Commons Sitting of 26 November 1996

Preamble
The House met at half-past Two o'clock
PRAYERS
[MADAM SPEAKER in the Chair]
PRIVATE BUSINESS

  KING'S COLLEGE LONDON BILL [LORDS]
  Motion made, and Question proposed,
  That the Promoters of the King's College London Bill [Lords] may, notwithstanding anything in the Standing Orders or practice of this House, proceed with the Bill in the present Session; and the Petition for the Bill shall be deemed to have been deposited and all Standing Orders applicable thereto shall be deemed to have been complied with;
  That if the Bill is brought from the Lords in the present Session, the Agents for the Bill shall deposit in the Private Bill Office a declaration signed by them stating that the Bill is the same, in every respect, as the Bill which was brought from the Lords in the last Session;
  That, as soon as a certificate by one of the Clerks in the Private Bill Office, that such a declaration has been so deposited, has been laid upon the Table of the House, the Bill shall be read the first and second time (and shall be recorded in the Journal of this House as having been so read) and shall be ordered to be read the third time;
  That no further Fees shall be charged in respect of any proceedings on the Bill in respect of which Fees have already been incurred during any previous Session.—[The First Deputy Chairman of Ways and Means.]
  Hon. Members: Object.
  Debate to be resumed on Tuesday 3 December.

  >WESTERN ISLES COUNCIL (BERNERAY CAUSEWAY) ORDER CONFIRMATION BILL
  Considered; to be read the Third time.
Oral Answers to Questions
  DEFENCE

    Armed Forces (Deployment)
    Sir Michael Neubert: To ask the Secretary of State for Defence how many armed forces personnel are currently deployed outside the United Kingdom; and in how many countries. [4309]
    The Secretary of State for Defence (Mr. Michael Portillo): Over 44,000 British service personnel are currently deployed in 18 countries outside the United Kingdom.
    Sir Michael Neubert: Is it not a remarkable tribute to our resolute defence policies and the professionalism of our armed forces that our participation is sought in so many parts of the world? Would not that be put at risk by the "painful consequences" of a Labour defence review?
    With regard to Zaire, now that the Canadians have scaled down their estimate of the number of troops required by a factor of 10, to about 1,000, what are the prospects for the British contingent? Are they required at all?
    Mr. Portillo: It is indeed a matter of great satisfaction that our forces are so highly respected around the world. That is partly due to the fact that it is known that the Government give them full support. The Government have always been committed to sound defences; and the alternative Government, the Labour party, now pays some sort of lip service to our armed forces, but over a long period has been committed to sharp reductions in our defence.
    The situation in Zaire has changed considerably since I last spoke to the House about it, although my hon. Friend the Minister of State for the Armed Forces brought the House up to date last week. Large numbers of refugees have gone home. We have little intelligence about the refugees in the southern part of the Lake Kivu area. We are seeking further intelligence at the moment.
    There has also been a withdrawal of consent from a number of states in the area which we had supposed would be supportive of a multinational force. I think the correct posture for us is to continue to plan on a contingency basis and to make the most of the intelligence that we are busy gathering from the area.
    Mr. Cohen: The Minister told me in May that the cost of these overseas garrisons was £360 million a year. After excluding that amount, and other exceptional payments for nuclear weapons and for Northern Ireland, our defence budget is still £5 billion more than the average of our European NATO partners' budgets. Where does that money go?
    Mr. Portillo: It goes to maintaining the posture that is suitable for a country that takes its international responsibilities seriously. I know that the hon. Gentleman and many others in the Labour party—many who declare themselves and many who do not—want to cut our defences. As the hon. Gentleman says, he wants them cut

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    to the European average, which would mean £4.5 billion or £5 billion off the present defence budget. I see a Labour Member nodding in agreement. Many Labour Members want our defences cut, and if there were a Labour Government I believe that the pressure in that direction from Back Benchers would be irresistible. If a Labour Chancellor of the Exchequer were standing at the Dispatch Box this afternoon, we know that defence would be a soft touch—that is where the cuts would come, as the hon. Gentleman has clearly told me today.
    Mr. Colvin: As some of those deployments were on NATO missions, and as NATO is an organisation that has fulfilled its mission—the ending of the cold war, hardly a shot having been fired—and in the light of proposals to enlarge NATO, when will the countries concerned get together and decide NATO's new mission?
    Mr. Portillo: I believe that there will be a very significant summit on NATO's future in summer next year. I think that that would be the right time for NATO to decide on its new missions and restructuring, to begin negotiations with those countries that are applicants for membership of NATO, to begin serious discussions with them and to unveil a new partnership for peace for those countries that are not going to be members of NATO or are not going to be members of NATO at once. I believe that it will also be the occasion for NATO to strike a new relationship with Russia and probably write down what that new security relationship consists of.
    Mr. William O'Brien: Can the Secretary of State give the House a reason why members of the Gurkha regiments, which must leave Hong Kong to come to the United Kingdom, are not allowed to bring their wives and families with them? Is there a reason why the Secretary of State is taking that attitude?
    Mr. Portillo: I have taken no attitude beyond saying that the Gurkhas find themselves in a completely new position. Now that we are leaving the colony of Hong Kong, Gurkhas will be deployed in the United Kingdom. Those circumstances have not obtained before, so we must investigate carefully what their conditions of service should be.
    We have not declared a position on that. We have said that we must review their conditions of service. That review is under way, and it must address several important topics that have been raised, including whether the Gurkhas can bring their families with them. I give the hon. Gentleman an undertaking that that will be considered thoroughly and without any preconceived position on my part.

    Whittington Barracks
    Mr. Fabricant: To ask the Secretary of State for Defence if he will make a statement on the role of the Whittington barracks, Lichfield, over the next five years. [4310]
    The Minister of State for the Armed Forces (Mr. Nicholas Soames): There are no plans to change the role of Whittington barracks, which houses the Army training regiment, Lichfield, over the next five years.
    Mr. Fabricant: I thank my hon. Friend for his reassuring answer. Will he take the opportunity to praise the role of the Army training regiment, which forges young, timorous boys into hardy men?
    Mr. Soames: It is certainly a pleasing prospect. I join my hon. Friend in paying tribute to the work of the Army training regiments. They do remarkable work, and I am sure that the House will agree with my hon. Friend that they do an excellent job of converting the basic material of new recruits into a well trained and motivated Army of the future. The House will also want to know that the quality of training undertaken in the Army training regiments is second to none in any organisation of its type in the world, and we are lucky with our ATRs.

    Armed Forces Overstretch
    Mr. Eric Clarke: To ask the Secretary of State for Defence what assessment he has made of the problems of overstretch in the armed forces. [4311]
    Mr. Soames: The services continue to be very busy but are well able to meet their current operational commitments.
    Mr. Clarke: Does the Minister agree that it is gross Government incompetence to cut the armed forces by one third and make our troops overstretched? Can he explain that total incompetence?
    Mr. Soames: The hon. Gentleman has been ill briefed and ill served by his hon. Friends in asking so gauchely a question that has an important root—the nature and length of the commitments of our armed forces. As I have said, they are very busy—very pushed. We must be mindful of what we ask them to do. They are highly motivated, their morale is high and they are superbly equipped. Questions such as that make a fallacy of the truth.
    Mr. Key: Notwithstanding the superb performance of our forces in their peacekeeping role, will my hon. Friend always ensure that the country realises that our service men and women are recruited for a fighting and combative role above all?
    Mr. Soames: I am grateful to my hon. Friend. He may be assured that no one in the Ministry of Defence—including my right hon. Friend the Secretary of State, my hon. Friends the Minister of State for Defence Procurement and the Parliamentary Under-Secretary of State—or in any of the training arms of the armed forces is under any delusion in that regard. They know that all our troops must continue to be trained to fight the high-intensity battle and to be able to cope with the most demanding combat conditions as well as some of the new missions, which, as the hon. Member for Midlothian (Mr. Clarke) meant to say, are indeed imposing some strain on the armed forces. Whatever they are asked to do, they acquit themselves superbly.
    Dr. David Clark: The Government have allowed a situation to develop where the Army has a shortfall of more than 5,000 recruits. Why?
    Mr. Soames: The Army is, indeed, approximately 5,000 men under strength. At each Defence Question Time the hon. Gentleman asks the same question in a more gauche and foolish way. On each occasion he comes back with a more stupid question.
    The reasons for the shortfall, particularly in the infantry, are plain. We cannot compel people to join the infantry. It is interesting that the technical arms—the sappers, the electrical and mechanical engineers, the signallers—are almost fully recruited. It is clear that we will have difficulty persuading people to join the infantry. Not everyone wants to be battle-fit 365 days of the year. We have a great deal to do. I am sure that the hon. Gentleman will be gratified to hear that enlistments are on the up and recruiting has increased by more than 35 per cent. compared with this time last year.
    Dr. Goodson-Wickes: I am confident that my hon. Friend will welcome signs that recruitment shortfalls in the Army are levelling out. However, the Government's admirable policies will mean that unemployment will fall lower, which will make recruitment increasingly difficult. In that context, will my hon. Friend give the House an assurance that a decision in principle has been made in his Department to reintroduce the admirable concept of junior leaders? Will he press his Treasury colleagues to ensure that that scheme can be put into action? Perhaps we shall hear an indication this afternoon.
    Mr. Soames: My hon. Friend is right that the junior leaders provided extraordinary technical and military leadership throughout all ranks and sections of the Army. My right hon. Friend and I are studying the scheme closely. We intend to consider whether to establish a pilot scheme of some sort, but clearly such matters must take their place in the priorities of ensuring that our people have the equipment they need to undertake the tasks that face them. I do not dissent from anything that my hon. Friend has said, and his support is extremely welcome.

    Eurofighter
    Mr. Donald Anderson: To ask the Secretary of State for Defence what recent discussions he has had with his German counterpart concerning the Eurofighter project. [4312]
    Mr. Portillo: I met my German counterpart, Volker Rühe, last week. We had extensive discussions on a wide range of subjects, including Eurofighter. He told me that Germany expects to make a decision on participation in the production investment phase and the production phase of the Eurofighter programme early in 1997.
    Mr. Anderson: The Secretary of State will be aware of the Labour party's total commitment to the project, because of its vital contribution to the Royal Air Force, to our industrial defence base and to employment in the north-west and Bristol. Now that there is endorsement from every party in the German coalition, and following his conversations, is the Secretary of State convinced that
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    the period of instability is over and that we can proceed, confident that the project will commence not later than March next year?
    Mr. Portillo: I am pretty confident about the attitude of the German Administration, but the proposals must go through the Bundestag, and one can never take parliamentary votes for granted. We must therefore wait until that happens.
    In the run-up to the election and, as the hon. Gentleman says disarmingly frankly, with so many marginal seats, I fully expect the Labour party to be solidly committed to the Eurofighter before the election. I point out, however, that it is a £15 billion project. I observe that the Labour Benches are full of Members who hate defence spending. They are busy promising to spend money on one programme after another. I know that, if the shadow Chancellor were Chancellor of the Exchequer, he would be looking for cuts in the defence budget. I very much doubt whether Eurofighter would continue under a Labour Government.
    Mr. Wilkinson: Will my right hon. Friend make it clear to Herr Volker Rühe that the export potential of the aeroplane is of crucial interest to his Government and country as well as to us and to the Italians and the Spanish? In that regard, the longer the project's production is delayed, the more vulnerable the aircraft and export markets will be to competition. Finally, will my right hon. Friend remind Mr. Rühe that the United Kingdom spends hundreds of millions of pounds in the Federal Republic through the stationing of British troops in time of peace, not least through the payment of locally employed German civilians?
    Mr. Portillo: My hon. Friend will know that my approach to international negotiations is one of delicacy and sensitivity. Therefore, I naturally urge my German colleagues to participate in the programme, and I hope that they will do so. My hon. Friend expertly employs the right arguments: we want the plane to be thoroughly exportable and, if it is delayed, it will be less competitive because it will be late and more expensive. It would be a false economy to save money on the project now, because it would cost more in the long term. My hon. Friend utilises those arguments admirably.
    Mr. Spellar: It is unfortunate that, after a few good weeks, today the Secretary of State demeaned himself by attempting to undermine the important Eurofighter project with a petty political issue. Will he take the opportunity to redress that mistake by joining me in extending congratulations to British Aerospace and its work forces on their excellent work developing the Eurofighter? Will he convey to his German counterpart at their next meeting the strong views of both his Government and their successors that the production stage should commence as quickly as possible?
    Mr. Portillo: The hon. Gentleman must not think that British industry is naive: it knows what Labour Members of Parliament think. British industry players can read the motions put down at Labour party conferences, and they are not taken in by Opposition Front Benchers' Johnny-come-lately attitude to defence.

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    My hon. Friend the Member for Ruislip—Northwood (Mr. Wilkinson) referred to defence exports. The industry can read perfectly clearly the Labour party's attitude to arms sales and arms exports. It knows that Labour is strongly committed to global disarmament, and then where would our defence exports be? The hon. Gentleman must not assume that he has taken in British Aerospace or any other leading British company.

    RAF Equipment
    Mr. Sweeney: To ask the Secretary of State for Defence what plans he has for RAF equipment upgrades over the next three years. [4313]
    The Minister of State for Defence Procurement (Mr. James Arbuthnot): Over the course of the next three years, the RAF will take delivery of upgraded Tornado attack and fighter aircraft, EH101 support helicopters, additional Chinook helicopters and the advanced short-range air-to-air missile. These and other important programmes represent significant enhancements to the RAF's capabilities.
    Mr. Sweeney: I welcome those announcements. Does my hon. Friend agree that the maintenance of progress in updating our equipment is vital to the morale and efficiency of the RAF? Will he comment also on the implications for RAF St. Athan, which he knows is the biggest employer in the Vale of Glamorgan and does much high-quality aircraft maintenance work?
    Mr. Arbuthnot: I agree with my hon. Friend, and I pay tribute to his consistent support for the excellent work done at RAF St. Athan in his constituency. He spoke to me recently on that subject. The "Competing for Quality" programme at RAF St. Athan will continue, because it has helped to save hundreds of millions of pounds for the armed services, which can then be spent on equipment such as that to which I have referred.
    Mr. Hardy: While I welcome the fact that the Royal Air Force will receive updated and proper equipment, does the Minister recognise that it also needs high morale and good people? Does he recognise that, in the past few years, the Government have cut manpower in the Royal Air Force by almost two fifths and often subjected those who remain to gross overstretch? That situation needs attention.
    Mr. Arbuthnot: The morale of the Royal Air Force is very high and service men know that they are highly valued by the party in government, partly because of the equipment programme to which I have referred. As a result of that programme, spending on RAF equipment will almost double by the turn of the century. That is fantastic news for the Royal Air Force, and the hon. Gentleman should not downplay it.
    Sir Anthony Grant: Will my hon. Friend tell us when a decision will be made on the RAF TriStar support contract, which he will appreciate is of great concern to Cambridgeshire? We are anxious that the expertise of Marshalls—the company that he knows all about—should not be lost.
    Mr. Arbuthnot: My hon. Friend has spoken to me on several occasions about this important contract, for which there are a number of competitors. I hope to make a decision shortly.
    Mr. Murphy: On the day of the Budget, Ministers talk grandly about saving money. Will the Minister tell the House how much money was squandered on the Tornado disaster at RAF St. Athan? Was it hundreds of thousands of pounds, millions of pounds or tens of millions of pounds?
    Mr. Arbuthnot: The hon. Gentleman is doing it again: he is irresponsibly playing with figures. It is far too early to give the precise amount involved: there must first be a full investigation. If the Labour party came to power, it would undertake a strategic defence review with the painful consequences to which the hon. Member for South Shields (Dr. Clark) referred. We know that those painful consequences would be cuts in defence, cuts in the numbers of our armed services and cuts for our defence industry. The hon. Member for South Shields admits that those would be the painful consequences.
    Mr. Bill Walker: Will my hon. Friend remind those who are critical of our concern about the future of Eurofighter of the TSR2? We had a world leader and a world beater that was cancelled by a Labour Government. Will he also remind Volker Rühe that, when the German Parliament considers the future of the Eurofighter, it should remember that we could still go it alone? We could call it the Spitfire, and at a later date we would be happy to sell it to the Luftwaffe.
    Mr. Arbuthnot: What a tempting prospect. My hon. Friend referred to the TSR2. I think that it was a Labour politician who said that we do not need to look into a crystal ball; we just need to read the book. We know what would happen if there were a Labour Government.

    RAF Recruitment Costs
    Mr. Flynn: To ask the Secretary of State for Defence what was the cost of recruiting each new member of the Royal Air Force in each of the past five years. [4314]
    Mr. Soames: The average cost of a recruit to the Royal Air Force in fiscal year 1995–96 was £10,333. Figures for the previous four years were £22,000, £26,000, £19,000 and £6,000 respectively.
    Mr. Flynn: Is this not an Alice in Wonderland situation? In the year when it cost £26,000 to recruit one member of the RAF, the Government made 1,000 members redundant, most of whom were highly skilled. Most of them were made redundant against their wishes. In the following two years, when a new recruit cost £22,000, the Government made 2,000 and 3,000 redundant. Is that not financial mismanagement on an Olympic scale?
    Mr. Soames: No, it is not. I know that the hon. Gentleman is unable to participate in Defence questions very often, but it is clear that he has not been present in the past few months when these matters were exhaustively debated. He must try to understand that, despite the

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    considerable downsizing that has taken place, the RAF needs to maintain a viable recruitment organisation. We need to recruit fewer people into the Royal Air Force, so each recruit plainly costs more. As the number of recruits rises in the next few years, the recruitment costs will fall. I am satisfied that we have an efficient and effective recruitment infrastructure, and that in the years to come the cost per recruit will significantly reduce.
    Mr. Bellingham: Will my hon. Friend join me in paying tribute to members of 39 PR squadron at RAF Marham, who have been involved in recent reconnaissance missions over Zaire and Rwanda? Incidentally, it is the former squadron of my hon. Friend the Member for Wyre (Mr. Mans), himself an intrepid aviator. Will my hon. Friend pay tribute to those airmen based in my constituency, and wish them well in their mission?
    Mr. Soames: I believe that every penny spent on the recruiting of the crew of that squadron was money well spent. I will always join my hon. Friend in paying tribute to the extraordinary aviation skills of our hon. Friend the Member for Wyre (Mr. Mans)—and I also thank my hon. Friend for his splendid support for the RAF.

    Gulf War
    Ms Eagle: To ask the Secretary of State for Defence if he will make a statement about the use of organophosphate pesticides by British troops in the Gulf war. [4315]
    Mr. Soames: As I announced last month, we have initiated an urgent and comprehensive investigation into the use of organophosphate pesticides during the Gulf war. I will report further and in great detail when that work is complete.
    Ms Eagle: Does the Minister realise that it is two months since he told the House that the use of such dangerous materials was much more widespread, and had possibly affected our troops during the Gulf war? Does he recall saying last month that an investigation would take place? Despite that, we have still heard nothing. Can the Minister tell the House when we are likely to hear the details of the investigation initiated by his Ministry? There are hundreds of Gulf war veterans with Gulf war syndrome out there, and they are very worried indeed.
    Mr. Soames: The hon. Lady is right: when I answered a question—the same question—that she asked on 29 October, I did indeed say that we would report to the House as soon as we had the information to hand, and that remains the case. This is an extremely detailed and urgently conducted investigation. I hope to be able to make a statement to the House early in December, with all the information that it will need in order to reach a conclusion.
    Mr. Robathan: The whole House will join my hon. Friend in wishing to ensure that people injured by their service are well looked after by Her Majesty's forces. Does my hon. Friend not agree, however, that a bandwagon is trundling by, on to which many Opposition
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    Members and lawyers are jumping? Does he accept that, six years after my service in the Gulf, the awful cold I have is not a matter for compensation?
    Mr. Soames: I am grateful to my hon. Friend, who knows at first hand the great importance that we attached to looking after our troops during what was a major deployment. Interestingly, because of extraordinary advances in medical science, we were able to have a deployment that was relatively disease-free—certainly in comparison with the experiences of the desert army in the last war.
    I agree with my hon. Friend that it is important to keep in touch with reality, but there is no doubt that there are people who served in the Gulf who, having come home, are not well. It is also true that a substantial body of research in the United States, along with a good deal of research in this country, has concluded that there is no Gulf war syndrome per se, but that there are people who served in the Gulf and are ill. We must ensure that they are cared for properly, honourably and decently—and they will be.

    Arms Exports
    Mr. Harvey: To ask the Secretary of State for Defence what recent advice his Department has given to the Department of Trade and Industry about the licensing of United Kingdom exports of arms to Indonesia. [4316]
    Mr. Arbuthnot: My Department advises the Department of Trade and Industry on various aspects of export licensing. These would include the legitimate defence requirements of the recipient, the effect on regional stability and the risk of use against United Kingdom forces.
    Mr. Harvey: What heroic military exploits on the part of the Indonesian army marked its members out as natural allies of this country? Was it the killing of 200,000 East Timorese since the illegal occupation of their country, or the assassination of Muslim protesters in Jakarta or that of Timorese people in Dili? Why do we keep an office in Indonesia for the Defence Export Services Organisation? Why did we underwrite half a billion pounds' worth of exports to the Indonesian military in 1992–93? Why do we send armaments, aircraft and tanks whose manufacturers describe them as ideal for internal security? What is it about these people that marked them out as our natural allies?
    Mr. Arbuthnot: The hon. Gentleman has ruined his case. Unfortunately, all export applications are examined very rigorously by this country. The hon. Gentleman ought to welcome positive developments in Indonesia: he ought to welcome, for example, the formation of the National Human Rights Commission there. We have thoroughly investigated every report that Hawk aircraft have been used against East Timor, and we have found that there is no evidence to support those claims. The hon. Gentleman does himself no service whatever.
    Mr. Atkins: Will my hon. Friend join me in ensuring that his advice to the Department of Trade and Industry is to congratulate companies such as British Aerospace, which is closing substantial deals with Indonesia, Qatar

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    and Australia? That is evidence of the efforts of that great company, which is represented by so many of our hon. Friends, who were working a jolly sight harder for British Aerospace at all levels long before that lot were.
    Mr. Arbuthnot: My right hon. Friend is right. What was notable as he asked his question was the total silence from Opposition Members. Although they profess to support British industry, in practice the Labour party hates British defence industry exporting any equipment at all.
    Mrs. Clwyd: The Minister is wrong. Hawk aircraft have been spotted in East Timor by Hugh O'Shaughnessy and by people who live there. The trouble is that the Government prefer to believe the Indonesian Government rather than eye-witness accounts. Why is he always telling us that Hawk aircraft are used as trainers in Indonesia when, during a military exercise last week, Hawk aircraft were used to fire rockets? The accounts are that the rockets reduced the target to scorched earth. Where were those aircraft converted for that use—in Britain or in Indonesia?
    Mr. Arbuthnot: I am sorry, but the hon. Lady is wrong. The minister counsellor at the Indonesian embassy has written that the Indonesian Government have never and will never use the Hawks to suppress the East Timorese. We have no evidence to suggest that that is untrue. We do not believe that it is untrue.
    As I have said, we welcome the positive developments in Indonesia. The National Commission on Human Rights is also to be welcomed. The hon. Lady should welcome that as well. I regret that she does not. I am pleased that her Front-Bench team is at odds with her on the issue. When we export equipment, we need to be absolutely sure that it is not used for the repression of internal civilian populations; in this case, it certainly is not.
    Mr. Richards: What is my hon. Friend's assessment of the level of international competition for defence contracts with Indonesia?
    Mr. Arbuthnot: It is high. It is because British industry is so successful in being competitive, in creating good equipment and in offering good prices that we are able to take such a high proportion of the world defence equipment market. That is good news for British jobs, for British influence and for the Ministry of Defence, which is able to reduce the prices that it pays as a result of large cost runs. British industry's success should be welcomed not only by the Conservative party but by the Labour party. I wish it were, but it is not.

    Army Commitments
    Mr. Home Robertson: To ask the Secretary of State for Defence if he will make a statement on the effects of overstretch in the Army. [4317]
    Mr. Soames: A third of the Army is deployed on, preparing for, or recovering from operations. Although I am conscious of this high level of commitment, which inevitably places a strain on soldiers and their families, I am confident that the Army remains supremely capable of meeting all its main tasks.
    Mr. Home Robertson: Is it not a fact that the Government are taking liberties with our soldiers in the armed forces and damaging their morale by increasing their work load at the same time as cutting their resources? Would I be far wrong if I were to suggest that the resident battalions in Northern Ireland are, on average, 80 men under strength, that soldiers there must spend 51 per cent. of nights away from their quarters and that the average number of hours worked a week by a soldier is 98.6? The Minister may use the term "busy", but those are intolerable conditions for our soldiers in Northern Ireland and elsewhere.
    Mr. Soames: The hon. Gentleman is always wrong on these matters and, today, he is wrong again. That was a misquoted farrago and tissue of innuendo and hopeless, incompetent fact. The Army's morale is extremely high. The Army is very busy, and that is one reason why its morale is high. Of course we are conscious of the fact that we can ask too much of our people, and that is why we take great care of their families and of them. Our people are well trained, well motivated and well equipped, and they do a wonderful job. The hon. Gentleman's portrayal is a fatuous travesty.
    Mr. Brazier: Although I am glad to hear my hon. Friend's comments on overstretch, does he agree that one way in which we could be certain to make the situation very much worse would be to cut defence and to take on all sorts of extra third-world commitments—the type of programme that we could expect from a Labour Government?
    Mr. Soames: My hon. Friend is right. As he knows, the nature and scale of the commitments that the armed forces of the Crown are invited to undertake are subject to the most rigorous and detailed scrutiny, particularly because our regular forces—which are all volunteer—are already heavily committed. The British Army will remain what it has always been: a supremely professional armed force, capable of high-intensity land battle, and not what it would be under the Labour party—some type of super-gendarmerie.
    Dr. Reid: What a load of codswallop. Will the Minister confirm reports that, under the Government, even the SAS is short of recruits—recruitment has plummeted and its members are leaving—and that that dates from when the Secretary of State pledged his undying allegiance to the SAS, at the Tory party conference? Is it true that, last year, we were 3,000 soldiers short, and that the Minister pledged to redouble his efforts? He has redoubled them, but with what result? He has doubled the shortage. There is no problem that the Government, when they put their mind to it, cannot make worse.
    Mr. Soames: That is a very silly little intervention, and I do not think that anyone will take it seriously. The hon. Gentleman knows perfectly well that that is not the case. Recruitment is up 35 per cent. this year on last, enlistments are way ahead, and the only limitation on recruits for the airborne or the special forces will be the ability of those who undertake the selection test to pass it.

    Isle of Wight Companies
    Mr. Barry Field: To ask the Secretary of State for Defence what assistance the Defence Export Services Organisation has provided to Isle of Wight companies in each of the past three years. [4318]
    Mr. Arbuthnot: The Defence Export Services Organisation daily provides assistance to British defence equipment companies to help them promote their products and services overseas. The assistance is available to, and used by, companies resident on the Isle of Wight.
    Mr. Field: Will my hon. Friend point out that more than 360,000 jobs in the United Kingdom—which still includes the Isle of Wight—are dependent on sales exports and orders? I thank him and the staff of the Defence Export Services Organisation for the help that they have given and are giving to Isle of Wight companies. Does he agree that, if the Opposition's policies were ever implemented, those jobs would be at serious risk and that the Opposition's defence policies are about as reassuring as a cross-eyed marksman?
    Mr. Arbuthnot: I agree with my hon. Friend. I should also like to acknowledge the support that he has given to Pilatus Britten Norman Ltd. and to Turbine Support Ltd.—both of which are based on the Isle of Wight—in bids for overseas business. The Defence Export Services Organisation is and has been astonishingly successful. It is a magnificent blend of Government help to industry with the support of the armed services and embassies. It has also enabled us to achieve the second highest performance on British defence exports, second only to the United States. It is a great success.

    Armed Forces (Asia)
    Mr. Legg: To ask the Secretary of State for Defence what will be the role of United Kingdom armed services in Asia after the United Kingdom's withdrawal from Hong Kong. [4319]
    Mr. Portillo: After withdrawal from Hong Kong, British armed forces will continue to contribute to security and stability in the region, in support of this country's wider interests.
    Mr. Legg: In view of our strong trading and investment links and the presence of 5 million United Kingdom nationals, will my right hon. Friend tell the House what role the UK will play in the peaceful resolution of disputes in the region?
    Mr. Portillo: It is important that we reaffirm our support of the five-power defence arrangements, which include Singapore, Malaysia, Australia and New Zealand. At about the time that we leave Hong Kong, we shall dispatch to the Asia-Pacific area a large carrier battle group, including a carrier, three destroyers, a submarine and about 15 Tornado aircraft. That will demonstrate our continued commitment to the area. We shall, of course, also maintain the Gurkha battalion at Brunei.
    Mr. Menzies Campbell: The Secretary of State told the House a moment ago that there was to be a review of the conditions of engagement for Gurkha troops. Will he assure us that two particular factors will be taken into account? We must remember, first, the unparalleled loyalty and service that those troops have demonstrated to the British Crown and, secondly, the fact that they are increasingly used to remedy deficiencies in numbers in other British Army units. In those circumstances, are there not compelling reasons for permitting Gurkha troops redeployed from Hong Kong to the United Kingdom to bring their families with them?
    Mr. Portillo: Those are important points. However, in my earlier reply I did not say that I would be considering those issues; I said that I was considering them. The review is well under way and I hope to be able to complete it shortly. My regard for the Gurkhas is not second to that of the hon. and learned Gentleman.

