§ The Secretary of State for Social Security and Minister for Women (Ms Harriet Harman)The Budget that my right hon. Friend the Chancellor unveiled on Wednesday is an historic one. It is the first Labour Budget for 18 years, and it takes the first steps to create a new welfare state for Britain.
We have inherited a legacy of failure and division from the former Tory Government. Today, I will set out our plans for tackling that legacy, and for providing new opportunities for everybody in Britain.
The Government have made a contract with the nation. We have promised to rebuild a society in which opportunities and duties are common to all, a society in which everybody has a stake, a society from which no one is simply excluded.
Unlike the previous Government, we will not stand by while more and more people are condemned to a life of dependency, cut off from the rest of society. We will create a modern welfare state to help rebuild a strong and cohesive society; a welfare state that offers everyone who is able to work the opportunity and encouragement to do so in order that they can provide a better life for themselves and their family.
518 Reforming the welfare state is one of the biggest challenges facing our Government, but, after just two months, we have already made a start. We do not underestimate the size of the task ahead of us. After 18 years of Tory neglect, Britain is divided as never before: the gap between rich and poor has grown; one in five households of people of working age now have no one in work; and the Tories condemned a generation of children to grow up on benefit—a quarter of all children in Britain now live in families where no one is in work.
Everybody has had to pay the price for that failure. Those who have been excluded from society, and their children, pay the heaviest price. But we all suffer the consequences: a divided society, and increased taxes. One pound in every three of Government spending now goes on social security.
The contribution of my predecessor, the former Secretary of State for Social Security, to dealing with the rising costs of social and economic failure was to hand the Treasury an IOU for more than £1 billion. The problem is that he never got round to paying the bill, and now we have to pay off his debt. But we will not shirk our responsibilities. We will make hard choices, because we have a contract with the British public, and we will stick to it.
We said that we would stay within the spending limits announced by the previous Government: we are. We said that we would have different priorities: we are changing spending plans to meet our different priorities. We said that we would offer a new deal to help the young and long-term unemployed to get off benefits and into work: we are providing a new deal for the young and long-term unemployed.
We are doing more. Lone mothers have previously been excluded. So have those with ill health or disabilities. We will extend opportunities to them, too. We said that our priority would be the poorest pensioners. We are helping them by cutting VAT on their gas and electricity bills, by cutting their gas bills, and by insulating their homes.
For people of working age, the best form of welfare is work. The Government's new deal, announced by my right hon. Friend the Chancellor on Wednesday and set out in more detail yesterday by my right hon. Friend the Secretary of State for Education and Employment, offers opportunities to work for all people of working age who have been left to depend on benefit for too long. Today, I shall set out to the House how we will take this further.
Many of those who are disabled or have long-term health problems want to do some work. They do not want to be simply written off by the system to a life on benefit. Under our new deal we shall offer them the opportunity to get back into work. Some £200 million from the windfall levy has been set aside to fund that important programme of opportunities.
Nearly all lone mothers want to work, particularly when their youngest child has started school; they want to provide a better life for themselves and their children. They want to work, not despite their children, but because of them. Their aspirations are no different from those of any other mother. They tell me, "I want the best for my children. I want them to have a better standard of living, and I want them to see me working rather than being dependent on benefit." That is what they say, and they are right.
519 When children grow up in a home where no one is in work, they can grow up to believe that life for them, too, is about being on benefit. But when children in a family with a lone mother grow up seeing their mother work, they expect that their income will also come from work, not benefits. Children who grow up with their mother in work rather than on benefit are better off. They are better off financially, of course, but, more than that, they are more likely to do well at school; they are more likely to get a job; and girls are less likely to become lone mothers themselves.
Under the Tories, lone mothers were in the wrong whatever they did. If they worked, they were neglecting their children; if they depended on benefit, they were scroungers. We want every lone mother to have the opportunities that are available to others in our society. First, we will help lone mothers to get off benefit and into work through our new deal for lone parents.
When her youngest child goes to school, each lone parent will receive a letter inviting her into the jobcentre. She will get her own personal adviser, who will help her through all the steps towards finding a job. Her adviser will talk to her about current job vacancies in the area and help her to make arrangements for her children out of school hours and during school holidays.
The adviser will offer to help with the costs of child care while the lone parent looks for a job. Her personal adviser will show her what benefits she can receive while she is working and, importantly, help her to sort out her in-work benefits. Her personal adviser will help her to apply for child maintenance if she is not already receiving it. Her adviser will help her to apply for jobs by helping her to write a curriculum vitae and prepare for interviews. Her adviser will help her to set her own action plan, tailored to her own circumstances and those of her children, to guide her through the process of looking for work.
