokesman. [Interruption.] If I have revealed that I was not sure that the hon. Gentleman was a Treasury spokesman, have I revealed something else: that there is a split between hon. Members on the Opposition Front Bench—between the Treasury trying to keep expenditure down and some other departmental responsibility trying to find the money to pay for increased expenditure? I do not mind which way it is; all that I tell the people of this country is that the Labour party is planning a 60 per cent. tax rate and it is doing the calculations on that basis.

Of course, the Labour party may try to suggest that one is raising claims about its policy that cannot be substantiated, but in the real world its own party members are asking the same questions. I happened to notice what the hon. Member for Hackney, North and Stoke Newington (Ms Abbott) said on the "Today" programme:

Gordon— I would be more respectful if I was referring to the shadow Chancellor—

can say anything he likes if he thinks that is going to win the election. When Labour is in power they will be looking for other priorities apart from tax cuts". I have to say, of course, that the hon. Lady is a young and enthusiastic Member of the Labour Back Benches, so perhaps again we can dismiss it as an isolated occasion, but I have always been interested in the old hands who have been around a little longer, one of whom is our old friend the right hon. Member for Chesterfield (Mr. Benn), who was on the "Clive Anderson Talks Back" programme. [Interruption.] I understand that Labour Members do not want to hear it, but hear it they will, not just from me but from their right hon. Friend. Let me quote what he said:

The Labour Party doesn't want to cause trouble because we want to get this bunch of crooks out of Government." [Interruption.] We can unite the Labour party on that. He goes on to say:

And that's absolutely right". Now get the cheer ready, boys.

And then when we come to power, then you'll find the Labour Party is the same … party as it's always been. So there we have it—a party determined to egg up expenditure at every moment; a shadow Chancellor refusing to answer any of the questions; a shadow spokesman asking for calculations of the product of 60p in the pound income tax; and the old hands of the Labour party saying, "Let them say what they like as long as we get into power, then we will revert to type."

I am not telling the Labour party anything that it does not know. It knows that the shadow Cabinet is torn apart by the traumas of the debate that is going on—the shadow Chancellor talking about 10p in the pound income tax.

Mr. Campbell-Savours

Hear, hear. That is a very good policy.

The Deputy Prime Minister

Well, the hon. Gentleman should go and tell the shadow Foreign Secretary that, because he blew his top when he first heard about it.

Mr. Campbell-Savours

No, he did not.

The Deputy Prime Minister

Yes, he did.

Shadow Chancellor talks about denying welfare payments to those people who do not present themselves for work. The shadow Chancellor just did not tell his colleagues in advance, so the shadow Foreign Secretary flipped his lid when he was first told.

The only thing that can be said for the deputy leader of the Labour party is that, as no one ever tells him anything, he cannot be blamed if anything goes wrong. I do not want to give the House a misleading impression about the deputy Leader of the Labour party. I do not want to give the impression that just because no one talks to him they do not love him. It has become abundantly clear through the media of The Times that at least someone loves the deputy leader of the Labour party.

I was intrigued today to see that a young lady, Fleur Adcock, has written a little poem to the deputy leader. It reads:

In the dream I was kissing John Prescott— or about to kiss him; our eyes had locked and we were leaning avidly forward, lips out-thrust, certain protuberances under our clothing brushing each other's fronts, when my mother saw us, and I woke up. I must say, it was a merciful release for somebody.

We are back with the essence of a Budget which has left the Labour party floundering with a wholly inadequate response. It is a Budget which will deliver an extra £9 a week to the average income in Britain. It is a Budget which has seen us pursue our priorities of extra expenditure on the health service, on education and on the police. It is a Budget which has seen us march on a journey which is intended to take us to our 20p in the pound tax rate. It has revealed, by the Labour party's abject inability to make up its mind which way to vote tonight, that it is a party of opposition and not fit to govern.

4.22 pm

Mr. Peter Luff (Worcester)

On a point of order, Madam Speaker. I would appreciate your guidance on a matter of some importance before the right hon. Member for Kingston upon Hull, East (Mr. Prescott) rises to move the amendment on the motion on public expenditure. The amendment in the name of the leader of the Liberal party, which has not been selected, includes an honourable declaration of interest by the hon. Member for Gordon (Mr. Bruce). The amendment in the name of the leader of the Labour party includes a call to switch resources

to investment in transport from the cost of rail privatisation". Would not it have been helpful if the right hon. Member for Kingston upon Hull, East had also declared his interest arising from his sponsorship by a rail union?

Madam Speaker

I have made my views known on this matter before and I shall not get further involved in it. The hon. Gentleman has raised such issues before, and I refer him to the Official Report.

4.23 pm

Mr. John Prescott (Kingston upon Hull, East)

I beg to move, as an amendment to the motion, in line 4, after `tax', insert

`other than in respect of value added tax on fuel and power for domestic or charity use'. The amendment gives the House an opportunity to vote again on the issue of VAT on domestic fuel.

It was sad to listen to the Deputy Prime Minister today. I have much respect for the right hon. Gentleman. He has written a lot on many issues; I am in common accord with him on some, and in strong disagreement on others. But he rather treated the House to a speech that did not address the issue. It was more in accord with the circus than with a debate in the House of Commons. I am sad about that, because I believe that the right hon. Gentleman is capable of making a more serious speech about the important issues involved in the Budget. The Budget debate is one of the most important debates in which the House engages in discussing the nature of the economy and the prosperity of the country.

The Deputy Prime Minister is, in fact, more concerned with being the chief propagandist of the Tory party, an art in which he proved himself proficient today. We have heard of the fiddling of statistics from a Government who have fiddled the unemployment figures—among others—to such an extent that the responsibility for recording those figures has been taken from the Department for Education and Employment and given to the Central Statistical Office. At least they are now reported more honestly.

The right hon. Gentleman's speech was indeed a propaganda speech. It continued much of the argument that he advanced on this morning's "Today" programme, when he spoke of the "sacrifice" that had to be made if we were to achieve the success to which he referred this afternoon. It is not a sacrifice made by millionaires such as the right hon. Gentleman, and the many other millionaires who have done very well under 16 years of Tory government. It is the low-paid—people who desperately need assistance—who have suffered, and have borne the heaviest tax burden.

I find it offensive that it is those who have made the decisions in Cabinet who have benefited from those decisions, while launching an attack on people who desperately need the protection of a minimum wage. That is little enough to expect when more and more people are being driven down into poverty pay. That is what has happened in the 16 years of this Tory Government, and it is a disgrace to the country.

Yes, a sacrifice has been made; but it has been made by the millions whom the Government have put out of work, often by deliberate acts of policy. Millions of low-paid people have been denied the protection of a minimum wage, and driven into poverty pay by exploitation.

Mr. Bob Dunn (Dartford)

Would the right hon. Gentleman be prepared, on behalf of his party, to guarantee jobs for those who become unemployed as a result of a minimum wage?

Mr. Prescott

I will not take any lectures from any Tory Member about the level of employment, but I give the hon. Gentleman this guarantee: we shall be committed to putting employment at the top of our list of objectives as a Labour Government. We believe that there are certain things that the current Government could do now to return more people to work, rather than allowing them to waste away on the dole. I am talking about real jobs, not the "skivvy" jobs offered by the Budget.

That is the challenge for us, and we readily accept it. I might add that it was a Labour Government who, after the war, produced full employment for the first time, despite the opposition of the Tory party of the day. That is a matter of record.

Mr. John Townend (Bridlington)

If by some mischance the right hon. Gentleman manages to gain power, will he and his party bring back the national dock labour scheme, which ruined the port of Hull and turned it from the country's third port to its 15th? Hull is now recovering, and has doubled its trade since the Conservative party did away with the scheme.

Mr. Prescott

The hon. Gentleman is living in the past. Let me tell him what I would bring back: I would bring back a minimum wage, which would help an awful lot of employees in his shop who are earning very much less than that wage would be. Can the hon. Gentleman honestly say that those people are at least guaranteed the level of wages introduced by the Wage Councils Act? No, he cannot. He should look at his own business before he starts lecturing us about the conditions of people in jobs.

A week has gone by since the Chancellor announced the 18th Tory Budget. The common theme—this year's Budget is no exception—is that these are Budgets for recovery. Every Tory Chancellor has said at the Dispatch Box, "This is another Budget for recovery." Lord Howe said it in 1983; the right hon. Member for Kingston upon Thames (Mr. Lamont) said the same in 1992. According to the Government, we are always recovering, but we can never quite shake off the illness from which the country has suffered over the past 16 years.

We have had time to study the Budget much more closely since it was announced last week, and we have had judgments from the media, economic experts, industry and hon. Members. It is clear from the general view that the Budget has failed to meet the needs of the nation. According to The Sun:

It was about as inspiring as a cold kipper. The Daily Mail questioned:

Where's the magic? The Daily Express announced:

It's too little, too late. Those quotes are just from the Tory press, never mind anyone else. The CBI's welcome was distinctly lukewarm, and even senior members of the 1922 Committee are critical of the long-term failure to cut public expenditure and taxes even further. As most people have agreed, the Budget is the first step towards a grubby attempt to win the next general election.

After the biggest tax hike in history in 1992, what has the Chancellor done to redress the balance? What principles are behind his new tax policies? Are they honest? No, they are deliberately misleading. Are they sustainable? No, and they show no desire to secure a more prosperous economy and greater employment. Do they reward hard work and provide opportunity? Certainly not in terms of providing real jobs and training. Are they fair? No, they are not.

The Chancellor of the Exchequer (Mr. Kenneth Clarke)

I am glad that the right hon. Gentleman has had a chance to study the Budget. Last week, I asked the shadow spokesman for Trade and Industry whether there was any tax reduction in the Budget that her party opposed. I asked her whether there was any spending ceiling in the Budget that her party would increase. She found those questions difficult, and was unable to answer either of them. The right hon. Gentleman says that he has studied the Budget. Which tax cuts does he propose to vote against, and on which services will he advocate more spending?

Mr. Prescott

We have made it very clear that we disagree with the Budget's general strategy. I am moving an amendment to reduce value added tax on fuel. That is an important step, and hon. Members disagreed with the Government and supported us on that matter. We will undoubtedly approach taxation in a fair way. The Government do not. For the past 16 years, they have followed an unfair and regressive tax system. That is why we shall be fundamentally different.

In the context of spending, we shall operate much more fairly the private finance initiative, which I was one of the first to advocate. [Interruption.] Conservative Members think they have discovered private finance initiatives, but when we spoke about them in the House, the Government constantly told us that we could not have them. The Chancellor will certainly confirm that. We disagree with the strategy, and we have made it clear that we disagree with the Government's taxation principles. We shall vote accordingly.

The Budget hides multitudinous unfairnesses. Some 5 million people on benefits will not share in the 1p in the pound tax cuts or the widening of the 20p band. [Interruption.] The Deputy Prime Minister said that his objective and that of the Chancellor was to reduce the burden of taxation. I am afraid that is not the case, because it has been increased, even on the Chancellor's figures. The overall tax burden has increased, and the Chancellor agrees that people are £670 worse off than they were after the last Budget. By any measurement, that shows that, on their own criteria, the Government have failed to be fair on taxation.

Mr. Kenneth Clarke

The right hon. Gentleman is again drifting away from the point. He cannot just be against a Budget strategy but not against any of its measures. A Budget is a combination of tax reductions that allow people to keep more of what they earn and what they save, and a series of public spending judgments about how much will be spent on each service. It strikes a balance between the interests of allowing people to spend their own money and providing good-quality public services.

Is there any tax decision or spending decision in the Budget with which the right hon. Gentleman's party disagrees? If not, how can he oppose the Budget strategy? He is just saying that he does not have an opinion at all on the Budget's contents.

Mr. Prescott

I can well understand why the Chancellor of the Exchequer continually wants to explain his Budget: the rest of the country has certainly not understood it, and gives it the thumbs down. We have an entirely different strategy from the Chancellor. For example, the Government have made great play—he keeps talking about it—about the windfall tax that my right hon. Friend the Leader of the Opposition proposed, which they disagree with, but it is a proposal. We identify that extra tax with jobs, and we are entitled to do that.

We disagree with the judgment exercised by the Government in cutting the resources in the training sector, which is vital. We disagree with the judgment in respect of the reduction in public expenditure. We disagree with the Budget's fundamental drift and direction, and we are entitled to do that. We are called the Opposition at this stage, not the Government, and we are discussing the Government's proposals.

The Budget hides a multitude of unfairness. Five million people on benefits will get no share of the Government's 1p in the pound tax cut or of the wider 20p band, yet those people must still pay VAT on fuel. In Britain, deaths from hypothermia are much higher than in Scandinavian countries, where climates are colder. Today's cold weather reminds us that pensioners cannot afford to turn up their heating as easily as we can in the House of Commons.

It is a disgrace, and an indictment of the proposal in the Finance Bill to cut £30 million from the energy conservation budget, that that money could have been used to put people back to work in decent jobs, providing energy conservation so that pensioners could live with a little more heat and a little less insecurity. That is what we call jobs and social justice, where we meet the need for a real job and for people who are desperate simply to have the essential requirement of decent heat in winter. That is one clear example.

If the Chancellor really had some money to spare, would it not have been fairer to the old, the low-paid and the unemployed to cut VAT on fuel? That is what we will offer the House the opportunity to do. Again, it might be the only tax reduction that has ever been forced on the Government, apart from last year's VAT cut, when the Government were prevented from putting up VAT on fuel. We will give the House the opportunity to do that again.

An awful lot of Conservative Members have made it clear that they support that. Why? Because they think that it is a more progressive way of tax than the regressive measures that identify much of the Government and Budget proposals.

Mr. Alex Salmond (Banff and Buchan)

I agree wholeheartedly with the right hon. Gentleman on VAT on fuel, and I will join him in the Lobby this evening, but will he explain why, when the Scottish National party and its allies gave the House the same opportunity on 21 January this year, he and his colleagues abstained, calling it a cynical ploy? Why was it a cynical ploy in January and right tonight?

Mr. Prescott

The hon. Gentleman must make his own judgment on this matter. We have given the House an opportunity to vote, and we are the only party that is likely to achieve victory. If the SNP and other political parties join us, we will have achieved that objective, and many pensioners, people who are dependent on heat, will be very pleased that again the Labour party has led the way in making another tax reduction.

The Deputy Prime Minister

rose—

Mr. Prescott

Ah.

The Deputy Prime Minister

Why was it a cynical ploy in January and the whole Opposition strategy tonight?

Mr. Prescott

I keep getting an explanation as to why it should be. I stick to my argument, which is that we have put the case and given the House an opportunity to cut VAT from 8 per cent. to 5 per cent. As the House knows, we cannot reduce it any further than that, because of the requirement of European Community regulations. We will provide the House with that opportunity.

These Budget tax cuts are unfair, dishonest and typical of many of the Tory tax proposals: the more one has, the more one gets. These tax proposals give nothing to millions of people, but their tax burden keeps increasing. Despite what the Deputy Prime Minister has said, the burden has increased from 34.7 per cent. of gross domestic product to 36.5 per cent. this year. Does he accept that figure? I assume that he does—they are the Government's figures. He suggests that the Government's objective is to reduce the overall tax burden, but nothing in the Budget reduces that burden. Even on the Chancellor's projections, it increases the burden.

Mr. Nigel Forman (Carshalton and Wallington)

What did the Leader of the Opposition mean when he told the CBI recently that, under a Labour Government, there would be no return to the old penal rates of taxation, such as 80 per cent? Did he mean a return to 70 per cent. or 60 per cent?

Mr. Prescott

We have made it clear that we will not return to penal rates of taxation. The hon. Gentleman has a reputation as someone who is concerned about the less fortunate in our society. Perhaps he should concern himself with the penal rates that affect people on welfare—if they take work, an 80 or 90 per cent. penalty is imposed on them. I wish that as much attention was paid to that problem as Conservative Members pay to penal rates or the top rate of tax.

We will make a judgment on the different levels of tax rates at the appropriate time. My right hon. Friend has taken an important step forward by stating our policy on the lower end of rates. I understand that Conservative Members are arguing whether 10p or 15p is practical. It is certainly practical in other countries. It is an important step towards measurable wealth which will help us to find the best ways to get people from welfare into work. It is an important point, and I shall deal with it in more detail later.

Mr. Marlow

Are the right hon. Gentleman and his party considering at some stage increasing the top rate of tax from 40 per cent? If so, what parameters is he thinking about?

Mr. Prescott

We will make a decision about that level of tax at the appropriate time. It is fair to assume that there will be another Budget before the general election, and I do not know what the Chancellor will include in it. We have an obligation to make clear, at the appropriate time, our precise approach to taxation at all levels of income.

What characterises this Budget is that the Chancellor gives with one hand while he takes away with the other. Council tax, car tax, petrol tax and cigarette tax are all going up—while for a few top earners there will be huge pay increases. They will be hundreds of pounds better off, yet the average family will be £670 a year worse off than they were at the last general election—and that is before the rise in council tax is taken into account. As many of my hon. Friends have said, it is a 7p up, 1 p down Budget. It is unfair, regressive and a flop.

Mr. Michael Fabricant (Mid-Staffordshire)

rose—

Mr. Prescott

I do not have much time, and I have given way a number of times already.

At the end of the Budget speech, the Chancellor boasted that it would put Britain on course to becoming the enterprise centre of Europe—a soundbite if ever I recognised one. On what basis does he claim that, when the public sector borrowing requirement will be £29 billion—£6.5 billion higher than the right hon. and learned Gentleman predicted a year ago? I am worried by the Chancellor's promises, because every time we have measured his promises against reality, he has been way off target. The PSBR is an example of that.

The PSBR is going up, inflation is rising, growth is slowing down, and the balance of payments is deteriorating despite a massive 25 per cent. devaluation. The Government have made great play about Labour Governments and devaluation, yet they introduced a 25 per cent. devaluation in one go, and then claimed the credit for the increase in exports.

With such a devaluation, there should have been a trade surplus—but that has not happened under this Tory Government. Instead, there is an increasing deficit in the balance of trade. It is the slowest investment recovery from any recession this century. Investment in manufacturing—that crucial area of wealth creation —is 20 per cent. lower than it was in 1979, and it is falling as a proportion of gross domestic product. It is a catalogue of failure.

The Deputy Prime Minister made great play about the world prosperity league. The right hon. Gentleman's own report, "Competitiveness: Forging Ahead", published this year, contains a table showing that Hong Kong and Singapore have overtaken Britain. The right hon. Gentleman suggested that Hong Kong and Singapore had done well because they did not provide the sort of unemployment benefits or housing programme that Britain provides.

Will he tell me which of the following countries—they are all ahead of us in the prosperity league—do not have unemployment benefit or a housing programme: Luxembourg, United States of America, Switzerland, Japan, Belgium, Norway, Denmark, Canada, Iceland, Austria, France, Germany, Italy, the Netherlands and Australia? All those countries have done better than Britain. Will he tell us which one of those countries does not have a housing programme or does not pay unemployment benefit? Can he tell us that, or was he mistaken in his remarks?

The Deputy Prime Minister

I was talking about Singapore and Hong Kong.

Mr. Prescott

The right hon. Gentleman was talking about those countries that had done better than Britain, and he suggested that Singapore and Hong Kong had done better because they did not pay unemployment benefit or have a housing programme. I do not know whether he reads his Department's publications. Obviously not: otherwise, he would know that all the countries I mentioned have done better than Britain. It is nonsense for him to suggest that that has anything to do with benefits or the social costs involved in providing decent housing.

Another interesting fact is that almost all those countries have a minimum wage. Why have they done better than Britain when the Government say that a minimum wage would be a problem for our economy? The people who make that claim should face facts. Most of those countries have a minimum wage, but they do far better than Britain in the world prosperity league. Does the right hon. Gentleman look at the evidence and take it into account, or does he just ignore it? A few years ago, the right hon. Gentleman used to believe in a minimum wage. He has changed his mind. However, the principle is still right, even if he has moved away from it.

As well as the world prosperity league, we should study what the OECD has said—an organisation that the right hon. Gentleman claims has said Britain is doing well. I accept that it has said some good things, but it has also said some bad things. It, too, has leagues, and they show that employment in Britain is lower than it was in 1979, that Britain has plunged to 21st in the investment league, to 24th in the skills league, and to 35th in the world education league.

Those figures show the total and chronic failure by the Government to provide the essentials to make Britain a prosperous country. That is why Britain is falling down the leagues: we do not train our people sufficiently, and we do not give them a good enough education. We do not invest sufficiently in our industries. All that has happened while the Government have been in power, and it has contributed to our dismal fall from 13th to 18th in the world prosperity league. In addition, most of that happened while the Deputy Prime Minister, in previous jobs, has been in charge of competitiveness. He has been in charge of that area of policy over the past five or six years, but it has been nothing but a dismal failure. I do not know whether the fact that he is Deputy Prime Minister will make any difference. Perhaps he can now take on the Treasury. We hope that Britain's position will improve, but our judgment is that the Budget will not do anything to bring that about.

The international tables are clear proof of the long-term failure of Tory economic policy, yet the Chancellor thinks that it will put Britain on course to be the enterprise centre of Europe. What will the Budget do to reverse Britain's decline? Nothing. All it has done is give us new theories and new targets.

In the 1980s, we were plagued by the theories of Friedman and the money supply—now generally discredited. Now we have the target of reducing public sector expenditure to below 40 per cent. of GDP. We are told that, if only that can be achieved, we will have the self-sustaining, non-inflationary growth the Government talk about continually. Do they not realise that it is not just how much they spend, but where they spend it? Labour spent money on investment and kept people in work. There were fewer than 1 million unemployed when the Government took office.

It is sheer arrogance for the Government to say constantly that somehow they have improved the employment situation—the number of unemployed people has risen from 1 million to 2.5 million, even by the fiddled figures. If the Government remain in power, there is the possibility that we will go into the next century with more than 2 million people unemployed. That is not only morally unacceptable, but creates massive problems with public finances which we are now trying to address. We are identifying the problems of failure.

We have to make it clear that the Tories—apparently spend more on keeping people out of work than using it to get them back to work. That is one of the essential differences between the Labour party and the Tories. They have cut public investment and increased public consumption—despite the enormous opportunities for investment. In the history of this country, no Government have ever been blessed with more resources in such a short period—from the £100 billion that they have taken from North sea oil to the £120 billion from privatising nationalised industries at a knockdown price.

That money has largely been wasted on keeping people on the dole. No Government in our history have had such resources, or, indeed, ever had such an opportunity to do something about fundamentally changing the relationship between investment and consumption to achieve greater prosperity in this country. That has always been our case, and the problem which we have always tried to address. It is not easy to deal with politically—I readily accept that—but, with such vast resources, the Government had an opportunity to make that change. No other Government would have squandered those resources like this Tory Government.

As last year's excellent report on manufacturing competitiveness by the Select Committee on Trade and Industry—chaired by my hon. Friend the Member for Sheffield, Central (Mr. Caborn)—said, investment is the key. The Committee catalogued the decline in manufacturing, which it said was due to the lowest levels of investment, training, qualifications and skills among our people. It pointed out where the failures lie.

If one reads the report's conclusions and looks at what this Budget—and the one before—have done, one sees that it has made no recommendations along the lines of those suggested by the Committee designed to deal with problems in reversing the decline in our manufacturing industry. The Government have ignored the Committee's recommendations. We have to invest if we want the economy to grow. That is the crucial variable in every successful economy which one studies. We need long-term investment in capital, infrastructure and people.

In Germany, Japan, the United States and any other major competitor country, investment, with an industrial strategy, is the key to economic prosperity. Why should industrial strategy be considered an ideological difference between the parties in Britain, when Governments of the left and right in various successful countries have managed to deploy a proper role for Government in developing one?

Indeed, the right hon. Gentleman who is now the Deputy Prime Minister has often advocated the case for such a strategy. I thought that he was right to do so, and I wait to see whether he is successful in his new job in challenging the rather short-term view of the Treasury which has often dictated matters.

Mr. Fabricant

Will the right hon. Gentleman give way?

Mr. Prescott

No.

Such a strategy is also the key in the Asian tiger economies, about which the Chancellor and the Prime Minister often talk, and on which the Deputy Prime Minister is so keen. In those economies, public and private finances work together in partnership, and the Government have a proper role to play. That is true of Singapore, as it is of Hong Kong. Any visitor to those countries notes that their deserved prosperity is as much to do with public as private investment. That is also true in Italy and Norway and a number of other European countries, because they invest more in capital and people. It is about not simply wages, but skills and productivity.

It is a mistake to suppose that the inward investors of whom we hear so much, and whom we welcome, come to Britain to take advantage of low wage rates or to dodge the social chapter. That is just not true. If that were the case, why has three times more investment left this country than come into it in the 16 years of Tory government? Of course, in a global economy, money flows in and out, but one cannot make the judgment that the money coming into this country is doing so simply because of cheap wages, and that the money leaving countries is because their wage levels are usually higher than ours. One cannot assume that that is somehow an indictment, and that we must therefore aim for the lowest costs with lower wages, and get rid of the social chapter. Such conditions have often been present in the countries where the money has gone.

Inward investors come to Britain because of the international advantage, and we should recognise that. Such an advantage is often down to our language —a common language and culture. Of course, we are also close to Europe. Those are the reasons why companies invest in this country.

r. Fabricant

On that very point, will the right hon. Gentleman give way?

Mr. Prescott

indicated assent.

Mr. Fabricant

That demonstrates that persistence pays off. I am grateful to the right hon. Gentleman for giving way. Does he think that one of the reasons—just one—why companies invest in this country is that we have the lowest rate of corporation tax? While we are at it, does he support the 1p reduction in income tax, given that a year ago he said that he would not support the Labour party if it were ever to go down the road of cutting income tax?

Mr. Prescott

I thought that the Whips gave out only one question, not two. I shall deal with the first one. Again, if one looks at the OECD figures and the levels of taxation, whether corporation or personal, one sees that no common criteria produce a successful result. In some countries, conditions are very different. From the evidence, one can see that even those countries with high corporation tax have done better in getting more people back to work and attracting more investment. In some cases, low taxation has had that effect. [Interruption.] I suggest that the hon. Gentleman looks at the OECD figures—

Mr. Fabricant

I have.

Mr. Prescott

I am afraid that he has not looked very carefully—

Mr. Fabricant

I have.

Madam Deputy Speaker (Dame Janet Fookes)

Order. I deplore seated interventions, especially given the fact that the hon. Member for Mid-Staffordshire (Mr. Fabricant) has already been allowed to make certain interventions quite properly.

Mr. Prescott

Basically, investors come here because of the access to markets, especially Europe. Of course, the devaluation of the pound by 25 per cent. has been attractive too.

Investors come, and they are welcome, but we cannot rely only on inward investment for future growth. We have to boost the indigenous investment—that is another thing that the Budget has failed to do. It has failed to provide any additional incentive for private investment in manufacturing. Industry has made that absolutely clear. Indeed, my hon. Friend the Member for Dunfermline, East (Mr. Brown) has made it clear that we would do more on allowances. Again, there is disagreement between the parties on the allowances that investors get against tax, but at least we argue the case.

The Budget has certainly failed to provide any additional incentive for small and medium firms. They clearly do not think that there has been much in the Budget to help them. There has not been any additional incentive for private investment in plant, training and public investment, on which much of the private sector is dependent, especially in construction and manufacturing. It is often not understood, and rather unfortunate, that much private investment is very much dependent on public sector investment, whether in housing or in various other industries. It is very important for manufacturing companies.

Yet the Government have been pursuing cuts in public expenditure—by 6 per cent. this year and 11 per cent. for 1996. It is hardly a Budget for investment. Given that investment is crucial to the development of prosperity and to moving up that league of prosperity, the Budget had to be designed to deal with investment. Frankly, it failed to do so.

The only argument given by the Government is that of the private finance initiative. We have heard it in every Budget since the Tories stumbled on the idea. I have spent a number of years at the Dispatch Box opposite various Chancellors and Secretaries of State for Transport arguing that there was a role for a private finance initiative—indeed, a very good role. I think that the Chancellor concedes that. I wish him well, so that public and private finance meet in investment.

Such investment should be in addition, but the Government's problem is that such investment often hides cuts in public expenditure; it is used as a smokescreen. It is often suggested that extra money through private finance will replace cuts in public expenditure, but, frankly, that does not happen. The Chancellor knows that to be true; the figures are very clear on it. Nevertheless, the idea is sound—it should be: it came from the Labour party. But the Government have ruined it through incompetence, sheer ignorance and blind ideological prejudice.

On transport, it was Labour's plan to bring public-private leasing into British Rail that forced the Government into a £150 million leasing deal two years ago. It was in our manifesto, after all. The Chancellor must have read it at the time. It was a good idea. They used to tell me that it could not be done. Yes, it was a leasing agreement, but leasing deals can be involved in private finance. We showed them that it could be done, but now it has been ruined. The whole process is being undermined by a Treasury still wedded to arcane principles and run by people who do not understand what they are doing.

I know that the Chancellor has sent a number of his civil servants away for training and education to break the cultural logjam in attitude, and I wish him well. That is absolutely right. Indeed, it was one of the recommendations made by my hon. Friend the Member for Dunfermline, East and myself on changes in private finance.

The Economist said that the Government's proposals were a "dog's breakfast". The PFI has replaced actual investment with expressions of intent. We have seen the growth of the PFI in the Government's wish list—from 78 projects in 1993 to 1,500 today, worth almost £27 billion. But only 64 of those projects have been completed, and less than £500 million of private finance has been levered into public investment. The private finance initiative has been a smokescreen for the Treasury, behind which it can cut hundreds of millions from public investment, which is set to be cut by a further 18 per cent. over the next three years.

Mr. Bernard Jenkin (Colchester, North)

The right hon. Gentleman has made many disparaging references to cuts in public expenditure. He has also said that he fundamentally questions the whole Budget judgment. In the view of the Labour party, what percentage of gross domestic product is it appropriate for the Government to take?

Mr. Prescott

At the time of the general election, the hon. Gentleman promised that the Government would cut taxes. I do not know how he answers that point now. The quality of public expenditure is as important as the quantity. We suggest that, instead of wasting money on keeping people on the dole—about £20 billion—we should use it to put people back to work. I will come back to that point in a second.

The real point about private finance is that our transport infrastructure is crumbling and our construction industry is on its knees. Our businesses are not getting proper access to the markets in the United Kingdom and abroad. The Birmingham northern relief road should have been built in 1992. It has been delayed, and is still not being built, despite all the arguments about private finance.

Good, modern railway works in York were closed down, simply because the Treasury would not approve any more leasing agreements, which would have enabled the carriage works to produce the trains. Yet more than 50 per cent. of the trains on Network SouthEast are over 25 years old. The leasing agreements were a simple way in which to finance new trains, which would have kept people in work instead of putting them on the dole. If people are in work, they can pay taxes and contribute to providing other services. That is the question we face today.

The east coast main line is more modern than the west coast main line, which is falling down, because it has had the investment. When the Chancellor and I were walking to another place, I said to him that, yet again, there was a Bill on the channel tunnel rail link. There has been a Bill on the channel tunnel rail link every year since 1986. Why is that? It is purely because the Government could not deal with the problems involved in financing the link.

The Secretary of State for Transport at that time, Lord Parkinson, told us that the link would not be built if the Government could not find private money, yet he is leading one of the consortiums bidding for about £2 billion of taxpayers' money to pay for the link. In the meantime, we have lost the benefits that come from a modern transport infrastructure.

That kind of disaster has plagued Britain in dealing with these matters, and one hopes that there will be a sensible compromise on the problems, with which I know the Chancellor is dealing. The issue is how we deal with sharing the risk between the public and private sectors. I had intended to say more about that, but time prevents me from doing so. It is an important question, and unless we solve the problem, we shall not be able to unlock the tremendous amount of private funds that are available to help us build the infrastructure. The infrastructure must be modernised, so that our regions can compete as they desperately need to do.