  PRIME MINISTER

    Engagements
    Mr. Wray: To ask the Prime Minister if he will list his official engagements for Tuesday 26 November. [4339]
    The Prime Minister (Mr. John Major): This morning, I presided at a meeting of the Cabinet and had meetings with ministerial colleagues and others. In addition to my duties in the House, I shall be having further meetings later today.
    Mr. Wray: Is the Prime Minister aware that the Government took £7.2 billion in tobacco duties last year? Is he also aware that the Health Education Authority says that tobacco costs the health service £680 million and 110,000 deaths annually? I know that the Government are against litigation by the Department of Health, but does the Prime Minister agree that a further ban on tobacco advertising is needed?
    The Prime Minister: As the hon. Gentleman knows, we have shown the dangers of tobacco in many advertising campaigns and also, of course, on every packet of cigarettes. That is an appropriate way to indicate the dangers—together, of course, with the disincentive of the taxation on tobacco.
    Sir Michael Grylls: Will my right hon. Friend find time today to consider the cash flow crisis that is affecting so many lorry drivers, many of whom come from small firms or are self-employed? Their problems are due entirely to the failure of the French Government to keep their highways clear. As a practical measure, will he consider asking the banks to be patient with those firms? Will he also do everything that he can to the French Government to ensure that they act responsibly?
    The Prime Minister: I am concerned about the consequences for British drivers and companies of the dispute, which is, of course, in France and has nothing to do with them or their customers. We have indicated to the French Government that we expect compensation claims for loss of earnings or for damage to perishable stock to

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    be met. I hope that they respond to that plea. My right hon. Friend the Secretary of State for Transport has already written to his French opposite number calling for an end to the dispute and making the point about necessary compensation. I shall not hesitate to raise the matter elsewhere if necessary.
    Mr. Blair: Given that the Prime Minister fought the last general election on the specific pledge that he would cut taxes every year, will he now at least apologise for the fact that, whatever the Chancellor does today, after 22 Conservative tax rises, the average British family will pay more in tax at the time of the next election than it did at the last, and that his promise was broken?
    The Prime Minister: I think that the right hon. Gentleman is confused. As he will know, we now have the lowest basic rate of income tax for 50 years. Even before today's Budget, the average family will be £700 better off this year, after tax and inflation, than it was at the general election. If the right hon. Gentleman is concerned about transparency in tax matters and tax promises, perhaps he will publish his own tax plans, which his deputy leader said it would be stupid to do.
    Mr. Blair: Perhaps, then, the Prime Minister would answer an even simpler question, as he could not answer that one: does he recall promising before the election that he would not raise national insurance contributions, and then raising them after the election? Does he recall that—yes or no?
    The Prime Minister: The right hon. Gentleman knows the reductions that we have made in tax. Whatever he may seek to do, he cannot deny that taxes are lower today than they have been in the past, that they are lower than they would be under any Labour Government, and that, if he were to begin to meet the spending pledges that he made at his party conference and then sought to deny, taxation in the United Kingdom would rise and rise again were he ever to have any responsibility for the Exchequer.
    Mr. Blair: If the right hon. Gentleman cannot answer the first two questions, perhaps he will answer this one: does he recall going into the last election saying that he would not put VAT on fuel and power and then doing just that? Will he answer—yes or no?
    The Prime Minister: If the right hon. Gentleman wants to discuss value added tax, perhaps he will tell us why he can make promises on VAT, but he cannot tell us about the windfall tax, the tartan tax, the London tax, the teenage tax, his spending promises, his taxation promises or anything that is relevant to the management of the economy.
    Mr. Cash: Does my right hon. Friend recollect that, in the most welcome statement yesterday, my right hon. and learned Friend the Chancellor of the Exchequer said in respect of one of the regulations that he would be most reluctant to contemplate using the veto? Bearing in mind that the Dublin summit will be a European Council meeting and not a meeting of the Council of Ministers and that the scrutiny reserved will be applied to the Economic and Finance Council meeting, does my right
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    hon. Friend agree with my right hon. and learned Friend the Chancellor in his reluctance to veto one of those regulations?
    The Prime Minister: Presumably my hon. Friend is referring to recital 13. If he would care to look at what was said yesterday, he will see that my right hon. and learned Friend made it clear that he would reiterate to the meeting of Finance Ministers that there was no legal basis on which countries not participating in the single currency could have sanctions imposed on them. In reply to my right hon. Friend the Member for Wokingham (Mr. Redwood), my right hon. and learned Friend made it clear that he would seek the best possible language to ensure that that understanding was copper-bottomed.
    Mr. Pearson: To ask the Prime Minister if he will list his official engagements for Tuesday 26 November. [4340]
    The Prime Minister: I refer the hon. Member to the answer I gave some moments ago.
    Mr. Pearson: Will the Prime Minister confirm that cutting VAT on domestic fuel and power will help every household in Dudley and nationally, while scrapping inheritance tax and capital gains tax will benefit, at most, 3 per cent. of the population? Why does the Prime Minister persist in supporting policies that favour the few instead of the many?
    The Prime Minister: The policies that we have followed have produced the best economic circumstances for generations, and that will help the many and encourage domestic investment, inward investment, job creation and growth—all of which are happening in Britain in a way that the hon. Gentleman cannot demonstrate as happening in any other European country.
    Mr. Colvin: To ask the Prime Minister if he will list his official engagements for Tuesday 26 November. [4341]
    The Prime Minister: I refer my hon. Friend to the answer I gave some moments ago.
    Mr. Colvin: Has my right hon. Friend seen the report by the International Labour Organisation that was published today? It shows that, in every other country, unemployment is rising, while in Britain, exceptionally, it is falling? Is that not further evidence of the merits of the Government's economic policy that has made Britain such a success? Was not Baroness Thatcher quite right last week when she said in a speech, "Don't let Labour ruin it"?
    The Prime Minister: When the news is improving, unemployment is falling and the economy is growing, as it is at the moment, there is very little for the Opposition to say: they hate good news, because they know that it is extremely bad news for them. They did not help to bring about the strongest economy of any western European country, which is what we have; they did not help to get more people in work, which is what we have done through the labour reforms that we have

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    produced; they did not help to make this the No. 1 country for inward investment anywhere in western Europe; and they did not help to create the lowest basic rate of tax for 50 years. My hon. Friend is right, as was my right hon. and noble Friend last week—Labour is still not fit to govern and I doubt that it will he in a position to do so.
    Mr. Heppell: To ask the Prime Minister if he will list his official engagements for Tuesday 26 November. [4342]
    The Prime Minister: I refer the hon. Gentleman to the reply that I gave some moments ago.
    Mr. Heppell: In view of the Prime Minister's completely unsatisfactory response to my right hon. Friend the Leader of the Opposition, may I ask him again why he promised tax cuts before the last election and subsequently broke that promise?
    The Prime Minister: The hon. Gentleman may recall the urgings of his Front Benchers and our determination to protect people during the recession. I make no apology for the fact that we sought to protect people during the recession; I make no apology for the fact that, by doing so, we have delivered the best economic circumstances that he can ever remember. If he wants transparency in tax matters, I challenge him to publish his own party's tax plans, about which the right hon. Member for Kingston upon Hull, East (Mr. Prescott) said it would be stupid to let the public hear.
    Mr. Couchman: Further to the question of my hon. Friend the Member for North—West Surrey (Sir M. Grylls) about the lorry drivers' strike in France, has my right hon. Friend contacted the European Traffic Commissioner? If so, did he find him conscious of the plight of British drivers, or was the European Commissioner too busy studying leaked documents from the Treasury?
    The Prime Minister: I have not contacted the European Commissioner, but I understand that he has made representations to the French expressing concern about the drivers' welfare.

    Jobseeker's Allowance
    Mr. Corbyn: To ask the Prime Minister what plans he has to visit a jobcentre to discuss the operation of the jobseeker's allowance. [4343]
    The Prime Minister: I have no immediate plans to do so.
    Mr. Corbyn: The Prime Minister should be ashamed of himself for not being prepared to go along to a jobcentre to discuss the introduction of the jobseeker's allowance, which is having a very serious effect on many
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    people, especially because of the parallel introduction of incapacity benefit; many disabled people who have to face an all work test will lose their benefits altogether and will have to try to get unemployment benefit through the jobseeker's allowance. When the Prime Minister visits a jobcentre, will he consider that point and what he intends to do for the 220,000 disabled people who next year will apply under the jobseeker's allowance for unemployment benefit, but will probably lose it and end up destitute as a result?
    The Prime Minister: The hon. Gentleman is talking nonsense, and I think that he knows he is doing so. The purpose of the jobseeker's allowance, as he should know, is to help people to plan the most effective route back into work. It creates a better framework of advice and support for the jobseeker and ensures that claimants better understand that benefit is dependent on the activities that they undertake to look for work. I believe that that principle is well understood and well supported across the country.
    The jobseeker's allowance is also, of course, underpinned by the jobseeker's agreement, which sets out what each jobseeker agrees to do to find work. That is infinitely preferable to the old system of unemployment benefit and income support, which was confusing and in many ways unfair.

    Engagements
    Mr. Patrick Thompson: To ask the Prime Minister if he will list his official engagements for Tuesday 26 November. [4344]
    The Prime Minister: I refer my hon. Friend to the reply I gave some moments ago.
    Mr. Thompson: Is my right hon. Friend aware of the exhibition to be held in the Upper Waiting Hall in the House of Commons next week to highlight the tremendous achievements of our engineering and manufacturing industry in this country? Does he agree that engineering offers attractive career prospects for our young people and will he pay tribute to those who are working to promote the achievements of the engineering industry through the Year of Engineering Success campaign next year?
    The Prime Minister: I am grateful to hear about the exhibition that my hon. Friend mentions. I certainly agree with his sentiments; they were a key aspect of the competitiveness White Paper a short while ago and the reason we launched the action for engineering programme, to increase engineering's contribution to the national economy. There are now about 150,000 more people employed in manufacturing than three years ago. That reverses a long-term trend and is very welcome. In addition, some 40,000 to 50,000 people are on modern apprenticeship schemes. I agree entirely that engineering is an important part of the British economy.
    Rev. Martin Smyth: To ask the Prime Minister if he will list his official engagements for Tuesday 26 November. [4345]
    The Prime Minister: I refer the hon. Gentleman to the reply I gave some moments ago.
    Rev. Martin Smyth: Has the Prime Minister noticed the change in emphasis between the hard man and soft man of IRA-Sinn Fein? Martin McGuinness is now promising to move heaven and earth—I know that he has tried to move earth in the past, but I do not believe that he has any influence in heaven—and Mitchell McLaughlin is now threatening lethal consequences, if the Prime
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    Minister does not come up with terms. Will the Prime Minister speak on behalf of the nation and say that we are not prepared to bow to the threats of terrorists?
    The Prime Minister: As the hon. Gentleman knows and as the House wholly accepts, IRA terrorism is utterly unacceptable for any purpose, at any time, in any place. It is also completely counter-productive if there is any suggestion that terrorism will bring Sinn Fein to the negotiating table. It emphatically will not bring it to the negotiating table. If I may quote what the Taoiseach said recently—with which I entirely agree—
    "If Republicans are committed to peace, as they say they are, let them call a ceasefire now and make it a credible one".

WAYS AND MEANS
  Budget Statement
  Mr. Deputy Speaker (Mr. Michael Morris): Before I call the Chancellor of the Exchequer, it may be for the convenience of hon. Members if I remind them that, at the end of the Chancellor's speech, copies of the Budget resolution will be available to hon. Members in the Vote Office.

  INTRODUCTION
  3.31 pm
  The Chancellor of the Exchequer (Mr. Kenneth Clarke): Contrary to popular belief, I always look at the mirror in the morning. I am reasonably well prepared for this occasion and I am about to deliver the real Budget statement. I think this is positively my last appearance in the House in a speaking capacity this week, or so at the moment I expect it to be.
  The British economy is today prosperous and successful. This Budget is going to make it even more prosperous and an even bigger success over the coming years.
  When I presented my first Budget in 1993, it was against a very different economic background from today. Although the recovery had begun then, consumer confidence had not yet returned. Growth was not yet firmly established. Further firm action was needed on the public finances, and our critics, in 1993, were peddling doom and gloom about the British economy. The recovery is now in its fifth year. Consumer confidence has returned and we are achieving something unprecedented for a generation in this country—growth with low inflation and without a widening trade gap. But one thing has not changed in 1996—our critics are still peddling doom and gloom. With all their predictions of impending disaster, it is obvious that there is probably more than one Cassandra lurking in the Labour party.
  In my first two Budgets I curbed the growth of public spending and took firm decisions on tax, which have brought borrowing down by almost a half since 1993. Last year, in my third Budget, I was able to return to cutting tax while spending more on the public services which the people I know care about most—health, schools and the police—and keeping borrowing on a firm downward path.
  This year, I am presenting a Budget which builds on the last three. This Budget reduces public spending plans further, while providing more money for priority services. It makes responsible progress on our tax-cutting agenda, while getting borrowing down faster. This is not a reckless Budget on either tax or spending. In the run-up to Christmas I am not going to play Santa Claus, but this year I do not have to play Scrooge either.
  I have one overriding aim, which is the lasting health of the British economy. [HON. MEMBERS: "And winning the election."] The lasting health of the British economy might win elections, that is true, but my first aim is the lasting health of the British economy. We are securing that by creating the best conditions for British businesses and British men and women to earn a living. All my
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  Budgets and all my policies have been designed to set this country on course to be the strongest industrial economy in western Europe in years to come.

  ECONOMY
  The British economy is in its fifth successive year of steady, healthy economic growth, with falling unemployment and low inflation. These are the best circumstances we have faced for a generation and that is the only sensible background to debate in this House. It is a Rolls-Royce recovery and it is built to last.
  The International Monetary Fund and the Organisation for Economic Co-operation and Development confidently expect the United Kingdom to be the fastest growing major European economy again next year. By next year we will have grown faster than either France or Germany for five years in succession for the first time in half a century.
  This time—unlike so many previous recoveries that many of us remember—healthy growth has been accompanied by the best inflation performance for nearly 50 years and restrained growth of earnings has been good news for jobs. The British labour market has become our flexible friend. Employment began to rise sooner and unemployment began to fall sooner than in the previous recovery. Growth creates jobs quicker, as long as we retain a flexible labour market.
  The OECD has praised us for having one of the least regulated labour markets in the industrialised world. High social overheads, minimum wages and unnecessary legislation do not protect workers—they cost jobs. Unemployment is still rising in France and unemployment is still rising in Germany. It has fallen sharply here, to its lowest level for over five and a half years.
  In the bad old days, recoveries were derailed by balance of payments crises. In this recovery, the current account has actually improved, despite the slowdown in our main European markets. In fact we now have a current account broadly in balance, which is our best overall trading performance for nearly 10 years.

  ECONOMIC POLICY
  Mr. Deputy Speaker, I want to ask the British people this question: in the years ahead do we seriously want to be prosperous in this country? I think that we do. That is why I am setting out an economic policy aimed at the next five years, not just the next five months. I am setting out an economic policy that will go on delivering our enviable combination of rising prosperity, low inflation and more jobs. That is my purpose in this Budget. This Budget secures a prosperous future for all sections of our people and their families.
  The last thing that the British economy needs now is a change of direction. We need at least another five years of this Government's continuous vigilance on inflation. We need more of this Government's determination to get government borrowing down. We need another five years of this Government's commitment to raise the wealth-creating potential of the British economy, by improving incentives, reducing the role of the state and creating a climate for enterprise.

  GROWTH
  Let me begin by turning to my forecast for growth. I expect the British economy to grow by 2 per cent. this year and 3½ per cent. next year—and there are few serious commentators who would disagree with me. I hear mutterings from the shadow Chancellor; there are few serious commentators who would disagree with me.
  By keeping a close eye on the prospects for inflation up to two years out, and by taking sensible early action if and when necessary, I intend to ensure that healthy growth continues without inflationary pressures emerging. That is what I have always promised—no return to boom and bust.

  CONSUMER SPENDING
  I expect consumers' expenditure to continue to be the main engine of growth next year. The real value of take-home pay is growing strongly.
  The housing market recovery is now firmly established. I hope that negative equity can soon be consigned to the economic history books.
  People are feeling the improvement in their family finances. Consumer confidence is at its highest levels for more than eight years.
  I expect consumer spending to grow by 3 per cent. in 1996 as a whole. But it has been strengthening through the year. So I expect stronger growth to continue, with consumers' expenditure rising by more than 4 per cent. next year.

  INVESTMENT
  But this recovery is not just about a more confident consumer. Businesses are optimistic too. The climate for business is excellent. Strong demand at home and a recovery in our key export markets present British industry and commerce with tremendous opportunities.
  Interest rates and tax rates remain low, and profitability is high. The result has been business investment growth of 6 per cent. so far this year. I expect business investment to continue to grow strongly—by almost 10 per cent. next year.
  These excellent conditions for business are not lost on overseas companies looking to invest for the future inside the European market. Let us never forget the most valuable practical endorsement that we get for our sound economic policies.
  The United Kingdom remains the No. 1 destination for inward investment into the European Union. Keeping our enterprise economy on course at the heart of Europe will keep us in pole position.

  EXPORTS
  Exports have grown by almost 20 per cent. over the past two years—an impressive performance in the face of weak demand in our key European markets. The achievement is down to our strong cost-conscious British exporters. They will benefit further next year as the tentative recovery on the continent becomes more established. I expect export volumes to rise by more than 7 per cent. this year and by 6 per cent. next year.
  The current account has been close to balance during the last two and a half years, thanks to strong growth in exports and income from our investments overseas. I expect the current account to remain broadly in balance this year and next.

  JOBS
  As I said earlier, I am glad to say that our thriving economy is creating jobs. Employment in the United Kingdom has risen by more than ¾million real jobs since the recovery began. Unemployment has fallen by almost a million from its peak. It will soon drop through the 2 million mark. But that is still too high. I want it to go on falling and I expect it to go on falling.
  I hope that during the debate the shadow Chancellor will say that he forecasts that unemployment will now rise, month after month. That seemed to help our performance in the labour market the last time he said it.

  INFLATION
  We are on course to get underlying inflation down to our target of 2½ per cent. or less, and to keep it there. In October underlying inflation rose to just over 3 per cent. This should not have surprised anybody who looked at last year's statistics. It is a temporary and inevitable reflection of the exceptional falls in the price level 12 months before.
  Let me give the House my concrete reasons for being so confident about low inflation. Apart from oil prices, which have risen sharply, commodity prices are steady and are not putting upward pressure on inflation. Earnings growth remains sensible and modest. Producer price inflation—a good indicator of what is in the pipeline for retail price inflation—is at it lowest levels in this country since the 1960s. Producer input prices are actually lower than they were a year ago.
  Any risk to this recovery from inflationary pressures re-emerging remains a good way off. But as I have demonstrated again and again, when I see any risks, I will act. I will continue to stay ahead of the game on monetary policy. Eddie will keep me steady and I intend to continue to be canny.
  I expect underlying inflation to meet our target of 2½ per cent. or less. I will ensure that we go on meeting that target for the foreseeable future.

  PSBR
  We have made good progress in reducing public sector borrowing, but it has not been as fast as I expected. The Budget therefore targets public sector borrowing again. The general public may ask why I concentrate on public sector borrowing in the way that I do. [Interruption.] It is suggested that I do so because I am a Tory. That is a good reason for concentrating on public sector borrowing as I do.
  One reason why I continue to concentrate so heavily on public borrowing in setting policy is that money spent paying the interest on our debt is, in my opinion, money that I would prefer to spend on public services and the reduction of taxation.
  We are making good progress on bringing down borrowing, but lower than expected tax revenues mean that it has not fallen as fast as I expected in the last Budget. This is not bad news for everyone. People are no doubt quite glad not to be paying as much tax as I expected. But as I am the Chancellor, I strongly prefer to keep any tax cuts under my own control.
  The causes of these shortfalls in our forecasts of tax revenue—primarily on VAT, but also on direct taxes—cannot wholly be explained by any experts inside or

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  outside the Revenue Departments. But there does seem to be an increasing tendency to exploit loopholes and use special reliefs in an artificial way to reduce tax bills. Those sort of tax cuts are unacceptable. On that, I seem to have agreement. If they are not tackled every year in the Budget, they mean that a few people pay less tax, but the rest must pay more.
  In this Budget I will propose a number of measures to stem tax leakage, to protect the ordinary tax payer and to make sure we get the right tax from the right people. When I reduce tax, I want to do so in a way that is fair for all businesses and fair for all hard-working British men and women.
  Government borrowing has been steadily coming down for three years. This Budget will ensure that Government borrowing keeps coming down. I expect the public sector borrowing requirement to be £26½ billion this year. That will mean it has halved as a share of GDP over the past three years. I expect it to come down to £19 billion next year and to be broadly in balance by 1999–2000.
  That pattern of declining borrowing is very much better than the one I had to put in my summer economic forecast last July. Since I produced the summer forecast, which was debated in the House last summer, I have reduced my expectations for next year by £4 billion.
  A large part of that improvement is the result of the measures that I am taking in this Budget. This Budget tightens fiscal policy. The reason why I am tightening fiscal policy now is to reduce the risk of having to tighten monetary policy excessively as I set policy to hit my inflation target.
  My decisions are always taken solely in British interests to benefit the British economy. But my decisions in this Budget also mean that, by happy coincidence, we will meet the Maastricht debt and deficit criteria in 1997, and we will do even better than that in the medium term. [Interruption.] I do not need any assistance from nationalists. It is a happy coincidence for everyone because those criteria make sound economic sense, as we all agree, with or without a single currency.
  Our option whether to join or stay out of a single currency, based on British national interest, remains a genuine choice. We will qualify, but we will choose in the next Parliament when the time comes.
  This Government is the champion of sound public finances, of limited government and of low taxation. Our combination of low taxation, low public spending and low debt is the best in Europe. We intend to stay in that enviable position. We can do that only if we continue to bear down on public spending.

  PUBLIC SPENDING
  In the 1980s, across the rest of Europe, the modern state remorselessly took an ever greater share of almost every nation's wealth. We in Britain held the line. The proportion of GDP going into Government spending in the United Kingdom is now 8 per cent. lower than the average in the rest of the European Union. If our spending had risen to continental levels we would now have to raise nearly £2,300 a year more in tax from every British household.
  I have set a target of 40 per cent. or below for the share of national income that goes on public spending. Making progress towards that desirable target means tough
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  decisions on public spending every year, but this year we have had to cope with the costs of BSE, and with larger than expected increases in the costs of social security, as more and more elderly and disabled people receive benefits to which they are entitled.
  Against that background, we had to keep the rest of public spending within the tightest possible limits, in order for us to spend more on the public services that people really care about: education, combating crime and our national health service. This country has been well served by my right hon. Friend the Chief Secretary who has successfully tackled that problem. Despite all the difficulties, we have been able to reduce public spending plans over the next three years by a further £7 billion in this Budget. Public spending next year will be more than £24 billion lower than was projected when I became Chancellor—a reduction of 7 per cent.
  We have been able to reduce spending plans because we have lower inflation, falling unemployment, a continuing campaign for efficiency in the public sector, sensible policy priorities and a Government capable of taking decisions about those priorities. On top of that, the Government's relentless drive against fraud and the abuse of tax and benefits will be stepped up another gear.
  Next year, we will meet our target of 40 per cent. for the share of national income that goes on public spending. In last year's Budget I said that I would make 40 per cent. in 1997–98. This year's Budget secures that important goal. So long as we keep—as the next Conservative Government will keep—the growth in public spending down below the growth in the economy, we will go below that.

  EDUCATION
  Education is the key to the future of any prosperous and civilised society. It helps to determine how well the economy performs in the long run. It also helps to determine the sort of citizens that we have and the sort of society that we have. The Government are committed to raising standards in education.
  As a result of last year's Budget, £878 million extra was provided for schools this year. We are giving schools priority again in this Budget. Planned expenditure on schools will rise by another £830 million next year. A large proportion of that money—£633 million, an increase of 3.6 per cent.—will be channelled through the local authorities. I see the hon. Member for Sheffield, Brightside (Mr. Blunkett) shaking his head. Perhaps the money did not reach his schools; I am not as familiar with Sheffield as he is.
  Judging by last year's experience, some local authorities are reluctant to pass on the increases in their standard spending assessment to their schools, preferring to spend the money on other areas. It is no good local authorities campaigning for more spending on education in the autumn and then spending their money on other things in the spring. Parents will want to make sure that their local authorities spend money on the things that they want for their children: good teachers and better equipped schools. I hope that the hon. Member for Brightside makes the same efforts to ensure that Sheffield passes the money on, if it did not last year.
  A good school has a value far beyond its buildings; but the quality of school buildings in which our children are taught is still very important. We have a long way to go

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  in the post-war era to get up to the standards that we require. We will be providing an extra £50 million on top of the previously planned provision for more capital investment to improve the fabric of our schools.
  By setting high standards for schools and increasing choice for parents, this Government are delivering better trained and better qualified young people. Almost one in three young people now goes on to university, compared with one in eight in 1979. And our universities and colleges maintain some of the highest standards in the world despite the pressure on their unit costs that this unprecedented explosion of opportunity for young people has produced.
  But I recognise this pressure—I have heard about these pressures—and I also realise that our universities and colleges make an important contribution to the economy.
  My Budget therefore includes £280 million to boost further and higher education over the next two years. This includes an extra £20 million next year for science equipment. We want to ensure that the British science research base remains the best in the world, which it certainly is at the moment.
  As my right hon. Friend the Secretary of State for Education and Employment announced in September, the Government are planning a substantial sale of student loans debt. It makes no sense for the Government to keep a huge portfolio of loans on their books when the private sector could manage it more effectively and is better placed to cope with the risk. I emphasise that the sale will have no effect on the terms on which students can get loans.
  The substantial reduction in the figures for education that Members will find published in the new spending plans is more than accounted for by the sale of this debt. As I have just described, we will actually spend more on the things that really matter—educating our children and young people.

  COMBATING CRIME
  This Government believe that effective law and order are an essential part of making Britain a nation at ease with itself. A good quality police service and an effective system of criminal justice are very high on the list of this Government's priorities.
  When it comes to spending on law and order this Government have a record as long as your arm. [Interruption.] Spending more money on a much better police service and a much better criminal justice system—I plead guilty as charged, if that is indeed the charge against the Government. Spending on law and order has already doubled in real terms since 1979.
  Provision for combating crime—police and prisons—will now rise by another £450 million next year. Our plans provide for 2,000 more police constables by the end of next year. We are well on course to meet the Prime Minister's pledge for 5,000 more constables.

  HEALTH
  Our British national health service, with treatment free at the point of delivery, is the envy of the world. It is the best system of health care that I have ever encountered. In every modern civilised society the demand for better health care, for new techniques to save lives and improve
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  our quality of life grows constantly and remorselessly. This Government completely understand that. That is why we have increased spending by some 75 per cent. in real terms since 1979.
  That is why the Prime Minister has pledged on our behalf more resources for the national health service in real terms every year, throughout the next Parliament—a pledge which, to my continual mystification, the right hon. Member for Sedgefield (Mr. Blair) has not yet brought himself to match.
  We are also spending that money better. We have reformed the NHS so it is much better managed and much more efficient. It is no good opposing these improvements, because when waste is reduced, more can be directed to higher quality patient care. This means that patients get more treatment and care out of every extra pound that we spend.
  For next year, we will increase current spending on patient services in the NHS by £1.6 billion, or 2.9 per cent. in real terms. The real increase in current spending for hospitals next year over and above inflation will be 3 per cent.
  On top of this, private finance initiative investment will play an increasingly important role in providing new health care facilities. The PFI contract for the Norfolk and Norwich hospital scheme, worth close to £200 million, was signed yesterday, and others will follow. [HON. MEMBERS: "Oh."] I am grateful to my right hon. Friend the Secretary of State for Health for not signing it tomorrow, but I do not think that he had the Budget in mind. There are many in the pipeline—[HON. MEMBERS: "Oh."] He had the people of Norfolk and Norwich in mind and the efficacy and investment in our national health service. PH investment in the NHS will reach some £900 million over the next three years on top of the increased public spending I am announcing. I think that the Labour party has at last belatedly become converted to that source of investment in our great national health service.
  The NHS will continue to grow and continue to improve. We are totally committed to the national health service as a public service providing high quality up-to-date treatment, free at the point of delivery.
  By our decisions on public spending, we prove that the NHS remains at the top of the Government's priorities. The NHS has been safe in our hands, it is safe in our hands and it will always be safe in our hands.

  OTHER PROGRAMMES
  This year's spending round was as tight as any that I can remember—I keep describing it as eye-wateringly tight—but we never lost sight of our objective, which is to sustain and improve the key public services that the British public care about: education, combating crime and our national health service. In part we have achieved that by increasing efficiency within the priority services, but inevitably we have also had to find savings in other programmes. [HON. MEMBERS: "Whisky."] You will find out in a minute.
  Falling unemployment and lower inflation has helped to reduce the social security and employment programmes. We are also continuing to transfer activities to the private sector where this is more efficient as it is for student loans. We have refocused the housing

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  programme to encourage the use of private finance and the transfer of the local authority housing stock to the private sector. We are stepping up our programmes against fraud. We are continuing our remorseless squeeze on the costs of bureaucracy itself. And we have looked in every department for ways of achieving our objectives more economically. With efficiency savings, most departments will be able to deliver their programmes next year, but with less public money in real terms.

  PRIVATE FINANCE INITIATIVE
  People pay their taxes in order to get good quality public services, not to accumulate state-owned buildings. This simple truth has led to the development of the private finance initiative.
  The PFI helps to square the circle of sound public finances and growing demand for better and more modern public services by tapping the expertise and the resources of the private sector.
  A year ago we had agreed £1.5 billion worth of deals—now we have agreed £7 billion, and we are on course to double that by March 1999. Time and again the taxpayer is getting better value for money, through new road schemes, new prison services, and information technology projects. And reforms to local government rules are bringing the PFI into new areas, notably schools.
  London is currently experiencing a transport investment boom under the PFI: the channel tunnel rail link, Thameslink 2000, the docklands light railway extension, and the A40 and A13 improvements. This is in addition to conventional public and private capital spending on the Jubilee line extension, the Heathrow express and the new A12-M11 Hackney link. Investment in London Transport is now running at 50 per cent. in real terms above the average for the 1980s. London will soon become one of the biggest construction sites in the country. As a defiantly provincial Nottingham man, I can only say that I hope that London will be even nicer when it is finished.
  Adding traditional capital spending to PFI investment, publicly sponsored capital spending in the United Kingdom in the next three years will be substantially higher in real terms than it was in the 1980s.

  SOCIAL SECURITY
  One third of all public spending goes on social security. Our social security system is there to provide an income when people cannot earn because of sickness, disability, unemployment, caring for relatives or old age. People on the left and the right of politics continue to search for a radically different and better way of meeting those needs in our wealthy nation. I have studied many of their proposals closely and so far, I am afraid, nobody has yet come up with anything remotely sensible or practicable.
  Until people come up with a radical alternative, if they ever do, our welfare safety net must remain affordable. We must not allow the welfare state to damage the incentives of individuals or businesses in the private sector, because it is the wealth-creating enterprise economy that sustains our entire social security system.
  In the post-war period social security has grown in real terms by around 5 per cent. each year. In recent Budgets we have taken action to bring that growth under control. We now expect future growth of 1½ per cent. a year—well below the growth of the economy.
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  Year after year, this Government have also vigorously attacked fraud and reformed benefits to target them on those in genuine need. The measures that I now propose in this Budget intensify those efforts yet again.
  We plan a further move to align the benefits paid to lone parents and couples with children, because both care for children. From April 1998, new awards of family premium and child benefit will be the same in value for lone parents as for couples. We are introducing a number of measures on housing benefit and council tax benefit to ensure that those on benefits do not have a more comfortable life style than some of those who are supporting themselves on modest incomes. The contrary would be unfair and unwise. Full details will be made available later today by my right hon. Friend the Secretary of State for Social Security who, with your permission, Mr. Deputy Speaker, will speak later in the Budget debate.
  In my Budget two years ago, I announced a whole package of measures to help the unemployed get back to work—from improvements to the family credit system to national insurance holidays for employers taking on long-term unemployed people. Those are contributing to the steadily improving jobs position.
  In this Budget I am providing another £100 million worth of new money for new measures mainly targeted on people who have been unemployed for two years or more. First, they will be required to attend a compulsory programme of interviews with the Employment Service to give them a helping hand to compete in our ever improving market for jobs.
  We are expanding Project Work pilots to a further 28 areas. That will create tip to 100,000 new opportunities, on a programme with a good track record for getting long-term unemployed people back to work. The pilots have been successful.
  I can also announce pilots for a new scheme called Contract for Work. Private contractors will help people to find work. Those firms will be paid by results. As with Project Work, if the scheme works better than the existing approach, we will expand it. We have drawn on some American experience. We will adapt it to Britain and, if it works, we will widen its application. We must tackle the problem.
  Dependency on welfare impoverishes us all. The welfare system should provide a safety net. It must provide the support that a caring society wants to give to our less fortunate fellow citizens. But the welfare system must never be allowed to become a way of life. We do not want our social security system to be undermined by resentment.
  We have to take these careful measures. We must move people from dependency to responsibility for themselves and their families, because we are serious about protecting those in genuine need and we want to go on delivering that protection for the future.

  SPEND TO SAVE
  We want to combine a strong, affordable welfare system with a successful low-tax economy. That means that when we spend money on social security, it must go only to those who need it. It also means that when we levy taxes, we must make sure that they are paid and not evaded by those who ought to pay them.
  As part of our continuing fight against tax and benefit fraud and tax loopholes, I am introducing a package of measures called "spend to save". That involves the

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  planned spending of money, carefully targeted to save much more money for the general public, and to raise revenue. There will be more money next year to clamp down on benefit fraud. There will be more visits and checks on benefit claimants in high-risk groups, and the information that we already have on benefit claimants will be used more effectively to catch cheats.
  Inland Revenue tax experts will be redeployed to investigate even more rigorously how some big, sophisticated companies seem to pay so little tax. They will make sure that companies are paying what they owe, and what we intended they should owe. In short, we intend to do more about companies being "economical with their tax".
  There will be more resources in the Revenue and Customs to stem the growth of the shadow economy. Tax cheats put law-abiding small entrepreneurs out of business, and we all lose from that. There will be more Customs and Excise officers to tackle value added tax and other tax abuse, including yet more to target the smuggling of alcohol and tobacco.
  The "spend to save" package will cost £800 million over the next three years to secure, in a well-planned and measured way, revenue and expenditure savings of well over eight times that amount—£6.7 billion. These measures are additional to the effective steps that we have taken previously.

  RUNNING COSTS
  "Spend to save" protects the ordinary taxpayer and the people in genuine need of benefits. It is certainly not about more bureaucracy or more red tape.
  We remain a Government committed to deregulation, and we are committed to a more efficient civil service. We have cut overall central Government Departments' running costs by 8 per cent. in real terms since the start of this Parliament and we are going to reduce them by a further 7 per cent. by the end of the decade. Civil service numbers are already below half a million, and we expect this fall to continue.

  TAXATION
  The first duty of Government is to make sure that people can live their lives as they want and that businesses can flourish. People must have the opportunity of a good quality job to go to, a good standard of living, good schools and hospitals, and safe streets to live in. It is only when those essentials are secure and only when the Government have made sure that they are not borrowing more than they should, that a responsible Government can start to think about tax cuts.
  Last year I cut taxes paid by the ordinary family and this year I am able to cut a little more. I think that the message I have repeated over recent months has now been understood. If there are to be tax cuts, in my opinion they must be for keeps. That means that they must be backed not only by sound spending decisions but by a sound fiscal judgment.
  Consumer spending is strong and inflation remains in check. But a fiscal stimulus to the economy at this stage could be just as damaging as letting go of monetary policy. So, in setting my Budget, I have struck a careful balance.
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  I want to cut taxes, but first I have to continue my drive to secure the tax yield. I want to make sure that the tax due is turned into tax paid. The balance of the tax burden must be distributed sensibly and fairly and it must not distort decisions or competition.
  I am introducing a number of measures which will help us to achieve this. I am plugging some loopholes to raise revenue, I am ending some tax reliefs that have done their job to raise revenue and I am adjusting some indirect tax rates.