The first stage of our welfare-to-work programme will start on 21 July, when the new deal for lone parents will be launched in the first eight areas, bringing help to more than 40,000 lone parents within just 12 weeks of Labour taking office. Our national programme will be fully implemented as soon as next year, using £200 million of windfall levy money, as announced in the Budget.
§ Mr. Simon Burns (Chelmsford, West)Could the right hon. Lady clarify something for the House? She keeps mentioning the figure of £200 million. The chart 2.1 on page 33 of the Budget booklet states that the new deal for lone parents has a running total of £200 million. But if she adds up each year's amount as specified in the chart, she will find that the figure is not £200 million, but £210 million. Is that a printing error?
§ Ms HarmanI cannot quite work out whether the hon. Gentleman is complaining that we have been too generous. I think that the Chancellor said that the figure would be "in the region of" £200 million—the actual figure is £210 million. What is the hon. Gentleman saying? Does he want the figure reduced by £10 million? If he has problems with the figures, I am sure that I can 520 write to him and set them out in detail. This is a debate of important substance about opportunities and the new programme that we are setting out.
§ Mr. BurnsI am grateful to the right hon. Lady for giving way again. I did say in my original question that I was asking for clarification, and it is sad that she seeks to answer by making a cheap point. The chart for the four years specifies £40 million, £50 million, £60 million and £60 million again, with a grand total of £200 million. To me, those figures add up to £210 million. As a matter of information and clarification, I was merely asking whether the figure was £210 million or £200 million. I am not trying to say that the figure should be more or less: I am merely asking about a point of information.
§ Ms HarmanThe figures as set out in the Red Book are correct, and the programme for opportunities for lone parents will be fully implemented, starting next year.
Secondly, we will help lone parents to get off benefit and into work by ensuring that they get proper maintenance for their children from the absent fathers. We know that, when fathers pay regular maintenance for their children, it helps lone mothers to get back to work. But too many fathers shirk their responsibilities; almost two out of three fathers do not pay proper maintenance for their children. We are determined that the Child Support Agency will build on the progress that it has already begun to make in that respect.
Thirdly, we will help lone parents to get off benefit and into work by providing better access to affordable high-quality child care. For the first time, we now have a Chancellor who recognises that women want to work, and, more than that, have a valuable contribution to make in the world of work and in the economy. Many businesses recognise that lone mothers are valuable employees. Bringing up children and running a household single-handedly require determination, flexibility and organisational ability—qualities that are essential in the modern labour market.
One of the keys to enabling women to balance their work and home responsibilities is child care. Child care is therefore as much part of our economic infrastructure as the roads that take women to work. In the Budget, we have announced a radical programme of measures that make child care an integral part of our economic policy. As promised in our manifesto, we shall set up a network of after-school clubs, so that children can be cared for when their mothers are at work. That will be funded by money from the national lottery.
Secondly, 50,000 young people will work and train in nurseries and after-school clubs to help those child care providers and to help young people to obtain qualifications in child care.
Thirdly, we shall put child care at the heart of rebuilding our communities, by highlighting its importance in the single regeneration budget.
§ Mr. Iain Duncan Smith (Chingford and Woodford Green)Will the right hon. Lady clarify another point of 521 information? Who will be trained as child carers? Will they be young people who have been unemployed for more than six months, or will the category be spread wider? It is important to know, because it will affect the job subsidy.
§ Ms HarmanThey will principally be people who are under 25 and who have been unemployed for more than six months. We want to ensure that they are offered a good choice of employment and training settings. But with this measure we can both give them a wider set of opportunities—of places where they can work and train—and ensure that we help our child care infrastructure.
Fourthly, we will make child care more affordable, and more within the reach of mothers who want to work, by making two improvements to the child care disregard in family credit, housing benefit and council tax benefit. We will introduce a new maximum disregard for child care of £100 a week for families with two or more children; and the age of the child up to which a disregard will be available will increase from 11 to 12.
Together, all those measures for new opportunities and for more child care make the beginning of a radical new approach to welfare—one that puts work at the heart of the welfare state and that extends opportunities to those who have until now been denied the chance to provide a better life for themselves and their children, and who have, worse still, been described as scroungers.
§ Mrs. Cheryl Gillan (Chesham and Amersham)The right hon. Lady has made much of the affordability of child care. As a point of information, will she tell the House now what is the current average cost of child care per week, and what the cost will be after she has brought in these radical proposals? How will the proposals actually make child care more affordable, and can parents rely on paying perhaps £40 or £50 a week? Can she tell us the exact amount she anticipates child care will cost?
§ Ms HarmanThe hon. Lady will know that there are two questions relating to after-school clubs. The first is how much it costs the after-school club to provide that care, which is an average of about £15 per child. The second is how much the mother is charged, if a charge is made. There is different practice in different local areas—some use a sliding scale, some provide all places free and some charge the full rate for all places.