Regions are important, yet they are not mentioned in the Budget statement. We need to expand investment in training, jobs and regional economic development. We believe that that can be done, and that public and private finance can play their part. The release of local authority housing receipts must be a classic way in which to release funds. The Government admit that £4 billion or £5 billion is still held in the accounts.

We are paying about £2 billion to keep a quarter of a million building workers on the dole. We have record levels of homelessness. Why can we not release people from the dole, provide jobs, train our youngsters in apprenticeships, and meet the requirements of jobs and social justice? That is what we think needs to be done. Construction jobs are real jobs—one can give many more examples.

The Government's only contribution to employment has been to propose the workfare scheme. This is the Government who told us in 1979 that Labour was not working. Unemployment has now grown to 2.5 million even on the Government's fiddled figures, yet all they offer is a workfare scheme. That came about as a panic measure. After the Budget was received badly, the Chancellor and the Deputy Prime Minister went on an assault over the weekend to improve people's attitude toward the Budget.

There were two proposals. The first was workfare—chain gangs—which does not mean proper jobs. There will be no education, no training and no connection with the real jobs my hon. Friend the Member for Dunfermline, East talked about when introducing our welfare-to-work proposals. The Government are forcing people to depend on the welfare services.

There was a second element in the assault this weekend on people's attitudes to the Budget. Can the Deputy Prime Minister answer this question, once and for all? He has been asked this before, and I have written to him to this effect. Is it a fact that people will be £9 better off as a result of the Budget? If so, does the figure include a 4 per cent. rise in earnings? Are the Government calculating that there will be a 4 per cent. increase in earnings next year in reaching the figure of £9?

Can the Deputy Prime Minister tell us? If he will not tell us, I assume that that must be the case. The Government are now telling us that they have a 4 per cent. wage policy; no doubt that will be noted. Is that what the Deputy Prime Minister wants? Is that what he is saying? The House and the country will note that the Deputy Prime Minister has no intention of doing anything.

Mr. Kenneth Clarke

I was going to save the answer for my winding-up speech, but there is little else for me to answer, as the right hon. Gentleman has not yet mentioned one measure in the Budget with which he disagrees.

The figure of £450 a year better off next year is the usual figure that is given if one asks the Treasury to make assumptions about the growth of the economy, about inflation, about earnings and about the effect of all the Budget changes. That includes changes that mean that tax goes up, such as the increase in tax on tobacco, and those that mean that taxes go down, such as the reduction in income tax. Every year, the Opposition ask the Government those questions, and the Treasury answers the questions on the basis of those assumptions.

The answer this year is the best forecast that could be made for next year. The average family will be £9 a week better off as a result of our best forecast of the economy and the Budget measures next year. That is what I said when introducing the Budget. The right hon. Member for Kingston upon Hull, East (Mr. Prescott) is deliberately misusing the figure and claiming that I said that there would be a £9 a week reduction in taxation. I did not say that. I talked about what matters to people—the money in their pockets, and the extent to which they are benefiting from the economy's recovery.

Mr. Prescott

It is very clear that the figure means that there will be a 4 per cent. increase in earnings. The Chancellor has not rejected that argument—indeed, all his arguments take that point into account. We have deduced from his figures what the tax reductions will be and what their effect will be on the average family. When we deduct that from the effects of the other changes, it is clear that the figure of £9 a week assumes an increase in wages of 4 per cent.

Mr. Clarke

indicated dissent.

Mr. Prescott

I do not think that anyone denies that. Let the House make a judgment about it. The figure includes that 4 per cent. I do not know what that will do for the Government's education proposals, although the Chancellor says that there will be improvements in education. I do not know what that will do for improvements in the health service. The Chancellor now tells us that the figure is an estimate.

Mr. Clarke

The right hon. Gentleman says that the figure is not good enough. What tax changes would the right hon. Gentleman make? This whole nonsense is based on an assumption that the Labour party has an opinion, one way or the other, about the changes we made in personal taxation. This is not a difficult question for a shadow Government. Is the Labour party in favour of the changes we have made to personal taxation, is it against the changes, or do Labour Members not have an idea in their heads except when a soundbite is given to them by the hon. Member for Hartlepool (Mr. Mandelson)?

Mr. Prescott

"Now you see it, now you don't." The House will make a judgment, and I shall move on. The 4 per cent. wage increase is clearly implied in the figure, and people will no doubt take that into account.

Our main indictment of the Budget is that there is no industrial strategy, no regional strategy, no training strategy, no investment strategy and no growth strategy. This is not a Budget for enterprise, as the Chancellor says it is: it is a Budget for continuing failure. It is a Budget of a busted flush Government who are led by a weak Prime Minister, a has-been, hop-along Deputy Prime Minister, who gave us some examples of his approach today, and an inadequate Chancellor. The Government have no idea what they want for our country. The sooner they are gone, the whole rotten lot of them, the better it will be for Britain.

5.8 pm

Mr. David Howell (Guildford)

If there was an entire alternative strategy buried in the speech we have just heard, it was buried very deep and with many layers of verbiage above it. We shall have to do a lot of digging to discover the alternative strategy. Although the right hon. Member for Kingston upon Hull, East (Mr. Prescott) recognised and, I think, understood some of the points about the private finance initiative, it is regrettable that he did not give one word of acknowledgement—he gave one small word—to the amazing story which my right hon. Friend the Deputy Prime Minister described as unfolding in the United Kingdom. The story can be summed up in one sentence: all around the world, people do not regard the United Kingdom as the catastrophic failure that the right hon. Member for Kingston upon Hull, East and his friends describe; they regard it as an outstanding success.

Those people from around the world do not use mere words, they act. If one talks to those people, they say that they want to put their factories here, and they do so on a colossal scale—more than in any other country in Europe. That activity is not slowing down but increasing. Those people want to put their funds here for management. The entire savings of Asia, from where the funds will come, are increasingly managed and recycled through the financial services industry of London, which dominates the whole world. I declare an interest here because I advise those people. They want to educate their children here because the United Kingdom is a brilliant exporter of educational services. They want to buy houses here, and they are crowding in to do so, which accounts for some of the vagaries of the housing market, particularly at the upper end. They want to keep their personal funds here

If those people want to do all that and regard Britain as such a successful place, above all other countries in the world, why does the right hon. Member for Kingston upon Hull, East and his colleagues need to keep coming back to the failure theme? That is a naive question in a sense. They belong to the Opposition, and they want to dig out the failure. They want to turf out my party. I understand that motivation because I remember being in Opposition, and that is what one spends a lot of time doing.

The story is not plausible, however, if one leaves out half the theme which my right hon. Friend the Deputy Prime Minister set out this afternoon. Opposition Members have left out another, major element of the story. Not only is the United Kingdom the magnet for inward investment on a massive scale, which brings in hundreds of thousands of jobs, but we are—there is nothing to be ashamed of in this, although it may offend old Labour doctrines—one of the world's largest outward investors. We place assets around the world on a colossal scale, which in turn brings back such large invisible earnings to this country that they exceed our entire earnings from manufactured exports.

Around the world, we have about £600 million of portfolio investments, £300 billion to £400 billion of direct investment and another £700 million of loans to foreign residents, which means that our total overseas assets are worth about £1,400 billion to £1,500 billion. The right hon. Member for Kingston upon Hull, East asked where the money from North sea oil has gone, and where the money from this and the money from that have gone. The money about which he is talking is a small amount compared to the colossal investment and inward flow of funds back into this country. In turn, that inward investment enables us not only to finance our present investment in the United Kingdom and our falling levels of unemployment but to continue to finance our undoubtedly expensive system of welfare and universal provision, which, like every other country, we are rightly worried about because it is such a burden on the budget.

The right hon. Gentleman made a speech about the Budget and the economy and he left out those gigantic elements in the story, which are the ones that determine where we trade. It is overseas investment that opens up trade nowadays. Trade does not follow the flag; trade follows investment. We put in the investment first, and then we put the goods into those markets. That is the story of jobs and investment in this country, and that is the story of our success. Although the right hon. Gentleman may not to give that aspect of the story the acknowledgement that it deserves, because he wants to set up a critical position, to leave out that aspect altogether leaves one with an absurd, empty husk of a speech. His case will not stand up and it looks ridiculous.

I ask the right hon. Gentleman and his colleagues, even if they will not speak in glowing terms—I understand that—at least to study what is going on in this country and what is happening to the economy. That would be the first move towards any claim that they may have to be a responsible Opposition, let alone a responsible Government.

I should like to return from that sad story of not understanding what is happening in the British economy to one or two specific aspects of the Budget and my right hon. Friend the Deputy Prime Minister's presentation on it.

Dr. Jeremy Bray (Motherwell, South)

The right hon. Gentleman has presented an oversimplified picture. Can he give us the net figures for inward and outward investment and tell us what has happened to our net foreign assets?

Mr. Howell

The net figures are obviously very different. We are outward investors and inward investors. Just as for net exports and imports of physical goods, the figures for exports are smaller. Nevertheless, we are a substantial net earner of invisible earnings. That offsets any export deficit that we may have had in the past. The picture is rapidly changing, particularly in our trade with Asia. As the hon. Gentleman knows, we now have an export surplus of physical exports to the tiger countries and we have recently achieved a surplus of such exports to Japan. So there, too, the story is changing radically. It is about time that that was recognised by someone on the Opposition Benches.

I wish to deal with three aspects of the expenditure and taxation plans of my right hon. and learned Friend the Chancellor. I am afraid that, having reinforced the strong case that my right hon. Friends have made, I now wish to strike a mildly critical note on an expenditure matter. My right hon. Friend the Deputy Prime Minister asked the Opposition whether there was any policy area on which they thought that expenditure should be higher. Nothing was forthcoming. I believe that a mistake has been made in one policy area. It is rather small, but it is at the cutting edge of our world effort. I refer to the cuts proposed in the budget of the British Council.

The Government propose to cut the British Council's budget by 17 per cent., or about £22 million in today's money. That is a devastating cut in the work of that agency. I do not know whether the same cuts are to be imposed on the BBC World Service, which is the other major arm of cultural diplomacy. I do not have the figures, but perhaps we could learn them from my right hon. and hon. Friends.

I wonder whether the Government's action is the right way to go about cuts or whether we have a touch of the slash and burn which my right hon. and learned Friend the Chancellor said that we should not have. The cultural diplomacy effort of the British Council creates the climate that enables British investment to go overseas and British goods to go after it. It creates the attractive nature of Britain that makes everyone want to invest here. Yet we have seen the same slicing of the small agencies of the British Council and the World Service, which are highly effective, as has been applied to much bigger operations such as defence and other aspects of our overseas effort.

The Government may say, "Fair is fair. Everything has to be chopped off together." I wonder whether that is right. The World Service and the British Council are the spearhead of today's foreign policy effort. If the Government have to make a shorter spear, why cut off the tip as well as the tail? It cannot be right. Although I do not ask that more money be found from nowhere, I ask my right hon. and hon. Friends to go back to their colleagues who have responsibility for foreign policy, defence, the diplomatic wing, the agencies and overseas aid and consult on whether it was right to slash the British Council budget. I know that there must also be restraint in overseas aid. That is probably right. We need an entirely new approach to aid and development nowadays.

I have made a criticism. One may say that it is a plea for more spending unless I suggest some alternatives—which I can do. I make the criticism with the strong feeling, which many of my right hon. and hon. Friends share and which has been aired in the Foreign and Commonwealth Affairs Select Committee, that the British Council and the World Service are the cutting edge of British success and interest in the world and we slash them at our peril.

Mr. Matthew Banks (Southport)

Why does my right hon. Friend believe that we ought to have a fundamental change in the way in which we deal with our overseas aid programme? The United Kingdom programme is one of the finest in the world. It is not only quantity but quality that count.

Mr. Howell

My hon. Friend tempts me to make a much longer speech than I wish. We have reached the point in the post-war doctrines of donors and aid at which it is realised that aid does not necessarily equal development. Merely calling for more aid, in particular more Government-to-Government aid, does not lead to the processes of development which are hoped for. Sir William Ryrie, who has been with the International Finance Corporation for some years, has written a book on the subject which I commend to my hon. Friend. It brings home the message that, if we are to make our aid budget smaller or limit its size, that ought to go hand in hand with implementing the policies that are necessary to achieve development. It is time that the whole aid policy was reviewed. That is happening in the United States, Japan and France and I hope that it is happening in Britain. Perhaps my right hon. and noble Friend Baroness Chalker will be able to tell us that that aid policy is being changed pari passu with limitations on the size of aid funds.

I commend the book to my hon. Friend the Member for Southport (Mr. Banks). It shows that the new engines of development are not primarily overseas aid but private investment. Even some of the more enlightened African leaders, who may understand free market economics better than Labour Members, are beginning to ask for capital, not aid. They want capitalist enterprise and entrepreneurs to get their economies—even in central Africa, let alone the booming countries of Asia—going.

I have declared an interest in the private finance initiative because I advise people on such matters. It is a superb initiative. I am glad that the Labour party supports it; it has even claimed some parentage of it. I am not sure that I would accept that, but I shall let it go for a moment. What is being done is immensely valuable. There are some points on which I hope that my right hon. and learned Friend the Chancellor can go even further and give the PFI a stronger push.

I reject the argument that the PFI simply shifts funds off-Budget. It creates the opportunity for projects to be fulfilled, even if it is only a case of sale and leaseback, with far greater efficiency. The Northern line and the national insurance over-the-counter payments system are two examples of ways in which the PFI can produce£for the same amount of money as or perhaps a little more than can public finance£vast savings, much greater efficiency and a better product.

I hope that those responsible for the PFI in Departments will be organised even more effectively than they are. My impression is that the PFI has got going in the Health and Defence Departments. They are thinking about ways in which private finance could deliver more efficiently all sorts of services hitherto financed in the public sector. However, the other Departments need to get their acts together. The Health and Defence Departments seem to be ahead of the others, which need to move more vigorously. I hope that they will be encouraged to do so by my right hon. and learned Friend the Chancellor and his officials and colleagues in the Treasury.

In the private sector, the construction consortiums should stop grumbling and realise that they have to get organised. They must win the support of, although they need not become directly mixed up with, organisations that can raise the capital and handle the financial side of the huge new operations that they are going to build, own, operate and perhaps transfer. That will require capital support. The building industry and construction firms do not have the capital—and never have had it—for that sort of operation. They must work out relationships with the operating companies that can produce the capital.

I would like a little more attention to be paid inside the Treasury to working out the implications in years ahead of such deals. Some people argue that the PFI merely postpones until tomorrow the payments that we should be making today for infrastructure. That is partly true. It is a good thing if it produces greater flexibility, but we need to monitor it carefully and count up what the future payments will be—how they will operate and how they will impact on the Budgets of five, 10 and 15 years ahead; otherwise we will be back to year-by-year, seat-of-the-pants finance that opens us to the accusation that the PFI only postpones the evil day. I am not against flexibility, but the matter needs to be handled using a more modern accounting method than appears to be used at present.

The PFI opens up enormous opportunities. What is more—again, I declare my interest—just as we exported the skill of privatisation, along with many other skills that are needed all over the world, so also, if we develop the techniques for the PFI, we shall find every country in the world, from Malaysia to China, Taiwan, India, the Americas and Africa, seeking to learn the techniques from us. We have colossal opportunities and leverage in respect of that. I hope that it happens.

My last remarks involve another set of initials which concern a bird which, in my view, will never fly: EMU—economic and monetary union and its convergence criteria. My right hon. Friend the Prime Minister asked some extremely pertinent questions, which I was glad to hear, when he made a speech the other day at the Guildhall about EMU. His questions have not received any answers because they are devastatingly accurate. Labour Members ought to feel that they should be trying to answer them because they are supposed to be broadly in favour of the single currency, the Maastricht criteria, the timetable and all that.

My right hon. Friend the Prime Minister asked how the relationship between the countries in the single currency and those outside it would work. How will those inside it feel about exports that will affect their textile and motor industries sweeping in from countries that cannot—or do not want to—join the single currency and have more competitive currencies?

What will the single currency do to the Euro-budget if there have to be huge compensatory mechanisms and a vastly swollen Brussels bureaucracy to increase redistribution to compensate the countries that cannot escape through a more flexible exchange rate? What will it do to the whole single market, which some of us have spent a quarter of a century encouraging and trying to build up? We are told that new barriers and divisions may have to be introduced between countries in the inner core and those outside it.

I never thought that I would make a speech in defence of the former leader of the Labour party, Commissioner Neil Kinnock, but I understand what he was thinking about when he began to say, as I believe he did, that the whole attempt to put the single currency into a political timetable over the next three and a half years or whatever was dangerous. If there is ever to be a single currency, it must come as a result of market forces and demand. It cannot be imposed by politics.

As my right hon. and learned Friend the Chancellor keeps reminding us, the Maastricht criteria—there are several others that one could add—are the normal indicators of good behaviour to which any sensibly run economy needs to adhere anyway. What discipline forces us to comply with them? It is not a lot of treaty declarations in Brussels but the dictates of the global financial system. That is the new gold standard.

People say that we should have a gold standard and that the single currency, instead, is not so bad. In fact, we have a gold standard: global financial disciplines that are so strong and which involve such a rapid withdrawal of capital in seconds—or nanoseconds—that, if things go wrong, they impose a deadly discipline on any country that seeks to move too far away from the sensible indicators of a low inflation rate, low interest rates, sensible borrowing, a sensible fiscal system and sensible rather than penal taxation on work and enterprise.

There is no need for us to submit ourselves to the so-called discipline of the single currency, even we wanted to do so. We have plenty of disciplines and they are the ones that we must obey. If we do not, the global financial system will come down hard on us.

Mr. Jenkin

Could it be that the Labour party is lunging at the single European currency because it imagines that it can escape from those international disciplines and believes that a single currency would somehow be a refuge from the real world?

Mr. Howell

There could be something in that. EMU may begin—although I do not think that it will fly—and do great damage to Europe. If it goes at all, it will be full of curious arrangements such as stability pacts and compensatory arrangements, about which the French are talking, and could provide an opportunity for an irresponsible Government to start doing irresponsible things and somehow take cover behind the European system. I had not thought of that. It may be a way out. It explains why the Opposition do not talk much about global financial disciplines but hang on to the idea of a single currency.

Economic and monetary union and the single currency mean bigger government. Perhaps that really explains the enthusiasm of the Labour party. It means a lot more central Government, higher taxation by Europe and higher redistribution. Even if it came together—and, heaven knows, events in France make that less likely every day—I think that it would explode.

I realise that, in asserting that view, one is saying something rather challenging. One is saying that the whole French political establishment, which has been wedded to the idea of recapturing its monetary destiny, as it calls it, is wrong. One is saying that Chancellor Kohl, who is a great man, the small entourage around him and many other learned Europeans, great bankers and officials are all wrong. They are the ones who said that one cannot have a single market without a single currency. They said that that was essential for the future of Europe, and that, if we did not achieve that, it would be the end of civilisation.

If I am wrong, and we go ahead with EMU, we will have division in Europe on a most miserable scale. It is a prospect from which I want to rescue Europe. If all those people are wrong, we will witness the discrediting of the entire European establishment. That is an awesome and dangerous thing as well. I do not think that we should cheer should that occur, particularly as the European establishment has linked the future of European integration, which I favour, to the ludicrous project of the single currency.

We have an agonising choice with which we should never have been faced. It was not necessary. There is no solid economic argument for a single market having to have a single currency. With tomorrow's technology, one could probably have many more diversified currency relationships than one can have today. There never was any need to face Europe with that choice. There never was any need to put the European story and the enlarged Europe which we want at risk with the single currency. I believe that those who try to pose that choice to us will greatly regret their action in due course.

5.30 pm

Mr. Robert Sheldon (Ashton-under-Lyne)

I listened with great interest, as always, to the right hon. Member for Guildford (Mr. Howell). I could not have agreed with him more when he said that Britain is an attractive country. Of course we are, but that does not mean that we are economically successful. There are plenty of attractive countries.

As for the proof of our economic success, look at the Red Book and our balance of payments deficit. That is the best test of all. Last year, the balance of payments deficit for this year was forecast to be £3.5 billion; it was increased in the Red Book to £6.5 billion. Is that a sign of success? Next year the balance of payments deficit will be £5 billion. Is that a sign of more success? Given the low level of activity in the economy in the past four years, we must ask ourselves why we have not been in balance at all. A period of low economic activity puts the brakes on; it is a version of stop-go. It is a recipe for getting an economy round and into balance. I have argued against stop-go many times, but one of its advantages is that it brings about a balance of payments surplus, or at least it removes the deficit. That has not happened during the past four years, and it is clear that there is something seriously wrong with our economy. Although we have carried on in the standard stop-go manner, we have not produced the results that one would normally always expect to find.

In a recession, imports and consumption decline, and that effect is the standard means of bringing an economy round. Not only have we suffered from a recession, but the value of the pound has reduced from DM2.95 to DM2.20. We all know about the J-curve effect, but that happened long ago. We should have been reaping the benefits now, but we are not.

I have always argued for a much lower exchange rate than we have had in the past, but I never expected to see it go down to DM2.20. When the exchange rate was DM2.95, I argued that it should drop to somewhere between DM2.30 and DM2.35. I did not like to voice that opinion because everyone would say that it was ridiculous. Now that we have an exchange rate of DM2.20, however, I am in the unique position of not wanting a lower exchange rate. If anything, I want it to be little higher.

We have had the recession and witnessed the pound going down against the deutschmark to DM2.20. We have seen cuts in public expenditure. We have seen a 7p increase in taxation followed by a reduction of 1p this year. The public sector borrowing requirement has gone up from £21.5 billion last year to £29 billion this year. All that has happened, and the balance of payments deficit is getting worse. One can draw just one conclusion from that—something has gone seriously wrong and our economy has not operated as it should have done.

I do not blame the Chancellor of the Exchequer. His predecessors thought that they were undertaking an economic miracle; in fact, they were preparing the foundations for a disaster. They ignored manufacturing industry and abandoned the skills and investment that used to be the cause of our prosperity. The basis of our prosperity was demolished in the early 1980s and those Ministers, in their arrogance, thought that they were doing something wonderful.

The question for the Chancellor and the House is, "What are we to do about the economy now?" We cannot allow the current tinkering with it to be the solution. A range of measures should now be employed. The one golf club approach, put so graphically by the right hon. Member for Old Bexley and Sidcup (Sir E. Heath), seems to be the standard feature of British economic policy, whichever Government are in power. In the 1960s, we had the one club of the exchange rate; in the 1970s, we had the one club of sterling M3; in the 1980s, we moved to a position between MO and M6; and now we have the one club of inflation. Despite the intellectual power that is supposed to lie behind Government decision making, Ministers are unable to concentrate on more than one variable at a time. In practice, the Chancellor is well aware that he must balance several claims—growth, unemployment, the balance of payments, investment and inflation. They are all factors. The Bank of England can, of course, afford the simplicity of concentrating on one claim, the Chancellor cannot. His skill is to provide the mix of policies that balance all the competing claims. He is in a worse position than Harold Macmillan who complained that he had only last year's "Bradshaw". The Chancellor does not even have that; he has something much more out of date.

Doctrine is not required now. The Chancellor of the Exchequer cannot exist on a doctrine—we cannot exist on a doctrine. We require judgment—the ability to make decisions based always on inadequate evidence. We are always confronted with inadequate evidence, which is why we need judgment. If we had all the solutions we would not need high-powered people to make important decisions. Most Chancellors try to produce a theme for their Budgets around those important decisions.

No theme was attempted for this year's Budget—they are frequently rather contrived—but there is one ready to hand. My hon. Friends will not be surprised when I say that it has to do with investment. We must take that issue much more seriously than we have ever done before. We must invest in people and in capital equipment. We must invest to reduce unemployment and to encourage modernisation. It is through such investment that a Chancellor can lay the foundation for our future growth and our future as an economically successful country.

The problem for the Chancellor is that investment in people through education and training is mostly for the longer term. We know that. We know that results are not obtained quickly. With the approach to a general election, I would expect to see some deference to such investment. It is likely, however, to fall well short of what we really need. If there is to be more than a superficial response from the new Department for Education and Employment, it must engage in some long-term planning.

Although we hear many protestations about the need for training and vocational education, little has been done. We have been down that road many times. We have had more than 100 years of lamentations about the skills gap. Time and again in that period, half-hearted measures have been introduced. With the current level of unemployment, the need now for action is even more urgent. Our weakness in this respect is well documented.

One of the more ambitious measures of the past was "Rab" Butler's plan for technical schools, as envisaged in the Education Act 1944. It was a brilliant idea, but it withered—like so many schemes that have been played out before and since. In order to improve our skills we must come to terms with the fact that the education establishment does not like the idea of technical training. By a long process of inactivity it has thwarted, again and again, proposals to produce technical and engineering skills which other countries have always regarded as normal. As long as we used to be wealthy, we could afford to tolerate that bias against industry, but we should not underestimate it now.

Capital allowances must be brought up to date. I know that this is my old theme, but I have to mention it again. I have long been a supporter of the old investment grants for plant and machinery and there was a big surge in investment following their introduction in 1967. Of course, those investments were not always good—that is the nature of such assistance—but there was a big improvement and the grants were a major encouragement for investment. However, the time has passed when such measures could be reintroduced.

We now need higher investment allowances. Once again, I must point out that the 25 per cent. allowance is damaging industry. Hardly any investment does not decline by 25 per cent. in value in the first year. We now have a massive disincentive to investment that is quite shameful. One would expect investment allowances to be pari passu with the decline in value of an investment. That would be ideal. Although it would not provide an incentive, at least it would recognise the reality. The current allowance does not even recognise the reality, let alone provide an incentive.

The loss of revenue is only a question of delayed payment of corporation tax, as the Chancellor will get the money in the end. I do not belittle the delay and I understand its implications, but it is not as serious as forgoing it altogether.

I should like the development agencies to expand to other parts of the country. They can be a useful way to channel investment. They have been successful in Scotland and even in Wales, although the Public Accounts Committee has had a few nasty things to say about what happened in Wales. The advantage of regional development contracts is that decisions can be made on the basis of involvement with those directly concerned. That gives people a stake in their own area and can promote greater responsibility in taking industrial decisions. It is an excellent idea and I should like it to expand.

All industrial decisions require management ability. Regular calls are made for the institutional investors to play a prominent part in improving management. Although they might not be good guides for making industrial decisions—I would not trust them with those—they can make excellent decisions about when to buy and sell shares and they should be able to use their weight in getting independent, non-executive members on to boards. Despite Cadbury, non-executive directors are too often chosen by the chairman, who wants friends to support him, not people who ask awkward questions. We must understand the nature of the relationship. Although the responsibility of non-executive directors might be more limited—one cannot expect too much from them or overload them as they work for only a few days a month at most—their presence can be a useful promoter of good practice.

One important area of economic policy where consensus between the parties would be most desirable is capital taxation. It is necessary because of the opportunities for postponing the realisation of capital gains and making transfers to avoid inheritance taxes.

In the post-war years, it has been possible to take advantage of the division between the parties and to wait for a different Government which might bring about changes. People can postpone the transfer of moneys until a change of Government and that can be destabilising, but capital taxes are an essential part of fair and sensible taxation. They are also valuable, even to those on the far right of the Conservative party, if only as a means of combating tax avoidance between income and capital. There have been many cases in the past of incomes being moved into capital for spurious reasons. We should seek to establish some common ground. We shall have to await the new thinking that will surely come when the Conservative party seeks to come to terms with its period in the wilderness following the next general election.

I do not understand how the Government can reject capital taxes, which have existed for the entire century and are an essential part of taxation. We require the creation of a consensus on the treatment of those taxes. The level of such taxation will always be a matter for disagreement, but there should be some agreement on its structure. It is obvious that that is impossible now, but I expect some new thinking from the Conservative party after the next election.

Some people see the solution as looking to other countries and copying their activities. I was surprised that the Governor of Hong Kong fell into that category. Others have pointed to the tiger economies as though we have only to copy them. It is all becoming too fashionable. A flow of ideas is always useful, but we cannot consider emulation.

There are real dangers in importing economic models from other countries. Comparisons with eastern countries can be rather less useful than one might have thought. There are certain lessons to be learnt, but comparisons based on a failure to understand their social and historical backgrounds cannot be justified. So much of what we do develops from our historical and social backgrounds, and if we make use of them we can achieve results that are far better than those that result from copying alien Administrations.

All that may come about in the next year or so, after the election of the next Labour Government. The Budget was an opportunity to show how the decline of our country could be brought to an end, and it is a thousand pities that it was not taken.

5.46 pm

Sir Peter Lloyd (Fareham)

The House is none the wiser about what the official Opposition would have liked in the Budget than it was before the debates began. I understand the concerns expressed by the right hon. Member for Ashton-under-Lyne (Mr. Sheldon) about the size of the PSBR, and the comments early in his speech about how some public expenditure decisions are made, and I shall return briefly to both those topics.

First, I congratulate my right hon. and learned Friend the Chancellor. He was hemmed in by unwelcome economic and political reality, and, with his Budget, he has extricated himself with considerable skill. He has put no new impediments in the way of continued economic growth, and he has given it some fresh impetus. I regard that as a success. He could so easily have done neither.

My right hon. and learned Friend's great achievement was to contrive to get his Budget dismissed by the Opposition and much of the press—not to speak of quite a number of my hon. Friends—as dull and unimaginative. By that means, he avoided most of the cynicism with which electors would view highly promoted tax cuts at present, while making sure that they appear in next April's pay packets, when they will be noticed rather less dismissively.

The announcement of tax cuts does not cut nearly as much political ice as some people believe, but reductions in stoppages on pay slips, whether as a result of thresholds going up or rates coming down, make a much deeper impression when they actually happen.

In the summer economic debate, I urged my right hon. and learned Friend the Chancellor to have the courage to be boring. However, I am afraid that he has been a little too exciting in one respect. I am sorry that, in addition to his well-judged raising of thresholds, he felt obliged to cut the standard rate of income tax by 1p. I would have preferred him to use the money to cut the PSBR. It would have been better to show those who are worried about its size and persistence that he gave a higher priority to reducing it. It would have been much easier then to make a substantial cut in interest rates.

The proof of the Budget's long-term success will be the way that those rates come down—and come down they must, and stay down, if we are to achieve the Chancellor's ambitious growth target of 3 per cent. next year, on which I take it that his public sector borrowing requirement projections are based. That is the only way of helping to restore confidence and activity in the housing market, and to assist property owners caught in the equity trap. No tax reductions or clever devices could conceivably do that, or have such a stimulating effect on the economy generally.

If there had been larger reductions in public spending, taxes could have gone down further, too, but there never was a realistic chance of that in this Budget. Spending programmes cannot be turned on and off like a tap without creating as many political problems as are solved, and just as many spending and administrative inefficiencies as are cured.

It is imperative that the inexorable growth in spending is checked and steadily reduced as a percentage of gross domestic product. One does not have to accept all the tiger economy argument to know that the United Kingdom would be better off if public spending were well below 40 per cent. rather than well above 40 per cent.

It is no criticism of the Budget to say that we do not have a sufficiently good mechanism to control public spending over more than one year, enabling Departments to plan properly for the medium term and to provide incentives to re-examine what Departments do and how they do it, in a way that produces proper priorities and genuine efficiency gains.

The way in which public expenditure survey reductions work is frequently wasteful of resources, and often compounds rather than cures inefficiency. My right hon. Friend the Member for Guildford (Mr. Howell) offered a good example. I do not understand the Government's justification for the cuts affecting the British Council and the BBC Overseas Service, and I cannot believe that they were thought through in terms of their impact on those organisations.

I do not have the finished solution to the overall problem—at least, not for this speech. I do not underestimate its complexity, which remains simply because it is so difficult to solve, even though real improvements have been made over the past few years in controlling spending sensibly over time.

If there is to be vigorous, unimpeded, long-term economic growth, that problem is one with which this Government or any other will have to deal much better in future than in the past. The Government cannot go on straining at the seams—in the way that the Chancellor has had to do, in trying to contain spending, in this Budget.