  SECURING THE TAX BASE
  Even though VAT revenues have revived in recent months, they are still coming in significantly below what was expected last year. This Budget includes a crackdown on some of the rather ingenious wheezes that have sprung up to get around paying VAT. The measures I am announcing will raise £¾ billion in revenue next year, but they also protect a further £1½ billion a year of existing revenue from further attack from ingenious accountants, acting lawfully and acting to take our revenue.
  Customs will restrict access to special VAT schemes for retailers. We will also tighten up the rules of VAT relief schemes for bad debts and the option to tax commercial property to prevent widespread abuse of these reliefs. I also propose to take steps against retailers who reduce their VAT bills when selling insurance with their products.
  We have already announced a three-year limit on repayments of VAT claims. This was a sensible precautionary measure in the national interest—not just that of the Exchequer. Recent high-profile court cases have revealed the potential exposure of the Exchequer to enormous claims for tax going back to when VAT was first introduced. No responsible Government could leave the Exchequer and, ultimately, all taxpayers exposed in that way. Government needs to strike a balance between what is fair to the individual taxpayer, and what is fair to the whole body of other taxpayers. The three-year cap that I have announced strikes that balance.
  But one feature that attracted particular criticism from not only accountants and their clients but others was that Customs and Excise retains the right to claim underpaid tax going back six years. That argument was rather disingenuous, because Customs and Excise does not claim underpaid tax on unexpected changes to the interpretation of the law when they go against taxpayers. However, Government must not only be fair—it must be seen to be fair. I have, therefore, decided that Customs' right to claim underpaid tax, in cases where no fraud or malpractice is involved, should be restricted to three years as well.
  I will be releasing today details of a package of measures to stamp out tax abuse in a number of areas, including leasing transactions, the abuse of foreign tax credit rules and paying employees in their own company's shares. I am sure that they will be accepted by the House and others as necessary and sensible measures to stem the growing loss of tax revenues, and thereby to protect the ordinary tax payer. I will not tolerate tax abuse. A number of those measures are being introduced—subject to the Finance Bill becoming law—with effect from today.
  Special tax reliefs can be a powerful tool. They can play an important pump-priming role, and encourage companies and individuals to change their behaviour in a

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  way that benefits the wider economy. But by their very nature, they need to be used very selectively. We owe it to the ordinary taxpayer to keep each and every special tax relief under constant review to determine whether it is still justified, or whether it has now served its useful purpose.

  PROFIT-RELATED PAY
  The tax relief that the Government introduced in 1987 to promote profit-related pay schemes has been a success. It has played a key role in reinforcing the Government's strong beliefs that employees' rewards should depend on the success of the business for which they work.
  I have always believed, and have argued publicly for many years, that in a modern enterprise economy people's pay should be closely linked to the performance of the business for which they work. The best way for businesses to motivate their staff is to let them share in the rewards of success. I am delighted that tax reliefs have helped to get that idea accepted so widely.
  Tax relief on profit-related pay was always intended to be a pump-priming measure, and it was introduced in very different circumstances. In the 1986 Green Paper, Nigel Lawson said:
  "There is considerable inertia to overcome, so it might make sense to offer some temporary measure of tax relief."
  Profit-related pay is now firmly established as part of British businesses' pay policy. It is one of the reasons for our success. More than 3.7 million people are in schemes. Ten years on, the temporary tax incentive has successfully served its pump-priming purpose.
  I can no longer justify the ever increasing cost of the tax relief to the 22 million taxpayers who are not in profit-related pay schemes. We cannot permanently divide the work force into groups of people who pay different levels of tax on the same earnings depending on whether the firm that they work for is in a scheme or not. The aim of the relief—a widespread use of PRP—has been achieved, and I would rather make faster progress on lower taxes for everybody. We have changed the culture.
  Good managers in today's enterprise economy no longer need a tax relief to know that pay should be linked to their firm's performance. Pay linked to profits produces it own rewards on the bottom line in a thriving economy.
  I shall describe to the House how the Government will start to withdraw this special tax relief. I intend to do that gradually, so I must ensure that businesses which need to adjust their pay packages and their sharing of the rewards of success have ample time to make those adjustments.
  The upper limit of pay attracting the relief will remain unchanged at its present £4,000 until 1998, which means that no one will be affected before then. [HON. MEMBERS: "In time for a general election."] But during the lifetime of a Conservative Government. It will then be progressively reduced until the year 2000, when the relief will be withdrawn altogether.

  CAPITAL ALLOWANCES FOR LONG LIFE ASSETS
  Investment is vital to our recovery, and business investment is now growing strongly. The tax system recognises investment through capital allowances. These allow the cost of investment to be written off against tax bills, frequently faster than it is written off in commercial accounts. But within that system, for plant and machinery with a long lifespan, the rate at which costs can be written
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  off for tax is far more generous than for other types of investment, and bears no relation to the useful economic life of the asset. This is an unjustifiable distortion in the tax system in favour of particular types of business and investment.
  I propose changing the capital allowance for plant and machinery with a life of more than 25 years to 6 per cent. on a reducing balance basis. That will spread the tax relief more evenly over the average life of these assets. Groups spending less than £100,000 a year on such assets will be exempt. This will mean that the vast majority of small companies will not be affected. Ships and railways will also be exempt.

  OIL PRODUCTION
  I also propose to withdraw the 100 per cent. corporation tax deduction for the intangible costs of drilling most production oil wells.
  OTHER TAX CHANGES
  The Government recognise that low marginal tax rates on income are a spur to hard work and enterprise. Taxes on spending do less damage to effort and enterprise than taxes on income, but the balance of the taxes that we do impose on spending must be right, and I am making some changes to taxes which help to move towards a better balance for the tax system as a whole.

  INSURANCE PREMIUM TAX
  I propose to increase insurance premium tax, which applies to most general insurance, to 4 per cent. Three quarters of all insurance—including life insurance, and other long-term insurance—will remain exempt. Insurance remains undertaxed for consumers compared with other services in this country.
  The introduction of the tax—I made it a very low rate—did not harm the healthy insurance industry that we have. Most companies absorbed the tax, and some premiums actually fell for a time. Even after this further modest change—which I think is lower than many people expected—the overall rate of insurance premium tax in the UK remains very low, lower than in almost any other European Union country.

  AIR PASSENGER DUTY
  Air travel has also been undertaxed, because it has proved difficult—still proves difficult—to get international agreement to tax its fuel. The rates of air passenger duty are to be increased. The £5 rate on flights to most European countries will be increased to £10, and the £10 rate on flights to the rest of the world will be increased to £20. Those increases will not come into effect until 1 November 1997. [Laughter.] I realise that we are all thinking of a forthcoming election, but the reason why the Opposition cannot produce a responsible economic policy is plainly that they are obsessive about it. The very good reason for delaying until November 1997 is to give tour operators who have already sold their packages time to reflect the new rates in the prices that they publish in their holiday brochures. I announce necessary things before an election. That is responsibility; that is what is totally lacking among Opposition Members, who seem to propose to announce nothing whatever of any substance, apart from a windfall tax, this side of the election.

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  Business travel is soaring, and the holiday business is booming at the moment in prosperous Britain. This modest change will not stop it booming in future prosperous years. About 40 per cent. of the revenue raised by passenger tax is borne by overseas visitors.

  VEHICLE EXCISE DUTIES
  I am making the same changes to the main vehicle excise duties this year as I did last year. The cost of a car tax disc will go up by £5, around the rate of inflation. The cost of a lorry tax disc will be frozen for the seventh year in succession.

  ROAD FUEL DUTIES
  I firmly believe that motorists should bear the full costs of driving—not only wear and tear and congestion on the roads, but the wider environmental costs. Even those of us who frequently have to drive—and, contrary to rumours that Ministers always travel in limousines, that includes most hon. Members—can take steps to cut fuel consumption and we all ought to consider carefully the use of our car.
  I intend to stick to my 1993 Budget commitment to raise road fuel duties by an average of at least 5 per cent. each year in real terms. In line with this, I am raising the tax on all petrol and diesel by 3p per litre from 6 o'clock tonight. Those tax rises will encourage fuel efficiency and help to control harmful pollution.

  AIR QUALITY PACKAGE
  I am glad to say that pollution from vehicles is already coming down, helped by tax measures in previous Budgets. The tax measures that we took to encourage unleaded petrol were a huge success. It now accounts for two thirds of the petrol market. I want to go further in this Budget for green purposes or, to put it more sensibly, to attack pollution in cities and to improve air quality by effective steps to reduce particulate emissions—the smoke produced by diesel engines.
  In recent years, new evidence has come to light strengthening the health arguments for reducing particulates. This pollution is being reduced, but we all want to see it being reduced further and faster.
  Ultra-low sulphur diesel is cleaner than ordinary diesel and it is slightly more expensive to produce, so I want to create the conditions where ultra-low sulphur diesel can cost the same at the pump as ordinary diesel. I have just said that I am increasing the tax on diesel by the same amount as petrol. I plan to reduce the duty on ultra-low sulphur diesel by 1p per litre relative to ordinary diesel, when I get the necessary international agreement.
  I also want to encourage high-mileage vehicles in our towns and cities to switch to cleaner gas power. Last year's Budget changes broadly equalised the pump prices of liquid gas and petrol. From 6 o'clock tonight, I am reducing the duty on road fuel gases by a further 25 per cent.
  I also intend to reduce vehicle excise duty by up to £500 for lorries meeting very stringent emissions standards from early 1998. That will give an incentive for lorry owners to fit particulate traps or to convert to gas power. We will be consulting on the practical details of those changes.
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  I believe that this air quality package will significantly speed up the reduction of urban emissions of particulates, helping us to meet our air quality targets for 2005 and beyond. We intend to ensure that the economic growth that we are achieving faster than others in this country is consistent with a healthy environment and with sustainable development as we become one of the most successful economies in the western world.
  In my 1993 Budget, I gave a commitment to raise duty on tobacco by more than inflation each year. I believe and accept that that is a fair and effective way to hammer home the message that smoking can seriously damage one's health. So far as I am concerned, this announcement is necessary masochism in the wider public interest.
  From 6 o'clock this evening, the tax on a packet of 20 cigarettes will increase by about 15p, on a packet of small cigars by about 7p and on a packet of pipe tobacco by about 8p, but I am limiting the increase in the duty on hand-rolling tobacco to the rate of inflation. Hand-rolling tobacco is proving to be by far the easiest tobacco product to smuggle, although it represents a very small part of the tobacco market.
  Mr. Terry Lewis: What time do the shops close?
  Mr. Clarke: Not yet.

  ALCOHOL
  I am aware of the serious problem that cross-border shopping and smuggling of alcohol causes our drinks industry in Britain. I have already announced that customs is further stepping up its efforts to catch smugglers.
  Last year, I was able to freeze the duty rate on beer and wine. This year, it will remain frozen. The proportion of tax on the price of a pint in the pub is now at its lowest level for 30 years. For some of us, that helps to keep our small cigars affordable—[Laughter.]
  Last year's cut in the duty on spirits was the first cut that any Chancellor had made for 100 years, and I was tempted to maintain a striking rate of once every 100 years. But I am sure that the industry will be glad to know that it will not have to wait so long this time. From 6 pm tonight, the tax on whisky, gin and other spirits will fall by another 4 per cent., which is worth 26p. The reduction in the rate on spirits boosts an important industry in the United Kingdom, and it will also reinforce last year's signal to overseas authorities not to discriminate against our products. Only smugglers will regret that we are slowly moving our duty on spirits nearer to the continental level.
  From 1 January, the tax on alcoholic soft drinks will be increased by over 40 per cent., which will put up the price by between 7p and 8p a bottle—for those who have not yet tried them. That increase will meet public concern about the attraction of the "alcopops" for under-age drinkers, but it will also attack a distortion of competition by bringing the tax broadly into line with that on beer. The House will notice that I have considered carefully the balance of my overall package on this matter, and I have not yet been converted to a bubble-gum flavoured "alcopop"—[Laughter.]

  BUSINESS
  Nothing matters more for business than a stable economic environment—low interest rates and low inflation—and businesses throughout Britain are benefiting from the healthy sustainable growth in the economy that I have described today.
  As I promised in my last Budget, there will be, from April 1997, a cut in the main rate of employers' national insurance contributions, to 10 per cent. The cut will be paid for by the proceeds that we are receiving from the landfill tax. A tax on waste is cutting a tax on jobs, and it will benefit employers in Britain and make it even cheaper to create new jobs in our growing economy. Our overheads on jobs are already less than half those in Germany, France or Italy. I am determined that we must keep that advantage over our competitors on the continent, where the creation of new jobs, in the rest of the European Union, is overregulated and overpriced. That fact is another practical reason for being confident that our unemployment will keep falling.
  In this Budget, I propose to keep the three intermediate thresholds for employers' national insurance contributions where they are now. I propose to increase—by £10 and £1, respectively—the upper and lower earnings thresholds for employers' and employees' national insurance contributions.
  In this Budget, I also want to deal with a particular concern of our small businesses, upon which so much of our future economic prosperity depends. I think that small businesses are most concerned about the burden of non-domestic rates.
  The uniform business rate is a fixed cost which can rise each year beyond the control of the manager of any business, and it hits the small business hard. Since the last revaluation of business rates, I have repeatedly slowed down the increase of rates for those businesses whose rates have had to go up. No business property has seen its rates go up by more than 7½ per cent. above inflation in any one year. But I want to do more than that; it is not good enough. I have decided to freeze next year's rates bill for all small businesses whose rates would have gone up. Small properties whose rates are falling will have those reductions accelerated, which will benefit over 1 million small business properties, by up to £130 a year.
  I want to go further. A freeze is a significant step that I can make right away, this year. We have already reduced business rates for rural village shops. But I realise that the current system of business rates bears particularly hard on smaller businesses, for which it represents a much bigger proportion of total costs compared with their large competitors. We must therefore move on as soon as possible to make more changes in the system to recognise this and to redistribute the burden more sensibly between smaller and larger businesses. My Budget next year will be a convenient opportunity to proceed with that.

  INHERITANCE TAX
  The Government are committed to reducing and then abolishing capital gains tax and inheritance tax. I repeat those commitments. But we have always said that we will cut these taxes only when we can afford to do so. This is a responsible Budget which is protecting future growth
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  and prosperity by putting the public finances into a healthier state. We will not be able to make progress on both these taxes this year.
  Mr. John Prescott: Next year.
  Mr. Clarke: The right hon. Gentleman can come back next year and discover from the same seat that he is now occupying.
  I am pleased to announce that we can take a further significant step towards abolishing inheritance tax. Inheritance tax is nowadays a penalty on thrift, independence and enterprise. It is a growing anachronism.
  Lloyd George's maxim that the "the most convenient time to tax the rich is when they are dead" no longer holds. Inheritance tax today is largely paid by people of modest means who either cannot or simply do not make careful plans to avoid it. [HON. MEMBERS: "Modest!"] Modest means in the opinion of all those outside the hard core of the labour movement, that is.
  Last year I made significant progress towards our commitment. In this Budget I will build on that by raising the value of the inheritance tax threshold to £215,000.
  Mr. Dennis Skinner: I read that this morning.
  Mr. Clarke: The hon. Gentleman appears to know that from this morning. Is he also aware that the Government have raised that threshold by 40 per cent. in only two years?

  TAX REWRITE
  In last year's Budget I announced a project to rewrite Inland Revenue tax legislation in plain English. That is a tall order. The project is as ambitious as translating the whole of "War and Peace" into lucid Swahili. In fact, it is more ambitious. I am told that "War and Peace" is only 1,500 pages long. Inland Revenue tax law is 6,000 pages long and was not written by a Tolstoy. We have consulted extensively on how the project should be carried out, and I am glad to say that there is wide consensus. The Inland Revenue will publish the plans and arrangements shortly after the Budget.
  The aim is to prepare a series of rewrite Bills, the first of them to be ready for enactment in the 1997–98 Session. My noble and learned Friend Lord Howe has produced a thorough and helpful report on how Parliament might handle those Bills. We endorse his broad proposals, and invite the Procedure Committee to consider how the House is going to handle the Bills in a sensible fashion. I can announce that my noble and learned Friend Lord Howe has agreed to chair the steering committee that will oversee the rewrite project.
  The project will bring the benefits of clarity and certainty to businesses and ordinary taxpayers. It has been widely welcomed and deserves the continuing support that it has enjoyed in all parts of the House.

  INCOME TAX
  The Government have led Britain towards our clear goal of a low-tax economy in which private enterprise has the incentive to generate jobs, investment and wealth to make people and their families more prosperous. We are

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  moving towards a low-tax economy in which individual living standards continue to rise and the Government can afford the excellent public services that people want.
  Low direct taxes are the most effective way to encourage enterprise and hard work—a message to which we have not converted Labour Members, but one that they no longer dare to deny. Under this Government, those who do an honest day's work and those who take entrepreneurial risk will keep more of what they earn and save by their own efforts.
  This year, people have taken more heed of my speeches on the overriding priority of securing future prosperity and jobs and financing key public services. Sensible people already expected my cuts in direct taxation to be modest before they read the one leak and many guesses this morning. They know that their well-being depends on lasting growth and more jobs and that living standards rise from a combination of steadily rising incomes in a successful economy and steadily lowering taxes. Tax cuts matter a lot to low-paid people and to men and women in ordinary jobs.
  I announced my income tax cuts last year as a return to our tax cutting agenda and, for the second year in succession, as a result of all the steps that I have announced, I can afford to deliver an instalment of that agenda. The choice is how best to do so. It is the old dilemma between thresholds and rates. Today it is between The Guardian, the Daily Mirror, The Independent or The Sun.
  I want to ensure that tax does not start to be paid at too low a level of income and I want to improve work incentives. Therefore, I propose to raise the threshold below which no income tax is paid at all.
  In this Budget, I am making an increase in the basic personal allowance of £280. That is 3½ times more than necessary to cover the rate of inflation. It will also ensure that each and every person who pays any income tax at all will get a direct benefit out of the Budget.
  I am also increasing the married couple's and related allowances by £40, maintaining the extra tax allowance to all married couples. It will now be worth nearly £275 each year for married couples. The tax system does recognise marriage, contrary to popular belief.
  We also give a special tax allowance to blind people. This year, I am increasing that by the rate of inflation. I am also moving to put indexation of that allowance on to the same statutory basis as for the other income tax allowances. I also propose to raise the threshold above which people start to pay the 40p higher rate tax by £600.
  One of the Government's most important pledges is that we will move to a basic rate of income tax of 20p as soon as we can. We are proving that we can move towards the delivery of that promise and still maintain healthy public finances. Every step that we take makes that more credible and makes it more affordable to reach the ultimate goal to which we are getting tantalisingly near and which a Conservative Government will achieve. As a further step towards that, I propose to widen the lower rate band of 20p tax by £200—twice as much as is required to meet indexation.
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  That will mean that the slice of income on which a 20p tax rate is paid will have more than doubled during the lifetime of this Parliament. More than one in four of all taxpayers will now pay a marginal rate of tax at 20p in the pound.
  They are wide thresholds, so were the newspapers wrong? Am I indeed going to cut a penny off the basic rate of income tax? What the newspapers did know was that my control of public spending and borrowing and the responsibility of my Budget means that I can raise thresholds, widen the 20p band and also responsibly afford to reduce income tax as well. If I had put it all on tax rates, I could have taken 2p off the basic rate of income tax, but I preferred instead to raise personal allowances and widen the 20p band for those at the bottom end of the scale. In addition, I am able to reduce the basic rate of income tax by one penny to 23p in the pound.
  The small companies rate of corporation tax will be reduced to 23p in line with that, helping 400,000 companies. The main rate of corporation tax of 33p is already lower than in any other major industrialised country. I look forward to hearing what the Labour party says about the basic rate of income tax.
  Seventeen years of steady progress—so far—means that the basic rate of income tax is now a full 10p lower than the rate that we inherited in 1979. The standard rate is now the lowest for nearly 60 years—since Stanley Baldwin was Prime Minister and Wally Hammond scored a double century at the Oval.
  Another penny off the basic rate is a significant further step towards this Government's target of a 20p basic rate of tax. For more than 7 million people, our promise of a 20p basic rate is already a reality. I am bringing other income taxpayers ever closer to that reality. A basic rate of 20p is a realistic and attainable goal for the next Parliament. We shall not be content until we have completed the task of getting it down to 20p and every Budget that I have presented has shown step by step how we shall get there.
  With increases in real earnings and all the tax changes in the Budget, a family on average earnings will be another £370 better off next year over and above inflation. We said it last time and it happened. The same family will have more than £1,100 more to spend each year after tax and inflation than they did before they voted Conservative at the last general election. In 1992, the background was one of a worldwide slowdown, but now we are enjoying strong growth and rising living standards, and we shall enjoy more of the same.
  In November 1993, I promised that I would put Britain firmly on course for a sustained period of rising prosperity and falling unemployment, based on low inflation and healthy public finances. I have done what I clearly said I would have to do and I have delivered on those promises.
  The Budget cuts public spending next year by £2 billion, and it generates an extra £½ billion in revenue through "spend to save". It contains a balanced tax package—it includes tax cuts of £2 billion while it secures the tax base by £1 billion. Taken together, the effect of the Budget is to tighten fiscal policy and so protect healthy lasting recovery—and still achieve our target of cutting the basic rate towards our 20p goal.
  I am a man of the world: I realise that virtue does not always brings its own rewards. I am probably not a particularly virtuous Chancellor, but this virtuous Budget

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  will bring rich rewards—the rewards of economic success to the hard-working men and women who are now in the best economic circumstances for years. It will also bring rewards to the Government. We should never forget that good economics is good politics.
  This is not a Budget just for the next few months; it is a Budget for many prosperous years to come. It is a Budget that the Government will build on again in 12 months' time and I commend it to the House.

  PROVISIONAL COLLECTION OF TAXES
  Motion made, and Question,
  That, pursuant to section 5 of the Provisional Collection of Taxes Act 1968, provisional effect shall be given to the following motions:—

  (a) Spirits, and wines of equivalent strength (rates of duty) (motion No. 2);

  (b) Hydrocarbon oil (rates of duty and rebate) (motion No. 7);

  (c) Tobacco products (rates of duty) (motion No. 9);

  (d) Vehicle excise duty (increase in general rate) (motion No. 12).—[Mr. Kenneth Clarke.]

  put forthwith, pursuant to Standing Order No. 50(2), and agreed to.
  Mr. Deputy Speaker: I now call on the Chancellor of the Exchequer to move the motion entitled "Amendment of the law". It is on that motion that the unified Budget debate will take place today and on succeeding days. The remaining motions will not be put until the end of the Budget debate next week and they will then be decided without debate. After the Finance Bill has been brought in, the House will be invited to dispose of proceedings on a motion dealing with public expenditure, which will have been debated along with the Budget resolutions.

Budget Resolutions and Economic Situations

  AMENDMENT OF THE LAW
  Motion made and Question proposed,
  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—

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

  (b) for refunding an amount of tax;

  (c) for varying any rate at which that tax is at any time chargeable; or

  (d) for any relief, other than a relief which—

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

  (ii) so far as it is applicable to services, applies to services of every description.—[Mr. Kenneth Clarke.]

  4.49 pm
  Mr. Tony Blair: We have heard a Budget that was very, very big on boasts, but let us look, one by one, at the facts of what the Chancellor of the Exchequer said. The one advantage of what has happened in the past 24 hours is that the Opposition are perhaps a little better prepared than normal on exactly what those facts are. We shall go through every one of the claims and test them out—first, tax. [Interruption.] I know that Conservative Members may not like to hear the facts, but they are going to get them from us, if not from the Chancellor.
  One thing that we now know for certain is that taxes will be higher at the next election than they were at the last. The Conservative party, which fought the election on the promise that it would cut tax, will, after all the changes that have been made today, leave the average British family £2,120 worse off in tax. The Chancellor announced a crackdown on tax cheats. I think that he should start with the Conservative party.
  There have been 22 Tory tax rises. Mortgage tax relief has been cut, the married couple's allowance has been cut—and not made up for by what he did today. National insurance has been raised, and not compensated for by what he did today. VAT was raised—we did not hear much about VAT, did we? It was as if that was never touched. The Chancellor said, of course, that the Conservatives have reduced the burden of tax. If one takes into account all the Tory taxes, the burden of tax is greater now for the average family than it was.
  On what we thought was coming, I was going to say that, as a result of the Budget, the Government have subtracted 2p from the equivalent of 7p that they have put on the standard rate of tax, which equals a 5p rise. I thought that that was going to be good enough, but that would be too generous.
  The other point that one notices when one goes through the facts is that the Government are back to their old Tory tricks. Let them confirm this: council tax, on their figures, is due to be put up by £4 billion over the next three years—a 6 per cent. rise. The Chancellor said that profit-related pay would not bite until next year, but will he confirm that some of the people on profit-related pay are low-paid workers, and that, when all the changes come

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  into effect, some of them will face a change in their income equivalent to about 8p on the standard rate of tax? We heard nothing about that.
  Insurance tax is also going up, airport tax is going up, there are measures on lone parents and there are measures on company cars. The record of the Tories over the years is that they give with one hand and take with the other.
  We may like to ask just how credible the Government's tax promises are. Days before the last election—in fact, in the Budget before it—the then Chancellor, the right hon. Member for Kingston upon Thames (Mr. Lamont), said:
  "I now turn to the question of value added tax. I have a very important announcement to make, to which I hope the whole House will listen carefully. I have no need, no proposals and no plans either to raise or to extend the scope of VAT."—[Official Report, 10 March 1992; Vol. 205, c. 761.]
  If they told those untruths then, why should we believe them now, no matter what they say?
  I thought that the most extraordinary point that the Chancellor made was about the great cuts in public spending that will come about as a result of the closure of loopholes and a more effective policing of the tax regime. I must point out that, when my right hon. Friend the Member for Dunfermline, East (Mr. Brown) used to talk about loopholes, the Chancellor said that the problem was that they did not exist, and that my right hon. Friend was living in an "Alice in Wonderland fantasy". Now, the right hon. and learned Gentleman's spending plans rest on such loopholes. He says, apparently, according to the press release, that there will be 2,000 extra Inland Revenue civil servants, who will be hammering down—
  Mr. Jerry Hayes: He has seen the press release.
  Mr. Blair: I am sorry, but these things have already been put out by the Government. Perhaps the hon. Gentleman is not aware of that. Perhaps he thinks that, although the Chancellor is able to say such things, we are not able to respond to them in any way.
  I should like to quote a figure to the House. According to the Chancellor, he is going to get £7 billion over the next few years out of the changes and—apparentlycracking down on tax avoidance and loopholes. First such loopholes are an "Alice in Wonderland fantasy"—now, the entirety of the Government's spending plans rest on them.
  The Chancellor says that borrowing will come down, but I should remind him of another promise that the Government made. At the last election, the Prime Minister proclaimed that he was going to cut the national debt, and that borrowing was going to come down. Perhaps the Chancellor recalls that, according to the Government before the last election, the borrowing requirement by 1994–95 was going to be zero. It was actually £44 billion. This year, on the original plans, it was supposed to be £6 billion—it is now £26 billion.
  Having won an election on the pledge that he would cut taxes and cut debt, the Prime Minister has doubled the national debt. As a result—again the Chancellor did not give the figure; he was being very coy about the figures he gave in certain parts of the Budget—and according to
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  the Government's figures, the interest payments on that debt will amount to £25 billion a year. That is more than we spend on law and order and on defence, and all from a Government who promised to cut taxes and cut borrowing.
  The Chancellor said that one of the other ways in which he would get the money is through our old friend the public finance initiative; that somehow, hey presto, the money—[HON. MEMBERS: "Give some details."] Conservative Members want me to give some details. Fortunately, I am able to do so again. Last year, the Tory party said in the Budget that it was going to build 12 new hospitals; the contracts would be signed, and one hospital a month would be signed off. I shall tell the House how many hospital contracts have been agreed: one—last night, by an extraordinary and mystical coincidence, just minutes before the Budget was due to be announced.
  The Tories say that there will be more money for health and education. They always say that; they said it before the last election. A newspaper report said:
  "Christmas comes early. Big increase for health. Lamont puts spending up £11 billion. Extra for health, transport and education."
  Let us look at the facts and what is happening in our national health service today. Waiting lists are rising again, 36 trusts are in deficit, there are 20,000 more managers under the Conservatives, and there are 50,000 fewer nurses.
  I have something more to announce to the House. We have the plans on NHS spending, and I find in them a very curious inconsistency with what the Chancellor said. He said that he was going to put up spending by almost 3 per cent. in real terms next year, but in the provisional plans for the two years after that, the increase is down to 0.2 per cent. and then 0.1 per cent.
  In other words, there will be a boost for election year, but the Department of Health's actual total spending in the year after next, which obviously includes some of the community care and personal social services, will in fact fall by 0.7 per cent. Even on health, there is an absolutely classic example of the Tories giving with one hand and taking with the other.
  Let me tell the House what else we learn from the press release from the Department of Health. I presume that we are allowed to have the press releases from the Departments. Let us look at the national health service press release.
  We did not hear anything about capital spending earlier. According to the press release, it will be down 10 per cent. According to the press release, prescription charges will increase. According to the press release, there will be a new maximum dental treatment charge of £330. What the Government will try to say is that, yes, they are reducing some health service spending, but they are transferring community care to the local authorities. But the local authority spending plans show that they will get no more money for those increases. So that is another complete Tory con trick.
  On education, we are told that there will be another £800 million. My memory may be playing me tricks, but I remember £800 million for education last year. What actually happened was that, because local authorities—
  Mr. Robert Atkins: Labour authorities.
  Mr. Blair: It was nothing to do with that. [HON. MEMBERS: "Yes, it was."] No, it was not. Because local authorities were already spending £800 million above their limit, the real increase was less than inflation. That again was just a Tory trick.
  Here are some more facts the House should know. According to our figures—if the Government want to dispute them afterwards, I am happy for them to do so—the Government's planned expansion of nursery education has been cut. There is a £56 million cut in the money allocated for the introduction of the voucher scheme. The training and enterprise council budgets—the training and skills budgets—will be cut in cash terms by £34 million.
  The Chancellor boasted about the money that will go to universities. They, apparently, will get a capital spending cut next year of £20 million. As for the Chancellor's spending pledges on crime and the police, the Government have not yet made good the pledge they made at the last election to put matters right. Their problem is not just the trade gap, the investment gap or the skills gap: it is a credibility gap.
  Most extraordinary of all, days before the last election, the Prime Minister said—it has some echoes of what we have heard today—
  "Vote Tory and the recovery starts on Friday."
  "The economy is transformed", he said.
  "What do we offer? A strong economy, free from the threat of inflation, in which taxes can fall."
  But within months, taxes went up, borrowing went through the roof and the pound was devalued by 20 per cent.
  However, the most remarkable quote of all from the Prime Minister comes after the election, not before it. He was interviewed, about a year later, by the Los Angeles Times and this question was put to him:
  "a year later, you find yourself under tire. What happened?"
  He answered:
  "Fiddle-de-dee!"
  I do not know why he said that, but he did. [Laughter.] It is a somewhat unusual sound bite. He continued—this is the important point—
  "I said … the day after we won the election, with a number of people around me: 'Within (he next 12 months the government will be the most unpopular we have seen for a long time!"
  The Prime Minister said that he said that the day after the election. I do not understand that. If the recovery was to start the day after the election, if taxes were going to come down, if the public debt was to be halved, if industry was to boom, why were the Government going to be so unpopular? I will tell the House why the Prime Minister said that the Government were going to be unpopular—because he knew the truth; but it was not told at the election.
  Of course, the final point the Tories make is the one they always make before every election. We hear it every time—that we are now living through an economic miracle. I remember them saying that in 1987 and in 1992, but they are not running on the record of a few months and the figures before an election—they are running on the record of 17 years.
  Over those years, we have had one of the lowest rates of growth of any major European country. We rank today ninth in the prosperity league. Even now, with the same
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  population and all the problems they have, the French economy is a third bigger than ours. We have fallen from 13th to 18th in the league table of living standards. Why? Because the Tories have never paid attention to the fundamental weaknesses that remain. They say they have learnt from past mistakes, but the recent inflation figures and interest rate rises show otherwise. We are now 11th out of 15 for interest rates and inflation. That is the old stop-go disease and the Tory boom and bust that we all recall.
  We lack the investment we need to make recovery last, and our manufacturing base is still too weak. The Chancellor did not tell us that, according to the figures, manufacturing investment is some 14 per cent. down on a year ago. Nor did he tell us that he has had to revise his figures down from 2.5 per cent. to 0.25 per cent. Productivity still lags behind that of our main competitors, and the trade deficit, according to the figures published today, is due to worsen. We still have a lot of ground to make up.
  We are not equipped for the future in education and skills. We are now 42nd in the education and skills league and that is not good enough. Cuts in the training budget will not help us to do better.
  The Government boast of their record in falling unemployment, but if we measure not those claiming benefit—of course, there have been 32 changes to the way that is calculated—but the number of homes with people of working age in which no one is working, the figure is one in five, or 20 per cent. That is worse than many of our main competitors. The Chancellor chose a very good time for him on the job statistics. Since the Prime Minister came to power, the number of jobs in the economy has fallen. Last year, which is supposed to be the year that the Government boast most about, the number of full-time male jobs fell.
  Nothing in the Budget tackles those fundamental problems. The Conservatives cut training, do nothing but provide a few make-work schemes for the long-term unemployed, make cuts in infrastructure, and give no help to investment. Without measures for the long term to increase investment, boost education and tackle structural unemployment, we will never have a recovery or prosperity that will last. That is why we say the Conservatives have failed.
  The Chancellor mentioned welfare dependency, but the Government have doubled welfare dependency in this country. That is their failure. They spend money and the welfare bills are up, but investment is down. They have had the colossal bonus of North sea oil and asset sales—£200 billion—and squandered it. The tax burden is up—except, of course, for the most wealthy. Why? Because they have always thought that, if they looked after a few at the top, the many would prosper.
  The Government thought that it did not matter how divided, fractured or unequal our society became. They thought that, if they satisfied the short term, the long term would look after itself. But it does not work like that. An under-educated people will never make a prosperous country. A society marked with gross inequality simply spends money cleaning up the consequences of it. If we do not invest now, we will never reap the reward for the future, and a nation run for the few will never be fit for the many. Those are the fundamental questions that the Budget does not answer.