We want to build on existing practices and ensure that, through the lottery, the Government help to build that important part of our child care infrastructure; but we will not lay down a blueprint from Whitehall for charging lone parents for after-school clubs. The after-school club network is one of the community-based organisations that have grown up locally. They will find their own best arrangements, but they know that they will now have the Government's support. They will not grow despite Government; they will grow with our backing.
Our new approach is a crucial part of achieving the aims that we set out in our manifesto—needing to spend less on the costs of social and economic failure so that we can invest more in education and health; and reordering existing spending plans to meet our priorities within the spending limits that we have inherited. To keep within those spending limits, we have had to proceed with some of the measures that we inherited, and I announced full details of all those measures on Wednesday.
522 However, I have made significant changes to three inherited proposals within our spending restrictions. First, although the number of waiting days at the beginning of jobseeker's allowance will increase from three to seven, I have announced a change in the way claims are paid to ensure that the maximum period anyone will have to wait before receiving the first benefit payment is no longer than at present.
Secondly, the new common time limit for backdating all benefit claims and all reviews will be one month. Thirdly, we have decided not to go ahead with reducing housing benefit entitlement for single people over 25. I intend to meet the considerable cost of that last measure by increasing the rate at which non-dependant deductions are set. However, I intend to leave unchanged the rate of deduction to housing benefit for those with the lowest incomes.
The reform of the welfare state to meet the challenges of the 21st century is one of the most important tasks facing the Government. Our welfare-to-work Budget marks the first step in a radical new direction for welfare—the end of the Tory approach to welfare that brought social exclusion and denied opportunity, and the beginning of a new approach to welfare bringing opportunities to work for all. We will deliver new Labour's commitment to build a new Britain in which everyone has a stake. That was our promise to the British people, and that is the promise we will keep.
§ Mr. Iain Duncan Smith (Chingford and Woodford Green)I have already welcomed the Secretary of State and her team to their positions, so I cannot go around that one again. Nevertheless, I wish them well, because this is a vital area. They are set to make big changes, and, as I have said before, we will look at them positively and try to be constructive.
Before I look at the Budget and its implications, I shall start by talking about my predecessor and the right hon. Lady's, my right hon. Friend the Member for Hitchin and Harpenden (Mr. Lilley). I want to put on record praise for him and all the work and effort he put into his job as Secretary of State. His successes were both political and administrative. His "intelligent stewardship" reformed the welfare system "carefully" and "intelligently"—not my words, but those of the Minister for Welfare Reform, the right hon. Member for Birkenhead (Mr. Field), who was most generous in his praise of the way in which my right hon. Friend set about changing the system. The key fact is that those reforms made certain that the exploding costs of welfare were held in check, and were, for the first time since Beveridge, kept below the growth of the economy.
In the run-up to the general election, the right hon. Member for Sedgefield (Mr. Blair), now the Prime Minister, claimed:
We will be open with the people about tax".What is clear from the Budget is that Labour was anything but open in opposition, and intends to continue that trend in government.The Budget raises large amounts of extra taxation—about £6 billion a year. We should make it clear, because it is not clear to many people outside, that that is equivalent to about 4p in the pound on the standard rate of income tax. 523 The Chancellor has not done it that way, of course; he has been careful to change it so that it is less clear to those outside. After all:
A high-tax economy is not a high-success economy"—the words of the Prime Minister at the Welsh conference last year.However, this huge tax hike, despite being so hidden from the general public, nevertheless carries massive implications for them. After all, as my right hon. Friend the Leader of the Opposition said, John Kay has already confirmed:
There is no such thing as a tax on firms: the effective incidence of all taxes is ultimately on individuals.Therefore, the tax increases on the corporate sector that have been levied this time around are bound to be passed on to everybody in work.What is most worrying, given the rhetoric of the right hon. Lady and her right hon. Friends, is that the first to suffer will be pensioners. The introduction of the windfall tax on the privatised utilities will impact on pensioners and pension funds. Holding shares in such companies, their returns will diminish. The value of pensions will also suffer as a result of the abolition of advance corporation tax. We have been around these points already, but they are worth repeating.
By reducing the amount of tax that funds can claim back, the measure raids some £5.4 billion from pension funds, which helps to explain why, yesterday, the National Association of Pension Funds described the Budget as
the biggest attack on funded pension provision since the war".By taxing pension funds, the Government will also reduce the capital base of British industry. The Chancellor is gambling that that will not lead to an economic downturn or to a rise in unemployment, for it is then that the promised savings in the social security budget will not materialise. Indeed, that might be why the Chancellor failed so singularly during the course of his Budget speech even to mention delivering social security savings.It is worth reminding all those on the Government Benches who have forgotten that, in the Labour manifesto, point No. 1 of the "contract with the people" said:
Education will be our number one priority, and we will increase the share of national income spent on education as we decrease it on the bills of economic and social failure".