5.52 pm

Mr. A. J. Beith (Berwick-upon-Tweed)

I am happy to extend to the right hon. Member for Fareham (Sir P. Lloyd) an invitation to join us in the Lobby to vote against a 1p reduction in the standard rate of income tax—and I shall shortly extend that invitation to Labour Members. I apologise if the right hon. Gentleman finds himself in bad company for that reason, but there will not be much of it, because it appears that most Labour Members do not want to vote on an issue central to the Budget's strategy.

The Deputy Prime Minister gave a glowing account of the state of the economy, in an optimistic, cheerleading manner that, such is his skill, would have enlivened the spirits of passengers who were going down on the Titanic. If the economy was as healthy as the Deputy Prime Minister said, we would be considering a different Budget from the one before us. If the economy was uproariously healthy, the Chancellor would be making the tax reductions for which so many members of his party and of the press called. The fact that those cuts were not made illustrates the problems that still beset the economy.

This year's growth forecasts were cut from 3.5 per cent. to 2.75 per cent. Next year's growth forecast looks distinctly artificial, being raised from 2.75 per cent. to 3 per cent. It may turn out to be a lot less—perhaps not much more than 2 per cent. Some commentators have even suggested that a mini-recession will occur. The borrowing forecast is up from £21.5 billion to £29 billion, and next year's figure of £22.5 billion is actually above the figure supposed for this year.

Again, that is a sign of an economy not in a state to deliver the tax cuts that the Conservative party wanted. There is to be a rise of only 1 per cent. in the whole economy investment forecast, and the 11 per cent. cut in Government investment will not help. That is not a healthy picture.

The Deputy Prime Minister, in dwelling on the significant, in some cases, structural changes that occurred some years ago, is in danger of looking as geriatric as he accuses the Labour party of looking. The right hon. Gentleman also is speaking from the past. Certain things were achieved, but they are not bankers and do not provide for the kind of improvement that the Chancellor wanted.

What a price we now pay for the failings that I identified. There is to be no additional investment in housing. The construction industry is profoundly worried, because it expected the cut in the roads programme, for which we argued, but there is no investment in the housing programme, which could have taken up some of the industry's slack. The private finance initiative is looking like a rescue operation rather than a means of adding to the stock of valuable public resources by allowing investment that would not have occurred otherwise—which was the basis on which the PFI was devised.

Year after year, I have sat on the Treasury Select Committee and been told, "This year, the PFI will really work. The rules have been successfully relaxed." Every year, false expectations have been entertained. This year, the PFI is expected to rescue a substantial part of that which everybody expected to be the normal public sector investment programme. The PFI is transferring a great deal of the current account to future years, because all that investment will have to be paid for—normally on current expenditure, in the price that will be paid for hospital services, or prisons. As was pointed out earlier, that aspect ought to be taken more clearly into account.

The real-terms cut in overseas aid abandons the Conservative's manifesto claim that they would move towards the United Nations target. The substantial cut in the British Council budget has upset right hon. and hon. Members in all parts of the House, who recognise the council's important function, which it undertakes at low cost in terms of the good will that it earns for Britain abroad.

Something mysterious is happening with the Post Office, and I would like a specific response when the Chancellor winds up. In May, the Deputy Prime Minister, in setting out future plans for the Post Office, pledged not to take more than about half its forecast profits through the external finance limit. That pledge has apparently been abandoned in the forecasts before us.

The external financing limit will be £210 million next year and £300 million in the two succeeding years, which appears to be raiding the Post Office's profits. The result will be an inferior postal service, because the Post Office will not be able to reinvest those profits in the way that it ought to keep postal services ahead. The public will pay in postal charges.

The Government still do not have the energy package right, and tonight will face opposition to a number of their proposals for that reason. The Government attacked us bitterly when we talked about raising petrol duty by 5p a gallon. We were castigated by Conservative central office for making such an outrageous proposal. The Government are increasing the price of petrol by 16p a gallon, with no compensatory element for people who are wholly dependent on a car to get to work£which is particularly the case in rural areas.

One obvious way to compensate such car users is to reduce their fixed costs by cutting vehicle excise duty. There would still be a penalty on large users of fuel. The Government are increasing vehicle excise duty, albeit by only a small amount, when they should be cutting it as a compensatory mechanism for increased petrol duty. We will vote against the increase in vehicle excise duty.

It would be right for the House to revisit the issue of value added tax on domestic fuel, as one amendment would permit, because the Government are taking away a key compensation element for VAT. They are taking so much from the energy efficiency budget that 200,000 fewer pensioners' homes will have their lofts insulated, and 1,000 fewer people will be employed by the small businesses that provide insulation work. The Government are pulling the rug from around the knees of the elderly by taking away the compensation that they need to cope with even 8 per cent. VAT on fuel.

The Government were right to identify education, crime and health as priorities in the Budget. But close examination reveals that the Budget does not—as the Chancellor said it would—shift more spending to schools, hospitals and the police. The Secretary of State for Education and Employment claims that she has won £878 million extra for schools, but in fact that money is not there. Merely to stand still, local authorities would need £443 million for rising pupil numbers, new EC regulations affecting school transport and local government pensions. All those elements will build up to a total of £443 million. Local authorities also have to pay for nursery provision and the expansion of the assisted places scheme. Local government will get £774 million, but £516 million will be taken up by inflation. That leaves only £258 million, which is nowhere near enough even for a standstill budget. When inflation is taken into account, the budget does not increase and there will be a cut in services to schools. Central Government spending on local government, including education spending, has merely kept pace with inflation. The only way schools will get extra money is by local authorities robbing other services or putting up council tax.

The Secretary of State for Education and Employment has put parents on duty as monitors of what local authorities do. She says—in the Department's press release—that parents must ensure that local authorities spend the money in the schools. That means that local authorities will have to abandon all discretionary, non-statutory spending: grants to students in further education; the youth service, which is very important in fighting crime; teacher training; and even nursery education. Local authorities will not be able to do that, because they have already been cutting those services for the past two years. My local authority in Northumberland has had to cut those services to stand still because of the cuts it has faced.

The extra money will have to come from the council tax. We know that, the Government know that, and they have included that in the figures in the Red Book, which allow for an 11 per cent. increase in council tax. The Government are simply passing the buck to local authorities by allowing them to increase the council tax by three times the rate of inflation.

Of course, when local authorities raise the council tax, the Government will attack them, but raising the council tax is the only way of achieving the object. The problem was brought into sharp relief by the exchange I had with the Deputy Prime Minister earlier. I asked the right hon. Gentleman what teachers should do. If they were to feel the benefit of the £9 a week promised by the overall improvements of the Budget and the economy, they would have to have a 4 per cent. pay increase. If teachers have a 4 per cent. pay increase, local authorities will have even less money to fund some of the services to which I have referred. Teachers cannot have it both ways, because they will not be better off if schools get their money. The schools will not get anything like the amount of money that the Secretary of State described.

A similar deception exists over NHS spending, which my hon. Friend the Member for Southwark and Bermondsey (Mr. Hughes) described yesterday. The much trumpeted rise in current NHS spending will be offset by inflation and cuts in NHS capital spending. Overall health spending between 1995–96 and 1996–97 will not rise in real terms, and it will decline slightly in future years.

There is a separate line now in the Red Book for NHS spending, to cover the Government's pledge to increase NHS spending. It will increase by £200 million in the coming year and by £100 million in subsequent years. However, when one takes account of the higher level of NHS inflation, and the aging population, one sees that the NHS will be seriously squeezed.

I said that the Government were right to identify crime and policing as a priority. In other ways, the Government are taking money from fighting crime by cutting the youth and probation services—crucial areas of crime fighting. The 5,000 extra police officers on the beat that the Government talk about will not be provided by the Budget. At best, the decisions in the Budget might allow 1,000 additional police officers to be appointed. That is one third the number that the chief constables requested two years ago. I welcome those additional officers, but there will be cuts in every other aspect of the Home Office budget—except, of course, prisons.

I warn the Chancellor that he has not seen anything yet. The Home Secretary has plans to increase the prison population by 20,000. There is no provision for that in the Budget, and there is no provision for the changes that the Home Secretary intends to make in remission for prisoners. That will be a serious problem for the Chancellor in future, unless he can sit on the Home Secretary soon.

On taxes, the rhetoric and the reality are worlds apart. The Chancellor said:

My Budgets of the past two years have kept us on the course that we said we would follow. We have cut taxes, we are cutting taxes".—[Official Report, 28 November 1995; Vol. 267, c. 1072.] That was just a week ago.

Where are the two years of tax cuts? Last year, the Budget contained £1.3 billion of tax cuts after indexation, but that was offset by £2.9 billion of extra taxes conveniently left over from previous Budgets, including MIRAS changes and fuel and tobacco duties. Taxes actually rose by £1.6 billion. This year's Budget appears to contain some £3.1 billion of tax cuts after indexation. However, that is offset by a £1 billion rise in fuel and tobacco taxes from previous Budgets, and a £900 million rise in council tax to pay for education spending. Stamp prices will rise by £120 million because of the Post Office changes..

The assumed contribution from business rates to local authority finance has shot up by 12.2 per cent. That sounds like marvellous news, but it is due to a more optimistic view by the Treasury of the proportion of money that will be collected and distributed. I will he delighted if that happens, but I am not convinced by the precedent set in previous years.

At best, the tax cut of £3.1 billion for 1996–97 declines to £l.1 billion after the inclusion of back-door tax rises. For 1995–96 compared with 1996–97, there is a total tax rise of £500 million, not the fall to which the Chancellor referred. Perhaps that is why we have not had the political Budget that this Budget was supposed to be.

I have some sympathy with the Chancellor. He was expected to work a miracle and to produce a Budget that solved everything that the Government have done wrong. Everything that has made people angry was supposed to be cured by tax cuts: the depth of the recession; negative equity; VAT; rail privatisation; fat salaries in privatised industries; ministerial resignations; the sleaze factor; divisions within the Conservative party on Europe; and the Scott inquiry. Tax cuts were supposed to make the people forget all those problems.

That was the theory, but it was never a good one. The Chancellor was in no position even to attempt to put that theory into practice in the Budget. The Daily Telegraph—a stalwart of Tory support—called it "A penny for your votes". The theory is not going to work, and the Budget will not undo the damage done by the Government's other policies. The Daily Telegraph's verdict is a deeply sarcastic and rather accurate judgment. The Tory party cannot be saved by a concession to vintage car owners. I admit that I wrote to the Chancellor on this. I do not have a vintage car, but some of my constituents have. The measure is useful, and tidies up the position, but the Government cannot be saved by vintage cars.

The Budget cannot save the Government from their fate. It fails to meet the national need for investment in education. But where is Labour? The Opposition are trapped in the Tory tax-cutting agenda, like rabbits trapped in the headlights of a car. A rabbit can run this way a bit and it can run that way a bit, but it dare not get out of the headlight's beam. The Labour party is engaged in a tactical game, the rules of which are made by the Conservatives. If the Government say tax cuts, it says tax cuts. If the Government say standards in education, it says standards in education. Whatever the Government can deliver, Labour can deliver more of the same. That is not a realistic basis for Opposition policy.

I ask Labour Members of Parliament to tell us what Labour's priorities are. I ask them not to give the Leader of the Opposition a political blank cheque to put tax cuts before decent education by going into the wrong Lobby tonight. If the Labour party can abandon that much in opposition, how much could it abandon in government?

Tonight, we will vote against the 1p reduction in income tax, because we, like the public, want to see the money go at this juncture to decent schools, to guarantee the future of our country. It is no use going on about monitoring standards unless one talks about where the resources will come from to raise them, so we invite those who believe that, in this Budget, the priority should be to put education right to join us in the Lobby and vote against that tax cut.

6.9 pm

Sir Thomas Arnold (Hazel Grove)

It is a pleasure to follow the right hon. Member for Berwick-upon-Tweed (Mr. Beith). When he was a member of the Treasury Select Committee we had a very good understanding. I was amused, therefore, by what he had to say about the Liberal Democrats' policy on roads, saying that they welcomed the Government's decision to cut the roads programme. But that is not what the Liberal Democrats locally in Hazel Grove have been saying. They want a number of local roads. Indeed, they forecast locally that the roads programme would be cut. It was not and a number of programmes will go ahead. That episode underlines once again the wisdom of the American politician—I think that I am correct—who said that all politics is local.

I congratulate my right hon. and learned Friend the Chancellor on a very skilful Budget, and join the right hon. Members for Berwick-upon-Tweed and for Ashton-under-Lyne (Mr. Sheldon) in making one or two remarks about the private finance initiative. This morning, the Treasury Select Committee took evidence, yet again, on the PFI. We have been doing that now for several years and, I have to tell the House, we are none the wiser. There is too much that is opaque and couched in language that is simply incomprehensible. It is not a party issue. Indeed, judging from this morning's exchanges, there is a good deal of cross-party agreement on the subject and a desire to go ahead and support the policy, but we need to know more about it in ordinary language that people can understand. Therefore, I think it likely that the Committee will want to hold an inquiry on the subject in the new year, and issue a short report, because we simply cannot go on like this. It really is incumbent upon the Treasury to find ways and means of making the policy more easily understood. Let us have some specific examples of the agreements that are being made. Let us see how they vary between one project and another, and then we can begin to understand how this wholly admirable policy in principle is being implemented in practice.

I shall concentrate my remarks on monetary policy and welcome the robust stand that my right hon. and learned Friend took during the summer months in agreeing not to put up interest rates. It has been only a few months since the Bank of England—we know what the advice was from the publication of the minutes of the monthly monetary meeting—was asking for an increase in rates at a time when it was already becoming apparent that the economy was slowing. My right hon. and learned Friend resisted that appeal and was absolutely right to do so. I say that because we have had a good deal of evidence during the autumn and as we go into the winter that growth has been moderating and slowing down. Even if there is not a deflationary bias in the economy, it is certainly now apparent that there is not an inflationary bias. Whatever increases may have taken place as a result of a surge in commodity prices, they appear to have worked their way through the system, and the immediate prospects for inflation are not at all bad.

I fully understand the difficulty that the Governor of the Bank of England faces, because he is enjoined by the Government, the Treasury and the Chancellor to give advice that is designed to help the Government to meet the very strict inflation target of 2.5 per cent. by the end of the Parliament. He can give that advice only on the basis of the evidence that is available to him when he is asked to give his opinion. He carries out what he calls a balancing act and then gives his opinion. Clearly, the Chancellor has to take account of a much wider range of factors, and I hope that my right hon. and learned Friend will listen to what I believe is a persuasive case for cutting interest rates.

The Budget forecasts that expansion—growth in the economy—over the next year will be some 3 per cent. One can say that that is trend or slightly above trend growth, but it appears to be a faster rate of activity than that which we are currently experiencing. If that is so, given the slowdown in activity elsewhere in the world, it is likely that we will not be able to rely on the expansion to be driven on net trade, as the recent expansion was. We must all look for more buoyancy from consumer spending, and we are unlikely to obtain that unless we can promote more activity in the economy. Indeed, a cut in interest rates would help that process considerably.

I understand the difficulty that the Chancellor faced in framing the Budget when his tax receipts were considerably less than that originally forecast—the public sector borrowing requirement came in very much higher than was forecast this time a year ago. He was short of some £8 billion or so of revenue. That has been a very difficult situation for him to deal with, but again that is a reason for relaxing monetary policy now to encourage more activity and in turn more buoyancy from the revenue. There is plenty of evidence to suggest that a modest stimulus of the kind that we could expect to see from a gradual loosening of monetary policy at this stage would be effective for the rate of activity in the economy.

We now have a much better understanding of the way in which the Government take decisions on monetary policy, and the monetary framework is, in many respects, admirable. I have no wish to criticise it in any way. The framework shows that the evidence on which the Bank gives its advice is of a kind about which it is frequently difficult to be certain. Indeed, if one looks at the last Bank of England inflation report, one sees that, far from the Bank showing the certainty that the Governor showed in the late spring and summer, it says—at the beginning, in the middle and again at the end—that the situation is so full of uncertainties that it is difficult to know exactly what is taking place. That being the case, set alongside the evidence of a slowing economy, I think that the Chancellor would not be taking any great risks if he now moved towards a slow easing. I have no particular view about the number. I think that it can be done in quite modest steps, and we can see how the situation develops. I simply do not believe that he would be taking any great risks with inflation, for the reasons that I have given. Inflation is low and is likely to remain low for some time to come. His Budget arithmetic depends on a revival of confidence, and on a further expansion of output and of activity. I hope, therefore, for all the reasons that I have given, that he will now feel able to ease monetary policy.

6.17 pm

Mr. John Hutton (Barrow and Furness)

I agree strongly with the comments of the right hon. Members for Guildford (Mr. Howell) and for Berwick-upon-Tweed (Mr. Beith) about the British Council and the BBC World Service. It would be a mistake to implement the cuts that the Chancellor proposes to make, and I hope that a way can be found to ensure that they do not happen.

I congratulate the hon. Member for Hazel Grove (Sir T. Arnold) on a polished and eloquent speech, made, of course, without reference to notes, which is something that I will not try to emulate. I agree with his remarks in relation to the PFI, and I shall say one or two words about that later.

Two things can be said about the Budget: first, that it has been grossly over-hyped by both the Tory tabloid press and by Tory Members of Parliament. It was supposed to be the Budget that would simultaneously restore Tory party fortunes and galvanise the country behind the idea of another term of Conservative Government. In fact, the Budget has completely failed to make any kind of impact or impression on public opinion.

The Budget arithmetic is already beginning to unravel. This is a Budget characterised by creative accountancy and false claims. People will not be £9 a week better off because of the Budget. The real figure for a typical family with two children, according to the House of Commons Library, is £2.03 a week. People will be left seriously out of pocket when the 21 Tory tax rises since 1992 are taken fully into account. They will be £670 a year, or £13 a week, worse off. That will be the true state of personal finances after the Budget.

Even the claims that the Government have made for the Budget rest on Treasury forecasts, and we know just how unreliable those forecasts have been in the past. We have had higher inflation than expected, borrowing has been much higher than predicted, investment forecasts have been hopelessly inaccurate and there has been slower growth and smaller manufacturing output.

The problems for the Government are more fully reflected in the Red Book. Last year, the Government thought that their receipts in this financial year would be £298 billion. Now they think that they will be £284.8 billion. That is a spectacular and unprecedented undershoot of more than £13 billion. We have seen an undershoot of £4.8 billion in income tax and £5.2 billion in lower and smaller VAT collections.

That serves to emphasise the second point that can be made about the Budget, which is that it has failed to address the fundamental weaknesses of the British economy. My right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) vividly revealed one of the central weaknesses of the British economy towards which the Budget will make no significant contribution—the serious balance of payments deficits that have been run up in recent years. Most importantly, the Budget will fail on the key question of investment. There is nothing in the Budget which will stimulate private investment while, at the same time, public investment, particularly in areas such as the NHS, has been hit hard.

There is an obvious but depressing short-termism about the Budget. Despite the Chancellor's claims to the contrary, investment in infrastructure is one of the few ways in which the Government can improve the conditions for economic growth. But even if we are to take the recycled claims about the private finance initiative at face value, the Chancellor is still planning to cut capital spending in education and health in favour of higher consumer spending. We all know that the Chancellor is ïn a political hole—he refers to it frequently—but it is a hole entirely of his own making.

However, this is a case of cutting off one's nose to spite one's face. In short, there is little in the Budget which will help investment or reduce the unacceptable levels of unemployment in our society and deal with the real problem of job insecurity, which is now a major drag on the British economy. The jobless will get little cheer from the Budget.

Training budgets have been cut by a further 4 per cent. on top of the substantial cuts in training and enterprise councils' budgets this financial year. My county of Cumbria suffers pockets of extremely high levels of unemployment, particularly in my constituency and along the west coast of Cumbria. But Cumbria training and enterprise council's budget has been cut by £1.25 million this year—nearly 7 per cent. Such cuts are completely unjustified against the background of the unemployment problems in Cumbria.

The balance of tax measures in the Budget will neither promote greater fairness, which should be a priority for Government, nor represent good value for money. I mention in particular the £250 million being spent on reducing inheritance tax liability. That money could have been better spent, and should have been spent, either by reducing income tax for the lowest wage earners or by lowering VAT on domestic fuel. Either of those measures would represent a much better spending priority.

Mr. Michael Stephen (Shoreham)

Does the hon. Gentleman accept that inheritance tax is iniquitous because it is a tax on money which has already borne tax throughout the lifetime of the deceased person?

Mr. Hutton

No, I do not accept that. Inheritance tax is a Conservative tax. If the hon. Gentleman has those strong feelings about inheritance tax, I am surprised that he has not been voting against previous Conservative Budgets.

I come now to the impact of the Budget on the housing market and the building industry and I want to say one or two further words about the private finance initiative. The Chancellor ruled out taking any special measures to boost the housing market or to promote growth in the construction industry. He may be right that there is no magic solution to the problems of the housing industry and the construction industry generally, but at the very least we should stop doing things that damage the confidence of home owners and prospective home buyers and which in turn have a damaging effect on the construction industry.

In my constituency, the construction industry and the housing market are seriously depressed. The Government could do two things in particular which would improve the general confidence of home owners and prospective home buyers. First, they should consider much more seriously the phased release of capital receipts from the sale of council house properties. If that was done in a sensible way, it could stimulate the construction industry. In particular, the Government should reconsider recent changes to income support and mortgage protection payments for those people who are out of work.

Clearly, the Government's intention is to switch the emphasis on to private insurance and away from support from the Department of Social Security. That will cause huge hardship. In particular, it is doubtful whether private provision will ever be able effectively to compensate for provision formerly provided by the DSS.

The Government should consider two problems in particular. First, there is a serious lack of awareness on the part of borrowers about the effect of the Government's income support changes. Recent surveys conducted by the building societies show that a third of existing borrowers still believe that in the event of unemployment the DSS will be there to provide them with a helping hand. That simply will not happen. Secondly, many of the mortgage protection insurance policies are so full of holes that they frequently fail to cover many of the redundancy situations that our constituents experience.

A particular problem in my constituency, which I know will be reflected elsewhere, concerns contractors and those who are self-employed. Many existing mortgage protection insurance policies fail to deal adequately or at all with those categories of workers. Policies such as those whose virtues the Prime Minister has trumpeted in the House and elsewhere—particularly those now adopted by the Skipton building society, to which the Prime Minister referred on 8 June at column 317—as representing the best practice of building societies, in fact turn out to be something substantially less than that.

The Skipton building society policy does not cover the first 56 days of redundancy and does not apply at all to absence from work caused by illness or accident. I am perfectly prepared to accept that the Skipton policy probably represents the best policy that is available. But it does not deal with the real situation facing many of our constituents. In many cases, there will effectively be no mortgage protection payment in the first 56 days of redundancy, and that will stoke up serious arrears problems for many people.

Many lenders restrict the sale of insurance to new borrowers, because they are concerned, as the Woolwich and other building societies have made clear, that an existing borrower who wants mortgage protection insurance to cover redundancy could well be perceived as someone who is at risk of redundancy, which is one of the conditions that will frequently exclude a person from taking any benefits under such a policy.

The chief executive of the Cumberland building society wrote to me on 29 November to express his concerns about that Government policy. He said:

We strongly feel that the reduction in income support to owner occupiers is inequitable and can only have an adverse effect on the housing market. I agree with the chief executive of the Cumberland building society, Mr. Ian Kitchen. It is a shame that the Government are not prepared to reconsider their proposed changes to the rules governing income support.

Many hon. Members have spoken of the private finance initiative. Along, I am sure, with every other hon. Member, I support the concept of genuine partnership between the private and public sectors: indeed, Opposition Members have long advocated that concept. The PFI involves problems, however—problems accurately identified by the hon. Member for Hazel Grove.

I have further anxieties. There is evidence that the PFI is becoming a vehicle not for genuine partnership between private and public sectors, but for a takeover of the public by the private sector, which would be a regrettable development. There is also clear evidence from the Budget that the PFI is a substitute for previously promised public sector capital spending, particularly spending in the national health service. The PFI does not, of course, provide cheaper sources of finance than those currently made available to the public sector by the national loans fund. Moreover, as the right hon. Member for Berwick-upon-Tweed has pointed out, in transferring capital spending to current expenditure streams we risk stoking up problems for many public sector organisations in the future.

I want a successful private finance initiative. I want sources of private finance to be released for use in the public sector. I do not, however, want the PFI to be substituted for public expenditure itself. For many years, a hospital in Ulverston, in my constituency, has provided excellent services for elderly people who need national health service beds; along with other services, it provides respite care. The building is now unsuitable, and no longer provides the standard of care that many people expect from the national health service. It needs to be replaced.

Morecambe Bay health authority is currently consulting organisations in my constituency and elsewhere, including the community health council, with a view to replacing the hospital with a new all-purpose residential facility and a new primary health care facility. I support that plan, and I support the concept of involving a private financial partner; but I have reservations about the application of the PFI to the renewal of the hospital. In particular, I want the range of services provided in that hospital to stay in the national health service. I think it extremely important for such services to be provided by NHS trusts in particular. I do not want management services in the new hospital, when it is built—which I hope it will be soon—to be contracted out to people outside the NHS, and I do not believe that my constituents want that either.

Moreover, as the hon. Member for Hazel Grove pointed out, the PFI is so bureaucratic and the rules relating to approvals so cumbersome that the scheme could be seriously delayed. I do not want the PFI to operate in that way: I do not want it to delay schemes, and to ensure that they disappear. We need that new hospital in Ulverston, and I want to make certain that we get it. The PFI has become something of a smokescreen to hide cuts in public sector capital spending—and, I suspect, an example of the kind of dubious creative accountancy for which the Government have become notorious over many years.

I do not think that the further round of cuts in the Ministry of Defence budget has been mentioned, at least today. I am sure that everyone supports the case for increased efficiency in all Departments—there can be no argument against it—but it is now proposed that a further £500 million of cuts this year, a further £500 million next year and a further £400 million the year after that should be found in efficiency savings. Those savings were not identified in the "Front Line First" study this time last year; they are to be made on top of the savings identified then.

If those are genuine efficiency savings, there can be no argument. My only concern in that event would relate to why they were not identified earlier, as the failure to identify them clearly represents a substantial loss to the taxpayer. If, however, the £500 million this year and the total of £1.4 billion over the next three years is to be found from the MOD's procurement programmes, the cuts should be resisted. I see no justification for further large cuts of that kind, especially as they affect the Royal Navy—which, as many hon. Members know, has a substantial base in my constituency. Two big programmes are coming up, for the replacement of submarines that the Navy needs in the future and for new assault landing ships. I do not want either programme to be delayed. I do not believe that there is any military argument for delay, and I hope that whoever winds up the debate will be able to reassure me. [Interruption.] Does the Chancellor wish to intervene?

Mr. Kenneth Clarke

No. I was just sitting here sympathising with the hon. Gentleman, who represents a lone voice in the Labour party in expressing doubts about defence cuts. But he is, of course, the hon. Member for Barrow and Furness. His distinguished predecessor, Albert Booth, used to find himself rather alone on that subject.

Having listened to all his hon. Friends asking for more to be spent on everything else while asking for taxation to go down to lop in the pound, does the hon. Gentleman really believe that there is the slightest prospect of Labour's not trying to cut the defence budget to make room for some of that?

Mr. Hutton

I was simply saying that, if these are efficiency savings, I think that every hon. Member would agree that we need to continue to make efficiency gains.

Mr. Clarke

I am trying to help the hon. Gentleman. I did not intend to stand up and attack him. I can reassure him that these are efficiency savings, which are not based on any cuts in procurement. He was right to ask the question, which interests people in Barrow and Furness, but he will have to protect them from the rest of the Labour party if it is ever near to taking office.

Mr. Hutton

I do not want us to have an argument about the matter, although I suspect that we are about to have one.

None of my constituents will take lectures from Conservative Ministers, or other Conservative Members, about cuts in defence expenditure. Since 1991, billions of pounds worth of programmes have been cut from the expected work profile of Vickers Shipbuilders and Engineering—capital projects and procurement programmes. The result, in terms of job losses, must be clear even to the Chancellor of the Exchequer. Nearly 10,000 jobs have been lost from the VSEL shipyard in Barrow since 1991.

I am not arguing against efficiency savings; I support them. I do not want money to be wasted anywhere in the public sector. I do not, however, want substantial cuts to be made in front-line equipment that the armed forces need if they are to defend and protect the country's interests internationally and in NATO, and I do not believe that my hon. Friends want that either. There is no consensus in the House of Commons for such cuts.

I am glad that the Chancellor has confirmed that there will be no further procurement cuts in the MOD's budget; my constituents will welcome that news. It may surprise some of the Chancellor's Government colleagues, but I am grateful for the assurance.

This Budget will make no lasting impression. There is a growing gap between ministerial rhetoric about the state of the economy and the way in which our constituents experience the economy in their own lives. That growing gap between rhetoric and reality, which underscores everything that the Chancellor has said in the Budget debate, is one reason why I expect the Budget to be regarded with contempt as a pathetic attempt by the right hon. and learned Gentleman to regalvanise support for his dispirited and now degenerate Government. I do not believe that hon. Members—especially Conservative Members—will do themselves any favours by supporting this contemptible Budget.

6.38 pm

Mr. David Martin (Portsmouth, South)

It seems that we are all agreed on at least one matter: this is unquestionably a Budget for another Budget rather than for a general election in 1996. It is none the worse for that; Budgets dubbed general election winners—or, indeed, general election losers—have an uncertain historical record. What matters is the proper management of the economy and the electorate's perception of it as it affects them, their families and even their neighbours. That failure was at the root of Labour's loss of office in 1979, and it has been at the root of the lack of electoral success in all the long years since which Labour has enjoyed—if that is the right word—in opposition.

We are experiencing an uncanny echo of those days, but this time it is in France where, instead of the International Monetary Fund, the German Bundesbank is writing the script. I wonder how many business men in this country realise that what is happening in France has far more profound effects on our economic and political prospects than the Budget, with its fiscal adjustment of 1 per cent. of total expenditure and 0.5 per cent. of gross domestic product.

Market realities, monetary policy and exchange and interest rate movements are far more serious determinants of the future economic prosperity and well-being of those whom we represent, whether rich or poor, young or old, employed or unemployed, and in those respects the Budget, although worth while in itself, is like holding a candle to the sun.

My right hon. Friend the Member for Guildford (Mr. Howell) mentioned the awful events in France. The recession, the unemployment and the resultant out-of-control public finances and public sector anarchy result from applying, come what may, the straitjacket of an overvalued currency in a single-minded obsession with monetary union, with reaching the Maastricht criteria and with eventual abolition of the franc and adoption of the Euro-mark by the turn of the century. How right my right hon. Friend the Prime Minister was to negotiate that single currency opt-out for us.

I know that the Cabinet is uneasy about policy on monetary union and the abolition of the pound, but as I am on the Back Benches I am, thankfully, not bound by such collective responsibility. I am also flushed by the recent letter that I received from my right hon. Friend the Chief Whip telling me how much he appreciates my "unblemished voting record" in the last Session. Perhaps I can afford to spend a little of that credit in saying that if France is forced by the unions and by student-led turmoil—to which the French Government will probably soon capitulate, as they have so many times in the past—to release the franc from its straitjacket and let it float free, the cheers that should go up in the House, and from No. 10 Downing street no less, ought to be heard in Paris. The consequences of that in setting back the ridiculous timetable for monetary union and the single currency would lead to a greatly improved competitive age for us all. My right hon. and learned Friend the Chancellor would certainly recognise the benefits for his next Budget.

Mr. Salmond

Will the hon. Gentleman give way?

Mr. Martin

No.

Throughout Europe, interest rates would come down with greater confidence, which is precisely what is required here, and the Government might even be encouraged to rule out any question of abolishing the pound in the lifetime of the next Parliament. In saying so, our backs, unlike those of the French, will clearly be turned against further damaging European integration which neither people in this country nor the overwhelming number of businesses want. Nothing could be more drastic than the adoption of a single currency, which is the absolute essence, the heart and soul, of integration, which would bring with it not only impossible pressure to adopt the social chapter in due course but compliance with all the other anti-competitive Euro-nonsense measures that would undoubtedly be forced on us once the great currency plunge had been taken.