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  The problem is not only that the Chancellor was wrong on many of his figures or that he has concealed many of the facts, but that, when those fundamental questions are met and have to be answered, the Conservative party has no vision for the future that can answer them.
  This is the last-gasp Budget of a Government whose time is up, who cannot be trusted with the future and who cannot make amends for the past. We have heard all their promises before. We heard them at the last election, and we did not believe them. The difference this time is that the country now does not believe them either. They cannot be trusted on tax. They cannot be trusted on the economy. They cannot be trusted on the health service. They cannot be trusted on education. They cannot be trusted with our future. The truth is that, after 17 or 18 years of one Government, there are no excuses left. There is nothing left for them to do, except go—and the sooner the better.
  5.9 pm
  Sir David Knox: In the past, when Neil Kinnock or the late John Smith was Leader of the Opposition, one could expect a reasonable and reasoned response to the Chancellor's Budget. Today, we have heard no more and no less than a shambling rant. The right hon. Member for Sedgefield (Mr. Blair) will have to do better if he is ever to become Prime Minister of this country. The right hon. Gentleman complained that the Chancellor gave with one hand and took with the other. Some of us remember Labour Governments: they took with both hands and gave nothing back.
  I congratulate my right hon. and learned Friend on his fourth Budget speech. Like his previous ones, it was well constructed, well delivered and commendably brief—especially in view of the fact that it was a unified Budget. I recall some long speeches from previous Chancellors who were dealing only with the revenue aspects of the Budget. Today, my right hon. and learned Friend has maintained the high standards that he established with his previous Budget speeches. Of course, he had a good story to tell. Since spring 1993, he has managed the economy with skill and sound judgment, and has proved himself to be one of the most successful Chancellors in the post-war era.
  I give a general welcome to the Budget and the measures it contains, but I must confess that I am more enthusiastic about some than about others. On the positive side, I feel that the Chancellor has got the balance between public expenditure and taxation about right. He has been wise to resist the silly suggestions from some quarters that he should introduce substantial tax cuts. That could have been done only if public expenditure had been cut significantly, or if he had gone on an irresponsible borrowing spree. He has done neither, and he was right to do neither.
  Instead, although he has kept overall public spending under tight control, he has been able to increase spending on health, education and the police in real terms in the coming year. At the same time, he has generously increased tax allowances, broadened the 20p band and reduced the standard rate of income tax. To my mind, the public want more spent on health, education and the police, and, when possible, they want a little relief from the burden of taxation. Like me, they will conclude that the Chancellor got it right today.
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  I am pleased that my right hon. and learned Friend has managed, once again, not to increase the duty on beer and wine, and that—more important in my view—he has reduced the duty on spirits, particularly whisky. As he did last year, he has faced up to the problem of cross-border shopping in the European Union, and he has attempted to bring some sense to the issue. I want to see uniform duties throughout the European Union, and the best way to achieve that is if we were to continue to reduce duty, and the other EU countries put theirs up.
  I welcome the relief on non-domestic rates. Small businesses in my constituency and elsewhere find that non-domestic rates place a heavy burden on their finances. They will all be pleased to learn of the relief, and I am sure that it will enable them to maintain better finances and be more prosperous.
  I am glad that my right hon. and learned Friend is to plug loopholes in the tax system, wherever they occur, because they undoubtedly cause much resentment. A great deal of highly paid accountants' time is spent trying to discover such loopholes. I do not know whether plugging them will make any difference to that activity, but one would like to think it will.
  I have some reservations about the increase in petrol duty. I represent a widespread rural constituency, where local people are highly dependent on motor cars. The continual increases in duty place a heavy burden on people who live in rural areas, and many such people are not especially well off. I understand the environmental arguments, but there is a balance to be struck. I hope that the practice of increasing petrol duty by 5 per cent. plus the rate of inflation will not continue indefinitely.
  In the modern world, the Budget is but one of the means by which the Chancellor tries to control the economy. There is a time lag of between 12 and 18 months—perhaps even longer—before measures announced in the Budget affect the economy. The consequences for the economy of today's Budget therefore will not become apparent for some time. By then, we will also be feeling the effects of those external factors over which the Chancellor has little or no influence, far less control, and which he can only try to anticipate at this stage.
  I wish that some of the Europhobes would remember that. They should recognise that we do not have complete sovereignty over our own economy and that we might have greater sovereignty if we were participating fully within the European Union.
  Although my right hon. and learned Friend's Budget judgment is about right, we shall not know for certain for about 18 months. What is certain is that he has been able to introduce his Budget in more favourable circumstances than any of his post-war predecessors was able to. That was also the case last year, and in 1994. All the economic indicators are today pointing in the right direction: we have steady economic growth, low inflation, falling unemployment and a satisfactory balance of payments. I emphasise that last factor, because, up until the last couple of years, our balance of payments position was weak, and we ran an excessively high deficit on the current account for a long time.
  All those favourable factors are a great tribute to my right hon. and learned Friend, who has managed the economy with great skill, caution and prudence over the past three and a half years, and who—unlike so many of

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  his predecessors—has resisted the temptation to stoke up rapid expansion for electoral purposes, while ignoring the eventual disastrous consequences. As a result, the prospects for the British economy are good, especially in respect of inflation and unemployment.
  I never cease to be amazed by the short-term nature of so much that passes for serious economic comment in this country. Until slightly less than a fortnight ago, there was a consensus among commentators—with the exception of some monetarists—that inflation was under control. Then, because last month's figure showed a disappointing rise in the rate of inflation, those commentators are now suggesting that inflation might be running out of control, and that there should be a change in the direction of economic policy.
  It would be more sensible to wait for the figures for the next two or three months before drawing any conclusions. They might well show that last month's figure was merely a blip—indeed, there is evidence to suggest that it was.
  Over the past 20 years or so, the main restraint on the expansion of the British economy has been the size of wage and salary increases and the consequent increase in earnings. From the mid-1960s until the middle of 1993, wage and salary increases ran well ahead of the rate of growth, and so contributed to high inflation.
  Since early 1993, however, wages and salaries have been increasing by about 3.5 per cent. a year, and earnings by just under 4 per cent. a year. Although that is slightly in excess of the rate of growth, it means that wage and salary increases have had only a marginal cost-inflationary effect during the past three years. That, as much as anything, has contributed to the more stable prices that we have enjoyed.
  It is especially encouraging that, although the economic recovery started four and a half years ago, and although unemployment has been falling for four years, the steadily increasing demand for labour has not resulted in higher pay settlements; nor is there any sign that it will.
  During past economic recoveries, rising pay settlements quickly became apparent, and at higher levels of unemployment than obtain today. It is far too soon to suggest that we have broken clear of the earnings-prices spiral, but the prospects are much better than they have been for more than 30 years.
  It would be foolish to claim that we have conquered inflation generated by excessive increases in earnings, but it seems that, because attitudes to pay bargaining are more sensible today than for several decades, the situation is under control to a degree inconceivable a few years ago.
  Not only does that bring enormous benefits in terms of inflation: it also means that the restraint on economic expansion, and thus on lower unemployment, has been greatly eased. It should therefore be possible to achieve lower unemployment than we have experienced for quite a long time.
  At present, unemployment is about 2 million. That is much better than having 3 million out of work, as we had four years ago, but unemployment is still unacceptably high. In addition to its appalling social consequences, it is economically wasteful.
  For the first 30 years after the war, we had full employment in this country. The number of people out of work fluctuated a little, but rarely exceeded 600,000, or 2.5 per cent. of the working population. In 1955, and again in 1966, unemployment was as low as 1.1 per cent.—about one seventh of its level today.
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  For the past 20 years—I must emphasise that that covers the period in office of the Labour Government as well as that of the Conservative Government—unemployment has stood at more than 1 million, and has usually been much higher. Twice, in the mid-1980s and again in the early 1990s, unemployment has exceeded 3 million. Those figures show how far we have fallen from the high level of attainment during the 30 years after the war.
  Because of the damage that unemployment does, the major economic task facing my right hon. and learned Friend the Chancellor of the Exchequer in the next few years is to ensure that demand for labour rises, so that the supply of labour is much more fully utilised than it has been in recent years, and that, as a consequence, unemployment is much lower.
  A continuation of sensible pay bargaining should make that possible, and enable us to expand economic activity without producing earnings-cost inflation. That would bring much greater economic success and social harmony to our country.
  5.23 pm
  Mr. Paddy Ashdown: Delivering a Budget speech is always a test of a Chancellor, and our Chancellor—or, rather, the Government's Chancellor—delivered his with his usual panache and robustness. However, by far the more difficult job on Budget day is the response that must be made immediately by the Leader of the Opposition—although perhaps this year the Leader of the Opposition may have had a little more preparation than usual.
  I do not believe that, since I entered the House, I have heard a more attacking or a better speech by a Leader of the Opposition than that made today by the right hon. Member for Sedgefield (Mr. Blair)—although I am bound to say, gently, that his speech would have been better if, as well as attacking the Government so effectively, he had told us what he and the Labour party intended to do. In my speech I shall certainly seek to explain my party's intentions.
  No doubt this year's Budget will always be known as the leaked Budget, but I believe that, long after the row about the leak has subsided, the real effects of it will continue to be felt, and that almost all of them will be bad.
  The leak is the least important aspect of the Budget. It should be known not as the leaked Budget, but as the smoke and mirrors Budget, for which canny Ken turned into conjuror Ken. The Chancellor's Budget pretends to do what it does not. It pretends to be what it is not. It pretends that the small things that it does are big things; the really big things it does not do at all.
  By far the most important thing about the Budget is not what it does, but what it does not do. It is complacent about Britain's mountain of debt, and fails to tackle the problem of rising interest rates. It will not control inflation, as we shall find out to our cost.
  A Budget should be judged not by what it looks like at the time, but by what it looks like in a year's time. The 1988 Lawson Budget, delivered in circumstances similar to today's, was also described by the then Chancellor, and by most City commentators, as responsible. But it was not. The Liberal Democrats, almost alone, spoke and voted against it, saying that it would overheat the

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  economy, plunge us into debt and worsen the economic slump that would follow. It did all those things, and cost many thousands of people in Britain their jobs, their homes and their businesses.
  Last year, unlike the Labour party, we, again almost alone, voted against the Chancellor's tax cuts, saying that they would deepen debt and cause underfunding in the public services. They did both those things, and the price has been paid in larger classes in schools, closed wards in hospitals and cuts in local services.
  There will be three consequences of today's Budget. Within three months, interest rates will go up—at least, they ought to; if they do not, the only reason will be the fact that the Government have an election coming. Within a year, the income tax cuts will be reversed, and within 14 to 18 months inflation will be rising sharply again.
  Both the Chancellor, who proposed the income tax cuts, and the shadow Chancellor, who will not oppose them, know that perfectly well. They know that it does not matter which of them is in government, the tax cuts that they both agreed today for the sake of the election will have to be put back some time after the election. They both know that when, in a year's time, inflation starts to go up, belts will have to be tightened, public spending will have to be cut, and taxes will have to go up again.
  Again, the British electorate will feel that they have been lied to about tax—and they will be right. Again, trust in politics and belief in politicians will diminish, and again everyone in the House will wonder why the people of this country do not believe a blind thing that we say.
  Both the Chancellor who proposes the tax cuts, and the shadow Chancellor who dares not oppose them, know perfectly well that, when in due course the economic cycle turns down again, we shall carry into the next recession an even bigger pile of debt than we carried into this one. Britain will spin once again around the cycle of boom and bust that has done us so much damage under both Tory and Labour Governments for the past half century.
  Let us face some facts. The economy is in better shape than it was four years ago—but when we consider the appalling state of the economy at that time, that is hardly surprising. There is a recovery, but it remains a modest one and it has happened—as the public know, despite Tory propaganda trying to tell them otherwise—as much despite the Government as because of them. The Chancellor is to be congratulated on, up to now, following economic policies that, up to now, have, by and large, sustained that recovery, but now he has decided to put all that at risk.
  This recovery, such as it is, does not belong to the Chancellor but to the British people, who have paid for it during the past four years in terms of jobs, mortgages, negative equity and broken businesses. The Government have decided to put their recovery, won at such a painful price, in jeopardy for one purpose—to get themselves re-elected. The truth is that the economy is now, at last, growing steadily, but the Government are broke and they intend to squander our economic chances to improve their electoral ones.
  The Chancellor claims that he has delivered today a triple bonus of good things—a kind of triple whammy of lower taxes, lower borrowing and higher public spending.
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  This is conjuror Ken defying gravity. In fact, it is not a triple whammy but a triple con trick. Borrowing will be lower today, but only because it was deliberately increased as a target over the summer. It seems probable that the borrowing outturn from this Budget will be higher than the dangerous levels that we reached at the previous Budget, which the Chancellor then told us he was determined to bring down.
  The books that the Government have published today show that, during the next three years, borrowing targets have been raised by a full £14 billion over what the Government predicted—only one year ago—they would be. The Chancellor has promised today—as he did last year—that, this time, he really will bring borrowing down. But once again, that depends—as it did last year—on predictions of growth, inflation and public cuts that neither he nor anyone else has ever managed to achieve in the past. He might achieve one, but not all of them.
  Meanwhile, Britain's national debt—going now for 300 years—is now double what it was six years ago. The Government's borrowing is now double what they promised it would be two years ago, and the debt we are now incurring is still rising at a rate of £600 a second. Meanwhile, interest rates in this country are higher than those in any other European country except Greece, and are higher even than those of Italy and Portugal. As a result of the Budget, they will go higher still. The short-term consequences of that are bad enough, but they are even worse for the longer term. If we are still piling up debt in this, the fifth year of an economic upswing, I hate to think what level of debt we will carry into the next economic downturn when it comes. God knows what the consequences will be then for tax levels, mortgages, interests rates and public services.
  The Chancellor's second claim is that he has cut taxes, but even here he uses sleight of hand. Yes, he has cut income taxes—although he should not have—but he has raised other taxes, especially indirect taxes. In fact, what he has clawed back from raising petrol prices, insurance taxes, air taxes and cigarettes amounts to more than he has cut. Contained within the Budget is an increase in council taxes of £700 million, and the total tax rise in this Budget amounts to well over £1 billion. In fact, at the end of the process—as a result of a Budget that pretends to give people tax cuts—the average British family will be £41 a week worse off. As my hon. Friend the Member for Gordon (Mr. Bruce) is fond of saying, "When this Government talks about tax cuts, don't watch their lips—watch your pockets."
  The third deception in conjuror Ken's three-card trick is his claim to have boosted spending on health and education. This trick is one of those "now you see it, now you don't" affairs. What he gives us today, he will take away in May by forcing up the council tax. That is fine, because the Conservatives do not control many councils and the blame cannot be put on them. This cynical exercise is not about shifting resources into public services but about shifting blame on to somebody else.
  It is dishonest of the Government to say that they are increasing spending on education when the overall amount given to councils will be cut this year. Most sensible councils—such as mine, and many others—are spending well above the standard spending assessment levels on education, but the Government are now telling us that they are to increase spending on education. They will lie to the electorate by saying that, and they will then

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  cut the amount going to councils. The consequence will be either cuts in services and in education, or rocketing council tax bills.
  Here is a message for the Labour party. If it does not have the courage to vote against the tax cuts in this Budget, it does not have the right to campaign against the slashed school budgets, the rocketing council taxes and the underfunded local services that are the inevitable consequences of the Budget in the months ahead. Basic honesty suggests that, if Labour will not vote against the tax cuts here, it should not be campaigning against them outside.
  Here is what the Budget should have done. It should have had as its first aim the consolidation of the present recovery. Even a wholly neutral Budget would probably have been wrong, as this is the time to provide a touch of the brake. The Budget should have had at its core a clear strategy for reducing public debt, rather than handing out tax cuts—even small ones. A central instrument in that strategy should have been the immediate establishment of an independent reserve bank.
  The Budget's immediate target should have been to prevent long-term interests rates from rising again, and to start instead to bring them down to German and French levels. If we did that, we would save £8.5 billion of public expenditure in just five years. We pay a premium in this country because we have failed to convince the world that we will not continue to follow a policy of competitive devaluation. That results in our paying a real price in public expenditure, taxes and failing local services. A commitment to responsible economics should be the foundation stone for a debt-reduction strategy that will lead to sustainable lower taxes in the future and the more solid basis for the nation's finances that we need.
  The Budget should have aimed to shift resources away from consumption and into investment—especially investment in education. Britain simply cannot succeed while we are 47th out of 49 in the world education league tables, or when one third of our primary children are taught in classes of 31 or more—a figure that has risen by 10 per cent. in the past year alone. We will vote against the penny cut in income tax proposed in this Budget; we would put that £2 billion into education, where it can do the most good for this country and our children.
  The Budget should have taken a much larger step towards a long-term shift towards environmental taxation by reducing tax on the things we want more of—such as jobs and wealth—and increasing tax on the things we want less of, such as pollution, energy and the use of finite natural materials. This is not tax raising but tax shifting to create not just a strong economy, but a sustainable, clean and safe environment.
  This should have been a Budget to tackle poverty and to begin to get people back to work. The gap between the haves and the have-nots in Britain is growing dangerously wide and now threatens the very fabric of our society. Rickets, malnutrition and tuberculosis have reappeared—a return to Victorian values indeed. The levels of poverty and deprivation in Britain are now a national scandal, and it is time we started to tackle them.
  I find nothing wrong with saying that those who have benefited the most from the Tory years should be prepared to pay their bit to tackle poverty. We should be prepared—as I regret the Labour party is not—to raise tax for those with taxable earnings of more than £100,000
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  a year to 50 per cent. To those who say that that would drive away the entrepreneurs, I say rubbish. In many countries, such as Japan, the highest earners pay 50 per cent. tax on similar earnings; and in many others, such as France and Germany, 50 per cent. taxation begins well below the £100,000 a year threshold that we propose. I do not see top earners flooding to leave those countries.
  With that money we could lift out of tax altogether hundreds of thousands of those who have suffered most during the Tory years; we could provide new incentives to work; reduce the country's social security bill; and lower the taxes for 99.5 per cent. of taxpayers across the board.
  The Budget could and should have been the start of a new contract between politicians as tax spenders and the public as taxpayers. We have to raise the level of the tax debate above the silly, puerile battle of insults between Tory and Labour that we have heard over the past few weeks. The Conservatives won the last election by lying about tax, and they appear to have decided to try the same trick again. I am sorry to say that Labour appears to have decided to join them.
  I fear that we are about to witness the most sterile, negative and childish general election that we have ever seen. Let me make it absolutely clear: taxes are the subscription charge that we pay to live in a civilised society. The public should be entitled to the truth about tax, to influence how their money is spent and to know that it is spent wisely.
  We have proposed a new framework for the debate through a fiscal responsibility and tax contract Act, but there are many other ways of achieving the objective. It is clear that, having been lied to so often on tax, the British public rightly do not believe a word that most politicians say about it. We in the House must recognise that truth and begin to tackle it, or one day we shall find that the basis of our system of public finance, and perhaps even the basis of government itself, has been fatally damaged.
  This is a Budget of slick tricks and small measures. It pretends to be responsible; but it is not. It pretends to give big tax cuts; but it does not. It pretends to invest in public services; but it will not. Though the measures in the Budget may be small, the damage that it will do will be big, because it is notable not for what it does but for what it does not do.
  Instead of consolidating the recovery that we have bought at such a high price, the Budget will place it at risk. Instead of lessening the huge burden of debt piled up by the Government, it will leave it for some future Government to pay for. Instead of investing in education, it tries to invest in the Conservatives' re-election. It is a bad Budget from someone who has up to now been rather a good Chancellor, and I am sad about that. We shall vote against the Budget and against the tax cuts that it contains, and we shall look forward to the real Budget that Britain needs and for which we must now wait until after the next general election.
  5.42 pm
  Sir Anthony Grant: I do not agree with what the right hon. Member for Yeovil (Mr. Ashdown) said, but he had the decency and the honour to admit frankly that his policy was to increase taxation. That is more than we ever get from the Labour party. We all know that a Labour Government would

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  increase taxation, but Labour Members do not have the decency to admit it. The right hon. Gentleman was positive in his speech—positively wrong, but positive compared with the Leader of the Opposition.
  We were entertained by the Leader of the Opposition's speech, although I thought that it was more appropriate to Hyde park corner than to the House of Commons; in fact, there were moments when I thought that he was about to emulate my hon. Friend the Member for Welwyn Hatfield (Mr. Evans) and talk about "That lot over there". The speech was entertaining, if not in any way positive.
  I want to say a word about the leak that took place. I do not agree with the Leader of the Opposition that it is not important or relevant. It is extremely serious when, through either wild incompetence or disgraceful dishonesty, matters as important as the nation's Budget can be leaked. We cannot go on like this; whether we have a Labour or a Conservative Government, we cannot conduct the nation's affairs if we cannot have trust in the people who are employed by the state.
  If the distrust continues, the alternative, I regret to say—I have said it in other debates, such as that on Ponting and the defence leaks—is that, when the Administration change, parties will bring in their own people, which would not contribute to the stability and well-being of the country. I hope that the situation can be rectified as a result of what I regard as a deplorable event.
  I have spoken in nearly all Budget or Finance Bill debates since I entered the House a very long time ago; this will be my last. Walking down memory lane, it has not always been a pretty sight. I am old enough to recall selective employment tax, which was such a disaster; the introduction of the first capital gains tax, which was a disaster; devaluation, when the pound in our pockets was changed dramatically, despite what Harold Wilson said; and the collapse of the Labour Government's economic policy when Denis Healey was Chancellor and the International Monetary Fund had to be called in—so much for the sovereignty about which we boast so much.
  I can also recall the biggest tax hike in my experience, brought in by Roy Jenkins, who has since dissociated himself from the Labour party. He was cheered to the echo by Labour Members, and I shall never forget it. Of course, the party then lost the general election. I remember all those gloomy events. I am old enough to remember what it was like when Labour was in office, and I shall continue, whether in the House or out, to remind the public of it.
  The tests that I have always tried to apply in such debates are as follows. Did the Budget encourage the spread of ownership throughout our country? I have been a pioneer of spreading ownership since long before I became a Member of Parliament, and I rejoice that today there are 10 million shareholders, compared with 3 million when we took office.
  Did the Budget reduce the power of the state to interfere with individuals' ability to develop and care for themselves and their families and did it also care for those who are sadly unable to care for themselves? Did it ease the burden on small businesses, which are fundamental to the growth of the economy as a whole? That is a cause that I have espoused ever since I became the very first very small Minister to have responsibility for small firms, many years ago.
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  Did the Budget encourage thrift and responsibility and, above all, did it enhance stability and create the confidence that a free, civilised trading nation demands? I believe that this Budget passes my test of many years' standing. I am especially pleased that my right hon. and learned Friend the Chancellor has recognised the difficulties of small businesses with the uniform business rate. That is something that I have urged for a long time.
  I am glad that the Chancellor has got his spending priorities right in education, law and order and health. Those are the issues about which my constituents are concerned, and he has wisely recognised that; his proposals are extremely welcome. Above all, his record has been one of creating a stable economy, and I want to emphasise the test of stability.
  Since 1992, we have had the strongest recovery of any major European Union economy. Inflation, to which my right hon. Friend the Prime Minister attached so much importance when he took office—it was almost an obsession—has been below 4 per cent. for longer than at any time during the past 50 years. Income tax is at the lowest rate for 50 years. One million fewer individuals pay that tax, and that figure may well go up. As a trading nation, we export more per head of population than does the United States or Japan. That is a great tribute to our exporters. Mortgage rates are at their lowest for 30 years. As that continues, I hope that it will stimulate the emerging recovery of the construction industry and confidence in the housing market.
  In a nutshell, the economy is in better shape than at any time I can recall since I entered Parliament. The Chancellor has maintained that stability on which business, industry and the individual depend. There have been persistent calls from some of my hon. Friends and others for reduced taxation, although I confess that there has not been much clamour for that in my constituency postbag. Certainly, I want reduced taxation; I have always believed that money belongs to the individual, not the state, and should therefore be extracted and redistributed with the utmost care and reservation.
  Way back in the 1950s, the late Anthony Crosland, the great intellectual of the Labour party and a much respected man, said that there was no hope of increasing individual welfare through redistribution via the tax system. That sentiment was unpopular and unfashionable at the time—I do not know what view the Labour party takes now.
  Over the years, I have welcomed the necessary shift from direct to indirect taxation—I openly admit that. Direct taxation is a tax on work and enterprise. No less an authority than Lord Healey would support me on that. He said in 1976 that a
  "high level of direct tax does discourage enterprise".
  I entirely agree with him.
  Indirect taxation, on the other hand, is a tax on spending. Both types of taxation include an element of choice. Capital taxes, however, are the worst of all, for they are a tax on thrift and saving, about which there is no choice whatever. I am therefore pleased that the Chancellor has maintained the right balance between direct and indirect taxation, between taxes on work and on spending, and has also gone some way—perhaps not far enough, since I do not like capital gains tax—towards helping by easing inheritance tax. That is welcome,

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  because it will help a great number of people who want to build up wealth and pass it on, or who want to develop their small businesses. The policy is right in that respect.
  If the price of reducing taxation is increasing interest rates, I would plump for interest rate stability every time. The Chancellor has said much the same thing. The CBI wrote in a recent publication:
  "The more stringent the Chancellor is in his Budget, the less will be his subsequent need to rely on higher interest rates".
  I am glad that my right hon. and learned Friend has not gone as far as some people would wish on the tax reduction front.
  Of course interest rates are a weapon in the battle against inflation, but I congratulate my right hon. and learned Friend on keeping things so well in perspective. We do need fiscal as well as monetary measures to control inflation. I strongly hope that we shall never revert to the rollercoaster years of the past, or to the appalling state of affairs that prevailed under the last Labour Government: the IMF was called in, interest rates went through the roof, unemployment was rising and industrial confidence fell through the floor.
  Nor should we tolerate a return to the 1980s, when, egged on by Labour and Liberal Members, and many others—I include myself in that; I have uttered my mea culpa in the House before—the Chancellor reduced interest rates too far, with the resulting boom and bust from which this Government and this Prime Minister have struggled so hard, successfully now, to recover.
  I congratulate my right hon. and learned Friend on his Budget. The only sane economic policy for any industrial nation must be to contain inflation, to keep Government debt at least below 60 per cent. and the deficit below 3 per cent. of GDP, to seek stable exchange rates, and to keep interest rates at no more than 2 per cent. above the European Union average. Those are, of course, the EU convergence criteria, but curiously they also coincide with the economic philosophy put before the electorate at all 10 general elections in which I have participated. The only surprise is that the criteria should strike such terror into the hearts of modern journalists and the broadcasting media. In or out of EMU, in or out of Europe, there is no escape from this discipline.
  Whatever we do, we will be economically affected by what the European Union does. We can no more sail in economic isolation from the EU than Scotland or Cambridgeshire can sail in isolation from the rest of the United Kingdom. All sensible people—all except the Opposition and certain receivers of stolen goods—will therefore share my confidence that, with patriotism and integrity, this Chancellor has the ability and the determination to do what is best for our nation.
  I have referred to all the elections in which I have participated. I shall close with the theme of the very first election I fought, in 1959, because I believe it to be applicable to today's Budget and today's political scene: "Life's better under the Conservatives—don't let Labour ruin it".
  5.55 pm
  Mr. Roy Hughes: Like the hon. Member for South-West Cambridgeshire (Sir A. Grant), I have been a Member for a long time, and like him I have spoken in many Budget debates. The pattern seems
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  always to be the same. Beforehand, the pundits make a deep economic assessment of what the Budget is likely to contain. Those forecasts are sometimes supported by leaks, official and unofficial. In Wales we know all about leeks—we actually bow down to them—but this time there has been an unofficial leak of gigantic proportions. The whole Budget litany has been blown asunder.
  What we heard from the Chancellor—we could have read it elsewhere—was that income tax was down by 1p, to 23p for the basic rate. That represents a giveaway of £1.9 billion. Like the leader of the Liberal Democrats, I think that that money would be far better spent on education and training, or perhaps on the national health service and infrastructure. The starting threshold for inheritance tax has been raised from £200,000 to £250,000. That will benefit only a small section of the community. Petrol is up by more than 3p a litre. That will put up the price of just about everything and will negate the tax concessions in the Budget.
  I look at this Budget from the perspective of the Conservatives having been in office for 17 and a half years. What do they have to show for this unprecedented period of office? First, there is the remarkable fact that taxes are higher today than they were when Labour left office in 1979. In that year, 32.2p in the pound of gross pay went to the Exchequer; now it is 34.9p. More recently, on 30 March 1992, the Prime Minister said:
  "Never has low tax been so vital for the economy. Never would it be so wrong to increase tax".
  What has happened since then? There have been no fewer than 22 tax increases—before today's Budget—since the last general election. A typical family—two adults and two children—has been landed with an extra tax bill of more than £2,000.
  Britain remains a relatively wealthy country, and since 1979 Conservative Governments have received no less than £128 billion in North sea oil revenues. In addition, they have received the massive sum of £80 billion from the sale of public assets—"the family silver", as they were aptly described by the late Earl of Stockton, Mr. Harold Macmillan.
  In contrast with all that wealth, one of the first acts of the Conservative Government after their election in 1979 was to cut the link between state pensions and average earnings. That has had the effect of cutting the basic state pension by £20 in real terms since 1979—a dastardly thing to do. In the unlikely event of the Conservatives being re-elected, my forecast is that they intend to means-test the basic state pension.
  We remember too the Chancellor's vainglorious attempt to increase VAT on fuel to 17.5 per cent. I am glad that the Labour party has given a specific pledge that it intends to reduce it to 5 per cent.
  The Government boast that unemployment is falling, but they need to be reminded that it is double the figure it was when Labour left office in 1979, despite 32 changes to the basis on which the statistics are calculated. What is more, as the shadow Secretary of State for Education and Employment, my hon. Friend the Member for Sheffield, Brightside (Mr. Blunkett), says, 2.75 million men are economically inactive in this country today and excluded from the unemployment figures. Job insecurity is endemic. People are stressed and worried that they might not have a job in the near future.

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  Consider, too, that one in five households in Britain have no working member—20
  per cent. "Ah," it will be said, "but what about other countries?" The figure for France is 12 per cent. and for Germany 13 per cent.—a good deal lower, and those two countries are our principal partners in the European Union and in economic terms, as well as our principal competitors.
  In the early 1980s, we witnessed a collapse of our manufacturing base. I agree that, since then, some leeway has been made up by foreign investors. Several Japanese car firms are established in Britain, and Koreans are investing heavily in engineering, microchips, and so on, but one quarter of our manufacturing output and half our manufacturing exports are now produced by foreign firms.
  I have never been able to understand why British manufacturing companies do not invest in Britain. They talk about their investments in Europe, the Pacific rim, and so on, but when asked about investment in this country they go all coy. Ministers should give much more attention to that issue, because we have invested less as a proportion of our national income than any European country.
  A modern, dynamic economy needs a highly trained, highly skilled work force. In fairness, this afternoon the Chancellor appeared to recognise that fact. Yet figures compiled by the World Education Forum show that, under Conservative Governments, Britain has fallen to 42nd of 48 in the world education league. Investment per worker is 18 per cent. higher in Germany, 51 per cent. higher in France and 68 per cent. higher in the United States of America. At the age of 18, twice as many Germans are in full-time education as young British people. Overall, that is nothing like the rosy picture painted by the Chancellor this afternoon. His Budget did little to redress the position.
  Over the years, I have taken an interest in road transport. To some extent, I shall address my remarks on that subject to Opposition Members as well as to the Government. Experts in the field are gravely concerned about cuts in the roads programme. The bulldozers are grinding to a halt; the environmentalists are claiming victory. Indeed, we have a bike-riding Secretary of State for Transport. Cycling is a very healthy activity. I have no wish to decry it, but I wonder what happens to all his red boxes. How do they get around?
  When I was a youngster in the south Wales valleys, the errand boys in the butcher's shop and the grocer's shop had one of those bikes with a huge frame in front in which they could carry parcels. Perhaps the Secretary of State for Transport should get one of those. I understand that those red boxes are conveyed separately by car. If so, it will be seen to be a queer way of protecting the environment.
  The Highways Agency's budget is 25 per cent. smaller than it was two years ago. Local authority road building has come under the axe and the supplementary grant has been halved in real terms since 1993–94. The Government derive massive income from road transport—£25 billion in 1995–96 from vehicle and fuel taxes, 25 per cent. of which was spent on roads. I understand that there will be further cuts in the roads programme.
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  From time to time, motorists are exhorted to leave the car at home—we heard it from the Chancellor this afternoon. Despite all the revenue that the Government receive from motor taxation, they do not invest anything like enough in new forms of public transport.
  We need to remind ourselves that Britain is essentially a road-based economy. Ninety-four per cent. of passenger traffic and 92 per cent. of freight traffic is reckoned to be by road. Moreover, it is estimated that traffic is reckoned to be will double in the next 25 years. If there is not greater realism about that issue, we are in danger of becoming little more than a pothole economy. The Budget has done nothing to rectify that problem. The Government are concerned only about grabbing funds from more taxation, yet traffic delays have huge social and economic costs.
  Finally, I quote from a speech by my right hon. Friend the Leader of the Opposition at the recent Labour party conference in Blackpool. He said:
  "A young country that wants to be a strong country cannot be morally neutral about the family. It is the foundation of any decent society. Behind strong communities lie strong families."
  I certainly agree with that sentiment.
  The Government claim to be the party of the family. It is difficult to reconcile that assertion with what has happened in practice. Since 1979, they have done more than any other Government to undermine the institution of the family. British couples face a tax penalty the moment they have a child. By comparison, the French tax system is heavily biased towards the family. Italian and Spanish parents enjoy similar benefits, yet the Chancellor cut the married couple's tax allowance in his very first Budget. He described it as something of an anomaly in today's world. What a statement! I notice from the measures that he announced this afternoon that he has repented a little.
  The Chancellor must surely be aware of the crime, mugging and drug taking in which rootless teenagers are involved. Invariably they are unemployed. Youth unemployment is still on the increase. I am glad that my party is pledged to get 250,000 under-25s off benefit and into work. That will be paid for by a windfall tax on the privatised utilities. I fully back such a proposal. It is well worth a try.
  Some of those youngsters are the victims of family disintegration and re-formation. If we are serious about repairing the moral fabric, major steps should be taken to redress the balance of the tax and benefits system in favour of married couples with children. Such measures are long overdue.
  The Budget is an attempt to win the next general election for the Tory party. What we needed was a Budget for Britain. Soon the people will have their say, and they will say emphatically, "Enough is enough."
  6.12 pm
  Mr. David Martin: Today's Budget is a thoroughly Conservative one—with both a small and a large C. It is a responsible package of measures. It reduces the mainstream burdens of taxation, particularly on those least able to bear them, but it also reduces public debt and public expenditure while finding extra money for health, education and law and order, which are dear to our constituents.

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  I welcome the shift of emphasis from a premium on single parenthood, and the other tax changes, especially those directed at employment and businesses. The tax on jobs has been reduced and the uniform business rate is to be frozen for small businesses. That will help the people I represent in Portsmouth.
  Overall, the measures should mean that people feel better off and less imposed upon, as the Government recognise that every unnecessary penny taken in taxation restricts people's choices and decisions to save or spend, and handicaps business enterprise and employment.
  Such a Budget would not be possible from a Labour Government. Even allowing for exaggeration in the costing of Labour's statements and promises in the excellent document produced the other day by my right hon. Friend the Chief Secretary, there is no doubt that a Labour Chancellor would be unable to resist politically the clamour of his spending Ministers, spurred on by hon. Members behind him, to pay off all the lobbies and interest groups, including unions, and meet the prejudices about inequalities and underfunding that have accumulated over the years, fanned by a Labour Opposition.
  After a couple of years of that—or perhaps sooner—we would see all the signs of old Labour haunting the new: increased taxes, increased public expenditure and inflation, more regulations, militant union power and rising unemployment. That does not include the little European difficulties that will crowd in, which I shall deal with in another context.
  It is all very well for the shadow Chancellor to claim, when challenged on the cost of Labour's plans and who will pay for them, that he has not seen the books. The books are no secret these days. We even know what happens at meetings between the Chancellor and the Governor of the Bank of England. Not knowing what is in the books is not the problem: being responsible for them will be the source of Labour's difficulties and the difficulties of the British people, including my constituents.
  One aspect of education has not been sufficiently costed by Labour or the Liberal Democrats, and the damage that they would cause has not been properly quantified. I refer to the proposal to abolish the assisted places scheme, in order, they say, to fund smaller class sizes. Leaving aside for a moment the damage that abolition would do to poorer families with gifted children, whose extra choice of a school would be arbitrarily removed, let us consider the false economics of such a vindictive policy.
  The basic cost of the present scheme—ignoring the cost of the Government's intention to double it—is about £134 million for the education of about 34,000 children from the backgrounds that I mentioned. Without the assisted places scheme, those children would require extra funded places in the state sector. Even assuming that those places were available, which would not be the case in Portsmouth without more school building, the cost would be about £100 million on present overheads.
  That appears to leave £30 million to £35 million for a Labour Chancellor to allocate, but matters would not work out as simply as that. Some schools in the private sector that provide a significant proportion of assisted places would go under, and for the rest the fees would rise. Parents who are just outside the criteria for getting
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  assisted places help for their child or children—some families have more than one child at such a school—would have to give up the struggle to meet the school fees. Many more pupils would therefore need state sector places. It is a fair bet that the cost of educating those children would use up most of the £30 million to £35 million supposedly saved by the abolition of the scheme. Abolition of the assisted places scheme is not only a vindictive policy, but ignorant Labour economics.
  As my right hon. and learned Friend the Chancellor recognises in his Budget and in the background to it, the big questions for the future, overshadowing all Budgets, whether Conservative or Labour, will be the economic, political and constitutional questions raised by economic and monetary union and the single currency—whether we will abolish the pound and adopt the euro. For want of something more magical to hold the Conservative party together on that issue, I accept the formula that we should not exercise our opt-out now, so long as, when push comes to shove, we are not foolish enough to take all the necessary steps that are required to join it, nor are we compelled into economic arrangements that effectively shadow it.
  On the opt-out itself, all the recent troubles about the stability pact and the ins and the outs—or the "pre-ins", which is the Commission's rather sinister description—boil down to a matter of trust. Our partners have done their best to cheat us out of our social chapter opt-out, and many of us suspect that they would do the same if it comes to the even more immensely important matter of a single currency. That is why I welcome my right hon. and learned Friend's assurance yesterday that we will not agree to any mechanisms that will assist such cheating in the future, and will seek health warnings or what he described as a "copper-bottomed text"—or language, as my right hon. Friend the Prime Minister described it today—which must be proof against the encroachment of our partners through the Commission or the European Court. That is a tall order, but it is essential and must be met.
  The preparations for a single currency in stages 1 and 2 are difficult enough for countries to harmonise. One has only to look at what is happening in France at present, as the country grapples with its grossly overblown state sector and the sort of stranglehold union power that used to cripple Britain's economic and social life until Conservative Governments sorted things out. France has just fiddled billions of francs in Telecom pension funds from an industry that was successfully privatised here years ago and is now a world beater. Any recent visitor to France—who travelled in the ordinary manner and not as a VIP—will know how overvalued the French franc is and of the widespread discontent among those who can do little or nothing to restrain their leaders' obsession with meeting the Maastricht criteria for a single currency in 1999.
  Those who think that it is practical to join France must first explain away our disastrous experience of being in the exchange rate mechanism and our economic success since leaving it and how it can possibly be practical politics to rejoin it in the foreseeable future—let alone for two years before joining a single currency, as the Maastricht treaty provides. The facts cannot be massaged away.

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  Secondly, they must explain how we would make the Bank of England independent next year—which is another necessary precondition under the treaty—and, thirdly, how on earth they will sell the idea to my constituents, via a referendum or some other means. How will they explain to those who are already exasperated by the powers of the European Union institutions that those institutions will decide vital economic and political policies rather than our present economic and political system, including—quintessentially—our Parliament?
  I believe that the single currency project will divide rather than unite Europe—it is doing so already—and will put strains on the European Union that it cannot bear. All those countries that submerge themselves in the project will pay a heavy price—and I hope that Britain will never be one of them.
  Finally, I turn to the measures in today's Budget that are not related to taxation. Particularly welcome in Portsmouth is the introduction of project work—or workfare as it is popularly known—to help back into work those who have been unemployed for two years or more and to winkle out of the statistics those who wrongfully claim benefit. Project work has produced good results in areas where it has been tried and it has proved instrumental in boosting the morale of the long-term unemployed by providing real jobs.
  I welcome the spend to save scheme, announced by my right hon. and learned Friend the Chancellor today, which will crack down on frauds and cheats. Of course we must help those who need our assistance—all hon. Members are united in that aim—but nothing causes more resentment among our constituents than people fiddling the system. The Chancellor is right to support further the efforts of my right hon. Friend the Secretary of State for Social Security in tackling that problem.
  My right hon. and learned Friend announced expenditure increases that will enable the employment of more Customs and Excise officers and make more certain the detection of those who abuse the generous import rules applying to tobacco and alcohol. That measure is welcome in Portsmouth, where the ferry port gives easy access to illegal supplies—to the grief of local tobacconists and alcohol outlets, who are convinced, with some justification, that abuse is adversely affecting their businesses.
  In summary, this is a carefully crafted Budget from a careful and crafty Chancellor. I am convinced that it does what is required in great style.
  6.23 pm
  Mr. Dennis Canavan: This is certainly the last Budget of this Parliament, the last Budget of this discredited Government and, hopefully, the last Tory Budget of the millennium.
  The Government have been in power for 17½ years and, for many in this country, they have been 17½ years of lost opportunities, of decline and of economic and social disaster. Unemployment has doubled and homelessness has more than doubled. Poverty has trebled to the extent that one in six people are now dependent on means-tested benefit. Britain has dropped from 13th to 18th place in the world prosperity league and we are 42nd out of 48
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  in the world education league. Yet the Chancellor of the Exchequer had the brass neck to come to the Dispatch Box this afternoon and tell us that, during the past 17½; years of Tory rule, the British economy has been prosperous and successful and will continue to be so.
  In fact, over that time, Britain's economic growth has been the slowest of any G7 member country. Our balance of trade in manufactured goods went into deficit in 1983, for the first time since the industrial revolution, and has remained in deficit ever since. Since 1979, Britain has had the lowest investment rate of the 24 Organisation for Economic Co-operation and Development countries. As my hon. Friend the Member for Newport, East (Mr. Hughes) pointed out, the irony is that the Government have accrued £80 billion from privatisation, that is from the sale of assets that belonged to the people of this country. They have also had the benefit of £128 billion in North sea oil and gas revenues.
  Instead of investing that money in the nation's future, the Government have frittered it away on tax concessions for their rich friends. The Tories try to pretend that they are the party of low taxation: their rich friends may have benefited from tax concessions, but the vast majority of taxpayers have suffered an increased tax burden under this Government. There have been 22 tax increases since the last general election, which means an additional tax burden of £2,000 for the average family.
  Today the Chancellor announced a 1p cut in the basic rate of income tax and some other changes to the personal taxation system. The truth is that, even taking those changes into account, the typical family in this country will still pay more tax today than they paid at the time of the last general election. If the Government were serious about cutting tax fairly, they would do as the Labour party has promised and cut value added tax on domestic fuel and power from 8 per cent. to 5 per cent. I am sure that such a move would be widely welcomed by pensioners and others on low incomes, particularly in view of the severe weather affecting Scotland and other parts of Britain at present.
  Instead of lowering the rate of VAT on domestic fuel and power, the Government propose to raise the threshold of inheritance tax from £200,000 to £215,000I think that is what the Chancellor said. He repeated the Tory party commitment to the eventual abolition of inheritance tax and capital gains tax—despite the fact that only a minority of very rich people would profit from those measures. For example, the directors and senior executives of the privatised water companies would stand to gain more than £30 million if capital gains tax were abolished, because they would not have to pay tax on share options.
  I look forward to a Labour Government not simply retaining capital gains and inheritance taxes, but introducing a windfall tax on the privatised utilities in order to invest in jobs for a quarter of a million unemployed people under the age of 25. Young people should have a right to real jobs and real training opportunities. That would be a good example of using the taxation system and public expenditure to invest in the future, rather than to fritter away whatever money is in the kitty through tax concessions to very rich people.
  Unfortunately, the Government do not have any effective strategy to invest in jobs or training opportunities. They are now faced with a social security

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  bill of more than £90 billion a year, which is almost double what it was in 1979 when Labour was last in power. The Chancellor had to admit that social security expenditure now amounts to about a third of total Government expenditure.
  We all agree—at least, I hope so—that people without work and people who are on low incomes need and deserve benefits. I deplore the fact that the Chancellor is abolishing the single parent premium. That will hurt many lone parents on low incomes. It is important to use the benefit system to help people most in need, but that must be combined with a more effective strategy to improve education and training and job opportunities, so that a decreasing number of people are dependent on benefits.
  In his Budget statement, the Chancellor announced a modest increase in educational expenditure. Investment in education should be seen as an investment in the future of our country, but we are investing in education only 5.1 per cent. of our gross national product, compared with 5.4 per cent. when Labour was last in power. Even with the modest increase that was announced this afternoon, the Government will still not achieve the 5.4 per cent. figure that they inherited. They are going backwards instead of forwards.
  The Government have strange priorities when it comes to disbursing the total amount of educational expenditure. More than £1.1 billion has been spent on the assisted places scheme to subsidise private fee-paying schools, yet local education authority schools, which educate the overwhelming majority of our children, lack sufficient resources. It is no wonder that we are 42nd out of 48 in the world education league and we have a lower proportion of young people in full-time higher education than any other western industrialised country.
  It is also no wonder that an increasing number of people, especially young people, are looking for change. The Government offer no hope, no vision and no future. The Chancellor reminded me of a poker player in the last chance saloon. His hand has now been revealed—it was revealed prematurely last night—and it is not good enough to save the Government's skin. It is time for them to go, and the sooner the better. I look forward to a Labour Government leading us into a new millennium, and building a better future and a better society for all the people of this country.
  6.33 pm
  Mr. David Congdon: The hon. Member for Falkirk, West (Mr. Canavan) is totally wrong. It is wrong to say that the Government offer no vision and no hope, when unemployment has fallen by more than 900,000 since its peak. He should consider comparative countries in Europe and see how well our economy has done since 1979—and even since 1992. Opposition Members should study what is happening in some European countries. In France and Germany unemployment is rising, whereas in this country it is falling. It is depressing to hear Opposition Members talk as if Government have the solution to all our problems, because in some cases they are part of the cause.
  Ms Diane Abbott: Opposition Members have studied what is happening in France and Germany. We found that France and Germany had far fewer households in which no one
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  was earning, whereas in this country one in five households have no wage-earner. We have a worse record than France and Germany.
  Mr. Congdon: Part of the problem in this country may be the break-up of the family structure. I did not intend to raise that subject, but I would submit that that break-up is one of the side effects of a welfare state. That is an important subject to debate. It was interesting that the hon. Lady did not mention the strikes that are taking place in France at this very moment. The lorry drivers' strike is preventing the transport of food into this country. Is that an example that this country should follow?
  There is always a danger of grossly over-hyping the impact of any one Budget. We should remember that our gross domestic product is round about the £700 billion mark, and that Government expenditure is round about the £300 billion mark. No one item in a Budget—whether it is £0.5 billion here or £1 billion there—has a greatly significant impact on the real economy. The economic climate that is created is more important than the minutiae of the figures in the Chancellor's statement. Businesses want stability so that they can plan for the future, and the Government have given them that.
  Last year, the Chancellor introduced a prudent Budget. Cuts in public expenditure of £3.25 billion were matched by tax cuts of an equivalent amount. I say public spending cuts, but in fact that is a misnomer. Public spending cuts are often cuts in so-called planned increases. The language is sometimes debased, because in reality public expenditure is never cut: it grows inexorably. The only issue is the rate of increase.
  When I spoke in the Budget debate last year, I praised the Chancellor for his prudent Budget. I also said that it was important to see what happened to interest rates. I hoped that interest rates would fall, so I was delighted to see that in the following year they fell four times and were increased once. We now have interest rates significantly lower than they were a year ago—lower by 0.75 per cent.
  The economy has improved steadily in the past 12 months. Today's Budget continues the trend that the Chancellor set last year of fixing a prudent Budget. Public spending has been reduced by about £2 billion, and taxes are down by about £700 million. As the Chancellor said, that is taking a fiscally tough stance to avoid having to introduce tougher monetary measures later. That is a prudent approach. It is a bit rich of Opposition Members to accuse the Chancellor of setting a Budget for an election when he has taken such a fiscally realistic view of the economy.
  The Leader of the Opposition must have written his speech a few weeks ago, because there was nothing in it about the Budget or about the Labour party's tax proposals. The public are none the wiser. It is clear from listening to Opposition Members whenever they open their mouths that they would spend and tax more than the Conservative Government, so the public should be warned.
  Much mention has been made today of our proceeds from privatisation and North sea oil. Despite the continuing pretence that somehow those proceeds have been squandered, they have in fact been spent on essential public services, and as a result taxation is slightly lower than it would have been if the money had not been raised. It is misleading to pretend that it has been squandered.

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  The leader of the Liberal party, the right hon. Member for Yeovil (Mr. Ashdown), said that the Budget did not consolidate the recovery. I find that somewhat hard to understand. This is clearly not a giveaway Budget containing massive tax cuts designed—as some Opposition Members would have liked to be able to say—to bribe the electorate; as I have said, it takes a fiscally tough stance. The right hon. Gentleman said that he would have liked a greater reduction in the public debt. So would I—but, in a complete non sequitur, the right hon. Gentleman went on to say that, instead of the tax cuts announced by my right hon. and learned Friend, he would have liked the money to be spent on education. So, at the first opportunity to reduce the public sector borrowing requirement, the right hon. Gentleman has spent it. That is all too typical.
  My hon. Friend the Member for Portsmouth, South (Mr. Martin) referred to economic and monetary union and the single currency. My concerns about the single currency are primarily economic. I strongly believe that a single currency would lead to significantly higher unemployment rates throughout Europe, and I think that this and other European countries would come to regret those higher rates if they joined a single currency. I also think that there is a grave danger of higher interest rates. I consider it fundamentally important for this country to maintain its freedom of action, and I welcome what my right hon. and learned Friend the Chancellor said about that yesterday.
  Listening to my right hon. and learned Friend's speech, I wondered what he would have been able to do and say if, 10 years down the road, we had joined a single currency. Would he have been able to announce all those tax changes, or would his hand have been totally constrained by some other body in Brussels or elsewhere? The last thing I want is for the Chancellor of the Exchequer—whatever party is in power—to become little more than a local authority director of finance. I do not dispute the fact that the convergence criteria are good in themselves, in economic terms, but, when the chips are down, this is the acid test: if a country wanted to go outside those criteria, would it be constrained by another body? That is the danger of being involved in economic and monetary union.
  Let me say a little about the general economic position. We now have lower inflation than we have had for a generation; but, equally important, we have seen stable growth levels. I was pleased to hear the latest growth forecasts in my right hon. and learned Friend's statement—2.5 per cent. this year, and 3.5 per cent. next year. Of course a balance must always be struck to avoid overheating of the economy, but I see no great danger of that, although my right hon. and learned Friend is right to take a prudent approach. As I have said, unemployment has fallen by 900,000 since its peak.
  I believe that, to ensure that more people get into work and to build on the success that has already been achieved, we must ensure that the United Kingdom economy secures sustainable levels of growth, and that we do not go into recession at some future stage. We can argue about what is a sustainable level of growth; I do not believe that the level is fixed and immutable for ever and a day, and, as I have said, I welcome the forecast of 3.5 per cent. for next year.
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  I said just now that a good deal of nonsense was spoken about public expenditure. In fact, whatever Chancellors say, public expenditure goes up in real terms in the long run, for a variety of reasons. One of those reasons is the existence of a growing elderly population; another—rightly—is the rising expectations of the public. The fact is—it is contained in the public expenditure statements—that public expenditure in real terms has risen from £219 billion in 1978–79 to £295 billion in 1995–96. That is an increase of £76 billion.
  We are often told by Opposition Members that that is to do with unemployment, and that much of it is connected with the fact that the economy was in recession. Again, however, the figures are in the Red Book. Cyclical social security costs about £14 billion a year. In fact, most of the growth is to do with such factors as the growth of £16 billion, in real terms, in the health service over that period. There has been growth of £4.8 billion in real terms in health since the last general election—and that excludes the extra growth announced today. Education has grown by £8 billion over the period, and law and order by £6 billion.
  The reality is that public expenditure goes up over time. I do not regret that; the challenge to the Government is to try to ensure that the rate of growth is sustainable, because otherwise the growth in public expenditure crowds out private expenditure.
  A good deal of nonsense is also talked about public expenditure as a percentage of gross domestic product. The figures show that, when Labour left office, the figure was 44 per cent. For 1997–98, it is planned to be 40 per cent., which is a reduction in anyone's book. The public sector borrowing requirement is lower as well. I think that that is all good news, and I would have expected Opposition Members to welcome it.
  The crucial question, however, is this: what is the overall judgment of the Chancellor? What I liked about this and, indeed, the last Budget was that, along with comparatively modest reductions in taxation—I welcomed those, including the reduction in the basic rate of income tax by 1p in the pound—there was sensible extra investment in the key public sector services. As a member of the Select Committee on Health, I particularly welcome the extra money announced for the health service today—£1.6 billion in cash terms. That is good news, which will be welcomed.
  As I have said, there has been significant extra investment in the NHS since the last general election and, indeed, since 1979. Of course demands increase year on year as people get older—and people are living longer than ever before—but it is a fact that we are spending £80,000 a minute on the NHS. The hon. Member for Falkirk, West (Mr. Canavan) mentioned education spending as a percentage of GDP, but the number of youngsters in education has dropped over that period. That is one of the reasons for the figures, although they are increasing again now.
  Interestingly, the percentage of GDP being spent on health is up from 4.7 per cent. to 5.8 per cent.—and that excludes the figures announced today. That is why the NHS can treat more patients than ever before, and why the number of patients treated in the last financial year was up by 6.5 per cent. We do not hear much about that from Opposition Members. I do not regret public

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  investment through taxes in services such as the NHS, on which we all depend: that is what I think a modern state should do.
  I believe, in principle, in low taxes. I think that it is far better to allow people to have more money in their own pockets, to spend as they wish. Of course taxes cannot be reduced to zero; we must have public expenditure. The challenge is, can they be kept at a comparatively low level as a percentage of GDP?
  My hon. Friend the Member for South-West Cambridgeshire (Sir A. Grant) mentioned the iniquitous selective employment tax introduced by a Labour Chancellor in—if memory serves me right—the 1960s. The danger is that, if taxes must be raised, some Governments—particularly Labour Governments—want to raise them on businesses, as if they were a soft touch. They are not, because taxes on businesses destroy jobs. That is why it is important to keep taxes as low as possible.
  I am getting sick and tired of hearing Opposition Members criticise previous tax increases when, in practice, they have opposed each attempt to rein back public spending. Unless the state borrows ever larger sums, taxes have to equate to public spending. It is dishonest to the electorate to pretend otherwise.
  I support the moves in the Budget to reduce taxes. I have mentioned the changes to income tax. I am pleased that there have been further attempts to plug loopholes. I noticed that hon. Members were jumping up and down and saying, "We told you that loopholes needed to be plugged," but it is a continual battle to plug such loopholes. As we plug one, another opens. Therefore, it is not a battle that suddenly ends. It is a battle that must be continued for a long time—probably for ever.
  I welcome the changes to the uniform business rate, particularly to help small businesses, and the proposals to consider how to redistribute the UBR burden. I have received representations from smaller businesses that the burden bears down excessively on them. It is important to ensure that it is fair.
  One Opposition Member said that taxes were a higher percentage of GDP than when the last Labour Government left office. I could not believe those figures, so I checked them in the Red Book. Having done so, it is clear that the percentage is marginally lower than in 1978–79—it 38 per cent. of GDP as opposed to 38.75 per cent. More important, in 1978–79, the public sector borrowing requirement was 5.5 per cent of GDP; in 1997–98 it is 2.5 per cent. Therefore, in 1978–79, the total amount that was being spent was 44.25 per cent. and it is now down to 40.5 per cent. It is misleading, therefore, to pray in aid the argument on the size of the PSBR, which is, in effect, what was being done.
  Another story keeps being trotted out that misleads everyone—that the Conservative Government have introduced 22 tax rises. Last week, the Evening Standard, which I do not often pray in aid in any argument, kindly published the list of the 22 rises, which include interesting items that have been counted not just once, but on a number of occasions.
  Fuel duties that have increased more than the rate of inflation and car tax increases, all of which would have been supported, I should have thought, by Members who profess to be concerned about the environment, account for five of the 22. Alcohol duties account for one of them.
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  Allowances being frozen and restricted count for seven and reducing mortgage interest relief at source accounts for two. One can argue whether they are tax increases, but it is misleading to regard each one as a tax increase. Have Opposition Members told the public that five of their 22 rises involve extra taxes on cars, which I thought most Members on both sides of the House support in terms of improving the environment? The list is therefore misleading, to say the least.
  We also hear much from Opposition Members about the need for more investment. I agree with the need for more investment, but where I part company with Opposition Members is that I do not believe that Government can decide where investment should be made in the economy. The only people who can decide that are those who invest—Britain's businesses. If they believe that an investment is worth while and that there is a market for the product, they will invest. All experience shows that, when Governments say, "We should invest in this and we should invest in that," the investment is doomed to failure.
  What is the one proposal we have from the Opposition that would have a negative effect on investment? It is the windfall tax. What would that do for investment in the privatised utilities? What incentive do they have to manage their businesses properly when they think that a Government might snaffle any money that they manage to raise as a result of that successful investment? What a message to consumers, who will undoubtedly end up paying those higher prices.
  I welcome the Budget. The Chancellor has achieved the right balance with some sensible changes in public expenditure, and some significant extra investments in the key public services of education, health and law and order. I should have thought that they were sensible priorities. At the same time, he has managed to find room for sensible tax-changing measures—both the raising of the thresholds and the reduction in the standard tax rate.
  If the Chancellor had wanted to have an election budget, he could have taken 2p or 3p off the standard tax rate. He did not, because he wanted, rightly, to have a prudent tax Budget that would sustain Britain for the future.
  6.55 pm
  Mr. Gerry Sutcliffe: I, too, welcome the Budget, but not because of its content. I welcome it because it will, I hope, be the last that a Tory Government will inflict on Britain's people. Tory loyalists defend the Government, but it is complacent of them to say that there have always been tax loopholes. Two years ago, and even last year, the Chancellor did not accept that there were tax loopholes. Labour Members have been saying for long enough that people should pay tax, and that clever accountants were robbing the Revenue because it was not collecting taxes that people should pay. It is interesting that, finally, the Chancellor has recognised that fact.
  I am saddened by the Budget, because we are here to represent our constituents, and nothing in it will do anything for my constituents in Bradford, particularly the long-term unemployed. The Budget should have contained a strategy for the future, but what we have is the usual thing. After 17 years, this Government think about the next few months. They think not about the economy's long-term prosperity, but about a Budget for

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  their election chances, which, after today, are far weaker. We should have had a Budget strategy that equips us for the 21st Century and lays the foundations for a sound and sustainable economic success. We have not had that.
  In the past 17 years, we have had failure. The Tories have increased tax 22 times. It is untrue for the hon. Member for Croydon, North-East (Mr. Congdon) to say that they have not raised taxes 22 times, because they have. The main point is that the Tory party emphasises that it is the party of tax cutters, but it is not.
  We have the highest tax regime ever, despite all the opportunities that the Tories have had—North Sea oil, for example. There is a great imbalance in wealth. The earnings of the top 10 per cent. have increased, and those of the bottom 10 per cent. have decreased by 17 per cent. That is a disgrace. As we have said, this is a Government for the few, not for the many.
  The economic failures are legion. Investment is growing more slowly in this recovery than in any this century. When we talk about investment, we mean internal investment—not inward investment from abroad, but British investment within Britain. Britain lacks the education and skills needed. We are 42nd in the world skills league. As has been said, one in five families are without work—more than in Germany, France and the United States of America.
  Since 1979, Britain has fallen from 13th to 18th place in the world prosperity league. Since 1992, we have seen a fall in living standards—a clear breach of Tory election promises. That proves that we could not trust the Tories then, we cannot trust them now, and the electorate should not trust them in future.
  The boom-and-bust recovery is built on sand. For years, the Government have neglected investment in industry, in education and in skills. Unless we invest in the future, the recovery will prove unsustainable, as happened in the 1980s. Again, the people who were hit were ordinary families.
  The Budget should have tackled the British economy's fundamental problems. Instead, it chooses to paint a rosy picture than no one outside recognises. We are judged on how the electorate view us—that is the simple test. That is why Labour has won the past nine by-elections. That is proof that people do not trust the Tories.
  As I said, under the Tories, we have fallen from 13th to 18th place in the world prosperity league, and, at 9th out of 15 countries, we are in the bottom half of the European prosperity league. In 1979, Britain was above the European average for living standards, but, by 1995, we were below the average. Far from being the enterprise centre of Europe, Britain has suffered economic decline with the Tories. We have had the slowest average growth rate of any major industrialised nation.
  Our manufacturing base has collapsed under the Tories. In 1979, manufacturing accounted for 30 per cent. of GDP, and employed more than 7 million people. By 1995, manufacturing accounted for only 20 per cent. of GDP, and employed only 4 million people. Industrial production has grown at a slower rate than in 11 other European countries, and matters have not improved much since the recession. In August 1996, manufacturing output was barely above the level before the recession. The collapse in manufacturing has undermined our ability to trade with the rest of the world.
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  In 1983, the UK's balance of trade in manufactured goods became a deficit for the first time since the industrial revolution, and the situation has remained unchanged ever since. That fact is truly an indictment of the Government. Our share of world trade has slumped to the lowest level this century, and it is less than the share held by Italy, Germany, Japan and the United States.
  The Economic Secretary to the Treasury (Mrs. Angela Knight): That is wrong.
  Mr. Sutcliffe: Wait; we will no doubt soon hear what the Minister has to say.
  The two worst recessions since the war have been brought to us by the Tories. The most recent hit home owners, workers and taxpayers alike. Home owners were hit as interest rates doubled to 15 per cent. and house prices plunged. Negative equity has affected nearly 2 million home owners, and the taxpayer was left to pick up the bill for the Conservative's failure. There have been 22 tax rises, which, since 1992, have meant an additional £2,000 in tax for the typical family.
  When the Tories let inflation get out of control on the most recent occasion, they had to raise interest rates to 15 per cent. in fewer than 18 months to get it back under control. The same pattern could be repeated if the Chancellor does not tackle the economy's fundamental weakness. Today's inflation rates are poor by European standards. Britain is 11th in the European inflation league, and, of the other major industrial nations, only Italy has higher inflation.
  Investment is the key to our economic success and to future growth and economic well-being. The recovery is lacking investment. In 1995, investment was still 11 per cent. below the 1989 level and, over that six-year period, investment has accounted for an even smaller proportion of national income—down from 23 to 17 per cent. Private sector investment is only 9 per cent. higher than it was in the depths of the recession. At the same point in the most recent recovery, such investment was about 30 per cent. higher. That is a slower rate of recovery in investment than in any recession this century, including the 1930s, and the manufacturing investment rate is still lower than it was in 1979.
  Under the Tories, we have invested less as a proportion of our nation's income than any other European country. We have been watching what has been going on. Investment per worker is 18 per cent. higher in Germany, 51 per cent. in France and 68 per cent. in the United States.
  A modern, dynamic economy requires a highly trained and highly skilled work force. However, under the Government, Britain has fallen to 42nd place out of 48 countries in the world education league. We have fewer 17 and 18 year-olds in full-time education than any other country except Turkey, and the percentage has decreased over the past two years. Only 67 per cent. of the work force are qualified to NVQ level 2 or above, compared to over three quarters of the work forces of Germany, France and our other major competitors. At the age of 18, twice as many Germans are in full-time education as young British students.
  The central task of economic modernisation for Britain in the 21st century will be to overcome the long-standing problem of under-investment in people, industry and our