I shall now turn to matters that are specifically dealt with in the Budget. I say quite frankly that I would have welcomed bigger tax cuts, but taxes can come down only if the state takes less. In that context, I welcome the Government's determination to reduce below 40p in every pound the amount of national earnings that are taken by public expenditure. If we can achieve that with further tax cuts, I have no doubt that we shall discover that the consequential growth that is generated will produce more pounds in taxation to pay for the teachers, the doctors, the nurses, the police officers, and so on, which we require and which the Budget has also produced. That is welcome.

That is the answer to the old socialist claim that one person's tax cut is another person's loss. Such a claim presumes that the national income remains the same, but what in fact happens is that more national wealth is created when enterprise is encouraged in a low-tax, high-incentive economy such as the type mentioned recently by no less a person than the Governor of Hong Kong. In my experience, he has not always been so closely associated with promoting such economic views.

On a related matter, may I say that those who rely on opinion poll evidence of voting intentions—that people would rather more was spent on education than on lower taxes—have been shown by the Budget that that is a facile approach and a false choice in a prudently managed economy. With such management, we can have both. That brings me to those who wish to see change and reform to improve the working of the welfare State rather than damage it, which change and reform are often misrepresented as seeking to do. I wholly agree with what the Chancellor said when he presented his Budget. He said:

the British people need to be prepared and equipped to embrace change in a flexible way. They will be more willing to do that if they know that high-quality schools, health care and a safety net for the unemployed, the disabled and the old are there if and when they need them."—[Official Report, 28 November 1995; Vol. 267, c. 1058.] That is what I, too, entered politics to promote. Those objectives are often wrongly taken to be the exclusive preserve of so-called one-nation Toryism, and equally often mischievously contrasted with the aims of those who press for change in the means of achieving them.

Of course the welfare state can and does help to deliver all these good objectives with which no one can argue, but they are not achieved wholly through reliance on the way in which our welfare state and economy operate today compared with what seemed sufficient yesterday or in 1945 or at any time since. If the welfare state as it has been operated has indeed created one nation, it is difficult to explain how, despite more and more money being poured into it year after year, it cannot under any Government sustain full employment or comprehensively tackle serious worries about violent crime, vandalism, drug abuse or family breakdown, to mention just some of the issues that are on the minds of my constituents.

Many people believe not only that too easy access to the benefits of our welfare state contribute to all those problems but that the burdens of taxation, particularly on the working poor to pay for them, fuel the disincentive to wòrk for a living and drive a wedge between those in receipt of benefit and those who do not qualify for it. My definition of one-nation Toryism embraces not only the Chancellor's objectives but the means to bring them about. Public expenditure is required, of course—less of it, but certainly a great deal of it—with private sector methods to make the best use of it in serving the public, more encouragement of self-help, of saving, of independence rather than dependence, and more action to encourage social responsibility through individual rather than collective state-run action. We need more trust in terms of people keeping their own money, and more belief in the benefits of doing that, and we need more recognition that the pursuit of profitable enterprise serves the public and that it could not succeed if it did not. Those who want reform to bring about such changes are not living in cloud cuckoo land. They are inhabiting this land and they are mindful of votes.

Some people's votes for parties or Governments may depend on a crude assessment of how much taxpayers' money—miscalled public money or, even worse, disguised in jargon as resources—is spent to buy them. The Labour and Liberal Democrat parties exist on that belief. But I represent a substantial number of people who are not motivated solely by such considerations and who do not have such trust in the all-powerful state. Whether they sometimes forget it between general elections, they are Tories and they are one-nation Tories too.

6.49 pm

Mr. Alex Salmond (Banff and Buchan)

I am sorry that the hon. Member for Portsmouth, South (Mr. Martin) did not give way to me. I was going to put the far from facetious point to him that, if he believes, as I am sure he does, that in the past three years one of the few successful bright spots in the United Kingdom economy has been the pound's accidental devaluation and depreciation after the exit from the exchange rate mechanism, the last thing that he would want is to see France, one of our major competitors, go down the same route, particularly if it provoked a series of competitive devaluations across the rest of the European Union. All the gains that the UK has had from that have been dependent on other countries not depreciating as well. He might want to consider that thought before he suggests that the French economy should get itself into a more competitive position than the UK.

Several hon. Members

rose—

Mr. Salmond

I shall offer the Chancellor of the Exchequer the opportunity to defend the hon. Member for Portsmouth, South.

Mr. Kenneth Clarke

I give credit to the Scottish Nationalists for having an economic policy for Scotland, which is more than the Labour party has, but is the hon. Gentleman seriously suggesting that the best route for France is for the communist trade union and others to succeed, for the social security system to remain broke, for all the structural reforms in France that are needed to be defeated and for the country to seek resort to competitive devaluation? He makes it sound as though he thinks that the successful outcome of the strikes and the franc's devaluation is all that the French should aim for. That is what the Labour party used to do when it was in office.

Mr. Salmond

I am sure that the Chancellor has been listening to my remarks, but, clearly, he has not been listening to the remarks of his hon. Friend the Member for Portsmouth, South, who was predicting as welcome the exit of the franc and the departure of French policy from the exchange rate mechanism, following the same path as the UK three years ago. I was merely pointing out that there is a competitive gain from that accidental policy three years ago. I know that the Chancellor does not like to acknowledge that—which is understandable as it removes any credit that he might want for his policies—but is it not true that, if other countries in the exchange rate mechanism follow a downward competitive devaluation, the competitive gain that the UK has experienced in the past three years will largely be written off? Whether it is a good or bad thing is neither here or there. The point is, that is a fact.

Mr. Clarke

rose—

Mr. Salmond

I shall allow the Chancellor one more attempt to explain his thinking on the matter.

Mr. Clarke

I know of no country that, since the war, has gained any economic advantage just by devaluing its currency. It is a mistake to start spreading the belief that devaluation is some sort of desirable activity.

Mr. Salmond

I was speaking about a belief that I know is widespread among Conservative Back Benchers. When the Chancellor deals with such points, he should turn around and address the atheists on the Conservative Back Benches who do not follow his position and who believe that any gain experienced in the, past three years has been the result of his predecessor being humiliated and chased out of the exchange rate mechanism.

Having stirred the Conservative party into total revolt against the Chancellor, I shall go on to make my speech. I note that Conservative Members have taken some consolation from the argument that, many times, Budgets that are poorly received develop like fine wines through the course of time. It is also true that some enthusiastically received Budgets have turned into vinegar later. I think in particular of the 1988 Budget, which was ecstatically received by Conservative Members at the time. By the end of that year, however, most of them were rueing the day.

I want to offér the House a third possibility: a Budget that is poorly received initially may remain poorly received over a period. I suspect that that is what will happen in relation to the fate of the Chancellor's present Budget. I noted that Bill Keegan, commenting on Sunday in what was a friendly column, given what he has written previously about the Chancellor and his predecessors, described the Budget as perhaps a "prisoner of failure". That is roughly right, because the Chancellor's room for manoeuvre was boxed in by a range of factors that are merely the result of this country's poor growth performance over the years. The Chancellor has therefore been reduced to manipulating his public sector borrowing requirement forecast and to giving an optimistic view of a surge in growth in a slowing economy.

In the past 16 years, the United Kingdom's growth performance has been poor by international comparisons. Those of us who were here for the economic debate that preceded the Budget will remember an exchange about whether it was appropriate or correct to make international comparisons with the UK from 1981 instead of 1979, when the Conservatives took office. The argument from the Government Benches was that it was unreasonable to count the first two years of their stewardship of the economy because, apparently, the problems of the period from 1979 to 1981 were not the fault of the then Chancellor of the Conservative party; they resulted from the winter of discontent whose effects were rolling through the UK economy. Some of the disastrous things that happened to the UK in that two-year period might have had something to do with the deliberate policy options that were taken to transfer the taxation burden on to indirect taxation, thus increasing the inflation rate substantially. The exchange and interest rate policy set sterling at a rate that, in retrospect, I think everyone would regard as extremely uncompetitive. Certainly, the Tory Back Benchers who argue that devaluation has been the salvation of the UK economy in the past few years must surely accept that sterling's rate between 1979 and 1981 caused severe strains for the UK economy.

It is reasonable, therefore, for Opposition Members to say that, if the Government want to compare their record with other Organisation for Economic Co-operation and Development countries, they should compare the record over the full 16 years of their stewardship of the economy, not conveniently omitting the first two years, when the economy effectively fell off the cliff and it was hardly surprising that it managed to scramble its way partly back up the precipice.

By virtually any international comparison, those 16 years have not been a good experience for the UK. It was the one major western European economy that had the benefit of a huge windfall gain from the North sea—£100 billion, a huge boost to the GDP, to the balance of payments and to Government revenue—yet, with that windfall, over those 16 years, the UK's average annual growth performance since 1979 has been 2 per cent. The average for the rest of the European Union is 2.1 per cent. That is not a huge difference, but all those European Union countries did not have the benefit of that huge windfall gain.

What makes it even worse is that, in the previous 16 years—from 1963 to 1979, when the economy was run by unreconstructed socialists such as the right hon. Member for Old Bexley and Sidcup (Sir E. Heath) and the late Lord Wilson—the UK's average growth rate was 2.6 per cent., considerably better than the average rate over the past 16 years, so neither by the comparison with what previously happened in this country nor by any fair international comparison is it reasonable to describe performance in the past 16 years as anything but mediocre.

Especially in Scotland, we consider the experience of the other oil-rich country of Europe, the small nation of Norway, which has experienced a growth rate of 2.9 per cent. over the past 16 years and which, from a position in 1979 roughly equivalent in terms of GDP per capita with Scotland and the UK, is now roughly 25 per cent. more prosperous. That is the penalty that we have paid in the past 16 years for this country's mediocre economic performance and for the Chancellor being a "prisoner of failure", as Bill Keegan said about the Budget.

I am tempted to consider further the oil benefit that the Chancellor and his predecessors have had, which was followed by the privatisation benefit to the PSBR. In this Budget, we can detect what the third great trick with the PSBR figures will be: the private finance initiative. Just as oil and privatisation proceeds massaged the PSBR, the private finance initïative is set to take its place as the great camouflage to hide the underlying position in public finances, which is desperate.

My party and I and our allies in Plaid Cymru will vote against the 24p basic rate of income tax, although not, I suspect, for entirely the same reasons as the right hon. Member for Berwick-upon-Tweed (Mr. Beith) set out earlier. It is reasonable, after 21 Tory tax rises—£1,000 a year for the average family—for the Chancellor to give back some of that money to the people from whom he has taken it. If it is £3 billion, that is fair enough, but a choice must be made as to how that —3 billion would best be spent. That is why on the Order Paper we have tabled our choice, which would bring the low rate of income tax, the first rate of income tax, towards 15p instead of the basic rate towards 24p.

I can claim fairly substantial credentials in arguing for a lower starting rate. I first put forward a proposal for a starting rate of 20p in the SNP budget before the 1992 general election. No sooner had I made that suggestion than I was pounced upon by the then Tory party chairman in Scotland, Lord Sanderson, who said that it was an idiotic idea and that no one would be convinced by

that sort of 0-grade economics. Within two weeks, the then Chancellor encompassed that proposal in his 1992 Budget. Obviously, he was convinced by 0-grade economics.

This year, a week or so before the Budget, we said that it was time that the starting rate of income tax moved towards 15p. Our Budget was immediately attacked by the shadow Secretary of State for Scotland, who said it was a "back-of-the-envelope calculation". Within hours of that attack, the shadow Chancellor announced that he, too, now believed in moving towards a starting rate of taxation not of 15p, but of 10p. I was outbid by the shadow Chancellor.

I am confused by the Labour party's decision not to vote on the 24p tax proposal. I can understand that Labour does not want the Tories to claim that Labour Members are not interested in helping ordinary people through tax cuts, at a time when most family budgets are under severe pressure. However, what I cannot understand is why, having chosen a different priority from the Chancellor for tax cuts—a low starting rate—the Labour party did not put that on the Order Paper and vote against the Chancellor's proposal to reduce the basic rate to 24p.

It is quite clear that, if £3 billion is available for tax cuts, it is possible to lower the basic rate to 24p and to do a few other things on the side or it is possible to go for a 15p starting rate—but it is not possible to do both. By accepting the 24p proposal, the Labour party is excluding the 15p proposal from future calculations. Therefore, even at this very late stage, it would make me extremely happy if it reconsidered its position and voted against the 24p proposal. If there are tax cuts available, it would be better not to have them in a range from £50 to £1,000 a year depending on family income levels, but instead to consolidate those tax cuts at about £200 a year for most earners—as would happen if the low starting rate option were chosen.

I want to raise the question of VAT on fuel. Earlier this evening, I pointed out that when, on 23 January, the SNP moved an almost identical amendment to tonight's Labour amendment, the Labour party decided not to vote in favour of it—although one or two brave souls defied the Labour Whips.

Mrs. Margaret Ewing (Moray)

Seven.

Mr. Salmond

My hon. Friend tells me that seven Labour Members defied the Whips. I welcome the fact that the Labour party has repented since its mistake in January.

Mr. Andrew Smith (Oxford, East)

Does the hon. Gentleman accept that the circumstances are entirely different? Our vote earlier this year was intended to ensure that VAT on fuel was held down to 8 per cent. By voting in the way that the SNP wanted, there was a possibility that we could have ended up with VAT on fuel at 17.5 per cent. We were not prepared to put our victory on VAT on fuel at risk for the sake of SNP gesturism.

Mr. Salmond

Earlier this evening, I heard the shadow Chancellor mumbling just that explanation to the deputy leader of the Labour party, who sensibly did not take it up. As the hon. Member for Oxford, East (Mr. Smith) knows, under the procedures of the House a clause must be agreed before an amendment can be made to it. The clause relating to 8 per cent. VAT passed without a Division, before the 5 per cent. amendment was called. The end result of Labour party posturing was that the opportunity to reduce VAT on fuel to 5 per cent. was lost. Perhaps the hon. Gentleman should apologise to the people who are suffering the consequences of that posturing rather than, 10 months after the event, coming out with some sort of lame explanation.

Mr. Smith

The hon. Gentleman should apologise for his remarks, as he will in due course when we exchange correspondence on this matter and I demonstrate that I am right. Is it not the case that, before the procedures that he mentioned, in law VAT was due to rise to 17.5 per cent.? We succeeded in securing an amendment to the Bill, which had not then been passed, to keep it down to 8 per cent. At that point, a wrecking amendment was moved to reduce it to 5 per cent. Will he accept that if there had been a possibility that the 5 per cent. amendment would be accepted, the Tories who voted with us on the 8 per cent. amendment might not then have done so, so the 8 per cent. option would have been lost, the 5 per cent. option would have been rejected and we would have been left with VAT on fuel at 17.5 per cent? That would have been the consequence of what the SNP wanted.

Mr. Salmond

That was not just the longest but the most convoluted explanation I have ever heard. I remind the hon. Gentleman that by 23 January the Chancellor had accepted an 8 per cent. rate. The Conservative party did not even divide against that rate. The only issue that remained to be determined was whether that 8 per cent. should be reduced to 5 per cent. The Labour party decided to sit and do nothing on that issue—as it intends to do again this evening on another issue—rather than take the opportunity to reduce the rate. No amount of post-match explanation can alter that fact. The only party changing its attitude is the Labour party.

I welcome Labour's belated conversion to a VAT rate of 5 per cent. on fuel. I will not refuse to go into the Lobby with the Ĺabour Members this evening just because it is now a Labour amendment to reduce the rate to 5 per cent. If the Labour party extended the same courtesy to other Opposition parties' amendments as we do to Labour amendments, opposition in this House would be rather more formidable.

My last point on the Budget proposals relates to increased tax on fuel. It is a serious matter for hon. Members who represent rural constituencies. This Chancellor and his immediate predecessor set targets of real increases each year in fuel duties of 5 per cent. over and above the rate of inflation. This Chancellor has excelled himself—there is to be an 11 per cent. increase in certain duties. Rural areas that are highly dependent on transport to get goods into the shops will face higher prices for virtually every item in every shop.

That is being done, as are so many things—including the original imposition of VAT on fuel—in the name of meeting environmental targets. In fact, it is being done for the much baser motive of getting as much revenue as possible for the Government. One official survey was quoted in The Economist:

Higher fuel prices will do little to cut congestion. A study of five cities—Leeds, Bristol, Sheffield, Derby and Reading—by the Transport Research Laboratory, a recently privatised research unit, found that even if fuel costs were raised by 50 per cent. there would only be a 3-4 per cent. reduction in urban congestion. The evidence shows that the Chancellor's motivation is the revenue that can be gathered for the Government, rather than any savings in energy and fuel that could be guaranteed by such a punitive policy.

When the Liberal Democrats suggested something similar during the Kincardine and Deeside by-election in 1991, the Conservative party greeted it as the saving of its campaign. Tories in that rural community argued strongly that it was a punitive policy being pursued by the Liberal Democrats without regard for the interests of the area. However, the Liberal Democrats were actually suggesting compensation for rural areas. The Chancellor is not suggesting any compensation. The SNP will vote against the increases in fuel duties. I hope that, on this occasion, we will be joined by other Opposition parties.

I want to speak about the Budget in a Scottish context. I would argue very strongly that the Scottish economy has two significant advantages over the economy of the United Kingdom as a whole. First, it experiences a relative lack of inflationary pressures when the economy is running at higher levels of output than at present. In the late 1980s, recovery in the economy was arrested in the United Kingdom, especially in the south-east of England, by spiralling house prices and other inflationary pressures. That was not evident in the Scottish economy to anything like the same degree. There is much convincing evidence that the Scottish economy could be run at a higher level of output without succumbing to inflationary pressures.

The second major advantage, which was spelled out yet again today, is in the export performance of Scotland. Export productivity in manufacturing industry runs at a level around a third higher than that in the rest of the UK. Scotland's export growth is running much higher than that in the rest of UK. Per capita, Scotland exports more than Germany, Japan or the United States of America.

That is again a sign that the balance of payments constraint, which has been the undoing of so many Chancellors—and may yet be the undoing of this one—is not prevalent in the Scottish economy to anything like the same degree. Rather than the tame, lame affair that the Chancellor presented last week, a Scottish Chancellor, producing a Scottish Budget, could have introduced measures for output, growth, employment and for social justice.

7.10 pm

Mr. Barry Legg (Milton Keynes, South-West)

We are in the fifth day of the debate on the Budget. Having sat through some of the earlier days, I think that it is improving as the days go by—somewhat like England's performance in the recent test match. Tonight, Conservative Members have made a series of excellent speeches, beginning with those made my right hon. Friend the Deputy Prime Minister and by my right hon. Friend the Member for Guildford (Mr. Howell), and followed by my hon. Friends the Members for Hazel Grove (Sir T. Arnold) and for Portsmouth, South (Mr. Martin). They all made some fine points.

I should like, first, to deal with the remarks made by the hon. Member for Banff and Buchan (Mr. Salmond) at the beginning of his speech. I hope that the hon. Member now understands the Government's policy on exchange rates. There is no difference between the views of Conservative Back Benchers and Ministers. There is no difference between my right hon. and learned Friend the Chancellor and me, for example. We all believe in floating exchange rates. It is as simple as that. We have learnt the lessons of membership of the exchange rate mechanism and we now all believe in floating exchange rates. My right hon. and learned Friend the Chancellor has told the House again and again that he has no target for the exchange rate.

As for the comments of my hon. Friend the Member for Portsmouth, South on France, I would say that there is no benefit to the United Kingdom from France's maintaining an unrealistic exchange rate that damages the French economy and political stability there. I want Europe's economy to be healthy as a whole. I want France, which is a major export market for the United Kingdom, to do well and to prosper through political and economic stability. There is no difference at all on that point among Conservative Members.

The further we get away from the initial rhetoric on the Budget, the more constructive our debate becomes. I greatly welcome the measures that the Chancellor has introduced to control public spending, especially those in social security to restrict housing benefit and combat fraud. He rightly pointed out that projected social security spending over the next three years had been cut significantly.

The proposed social security reforms cannot, however, be the end of the matter. The Red Book shows that social security spending this year is being increased by £1 billion over previous plans and that, next year, it will increase by £1.2 billion over existing plans. Despite healthy economic growth for a number of years and the Treasury forecast of 3 per cent. growth next year, overall social security spending is set to increase by 4.5 per cent. in next year's estimates. That is one of the biggest expenditure increases announced in the Budget. There is plenty of scope for extra measures in that area and I hope that my right hon. Friends will continue to introduce measures to cut fraud and end the abuses that are rife among social security claimants.

Overall, my right hon. and learned Friend the Chancellor has made it clear that he is an adherent to firm control of public spending. There is, however, sometimes danger in making our rhetoric too tough. If the reality does not match the rhetoric, we do not benefit. Most people believe that the Government have been cutting public expenditure, but the figures in the Red Book show that in no year has public expenditure been reduced in real terms. Treasury Ministers have sometimes planned to reduce public expenditure in real terms, but the reality is that it has increased in real terms each year, so we should not let our rhetoric become too harsh. It will not fool the financial markets and it might mislead voters.

Nevertheless, the Budget is much tighter than is normal a year before an election. It appears that the Government have learnt some important lessons on public expenditure, especially if one compares next year's spending with, say, the levels set for 1992–93. When my right hon. and learned Friend the Member for Putney (Mr. Mellor) had control of the nation's purse strings, public expenditure was increased in real terms by some 5.7 per cent. We have come a long way in controlling public expenditure and I applaud the levels set in the Budget.

The Labour party has derided Conservative achievements on inflation since 1979, but if anybody had said in 1979 that, under a Conservative Government, inflation could be brought down to a level that had not be seen for 40 or 50 years, that the horror of inflation—it was a horror for many people—could be brought to an end, everyone would have said that it would be a great achievement.

Mr. Michael Connarty (Falkirk, East)

Does the hon. Gentleman recall that inflation was negative during the depression? People would not say that the country was exactly booming then.

Mr. Legg

I am not talking about negative inflation. Indeed, I am an advocate of ensuring that we do not have it. I shall make further comments on monetary policy later. Under the Conservatives, inflation has been brought down to a level that has not been seen for 40 or 50 years. Following the hon. Gentleman's comments, I am afraid that I must again remind the House that inflation reached 27 per cent. under Labour.

The prospects for inflation are good. In the coming year, it will fall further—because we have a very competitive economy. Competition is particularly keen in energy prices, for example. The electricity rebate—derided by the Labour party—will make a big difference to consumers. The productivity and efficiency savings achieved in the public utilities will work their way through to people's pockets.

Indirect tax increases have been substantially reduced, the mortgage rate is falling and many firms will begin to destock in the coming months. Those trends will provide further competitive pressures in the economy. It would not surprise me if inflation came down to between 1 per cent. and 2 per cent. over the coming year.

Some concern has been expressed about monetary policy, and especially about the growth in broad money, M4. It has grown towards the top of its monitoring range in recent months, but we should not over-worry about that trend. Developments in the financial world, such as the demutualisation of building societies and substantial takeovers, are important factors in that trend. There is not yet sufficient evidence to make us over-concerned about the current level of expansion of M4. The favourable inflation background should lead to further reductions in interest rates.

There are a number of forecasts in the Red Book to which I should like to draw the House's attention. I especially welcome the section that deals with the economy in the medium term. It has been greatly expanded and I draw attention to it because it makes a number of important points. It highlights the substantial improvements to the supply side of the economy that have occurred during the past few years and the significant and substantial margin of spare capacity that still exists in the economy. It points to there being plenty of scope for non-inflationary growth in the economy and an improvement in the long-term trend rate of growth in the UK economy. The Treasury maintains that the sustainable long-term rate of growth in the economy has increased from 2.25 per cent. to 2.5 per cent. That is an extremely welcome development. Spare capacity and improvements in the supply side are safeguards against higher inflation in the medium term and provide the opportunity for the economy to grow at above the levels we have seen in recent months.

There has been considerable comment about the Treasury's projection of 3 per cent. growth in 1996. This morning, the Treasury Select Committee interviewed Treasury officials on that and other points. They maintained that it was possible to achieve that level of growth without further interest rate cuts. However, it appears that their assumptions on that score are optimistic. Their view is that exports will increase markedly in the coming year although the figures on world trade in the Red Book show that the rate of increase in world trade will fall. They have extremely benign views on the impact of reductions in stock levels in UK manufacturing and commerce and they hope for a reduction in the savings ratio.

It seems unlikely that a 3 per cent. rate of growth can be achieved without further interest rate cuts. The weekend press talked in terms of interest rate cuts of 0.25 per cent. I believe that, for confidence to come back into the economy and for the growth rate of 3 per cent. to be achieved, we shall need an initial interest rate reduction of 0.5 per cent. and, probably, further reductions as the months pass.

I draw attention to the comments of Professor Congdon, one of the Treasury's six wise men, on the 3 per cent. growth forecast. After the Budget, he said:

If GDP growth ran at 0.3 per cent. per quarter until the end of quarter 1 1996, the annualised growth rate in the remaining three quarters would have to run at 6 per cent. (ie. at a boom rate) in order to deliver the 3 per cent. growth figure projected by the Treasury for the calendar year as a whole. Quite a lot must happen if that growth rate is to be achieved, especially as the growth rate for the most recent quarter was due entirely to stock building. As my hon. Friend the Member for Hazel Grove said, the Chancellor will have to make some further easing. The determination and good judgment that he showed last May in countering the views of the Governor of the Bank of England on interest rates will have to be brought into play again if our economy is to perform at a healthy rate next year.

There has been much talk in recent weeks about Iain Macleod and his legacy to the Conservative party. It has been right to bring lain Macleod to the fore. Some hon. Members might remember that he was the shadow Chancellor when the Conservatives were in opposition from 1964 to 1970. He had some extremely robust views on the level of spending in the economy and on the consequent level of taxation. In October 1965, he described his views as follows:

There is a limit, and that we are already beyond it, to the percentage that we can take of the GDP in public expenditure and to the burden that one can put on personal taxation without a dramatic drop in efficiency and enterprise and there I take my stand. He said that there was a limit to the level of public spending that we could have as a proportion of gross domestic product and, consequently, a limit to the amount of taxation that could be borne to pay for that expenditure. He made his comments in 1965, when the level of spending by the state, which he considered unacceptable, was 35 per cent. of GDP. We are now battling with expenditure levels of 42 per cent. of GDP.

We see in the Red Book the consequences of setting expenditure at that level. Once it gets there, we have Budget deficits that generate extra interest burdens on the economy. Last year, public spending was 42 per cent. of GDP. The level of public expenditure this year is, again, 42 per cent. of GDP. If the state becomes very big, it is difficult to reduce its size—it acquires a momentum of its own. What is more, it becomes difficult to raise taxation to pay for the expenditure. That is what is happening at the moment. The Treasury has had to cut its forecasts of the amount of taxation that the economy will bear.

Last year, the Treasury forecast what revenue could be raised in the current year. In reality, the¹ revenue take in the current year will be £8 billion less than was forecast. For the coming year, it will be £12 billion less than forecast. There are many reasons why tax revenues are down. Admittedly the economy is growing less quickly, but people also have a natural reluctance to pay high levels of tax. If high levels of tax are set, people seek shelters, and there are plenty of shelters in the UK economy, such as personal equity plans and occupational pension schemes. Many of us know that our constituents use far less orthodox shelters to escape higher levels of tax.

Part of the purpose of having a unified Budget was to take tax and spending decisions together. We shall have to look much more firmly at the spending side so that we do not impose excessive burdens that cannot be funded by taxation.

There are a number of other important changes set out in the Red Book. It has not been brought to the attention of the House that the Maastricht criteria on the budget deficit, which we were led to believe we would achieve in 1996–97, have now gone by the board. Paragraph 4.10 of the Red Book shows that, in the last full fiscal year before decisions will be made about membership of a single currency, the forecast for Britain's public spending deficit is some 3.5 per cent. of GDP. That exceeds the 3 per cent. Maastricht criterion.

How wise my right hon. and learned Friend was when he said in his Budget statement that the public sector borrowing requirement was the difference between two very large numbers. Forecasts are often missed by quite a wide margin. Basing so much of one's economic policy around trying to hit precise public spending deficit targets each year, in strict percentage terms, risks grave dangers for any economy.

We have not been able to meet our target for the PSBR in the current year because there has not been as much growth in the economy as we forecast last year. That is the problem that exists in France today. The French cannot meet the Maastricht criteria because they have to hold down the level of growth in their economy to defend an artificial exchange rate which requires higher interest rates than the domestic economy can bear. If politicians pursue artificial criteria come what may, they will only drive their economies into deflation.

I note with pleasure what my right hon. and learned Friend the Chancellor said about the difficulties of forecasting the percentage of the Government deficit each year and I congratulate him on his stance at the Economic and Finance Council meeting some six or seven days ago. He met other European Finance Ministers the day before the Budget to consider the Waigel stability pact, which placed further requirements on member states to the effect that, if a single currency were to be achieved, they would no longer have to aim for a 3 per cent. budget deficit but for a 1 per cent. deficit.

Those of us who have argued that a single currency would reduce sovereign parliaments such as this one to no more than rate-capped councils could have no better example of what that would mean in practice than the proposals of Herr Waigel, the German Finance Minister. I am relieved that my right hon. and learned Friend opposed those proposals, and I hope that he will continue to oppose any similar ones put before European Finance Ministers.

The Budget is another welcome step in rebalancing the economy. Further steps must be taken to ensure that it achieves the forecasts for the coming 12 months that are set out in the Red Book. If we are to achieve them, there will have to be further interest rate cuts to bring further confidence to British business and consumers. When we get to next November's Budget, I am sure that we shall see a further instalment of the Chancellor's prudent management, which will enable the economy to generate considerable growth during the remaining years of the century.

7.33 pm

Mr. Roger Godsiff (Birmingham, Small Heath)

I have always believed that Budgets should be judged by the reaction from one's constituents. My constituents are interested not in figures in the Red Book but in facts in the real world. Last week's Budget did not bring about great dancing on the streets of Small Heath or the rest of Birmingham. Indeed, it brought a rather long yawn, but behind the yawn there was real anger. Once again, the people of Birmingham have seen missed opportunities.

My constituency is one of the most deprived in the country. On all the indices of deprivation, Small Heath comes near the top of the list. There are 6,632 people unemployed in my constituency. Male unemployment is 26.2 per cent. Overall unemployment is 19.9 per cent. of the working population. Small Heath has one of the largest numbers of single-parent families in the country.

What has the Budget done for people in my constituency? I put aside the comments made in the traditional Tory newspapers such as, in The Sun:

It was about as inspiring as a cold kipper", in The Daily Mail, "Where is the magic?" and in The Daily Express, "too little too late." I put those comments to one side and judge the Budget against what it does for the unemployed, the deprived and the single-parent families in my constituency. The Budget abolished the community action programme. That did not do much for the unemployed. Likewise, the 4 per cent. cut in job training. The freezing of one parent benefit did not help single-parent families very much. While 27p off a bottle of whisky is to be welcomed, it does not have much effect on my constituents. Nor does the 1p off income tax.

We have heard the Chancellor say on a number of occasions that this is a Budget for recovery. The Conservative party has been in power for 16 years, so what is the recovery from? Is it recovery from the stewardship of the Chancellor's predecessors, Mr. Howe, Mr. Lawson, Mr. Major and Mr. Lamont? Is it recovery from the ravages of Thatcherism? If that was the case, the Budget could be welcomed, but I regret that it has nothing to do with any of those things.

The Budget that we heard last week did nothing to deal with the real problems of the economy because the economy remains fundamentally weak. The Budget has done nothing for private investment while public investment has been slashed. The forecast for investment growth is 1 per cent for 1995 and for 1996. The forecast for overall growth in the economy has been revised downwards to 2.1 per cent. The deficit in the balance of payments is forecast to increase to £6.5 billion in 1995.