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  economic and social fabric. The only way in which to achieve the higher level of sustainable growth and employment we all want is to invest and for those investments to grow. Since 1979, however, Britain has had the lowest level of investment of any of the 24 Organisation for Economic Co-operation and Development countries, and the Tories have failed to recognise the role of Government in encouraging investment in the private sector, and the importance of investing in infrastructure and setting up true partnerships.
  Any sensible Government would have used this Budget to ensure that we had a platform for economic stability, which is essential for sustained growth. Labour would have created regional development agencies to work with venture capital to encourage the provision of more long-term finance for small businesses, considered other ways in which we could enable the tax system to encourage long-term investment, and shown interest in the Confederation of British Industry's proposals for a two-tier capital gains tax, to encourage assets to be held over the longer term.
  We should be bringing the public and private sectors together to invest in major infrastructure projects of national interest. Labour would radically improve the private finance initiative by prioritising projects and streamlining the decision-making process. In rebuilding our infrastructure, the way ahead is not to resort to the Tories' methods—relying solely on privatisation—and it is not to rely on the public sector to do everything. We should instead consider constructive and lasting partnerships between the public and private sectors. Britain badly needs capital investment across the range of our infrastructure, and especially in our physical infrastructure.
  Transport is vital to the future of our economy and to the everyday life of each of our citizens. We value it because it provides us with access to our jobs, to leisure, to services, to family and to friends, and it is crucial to the quality of life. The effects of transport policies reach far beyond the transport sector itself. They effect nearly every aspect of the nation's life, yet Britain is currently investing only 0.7 per cent. of GDP in transport infrastructure, which is about half the rate of our closest European neighbours.
  Transport congestion costs British business £19 billion a year, according to the CBI's figures, which is equivalent to £800 for every household in Britain. But the Tories persist in refusing to set a national transport strategy, and continue to be driven by dogmatic faith in free market solutions—rail privatisation, bus deregulation and, now, privatisation of the road network.
  I wonder whether people noticed today's cuts in the roads programme, which were mentioned by my hon. Friend the Member for Newport, East (Mr. Hughes). Those cuts will mean that we will not have many necessary roads which were called for by local authorities and communities. Our road, motorway and trunk road networks will suffer chronic congestion by 2005, and, based on current trends, all but one of the major roads into London will be gridlocked. According to the Automobile Association, one of every seven miles in our motorway network and over 4,000 miles of our primary roads urgently require repair.
  Parts of the London underground system are now 120 years old, and the King's Cross inquiry was told only a few years ago that the disaster revealed
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  "an endemic and long-standing under-investment in technology at a risk to safety."
  Consider what happened to the underground system last Wednesday, when the entire system was shut down because of the total failure of a 91-year-old power station.
  Rail privatisation has squandered more than £450 million in fees for consultants, lawyers and accountants, although service and standards have become worse. Rail privatisation has fragmented a nationally integrated British Rail into more than 100 different companies. They were sold off at knockdown prices, with separate companies owning the trains and the track and running the services. Those companies have now called for large public subsidies before they can do anything to increase the amount of freight currently carried by road to rail.
  The situation has come about because of the Government's actions of the past 17 years. They have been driven by a dogmatic belief in free market solutions, irrespective of the transport consequences. A road-building programme that was meant to cater for an ever-growing demand for car use has suddenly been chopped back, with no alternative plans in place. Meanwhile, the Government-driven privatisation of the rail network and deregulation of the bus industry has led to further decline in public transport provision. Nationally, since deregulation, there has been a 35 per cent. reduction in the number of bus passengers. That failure of the people is absolutely outstanding.
  We have fallen behind our European competitors in vital transport investment. France already has a high-speed rail link to the channel tunnel, but the building of Britain's has not even begun.
  Conservative policies have denied real choice in transport. People with cars are forced to suffer traffic jams and fumes, whereas those who wish to use public transport suffer declining services, and those who wish to walk or cycle cannot find safe and unpolluted streets.
  The Government's role is to set the framework and then to enable much of the provision to be privately funded. There must be a genuine public-private partnership, in which stated public policy aims have central place. The role of the private sector would then be to participate in those projects, to which it can bring its expertise and investment. Investment is lacking in our transport infrastructure, and that is the Government's legacy after 17 years.
  We have heard from the Chancellor today that the 1p to be cut off income tax will be lost to local government, whose funding will again be attacked by the Government. Local government is at the sharp end of dealing with the day-to-day realities of the problems in our communities—the lack of investment in our schools, in community care and in other essential local services. Local government needs £2.3 billion just to stand still and avoid service cuts.
  Local authorities will need to spend £19.2 billion on education next year. We always say this, because it is true and has been true when local authorities of all political persuasions have gone to Ministers to argue against the central Government funding formula.
  More than 1 million primary school children are educated in classes of more than 30 pupils. That figure has risen by 500,000 since 1992. Large classes can damage young children's chances, but class sizes have

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  risen steadily over the past six years. If more resources are not found, there will be serious consequences: pupils with special needs will not get the help that they need and have been promised; there will be a further deterioration in pupil-teacher ratios; and the condition of school buildings will continue to be a national disgrace. There are more temporary classrooms in my constituency than in any other constituency in the country because of the authority's inability to spend money on capital projects.
  Britain has the lowest level of publicly funded services for young children in Europe and the wider industrial world. As Secretary of State for Education, Baroness Thatcher pledged to provide nursery education free of charge to all three and four-year-olds whose parents wanted it. Despite her pledge, the Government have undermined nursery expansion through repeated cuts in local authority budgets, forcing a squeeze on discretionary services. In a skills-based economy, local authorities cannot provide the standards necessary to meet the needs of future generations.
  The cost of providing an acceptable level of personal social services will rise by nearly 8 per cent. next year, due to factors beyond the control of local authorities. Personal social services are already severely underfunded, particularly community care. Many people who need services and would have received them in the past now receive none because of the implementation of charges or the inability of the local authority to provide the services. The transfer of responsibility for community care from the Department of Health to local authorities requires additional funding of £127 million next year.
  Increased investment in public services such as personal social services can save money for central Government programmes. It has recently been shown that increased investment in preventative programmes in community care could lead to lower NHS expenditure on long-term hospitalisation.
  Many local services have already been cut or underfunded to protect services such as schools and community care. That will continue. The Government say that they will make more money available to schools, but the reality is that they take it from the other side of the pot. That is the true situation. People will find out that they are paying more for less.
  The Government have ensured that local government has suffered. Those who look to the local authority to provide the services they so badly need have been let down time and again by central Government, because not enough money has been allotted to local government. Some 85 per cent. of local authority spending is controlled by central Government. That does not meet local needs or give local authorities the opportunity to develop programmes to do so.
  The Government have tried to play it both ways with the electorate, but I am sure that the electorate will not be hoodwinked as they were in the past. They have seen that the Government that promised tax cuts gave them tax rises. The Government will not be allowed to get away with that trick again. We want a Government who care about the future of the country and can take the young long-term unemployed off the dole queues and put them into positive work. We want investment, and a Government who care where the country is going in the
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  wider world, not a Government who want to look after only those that they have looked after for the past 17 years.
  The Budget will go down in history as a leaked Budget, as has been said, but it will also go down as the last one from a Tory Government who did not care about the people of this country. The people want to hear speeches such as that of my right hon. Friend the Leader of the Opposition. He spoke about the country's future, and about putting things the way the people want. I am confident that Labour will win the next election. For many people in this country, that cannot come soon enough.
  7.14 pm
  Mr. Dafydd Wigley: I agree with much of what the hon. Member for Bradford, South (Mr. Sutcliffe) said about the additional expenditure needs for many programmes—for local government, for community care, for our transport infrastructure and all the rest. I part company with him on his castigation of the Government for having pushed taxes up, since I must assume that he would prefer a lower level of tax.
  To sustain the level of public expenditure we need—I agree with him on the expenditure that is needed—the money must come from somewhere. We cannot go on borrowing indefinitely. If we believe in the need for the expenditure, we have to believe in the means of raising the wherewithal to fund it. Sooner of later, the Opposition will have to come clean. I shall come to some of the details in a moment.
  The background to the Budget in Wales is that our income per head has dropped to the lowest of any country or region in the United Kingdom. We are at something like 82 per cent. of the UK average. Our unemployment does not differ much from the UK average—it is very similar, although there are pockets of high unemployment and pockets in which the economy is going fairly well. That underlines the need for specific action in those areas that still have high unemployment and those areas with very low income per head.
  I am thinking particularly of the western parts of Wales—the old counties of Gwynedd and Dyfed—and of the old coal mining valleys of south Wales. In an all-Wales context, we need a strategy from the Chancellor to ensure that the economy in those areas is stimulated. If the overall economy does not need stimulation—that is the general thrust of the Chancellor's strategy—we need some devices to ensure that resources, either through public expenditure or some other means, are targeted on those areas that have pressing needs.
  We can compare and contrast our position in Wales with that over the water. My nearest capital city is Dublin, which has a growth rate two to three times that of the United Kingdom. The GDP per capita of the Irish republic passed that of Wales for the first time ever in 1995. During the past two years, the Irish republic has created 56,000 new jobs. I know that the level of unemployment there is still too high, but the Irish have a dynamism that we are failing to achieve in Wales, and we need policies geared to achieving it.
  How have the Irish achieved that? Obviously part of the answer can be found in Ireland's internal strategies and the way in which it attracts internal investment. Ireland's rate of corporation tax is an incentive—at 10 per cent., it cannot but be an incentive. It has negotiated a

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  derogation on that. That leads to the second part of the answer, which relates to Ireland's success in achieving a substantial input from the European Union—some £478 per head a couple of years ago, compared with £45 per head in Wales.
  Given the need to target, I have no doubt that we should make a serious approach to gain objective 1 status for the western coast of Wales—the old counties of Gwynedd and Dyfed—and for the old coal mining areas. On all the criteria by which objective 1 status is calculated, it is needed.
  That provides the background to the Budget, because such approaches are needed to overcome our economic problems. I judge the Budget against that background, and I find it deficient. It is deficient on the central issue of creating employment. Some 100,000 people in Wales are unemployed. We would prefer them to be paid perhaps £160 a week to do work that needs to be done in our communities than £80 a week to rot on the dole.
  We know that work needs to be done in the environmental sector, in the transport sector, in community care and in education. All around us is work that needs to be done, and people who want to do that work. They may not have the right training, but work can be done on that as well. We would prefer the cost of the depression to be borne by the taxpayer, paying those people to do the work that needs to be done, rather than leaving them idle on the dole.
  Of course, that would presuppose a higher rate of tax. We voted against last year's reduction in income tax, because we believed that the money was required to pay for work to be carried out in our communities. That is why we shall be voting against the penny reduction in income tax this year as well. We would be happy to retain a standard rate of income tax of 25p in the pound, and raise additional resources.
  That does not mean that people on low incomes should be hit so hard by the taxation system. Therefore, I welcome the steps taken by the Chancellor to raise the tax threshold by £280, but, frankly, it is not enough. The erosion in the income tax threshold since the war, and particularly in the past 20 years, is staggering. Before I came to the House in 1972, the personal income tax allowance for a single person represented some 30 per cent. of average earnings. It is now down to 19 per cent. of average earnings. In order to restore it to its previous level, it would have to rise to more than £6,000. That how far people on low earnings have been drawn into the tax net.
  Increasing the personal allowance by some £500 would have taken some 830,000 people out of income tax, and would have made a considerable difference to those on low incomes. Had that same allowance been applied to people over 65, it would have taken a further 300,000 people out of income tax, including some 20,000 in Wales.
  We needed such a strategy. It would have cost money, but it could have been funded by removing the upper limit on employees' national insurance payments. The present ceiling of £455 a week has been increased by £10 in the Budget. If that limit were removed, the proceeds would be more than enough to pay for the changes that we have
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  advocated. We believe, therefore, that our proposals could be implemented. However, the Budget implements a strategy that is geared to the general election.
  Mr. Tim Devlin: That is silly.
  Mr. Wigley: The hon. Gentleman, who has just entered the Chamber, is making sedentary remarks. If he wishes to intervene, I shall give way to him. As he does not, I shall continue.
  We are aware that the Budget is geared to the general election, so there is a give-away on the standard rate of income tax. I do not believe that the electorate will buy that as a strategy. They want services to be maintained rather than eroded.
  The Red Book sets out the cuts in expenditure that accompany the reduction in taxation. I am particularly worried about the cuts in capital grants to local government by £1.5 billion. The Department of Education and Employment has lost £1 billion. Overseas aid has been reduced by £150 million, although we see on television starving children around the world. Should we rest quietly before a general election when that cut is paying for our tax bribe?
  On agriculture, apart from spending on BSE, there is a reduction of £90 million. The Department of Trade and Industry, the Department that would create the jobs that I mentioned, has also suffered a reduction of £90 million. The Department of National Heritage faces a reduction of £60 million. We know what that will do to the Arts Council. In other words, there is no such thing as a free lunch.
  Tax reductions have to be funded. My great fear is that the biggest cut of all will be in the money available to local authorities. Given their additional burdens, local authorities will be forced to increase council tax significantly to make up the deficit. The Welsh Office budget is to be cut by £120 million, rising to £270 million in 1998. I have little doubt that that will impact on the money available to Welsh local authorities.
  There are some good points in the Budget. We welcome the approach to pollution and sustainability, and the increase of £280 in the tax threshold, although it is not enough. We also welcome the steps to close tax loopholes on VAT and the limit on the business rate, which is a severe burden on small businesses. We welcome the small reduction of 0.2 per cent. in the employers' national insurance contribution. Although we welcome those small matters, the overall strategy is not putting the resources were they are most needed.
  In conclusion, let me draw the attention of the House to one group of people who have not been mentioned today—pensioners. The state pension will rise from £61.15 to £62.45—an increase of just £1.30. Let me quote the Chancellor of the Exchequer directly:
  "Individual living standards continue to rise."
  That may be true for some people, but, over the past 10 or 12 years, living standards have not been rising for the 40 per cent. of pensioners who have no income other than their state pension and benefits. Benefits have increased with the cost of living, but decoupling them from the link to earnings has meant that, instead of £83, a single pensioner receives only £62.45 after the increase in the Budget.

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  Some people have benefited from the increase in living standards, but pensioners are the only group who have not benefited, and who can do nothing about it. The Government will pay a severe price for letting pensioners down and not allowing them to enjoy any increase in their standard of living. Against that background, we find the Budget unacceptable, and we shall vote against it.
  7.25 pm
  Mr. Tim Devlin: I welcome the Budget because it is pragmatic, effective and philosophically correct. It is pragmatic because, contrary to the assertions of the hon. Member for Caernarfon (Mr. Wigley), it has not been framed solely with the election in mind. As my right hon. and learned Friend the Chancellor made clear, he was looking at the medium and long term as well as the short term. I know that he very much looks forward to presenting another Budget next year and in the subsequent years of Conservative government after the next election.
  When we consider the various options that were floated before the Budget—including massive tax cuts and various other amazing vote-winning strategies—it is clear that the Chancellor has been extremely pragmatic, working within the strict parameters that he set himself, to ensure that the economy is well based and on an even keel for the future, whether we win, lose or draw at the next election.
  The Budget affects matters that concern people in my constituency. It provides an extra £875 million for education, an extra £450 million for law and order and the police service, and a substantial increase of £1.6 billion for the national health service—and that does not take into account the important news about jobs and the economy.
  I very much welcome the extra £50 million grant for urgent school repair. I draw the attention of the House to my visit to a school in my constituency in July which resulted in the headline:
  "We need to spend more cash on schools now".
  I should mention to the hon. Member for Bradford, South (Mr. Sutcliffe) that one of the big problems about giving money to local authorities to spend on education, among other matters, is that they do not hand it over. If Stockton council is serious about providing a new primary school at Preston in my constituency, I hope that it will apply to the Government for the money now and not wait until 1997–98, as I was told in a parliamentary answer last week. There is no reason for delay. Two years is a long time in the education of four, five and six-year-olds. The council should apply for the money and start work as soon as possible.
  I welcome the £50 million for school buildings, and hope that Labour-controlled local authorities will hand the money over to the schools that need it.
  I also welcome the £129 million provided to nursery education, particularly the introduction of the voucher scheme, which will enable parents throughout the country to choose the education that their children receive. It is very important that this Budget should be a Budget for the family and that the Conservative party should be the party of the family. I therefore think that it is important
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  to give money to parents so that they can make real choices about their children's education. If local authority nurseries are so good, as local education authorities contend, I am sure that parents will stick with them and hand over their vouchers to them. Parents would still be exercising an important element of choice in doing so.
  I welcome the £280 million that is to go to universities and further education colleges. Under the Government, there has been an enormous growth in higher education. In 1979, only one in eight young people went on to higher or further education. Now, one in three do. We have a much better educated work force and many people enjoy the many benefits—not just academic ones—of further education. I welcome the extra money that will be given to such institutions.
  I welcome most particularly the £450 million that will be spent on law and order. More important, the underlying philosophy taken forward by the Government of judging all our public services by results and what they deliver, rather than allowing them to continue with age-old containment strategies, means that we are getting much more value for our taxpayers' pounds.
  I was very heartened by a report in The Daily Telegraph on the adoption by Cleveland constabulary of a profiler—a Cracker-style person who will profile criminals and be able to track them down more successfully. I was even more heartened when I read that our assistant chief constable said:
  "It is only recently that the police have come to the conclusion that we can cut crime. In the Eighties we perhaps mistakenly felt we could only contain crime. Now we are putting our money where our mouth is, we can and we will cut crime."
  Coupled with the money that is being spent by the Exchequer on law and order, that will be a very welcome piece of news to the electorate in my constituency.
  The hon. Member for Bradford, South said something about congestion in London bringing the whole city to a halt before very long. He put me in mind of when I was reading up for my history degree many years ago. I remember reading that a leading pundit in the 1890s said that, if the growth in horse-drawn carts in London continued at the rate at the time, London would be 6.5 ft under horse muck by 1915. That did not happen, although the roses in London may have been spectacular during those years. I am very dubious about some of the predictions about traffic congestion and traffic growth. In my experience, an invisible hand guides people, and they leave their cars at home when they find that it is too difficult to take them on the road.
  The hon. Member for Bradford, South asserted that the railways were far worse since privatisation. I was interested to read a commentary in one of the newspapers that said:
  "Trains are running on time more frequently under privatisation than when they were State-owned, according to official performance figures.
  The statistics, compiled by the Office for Passenger Rail Franchising, show that the first eight operators to be sold to the private sector increased service punctuality by two per cent between February and October, compared with the previous 12 months under British Rail."
  I happen to know that that is a fact because I am a regular traveller on the railway system, especially on the east coast main line, which has recently been taken over by Great North Eastern Railway. Not only are the trains

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  running far more punctually and, with the new blue livery, looking nicer, but the range of services on trains and at stations has broadened enormously because of the concentration on service delivery and customers rather than the operating convenience of the unions and the service providers. That underlying philosophy has been very effective in all our public services.
  It is very easy to say that local government is strapped for cash, but it is possible to go to certain parts of the country, such as where I live on the borders of Stockton, Middlesbrough and Hambleton district councils, and discover that two councils, which are control led by Labour, impose some of the highest band D council tax anywhere in the country, whereas the third—Hambleton—imposes a considerably lower council tax. When we ask why, we are told that Stockton and Middlesbrough have much worse social problems than Hambleton, which is in North Yorkshire. We find also that council tax in Stockton and Middlesbrough is considerably higher than it is in Hambleton despite the fact that the Government hand over more per head to Stockton and Middlesbrough than they do to Hambleton.
  It is important that we guard our environment as we approach the millennium, and I very much welcome tax differentials for less polluting fuels such as low-sulphur diesel. When I was a newly elected Member of Parliament, I visited the first lead-free pump in Stockton-on-Tees, filled the car up and gave an interview to the media about the importance of tax differentials to encouraging good environmental behaviour. Since then, lead-free petrol has taken off throughout the land and I hope that, in due course, low-sulphur diesel will do the same.
  Above all else, the people in my constituency care most about jobs. They will be very heartened to learn from the Chancellor today that unemployment throughout the country has fallen by 950,000 from its peak and that 750,000 more people are in work than at the end of 1992. They will also be particularly pleased to learn—if they do not know it already—that at 8.1 per cent., the United Kingdom's unemployment rate is lower than that in Germany, where it is 9 per cent., lower than that in France, where it is 12.5 per cent., and lower than that in Italy, where it is 12.2 per cent. Indeed, of all the countries in Europe, the UK has the highest proportion of its population in work.
  My constituents also recognise the importance of Europe as a framework and a market in which to expand and operate. They see, almost weekly, huge inward investment coming to the north of England from Japanese companies such as Nissan, Korean companies such as Samsung and smaller companies such as Tabuchi and Sanyo. Such inward investment is being made because we are full players in the European Union but do not have the burdens of social legislation that other countries have.
  When I consulted businesses in my constituency about what they would like to hear in the Budget, 83 per cent. replied that they would not want any form of minimum wage, and 79 per cent. said no to the social chapter being introduced. Opposition Members will have a job to explain to the business men of the north of England why they want to saddle them with such additional costs when businesses so clearly do not want them.
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  I am also very pleased that the tax on jobs in the form of employers' national insurance contributions has been cut and that it will be partly financed by the landfill tax—a tax on waste.
  The Budget is effective because it helps the real engines of growth in our economy: small businesses. As I have already said, they do not want to be saddled with unnecessary social legislation. They will be pleased by today's announcement on the non-domestic rating system and by the reduction in small companies' corporation tax to 23 per cent. Many of them in villages are already pleased by the changes in the rates for village shops. Indeed, Cleveland council's voluntary services wrote to me to tell me how delighted it was and how important such changes are to the future of our local communities.
  As we consider the effectiveness and correctness of the Budget, it is important to take into account whether we shall get borrowing back into balance. I am very pleased that we are, and that we shall do it relatively quickly. That move has been financed not just by the success of our domestic companies, but by the success of our exporters. If I have one tiny criticism of the Chancellor, it is that, when he said that we now have the best trade figures for many years, he did not mention the sterling efforts of my hon. Friend the Minister for Trade, who is at this very moment negotiating yet another big trade deal for us in Buenos Aires. I look forward to seeing him back in this country, and I am sure that companies in my constituency and many others will look forward to the contracts that he will bring back with him.
  The Budget is philosophically correct. We believe in low taxes because it is better to leave people to make choices in life with their money. The Government do not have any money: they have only taxpayers' money. The money that we invest on behalf of the whole community has to be well spent and well accounted for, but it is important too that individuals make choices about their lives, make provision for themselves and their families and take responsibility and feel a sense of duty towards their families and their immediate communities. To do that, they have to be left with the resources to make real and beneficial choices. They cannot do that if the community takes their resources from them and distributes them on their behalf. If that happens, the only choice individuals get in the matter is when they come to elect a Government and then come cap in hand to ask for money for particular causes.
  One of the special features of the past 17 years has been the enormous growth in charitable giving. Individuals have personally supported a plethora of good causes. On Teesside, we have seen massive charitable giving to local causes through the Cleveland Charitable Foundation. Local needs have been met by new enterprises that have arisen quickly in the voluntary sector. The hospices are a good example, and they are entirely supported by voluntary donations. That is an important philosophical feature of the Budget. We want to leave people the resources to make those choices possible, and to give people the opportunity to get meaningfully involved in their local communities.
  What have we heard from the Labour party? We have heard a lot of carping. In all the years I have known the right hon. Member for Sedgefield (Mr. Blair), today he made one of the worst speeches he has ever made. It had no content. Here was a great opportunity for Labour to

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  say what it would have done in the Budget, and he blew it. The right hon. Gentleman represents a neighbouring constituency, and I know that he will blow it again.
  Opposition Members disclaim any responsibility for the 89 pledges that were recently identified and costed by my right hon. Friend the Chief Secretary to the Treasury. They say that they cannot get the pledges past the right hon. Member for Dunfermline, East (Mr. Brown), but the reality is—and I know enough Labour Members of Parliament well enough to know it—that those 89 pledges represent the aspirations of most Opposition Members. They will disavow those pledges only for as long as it takes to get them into power, but if they do not get into power they will be in a serious situation—they will have dumped everything they believed in to try to get elected and they will not have anything to show for it. What will happen then? Presumably they will chop their nice, smiling leader and find themselves a proper socialist leader, if such a thing exists nowadays.
  Alternatively, if the Opposition get into power, what will happen? Will they still disavow the 89 spending pledges, or will they be queuing up outside the door of the new Chancellor of the Exchequer to demand that more money be spent on road congestion in London, rail services in Bradford and the many and various different causes that they have espoused without attaching price tags? Today was a great opportunity for the future Labour Government, if that is what Opposition Members really think they are, to set out their agenda to the nation, to tell us where they would spend the money and where they would raise the money. What happened? The right hon. Member for Sedgefield blew it, and he will continue to blow it.
  This has been a good Budget for the family, which will pay less on average than single people, and a good budget for all taxpayers. It shows that my party is serious about reducing the burdens of taxation. The Budget has shown that, for all the waffle, the Labour party is not so inclined and does not have the heart to do it. It had the opportunity to tell us, if it could, how it would reduce the standard rate of tax to 10p, as it once fatuously said it would. It had the opportunity to tell us which spending commitments would be chopped so that it could do that.
  We could have learnt today how Labour would spend so much on education, the national health service and all its other sacred cows, but we heard not a word from the Leader of the Opposition. I doubt whether there will be another word on the subject from the Leader of the Opposition, the shadow Chancellor or any other Opposition Member this side of the general election. After the next general election, when they are in opposition again, I look forward to the great squabbles about what went wrong.
  7.45 pm
  Ms Diane Abbott: It is almost—but not quite—touching to hear and watch Conservative Members try to put a brave face on the Budget. The truth is that this was the Tories' last chance Budget and they were desperate for big, splashy tax cuts which, for many of them, were their last, threadbare hope of holding on to power. As the Tories flowed out of the Chamber after the Chancellor's speech,
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  many of them must have been seeing their political futures drain away before their eyes, because it simply was not enough.
  One has to have some sympathy for the Chancellor. The Budget was, in many ways, blown off course by events. Harold Macmillan, when asked what was the most difficult thing in politics, said, "Events, dear boy, events." First, the Chancellor faced the mischance of having his entire Budget leaked to the Daily Mirror the day before delivery. That is unheard of in the history of Budget speeches. Then we had the unfortunate incident yesterday, when the Chancellor was dragged to the Dispatch Box by uproar in his party over economic and monetary union, which is the biggest economic issue facing the House in the coming 18 months.
  The Chancellor was more than a little disingenuous in his performance yesterday. For the Chancellor to claim that matters being discussed at ECOFIN have no relevance to this country because of our opt-out seems to me to be playing games with the truth.
  The Exchequer Secretary to the Treasury (Mr. Phillip Oppenheim): It would be helpful to the general course of the debate if the hon. Lady would ensure that her comments comply with the facts. The Chancellor said no such thing. I shall ask her a straight question for a yes-or-no answer. Are there any divisions in her party over economic and monetary union—yes or no?
  Ms Abbott: The real question is whether there are any divisions in my party about Europe. My party is united in the belief that we should stay in Europe, but, as the days go by, more and more Conservative Members of Parliament are coming out of the closet—the economic closet—and declaring themselves to be in favour of this country coming out of Europe. What more misguided and kamikaze policy could there be than that?
  Mr. Oppenheim: I am not sure about the hon. Lady's dodgy metaphors, but I shall ask her the question again on the off-chance that she will give me a straight answer this time. Are there any divisions in her party over EMU—yes or no?
  Ms Abbott: On that issue, as on all issues, my party is 101 per cent. united behind the leadership of my right hon. Friend the Member for Sedgefield (Mr. Blair).
  Mr. Oppenheim: You used to be honest.
  Ms Abbott: No, I was never honest—your mistake.
  It seems that the Chancellor is being disingenuous on the question of EMU, and he will have to return to the Dispatch Box to answer the real questions of what is to be decided at ECOFIN and afterwards. Anyone who has made any study of economic and monetary union knows that the one thing of which those in France and Germany are terrified is that countries that stay outside EMU might thereby gain competitive advantage. There is no question of every European country fulfilling the criteria for entering EMU on target—for example, the notion that Italy can hit the Maastricht criteria and enter EMU within the timetable is wholly fatuous.
  The question of how to bind countries that stay outside EMU in the first wave to continuing scrutiny and oversight of their public spending and taxation plans is

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  not merely a by-chance of ECOFIN's deliberations, but a central concern of the discussions. For the Chancellor to come to the Dispatch Box and attempt to reassure his mutinous Back Benchers by saying that, if we stay out, none of that can apply to us, flies in the face of the facts and of political opinion in France and Germany.
  I notice that, in a throwaway line, the Chancellor said that, by a happy coincidence, we were currently hitting the Maastricht targets on spending and borrowing. Innocent right wingers on the Conservative Benches should wake up to the fact that the Chancellor has a clear and relentless political commitment to entering EMU and that he will guide this country into EMU, whether his hon. Friends like it or not. As an admirer of the parliamentary process, I was saddened to see hapless Tory Members of Parliament so easily bamboozled yesterday.
  Turning to the contents of the Budget, I want to highlight Conservative Members' entirely dishonest claims about increased spending on the health service. On Monday, I was in my local general hospital, the Homerton hospital in Hackney. Conservative Members should go to hospitals, especially inner-city hospitals, and talk to staff there about increased spending on the health service. The figures on increased spending are phoney figures—they completely ignore differential rates of price and wage inflation in the health service.
  If one really wants to know what is happening in the health service, ask a nurse—any nurse. Far from more money flooding into the health service, as Conservative Members insist it is, nurses are voting with their feet and there has never been a greater shortage of trained nurses in the health service. That is not because there are no trained nurses about—I know many trained nurses—but because nurses have left the health service because of cuts, the increased work load, the pressure and the weight of bureaucracy.
  My local health authority, in the middle of London, has to go as far afield as Finland and Scandinavia to recruit nurses to work in the east end of London—not because there are no trained nurses in Hackney but because trained nurses are fleeing the health service. They know that, despite the Government's boasts about increased spending, the reality is cuts and increasing bureaucracy, year after year. The Government's boasts will sound hollow to ordinary people and health service workers who know what is really happening in the health service.
  I note that the Chancellor today glossed over a matter that will have a severe impact: the rise in prescription charges.
  I also want to touch on the proposals in the Budget relating to single mothers. I have to declare an interest: I head a single-parent household. One of the more distressing aspects of recent political debate is the concerted attempt—especially by Conservative Members—to stigmatise single mothers and to make them scapegoats for society's ills as a softening-up process before cutting benefits.
  I read with interest the press release issued by the Secretary of State for Social Security in respect of the cuts in benefits for single parents. He said:
  "Research shows that the only substantial extra expense lone parents have … is the cost of childcare."
  The Secretary of State must know that that statement is wholly misleading. Single parents do not have extra expenses as such; but, because lighting a flat costs the
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  same for a one-parent family as for a two-parent family and because housing expenses are the same for one and two-parent families, single parents' unit costs are far greater.
  That the social security system has had a lone-parent premium in the past is not a perverse incentive for single-parent families, but the state's recognition of the fact that, penny for penny and in terms of unit costs, running a single-parent household is relatively more expensive. That is not because there are specific extra costs but because the same costs are not divided between two wage earners.
  Hidden in the Budget announcement were cuts in housing benefit for single people and single mothers. It is wrong for the Chancellor, in his search for areas in which to scrape up money for tax cuts, to attack single-parent families, who are the poorest and most vulnerable families in our society. That measure does not do either the Chancellor or the Government any credit.
  In their final months in power, Conservative Members persist in proclaiming that theirs is the party of low taxation. Who believes that now? The fact is that, when one looks at the totality of taxation—direct and indirect—one finds that the only people who benefited in real terms throughout the 1980s from the Government's tax-cutting measures were those earning more than £70,000 a year. This is a Government for the people, by the people—but only the people who earn £70,000 a year.
  The public have seen through the Tories on tax. The reason the Chancellor could not come here with fatuous proposals to cut taxes is that he knows that the public would not believe him. The Tories have lied to the public about taxation too often and now the public see through the Tories entirely. This was the last Budget of this Parliament and, happily, it is the last Budget that many Conservative Members will be in the House to see.
  7.56 pm
  Mr. Barry Jones (Alyn and Deeside): I thought that my right hon. Friend the leader of Her Majesty's Loyal Opposition made a fine speech and was on good form. I disagree with the hon. Member for Stockton, South (Mr. Devlin)—when last was there so vigorous, so savage and so comprehensive a response to a Budget statement? I only hope that my constituency party workers observed my right hon. Friend, because it would make them work even harder organisationally to deliver a Labour Government on 1 May, or earlier.
  For the Government, the Chancellor of the Exchequer began in a smiling and jocular manner. He played the House with aplomb and great professional finish, as he always does and always enjoys doing. I heard him promulgate his five-year plan, but it was based on consumerism. I shall remember this general election Budget as the Budget that sold off the student loans book. Put in that context, we realise what a humbling predicament the Chancellor found himself in. The Chancellor's statement had a valedictory flavour. He was speaking for the record on exit from Government and hoping to put the best possible spin on his activities as Chancellor of Great Britain for the past four years.
  I wanted a Budget to strengthen Britain's manufacturing industries. I wanted a Budget to make serious inroads into the long-term unemployment totals. I also wanted a Budget to tackle the disturbing youth unemployment totals.

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  I had hoped for a Budget that would signal extra money for the hard-pressed county councils throughout Wales, and a Budget dedicated to stimulating the building industry, especially in terms of building houses at affordable rents, and the modernisation of the large, aging council estates that are so difficult and so cold to live in now.
  I wanted the Chancellor's Budget to signal real assistance for the beleaguered hospital trusts throughout Wales, because they fear a winter of unremitting pressure on their beds and services.
  I certainly wanted a guarantee that no local education authority in Wales would have to make even one teacher redundant, especially not in my county of Flintshire—but I fear that redundancies are on the horizon. I deplore the cuts in the training budget; those are folly. I also deplore the increase in prescription charges; that is unjust.
  In their determination to create a lean and powerful economy for the next century, the Government have neglected the moral challenge of long-term unemployment. They have neglected to provide for the young unemployed. It is one thing to aim for and to boast of profitable industries—certainly those exist—but what of the huge cost of paying benefit to the 2 million unemployed people in our country?
  That represents a ruinous charge of billions of pounds on the country. What of the financial consequences of the despair and alienation of the long-term unemployed and of young people who have left school and have no meaningful work? The Budget is silent on that question, which is so important for all the citizens of our country.
  This summer, 870,000 people had been out of work for more than a year, more than 500,000 had been jobless for two years, and 370,000 for more than three years. We have to face the fact that, with 37 per cent. jobless for more than a year, long-term unemployment for men is at a scandalous level.
  Those are grievous statistics for any nation in the western world, especially for our nation, with its previous record. I regret the fact that the Government appear to have no real determination to tackle the causes of deep-rooted unemployment.
  Why do the Government not designate a named Minister to take special responsibility for such a large problem? I remind the House that the Conservative party once gave the right hon. Member for Old Bexley and Sidcup (Sir E. Heath), who later became Prime Minister, special responsibility for the north of our country, with the aim of reconstituting an ailing economy and tackling unemployment.
  I conclude that Her Majesty's Government do not appreciate the terrible blight of long-term unemployment in the areas of our country that once sustained large, viable and profitable industries such as textiles, steel, shipbuilding, coal mining and brick making. Those industries have all but disappeared, or at least have substantially contracted.
  However successful we are in building a new local economy in the regions—we are successful from time to time—there are never enough new jobs to cope with the people who are still out of work. The tragedy in the 1980s was that the Conservative Government let too many of
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  our manufacturing jobs go to the wall. Within three years, when Sir Geoffrey Howe, now Lord Howe, was Chancellor and Sir Keith Joseph was Secretary of State for Industry, we let 2.5 million jobs go.
  Too many willing but unskilled men have no work, and they lead a wretched existence. They are without a skill and without a job, having only a memory of their previous pride in their job and their previous status in their communities. For years, they have had no formal role in life whatever.
  Neither the present Government nor previous Conservative Governments have addressed those people's predicament. That is unjust, and it is not good for our nation. It could be said that those tens of thousands of men, and some women, are rotting away. They exist, but the good things of life are not for them. They see, but they do not experience; they see, but they do not have.
  The Government are not battling for those people, or aiming to get them into work in sufficient numbers. They appear to have no strategy, no plan and no commitment; they appear not to care. It cannot be right for Britain that that cancer in our midst is allowed to continue. A Government must tackle the problem.
  The long-term unemployed and the young men and women who have recently left school have no real work. Not for them are the high wages of the skilled worker. They cannot share sufficiently in the good things of life in which most of us share. For them, there is only basic unemployment benefit.
  I would be the first to say that I do not want a dependency culture; the Chancellor was right there. But I want a Government programme to get the jobless into work. I want to see a success in that sphere of policy, to save Britain the cost of providing benefits on such a mighty scale. My right hon. Friend the Member for Dunfermline, East (Mr. Brown), the shadow Chancellor, has pointed the way forward in that respect, and his policies are commendable.
  I draw to the attention of the House some sobering figures—the social security benefit rates paid by the Benefits Agency. These are the most recent figures that the Library can give me. A person aged 16 to 17 who is out of work will have £28.85 each week. Someone aged between 18 and 24 has a total of £37.90 to exist on for a week. For a man or a woman aged 25 or over, the total is £47.90.
  The challenge that I put to the House is: how can such people manage their weekly lives with so small a sum? Tens of thousands of people must face that daunting challenge. What is the House prepared to do for those who are in such a predicament? What are the Government prepared to do? Why did the Budget not address that problem?
  It must be a harrowing experience to try to live on so wretched a sum for one year, let alone for two or three years, yet tens of thousands of people have to do it. That cannot be right. Nowhere are the Government addressing that problem that is so central in our communities. They are deaf to the cries of those who are poverty-stricken and unemployed. The problem must be tackled, for the sake of social justice and fair play. That is what I ask of the Government.
  The Budget is for the whole nation; it shapes life for us all. But at the grass roots, among the common people, what helping hand does it extend to the millions who are

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  elderly, disabled, poor, ill or jobless? It does not, and it is a failure. It is on behalf of my jobless constituents that I make my protest. I believe that the Government must face our people soon, and I hope that the electorate will send them packing.
  8.9 pm
  Mr. Michael Stephen: As we have come to expect from my right hon. and learned Friend the Chancellor, this has been a well thought out Budget delivered with his customary skill and good humour.
  We are constantly reminded by Opposition Members that before the last general election the Prime Minister indicated that he had no plans to increase the scope or rate of VAT. The Prime Minister is an honest man and I have no doubt that when he said that, he meant it.
  Someone once said that a week is a long time in politics, but six months is an eternity in economic affairs. Nobody knows what the economies of the world will be like in six months or a year, and any Government who said at any time—before or after a general election—that they would never increase taxes would be wrong. No Government can, nor ever should, fetter their ability to manage the nation's economy and to deal with new circumstances that the world economy may present.
  In my view, the Conservative Government had no choice but to increase taxes after the election. We could have increased borrowing—as the last Labour Government did—but that would simply have thrown the burden on to our children and grandchildren, and no responsible Member of Parliament could have done that. We could have cut spending on the national health service, on schools or on pensioners, but again, no responsible Member would have wished to do so. Certainly no Conservative Member wished to do that. The Government had to bite the bullet and do what Conservative Governments always do—they took a hard choice, even though that choice might turn out to be electorally unpopular. We raised taxes, and we should not apologise for that—it was the right thing to do in the circumstances.
  Opposition Members forget that, at that time, Britain and the entire western world were going through the worst economic recession since 1929, which had flattened the economies of the United States, France, Australia, New Zealand and many others. In so far as any action by the British Government exacerbated that situation, I have to say that it was entering the ill-advised exchange rate mechanism.
  We must remember, however, that at that time everybody was saying that we should enter the ERM—the Confederation of British Industry, the Trades Union Congress, the Labour party, the Liberal Democrats and pundits in The Spectator and The Economist all agreed that Britain ought to go into the ERM. It turned out to be a disaster, and I for one was extremely glad when the then Chancellor decided that we should come out. Since we came out, the British economy has not looked back and we are now in our strongest position for many years.
  Dr. Lynne Jones: Is the hon. Gentleman not being disingenuous in suggesting that the then Chancellor actually decided to come out of the ERM? After black Wednesday, he had no choice. Was not the reason why we had to come out the fact that we
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  had entered the ERM at far too high a rate in the first place? The reason why the economy has improved since is because the pound has now fallen to a more reasonable level. Sadly, it is now rising again and the Chancellor had better beware of the effects that that may have on his much-vaunted recovery.
  Mr. Stephen: I am grateful to the hon. Lady for making that intervention, because it shows how little she knows about the economy of the real world. There is no such thing as a correct rate to enter a system such as the ERM. If we had gone in at a lower rate, the dynamics of our economy and that of the world might—and probably would—soon have shown us that the rate was too low. The result would have been that interest rates would have been too low and inflation would have begun to stoke up.
  Mr. Bill Walker: Is it not a fact that, at whatever rate one enters any exchange rate mechanism, it is the other activities that matter? One can never say with certainty that a country operating within a fixed exchange rate mechanism is invulnerable to the events of the market.
  Mr. Stephen: My hon. Friend is absolutely right. King Canute could have told us that it was a mistake to go into the ERM. So much money crosses the exchanges every day as to be greater than the sum of money contained not only in our Treasury but in all the Treasuries around the world. No one can stand against those tides, any more than King Canute could stand against the tide, even though his courtiers suggested that he might be able to do so.
  We are told frequently that this Conservative Government have put up taxes 22 times—that there have been "22 Tory tax rises". But when we look at them, we see that four of them were increases in vehicle excise duty, four were increases in tobacco duty, four were increases in petrol duty and one was something to do with gold and the way in which tax is levied on bullion dealers. Come on! No Conservative Member has shirked the real tax rises and the restrictions in allowances. But for the reasons to which I referred a moment ago, the Government were right to make those tax rises, however unpopular they were in electoral terms.
  Would the Labour party have taxed less, had it been in power? As the Duke of Wellington suggested, "Anyone who believes that would believe anything." Those of us who listen to Opposition Members day after day and week after week realise that, if they had their way, there would be more spending on just about every left-wing interest group who approached them at their surgeries and in their offices here. Calculations have been made that Labour would introduce some £30 billion in extra spending. That is a vast sum of money which would have to be found by the Labour party.
  Perhaps Labour would not have raised taxes, but would instead have gone back to its old habit of borrowing money as though there were no tomorrow. I have no doubt that, if Labour gets into power at the next election, it will go back to its old ways of taxing, spending and borrowing, and it will take perhaps another 20 years for the next Conservative Government to put matters right. I sincerely hope that the British public will not be misled by the press, the media and the nonsensical propaganda that we hear every day from the Labour party into making the dreadful mistake of putting Labour into power.

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  One other factor that we must consider in terms of the "22 tax rises" is that interest rates have fallen. Interest rates are perhaps the biggest item in the budget of any family. They affect mortgage rates, which have now halved since their peak in 1990. That has done even more to benefit the average family than the tax cuts that my right hon. and learned Friend the Chancellor has been able to announce. When one looks at the overall picture, there may have been extra taxes but they are now coming down. The average family are now a great deal better off—after paying their taxes and national insurance contributions—than they were when we came into office.
  The hon. Member for Alyn and Deeside (Mr. Jones) mentioned the training budget. It is hardly surprising that, at a time when unemployment is declining as rapidly and consistently as it is at present, the Government might think it appropriate to reduce the amount of spending on training. Any hon. Member who talks to business men, as I do, will have been told that the Government should not be in the business of training at all. Business men want the Government to send them well educated, numerate and articulate young people, and they—the companies—will train them to do the jobs. The problem in this country is not lack of training, but lack of demand for trained workers. Resources are always scarce, but such resources as we have must be put into creating a climate in which businesses will think it worth their while to create jobs, rather than into training people for jobs that will not be available.
  I am glad that my right hon. and learned Friend the Chancellor was able to provide more money for the Home Office and that the police force is now better paid and better equipped than ever before. Those of us who remember the last Labour Government will remember that the police force was so demoralised that policemen were leaving in droves.
  But all the policemen in the world cannot protect us against crime, because throughout the western world crime is an entirely different entity from what it was 20 or 30 years ago. The root of crime today is drugs, which cause people to behave in a deviant way and to commit crime in order to get money to feed their habit.
  Drugs do not drop out of the sky. Hard drugs are imported and enter the country through our ports and airports. I do not care what the continental Europeans want to do: if they want open borders, and drugs, flooding across their countries, that is a matter for them. The English channel and the sea around us have given us a priceless defence against crime and drugs, and we must never let it go. I hope that my right hon. and learned Friend the Home Secretary will make that absolutely clear to his opposite numbers in Europe. Britain must maintain its frontier controls.
  Drugs come in through our ports and airports, carried by passengers or in freight consignments. We have to wage a war on drugs and we must put into it the same resources that we put into the war in the Falklands. Galtieri could have taken the Falkland Islands, but he could not attack the heart of our community and corrupt and destroy our young people as drugs are doing. There is the strongest possible case for a war on drugs.
  We should have not hundreds but thousands of sniffer dogs at our ports and airports. Every passenger entering the country should go through a screen that sniffs for
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  drugs and detects other contraband. We have no such screens. Extra money is to be given to Customs and Excise to check on beer smugglers—that is welcome, because I know the damage that they do to our drinks industry—but catching drugs smugglers is more important. I would have been pleased if the Chancellor had been able to put more money into the fight against drugs. I hope that he will do so in his next Budget.
  Those of us who visit prisons see the terrible destruction and blight that drugs cause to the lives of otherwise intelligent young people. When I visited Downview prison in Surrey, I sat with a group of prisoners who were there because of drugs. I was immensely impressed by the successful programme there, organised by the Addictive Diseases Trust, which forces young people to come to terms with their drug addiction and deviant behaviour. I know that the Minister of State, Home Office—my hon. Friend the Member for Maidstone (Miss Widdecombe)—has been to Downview to see the programme for herself, and I urge my right hon. and learned Friend—to put more money into the fight against drug addiction in our prisons.
  It should be absolutely impossible to get drugs into prisons. I know that we have tightened the procedures, but any prisoner who is found to have drugs in his blood or urine should be denied any future contact visits. If prisoners cannot be trusted, they should have no contact visits.
  Combating drugs is also a process of education. Companies spend millions of pounds on television advertising to persuade us to buy the latest products, but how much is spent on persuading our young people of the dangers of drugs or invested in a system that could turn 10 per cent. or 20 per cent. of them away from destroying their lives through addiction? Very little is spent, and I urge the Home Secretary to devote more money to a drugs education programme.
  In my view, this has been a good Budget, but I wish that we would declare war on drugs and fund that war properly.
  8.24 pm
  Mr. Clive Soley: It would be naive to assume that there was not a political agenda, just as there is an economic agenda, to every Budget, but many people outside the House will be surprised at the lengths to which the Government have gone to try to win the next election by manipulating the Budget to their political advantage. I do not believe that that strategy will work, but it will do considerable damage to our long-term economic recovery.
  I do not believe that people will be taken in by the Budget, especially on taxation. My right hon. and hon. Friends have made it clear that there is no longer anyone who believes the Conservatives about taxation; but there are more serious problems than that. The hon. Member for Shoreham (Mr. Stephen) said that the Government faced a difficult choice—to put up taxes or to increase borrowing—and that they chose to put up taxes; in fact, they dramatically increased borrowing as well.
  The Government have a dismal record. They have not only dramatically and unnecessarily increased public sector borrowing and taxation over the years, but they have maintained high interest rates throughout my 17 years in this place, doing enormous damage to our industry. That is a singular failure. The Government have

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  had all the advantages of North sea oil, of privatisation assets and of low commodity prices during the 1980s. That happy coincidence of events should have been of enormous advantage to a Government throughout the 1980s, and it was wasted.
  Mr. Oppenheim: One of the many myths promoted by new Labour is that we have had a massive oil bonanza. Does the hon. Gentleman know what oil receipts were in real terms in the last year of the Labour Government and what they have been for the past five or six years?
  Mr. Soley: What matters is that in the last year of the Labour Government they were rising dramatically. It was too late for that to influence the general election in 1979, but everyone knew that whoever won that election was likely to be in power for 10 years; after that, the oil revenues continued to increase, reached a plateau and then began to decline. Is the Minister really trying to convince me or anyone else that the Government had no advantage from North sea oil?
  Mr. Oppenheim: I can help the hon. Gentleman with the figures. In the last year of the Labour Government, oil receipts in real terms, in today's prices, were close to £1.3 billion; this year, they are expected to be close to £1 billion. In the past three or four years, they have cruised at around £300 million to £500 million. The only time at which they were briefly higher than in the last year of the Labour Government was in the mid-1980s, for three or four years.
  Let us hear no more of this myth about the great wasted oil revenues. They never existed: we are a very large country, so oil revenues as a proportion of gross domestic product are low, and United Kingdom oil is difficult and expensive to extract, which is why taxation on it does not yield as much as it would if the oil came from the Arabian desert.
  Mr. Soley: It is a pretty desperate argument to say that North sea oil was not a great advantage to the Conservatives in the 1980s. The House, and anyone reading this debate, will notice that the Minister did not deal with the figures before 1978–79.
  Mr. Oppenheim: I was referring to that year.
  Mr. Soley: I agree that revenues were high in that year, but before that they were low. They rose in 1978–79, stayed high throughout the 1980s, with a couple of dips, and then declined slightly. If it is the Minister's case that North sea oil did not benefit this country, he is denying what every economist knows to be true. It was an enormous benefit. North sea oil receipts, combined with all the assets of privatisation and low world commodity prices, is the explanation. Together those three items gave any Government, however incompetent, an enormous advantage.
  The problem is that the Government of the time kept interest rates so high that they damaged British industry—the Government know that, and so does British industry.
  I acknowledge that the Labour party lost the argument over tax for a number of years, but the fact remains that the burden of taxation under the Conservatives has been historically high. Theirs is not a party of low tax. If any
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  Conservative Member doubts that, he can turn to page 71 of the Red Book and see that throughout the 1980s, and, except for a short period, in the 1990s, the tax burden and social security contributions as a percentage of money GDP have been higher than under Labour Governments.
  The difference between our two parties is that the tax burden for the very rich has declined under the Conservatives, but for the lower paid and those on middle incomes it has increased.
  Mr. Oppenheim rose
  Mr. Soley: The Minister should be less keen to intervene, given that he does not seem to be able to get the economy right. Yesterday's "Panorama" programme revealed that the Institute for Fiscal Studies had assessed each of the groups that I am describing in such a way as to offer considerable support for my argument. The Red Book supports it too.
  Mr. Oppenheim: I shall ignore the hon. Gentleman's catty remark. I see it as an important function of mine to put him right on certain key figures. He says that the tax burden now is higher than it was in 1979. Is he aware that borrowing under the Labour Government averaged 7 per cent. of GDP, twice the average rate under this Government? If we had carried on borrowing at the rate Labour borrowed at between 1974 and 1979, income tax would be 14p higher than it is now. That borrowing was merely deferred taxation; we have spent 17 years paying off much of the debt incurred by the last Labour Government.
  Mr. Soley: The Minister is plain wrong, as page 65 of his Red Book shows. The public sector borrowing requirement is very high under this Government—
  Mr. Oppenheim: Half Labour's rate.
  Mr. Soley: The Minister should listen; he keeps seizing on particular statistics and then thinks he has won the argument. It is not like that.
  The Government came to power in 1979 claiming that they were going to cut public expenditure. They failed to do so and they have failed to reduce the PSBR significantly over 17 years. The reason is simple: high unemployment. High unemployment inevitably entails high public expenditure. So the Government are paying the price in the form of public sector payments, even though they have cut the money for unemployment and have fiddled the figures. The PSBR and borrowing generally have been so high because of the Government's failure to deal with unemployment.
  Mr. Bill Walker: Is the hon. Gentleman suggesting that, if people work for the state, it does not really matter whether they work at all? If the state, paid people to do that, we would be in the same position as the Soviet Union was—relatively no unemployment but broke.
  Mr. Soley: The hon. Gentleman is over-simplifying. No one is suggesting that we give people jobs and print the money to pay for them. Henry VIII discovered that that did not work, although not for the same reasons. We need to create employment and set up training schemes that give

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  people jobs and skills that are relevant to a modern economy. What is impossible is to pay people to be unemployed and expect to have a low PSBR. Unless all the unemployment benefits paid to people are abolished, they will remain the biggest burden on the Exchequer.
  Mr. Stephen: Of course we are all concerned about unemployment, but does the hon. Gentleman accept that the two main reasons for recent unemployment have been, first, the technological revolution that we are still undergoing—scores of men bent over workbenches are replaced by five or six robots—and, secondly, the world recession to which I alluded?
  Mr. Soley: I agree that the world recession has been a factor, but not enough to explain the problem. During the 1980s, the Conservative Government simply pulled the plug on the old rust bucket industries, watched them sink and put nothing in their place. Mazda in Japan and AEG in Germany also owned rust bucket industries, but they turned them around.
  I am happy to criticise the last Labour Government on one score: we subsidised industries with no clear idea of how to bring those subsidies to an end. But when the Conservatives took over in 1979 they just pulled the plug, and unemployment rocketed. Then they were surprised to see the PSBR go up and stay up. That should not have been surprising. Even the Conservatives do not deny that unemployment stood at 3 million—all those people had to be paid money and their taxes and productivity were lost to the economy. That led to high borrowing and the need to put up taxes. That, in macro-economic terms, is precisely what happened.
  Page 71 of the Red Book shows that taxation will again be higher towards the end of the century, and that, from 1998 on, total taxes and social security contributions as a percentage of GDP will again be higher than under Labour. So it is not just a matter of a few blips; the Government themselves are predicting a higher tax burden.
  That shows what is wrong with this Budget. It is a short-term effort to avoid defeat at the general election; and because the Government know that they are unlikely to win that election, they are not too troubled about the knock-on effects.
  I shall not deal this evening with growth or investment, important though they are, because I want to mention a highly political issue which will be profoundly damaging. I refer to the Chancellor's clearly stated intent to increase council taxation by £4 billion over the next three years. So the Conservatives are making councils put up local authority taxes from the spring of next year—when there will be an election—to pay, over the next three years, for the tax cuts that the Chancellor has announced today.
  The results will be deplorable, and not just for the council tax payer. This will be a body blow, too, to the ordinary person in the street in Hammersmith—but the Government will try to distance themselves from the increase, claiming that it is all the fault of Labour local authorities.
  I am also troubled about the effect on services. In today's Budget, the Chancellor of the Exchequer imposed on local authorities additional duties for care in the community, but he has said that there will be no additional money for such programmes.
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  I know of numerous cases in Hammersmith of care in the community not working as well it should, sometimes because of lack of resources. I am not unique in that. People throughout the country, and I suspect some hon. Members in the Chamber, know of such cases. I know of cases of people who are regarded as a danger if they stop taking their medication after release from hospital, receiving minimal support, not because of lack of concern or of ability to do the job, but because the money is not there.
  Care in the community is a good idea if it is well resourced, but without resources it is a disaster. At times, that disaster has been expressed in extreme forms of violence by some mentally ill people who do not have the support they need to survive in the community.
  We are imposing on local council employees the burden of paying extra to ensure that that job is done, or not paying it and seeing the job left undone. As usual, councils will try to do their duty—whatever their complexion, although there are not many Tory councils left—but it will be done in a penny-pinching way, so care in the community will not work properly. The consequences will be very serious.
  I shall now discuss an issue that we have not addressed properly for several years. It relates to the wider family issue, but I shall focus on the social security payment. I believe that most people accept that we need a radical reform of social security.
  I have never understood how the Conservative party has managed to continue the crazy policy that puts people in a trap, so that if they earn a bit more money they lose benefits. They are faced with the unenviable choice between earning money illicitly and risking the knock on the door by the fraud investigator or whatever, and living off their benefits.
  Let us suppose that, to give him a reasonable income, a person receives family credit to top up the money that he earns by working—usually part time, but perhaps full time. The taper is so steep that, if that person earns slightly more, family credit tapers off rapidly and other benefits are withdrawn.
  I recently heard of a classic example of a woman who earns the maximum that she can without losing family credit, but by doing so she loses free school meals, so suddenly she must find £15 or £20 a month extra. What does she do? Should she work extra time and try to find extra work and not declare it? That is illegal, but we know that many people do it. Or does she not pay for school dinners, and perhaps give the child a packed lunch?
  Is that a good family policy? When we speak about concern for the family, is that what we mean by a good policy? Of course it is not. It is no good the Chancellor of the Exchequer saying in the House, as he did today, "I care about the family because I shall treat married families slightly differently from the way that we have done." In that sense, marriage is not the issue.
  What matters is giving families of all shapes and sizes enough support to make them a functioning unit, and a unit that enables people to get back to work. That should apply in the care in the community case of an elder son or daughter looking after an elderly parent, or of the mother at work who receives family credit but does not receive enough to pay for school meals.
  As the hon. Member for Shoreham (Mr. Stephen) said, the change in the technology of this country has been dramatic and continuing, and as a result the nature of

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  work will continue to change. The dramatic change in family structure is not to do with the decline of marriage per se—that is merely a symptom. With the collapse of heavy industry, the set-up whereby the man went out to work and earned a living and the woman stayed at home and played the traditional housewife role has gone. It will not return, because the existing industry is seeking people to do part-time, short-term work—contract work and so on. That is often more attractive to a woman. It also often pays less, so it gets the woman into work, not the man.
  If we really want a family policy, we had better work out our Budget in a way that helps families without moralising about whether they are one-parent, two-parent, married or unmarried. That is not relevant. The relevant issue is to help parents be good parents by providing the infrastructure necessary for good functioning as a parent. I shall end with a couple of examples of that.
  How long will it be before we hear a Chancellor of the Exchequer says, "I want to help the family. There is no advantage to anyone in a parent trying to bring up a child in bed-and-breakfast accommodation or even temporary accommodation. We shall put an end to it"? I also want to hear a Chancellor of the Exchequer say, "We shall give support for nursery provision so that we can spot problems in the early stages and help parents manage the juggling that goes on between the modern structure of work and the problems of parenting, and we shall create a structure of financial, social security and other systems that support that." It will not necessarily cost more, although I accept that it may cost more during the transition.
  The Chancellor is saying today, in all these wonderful documents, that he will spend to save. I am fascinated by that. We shall even have more customs officers. Only six months ago I was trying to save from the sack some customs officers who dealt with small businesses in my constituency. Perhaps this is a sudden about-turn to do with elections.
  This is a sad Budget. It is a political one. The Conservatives have been rumbled by the public, and not before time; they could have been rumbled in the 1980s, but they were not. Fair enough; that is the way that these things go. But unless we address these issues in a more serious long-term way, we are destined to relive some of the problems with which we have struggled in the past few years.
  8.47 pm
  Mr. Peter Thurnham: I felt some sympathy with the Chancellor of the Exchequer when he was called to the Chamber yesterday at a time when he obviously expected to be preparing for his Budget. I was not surprised when he let slip a remark referring to
  "a country that is already struggling to cope with an excessive deficit."—[Official Report, 25 November 1996; Vol. 286, c. 30.]
  We already knew that the national debt had doubled in six years, and we have learnt today how the national debt continues to rocket upwards. The country is not cutting its borrowing—far from it. Borrowing continues to increase at a frightening rate.
  The figures for this year and next year come to a total of £45 billion of borrowing—two and a half times as much as the Chancellor projected in his 1994 Budget and £8 billion more than he projected in last year's Budget. I do not understand how he can honestly talk about
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  reducing tax by a penny—and more than talk about it, do it—when our deficit continues to grow at such a rate. A Budget that cuts tax when deficits continue to increase at that rate—much faster than was projected two years ago or last year—is not honest.
  We are all paying for it. We are all suffering because interest charges on borrowing are now reaching the prodigious figure of £26 billion per annum. That is a massive amount. If we were not paying it, we would have been able to have an honest Budget and have a tax reduction in that way, or to increase services in areas where they are hard pressed.
  The Financial Secretary to the Treasury (Mr. Michael Jack): I could not allow the moment to pass when the hon. Gentleman spoke about the public sector borrowing requirement. Does he agree that in 1997–98 it is forecast to be 2½ per cent. of gross domestic product, dropping in the next two years to 1½ and ½ per cent., which illustrates that the Chancellor has the matter well and truly under control?
  Mr. Thurnham: It is not possible to say that the Chancellor has the matter under control, when his projections were so far wrong. Two years ago he projected it at £18 billion, and it now comes out at £45.5 billion. That does not suggest that it is under control. He is now projecting a balance, but I do not believe that, as his earlier projections have not come true.
  Mr. Mike O'Brien: Does the hon. Gentleman agree that the Chancellor's projections today must be considered as reliable as they have been in the past, which is not reliable at all?
  Mr. Thurnham: Perhaps at one time people were prepared to give the Chancellor the benefit of the doubt, but that is running out with such massive borrowing figures.
  Where will the blow fall? It is clear to me that the impact will be felt in local government, as the hon. Member for Hammersmith (Mr. Soley) said. There will be massive increases in council taxes; that is unavoidable. The Red Book shows the increase for the current year as the best part of £1 billion. There will be cuts in services, although households will pay an extra £1 a week.
  In his speech the Chancellor made great play of increasing spending on education by £633 million or 3.6 per cent. Then he gave the game away with his comment that councils were reluctant to pass on education increases—they prefer to spend on other things. It is not a question of what councils prefer but of councils themselves reaching such decisions.
  The figures show that there has been a considerable increase in the demand for and provision of community care services, again as the hon. Member for Hammersmith mentioned.
  Spending on schools has gone down per pupil. In 1992 spending on each pupil was £2,988 in today's money. The latest figures for this year show it at £2,728. So there has been a fall in spending on education of £260 per pupil or some 8 per cent., even though that is said to be a priority for all the parties.
  The figures prove that the expenditure is going elsewhere. As the hon. Member for Hammersmith rightly observed, the pressures are on community care. The

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  figures show that there has been an increase of 6 or 8 per cent. in the demand for those services and the provision of home care and home help. This year local authorities are spending £570 million above the standard spending assessment. That shows that the provisions are not sufficient and local government is forced to find the money elsewhere to provide the bare minimum of services. This year only a 1 per cent. increase is allowed in the SSA, whereas the figures show that it should be much greater.
  Next year the joint local authorities submission shows that an extra £665 million or 8.9 per cent. is needed to maintain a satisfactory level of personal social services. Yet the figures suggest that nothing like that sum will be forthcoming. We shall have to wait and see the figures in the local government statement tomorrow.
  It is already known that there will be substantial demands. The growth in the number of elderly means that there must be increased spending of 1 per cent. Cost shunting from health authorities will be over £100 million. The capital disregard figure which has been changed previously will be over £30 million. Inflation will lead to calls for an additional £200 million.
  What will happen? It is clear that some of the most vulnerable people in our society will suffer. The elderly will be faced with even tighter eligibility criteria if they want to go into a residential home. Cruel decisions will have to be made. Increasing demands for intensive care in health authorities are being shunted into residential care, although that is not always appropriate. The disabled will suffer; there will be increased charges for home help services, and false economies if that leads to more people going into hospital than would otherwise have been the case.
  With regard to children's services, as the hon. Member for Hammersmith said, there is a need for co-ordinated preventive services. False economies will lead to increased law and order budgets later. The voluntary sector will suffer and organisations such as Home Start in my constituency, which does an excellent job helping under-five-year-olds, are vulnerable if there are intense pressures on local government spending.
  Far from an increase in spending on education, the number of teachers will be cut and class sizes will rise. Elderly people will be left to die alone and neglected in their homes because of insufficient funding for local authorities. We shall look keenly at tomorrow's figures, but in the present circumstances I do not see that there will be sufficient funding for the most vulnerable in our society. On that basis I do not see how the Chancellor of the Exchequer could say that this was an honest Budget. It is not; it is a dishonest Budget.
  8.55 pm
  Dr. Lynne Jones: The Chancellor's Budget has been almost entirely as predicted. No wonder the Daily Mirror decided that there was no great scoop in publishing the leaked documents that it had obtained.
  The Chancellor knew that very few people were clamouring for tax cuts. Business people do not want tax cuts; they want investment. According to a recent survey, even quite well-off members of the public see the need
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  for increased spending on welfare benefits and public services. The Chancellor had to respond to the clamour on his Back Benches for tax cuts of some kind. The 1p cut in the standard rate was widely predicted.
  This is not an honest or even a prudent Budget. It does nothing to address major concerns about growing inequalities, the fracturing of our society and the breakdown in the fabric of our public services. People want more investment in health, education and law and order, but when we examine the figures we will probably find that the Chancellor's promises turn out to be almost entirely illusory.
  When the Chancellor quotes the number of additional police officers, I notice that he always refers to "additional constables", not to an increase in the overall police establishment. The Government have used that trick before. Last year's increase in education spending was entirely illusory. As usual, they gave with one hand and took away with the other. That summarises their approach. The tax cuts will be paid for through increases in council and other taxes.
  I do not want to be entirely churlish. I welcome the Chancellor's air quality package, as he called it, the trend towards green taxes, and the slight reduction in taxes on employment through the employers national insurance contribution.
  It is widely recognised that now is not the appropriate time to cut taxes, because of concern about the public sector borrowing requirement. Although the Chancellor predicts that we shall break even by 2000, why should we believe him? The amalgamation of independent forecasts predicts a deficit of about 2 per cent. of gross domestic product in 2000.
  As we have seen in the past 17 years, the more the Government talk about cutting taxes and reducing borrowing, the more they increase them. Borrowing has exceeded Government estimates at the last election by £40 billion, and it is £25 billion more than was predicted in the 1995 summer economic forecast. As hon. Members have said, why should we believe the Chancellor's predictions now?
  We must examine the nature of the PSBR. Government spending and borrowing has increased, largely because of high levels of unemployment and a lack of investment in this country. One of the few budgets that is set to increase in real terms is the social security budget. We are not seeing the reduction in welfare spending and the increase in tax revenues that should flow from the decline in the claimant count about which the Government proudly boast.
  The unemployment figures are down because people are becoming economically inactive and moving from one type of benefit to another, or are starting training schemes. Analysis shows that 80 per cent. of those who undertake Government training schemes are back on the dole within 12 months.
  The Chancellor seemed rather perplexed about the shortfall in tax revenues—he does not seem able to predict why tax revenues have not increased as forecast. Perhaps one explanation is the nature of the jobs created in our economy in the past 12 months—most of which were part-time and low-paid. One has only to look at the difference between the tax revenues generated by those types of jobs and those generated by full-time jobs with average male pay rates to see why revenues are down.