In addition, as has been pointed out in this long debate on the Budget, the overall level of taxation has increased since 1992 by the equivalent of 7p on income tax. So a typical family now pays £670 a year more than when the Tories first came to power.

During all that time, the taxpayers of Britain have had to bear the cost of £20 billion a year to keep more than 2 million people doing nothing. The figure of 2 million is, if the House will forgive the pun, a conservative estimate. As everyone in the country knows, the employment statistics are fiddled. They have been changed so often by the Conservative party since it came to power that they have no credence whatever. The real level of unemployment, particularly in many of the unemployment blackspots, is now far higher than the official figures suggest. That is the price of 16 years of Conservative rule.

Let us consider the one thing that the Conservative party always used to be able to boast about—the public sector borrowing requirement. There is nothing wrong with borrowing to invest. Indeed, I look upon it as good housekeeping, as did a previous occupant of No. 10 Downing street. However, at present we are not investing in the future.

Investment growth is forecast to go up by only 1 per cent. next year and 1 per cent. the year after. The public sector borrowing requirement is scheduled to increase to £29 billion, despite the benefit of the proceeds of North sea oil and privatisation, purely because of the failure of the policies of the Government—the lack of growth in the economy and the huge cost that the public purse has to bear for keeping well over 2 million people unemployed.

The Budget did nothing for my constituents. What was last week's charade really about? It was all about the next general election. More than anything else, it was about the Conservative party trying to save as many seats as possible. The Chancellor had to appear restrained this year to be able to indulge in a massive give-away extravaganza in the Budget next year. If this Budget shows anything, it is that the next general election will be held in April or May 1997. This is an a cast-iron certainty. The right hon. Member for Fareham (Sir P. Lloyd) is not here, but I have great respect for what he said. He let the cat out of the bag. He referred to the 1p income tax cut working its way through into pay packets in April 1996. That is right. That is when it will come in. The 2p or 3p tax cuts which are going to be introduced in next year's Budget will look good in pay packets in April 1997.

The Tory party has always believed that it can con its way back into power. It believes that it can fool most of the people most of the time. Next time, the people will see through the con trick being played on them. They will see through the 2p or 3p tax cuts that will be offered up in next year's Budget.

The people will—I am sure that the Opposition parties will remind the electorate of it again and again—look back to the highlight of Tory economic policy in this Parliament. That occurred on so-called black Wednesday in September 1992. What a glorious day that was for the country and the Government. There were two increases in interest rates in one day; billions of pounds of the country's money was poured down the drain as the Chancellor fought as hard as he possibly could to stay in something that the Prime Minister took us out of at the end of 24 hours. It was an absolute shambles from one end to the other. That is the Government's record.

In the ensuing three years, the Tory party has attempted to try to recover from the disaster of September 1992. It will offer any bribes or incentives to try to buy the electorate next time. I believe that the people have seen through the Tories. Certainly, my constituents do not want 1p off income tax or 27p off a bottle of whisky; they want a general election.

Mr. Deputy Speaker (Sir Geoffrey Lofthouse)

There are 85 minutes available before the Front Bench winding-up speeches and eight hon. Members hoping to catch my eye. I hope that they will all be successful.

7.43 pm

Mr. Neil Hamilton (Tatton)

We have had a serious and thoughtful debate. Of course, only a handful of discriminating hon. Members are here to participate in the event and hardly anyone is here to report it. We have at least the comforting knowledge that we are talking to posterity. Talking of posterity, the last time that I was able to participate in a Budget debate was in 1990. I took the precaution of looking up my speech on that occasion on 1 May 1990—on what the Labour party used to call May day but about which they are no longer keen to be reminded.

Lord Rosebery, the former Liberal Prime Minister, once said that nobody reads old speeches any more than they read old sermons; the more glittering they were at the time, the more dolorous the quest. I was pleased to read what I said on that occasion because it will help me put this year's Budget in the perspective of history.

In the period running up to 1990, we were in the opposite stage of the economic cycle to the one in which we have found ourselves recently. It was a period of runaway boom following the rapid expansion of the money supply in 1987. To compare 1986 with 1987 will perhaps help to explain why we are in our present circumstances.

Through the whole of 1986, M3 expanded by less than £200 million whereas in March 1987 alone there was an expansion of nearly £1 billion; in April nearly £2 billion; and in May, nearly £3 billion. That was a case of pouring petrol on the flames if ever there was. Why did it happen? We were shadowing the deutschmark and were effectively members of the exchange rate mechanism, although we dared not admit it. The consequence of that was the runaway boom which we then had to counteract. That gave us three years of painful recession from which we have been slowly and gradually emerging, but it has been patchy progress.

All those years ago, before we joined the ERM, on Second Reading of the Finance Bill in 1990, I said:

Joining the ERM is no soft option. We have a choice. Either we can use interest rates to stabilise the currency, in which the case the economy will go up and down, or we can stabilise the economy, in which case the currency will go and up down. There is no way of wishing away that distinction and that choice."—[Official Report, 1 May 1990; Vol. 171, c. 969.] Unfortunately, we made the wrong choice on that occasion and joined the ERM—enthusiastically supported by virtually every Opposition party, all of which wanted us to go in earlier. The Liberal party is still committed to that and, so far as one can discern from its policy pronouncements, even the Labour party is committed to shoving us back into that hell-hole.

It is a tragedy that virtually the whole of the last Parliament, and the whole of this one, has been consumed by that fundamental policy error, which has had tragic consequences for our party. It has wrecked our public finances and our party's reputation for good housekeeping because of the £50 billion deficit that we have had to massage down by tax increases that we would never have wished to bring in. It has pole-axed home owners and small businesses. I have had no need to dilate upon the property slump and its effects. That is again painful for Conservatives who had hoped that the economy would be run in a different way. It compromised our tax-cutting image and reversed, for a time, our policy of rolling back the state.

I very much agree with what my hon. Friend the Member for Milton Keynes, South-West (Mr. Legg) said. For all the talk about cuts in public expenditure, over all the years we have been in office since 1979, there have never been any cuts in real terms in public expenditure. One has only to consult table 6A.1 at the back of the Red Book to find all the figures. In every year without exception, there has been a real-terms rise in public expenditure. Consequently, we have not been able, until this year, to re-embark upon those long-term Tory policies which were so successful electorally in the 1980s and which I believe can still win us the general election when it comes in 1996 or 1997.

It is certainly instructive to look across the channel at what is happening to the French Administration as the people of France grapple with the Procrustean bed of the Maastricht criteria. That is utterly perverse because the French economy is in severe recession and the French Government are embarking upon an unprecedentedly contractionary fiscal policy which will exacerbate the recession and turn it into the sort of slump, to which the hon. Member for Falkirk, East (Mr. Connarty) referred, that occurred in the 1930s. That was caused precisely by the contractionary policies of the Federal Reserve Bank—an independent bank, independent of politicians. Wrong-headed policies were followed to the immense cost of an entire generation before the war —a mistake which we will, I hope, never make again.

The Banque de France is now no more than a branch office of the Bundesbank and, as in 1940 to 1945, French economic policy is actually being dictated from across the Rhine. The French people have no voice, and the only way in which they can make their protest is on the streets. That is exactly what many feared might happen as a result of the theories that underlay the Maastricht treaty. They feared that as a result of attempting to enforce an artificial straitjacket on something which cannot be constrained by law, we would not make decisive moves towards the unity of Europe, but break its existing institutions and political structures.

I am delighted to see in the Chamber the Minister of State at the Foreign Office. He is conducting a rearguard exercise at the moment in Europe; he is trying to shine a searchlight of common sense upon the horrors that we see developing, and which for some extraordinary and incomprehensible reasons the political elites of the rest of Europe seem incapable of seeing.

We have been in a fortunate position ever since golden Wednesday 1992. As a Government we have been able to pursue our own independent monetary policy, which has been a tremendous success story. My right hon. and learned Friend the Chancellor of the Exchequer will go down in history—perhaps rather surprisingly to some of us—as a sane, sensible and well-balanced Chancellor. He will have solid achievements to his name so long as he does not dart off into the theological complexities of the issue to which I just referred. I think that his tenure of office in this Parliament will demonstrate what strengths come through for a country when it determines its monetary policy according to its own needs. That is why I think we need to have further reductions in interest rates.

The Chancellor's good sense was demonstrated in the summer by the way in which he stood up to the Bank of England and refused to increase interest rates as the Governor wanted. I have the greatest admiration for the Governor, who recently gave me a free lunch at the Bank. I am not sure whether that disqualifies me from speaking in the debate under the new criteria. It was a jolly good lunch and, once one builds into it all the hidden costs and overheads of the Bank of England, it may well have breached the expenditure thresholds laid down in the Register of Members' Interests. That is something that Sir Gordon Downey may need to look at.

Technocrats who run policy as sensitive as monetary policy effectively run the whole economic policy of a Government, because that is the framework within which all other tax decisions are made. That is a recipe for disaster because technocrats arrive at the wrong conclusions, perhaps by more scientific methods, and when they do so, there is no democratic means of calling them to account. That is why in France today the Government are not being made accountable through the ballot box but by riots and demonstrations on the streets. That was exactly our experience under the last Labour Government. Such lack of accountability is not a recipe for success but disaster, and one that we should certainly avoid.

I welcome very much the return to the tax-cutting-agenda. The Budget should be judged according to the long-term perspective to which I referred at the beginning of my speech. All economies go up and down. There are economic cycles that cannot be wished away, and certainly cannot be legislated against. In this Budget, and those that preceded, we were obliged to increase taxes in order to maintain a reasonably balanced budgetary policy. Those increases should be seen as part of our long-term objective to reduce the proportion of national income taken by the state from the taxpayer, and spent for him on priorities that politicians rather than the people decide.

The last three Budgets taxed our economy virtually to a standstill, and even in the past three years growth has faltered from time to time. There is still a significant feeling of insecurity in the country. People fear for their jobs in the future and are anxious about the costs that they might have to encounter in their declining years. All sorts of reasons of that kind explain why the so-called feel-good factor has been elusive over the years.

The most obvious reason for the relative lack of a feel-good factor is to be found in a table that appears in the "Economic Trends" annual supplement, which was published only last week. That table shows the figures for disposable income per head of citizens in this country. If we look at the period from 1985 to 1990 there was about a 13 per cent. increase in real personal disposable income. In the period from 1990 to 1995 that figure had dropped to less than 5 per cent. The bulk of the growth in that time has occurred in the last few quarters, so it is clear that throughout most of those five years people have been worse off than they were at the height of the boom in 1990, or only marginally better off. No wonder people have felt sore at their experiences.

I have explained why we found ourselves in such an unfortunate position, and it is not a mistake that, I hope, we will make again. The Government do not have an exchange rate target, and although it is right to consider the exchange rate as one of many ingredients of economic management, it should not be given undue weight.

We have not, seen any real spending cuts in the past 16 years, let alone recently. The Government's expenditure overall has been planned, from start to finish, to rise by about 12 per cent. in this Parliament compared with 4.5 per cent. in the previous Parliament. We have been far less stringent in our of control of public expenditure—partly because of the recession—in this Parliament than in the previous one. It can hardly be a credible allegation against the Government that we have been unduly Scrooge-like in our control of public expenditure.

Labour Governments are very much better at cutting public expenditure than Conservative ones because they have a little external help. That was clear after the 1967 devaluation, and after Denis Healey's famous trip and swift return from Heathrow airport back in 1976 when the IMF came on board. In the two years following that, the Labour Government were able to make a 7.5 per cent. cut in public expenditure in real terms. That was a considerable achievement. If Lord Healey were invited to become a consultant to Her Majesty's Treasury, he might have some useful tips for my right hon. and learned Friend on how to keep public expenditure under control.

Public expenditure has gone up by a significant proportion. I do not underestimate the difficulties of controlling it. I have been on the inside of government and seen the pressures on Ministers to push up spending. I know that with demand-led programmes it is even more difficult to exert control over that discretionary part of Government expenditure. If we are to deliver our long-term objective to reduce the role of the state in people's lives, and return to them the freedom to spend the money that they earn and the wealth that they create in the way that they choose, it is vital that we make better progress on controlling public expenditure.

We needed a bold Budget. It is a good Budget as far as it goes, although I would have preferred it to have been a little bolder. I do not make any great criticism of the Chancellor on that count. There are difficult judgments to strike, and no doubt we all have different views about where the balance of advantage lies. A number of fundamental features underlie the Budget, and everybody should recognise that they should incline us rather less towards caution on tax cuts and interest rate reductions than otherwise. For example, there is no inflation risk at the moment. Last year, the price of raw materials rose by 5 per cent. and more. There was a fear that that would feed a wage-price spiral, with all sorts of shortages and bottlenecks developing, but that simply did not happen. The retail prices index rose by a little more than 3 per cent. When one looks at what happened to wage rates last year, however, that shows where the fundamental weakness in our economy lies. Wage increases actually fell from 4 per cent. to about 3.75 per cent. and in some cases wages decreased in real terms. The present inflation suppression mechanism is the result of many of the policies that we have introduced in the decade and a half that we have been in government.

We have a more flexible labour market than we had in 1980. If the Opposition were to win an election, they would make it more rigid again with such innovations as signing up to the social chapter, introducing minimum wages and, no doubt, returning some privileges to the trade unions. A flexible labour market, relaxation of rent controls, deregulation of working conditions and toughening up the benefits system—in which we have much further to go—have become crucial to our ability to grow and compete without inflation.

The evidence is clear not only in wages, but in the unemployment figures and the resurgence of manufacturing exports and inward investment. Who would have thought that we would ever again export televisions and become a major exporter of cars? It is clear that there would be little justifiable fear of inflation were we to relax the controls just a little more.

The United Kingdom has become the most successful country in the world after the United States in attracting overseas investment. In 1979, the figure was £22 billion; in 1994, it was £144 billion. That is a sevenfold increase. More than 3,500 United States companies, including 98 of the Fortune 100 companies in the United States now have operations in Britain. The three largest car companies in Japan have secured bases here and 40 per cent. of Japanese investment in the European Community is in Britain. More than 1,000 German companies are in Britain, representing 12 per cent. of all German investment overseas. In the past two years alone, more than 800 inward investment projects have brought 200,000 jobs to Britain.

That has not happened of its own accord or because companies stuck a pin in the map and decided to locate to Britain. They located here for the hard-headed reasons that we have a low-tax, relatively deregulated economy that is no longer inimical to wealth creation and is not suffused by the miasma of envy politics and the destructive trade unionism of the 1970s that repelled them from our shores.

What is lacking today, or is insufficiently to be found, is a recovery in domestic demand. We need to build on the useful measures contained in the Budget with a further reduction in interest rates, as recommended by my hon. Friend the Member for Hazel Grove (Sir T. Arnold).

This has been derided by Opposition Members as an attempt to bribe the electorate, but I do not regard returning what people have created for themselves and rightly belongs to them as a bribe. Bribery occurred under previous Administrations—Tory as well as Labour—when ordinary people were made a fraudulent promise that they could get something for nothing and were gulled into believing that the rich would somehow pay for vast increases in expenditure on health, education and social security.

The tragic reality is that as the welfare state and the role of the state generally has expanded over the past few generations, ordinary people have had to pay the bills themselves. As a result, they have been deprived of the freedom to choose, and that has become the privilege of the few. We have to alter that. We have taken some decisive steps in the right direction, but we have much more to do.

It is projected that there will be a surplus on Government accounts by the end of the century. If surpluses are in prospect, we can cut taxes to a level at which borrowing is sustainable without worrying. It is a pity that my right hon. and learned Friend the Chancellor committed himself to a zero borrowing requirement in such a short time. Were it over a longer period of time, we would have had far more leeway sooner for significant tax cuts, which, as we know from our experience in the 1980s, have advantageous supply-side effects.

The Chancellor was prudent in not changing his projections for the PSBR, but had he taken a little more risk on that, we could have done a lot more this year. Patrick Minford has suggested that as much as £17 billion would have been available on a rolling tax cut programme over three years, had we adopted a rather more lenient view of borrowing in the next five or six years, but we cannot do everything at once.

Many Opposition Members fail to recognise that tax cuts produce wealth. Even after the dramatic reductions in the top rates of tax in the 1980s, not only did more revenue come into the Exchequer for redistribution, but the proportion of income tax revenues paid by those on higher incomes actually increased. It is a perverse policy to call for punitive increases in taxation because the consequences are that there is less money to redistribute and the rich pay a smaller proportion of the total tax revenue. We have a long way to go, but low-tax countries always lead the growth league.

When the United Kingdom was the leading low-tax country in the world between 1780 and 1890, we topped the growth league. The same occurred in the United States between 1890 and 1970. Today, countries such as Japan, Switzerland and certain far eastern countries—the Asian tigers—have low-tax, deregulated regimes which put them at the top of the growth league. We should look to that example and not to countries such France and Germany—the over-regulated sclerotic regimes that are attempting to force their uncompetitive policies on us because they are too frightened to adopt or have some other reason for not adopting the sensible, open-market, outward looking, low-tax, deregulating policies that have been so successful here and elsewhere.

Labour is trying to project itself as the party of tax cutting. A recent article in the Daily Telegraph was headed

Blair: 'I will not squeeze the rich'". The Leader of the Opposition said that in his speech to the CBI. The hon. Member for Dunfermline, East (Mr. Brown) recently laid out his stall for a 10p income tax rate—admittedly to the annual conference of the British Dyslexia Association, perhaps thinking that the audience might not be able to read the fine detail of his policies, although I say that with some trepidation as I know that the debate was opened by my right hon. Friend the Deputy Prime Minister. The 10p income tax rate has been derided as a gimmick by the Institute for Fiscal Studies.

Opposition Members do not seem to understand the mechanisms that achieve the policy objectives that they themselves set. The best way to help those on the lowest income is not to introduce a band of tax at 10p but to raise tax thresholds, as my right hon. and learned Friend has done this year, to take out of the tax net as many people as possible who are on the lowest levels of income, because the greatest disincentive to work is provided not by the tax system but by the benefit system due to the combination of the withdrawal rates and the tax rates which apply at that level of income. There is much to be done on that side of the equation.

We need to continue in the direction that we are now taking. We are getting back to the policies on which we were elected in 1979, to which we have adhered and which have been so successful for Britain and have made the Conservative party so electorally successful. The greatest tribute to the truth of that analysis is that the Opposition have now discovered that they cannot be elected on the policies in which they really believe and therefore they have to present themselves as a watered down version of Tories.

Looking at the right hon. Member for Sedgefield (Mr. Blair) and his supporters in recent months, I have been struck by the right hon. Gentleman's resemblance to Sun Myung Moon. When the moonies sign up to their cult, they have to accept the Reverend Sun Myung Moon's decision as to who they marry. He spends quite a lot of his time looking at photographs and selecting and matching the couples who are to spend the rest of their lives together. That role is being performed by the Leader of the Opposition in the Labour party as he matches his members to their new beliefs. They may not have had much connection with them in the past or any understanding of the matters that they now profess to believe, but so desperate are Labour Members to achieve office that they are no longer concerned about what they would do there.

We see in Labour a bankrupt party which has plenty of experience of bankrupting the country. That is why I hope that my right hon. and learned Friend the Chancellor will continue the successful policy that he is adopting, which will be the best prophylactic against the country ever again entrusting the Opposition with the levers of power.

8.10 pm

Mr. Ray Powell (Ogmore)

I was present for the speeches at the start of the Budget debate and have listened attentively to other speeches during the course of the week. I left the Chamber earlier to attend a meeting of the parliamentary benevolent fund, at which we presented ex-Members of Parliament or their widows with more money than the Chancellor are giving them, and more money than the Chancellor will be offering people throughout the country. The beneficiaries of our benevolent fund will receive a Christmas box of £500. Many pensioners in my constituency would love to be afforded a £500 Christmas box from the Chancellor.

What is the Chancellor offering, and what is he taking back, and how will that affect my constituents and Wales? The House and the country realise that the Budget pretended to offer a lot to the people. With respect to the hon. Member for Tatton (Mr. Hamilton), Labour will not be running afraid of the Government at the next general election. We are positive in the policies that we want to pursue. I do not know the hon. Gentleman's majority, but I am sure that it will have to be good for him to retain his seat at the next general election—especially after this year's Budget.

Newspaper reports following the Budget, especially that in the Financial Times, and the state of the pound immediately after the Budget was announced, proved conclusively that the array of Order Papers waved by Government Members was a farce. As soon as Conservative Members read the details of the Budget, they realised that there was not sufficient in it to allow those right hon. and hon. Members to regain their popularity with the electorate. I would not be so complacent as the hon. Member for Tatton. If he thinks that Labour's lead in the opinion polls can be reduced within the next 18 months without a giveaway Budget and a substantial reduction in interest rates, he is living in cloud cuckoo land.

When I entered the House 16 years ago—you, Mr. Deputy Speaker, were here long before, and it can be seen that we are aging—there was a lengthy list of hon. Members waiting to participate in the Budget debate. In the years that followed, most Budget debates were well attended. The Chamber would not be empty but fairly full. Things have changed. When one examines the Budget, one can understand why the Chamber has not been well attended this week.

When the Chancellor presented his Budget, he suggested that the family on average earnings would be better off next year by £450, which he said was the equivalent of £9 per week. Since then, the Chancellor and the Conservative party chairman have admitted that that large promised improvement was false.

The Treasury press release on Budget day made the inaccuracy clear. It stated that the tax changes would be worth an average of just over £2.80 a week. The day after, the Library—whose figures give me far more confidence—suggested that the average family would be approximately £2.08 better off. In exchanges earlier between the Chancellor and my right hon. Friend the deputy leader of the Labour party, it was plain that the right hon. and learned Gentleman's figure was based on rosy forecasts rather than grim reality.

Living standards have fallen over the past five months—more than at any time in 40 years. After this Budget, the typical family will still be £670 worse off than at the time of the last general election. The Chancellor's figures cannot be trusted. One year ago, he stated that public borrowing in 1996–97 would be £12 billion. Now he states that it will be nearly double—£22 billion. Last year, the Chancellor predicted that investment would grow this year by nearly 6 per cent. Now he says the figure is just 1 per cent. Also last year, the right hon. and learned Gentleman said that the economy would grow by 3.25 per cent. this year. Now he admits that growth is running at only 2.75 per cent.

The Chancellor argued, in exchanges with my right hon. Friend the deputy leader during his true and excellent assessment of the Budget, that the Budget was all about putting extra money in people's pockets. What extra money—the £9 that the right hon. and learned Gentleman mentioned when he presented his Budget, or the £2.08 that the Library calculated?

Where are the tax cuts that the Chancellor talked about? Conservative Members waved their Order Papers when the right hon. and learned Gentleman sat down, but, having analysed his speech, they began to realise that they must start looking for a job with a friendly company or a bank, because no way can they win the next general election and hold on to their seats.

As to increases in local government charges, the Secretary of State for Wales stated in a letter to my right hon. and learned Friend the Member for Aberavon (Mr. Morris) that an 11 per cent. increase will be imposed on rates in Wales, which will mean an increase of £35 a year for the average ratepayer. What kind of tax cut is that? To burden the new unitary authorities in Wales, with all their new responsibilities from 1 April, with an 11 per cent. rates increase is absolutely disgraceful, and should seriously be further considered.

What does this Budget do about job insecurity, or about expensive bureaucrats in the NHS? What are the Government's proposals to solve the negative equity problem in the housing market? Yesterday, my hon. Friend the Member for Newport, East (Mr. Hughes) referred to the "Kane" programme, so called

because that is the name of its distinguished presenter, Mr. Vincent Kane, who has not exactly made a reputation for himself as a Labour supporter. A fortnight ago the programme dealt with poverty and made a convincing case for Wales to be described as the most poverty stricken area in western Europe, certainly on a par with some of western Europe's most devastated areas such as are found in Greece, Portugal, southern Spain, Sardinia and the former East Germany. Once vibrant communities in Wales have been totally decimated. In addition to massive unemployment, officially registered and otherwise, wages are deplorably low. If ever there was a case for a minimum wage, it could certainly be made for Wales. After my hon. Friend had spoken, the hon. Member for Sutton and Cheam (Lady Olga Maitland), who is not in her place now, asked him to apologise to the people of Wales:

I cannot believe that they would thank the hon. Gentleman for describing them as living in an impoverished state and equating them with some grossly chaotic country overseas. I would be furious to be put into such a category, and I hope that the hon. Gentleman will later apologise to the people whom he represents."—[Official Report, 4 December 1995; Vol. 268, c. 78-80.] My hon. Friend's experience, however, does not differ from my experience of my constituency. During the 16 years of Conservative rule, seven collieries there have been closed, making 8,500 miners redundant. The decommissioning of the Port Talbot steelworks put 12,000 steel workers out of work. That makes a total of 20,500 redundancies between 1979 and the end of the miners' strike in 1984. Without economic planning, no constituency could recover from such a blow. Perhaps the hon. Member for Sutton and Cheam, who criticised my hon. Friend, should travel around the country and visit parts of Wales to see the deprivation and squalor there.

People of all political opinions have said that this Budget was a wasted opportunity. The overwhelming majority of people have found their concerns completely ignored. What measures were included to alleviate the insecurity felt by so many families in respect of jobs, housing, education, hospital services, social security, and increasing drug abuse? That is not to mention the Government's staggering record of failure with bodies such as the Child Support Agency, which has already claimed 35 wasted lives. The Act that set it up should be scrapped as a matter of urgency. In numerous measures, the Government have moved rightwards so as to put clear water between themselves and the Opposition.

Most Opposition Members, like me, wanted positive steps taken to solve the problems in their constituencies and in the country at large. Our constituents, especially the unemployed, are crying out for help. Some of them in my constituency have been unemployed for 10 years or more. Young people leave education with loans hanging over their heads and degrees in their pockets, desperately seeking work.

The Ford engine plant in Bridgend announced a few weeks ago that 480 new jobs were to be created under a £340 million expansion programme. It was reported that 11,600 people applied. That means that 11,120 of them are still looking for work in Ogwr borough. This part of Wales has suffered greatly over the past 16 years, and I greatly doubt that it will recover under the Chancellor's economic plans.

No one will be fooled: this is not the Budget of a Government who have succeeded. After 16 years, they have signally failed, as shown by rising taxes, declining living standards and public services, and increased borrowing. The Budget was the last gasp of a degenerate regime.

We say that the only long-term solution to our unemployment and public spending difficulties is investment to strengthen the economy, a radical welfare-to-work programme, and a fair tax system that rewards hard work. Only by putting people back to work will we build a strong economy. The Tories should have adopted Labour's plan for a windfall levy on the utilities. Then we could have begun to break the logjam of unemployment and to reduce the price that we are paying for failure. That is the only route to better public services. I am sure that the Labour party will use the next 18 months to campaign for what we are advocating.

8.26 pm

Mr. Edward Leigh (Gainsborough and Horncastle)

After a week of debates on the Budget, an essential truth remains: given expectations about public services and the level of Government borrowing, the Chancellor had very little room for manoeuvre. Hence this was an honest, shrewd Budget, and I congratulate my right hon. and learned Friend on it.

In the few minutes I have, I want to deal with some of the difficulties and paradoxes facing the Chancellor and those who manage our public finances. The three problems with which I shall deal are also electoral problems for us.

First, assuming that the figures given me by the Library are broadly correct, the average married man with two children will be paying £150 more in tax and £217 more in national insurance in 1996–97 than he did at the time of the last general election. Doubtless the Labour party will make great play of that. But what the Labour party will not say is that the same man's wages will have increased in real terms by £558, and he will be paying £675 less a year for his mortgage, because of cuts in mortgage interest rates. He will therefore have £877 more in his pocket. That is the honest truth as far as I have been able to determine it from all the conflicting statistics of the past week.

The fact remains that this average married man will be paying more tax—a challenge that will face the Chancellor before his next Budget. Let us assume that every 1p reduction in the base rate gives my average family man £130 more in his pocket. Let us also assume that he will be paying about £367 more in tax by the next election than he did at the last. Thus, to wipe out the tax increases, and to present us with an attractive electoral message, a 3p cut in the base rate will be needed in the next Budget. That is a very great challenge, because, as my hon. Friends the Members for Tatton (Mr. Hamilton) and for Milton Keynes, South-West (Mr. Legg) made clear, with every year that passes, public spending increases. That is the first paradox and dilemma that faces the Chancellor as he wrestles very ably with these problems.

The second is concerned with the married man's tax allowance and mortgage tax relief. Again, there are numerous conflicting figures, but from the evidence that I have been able to glean, it seems that that allowance, which was worth £430 in 1991, is worth £268 today. If the cuts since 1988 had not taken place, a married man would be paying £878 less for his mortgage. That is a powerful weapon, which the Labour party will use.

The only reply that we can make is that what counts is not the tax that a married man pays but also what he takes home. As I said, his mortgage, because of the cut in the base rate, has been reduced by £675. I do not see how we can reverse the long downward trend in mortgage tax relief that we have seen over the past seven or eight years, but we can begin to reverse the cuts in the married man's tax allowance. I say that for good political reasons, because we have to give the powerful message that we are the party that supports the married man. It is perfectly possible, and I beg the Chancellor and the Chief Secretary, as they plan their strategy for the next year, to consider those points.

The third problem is what I call the four ages of man, and why we are slipping so badly behind—apparently—in the opinion polls. Although they feel that they have made adequate contributions for their old age through their national insurance contributions, the elderly are increasingly concerned that those contributions—as people live longer and expectations are greater—are insufficient to cover their needs. Therefore, what the Chancellor did with nursing homes was very shrewd.

The elderly also feel that some people—they blame in particular unattached teenage mothers—are taking the state for a ride. That may or may not be fair criticism—I do not want to get into that debate—but the elderly blame other sections of the community for what they consider an unfair attack on the resources of the welfare state. They blame the Government for making them contribute more.

The next generation down—those in their 50s—are increasingly concerned about job insecurity. They may well blame the Government for that, although it has very little to do with the Government. The generation in their 30s and 40s are concerned about negative equity, and, of course, the young are always impatient.

So in those four ages of man, one sees that there are enormous problems for the Government to deal with. The only solution for us is simply to be honest and to look at the Budget, to look at what we have tried to achieve, to look at our place in the world trading economy, and to tell the truth: that, in terms of real take-home pay, the average man will be better off.

But we have to do more. I say to the Chancellor that we are laying the foundations for a new socialist consensus if we argue that we can continue the present structure of the welfare state. I am not sure that that will be possible, because expectations will rise so fast that I do not think that we will not be able to meet them.

Therefore, we must have the courage to indulge in fundamental reform of the welfare state, because the Labour party will always be able to promise to spend more on health, education and social security. I do not think that we will ever be able to match its promises. That again is a fund[...]mental problem that we face in terms of electoral popularity.

Dame Elaine Kellett-Bowman (Lancaster)

It would appear from the opening speeches that the Labour party may make all sorts of promises, but one of them is a 60 per cent. tax rate, which will not be very attractive to the British people.

Mr. Leigh

That is true, although we can always hope, of course, that the Labour party will shoot itself in the foot, as it did in the run-up to the previous election. But I do not think that we can necessarily rely on that.

I think that we will solve the long-term dilemmas and paradoxes that face us in the management of the welfare state. We have to be prepared to look in the long term at very radical reform. There is no big bang or instant solution in the reform of social security, given that expectations are rising all the time. Nor is it possible to argue in a simplistic way that we can deliver tax cuts and ever-improving standards in health, education and social security, which is what people want. That is a simplistic point of view. The fact is that people want to spend more on their health and on education. It is easy to argue that there is room for huge cuts in social security, until one bears in mind where the money is being spent: on the disabled, pensioners and so on.

Much of the debate is conducted on an entirely simplistic basis that has no reality in fact. The only way in which we can try to fight our way out of these dilemmas and paradoxes in the management of the welfare state is to look for management and efficiency savings, and at where it is possible to privatise. All that is possible, but perhaps we are coming to the end of the road on that.

I believe, though, that there is a new, extraordinary consensus, which is coming from right and left: from the hon. Member for Birkenhead (Mr. Field), who heads the Social Security Select Committee, and from people like myself on the right, who argue that one has to reinforce individual responsibility in the management of the welfare state.

One has to try to create more of a community. I do not propose that we privatise the welfare state; there simply is no public support for that. There is no support either for privatising the national health service or state education. Where individuals make contributions towards their old age or for education, there is support for the idea that they receive much more personal credit than they do at present. At the moment, they believe, rightly, that their contributions are just poured into a bottomless pit. They are given no credit for their contributions.

They feel, frankly, that other people are taking the state for a ride. It would be an immensely complicated process. It would have to be a rolling programme. There is no way in which one could introduce it in one Budget, two Budgets, or even five. There may even have to be some degree of cross-party consensus.

I am absolutely convinced that, if we look at how the welfare state will be managed in 10, 15 or 20 years' time, we will be looking at lifetime personal accounts, and people will have confidence that what they pay in for their old age or education will not be raided by the state, whether for tax cuts, for spending in other areas or to manage the economy.

That is a very attractive philosophy, which we have to start to grapple with. If we do not, we will always be caught between the constant desire, which Conservative Members naturally have, for tax cuts, realising at the same time that the bulk of spending is locked up in these great state bureaucracies: spending on health, education and welfare.

As part of that process, I see the Treasury not so much involved in a vast churning process of taking from one hand, whether in child benefit and so on, and giving with the other, as becoming much more of a Ministry of Finance, charged with balancing the books, with the welfare state devolved much more into charitable trusts, in which people have real confidence that their savings and investments are protected—not private companies trading for profit, but charitable trusts.

I see education organised in very much the same way, with the boundaries between state and private education blurring as the money effectively follows the pupil around to whatever school or college he or she attends. That is an attractive solution, which the Treasury should at least be considering. The Treasury would become much more of a Ministry of Finance.

At the same time, the annual Budget would not be so much an exercise in political management with the Chancellor constantly looking over his shoulder, as he has had to do this week, balancing tax cuts with managing the currency because he wishes to bring in interest rate cuts which will be important in terms of the supply-side economy, economics and electoral popularity. He would be looking at the Budget much more from the point of view of a Minister of Finance, balancing the nation's books. The currency would be run by an independent Bank of England, backed by commodities, becoming a true inflation-proof hard currency.

I accept that those are radical reforms, which could take five, 10, 15 or 20 years to introduce. But we need the courage, vision and determination to debate such reforms. If such issues are discussed in terms of a fatuous party political debate across the Chamber, we will never meet the expectations of the British electorate.

Several hon. Members

rose—

Mr. Deputy Speaker

Order. There are 30 minutes left before the winding-up speeches begin and three hon. Members hope to catch my eye. I hope they all will.

8.40 pm

Ms Judith Church (Dagenham)

I shall take your advice, Mr. Deputy Speaker.

We have heard a number of interesting speeches tonight, particularly from my right hon. Friends the Members for Kingston upon Hull, East (Mr. Prescott) and for Ashton-under-Lyne (Mr. Sheldon) and my hon. Friends the Members for Birmingham, Small Heath (Mr. Godsiff) and for Barrow and Furness (Mr. Hutton). When a matter has been addressed so well, I see no reason in the same debate to repeat points that have already been made.

I hope tonight to address the concerns of single parents in Britain, the vast majority of whom—nine out of 10—are women. More than that, I want to address the problems of their children who will be the real victims of the measures announced by the Chancellor in his Budget. Many of my constituents are single parents and they are the scapegoats of a Budget that has made the pathway from unemployment into work more difficult.

As we all know, single parenthood takes many forms—widowhood, the abandonment of women and their children, mothers bringing up their children when the father has failed to acknowledge his responsibility, women who have been separated or divorced who still maintain their children's contact with their father and women who are unable, for many reasons, to live with the father of their children.

Those parents all care for and love their children, but their lives are challenging and stressful. There are only so many hours in the day, but there are many domestic and caring tasks to undertake and complete. With the addition of paid employment, the burden becomes truly onerous. We all recognise that such a responsibility is better shared between two parents, but we must accept the reality that that is not possible for many people—a growing number in Britain.

I want to acknowledge the magnificent job which so many single parents do for their children. They deserve our praise and support and, more than that, financial recognition of the additional costs faced by lone parents in bringing up their children. Instead, all they get from the Chancellor in the Budget is a kick in the teeth. That in itself would be bad enough, but what is worse is that the Budget will hurt their children and it is the children who are the most important people in our society. They deserve not just our affection and love but our protection and fair provision in the benefits system.

In his Budget statement, the Chancellor said that steps would be announced

to close the gap between single parents benefit and those paid to other families. The hon. Member for Gainsborough and Horncastle (Mr. Leigh) gave the impression that it is the families with a married man who are the good families, the real families, and that single-parent families are less good. The Chancellor went on to say:

The right approach to single parents is neither to penalise them nor to favour them. But he has actually shown a far right, extremist and uncaring approach to single parents which is far from what I consider to be the right approach.

I listened in disbelief as the Chancellor continued. He may have been too involved in delivering his speech to hear, but I actually said, "Not true", when he said:

The costs and responsibilities of having children are the same for couples as they are for single people."—[Official Report, 28 November 1995; Vol. 267, c. 1060.] The reason why that is not true was given in the Chamber the following day by my hon. Friend the shadow Secretary of State for Social Security, my hon. Friend the Member for Islington, South and Finsbury (Mr. Smith). He said that the Government had recognised the obvious truth that it is more costly for a single parent to bring up children than for a couple. He said:

The 1985 Green Paper on the reform of social security argued that one-parent benefit should be continued 'as a contribution to the additional costs' … 'faced by lone parents in bringing up children alone'. It approved the introduction of a lone-parent premium in order to recognise 'the extra pressures faced by lone parents.' In 1985, the Government recognised that extra pressures and extra costs were faced by lone parents; now it would appear that they do not."—[Official Report, 29 November 1995; Vol. 267, c. 1216.] What has changed in the past 10 years to alter the Government's policy so dramatically?

The true additional costs of bringing up a child within a single-parent family are far too numerous to list now, but let me cover just a few. There are families with two economically active parents and families where only one parent is economically active and perhaps the wife stays at home to look after the children. In both those cases, the cost of child care is covered either by the additional income of the second earner or because the non-working mother cares for the children for free within the family unit.

The cost of child care is amazingly high. I am sure that Conservative Members will know that the cost of a nanny is well beyond what my constituents can afford. Even a registered child minder, recognised to be a good but cheaper form of child care, can cost £100 a week for 50 hours of care and another £60 or £70 for an additional child for the same number of hours. That is a tremendous amount of money. Conservative Members are out of touch if they do not recognise that a number of single parents who voted for them at the last general election are horrified at the steps being taken to freeze and reduce their benefits. After-school care of 15 hours a week for two children costs between £50 and £75 a week net.

In addition, there is the cost of babysitting. It is not a question of a single parent wanting to go out on the town at Ronnie Scott's or wherever it is that the Chancellor thinks single parents might want to go in the evening; it is a question of going to parents' evenings at a child's school—parental involvement in education, which the Government allege they want to encourage—or of going to self-improvement or evening classes so that a single mother can return to the work force or, if she is working, acquire additional qualifications so that she can progress up the ladder and provide a better standard of care for her children, which is what she is trying to do. It is clear that the additional costs are there. They were recognised 10 years ago, but suddenly in this Budget they have disappeared.

The effect of the Budget on children from lone-parent families will undoubtedly be quite dreadful. Account is not taken of children who are growing up in families without an income earner. Income support takes no account of birthday and Christmas presents, birthday parties, treats such as visits to the zoo and museums and other things that cost a good deal of money, as all of us who are parents recognise. The same applies to lone parents on low wages who receive family credit or who struggle to hold on to their jobs when their children are ill and they must stay at home.

A Budget such as this, which takes money away from lone parents, hurts children. It puts more pressure on people who, although they may be coping brilliantly now, are struggling to keep their heads above water. Conservative Members do not listen; they do not understand. They do not perceive the economic nonsense of the Government's proposals—for it is economic nonsense to block the pathway into work for those who want to work but cannot afford to, like my constituents, by freezing benefits.

This tired, discredited, failed Government are out of touch. They have run out of ideas, and the people know that they should be out of office.

8.50 pm

Mr. Graham Riddick (Colne Valley)

My hon. Friend the Member for Tatton (Mr. Hamilton) made a comparison between the Leader of the Opposition, the right hon. Member for Sedgefield (Mr. Blair), and the Reverend Moon. I suggest a somewhat less dramatic comparison between the current Leader of the Opposition and Harold Wilson in 1963–64. Both were new, youngish leaders; there had been a long spell of Conservative Government; both apparently offered change. The right hon. Member for Sedgefield is hitching a ride on the Internet bandwagon, which carries echoes of the way in which the then Leader of the Opposition, Harold Wilson, claimed to embrace the white heat of the technological revolution.

In the event, the Labour party was just able to squeak into government. We must ensure that that does not happen this time. As one would expect, however, that Labour Government were booted out after six years. As we know, whenever the British people have had a dose of socialism they have booted out the Labour Government at the next available opportunity.

The time since the last general election in 1992 has been a tough one for Conservative Back Benchers and Conservative activists. Effectively, we have had to do things in which we do not really believe. For instance, we were in the exchange rate mechanism, and we had fixed exchange rates. We Conservatives believe—or we certainly should believe—in floating exchange rates; we believe in a free market in exchange rates. We have also had to increase taxes, which was very unpopular not only with the country but with our supporters.

A comparison with the Labour party can be made in that context as well. Under the current Leader of the Opposition, Labour is also doing things in which I do not think Labour Members truly believe—but they keep quiet about all that, because they are happy to put up with whatever the right hon. Member for Sedgefield says in his quest for No. 10 Downing street. Things would, of course, be different if he were successful in that endeavour.

The experience of the past three years demonstrates just how difficult it is to control public spending. In the early 1990s, the Conservative Government took their eye off the ball, and allowed public spending to increase beyond a sustainable level. We therefore had no choice but to increase taxes in order to keep the public sector borrowing requirement at a reasonable level. Labour spokesmen make commitment after commitment, day in, day out. They are for ever criticising the Government for not spending enough money. As we know, a recent survey found that four out of 10 speeches made in the House by Labour Members called for more public expenditure. In fact, every Labour Government have increased the basic, or standard, rate of income tax, with one exception.

Before the last general election, my hon. Friend the Member for Dover (Mr. Shaw) tabled an interesting question. Looking back into history, he asked about the rates of tax that had applied under various Governments. It was revealed that all Labour Governments, with the exception of the first—they came to power in 1924, and remained in power for only nine months; they did not have time to increase taxes—had left office with a higher standard or basic rate of tax than had obtained when they came to power. Now the Labour party says that if it were in government it would introduce a windfall tax on the utilities, which would pay for—so far—11 spending commitments made by a number of Opposition spokesmen. Those spending commitments are on-going, but the windfall tax would be a one-off. I think that Labour would find it impossible to square the circle, and to reconcile the desire for higher public expenditure with its express wish to keep taxes down.

I do not deny that I should have liked taxes to be reduced further in last week's Budget. There is a strong moral case for tax cuts under a party that believes that people should be allowed to keep more of the money that they earn. I believe that there is a strong economic case as well: consumer confidence is low, and a stimulus in the form of tax cuts would have increased economic activity, which in turn would have generated increased revenue. Nevertheless, I welcome the fact that my right hon. and learned Friend the Chancellor—I am pleased to see him in his plaċe—was able to reduce taxes. The fact that he reduced them by £3 billion, as opposed to the £5 billion or so that I would have liked, leaves him with considerable room to reduce interest rates, and I hope that we shall see action on that front in the near future. Indeed, I believe that my right hon. and learned Friend will have to act on that front if he wishes to meet the target of 3 per cent. growth that he has set for the economy next year.

When we say that we want taxes to come down, we are always asked where we would reduce public expenditure. That is a fair point. An aspect that causes me concern is the national lottery. I have never been a great supporter of the lottery: I saw it almost as state-sponsored gambling. I went along with it, however, on the ground that, in a single market, it was inevitable that other countries' lotteries would come into this country, and we—the British Exchequer—would lose out on considerable revenue. The national lottery has been an enormous success, generating some £4 billion to £5 billion turnover in its first year. Perhaps more tax should be raised from the lottery. At the moment the tax on the money raised is 12 per cent., but after the Budget pool betting duty will be 26.5 per cent.

Because of its effect on the economy as a whole—it is affecting economic patterns in a number of ways—perhaps we should treat the national lottery in the same way as we treat the pools companies. I suggest increasing the tax on the lottery to the same as that levied on the pools companies. I also suggest using lottery money rather more flexibly. Most of the money for good causes has to be pumped into capital projects, but much more of it could be used to meet the running costs of charities for example.

I welcome the Budget's help for the elderly. The 20 per cent. tax on income from savings will help millions of pensioners who, on average, have higher levels of savings. The fact that the Chancellor has been able to introduce that change with no opposition as far as I can see demonstrates how we have improved the debate about taxation generally and tax on savings in particular. In the old days, such income was known as unearned income and the last Labour Government penalised those who received such income with an additional 15 per cent. tax. The reduction of the tax to 20 per cent. for most savers is good news, especially for pensioners who rely so much on income from savings. I welcome the fact that the benefits system is to be more friendly towards elderly people who have long-term savings to pay for care in their old age.

I am delighted that education will receive substantially more in the next financial year than it received this year. That is right, but there is a problem in that the resources are channelled through local education authorities. I urge all LEAs to ensure that the extra money that we have made available goes to schools.

The Conservative party is the only one that believes in low taxes and whose philosophy demands that individuals should be allowed to keep more of the money that they earn. It is the only party that believes in private enterprise and free markets. Since 1979, we have made substantial supply-side changes to the British economy across a range of areas. The economy is now in good shape and it is important to maintain the approach that ensures low inflation, a consistent economic policy and competitive corporate taxation. We must also continue deregulation. The best form of deregulation is not to introduce new regulations in the first place.

Unemployment is falling, and that contrasts with the rest of Europe. The introduction of a national minimum wage and the adoption of the social chapter would be disastrous, especially for young people and for the long-term unemployed. The experience of countries such as Spain and France, where youth unemployment is 40 and 25 per cent. respectively, must send a clear message to Opposition Members that a minimum wage and a social chapter would not be good news for the people that they profess to care for, those with few skills. Such people would suffer because of the minimum wage and I hope that the Opposition will drop the approach of increased regulation of the labour market.

This is the first Budget of a two-Budget strategy that will lead to an improvement in the Government's fortunes. We have to ensure that we avoid the disaster of a socialist Government in the general election of 1997. I commend the Chancellor on his Budget and look forward to next year's, which I am sure will deliver even more.

9.3 pm

Mr. Michael Connarty (Falkirk, East)

I shall start by declaring that my constituency party receives money from the Union of Communication Workers. I do not know whether I shall say anything in my speech to require that declaration, but I am so proud of the fact that I am sponsored by a trade union through my constituency party that I wish to put it on record.

I do not know whether the Chancellor, when he was out of the Chamber, took the trouble to go outside to feel the freezing wind which we are told is blowing from the Arctic. When he does that every day this winter I hope that it will remind him that when elderly people put on their gas or electricity, whether to cook or heat their homes, 8p in every pound that they pay will go to the Treasury. To that must be added standing charges. I have looked at the bills of some of my elderly constituents. Often up to 40 per cent. of the bill goes on VAT and standing charges. That is a terrible indictment of the philosophy behind the Chancellor's Budget last year and which continues this year. I heard someone say something about the Chancellor's language. I think that it was the language of bluff. It is the Chancellor's Budget, but it is really the Tory Government's strategy and their media "spin". The Chancellor said in presenting the Budget that a family on average earnings would be better off next year than this by around £450, around £9 a week, but it was not true. Such a family will not be better off in that way. It was strange that on the same day a Treasury press release on the Budget made the inaccuracy clear. It said:

Tax changes … will be worth … on average … over £2.80 a week". The day after the Budget, the House of Commons Library issued a bulletin that said:

For a single earner couple with two children on average male earnings … of the total … £2.03 (reflects) the real change in income tax, NICs and child benefit. Eventually, the Chancellor was forced to admit his own, I call it, exaggerated claim. In a letter on 30 November 1995 to the Leader of the Opposition, he said that

The Budget tax changes will leave such a family on average earnings £190 a year better off in cash terms. I heard several Conservative Members say how disappointed they were about the position of the married man and about what has happened to the married couples allowance. After freezing the size of the married couples allowance five years running and reducing its rate from 25 per cent. to 15 per cent., the Budget increased the allowance by £70, which is in line with inflation. It is now worth £269, just over half the £523 that it would have been worth if it had been uprated in line with inflation and were still available at 25 per cent.

The Budget increased taxes on petrol, up now, taxes on cars, up now, and taxes on cigarettes, up now. We heard the hon. Member for Banff and Buchan (Mr. Salmond) speak about the effect on rural communities. The National Farmers Union for Scotland has written to me and said:

In addition to freezing Hill Livestock Compensatory Allowances at this year's level, the increase in tax on vehicle fuel will bear heavily on the rural sector, and farming in particular. These increased costs will be reflected throughout the food producing chain on and off farm, and will have to be recovered from the market place"— in other words, on prices.

The Deputy Prime Minister, who opened this debate, was responsible for the Department of Trade and Industry when he said on the Post Office external financing limit on 11 May 1995:

I am prepared to agree that in future we shall aim to set the EFL at about half the Post Office's forecast post-tax profit. I hope to make progress in that direction this autumn."—[Official Report, 11 May 1995; Vol. 259, c. 885.] But what has happened? The external financing limit, which is basically a smash and grab raid on the Post Office's profits, will go to up to £298 million next year; in 1997– 98 it will go up to £317 million and in 1998–1999 it will go to £310 million. The Post Office's assessment says:

For every £1 we make, the Treasury is now demanding 66p. That is not a 50–50 split. The assessment continues:

On top of that we have to pay Corporation Tax and together they leave nothing to invest in The Post Office. So much for freeing up the Post Office as promised by the Deputy Prime Minister. As everyone knows, it is basically a smash and grab raid on the Post Office, an attempt to cripple it because the people would not let the Government privatise it.

On another part of the Government's strategy, the £400 million proposed cuts in social security, I want to give an example that is repeated again and again of what happens in the marginal rate. I shall call it the case of Mrs. Q, who was working and earning £19. Her husband is disabled, is unable to work and receives benefit and benefit for her. She got a job, which allowed her to earn £46. The family lost £30 and every allowance for the wife. When she went to inquire, she was told that the taper had been abolished. It was not a case of earning between £19 and £46, which one would think would be encouraged, and of her losing some benefit: they lost everything that was being gained by the husband for her.

In relation to incapacity benefit, before people would have had invalidity benefit. There is no doubt in the assessment that they are incapacitated—that has been agreed by medical officers. In April someone on invalidity benefit would have got a pension on top of benefit as an additional sum. Now that individual gets £8, whereas in April under the invalidity benefit he would have had £80. That is a massive cut in the standard of living. It was not someone who wanted to leave work and skive; it was someone who had worked hard all his life, found his health breaking down and needed some help from the state— yet he found himself £72 worse off than someone eligible for that allowance in April 1995. I have been told that in the Falkirk area 7,000 invalidity benefit claims are being reprocessed for incapacity benefit. There are 14,000 people on income support, plus 1,400 receiving the severe disablement supplement. Every one of those people—more than 22,000—live in fear of the philosophy behind the Chancellor's Budget. The Government are cutting the welfare state to store money to give away, but people will not believe that the giveaway is worth anything.

There was a debate last night on the health service. I was impressed by Professor Baumol's analysis of health care when he spoke at the Office of Health Economics annual lecture 1995. His theory was basically that we can afford all the additional costs of health care, even though it is a personally delivered service, from which we cannot get great productivity without taking out staff. He said in his analysis that health care can be afforded only if the rest of the economy maintains its growth and productivity. We must have growth and we must have a productive economy.

In September, the CBI's report—I believe that it was sent to the Chancellor— said that the manufacturing order book for the UK is now lower than before September 1992. Manufacturing confidence is now lower than it was in September 1992. The Chancellor will recall that it was in September 1992 that Britain was kicked out of the exchange rate mechanism and there was a 16 per cent. forced devaluation of the currency. That has been squandered and we are back where we started—manufacturing order books are down.

I have looked at the figures for unemployment because the Chancellor has claimed that they are getting better. We must examine two counts. The first is the count done by the unemployment unit, based on the same standard that was used in 1979 under a Labour Government. On that count, there are 3,355,500 people—11.4 per cent.— unemployed, whereas the Government claim that the figure is 2,265,100—8.1 per cent. I want to put on record the definition of the unemployment unit count, because that is very important. It is, "The UU Broad LFS"—that is, the unemployment unit broad labour force survey—

is a provisional estimate of unemployed people who have not undertaken any work for pay or profit in the Survey reference week, who want work and are available to start work within two weeks. In other words, it is the unused capacity in Britain's labour force. For Scotland, the count is 297,800—11.5 per cent., whereas the Government claim that the figure is 196,100—7.9 per cent.

Let us examine the Government's unemployment figures. For 1995, it is 8.1 per cent. of the population; for 1994 it was 9 per cent.; for 1993 it was 10.3 per cent; for 1992 it was 9.7 per cent., and so on. The point is that if we are not using that massive amount of productive capacity in our economy, we cannot generate the productivity and the growth that would allow us to do all the things that a Government who were running the economy properly could do.

I shall conclude. my speech now because I am conscious of the fact that there have been very long speeches. Although I have sat here all day yesterday and all day today, I am being squeezed in at the end of the debate. However, that is the way the place runs. I want to focus on the end of the Chancellor's figures. An important speech was made by my right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon). If we want to gauge the real state of our economy, we should look at our international trade balance, especially for each year from 1990 to 1994. In 1990, there was an £18 billion net negative figure. There was a £10 billion net negative figure in 1994. This year, the net negative figure so far is only £3 billion, but it will end up at a negative figure of £6 billion and the Chancellor has forecast that in 1996–97 it will reach a negative figure of £5 billion.

If, after a 16 per cent. devaluation, we cannot actually beat other countries, Britain will turn into something that the right hon. and learned Gentleman criticised, but which was commended by one of his Back Benchers—a country that makes its money by being a tax haven for other countries, laundering their money rather than selling them products. That is the problem with this Budget. It is simply fiddling about. I do not blame the Chancellor —he is a sweeper-up. The real economy is broken. The real economic policy of his Government has failed. The Budget is just fiddling about. The Chancellor is fiddling while the futures of my son and other children are going down the tubes. His Budget will do nothing to help them because it does not address the real problem—the economy of this country, not fiddling about with taxes on the margin.

9.14 pm

Mr. Andrew Smith (Oxford, East)

This Budget fails the test of investment, fails the test of prudence and fails the test of fairness. That is why we shall vote tonight to give this House the chance to cut that most iniquitous of taxes, VAT on fuel, and why we could not accept the amendment to the law motion as it stands.

Mr. Fabricant

Will the hon. Gentleman give way?

Mr. Smith

In a moment.

We shall abstain on the tax changes in the Budget resolutions because although they do not include measures that we should have liked to see, we believe that people have suffered enough from the Government's broken promises and we do not intend to stand in the way of the small relief that the resolutions provide. In addition, we shall not only vote for the public expenditure amendment, moved by my right hon. Friend the Member for Kingston upon Hull, East (Mr. Prescott), but we shall vote against the Government's public expenditure programme because it is a product of wrong priorities and fails totally to provide the employment, investment and skill strategy needed for a fair society and a strong economy.

My right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) spoke with characteristic wisdom of the importance of investment, which is now growing more slowly out of recession than at_ any comparable time this century. He referred to the need for capital allowances—something that we urged on the Government in our Budget submissions.

My hon. Friend the Member for Barrow and Furness (Mr. Hutton) deplored what he rightly called the "depressing short-termism" of a Budget that leaves the construction industry in slump and does so little for investment or fairness. The right hon. Member for Guildford (Mr. Howell) raised the issue of the cuts to the British Council, as did a number of hon. Members on both sides of the House. I look forward to the Chancellor explicitly referring to that in his winding-up speech.

My hon. Friend the Member for Falkirk, East (Mr. Connarty) said that it was an unfair Budget and, of course, he was right. A fair Budget would not have made the poorest fifth of the population even poorer as a direct result of its measures. A fair Budget would not have rejected, as the Chancellor did, our proposals for a windfall levy on the excess profits of the privatised monopoly utilities. I do not see how the Government can possibly claim fairness for measures which make more from the poorest while doing nothing about the privatised utilities in which £100 million on share options remain to be cashed in and in the very week of the Budget Yorkshire Water increased its profit by 50 per cent.— not by supplying the people of Yorkshire with water, but by not supplying them with water.

On privatisation, that industry had a green dowry of £1.4 billion, with £6 billion of debt written off and £3 billion in investment credits set against tax. Yet since privatisation, executive pay has gone up by 339 per cent., profits have trebled, dividends have risen by 57 per cent., pollution incidents have gone up 53 per cent., investment has gone down by 20 per cent. over the past year and almost no mainstream corporation tax has been paid.

As my hon. Friend the Member for Ogmore (Mr. Powell) argued, a windfall levy on the excess profits of the privatised monopoly utilities applied to fund a welfare-to-work programme to help the young and long-term unemployed into real jobs with quality training would have been the cornerstone of any fair Budget. As for the Government's claims that their measures make people £9 a week better off, as my hon. Friends have said, we have exposed and will continue to expose the truth that, even on the Government's figures, only £2 of that can be set against the measures in the Budget, the rest is a Government assumption of earnings growth.

In his letter responding to my challenge on the matter, the Chancellor conceded that he cannot make his claims stand up as a direct effect of tax changes—only as speculation on growth and wages next year.

What becomes clearer by the day is that even that little bit the British people have been given back in the Budget will be taken away in other charges. Council tax, travel costs, rents, postal charges, water charges, prescription charges, dental charges, school meal charges and television licences will all go up. Everywhere they look, people will see that what is given with one hand is more than taken away with the other. As always, it is those on the lowest earnings, who are struggling to get off benefits and into work, who will be hit hardest by the increases. If the Government think that people will suddenly start to feel a lot better off as a result of the Budget, they are in for a shock.

Some of the measures in the Budget are welcome. The lower tax rate on savings income is a step towards the fairness on savings for which we have been calling. The increase in the thresholds for contributions to long-term care is welcome. The cut of 1p in the basic rate, the increase in personal allowances and the 20p band all provide a little welcome relief against the huge tax increases the Chancellor has imposed since the general election, but they will still leave typical families £670 a year worse off. People are still paying the price for the Government's record of failure—broken promises year on year and not the tax cuts year on year that they were promised.

Conservative Members are fond of talking about their instinct on taxation. Yet they now repeat the pledge to end capital gains and inheritance tax. They choose to spend £4.6 billion to benefit the better off, half of it going to the 5,000 wealthiest families in the land, rather than to cut the starting rate of tax which would help the many and especially those moving from welfare to work. It only goes to show that when it comes to instincts, the Tory instinct is for unfairness.

Mr. Riddick

I very much welcome the fact that the hon. Gentleman welcomed the new 20 per cent. tax on savings, which he said was fairer. Why was it that at the general election the Labour party intended to impose a 9 per cent. surcharge tax on savings income?

Mr. Smith

The hon. Gentleman is in no position to lecture us on promises made at the general election. He should explain to his constituents why he promised tax cuts year on year and why they have had tax increases that mean that they are £670 a year worse off.

On the expenditure side of the Budget, we see the same sleight of hand at work. We find that the much-vaunted increase for education will depend on council tax increases and cuts in other council services, many of them essential services such as the fire service. Education will face difficulties this year, like the difficulties in Northumberland which have been reported to me. Extra funding, as the Chancellor has promised, does not always translate into improvements in front-line services because of the problems that the Government are causing those services. The extra funding for the police does not add up to the 5,000 extra officers the Home Secretary has promised. In the. health service, we see real cuts next year of 17 per cent. in public capital spending and a 6.5 per cent. cut, even including the hoped-for public finance initiative expenditure, with total capital spending from public and private sources together set to fall by II per cent. over the next three years. Again, more is taken with one hand than is given with the other.

We have to ask what sort of Government cut overseas aid by 6 per cent. after having wasted £234 million on the Pergau dam and what sort of Government cut the schools subsidy scheme even as they increase UK spending on the common agricultural policy by £100 million. How can it be right to freeze lone parent benefit which, as my hon. Friend the Member for Dagenham (Ms Church) said, will make it harder for single parents to get into jobs, even as the administrative costs of the Department of Social Security go up this year by £100 million? How can it be right to cut training by 4 per cent. even as the community action programme is dumped? My hon. Friend the Member for Birmingham, Small Heath (Mr. Godsiff) was right to stress the damage that those would create. It is no one-nation Budget which ends 40,000 opportunities for young people and in which the Chancellor axes the one programme designed to help young unemployed people with disabilities get into work. For those young people it is not a one-nation Britain but a no-hope Britain. I give way to the Chancellor on no-hope Britain.

Mr. Kenneth Clarke

The hon. Gentleman has given a long and passionate list of savings in public spending to which he is opposed. His arithmetic is wrong and he has distorted several of them. Would it be fair of us to take some of what he said as a commitment that a Labour Government would reverse any of the spending savings? If so, would he like to say what is the cost of his commitment on any of those policy areas?

Mr. Smith

I will give the Chancellor some commitments. We would make cuts in the assisted places scheme. We would phase it out to put proper resources into cutting class sizes for five, six and seven-year-olds. We would cut the cost and the waste of rail privatisation and put that money into an integrated transport policy. We would cut the excess bureaucracy in the national health service and put the money into front-line patient care. We would cut the cost of nuclear privatisation. We would look carefully at that extra £100 million for social security running costs which the Chancellor has put in his Budget. Our public expenditure amendment spells out that and much more.

The welfare-to-work programme that we need to get especially the young and long-term unemployed into jobs with training would be funded by the windfall levy. The phased release of local authority capital receipts for social housing would cut bed and breakfast costs. We would boost front-line patient care and cut class sizes. Those are the choices which a fair Government would be making in a prudent Budget. Flow can the public believe the Government's claims of prudence when they see the neglect of public and private investment in the Budget? The climate of confidence for business to invest will not be created by a Budget which does nothing on capital allowances and nothing to encourage investment for the longer term, which increases VAT thresholds for small businesses by only half the rate of inflation and increases the business rate by 25 per cent. above the rate of inflation. No wonder the deputy director of the British chambers of commerce says:

Growth is not enough and will be unsustainable without investment … As a nation we are good at attracting investment from other countries but the question the Chancellor should be asking is why we are not investing in ourselves … If we are to become the enterprise centre of Europe, some redress of these spending priorities needs to take place. The Government have taken one or two steps on the PFI that we have long called for. Training for civil servants who will negotiate the scheme will certainly be useful. The Government have failed to clarify the tendering process and the allocation of risk and to establish the new task force that is necessary to get things moving properly.

As for setting priorities for the PFI, we now have an A-list and a B-list of schemes. It is revealing that they are prioritised not according to their public benefit but according to commercial prospects. It is the privatisation not merely of provision but of the public interest in determining priorities for provision.

As the reaction of the construction industry shows, the whole history of the PFI has been one of reality falling far short of Government rhetoric. It is no wonder that, since the Budget, the chairman of the Confederation of British Industry of Scotland has said of the PFI plans that he is

deeply anxious … When the PF1 came out in 1993, it was additional to Government spending. In fact what we now have is replacement funding. Of course, the reality is even worse. The Chancellor's own projections show a real cut of 17.8 per cent. in public capital spending, reduced only to a real cut of 8.4 per cent. when the private finance initiative wish list is included. According to the Red Book, we are faced with the certainty of a £3.9 billion cut in direct Government capital spending, offset only by the hope that the private sector will make up £2 billion of the difference.