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  Tax revenues from part-time jobs are one thirteenth of the revenues generated by full-time jobs with average male rates of pay. The creation of low-paid jobs—many of which are temporary—has not provided the expected boost to the economy and to Government revenues, and has led to a larger than expected increase in the PSBR.
  This is not a Budget for jobs, because it fails to invest in the sectors that will create work. Conservative Members have expressed concern about the proportion of jobs created in the public sector compared with the private sector. It does not matter where jobs are created, so long as we have a strong, wealth-creating economy.
  New technologies have resulted in a loss of jobs in those industries that have invested in that technology. However, if we have a strong research and development technology base that generates wealth-creating industries, it does not matter whether the jobs are in the public sector or the private. Japan has shown that a strong manufacturing base and an efficient wealth-creating sector can support many jobs in the service sector.
  It would be the same in this country if all of our industries were as effective as the pharmaceutical industry. That is the only industry with world-class British companies—Glaxo Wellcome is the No. 1 pharmaceutical company in the world. The industry is successful because of the symbiotic relationship between the public and the private sectors. The pharmaceutical industry has felt able to invest in research and development because it knows that there is a market for its products—mainly through the NHS.
  Britain's other very successful industry, aerospace, also depends upon military contracts that are procured by the public sector. It is a pity that we do not see similar investment in civil engineering and technology, but perhaps we should look at what the public sector could do in that area.
  When I visited GEC a couple of years ago, it proudly showed us a firefighter's helmet that it had developed as a spin-off from military technology. It was selling them to the New York fire service. Why cannot the public sector procure such development projects? Why are we not asking companies to produce better equipment for our firefighters in the public sector? I bet that we would create far more jobs in civil development than with the military procurement budget of £8.5 billion. Each job created for the European fighter aircraft costs £1 million. Such spending in other areas would create far more jobs.
  Mr. Bill Walker: If the objective of buying the Eurofighter were to create jobs, the hon. Lady would be right. But the reason for buying it is to deter anyone from aggression against us. That is less expensive than fighting wars.
  Dr. Jones: Which aggressors will such equipment deter?
  Certain elements of the defence procurement budget are necessary. I mention Nimrod in particular: it is obvious that a maritime nation should have a coastal surveillance capability. Such expenditure can be supported, but an analysis of the expenditure on the fighter aircraft would show that we could probably do the same job much more cheaply by buying much of the military equipment that was left over after the demise of the USSR.
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  I am using this example to show the importance of Government spending for the wealth-creating sectors. It is wrong to suggest that Government spending is necessarily a bad thing: it can be very important for our industries, and for research and development.
  As well as encouraging firms to invest, the public sector plays a crucial role in the creation of our science base. I read in yesterday's Financial Times that the leaders of the pharmaceutical industry have made representations to the Government about their deep concern about the rundown of the science base.
  The £20 million so-called additional capital expenditure for science in the universities is merely a token gesture, because capital spending overall in the universities is still set on a downward trend. Coming after last year's massive 30 per cent. cut in capital spending on universities, £20 million is neither here nor there. There is still a steady decline in our science base, and that is not good for future investment.
  The Chancellor says that the trade gap is pretty even, but I note that he declined to give the actual figure, which shows that we are still in deficit. We have a manufacturing deficit, and our manufacturing production is still only 2 per cent. above what it was before the recession. Those figures show the underlying problems of our economy, which the Budget fails to address. We should be introducing measures to increase research and development.
  The Select Committee on Science and Technology, on which I serve, and the Select Committee on Trade and Industry have suggested tax incentives to increase business investment in research and development. I should also like to see more Government investment in research and development.
  The Chancellor proposed the concept of "spend to save". I like that concept: it can be applied to the investments to which I have referred, and to much public spending. It is right that we should be looking to reduce the public sector borrowing requirement for Government spending on consumption, which should be paid for out of tax revenues.
  Certain elements of public spending and public borrowing, however, are for investment, which pays for itself in terms of job creation and income revenue stream. I am thinking particularly of investment in public transport infrastructure and housing. A boost to Government spending in those areas would have paid for itself in a very short time, and would also have created jobs and increased demand in the economy. That would indeed have been spending to save, but we have been given the reverse. I have not had a chance to examine the figures, but it is widely predicted that the transport and housing programmes will continue to be slashed in the run-up to the election.
  There is also the question of the growing inequalities in our society. A paper produced recently by Cambridge university showed that a penny reduction in income tax largely benefited the better-off: 89 per cent. of the benefit of a cut in the standard rate goes to those on the upper half of the income scale, while a mere 3 per cent. goes to the 10 per cent. who are on the lowest incomes. Cuts of that kind do nothing to deal with the growing inequality in society, or with the poverty in which so many people live.
  A third of our children are growing up in poverty, and our pensioners are struggling to make ends meet following the consistent withering on the vine of the state

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  pension. As my hon. Friend the Member for Hammersmith (Mr. Soley) said, instead of reducing income tax, the Government should have targeted families, and the best way of helping them would have been to increase child benefit.
  It is disgraceful that, rather than doing that, the Government are penalising children in one-parent families by cutting benefits. Last year, the Chancellor ruled out such a measure, on the basis that it would deter members of one-parent families from working. It is disgraceful that so few adult members of one-parent families in this country go out to work. This measure does nothing to provide incentives to work, or to deal with growing inequalities and poverty in society.
  Despite what the Chancellor says, this Budget looks no further than the next general election. He has scrabbled around to try to find bits of extra money in an attempt to justify income tax cuts. There has been the sale of Ministry of Defence married quarters, we have heard today about the sale of the student loans debt, and the private finance initiative will ultimately cost the taxpayer far more: the debt charges will be higher, because the private sector will pay more to borrow than the public sector would.
  These chickens will come home to roost after the next election, but the Government do not care about that. They have set their sights on winning the election. Unfortunately, like so many people, they are trying to fight the last election.
  The public, however, have seen through a party that argues that the tax-cutting agenda is the way in which to establish a vibrant economy. They realise that that is not the case, and that what we need is a Budget that addresses the lack of investment in our economy, the lack of investment in our public services and the lack of investment in our infrastructure, along with growing inequalities that need to be reversed. That is what should be in the Budget, and I look forward to the implementation of such measures by a Labour Government.
  9.13 pm
  Mr. Hugh Bayley: I will speak briefly about one line in the Red Book: the control total for the Department for Education and Employment. The reason I rise to speak is that, at the end of last week, there was a serious and terrifying assault on a young girl in a York local education authority junior school. It was terrifying, obviously, for the girl who was attacked, for the other pupils and for parents, and I speak as a parent with junior school-age children in York.
  Fortunately, a man has been arrested and charged with the assault, but that does not undo the damage. After Dunblane and the murder of Philip Lawrence, schools throughout Britain need better security, for the sake of children's safety and for parents' peace of mind.
  Earlier this year, my local authority, City of York council, made a bid for closed circuit television for all York schools. It bid to a Home Office scheme—the CCTV challenge. After the murder of Philip Lawrence, the Department for Education and Employment and, I believe, the Welsh Office added funds to the scheme. Local education authorities were specifically encouraged to bid to the scheme for school security measures.
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  In June, the Government responded to my local education authority. Their letter said:
  "I am afraid that your bid has not been successful in this round of the competition … The value of the bids—at almost £45 million—was three times the amount of money we had available.
  However, the Government has made it clear that it will provide a total of £45 million over the next 3 years to support the extension of CCTV … Local partnerships will therefore have a further opportunity to bid in the near future."
  On the face of it, the letter sounded promising, but it now transpires that the money that is available for those future rounds of CCTV bidding is not available to schools. The current round is seeking bids for CCTV to monitor "open spaces". Local education authorities have been told that money for school security should come from GEST, grants for education support and training.
  A Department for Education and Employment press release, issued today as part of the Budget pack, says that an additional £60 million of GEST money will be earmarked for school security, but the line in the Red Book that concerns me is that on the control total for education and employment. It shows that Government spending, excluding standard spending assessment expenditure borne by local authorities, will fall from this year's forecast outturn of £14.81 billion to £13.95 billion next year. The difference must be made up by local authorities in their council tax bills.
  Will the local authorities be able to make up the money? Other hon. Members have already mentioned the fact that the taxation burden is being switched from central to local government. The simple answer is no. Political pressures stop huge increases in council tax, so they will not be able to make up the money in that way, but, even if they wish to brave the political pressures for funding a need such as school security, council tax capping will stop them doing so.
  My local authority will have to reduce its expenditure next year by about 5 per cent. overall. It will protect the education budget, but the opportunity for increased spending out of the money available to the local authority from the combination of central grant and the council tax will simply not allow it to increase education spending.
  The Government should therefore not be playing political games with children's safety in schools. They should not be requiring LEAs to make a choice between spending money on teachers, books, reducing class sizes and improving the quality of education, and spending it on the security and safety of children in schools.
  The same Department for Education press release, in the Budget pack, stated that the Government intend to make £22 million of extra money available to expand the assisted places scheme. I urge Ministers to put the safety and quality of education for all children in all schools above their decision to buy a few more places for a small minority of children in selective schools. Ministers will make the wrong decision if they proceed with their policy of expanding the assisted places scheme for a few children at the expense of safety for all schoolchildren. I urge them to think again.
  Debate adjourned.—[Mr. Knapman.]
  Debate to be resumed tomorrow.

PETITIONS

  Toxic Waste Disposal (Worcestershire)
  9.20 pm
  Mr. Peter Luff: It is my privilege to present a petition of 3,738 signatures of the people of Worcestershire—largely from the Warndon villages area of Worcester city—compiled by an organisation known as Warchem, which is short for Warndon Residents Against Chemicals. The petition addresses one of the most pressing issues in my constituency. My constituents express grave concern about the grant of planning permission and the imminent grant of a waste management licence to Norchem Environmental Services—at its site at Shire business park, Warndon, Worcester—for a toxic waste transfer and oil recyling facility.
  The petitioners believe that serious questions need to be asked about how we have reached the current situation with the application. They acknowledge that planning permission from the county and city councils has been granted, subject to certain conditions, and they are very fearful of the imminent grant of a waste management licence from the Environment Agency. They state:
  "We believe that in granting these applications insufficient consideration has been given to the effects on and dangers to local residents whose homes are adjacent to this site (effected are approximately 4,000 homes).
  The petitioners therefore request the House of Commons to urge the Government to investigate the procedures and decisions that have been undertaken in granting these permissions and very strongly urge that they be overturned."
  To lie upon the Table.

  Bourne Hospital, Lincolnshire
  9.22 pm
  Mr. Quentin Davies: I beg to present a petition signed by more than 8,000 of my constituents, urging the Secretary of State to save Bourne hospital.
  Bourne hospital is almost the ideal type of local hospital, each year providing about 8,000 bed days and 3,500 to 4,000 out-patient appointments for a population of about 15,000 people. As more than 8,000 people in my constituency and in the area served by Bourne hospital have signed the petition, Mr. Deputy Speaker, you will realise that it is supported by an overwhelming majority of the adult population in the area.
  Lincolnshire health authority proposed the closure of the hospital on clinical grounds, but the hospital's survival is supported by every general practitioner in the area, and by their patients. I believe that Bourne hospital is exactly the type of cottage hospital to which the Prime Minister recently paid very warm tribute. It is an absolutely essential part of the health care of the local community in a rural area such as Lancashire. The nearest general hospitals are 20 miles or more away, and it would be a major blow for the health of the people in my constituency if Bourne hospital were to close.
  The health authority has made no financial arguments for closing the hospital that stand up to scrutiny. If it were closed, there would be considerable additional expenditure on ambulances, and the beds currently occupied by patients in the hospital would have to be purchased from acute hospitals elsewhere, most of which are a good deal more expensive. I urge the Secretary of State to do everything possible to preserve Bourne hospital.
  To lie upon the Table.

Scottish Ambulance Service (Mrs. Susan MacKenzie)
Motion made, and Question proposed, That this House do now adjourn.—[Mr. Knapman.]
9.24 pm
Mr. Bill Walker: I thank Madam Speaker for giving me the opportunity to have this Adjournment debate.
My constituent, Mrs. Susan MacKenzie, of Aspen, Fonah, Pitlochry, was an employee of the Scottish ambulance service. I have written to my right hon. Friend the Minister many times about the problems that Mrs. MacKenzie faced in her employment. She believes that her dismissal from the Scottish ambulance service was the result of a false picture of her as an employee, created by the shop steward and possibly others in the way in which they destroyed records.
Mrs. MacKenzie believes that several factors caused the problem. The first was that she would not become a member of the relevant trade union for the ambulance service. She also refused to take an ambulance on shopping trips—not shopping trips to pick up just a roll or a sandwich, but trips to buy five or six bags full of weekly shopping. The ambulance that she was responsible for was removed from the station and used for such trips. Written regulations in her contract of employment forbade that practice.
My constituent's refusal to accept such practices led to difficulties over injections to protect her against hepatitis B. She claims that some employees of the Scottish ambulance service criminally destroyed prescribed drugs that were sent to the ambulance station at Pitlochry for use by Mrs. MacKenzie to protect her against hepatitis B. She further claims that an employee of the Scottish ambulance service criminally altered or falsified the record and log books that were required to be kept in connection with immunisation records.
Mrs. MacKenzie also claims that an employee of the Scottish ambulance service criminally destroyed faxes, sent to the head office of the service, in which she repeatedly requested that the prescribed drugs held in her name should be released from the refrigerator so that she could take them to her GP for immunisation. She stresses that the Scottish ambulance service is a record-keeping organisation. It now admits that the second and third doses were sent to Pitlochry ambulance station. As they were not returned to the occupational health service, it was presumed that she had been in receipt—in other words, that she had had the injections. Presumption, as she says, is not in accordance with its status as a record-keeping organisation.
My constituent claims to have evidence that the logs and records were falsified to make her appear to be a bad timekeeper. She holds copies of faxes disproving that allegation. Mr. Duffy, an ambulance man at Pitlochry of 21 years' service, also confirms that that is not correct. He gave evidence at a disciplinary hearing at the Scottish ambulance service headquarters in Edinburgh. When asked if there was a troublemaker at Pitlochry station, Mr. Duffy replied that he thought that there was—someone who he felt held too much influence in the station. He thought that the wrong person had been dismissed.
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He went on to say that the individual in question was a shop steward at the station. Mr. Alan Jamieson, who seemed to have a great deal of influence in that other staff would follow his lead. When asked whether he had been threatened before the tribunal, Mr. Duffy said that he had not, but when he was asked whether he had been told to be careful about what he said at the hearing, he said that Mr. Delpippo, the senior officer in Perth, had told him to watch what he said.
Mrs. MacKenzie says that the whole matter is being swept under the carpet by the Scottish ambulance service and that the Health and Safety Executive has been passing incorrect information to Ministers, who have therefore been misled. Mrs. MacKenzie sets out her concerns in her letters to me, as her Member of Parliament, of 4 February 1996, 28 March 1996, 8 April 1996, 1 May 1996 and 2 June 1996, copies of which have been sent to my right hon. Friend the Minister. She states that there are known to be 350,000,000 carriers of hepatitis B in the world, that it is spread not only through blood, but can be contracted through saliva and other body fluids, and that hepatitis B is more dangerous than hepatitis A.
Mrs. MacKenzie maintains that the Health and Safety Executive states in a letter to me, as her Member of Parliament, that it found no evidence that she was required to undertake work that would have necessitated immunisation against hepatitis B—emergency 999 calls. She asserts that that is not true and that the Health and Safety Executive never asked her what evidence she could provide. She claims that the evidence is recorded and that the ambulance man of 21 years' service would verify that.
Mrs. MacKenzie claims that the Health and Safety Executive refused to implement proceedings where she could prove breaches of the Health and Safety at Work etc. Act 1974. She claims that they included falsifying records and criminal malicious intent. She suggests that the Health and Safety Executive could question the long-serving ambulance man or investigate the trail of injectable material and find out where and how it disappeared, bearing in mind that she was in the service for 15 months after the material was sent to the station. I remind my right hon. Friend that Mrs. MacKenzie received her first injection during her training course.
The Health and Safety Executive has made more of an issue of the changed rules that the Scottish ambulance service has implemented since her problems arose than the events and circumstances involved in her case. Mrs. MacKenzie states that changes to procedures are of no interest to her and bear no relevance to what she calls "a previous criminal act". She asks why the Health and Safety Executive is satisfied with changes that have now been made, when she believes that she can prove criminal, malicious intent that exposed herself, her husband and her two children to hepatitis B.
Mrs. MacKenzie believes that the Scottish ambulance service purposely misinformed Ministers. For example, the chief executive of the Scottish ambulance service stated that Mrs. MacKenzie was employed as a patient transport ambulance care assistant and that immunisation against hepatitis B was not required for such staff, but that it was offered as it saved time when staff moved to emergency duties where such immunisation was required. Mrs. MacKenzie claims that that is simply not true, and that when she first joined the ambulance service she was given the first of three injections against hepatitis B during her first week at training school. She states that it

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was also her personal desire to be immunised, and claims that the Scottish ambulance service had a duty of care to ensure completion of her course of injections and to act on her verbal, written and faxed communications stating that she had not received her last injection.
Mrs. MacKenzie was sent on 999 emergency cases, and records at Pitlochry and the local hospital on her attendance are there for anyone to see. In the course of those duties, she received staining of blood on her skin and clothes, which is, of course, the reason why staff are immunised against hepatitis B. She attended those 999 calls because emergency personnel were not available.
Mrs. MacKenzie says that my right hon. Friend the Minister was told that the Scottish ambulance service records show that immunisation is given in three (loses over a period, that subsequent treatments were sent to the local ambulance station and that the Scottish ambulance service "presumed" that the procedure had been followed. She says that that is a blatant lie. The Scottish ambulance service was in receipt of a fax from her—she has a record of it from her fax machine—saying that she had not received her third immunisation dose despite her repeated requests. The fax was sent 15 months prior to the end of her service with the Scottish ambulance service and within the allocated time given for the completion of the three-part course of injections. She claims that the Scottish ambulance service has not told the Minister the truth by using the word "presumed".
Mrs. MacKenzie says that my right hon. Friend the Minister was told by the chief executive of the ambulance service that the settlement that she accepted at the industrial tribunal was the end of the matter and included aspects of her hepatitis B injections. She says that that is another lie. She provided me with a copy of the letter from her solicitor that clearly states that the industrial tribunal settlement is only connected to wrongful dismissal with regard to her contract of employment.
The letter, of which my right hon. Friend the Minister has had a copy, clearly states that the Scottish ambulance service's omission to provide her hepatitis B injection is a matter of "duty of care" owed to her by the service, and is based on "delict". She says that the matter settled at the tribunal is one of contract, which is entirely separate. She also says that the discharged papers that she signed at the tribunal did not prejudice her in any way with regard to matters concerning hepatitis B. She says that the letter that my right hon. Friend sent to me on 8 May states that she was not involved in any 999 calls, but that that is obviously a lie because the records show that she was. She says that he has not been told the truth and has been misled.
Mrs. MacKenzie says that my right hon. Friend the Minister should know that changed procedures bear no relevance to the criminal, malicious intent that was in force against her at the time. She says that he should also know that the destruction of prescribed drugs named for an individual is a criminal act, as is the refusal to provide prescribed drugs named for an individual. She claims that he has misled me by stating in his letter that the matter was settled at the industrial tribunal and that she accepted full and final settlement in respect of all claims under statute or common law arising out of her contract of employment and its termination. She says that that is simply not true. I repeat that Mrs. MacKenzie claims that her solicitor's letter clearly states that she settled only matters applicable to the contract of employment.
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She says further that the discharge she signed over the tribunal does not prejudice her in any way on the matters concerning the hepatitis B injections.
Mrs. MacKenzie says that my right hon. Friend has refused to acknowledge serious wrongdoings by the Scottish ambulance service and that attempts have been made to cover up and to mislead my right hon. Friend, and that the Scottish ambulance service is responsible for that. She asks that her claim, that proven criminal intent and incorrect procedures have resulted in a serious breach of the health and safety at work Acts, be acknowledged.
She also asks that an independent inquiry should be set up to examine and determine the evidence, which she claims is all there, and that the Health and Safety Executive question and investigate all the parties. It is not suitable or correct that the matter should rest with the explanations that have been provided by the Scottish ambulance service. She says that the Health and Safety Executive has now accepted that changed procedures are the answer, but she says that it is sweeping everything under the carpet; the solution to her complaints about criminal and malicious intent in the matter of her hepatitis B injections must be examined.
Mrs. MacKenzie claims that she is able to prove a clear breach of the health and safety at work Acts and criminal and malicious intent in those responsible for the matters. She asks that my right hon. Friend initiate an independent inquiry and that the Health and Safety Executive bring matters forward for prosecution. She further says that there should be a police or criminal inquiry.
In conclusion, I have in my possession a reference received from the Pitlochry festival theatre on behalf of Mrs. MacKenzie and I will give a copy to my right hon. Friend after I have finished speaking. The reference shows that she was employed by the theatre and that the managers think highly of her. It says:
"I would strongly recommend her for any job she would wish to choose".
That is only part of what is said in the recommendation from the Pitlochry festival theatre. I know the theatre managers well and I know that they would not write that if they did not believe it.
The allegations and charges being made by Mrs. MacKenzie are serious. The only way to resolve the matter is by having it thoroughly investigated by someone independent so that the truth can come out.
9.42 pm
The Minister of State, Scottish Office (Lord James Douglas-Hamilton): I congratulate my hon. Friend the Member for North Tayside (Mr. Walker) on his success in obtaining the debate. In response to his call for an inquiry, I may say that the Health and Safety Executive has investigated the matters fully on the basis of the evidence made available to it. The Health and Safety Executive can act only on the information it has and if Mrs. MacKenzie has further evidence that she has not yet made available, I respectfully suggest that she does so. My hon. Friend referred to the allegations of criminal activity, and again, if Mrs. MacKenzie has not already submitted all the relevant information to the procurator fiscal, I recommend that she does so.
I know that my hon. Friend has been exercised about this matter and we corresponded earlier in the year. I intend to take a few minutes to explain the role and

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function of the Scottish Ambulance Service NHS trust and how it goes about discharging its responsibilities and to demonstrate its treatment of Mrs. MacKenzie's case.
Established on 1 April 1995, the Scottish Ambulance Service NHS trust provides a 24-hour national accident and emergency service for the people of Scotland. It also provides an essential non-emergency patient transport service conveying patients to and from NHS trust hospitals, clinics and day centres across the length and breadth of the country. Consuming more than £74 million of revenue per year, the trust employs around 2,900 staff, of whom about 2,500 are operational ambulance staff, officers and control personnel. Collectively, those staff will respond to nearly 500,000 emergency and urgent calls each year and make 2.5 million non-emergency patient journeys. In more than 90 per cent. of emergency cases, the ambulance will be in attendance within the appropriate target response time.
The role of accident and emergency crews has developed dramatically in recent years. In the past, their prime function was to "scoop and run", the priority being to transport the patient to a hospital as quickly as possible. For some patients the time taken to reach the hospital was simply not quick enough, and it was recognised that what was essential to the chain of survival of a patient was how long it took the first response to reach the scene of the accident or emergency. For many, that first response was not a doctor or other clinician, but an ambulance man, and it was, as a result, acknowledged that the skills and capabilities of ambulance men and women needed to be developed.
The Royal College of Surgeons and the Royal College of Physicians, along with senior consultants in accident and emergency and in other specialties, were engaged in determining what range of skills and training should be given to ambulance personnel. Representatives of the colleges and of the key specialities involved with accidents and emergencies continue to play a significant role to this day as members of the services professional advisory group, routinely influencing the scope and content of the professional training given to front-line personnel. While the speed of transfer to hospital remains of course a priority, the product of that commitment is that, nowadays, ambulance men and women are highly skilled professionals who are capable of dealing with a wide variety of medical and traumatic emergencies on which they may be called to attend.
Despite the demanding and often very stressful nature of the work, each year sees many thousands of men and women applying for a small number of positions. However, the vast majority of entrants into the ambulance service will start initially as ambulance care assistants and will, following basic training, work on non-accident and emergency services. Even at that level there are more than 100 applicants for every vacancy. The trust is generally regarded as a good employer. Within 18 months of having achieved trust status, more than 85 per cent. of staff opted voluntarily for the locally negotiated trust terms and conditions of service, which are uniquely supported by all the major trade unions involved.
The trust's newly opened national training college provides a consistently high standard of instruction for staff at all levels, from ambulance care assistants through to ambulance technicians and paramedics, up to and
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including tutor training of instructors for ambulance training centres in England and Wales. Of course, being a good employer goes beyond induction and training and kitting out—it involves looking after employees on an on-going basis, being alert to the stresses and dangers facing ambulance personnel and taking action to eliminate those risks, or at least to minimise them, wherever possible.
That action can often be taken at what may be described as the "macro" level. For example, my hon. Friend may care to know that the ambulance service is actively involved in a working group that I set up to investigate and report into the risks and dangers to front-line emergency personnel and how these might best be mitigated across all the emergency services so as to safeguard personnel against assault. Such action can also take the form of the counselling services that the trust provides for personnel who have had to attend on major incidents and who have themselves perhaps been traumatised as a result; or it can be in the very specific and tangible measures taken to immunise personnel against the risk of infection from patients with whom they come into contact.
It is as a good employer and in recognition of the fact that emergency ambulance crews are at risk of coming into contact with members of the public who carry infectious diseases that the trust's policy is to insist upon the mandatory vaccination of all accident and emergency ambulance staff. I would, at this point, make it absolutely clear to my hon. Friend that, because medical advice is that there is no identifiable risk, hepatitis B immunisation is not required for non-emergency patient transport staff, including ambulance care assistants. Nevertheless, as a good employer, the trust provides immunisation to all those non-emergency personnel who wish to avail themselves of the opportunity to be immunised.
My hon. Friend's constituent, Mrs. Susan MacKenzie, joined the Scottish ambulance service as a trainee part-time ambulance care assistant in February 1993. Before leaving the ambulance service training school, she elected to receive the first of a series of three injections for immunisation against hepatitis B.
Mrs. MacKenzie was subsequently employed as a part-time ambulance care assistant located at the Pitlochry ambulance station. In accordance with the protocols that existed at that time, the second and third doses were sent by the Scottish Ambulance Service occupational health service to Pitlochry ambulance station for Mrs. MacKenzie to have administered by her local general practitioner.
There is no question about the matter of the second dose, which Mrs. MacKenzie had administered to her by her local GP. Nor at any time has the Scottish Ambulance Service NHS trust taken issue with the claim made by Mrs. Mackenzie that the third dose of the vaccine was not passed on to her. Indeed, following her subsequent departure from the service, under the full and final settlement that she and her legal advisers accepted and signed, all issues raised by Mrs. Mackenzie were considered closed. As a result, there was no requirement to hold the planned industrial tribunal.
Nevertheless, notwithstanding the settlement, the chief executive of the Scottish ambulance service acknowledged that there was a deficiency in the rigour with which the occupational health service procedures had

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been operated at Pitlochry ambulance station, and he has, in co-operation and consultation with the Health and Safety Executive, taken steps to prevent any future recurrence of such a situation, while at the same time re-emphasising the lack of any identifiable risk of hepatitis B to non-emergency patient transport staff such as Mrs. MacKenzie.
Indeed, it was only subsequent to Mrs. MacKenzie's dismissal that the matter of her having failed to receive the third dose of vaccine was pursued by her in a manner that enabled the claims to be properly investigated by the senior management of the trust.
In case there remains any doubt about the clinical basis for the Scottish ambulance service's policy of mandatory immunisation against hepatitis B for accident and emergency ambulance staff, and the fact that immunisation for non-emergency personnel is optional, I shall quote from the established guidance on the matter, the book "Immunisation against Infectious Diseases", published jointly by all United Kingdom Health Departments. It states:
"The incidence of infection is not apparently greater than in the population as a whole for members of the police, ambulance, fire and rescue services. Nevertheless, there may be individuals within these occupations who are at higher risk and who should be considered for immunisation. Such a selection has to be decided locally by the Occupational Health Service or as a result of appropriate medical advice following the necessary risk assessment."
As we have heard, it is the policy of the ambulance service that immunisation against hepatitis B is mandatory for all staff on accident and emergency service duties. There is a theoretical risk that such staff may be exposed to the virus through cuts or abrasions that they could sustain when dealing, for example, with a patient bleeding heavily in a difficult environment such as a car crash. The use of gloves and safe working practices keep such risks to a minimum, but immunisation is considered an appropriate further safeguard.
I would also suggest that the particular incident should be kept in perspective. I mention to my hon. Friend the fact that there was and is no requirement for the service to provide immunisation against hepatitis B for personnel involved in the provision of patient transport services. That reflects a clinical recognition of the reality that the risks to such personnel of contracting the hepatitis B virus are considered to be so small as to be incalculable.
None the less, the ambulance service takes the most cautious view possible, and goes far beyond reasonable minimum precautions in offering non-emergency staff immunisation. I am very much aware of the fact that it is the view of my hon. Friend's constituent that the failure to provide her with the third injection was in effect a criminal act, and one which warranted the consideration of the procurator fiscal.
However, I remind my hon. Friend that that point was considered carefully by the Health and Safety Executive. Indeed, as the director general of the Health and Safety Executive stated clearly in the letter that my hon. Friend sent to me on 29 April:
"there is no evidence to support the assertion that the Scottish Ambulance Service failed to meet its responsibilities under Health and Safety Legislation in respect of Mrs. Mackenzie and therefore no case which could be put to the Procurator Fiscal."
The Scottish Ambulance Service NHS trust has accepted that, for whatever reason, Mrs. MacKenzie did not receive the third and final dose of vaccine to enable
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her to complete her course of immunisation against hepatitis B. Following consultation with the Health and Safety Executive, the trust has improved its recording procedures to prevent any future recurrence of such a situation. On the matter of all claims arising out of her contract of employment, I would remind my hon. Friend the Member for North Tayside that, following her departure from the service and her subsequent action against the trust, she and her legal advisers agreed to accept a sum of £2,500 in full and final settlement.
On Mrs. MacKenzie's claims regarding the course of hepatitis B immunisation, this matter was fully investigated by the Health and Safety Executive—the competent authority—which found that the Scottish ambulance service had not breached its duty of care. The Health and Safety Executive can, of course, only act on the evidence available. If Mrs. MacKenzie has evidence to support her assertions which she has not previously made available to the Health and Safety Executive, I strongly recommend that she does so.
Mr. Walker: The basis of Mrs. MacKenzie's case—which I probably did not put well enough—is first, that she disputes that she agreed to a full and final settlement and, secondly, that she attended emergencies, as the records at Pitlochry show. It is all very well to say that people in her job should not attend emergencies, but she did attend them and was exposed to the risks of hepatitis B. The service was not protecting her against that because she did not receive the third injection.
Lord James Douglas-Hamilton: It is standard practice in the ambulance service that, if no accident and emergency ambulance is available to respond to a 999 call, any non-emergency crew available will attend, pending the arrival of an accident and emergency unit. Training for non-emergency patient transport staff includes basic first aid and resuscitation. Such skills—whether provided by an ambulance care assistant or a member of the general public—can obviously save lives. On that basis, it would not be acceptable for the service to withhold any help that it could make available as soon as possible.
I understand that Mrs. MacKenzie was not required to perform any duties or procedures for which she was not suitably trained and equipped. I note what my hon. Friend the Member for North Tayside says about the final settlement. The information that I have received is different, but this is a legal matter and Mrs. MacKenzie is free to consult her lawyer on that point.
In concluding, I would like to take the opportunity to inform my hon. Friend the Member for North Tayside about the nature of the services provided by the Scottish Ambulance Service NHS trust. The trust provides three main services to the people of Scotland—the accident and emergency service, the non-emergency patient transport service and the patient air transport service, referred to as the air ambulance service.
The accident and emergency ambulance service is the one we see in action every day on the streets of our cities, towns and villages. This is the service which responds to 999 calls made by the public. It also responds to calls made where a doctor, dentist or midwife is already attending a patient and requests an ambulance to take them to hospital within an agreed time. These calls—

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known as urgent calls—form a major part of the demand on the accident and emergency service, although many people are not aware of this activity.
The accident and emergency service consumes by far the largest share of the considerable resources devoted to the service. By its very nature, demand for the service is largely unpredictable and a number of strategies have been adopted to optimise the use of resources. These include sector ranging, whereby ambulances, rather than operating from fixed ambulance stations as in the past, take up position at predetermined locations.
The changing demography of our towns and cities, as well as the development of the roads, can sometimes mean that ambulance stations which were ideally situated 20 years ago are now further than desirable from the populations they serve. Sector ranging is one solution to this, while another, of course, is the construction of new ambulance stations. There is currently an on-going programme of upgrading and replacing ambulance stations in Scotland and I shall, incidentally, be travelling to Glasgow tomorrow morning to open a new station at Clydebank on the west side of the city.
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The special difficulties in urban areas also call for innovative solutions. In Glasgow, paramedics on motor cycles bring emergency help when a conventional ambulance cannot reach the patient. In other cities, paramedic response units also operate. They are designed to provide an emergency response as quickly as possible. We are determined to have the best ambulance service in the world.
Scotland has the only fully integrated air ambulance service in the United Kingdom and by far the largest, operating four fixed-wing aircraft and two helicopters in addition to the back-up provided by the Ministry of Defence and Coastguard services.
I congratulate my hon. Friend the Member for North Tayside once more on securing this debate. I hope that I have managed to address his concerns and to reassure him that these matters have been dealt with in a proper and professional manner by the Scottish Ambulance Service NHS trust.
If my hon. Friend's constituent has further evidence, it should be made available to the Health and Safety Executive, and if she has evidence of criminal activity, it should be reported to the procurator fiscal. With that, I hope that I have fully covered the subject.
Question put and agreed to.
Adjourned accordingly at Ten o'clock.