Let us not forget either that PFI spending carries with it revenue consequences and contingent liabilities for the future which, as my hon. Friend the Member for Barrow and Furness pointed out in an excellent speech, will count against the public sector. I challenge the Chancellor in his reply to say how the public sector accounts will deal with that because not to account for the future consequences of present commitments is not prudent either.

The reality is that under the Government, public assets—the infrastructure of competitiveness and fairness—are being run down to pay the costs of economic and social failure. How can this be a prudent Budget when it not only increases public borrowing projections substantially but does so not for productive investment but to cover the shortfall on current Government spending.

It is bad enough for this year's PSBR to be £7.5 billion greater than forecast last year; for next year's to be £9.9 billion greater; and for the year after next's to be £10 billion bigger. However, for that to happen at the same time as public investment expenditure is being cut by £4 billion over the next three years is imprudence embedded as economic dogma.

In place of the golden rule that borrowing should be for investment across the cycle we now have Clarke's leaden rule: that investment must fall as far as necessary so that borrowing across the cycle can sustain a current deficit. It is the economics of remortgaging the house and forgoing repairs simply to pay the housekeeping bills.

I do not think that it has yet sunk in how serious the position is. If the Chancellor's projections turn out to be accurate—and they are based on what the right hon. Member for Fareham (Sir P. Lloyd) called an optimistic growth forecast—the Red Book shows that the Chancellor proposes to borrow between now and the end of decade twice as much as he said that he planned to borrow last year: an extra £39 billion Tory borrowing plan between now and the millennium.

To put it in perspective, even if the Chancellor's forecasts are accurate, Britain will, over the 1990s, have taken on an extra £200 billion of borrowing as compared with £ 31 billion in the 1980s. Central Government debt interest payments alone will add an extra £33 billion in interest payments on to the shoulders of the British people. [Interruption.] I got that figure from page 69 of the Chancellor's own Red Book statement. He ought to read it.

It is the old, old story of Conservatives borrowing for their Government before an election that which they would force the people to pay for afterwards. The truth is that the Government are prisoners of their economic failure. It is the same failure on investment, growth, training and unemployment that has plunged Britain down the world prosperity league from 13th to 18th place: 7p up, 1 p down—taking with one hand more than they give with the other and borrowing, borrowing all the way. No—for a strong economy, a fair society, sound public finances and quality public services, Britain needs a new start with Labour, a strategy for productive investment and skills to unite a country so divided by the Conservatives and a welfare-to-work programme which will enlist the talents, skills and energies of all our people in common success.

When it comes down to it, it is all about unfairness with the Tories and fairness with Labour: unfair taxation with the Tories and fair taxation with Labour; an unfair Britain with the Tories and a fair Britain with Labour. That is why the House should vote to cut VAT on fuel and vote for a public expenditure programme to build a fair society and a strong economy.

For now, all that we have is a Government who have run out of ideas and who are getting by on borrowed money and living on borrowed time. With their credit with the British people exhausted, and the day of reckoning approaching, they know that the Budget cannot save them, and it will not.

9.34 pm

The Chancellor of the Exchequer (Mr. Kenneth Clarke)

The hon. Member for Oxford, East (Mr. Smith) called for a new start with Labour, but unfortunately he said that with 30 seconds to go in his speech, so he had no time to explain to us what that new start might mean in particular. We have had that type of speech every day throughout the Budget debate. The trouble is that the Labour party has introduced all the new American public image approaches to electioneering, and it has begun to reduce politics to the level of light entertainment.

The Labour party has given an illustration this evening, yet again, of an official Opposition party that has decided that, when faced with real problems, it will not oppose, it cannot oppose and it certainly will not propose anything to deal with them. I accept that the hon. Member for Oxford, East touched on those problems with some vigour, but he produced no pledges or polices. He certainly produced nothing—quite remarkably—that disagreed with any of the Budget propositions that I have brought before the House.

There is no Labour alternative, for which in some ways there is much thanks, but it is the vacuum that the Labour party represents that poses the greatest threat to the present strides that the British economy is making towards, I believe, being one of the strongest economies in western Europe.

The Opposition have retreated before a Budget that combined a reduction in taxation, balanced by a reduction in public spending, while still protecting increased spending on the key services of health, education and the police. The Budget has also kept borrowing firmly under control, so that, outside the House, I have a won a reputation for responsibility, honesty and sound finance. I am happy to be accused of all those things, which frankly no Labour Chancellor would ever be accused of in a thousand years.

Mr. Hugh Bayley (York)

In his Budget speech, the Chancellor said that the Government would provide resources to appoint 5,000 extra police officers. The resources they have given to North Yorkshire will provide just 30 extra police officers, leaving North Yorkshire police force still 70 below establishment, and eight police officers below the number in post under the last Labour Government, when the crime rate stood at 20,000 crimes a year. That crime rate is now more than 60,000 crimes a year, and in my county it is still rising. When will the Chancellor make good his pledges to provide the policing that people in North Yorkshire need to protect them and to catch the criminals?

Mr. Clarke

The increase of 5,000 officers is spread over a number of years. The hon. Gentleman is talking about the first year. [Interruption.] No, of course it is spread over a number of years, and was clearly expressed to be so. The money is there to provide for that increase in police manpower. The hon. Member for York (Mr. Bayley) delved back to the days before civilianisation. Now we have more policemen, we have more officers engaged in the targeting of crime, such as the successful operation about which we heard today. Additional real resources will go to the police service.

I must point out to the hon. Member for York what I have pointed out to other Labour Members frequently throughout the debate. There was not a word in the Opposition winding-up speech tonight, or a word from any the shadow Treasury Front-Bench. team about an undertaking to spend any more than we are undertaking to give in increased spending on the police services. That is true of all our tax provisions and spending plans.

On tax, we have achieved great progress towards the 20p basic rate. We have widened the lower rate limit, raised the threshold and cut the basic rate to 24p.

Mr. Robert Ainsworth (Coventry, North-East)

Will the right hon. and learned Gentleman give way?

Mr. Malcolm Bruce (Gordon)

Will the right hon. and learned Gentleman give way?

Mr. Clarke

I will do so in a second, but I cannot give way too much in my short winding-up speech. Let me make some progress.

The various reasons that have been given for not voting against the cut in basic rate make no sense at all. Labour Members use the litany that "the people have suffered too much". When that was given to them by the hon. Member for Hartlepool (Mr. Mandelson), they might have asked him to explain how it answers the question, "Do you think it is a good thing or a bad thing to reduce the rate to 24p?" After five days of debate, the Opposition Treasury team cannot make up their minds on that difficult question. They abstain.

We have reduced taxation for savers. The hon. Member for Oxford, East was clearly in favour of that. The cut in the small companies' corporation tax will greatly benefit many small businesses. I am not sure about the Labour party's abstention on that.

I heard the right hon. Member for Kingston upon Hull, East (Mr. Prescott) busily denying that there was any correlation between economic success and low rates of corporate taxation. He was worried about that, and anxious to demonstrate that there were successful countries that had higher rates of taxation. To what level does the Labour party intend to raise corporate taxation? The right hon. Member argued that raising corporate taxation does not affect economic success. I am rather suspicious about Labour's abstention on that. We have also provided relief on the uniform business rate. The Labour party has no view on any of those tax proposals.

The Liberal party, however, does have a view. Liberal Members will agree that it is absolutely pathetic for the Labour Front Bench to have a so-called shadow Chancellor and a so-called shadow Chief Secretary to the Treasury who cannot even tell the hungry masses behind them what opinion they have on any tax proposal in the Budget.

The hon. Member for Gordon (Mr. Bruce) is in favour of a penny increase in income tax, which has become a vote against my penny. It was a penny increase at the last election. The Liberals have spending commitments of almost £5 billion. They keep spending the same penny over and over again. It is a Liberal party windfall tax.

Mr. Malcolm Bruce

The Chancellor knows that that is not true, and that our spending commitments were fully costed. He started by saying that he had a well earned reputation for sound finance, and he knows that I have given him credit for that. How can he explain to the House the fact that, last year, when forecast borrowing was £21 billion and growth was 4 per cent., the position was so serious that he had to increase taxes? This year, when borrowing is forecast at £22.5 billion and growth has slowed to 1.6 per cent. apparently there is room to cut taxes. Is that sound financial management?

Mr. Clarke

I agree that last year's forecasts have not proved correct in the outturn, not because we have lost control of public spending, but because the revenues from the taxation to which the Opposition appear to object have fallen short and because of a slowdown, particularly in our key overseas markets.

The Budget has reacted to that by keeping borrowing on a firm downward course towards balance in the medium term. It is absurd for the Liberals first to go in the opposite direction to the Labour party and say that they are a tax-increasing party, and then to claim to outdo me in achieving a balanced Budget in the medium term—which I am not sure is their objective. The Liberals are pretty free with their spending pledges, as they would spend a 1p increase in income tax several times over.

We have controlled public spending. The shadow Chief Secretary, the hon. Member for Oxford, East, complained about that. Some of my hon. Friends raised small objections. My right hon. Friend the Member for Guildford (Mr. Howell) mentioned the British Council. It is clear that we have to make some cuts in our overseas expenditure. My right hon. and learned Friend the Foreign Secretary has distributed public spending restraint between the diplomatic service, the British Council and the BBC overseas service. It is for him to judge the respective priority of those services and where the costs should properly fall, but one cannot exempt any area if one is to achieve public expenditure control.

It is that which has paved the way for the tax cuts that I have just described. The tax cuts were targeted in the way I described at areas that will help the country's performance, but they were financed by the public expenditure cuts to which the hon. Member for Oxford, East objected.

At one stage, the hon. Member for Dunfermline, East (Mr. Brown) described as "peanuts" my tax cuts of £3.5 million, which is one half of 1 per cent. of GDP—without jeopardising our fiscal aims. Over three Budgets, I have taken £53 billion out of public spending plans, and almost all those measures were opposed by the Labour party. We have done that in a way that allows an extra £878 million to be spent on schools. We will increase national health service spending by more than £1 billion next year.

It is no use Labour Members trying, as several did, to hold up as a cut a switch out of publicly procured capital spending to current spending on patient care, disregard the £650 million already built in on top for savings in bureaucracy in the health services, and disregard the funds that the private finance initiative—which Labour supports—will undoubtedly bring in.

The Budget has allowed for an extra 5,000 police officers and 10,000 closed circuit television cameras.

We are a reforming Government. Some people outside doubt our ability to deliver the tight spending plans that we have produced. They ignore the fact that, to achieve cuts, we have not gone in for a routine candle-ends public spending round. We now have a Cabinet Committee that examines priorities. That is how we can cut overall and still increase spending on health, schools and the police.

That obviously throws Opposition Members completely, because they do not understand how we do that. We are also moving to resource accounting and modernising the civil service. The modernisation of government and the introduction of measures such as the private finance initiative and contracting out—which Labour often opposes—make credible the delivery of essential public services costing less than 40 per cent. of GDP.

Mr. Robert Ainsworth

The Chancellor has tried to convince the public that his tax cuts are worth £9. What assumption did the right hon. and learned Gentleman make as to the level of earnings increases to arrive at that figure of £9?

Mr. Clarke

Last year and in many previous years, the Opposition asked a great number of questions about the effect on the average family of Budget assumptions and changes. That is a perfectly fair question, and the Treasury has a standard methodology. It involves making assumptions about the growth of earnings, inflation and the economy, and setting those against all taxes and charges.

We have done that again. That reflects reality. My Budget statement made clear the difference in tax. The Opposition are deliberately being stupid when they pretend that the figure of £9 per week was ever held up by anybody as a £9 per week reduction in taxation. It is the increase in spending power of the average family as a result of economic growth, the success of our policies, the low inflation that we have achieved, the growth in earnings that we expect and reductions in taxation. An Opposition who are silent about all the Budget measures are in no position to deride or gainsay them.

Mr. Andrew Smith

rose—

Mr. Clarke

Of course I will give way to the hon. Gentleman, but will he bounce to his feet and say what proposal he has that would affect that figure of £9? The hon. Gentleman does not seem to deny in the slightest that the average family will expect to be £9 a week better off next year—£450 a year—as a result of the success of this Government's policies.

Mr. Smith

Will the Chancellor answer the question asked by my hon. Friend the Member for Coventry, North-East (Mr. Ainsworth)? Of that £9, how much is earnings, and what assumption did the right hon. and learned Gentleman make about the rate of earnings increase? A figure will do.

Mr. Clarke

A whole set of assumptions are set out in the Red Book, as the hon. Gentleman perfectly well knows. One assumption is a 1¾ per cent. increase in earnings— which is not the same as pay settlements. That assumption is alongside a lot of other well-founded assumptions about inflation and growth based on the Budget, which add to the increased purchasing power of the average family.

Take-home pay, after tax and after inflation, will be about £450 higher next year. We have never tried to conceal any of this; if the Labour party would quote my Budget speech accurately, all of it would be perfectly clear.

I return to my theme, and make no apology for doing so. We have heard not a word from the Opposition that would affect this figure in the slightest: not a word on taxation, not a word on spending. No one on the Labour Front Bench has committed the Labour party to spending a penny more on the national health service than we propose. Indeed, when we suggested that the hon. Member for Bristol, South (Ms Primarolo), a Labour Treasury spokesman, had talked of increases in spending on the NHS only 12 months ago, the hon. Member for Dunfermline, East demanded that the Chief Secretary withdraw his heinous allegation.

Not a penny more for the police has been pledged by any Labour Front-Bench spokesman. Nor has a penny more for education been pledged—which is surprising, because this morning the party came up with some half-baked but expensive-looking proposals in this respect. I quote the general secretary of the National Association of Schoolmasters/Union of Women Teachers, who said this evening:

Labour's plans add up to a curious concoction of the good, the bad, the idealistic and the unrealistic. There is not a snowball's chance in hell of realising these plans without substantial additional expenditure". The Labour party stands accused of not offering a penny piece in support of any of their proposals.

Mr. Salmond

rose—

Mr. Clarke

I am just coming to the hon. Gentleman's point about VAT on fuel.

The Labour party says that it will not vote against anything. Voting against the Budget simply means voting against the resolution changing the law—totally meaningless. The Budget is a combination of tax proposals and, nowadays, of spending proposals. The Opposition ain't going to vote for any particular tax or against any particular tax. They do not have a spending proposal—yet they are going to vote against the Budget. Meanwhile, they appear to be going to join the hon. Member for Banff and Buchan (Mr. Salmond) and his Scottish nationalist friends, although not actually in voting for lower VAT on fuel. They are just sticking their noses out of the burrow, and they appear, just possibly, to be wavering towards a policy that might pave the way to reducing VAT —

Mr. Prescott

What about last year?

Mr. Clarke

I will tell the hon. Gentleman what happened last year. The idea was proposed by the hon. Member for Banff and Buchan last year. Then, the Labour party could not say how it would pay for the idea, which is no doubt why the Opposition retreated last year, in a faintly insulting fashion, from the very thing they are now going to vote for.

Let me repeat what the hon. Member for Edinburgh, Central (Mr. Darling) said then about the very matter which this evening constitutes the one vote of principle on which the Labour party says it will take a stand:

This nationalist amendment is another cynical ploy from an increasingly opportunist and desperate party. The nationalists know that the amendment has no chance of succeeding because there has been no campaign behind it … The nationalist amendment has been tabled for them to be able to play party politics with people's VAT bills. It is a cynical ploy from a party that sees its support slipping in the Scottish polls."—[Official Report, 23 January 1995; Vol.253, c.49.] The hon. Member for Oxford, East tried to invent a reason to explain why the Labour party is standing on its head on this issue within the space of 10 months. Rather fatuously, he suggested that there was otherwise a risk of not getting the 8 per cent. through last year. But a few moments before in that debate, the Paymaster General had made it perfectly clear that there was no such risk. So Labour has ended up tonight supporting the Scottish nationalists in what Labour described but 10 months ago as a cynical ploy.

Mr. Salmond

Let us test the Chancellor's consistency. Does he remember, in his last Budget speech, and in other speeches, defending the imposition of VAT on domestic fuel on the grounds that there were increased resources for the home energy efficiency scheme? Now that he has cut that scheme by 30 per cent.—£30 million—200,000 fewer homes will be insulated. Would he care to revisit his arguments for VAT on domestic fuel?

Mr. Clarke

The home energy efficiency scheme is hugely successful, and I am second to none in my support of it. Expenditure on the scheme had reached a total of £100 million a year, and it has insulated many thousands of homes. It is a great breakthrough in energy efficiency, and it is also helping many people on lower incomes with their bills.

The reason why my right hon. Friend the Secretary of State for the Environment announced that he is cutting back from our peak of £100 million last year is that, as it stands, the scheme is open to people above retirement age, regardless of income. In principle, it is open for applications from people who happen to be fortunate enough to have retired with considerable resources of their own. It was never intended that the grant should be available to people of better-than-average incomes when they retire. Therefore, it will be more selectively offered to retired people.

I invite the hon. Gentleman to ask my right hon. Friend the Secretary of State for the Environment for the details that lie behind the change in estimates for that scheme. I have not heard a member of the Labour party commit to having any view one way or the other on that, either. I have some sympathy on this occasion with the Scottish National party for pressing the matter, because only in Scotland does the Labour party have a taxation policy at all. In Scotland, everybody would have to pay 3p in the pound more. Income tax will be higher than it is south of the border. It is no good the hon. Member for Dunfermline, East looking uncomfortable. No policy has come forward. He tried one—a 10p rate. We have heard very little more about that rate. The £8 billion that it would cost has somehow never been explained.

The right hon. Member for Kingston upon Hull, East gives no other rates. Earlier, when I asked the deputy Leader of the Opposition why he would not give any other tax rates, and repeated the question that I asked the right hon. Member for Derby, South (Mrs. Beckett), who is also on the Front Bench—whether she could name a tax cut in this Budget that she is against, and whether she could give me a spending limit that she should raise—he could not answer that, either. He says that we have to wait.

If it is too difficult for the Opposition to read the Red Book, and if, in the mass of statistics, there is some nugget of information about the British economy that is holding them back from propounding the policies that they are so anxious to introduce, I would like to know what it is. But if there is something missing, why is it possible to give a 10p rate at the bottom and yet not say what rate they would put at the top? Why do they need to look at the books to say that lop will be the bottom rate, if they cannot say what rate they would contemplate for the higher-paid? We all know perfectly well that they are the only Front Benchers in history to have a split when they have no policy.

But the right hon. Gentleman want to puts up the tax on the higher-paid. I have known him for 25 years. His idea of the higher-paid is not very high at all in the opinion of many—[Interruption.] Many frustrating things appear to happen on the Opposition Benches. Perhaps we should have had the shadow Foreign Secretary come in and try to give us a policy, because somebody should.

When the right hon. Gentleman was asked a question by the Deputy Prime Minister, he, being an honest and candid man, for one moment paused and gave a rather endearing smile. I think that it was the smile that must have inspired the poetry that my right hon. Friend quoted, and of which Conservative Members are all so deeply envious. When the right hon. Gentleman gives that sweet smile, he is meant to use the words "New Labour". They have absolutely nothing else to say.

As I said when I began, there is a serious problem in all this. It is a problem for Opposition Members. They all went on and on about cuts in public spending—the hon. Member for Oxford, East quoted an absolute litany. He had a better reply when I asked him what the Labour party was promising to increase spending on. He did not give me an answer, but everybody cheered while he announced a list of cuts that either added up to nothing or were giving up a lot of privatisation proceeds, which will not do very much about the borrowing requirement, on which he claimed that he would do better than me. He has no answer. He did not promise a thing, and he is not going to vote against the tax cut.

Has the great Labour and trade union movement come to this? Well, it has. The Opposition are not new Labour, they are not one-nation Conservatives, they are not ex-socialists; they are nothing on policy. Handing over to them a great economic recovery would take us back to recession in a very short time indeed.

Question put, That the amendment be made:—

The House divided: Ayes 290, Noes 307.

Division No. 6]	[10.00 pm
AYES
Abbott, Ms Diane	Cox, Tom
Ainger, Nick	Cunliffe, Lawrence
Ainsworth, Robert (Cov'try NE)	Cunningham, Jim (Covy SE)
Allen, Graham	Cunningham, Rt Hon Dr John
Alton, David	Cunningham, Roseanna
Anderson, Ms Janet (Ros'dale)	Dalyell, Tarn
Armstrong, Hilary	Darling, Alistair
Ashdown, Fit Hon Paddy	Davies, Bryan (Oldham C'tral)
Ashton, Joe	Davies, Chris (L'Boro & S'worth)
Austin-Walker, John	Davies, Rt Hon Denzil (Llanelli)
Banks, Tony (Newham NW)	Davies, Ron (Caerphilly)
Barnes, Harry	Denham, John
Barron, Kevin	Dewar, Donald
Battle, John	Dixon, Don
Bayley, Hugh	Dobson, Frank
Beckett, Rt Hon Margaret	Donohoe, Brian H
Beggs, Roy	Dowd, Jim
Beith, Rt Hon A J	Dunwoody, Mrs Gwyneth
Bell, Stuart	Eagle, Ms Angela
Benn, Rt Hon Tony	Eastham, Ken
Bennett, Andrew F	Etherington, Bill
Benton, Joe	Evans, John (St Helens N)
Bermingham, Gerald	Ewing, Mrs Margaret
Berry, Roger	Fatchett, Derek
Betts, Clive	Faulds, Andrew
Blair, Rt Hon Tony	Field, Frank (Birkenhead)
Blunkett, David	Fisher, Mark
Boateng, Paul	Flynn, Paul
Bradley, Keith	Forsythe, Clifford (S Antrim)
Bray, Dr Jeremy	Foster, Rt Hon Derek
Brown, Gordon (Dunfermline E)	Foster, Don (Bath)
Brown, N (N'c'tle upon Tyne E)	Foulkes, George
Bruce, Malcolm (Gordon)	Fyfe, Maria
Burden, Richard	Galbraith, Sam
Byers, Stephen	Galloway, George
Caborn, Richard	Gapes, Mike
Callaghan, Jim	Garrett, John
Campbell, Mrs Anne (C'bridge)	George, Bruce
Campbell, Menzies (Fife NE)	Gerrard, Neil
Campbell, Ronnie (Blyth V)	Gilbert, Rt Hon Dr John
Campbell-Savours, D N	Godman, Dr Norman A
Canavan, Dennis	Godsiff, Roger
Cann, Jamie	Golding, Mrs Llin
Cattle, Alexander (Montgomery)	Gordon, Mildred
Chidgey, David	Graham, Thomas
Chisholm, Malcolm	Grant, Bernie (Tottenham)
Church, Judith	Griffiths, Nigel (Edinburgh S)
Clapham, Michael	Griffiths, Win (Bridgend)
Cark, Dr David (South Shields)	Grocott, Bruce
Clarke, Eric (Midlothian)	Gunnell, John
Clarke, Tom (Monklands W)	Hain, Peter
Clelland, David	Hall, Mike
Clwyd, Mrs Ann	Hanson, David
Coffey, Ann	Hardy, Peter
Cohen, Harry	Harman, Ms Harriet
Connarty, Michael	Harvey, Nick
Cook, Frank (Stockton N)	Hattersley, Rt Hon Roy
Cook, Robin (Livingston)	Henderson, Doug
Corbett, Robin	Heppell, John
Corbyn, Jeremy	Hill, Keith (Streatham)
Corston, Jean	Hinchliffe, David
Cousins, Jim	Hodge, Margaret

Hoey, Kate	Morris, Rt Hon John (Aberavon)
Hogg, Norman (Cumbernauld)	Mowlam, Marjorie
Home Robertson, John	Mudie, George
Hood, Jimmy	Mullin, Chris
Hoon, Geoffrey	Murphy, Paul
Howarth, Alan (Strat'rd-on-A)	Oakes, Rt Hon Gordon
Howarth, George (Knowsley North)	O'Brien, Mike (N W'kshire)
Howells, Dr Kim (Pontypridd)	O'Brien, William (Normanton)
Hoyle, Doug	O'Hara, Edward
Hughes, Kevin (Doncaster N)	Olner, Bill
Hughes, Robert (Aberdeen N)	O'Neill, Martin
Hughes, Roy (Newport E)	Paisley, The Reverend Ian
Hughes, Simon (Southwark)	Parry, Robert
Hutton, John	Pearson, Ian
Illsley, Eric	Pendry, Tom
Ingram, Adam	Pickthall, Colin
Jackson, Glenda (H'stead)	Pike, Peter L
Jackson, Helen (Shef'ld, H)	Pope, Greg
Jamieson, David	Powell, Ray (Ogmore)
Janner, Greville	Prentice, Bridget (Lew'm E)
Jones, Barry (Alyn and D'side)	Prentice, Gordon (Pendle)
Jones, Ieuan Wyn (Ynys Môn)	Prescott, Rt Hon John
Jones, Lynne (B'ham S 0)	Primarolo, Dawn
Jones, Martyn (Clwyd, SW)	Purchase, Ken
Jones, Nigel (Cheltenham)	Quin, Ms Joyce
Jowell, Tessa	Radice, Giles
Kaufman, Rt Hon Gerald	Randall, Stuart
Keen, Alan	Raynsford, Nick
Kennedy, Charles (Ross,C&S)	Reid, Dr John
Kennedy, Jane (L'pool Br'edg'n)	Rendel, David
Khabra, Piara S	Robertson, George (Hamilton)
Kilfoyle, Peter	Robinson, Geoffrey (Co'try NW)
Kirkwood, Archy	Robinson, Peter (Belfast E)
Lestor, Joan (Eccles)	Roche, Mrs Barbara
Lewis, Terry	Rogers, Allan
Liddell, Mrs Helen	Rooker, Jeff
Litherland, Robert	Rooney, Terry
Livingstone, Ken	Ross, Ernie (Dundee W)
Lloyd, Tony (Stretford)	Ross, William (E Londonderry)
Lloyd, Elfyn	Rowlands, Ted
Loyden, Eddie	Ruddock, Joan
Lynne, Ms Liz	Salmond, Alex
McAllion, John	Sedgemore, Brian
McAvoy, Thomas	Sheerman, Barry
McCartney, Robert	Sheldon, Rt Hon Robert
McCrea, The Reverend William	Shore, Rt Hon Peter
Macdonald, Calum	Short, Clare
McFall, John	Simpson, Alan
Mackinlay, Andrew	Skinner, Dennis
McLeish, Henry	Smith, Andrew (Oxford E)
Maclennan, Robert	Smith, Chris (Isl'ton S & Fsbury)
McNamara, Kevin	Smith, Liew (Blaenau Gwent)
MacShane, Denis	Smyth, The Reverend Martin
McWilliam, John	Snape, Peter
Madden, Max	Soley, Clive
Maddock, Diana	Spearing, Nigel
Mahon, Alice	Speller, John
Mendelson, Peter	Squire, Rachel (Dunfermline W)
Marek, Dr John	Steel, Rt Hon Sir David
Marshall, David (Shettleston)	Steinberg, Gerry
Martlew, Eric	Stevenson, George
Maxton, John	Stott, Roger
Meacher, Michael	Strang, Dr. Gavin
Meale, Alan	Straw, Jack
Michael, Alun	Sutcliffe, Gerry
Michie, Bill (Sheffield Heeley)	Taylor, Mrs Ann (Dewsbury)
Michie, Mrs Ray (Argyll & Bute)	Taylor, Matthew (Truro)
Milburn, Alan	Thompson, Jack (Wansbeck)
Miller, Andrew	Timms, Stephen
Mitchell, Austin	Tipping, Paddy
Molyneaux, Rt Hon James	Touhig, Don
Moonie, Dr Lewis	Trimble, David
Morgan, Rhodri	Turner, Dennis
Morley, Elliot	Tyler, Paul
Morris, Rt Hon Alfred (Wy'nshawe)	Vaz, Keith
Morris, Estelle (B'ham Yardley)	Walker, Rt Hon Sir Harold

Wallace, James	Wise, Audrey
Walley, Joan	Worthington, Tony
Wardell, Gareth (Gower)	Wray, Jimmy
Wareing, Robert N	Wright, Dr Tony
Wicks, Malcolm	Young, David (Bolton SE)
Wigley, Dafydd
Williams, Alan W (Carmarthen)	Tellers for the Ayes:
Wilson, Brian	Mr. Jon Owen Jones and
Winnick, David	Mr. John Cummings.

NOES
Ainsworth, Peter (East Surrey)	Curry, David (Skipton & Ripon)
Aitken, Rt Hon Jonathan	Davies, Quentin (Stamford)
Alison, Rt Hon Michael (Selby)	Davis, David (Boothferry)
Allason, Rupert (Torbay)	Day, Stephen
Amess, David	Deva, Nirj Joseph
Ancram, Michael	Devlin, Tim
Arnold, Jacques (Gravesham)	Dicks, Terry
Arnold, Sir Thomas (Hazel Grv)	Dorrell, Rt Hon Stephen
Ashby, David	Douglas-Hamilton, Lord James
Atkins, Rt Hon Robert	Dover, Den
Atkinson, David (Bour'mouth E)	Duncan, Alan
Atkinson, Peter (Hexham)	Duncan-Smith, Iain
Baker, Rt Hon Kenneth (Mole V)	Dunn, Bob
Baker, Nicholas (North Dorset)	Durant, Sir Anthony
Baldry, Tony	Dykes, Hugh
Banks, Matthew (Southport)	Eggar, Rt Hon Tim
Banks, Robert (Harrogate)	Elletson, Harold
Bates, Michael	Emery, Rt Hon Sir Peter
Batiste, Spencer	Evans, David (Welwyn Hatfield)
Bellingham, Henry	Evans, Jonathan (Brecon)
Bendall, Vivian	Evans, Nigel (Ribble Valley)
Beresford, Sir Paul	Evennett, David
Bitten, Rt Hon John	Faber, David
Body, Sir Richard	Fabricant, Michael
Bonsor, Sir Nicholas	Field, Barry (Isle of Wight)
Booth, Hartley	Fishburn, Dudley
Boswell, Tim	Forman, Nigel
Bottomley, Rt Hon Virginia	Forsyth, Rt Hon Michael (Stirling)
Bowden, Sir Andrew	Forth, Eric
Bowls, John	Fowler, Rt Hon Sir Norman
Boyson, Rt Hon Sir Rhodes	Fox, Dr Liam (Woodspring)
Brandreth, Gytes	Fox, Sir Marcus (Shipley)
Brazier, Julian	Freeman, Rt Hon Roger
Bright, Sir Graham	French, Douglas
Brooke, Rt Hon Peter	Gale, Roger
Brown, M (Brigg & Cl'thorpes)	Gallie, Phil
Browning, Mrs Angela	Garnier, Edward
Bruce, Ian (Dorset)	Gill, Christopher
Budgen, Nicholas	Gillen, Cheryl
Burns, Simon	Goodlad, Rt Hon Alastair
Burt, Alistair	Goodson-Wickes, Dr Charles
Butcher, John	Gorman, Mrs Teresa
Butler, Peter	Gorst, Sir John
Carlisle, John (Luton North)	Grant, Sir A (SW Cambs)
Carlisle, Sir Kenneth (Lincoln)	Greenway, Harry (Ealing N)
Carrington, Matthew	Greenway, John (Ryedale)
Carttiss, Michael	Griffiths, Peter (Portsmouth, N)
Cash, William	Grylls, Sir Michael
Channon, Rt Hon Paul	Hague, Rt Hon William
Chapman, Sir Sydney	Hamilton, Sir Archibald
Churchill, Mr	Hamilton, Neil (Talton)
Clappison, James	Hampson, Dr Keith
Clark, Dr Michael (Rochford)	Hanley, Rt Hon Jeremy
Clarke, Rt Hon Kenneth (Ru'clif)	Hannam, Sir John
Clifton-Brown, Geoffrey	Hargreaves, Andrew
Coe, Sebastian	Harris, David
Colvin, Michael	Haselhurst, Sir Alan
Congdon, David	Hawkins, Nick
Coombs, Anthony (Wyre For'st)	Hawksley, Warren
Coombs, Simon (Swindon)	Hayes, Jerry
Cope, Rt Hon Sir John	Heald, Oliver
Cormack, Sir Patrick	Heath, Rt Hon Sir Edward
Couchman, James	Heathcoat-Amory, David
Cran, James	Hendry, Charles
Currie, Mrs Edwina (S D'by'ire)	Heseltine, Rt Hon Michael

Hicks, Robert	Neubert, Sir Michael
Higgins, Rt Hon Sir Terence	Newton, Rt Hon Tony
Hill, James (Southampton Test)	Nicholls, Patrick
Hogg, Rt Hon Douglas (G'tham)	Nicholson, David (Taunton)
Horam, John	Nicholson, Emma (Devon West)
Hordern, Rt Hon Sir Peter	Norris, Steve
Howard, Rt Hon Michael	Onslow, Rt Hon Sir Cranley
Howell, Rt Hon David (G'dford)	Oppenheim, Phillip
Howell, Sir Ralph (N Norfolk)	Ottaway, Richard
Hughes, Robert G (Harrow W)	Page, Richard
Hunt, Rt Hon David (Wirral W)	Paice, James
Hunt, Sir John (Ravensbourne)	Patnick, Sir Irvine
Hunter, Andrew	Patten, Rt Hon John
Hurd, Rt Hon Douglas	Pattie, Rt Hon Sir Geoffrey
Jack, Michael	Pawsey, James
Jackson, Robert (Wantage)	Peacock, Mrs Elizabeth
Jenkin, Bernard	Pickles, Eric
Jessel, Toby	Porter, Barry (Wirral S)
Johnson Smith, Sir Geoffrey	Porter, David (Waveney)
Jones, Gwilyn (Cardiff N)	Rathbone, Tim
Jones, Robert B (W Hertfdshr)	Redwood, Rt Hon John
Jopling, Rt Hon Michael	Richards, Rod
Kellett-Bowman, Dame Elaine	Riddick, Graham
Key, Robert	Rifkind, Rt Hon Malcolm
King, Rt Hon Tom	Robathan, Andrew
Kirkhope, Timothy	Roberts, Rt Hon Sir Wyn
Knapman, Roger	Robertson, Raymond (Ab'd'n S)
Knight, Mrs Angela (Erewash)	Robinson, Mark (Somerton)
Knight, Rt Hon Greg (Derby N)	Roe, Mrs Marion (Broxbourne)
Knight, Dame Jill (Bir'm E'st'n)	Rowe, Andrew (Mid Kent)
Knox, Sir David	Rumbold, Rt Hon Dame Angela
Kynoch, George (Kincardine)	Ryder, Rt Hon Richard
Lait, Mrs Jacqui	Sackville, Tom
Lamont, Rt Hon Norman	Sainsbury, Rt Hon Sir Timothy
Lang, Rt Hon Ian	Scott, Rt Hon Sir Nicholas
Lawrence, Sir Ivan	Shaw, David (Dover)
Legg, Barry	Shaw, Sir Giles (Pudsey)
Leigh, Edward	Shephard, Rt Hon Gillian
Lennox-Boyd, Sir Mark	Shepherd, Colin (Hereford)
Lester, Jim (Broxtowe)	Shersby, Sir Michael
Lidington, David	Sims, Roger
Lightbown, Sir David	Skeet, Sir Trevor
Lilley, Rt Hon Peter	Smith, Tim (Beaconsfield)
Lloyd, Rt Hon Sir Peter (Fareham)	Soames, Nicholas
Lord, Michael	Speed, Sir Keith
Luff, Peter	Spencer, Sir Derek
Lyell, Rt Hon Sir Nicholas	Spicer, Sir James (W Dorset)
MacGregor, Rt Hon John	Spicer, Michael (S Worcs)
MacKay, Andrew	Spink, Dr Robert
Maclean, Rt Hon David	Spring, Richard
McLoughlin, Patrick	Sproat, Iain
McNair-Wilson, Sir Patrick	Squire, Robin (Hornchurch)
Madel, Sir David	Stanley, Rt Hon Sir John
Maitland, Lady Olga	Steen, Anthony
Major, Rt Hon John	Stephen, Michael
Malone, Gerald	Stem, Michael
Mans, Keith	Stewart, Allan
Marland, Paul	Streeter, Gary
Marlow, Tony	Sumberg, David
Marshall, John (Hendon S)	Sweeney, Walter
Marshall, Sir Michael (Arundel)	Sykes, John
Martin, David (Portsmouth S)	Tapsell, Sir Peter
Mates, Michael	Taylor, Ian (Esher)
Mawhinney, Rt Hon Dr Brian	Taylor, Rt Hon John D (Strgfd)
Mayhew, Rt Hon Sir Patrick	Taylor, John M (Solihull)
Mellor, Rt Hon David	Taylor, Sir Teddy (Southend, E)
Merchant, Piers	Temple-Morris, Peter
Mills, Iain	Thomason, Roy
Mitchell, Andrew (Gedling)	Thompson, Sir Donald (C'er V)
Mitchell, Sir David (NW[...]Hants)	Thompson, Patrick (Norwich N)
Moate, Sir Roger	Thornton, Sir Malcolm
Monro, Rt Hon Sir Hector	Thurnham, Peter
Montgomery, Sir Fergus	Townend, John (Bridlington)
Moss, Malcolm	Townsend, Cyril D (Bexl'yh'th)
Needham, Rt Hon Richard	Tracey, Richard
Nelson, Anthony	Trend, Michael

Trotter, Neville	Whittingdale, John
Twinn, Dr Ian	Widdecombe, Ann
Vaughan, Sir Gerard	Wiggin, Sir Jerry
Viggers, Peter	Wilkinson, John
Waldegrave, Rt Hon William	Willetts, David
Walden, George	Wilshire, David
Walker, Bill (N Tayside)	Winterton, Mrs Ann (Congleton)
Waller, Gary	Wolfson, Mark
Ward, John	Yeo, Tim
Waterson, Nigel	Young, Rt Hon Sir George
Watts, John
Wells, Bowen	Tellers for the Noes:
Wheeler, Rt Hon Sir John	Mr. Timothy Wood and
Whitney, Ray	Mr. Derek Conway.

Question accordingly negatived.

Main Question Put:—

The House divided: Ayes 315, Noes 285.

Division No. 7]	[10.16 pm
AYES
Ainsworth, Peter (East Surrey)	Clappison, James
Aitken, Rt Hon Jonathan	Clark, Dr Michael (Rochford)
Alison, Rt Hon Michael (Selby)	Clarke, Rt Hon Kenneth (Ru'clif)
Allason, Rupert (Torbay)	Clifton-Brown, Geoffrey
Amess, David	Coe, Sebastian
Ancram, Michael	Colvin, Michael
Arnold, Jacques (Gravesham)	Congdon, David
Arnold, Sir Thomas (Hazel Grv)	Coombs, Anthony (Wyre For'st)
Ashby, David	Coombs, Simon (Swindon)
Atkins, Rt Hon Robert	Cope, Rt Hon Sir John
Atkinson, David (Bour'mouth E)	Cormack, Sir Patrick
Atkinson, Peter (Hexham)	Couchman, James
Baker, Rt Hon Kenneth (Mole V)	Cran, James
Baker, Nicholas (North Dorset)	Currie, Mrs Edwina (S D'byire)
Baldry, Tony	Curry, David (Skipton & Ripon)
Banks, Matthew (Southport)	Davies, Quentin (Stamford)
Banks, Robert (Harrogate)	Davis, David (Boothferry)
Bates, Michael	Day, Stephen
Batiste, Spencer	Deva, Nirj Joseph
Beggs, Roy	Delvin, Tim
Bellingham, Henry	Dicks, Terry
Bendall, Vivian	Dorrell, Rt Hon Stephen
Beresford, Sir Paul	Douglas-Hamilton, Lord James
Biffen, Rt Hon John	Dover, Den
Body, Sir Richard	Duncan, Alan
Bonsor, Sir Nicholas	Duncan Smith, Iain
Booth, Hartley	Dunn, Bob
Boswell, Tim	Durant, Sir Anthony
Bottomley, Rt Hon Virginia	Dykes, Hugh
Bowden, Sir Andrew	Eggar, Rt Hon Tim
Bowis, John	Elletson, Harold
Boyson, Rt Hon Sir Rhodes	Emery, Rt Hon Sir Peter
Brandreth, Gyles	Evans, David (Welwyn Hatfield)
Brazier, Julian	Evans, Jonathan (Brecon)
Bright, Sir Graham	Evans, Nigel (Ribble Valley)
Brooke, Rt Hon Peter	Evennett, David
Brown, M (Brigg & Cl'thorpes)	Faber, David
Browning, Mrs Angela	Fabricant, Michael
Bruce, Ian (Dorset)	Field, Barry (Isle of Wight)
Budgen, Nicholas	Fishburn, Dudley
Burns, Simon	Forman, Nigel
Burt, Alistair	Forsyth, Rt Hon Michael (Stirling)
Butcher, John	Forsythe, Clifford (S Antrim)
Butler, Peter	Forth, Eric
Carlisle, John (Luton North)	Fowler, Rt Hon Sir Norman
Carlisle, Sir Kenneth (Lincoln)	Fox, Dr Liam (Woodspring)
Carrington, Matthew	Fox, Sir Marcus (Shipley)
Carttiss, Michael	Freeman, Rt Hon Roger
Cash, William	French, Douglas
Channon, Rt Hon Paul	Gale, Roger
Chapman, Sir Sydney	Gallie, Phil
Churchill, Mr	Garnier, Edward

Gill, Christopher	MacKay, Andrew
Gillan, Cheryl	Maclean, Rt Hon David
Goodlad, Rt Hon Alastair	McLoughlin, Patrick
Goodson-Wickes, Dr Charles	McNair-Wilson, Sir Patrick
Gorman, Mrs Teresa	Madel, Sir David
Gorst, Sir John	Maitland, Lady Olga
Grant, Sir A (SW Cambs)	Major, Rt Hon John
Greenway, Harry (Ealing N)	Malone, Gerald
Greenway, John (Ryedale)	Mans, Keith
Griffiths, Peter (Portsmouth, N)	Marland, Paul
Grylls, Sir Michael	Marlow, Tony
Hague, Rt Hon William	Marshall, John (Hendon S)
Hamilton, Rt Hon Sir Archibald	Marshall, Sir Michael (Arundel)
Hamilton, Neil (Tatton)	Martin, David (Portsmouth S)
Hampson, Dr Keith	Mates, Michael
Hanley, Rt Hon Jeremy	Mawhinney, Rt Hon Dr Brian
Hannam, Sir John	Mayhew, Rt Hon Sir Patrick
Hargreaves, Andrew	Mellor, Rt Hon David
Harris, David	Merchant, Piers
Haselhurst, Sir Alan	Mills, Iain
Hawkins, Nick	Mitchell, Andrew (Gedling)
Hawksley, Warren	Mitchell, Sir David (NW Hants)
Hayes, Jerry	Moate, Sir Roger
Heald, Oliver	Molyneaux, Rt Hon James
Heath, Rt Hon Sir Edward	Monro, Rt Hon Sir Hector
Heathcoat-Amory, David	Montgomery, Sir Fergus
Hendry, Charles	Moss, Malcolm
Heseltine, Rt Hon Michael	Needham, Rt Hon Richard
Hicks, Robert	Nelson, Anthony
Higgins, Rt Hon Sir Terence	Neubert, Sir Michael
Hill, James (Southampton Test)	Newton, Rt Hon Tony
Hogg, Rt Hon Douglas (G'tham)	Nicholls, Patrick
Horam, John	Nicholson, David (Taunton)
Hordern, Rt Hon Sir Peter	Nicholson, Emma (Devon West)
Howard, Rt Hon Michael	Norris, Steve
Howell, Rt Hon David (G'dford)	Onslow, Rt Hon Sir Cranley
Howell, Sir Ralph (N Norfolk)	Oppenheim, Phillip
Hughes, Robert G (Harrow W)	Ottaway, Richard
Hunt, Rt Hon David (Wirral W)	Page, Richard
Hunt, Sir John (Ravensbourne)	Paice, James
Hunter, Andrew	Patnick, Sir Irvine
Hurd, Rt Hon Douglas	Patten, Rt Hon John
Jack, Michael	Pattie, Rt Hon Sir Geoffrey
Jackson, Robert (Wantage)	Pawsey, James
Jenkin, Bernard	Peacock, Mrs Elizabeth
Jessel, Toby	Pickles, Eric
Johnson Smith, Sir Geoffrey	Porter, Barry (Wirral S)
Jones, Gwilym (Cardiff N)	Porter, David (Waveney)
Jones, Robert B (W Hertfdshr)	Powell, William (Corby)
Jopling, Rt Hon Michael	Rathbone, Tim
Kellett-Bowman, Dame Elaine	Redwood, Rt Hon John
Key, Robert	Richards, Rod
King, Rt Hon Tom	Riddick, Graham
Kirkhope, Timothy	Rifkind, Rt Hon Malcolm
Knapman, Roger	Robathan, Andrew
Knight, Mrs Angela (Erewash)	Roberts, Rt Hon Sir Wyn
Knight, Rt Hon Greg (Derby N)	Robertson, Raymond (Ab'd'n S)
Knight, Dame Jill (Bir'm E'st'n)	Robinson, Mark (Somerton)
Knox, Sir David	Roe, Mrs Marion (Broxbourne)
Kynoch, George (Kincardine)	Ross, William (E Londonderry)
Lait, Mrs Jacqui	Rowe, Andrew (Mid Kent)
Lamont, Rt Hon Norman	Rumbold, Rt Hon Dame Angela
Lang, Rt Hon Ian	Ryder, Rt Hon Richard
Lawrence, Sir Ivan	Sackville, Tom
Legg, Barry	Sainsbury, Rt Hon Sir Timothy
Leigh, Edward	Scott, Rt Hon Sir Nicholas
Lennox-Boyd, Sir Mark	Shaw, David (Dover)
Lester, Jim (Broxtowe)	Shaw, Sir Giles (Pudsey)
Lidington, David	Shephard, Rt Hon Gillian
Lightbown, Sir David	Shepherd, Colin (Hereford)
Lilley, Rt Hon Peter	Shepherd, Richard (Aldridge)
Lloyd, Rt Hon Sir Peter (Fareham)	Shersby, Sir Michael
Lord, Michael	Sims, Roger
Luff, Peter	Skeet, Sir Trevor
Lyell, Rt Hon Sir Nicholas	Smith, Tim (Beaconsfield)
MacGregor, RI Hon John	Smyth, The Rev Martin

Soames, Nicholas	Tracey, Richard
Speed, Sir Keith	Trend, Michael
Spencer, Sir Derek	Trimble, David
Spicer, Sir James (W Dorset)	Trotter, Neville
Spicer, Michael (S Worcs)	Twinn, Dr Ian
Spink, Dr Robert	Vaughan, Sir Gerard
Spring, Richard	Viggers, Peter
Sproat, Iain	Waldegrave, Rt Hon William
Squire, Robin (Hornchurch)	Walden, George
Stanley, Rt Hon Sir John	Walker, Bill (N Tayside)
Steen, Anthony	Waller, Gary
Stephen, Michael	Ward, John
Stem, Michael	Wardle, Charles (Bexhill)
Stewart, Allan	Waterson, Nigel
Streeter, Gary	Watts, John
Sumberg, David	Wells, Bowen
Sweeney, Walter	Wheeler, RI Hon Sir John
Sykes, John	Whitney, Ray
Tapsell, Sir Peter	Whittingdale, John
Taylor, Ian (Esher)	Widdecombe, Ann
Taylor, Rt Hon John D (Strgfd)	Wiggin, Sir Jerry
Taylor, John M (Solihull)	Wilkinson, John
Taylor, Sir Teddy (Southend, E)	Willetts, David
Temple-Moms, Peter	Wilshire, David
Thomason, Roy	Winterton, Mrs Ann (Congleton)
Thompson, Sir Donald (C'er V)	Wolfson, Mark
Thompson, Patrick (Norwich N)	Yeo, Tim
Thornton, Sir Malcolm	Young, Rt Hon Sir George
Thurnham, Peter	Tellers for the Ayes:
Townend, John (Bridlington)	Mr. Timothy Wood and
Townsend, Cyril D (Bexl'yh'th)	Mr. Derek Conway.

NOES
Abbott, Ms Diane	Carlile, Alexander (Montgomery)
Ainger, Nick	Chidgey, David
Ainsworth, Robert (Cov'try NE)	Chisholm, Malcolm
Allen, Graham	Church, Judith
Alton, David	Clapham, Michael
Anderson, Ms Janet (Ros'dale)	Clark, Dr David (South Shields)
Armstrong, Hilary	Clarke, Eric (Midlothian)
Ashdown, Rt Hon Paddy	Clarke, Tom (Monklands W)
Ashton, Joe	Clelland, David
Austin-Walker, John	Clwyd, Mrs Ann
Banks, Tony (Newham NW)	Coffey, Ann
Barnes, Harry	Cohen, Harry
Barron, Kevin	Connarty, Michael
Battle, John	Cook, Frank (Stockton N)
Bayley, Hugh	Cook, Robin (Livingston)
Beckett, Rt Hon Margaret	Corbett, Robin
Beith, Rt Hon A J	Corbyn, Jeremy
Bell, Stuart	Corston, Jean
Benn, Rt Hon Tony	Cousins, Jim
Bennett, Andrew F	Cox, Tom
Benton, Joe	Cunliffe, Lawrence
Bermingham, Gerald	Cunningham, Jim (Covy SE)
Berry, Roger	Cunningham, Rt Hon Dr John
Betts, Clive	Cunningham, Roseanna (Perth & Kinross)
Blair, Rt Hon Tony	Dalyell, Tam
Blunkett, David	Darling, Alistair
Boateng, Paul	Davies, Bryan (Oldham C'tral)
Bradley, Keith	Davies, Chris (L'Boro & S'worth)
Bray, Dr Jeremy	Davies, Rt Hon Denzil (Llanelli)
Brown, Gordon (Dunfermline E)	Davies, Ron (Caerphilly)
Brown, N (N'c'tle upon Tyne E)	Denham, John
Bruce, Malcolm (Gordon)	Dewar, Donald
Burden, Richard	Dixon, Don
Byers, Stephen	Dobson, Frank
Caborn, Richard	Donohoe, Brian H
Callaghan, Jim	Dowd, Jim
Campbell, Mrs Anne (C'bridge)	Dunwoody, Mrs Gwyneth
Campbell, Menzies (Fife NE)	Eagle, Ms Angela
Campbell, Ronnie (Blyth V)	Eastham, Ken
Campbell-Savours, D N	Etherington, Bill
Canavan, Dennis	Evans, John (St Helens N)
Cann, Jamie

Ewing, Mrs Margaret	Litherland, Robert
Fatchett, Derek	Livingstone, Ken
Faulds, Andrew	Lloyd, Tony (Stretford)
Field, Frank (Birkenhead)	Llwyd, Elfyn
Fisher, Mark	Loyden, Eddie
Flynn, Paul	Lynne, Ms Liz
Foster, Rt Hon Derek	McAllion, John
Foster, Don (Bath)	McAvoy, Thomas
Foulkes, George	McCartney, Ian
Fyfe, Maria	McCartney, Robert (North Down)
Galbraith, Sam	McCrea, The Reverend William
Galloway, George	Macdonald, Calum
Gapes, Mike	McFall, John
Garrett, John	Mackinlay, Andrew
George, Bruce	McLeish, Henry
Gerrard, Neil	Maclennan, Robert
Gilbert, Rt Hon Dr John	McNamara, Kevin
Godman, Dr Norman A	MacShane, Denis
Godsiff, Roger	McWilliam, John
Golding, Mrs Llin	Madden, Max
Gordon, Mildred	Maddock, Diana
Graham, Thomas	Mahon, Alice
Grant, Bernie (Tottenham)	Mandelson, Peter
Griffiths, Nigel (Edinburgh S)	Marek, Dr John
Griffiths, Win (Bridgend)	Marshall, David (Glasgow,
Grocott, Bruce	Shettleston)
Gunnell, John	Martlew, Eric
Hain, Peter	Maxton, John
Hall, Mike	Meacher, Michael
Hanson, David	Meale, Alan
Hardy, Peter	Michael, Alun
Harman, Ms Harriet	Michie, Bill (Sheffield Heeley)
Harvey, Nick	Michie, Mrs Ray (Argyll & Bute)
Hattersley, Rt Hon Roy	Milburn, Alan
Henderson, Doug	Miller, Andrew
Heppell, John	Mitchell, Austin (Gt Grimsby)
Hill, Keith (Streatham)	Moonie, Dr Lewis
Hinchliffe, David	Morgan, Rhodri
Hodge, Margaret	Morley, Elliot
Hoey, Kate	Morris, Rt Hon Alfred (Wy'nshawe)
Hogg, Norman (Cumbernauld)	Morris, Estelle (B'ham Yardley)
Home Robertson, John	Mowlam, Marjorie
Hood, Jimmy	Mudie, George
Hoon, Geoffrey	Mullin, Chris
Howarth, Alan (Strat'rd-on-A)	Murphy, Paul
Howarth, George (Knowsley North)	Oakes, Rt Hon Gordon
Howells, Dr Kim (Pontypridd)	O'Brien, Mike (N W'kshire)
Hoyle, Doug	O'Brien, William (Normanton)
Hughes, Kevin (Doncaster N)	O'Hara, Edward
Hughes, Robert (Aberdeen N)	Diner, Bill
Hughes, Roy (Newport E)	O'Neill, Martin
Hughes, Simon (Southwark)	Paisley, The Reverend Ian
Hutton, John	Parry, Robert
Illsley, Eric	Pearson, Ian
Ingram, Adam	Pendry, Torn
Jackson, Glenda (H'stead)	Pickthall, Calin
Jackson, Helen (Shef'ld, H)	Pike, Peter L
Jamieson, David	Pope, Greg
Janner, Greville	Powell, Ray (Ogmore)
Johnston, Sir Russell	Prentice, Bridget (Lew'm E)
Jones, Barry (Alyn and D'side)	Prentice, Gordon (Pendle)
Jones, Ieuan Wyn (Ynys Môn)	Prescott, Rt Hon John
Jones, Lynne (B'ham S O)	Primarolo, Dawn
Jones, Martyn (Clwyd, SW)	Purchase, Ken
Jones, Nigel (Cheltenham)	Quin, Ms Joyce
Jowell, Tessa	Radice, Giles
Kaufman, Rt Hon Gerald	Randall, Stuart
Keen, Alan	Raynsford, Nick
Kennedy, Charles (Ross,C&S)	Reid, Dr John
Kennedy, Jane (L'pool Br'dg'n)	Rendel, David
Khabra, Piara S	Robertson, George (Hamilton)
Kilfoyle, Peter	Robinson, Geoffrey (Co'try NW)
Kirkwood, Archy	Robinson, Peter (Belfast E)
Lestor, Joan (Eccles)	Roche, Mrs Barbara
Lewis, Terry	Rogers, Allan
Liddell, Mrs Helen	Rooker, Jeff

Rooney, Terry	Taylor, Mrs Ann (Dewsbury)
Ross, Ernie (Dundee W)	Taylor, Matthew (Truro)
Rowlands, Ted	Thompson, Jack (Wansbeck)
Ruddock, Joan	Timms, Stephen
Salmond, Alex	Tipping, Paddy
Sedgemore, Brian	Touhig, Don
Sheerman, Barry	Turner, Dennis
Sheldon, Rt Hon Robert	Tyler, Paul
Shore, Rt Hon Peter	Vaz, Keith
Short, Clare	Walker, Rt Hon Sir Harold
Simpson, Alan	Wallace, James
Skinner, Dennis	Walley, Joan
Smith, Andrew (Oxford E)	Wardell, Gareth (Gower)
Smith, Chris (Isl'ton S & F'sbury)	Wareing, Robert N
Smith, Llew (Blaenau Gwent)	Wicks, Malcolm
Snape, Peter	Wigley, Dafydd
Soley, Clive	Williams, Alan W (Carmarthen)
Spearing, Nigel	Wilson, Brian
Spellar, John	Winnick, David
Squire, Rachel (Dunfermline W)	Wise, Audrey
Steel, Rt Hon Sir David	Worthington, Tony
Steinberg, Gerry	Wray, Jimmy
Stevenson, George	Wright, Dr Tony
Stott, Roger	Young, David (Bolton SE)
Strang, Dr. Gavin	Tellers for the Noes:
Straw, Jack	Mr. Jon Owen Jones and
Sutcliffe, Gerry	Mr. John Cummings.

Question accordingly agreed to.

Resolved,

That it is expedient to amend the law with respect to the National Debt and the public revenue and to make further provision in connection with finance; but this Resolution does not extend to the making of any amendment with respect to value added tax so as to provide—

1. (a) for zero-rating or exempting any supply, acquisition or importation otherwise than by—
1. (i) zero-rating or exempting supplies of goods which are, or are to be, subjected to a fiscal or other warehousing regime; or
2. (ii) zero-rating or exempting supplies of services on or in relation to such goods;
2. (b) for refunding any amount of tax otherwise than to persons constructing or converting buildings in cases where the construction or conversion is not in the course or furtherance of a business;
3. (c) for varying any rate at which that tax is at any time chargeable; or
4. (d) for relief other than relief applying to goods of whatever description or services of whatever description.

MADAM SPEAKER then, pursuant to paragraph (3) of Standing Order No. 50 (Ways and Means Motions), put forthwith the Questions necessary to dispose of the further motions.

c244
1. 2. SPIRITS (RATE OF DUTY) 68 words
c245
2. 3. WINE AND MADE-WINE (RATES OF DUTY) 137 words
c245
3. 4. CIDER (RATE OF DUTY) 22 words
cc245-8
4. 5. HYDROCARBON OIL (RATES OF DUTY AND REBATE) 1,614 words, 1 division
c248
5. 6. HYDROCARBON OIL (REBATE ON UNLEADED PETROL) 15 words
c248
6. 7. HYDROCARBON OIL (RELIEF FOR MARINE VOYAGES) 17 words
c248
7. 8. TOBACCO PRODUCTS (RATES OF DUTY) 124 words
c248
8. 9. GENERAL BETTING DUTY (RATE) 72 words
c248
9. 10. POOL BETTING DUTY (RATE) 74 words
c248
10. 11. AMUSEMENT MACHINE LICENCE DUTY 10 words
c249
11. 12. EXCISE DUTIES (REPAYMENTS, ALLOWANCES AND DRAWBACKS) 24 words
cc249-51
12. 13. VEHICLE EXCISE DUTY (INCREASE IN GENERAL RATE) 1,553 words, 1 division
cc251-2
13. 14. VEHICLE EXCISE DUTY (ELECTRICALLY PROPELLED VEHICLES) 192 words
c252
14. 15. VEHICLE EXCISE DUTY (STEAM POWERED VEHICLES, ETC.) 211 words
cc252-3
15. 16. VEHICLE EXCISE DUTY (VEHICLES CAPABLE OF CONVEYING LOADS) 578 words
cc253-4
16. 17. VEHICLE EXCISE DUTY (OLD VEHICLES) 278 words
c254
17. 18. VEHICLE EXCISE DUTY (REBATES) 16 words
c254
18. 19. VALUE ADDED TAX (VALUE OF IMPORTED GOODS) 227 words
c254
19. 20. VALUE ADDED TAX (FISCAL AND OTHER WAREHOUSES) 21 words
c254
20. 21. VALUE ADDED TAX (ANTI-AVOIDANCE: GROUPS) 31 words
c255
21. 22. VALUE ADDED TAX (WORK ON MATERIALS, ETC.) 224 words
c255
22. 23. VALUE ADDED TAX (SUPPLIES OF GOLD) 91 words
c255
23. 24. VALUE ADDED TAX (SMALL GIFTS) 66 words
c255
24. 25. VALUE ADDED TAX (PAYMENTS ON ACCOUNT) 31 words
c256
25. 26. VALUE ADDED TAX (PENALTIES) 216 words
c256
26. 27. LANDFILL TAX 17 words
cc256-9
27. 28. INCOME TAX (CHARGE AND RATES FOR 1996-97) 1,733 words, 1 division
cc259-61
28. 29. LOWER RATE TAX ON SAVINGS 1,107 words
c261
29. 30. INCOME TAX (PERSONAL ALLOWANCES) 128 words
c261
30. 31. BLIND PERSON'S ALLOWANCE 59 words
c262
31. 32. RELIEF FOR INTEREST (LIMIT FOR 1996-97) 54 words
c262
32. 33. CORPORATION TAX (CHARGE AND RATE FOR FINANCIAL YEAR 1996) 18 words
c262
33. 34. CORPORATION TAX (SMALL COMPANIES: 1996) 38 words
c262
34. 35. GOVERNMENT SECURITIES, ETC. 40 words
c262
35. 36. LOAN RELATIONSHIPS 44 words
c262
36. 37. DISCOUNTED SECURITIES 17 words
c262
37. 38. LIVING ACCOMMODATION PROVIDED FOR EMPLOYEES 25 words
c262
38. 39. BENEFICIAL LOANS 21 words
c262
39. 40. PAYE SETTLEMENT AGREEMENTS 57 words
cc262-3
40. 41. SELF-ASSESSMENT 52 words
c263
41. 42. PAYMENTS ON ACCOUNT OF LIABILITY TO INCOME TAX 15 words
c263
42. 43. CHARITABLE DONATIONS (PAYROLL DEDUCTION SCHEMES) 56 words
c263
43. 44. SHARE OPTION SCHEMES 28 words
c263
44. 45. TAX RELIEF FOR CLASS 4 CONTRIBUTIONS 35 words
c263
45. 46. RELIEF FOR CERTAIN ANNUAL PAYMENTS 125 words
c263
46. 47. GOVERNMENT PILOT SCHEMES 62 words
c263
47. 48. FOREIGN INCOME DIVIDENDS 9 words
c263
48. 49. UNAUTHORISED UNIT TRUSTS 38 words
c264
49. 50. TRANSFER ON DEATH UNDER THE ACCRUED INCOME SCHEME 16 words
c264
50. 51. PAYING AGENTS AND COLLECTING AGENTS 26 words
c264
51. 52. MANUFACTURED PAYMENTS, REPOS, ETC. 42 words
c264
52. 53. CANCELLATION OF TAX ADVANTAGES (TRANSACTIONS IN SECURITIES) 19 words
c264
53. 54. TRUST MANAGEMENT EXPENSES 14 words
c264
54. 55. INSURANCE AND CAPITAL REDEMPTION BUSINESS 28 words
c264
55. 56. INSURANCE COMPANIES (PROVISIONAL REPAYMENTS) 16 words
c264
56. 57. QUALIFYING LIFE INSURANCE POLICIES 25 words
c264
57. 58. LOANS TO PARTICIPATORS, ETC. 16 words
c264
58. 59. CHARGEABLE GAINS (NON-RESIDENT COMPANIES) 16 words
c264
59. 60. CONTROLLED FOREIGN COMPANIES 19 words
c265
60. 61. DIRECTIONS RELATING TO SALES AT AN UNDERVALUE OR OVERVALUE 31 words
c265
61. 62. PETROLEUM EXPLORATION 31 words
c265
62. 63. INHERITANCE TAX RELIEFS 16 words
c265
63. 64. BANKING 9 words
c265
64. 65. QUOTATION OR LISTING OF SECURITIES 20 words
c265
65. 66. COPYRIGHT, DESIGNS AND ARTISTS' RECEIPTS 23 words
c265
66. 67. STAMP DUTY (SPOILED INSTRUMENTS) 34 words
c265
67. 68. STAMP DUTY RESERVE TAX 10 words
c265
68. 69. SCHEDULE 2 TO THE AGRICULTURE ACT 1993 24 words
c265
69. 70. RELIEF FROM TAX (INCIDENTAL AND CONSEQUENTIAL CHARGES) 34 words