§ Mr. Duncan SmithI am glad that the right hon. Lady stands by that, and I shall question her later about other things she stands by. That promise at the beginning of the manifesto was then quietly dropped from the rhetoric of her right hon. Friend the Chancellor.
As my right hon. Friends the Leader of the Opposition and the shadow Chancellor have said, the Conservative party supports the aim of getting young people off welfare and into work. Of course we do—that was the position before the election and it remains the position now. It was one of our most fundamental objectives, and, I believe, the one in which we were most successful.
Let us be absolutely clear: the Government will want to claim the credit for reducing unemployment, but the work has already been done through our policies of 524 reducing burdens on business and creating new benefits, such as the jobseeker's allowance, which combines carrot and stick, and achieving sustainable economic growth. We therefore now need to define what the Government will need to do to succeed over and above that. In other words, we need to put a floor underneath the Government's expectations and claims, so that we may judge them over the course of the next few years.
Unemployment among the under-25s has fallen by 100,000 a year for the past four years—from 800,000 to 400,000—a fact that is often repeated, but worth doing so again. A similar steep trend has emerged in the number of those who have been unemployed for more than six months. It has fallen from more than 400,000 to less than 200,000—I believe about 178,000—in the past four years. That was done without a windfall tax, a tax on prices or a tax on pension funds. Britain's percentage of unemployment is among the lowest in the major European Union countries. Obviously, therefore, we support the Government's aim.
However, today and in the coming months and years we must ask ourselves, will the measures succeed as the Government wish, and will the proposals that they intend to implement not destroy jobs but create employment, which is the priority that the Government have set themselves? I am worried about that, and I believe that we have a right to be worried.
Our experience of government suggests to us—and, it appears, to most other commentators—that the Government's proposals are more than likely to create only temporary jobs, and are not, in the long run, the best way to remedy unemployment. Unfortunately, make-work schemes always cost more than they save. We know that; we have been around this loop before; the argument has been repeated when Labour was in opposition and now, when we are in opposition. Job-destroying taxation also costs more than it saves.
When the Government were in opposition, they embarked on a sort of Robin Cook's tour of the world, studying all the programmes that existed. They were followed by a team of economists, which eventually caught up with them and summarised all the programmes that they had considered. It was National Economic Research Associates which tried to find any make-work scheme that saved money as the Government claimed. It considered 17 schemes in 10 countries, and decided that they had all failed. None saved money in real terms. The reasons that NERA stated are obvious, and worth repeating.
First, money is spent on people who are likely to have obtained jobs anyway. NERA has estimated that up to 50 per cent. of wage subsidies go to people who do not need them.
Secondly, money is spent on "creating" jobs that are not "created" at all. Employers are simply destroying the jobs of people who are not eligible for the £60 subsidy—or whatever subsidy is given elsewhere—to employ people who are. The Economist has estimated that Labour's proposed scheme will destroy as many jobs as it creates, and NERA has estimated that only two out of every five jobs will be "really created".
Thirdly, money is spent on creating jobs that turn out to be temporary. Many business men have admitted that they could easily use the scheme to take on the 525 unemployed, employ them for as long as the subsidy exists and then replace them with another round of subsidised employees—the revolving door concept.
What checks, what elements of stricture, will the Government introduce to prevent that happening? The Minister for Welfare Reform knows that I have raised that matter in a roundabout way in relation to abuse of the system, but this obviously has an impact on young people's aspirations. If they find that their colleagues and friends are going through that process, many others will be deterred from taking advantage of the scheme. That is a very important aspect, which needs to be tackled.
§ The Minister for Welfare Reform (Mr. Frank Field)How does the hon. Gentleman square what he has just said with NERA's overall finding that the Right to Work Bill would save money?
§ Mr. Duncan SmithI accept that NERA did say that, but I am considering the proposals that have been presented today and in the Budget. NERA studied similar schemes worldwide—the proposed scheme is largely based on what has been seen elsewhere and thought to work, especially the jobs, education and training scheme in Australia. Let us remember that it was said that the scheme would, net, save money. My question is, will it save money? I feel—as did NERA—that it will not do so. The jury is still out on the broader question whether it will, and the right hon. Gentleman knows that that is not yet proven.
§ Mr. Field"The right to work proposals" was a collective title. Under that title were included programmes such as those that the hon. Gentleman is now discussing.
I repeat my question: if NERA came up with an overall finding that such an approach would save money in the long run for the Exchequer and taxpayers, as well as doing an enormous amount of social good to the individuals involved, why does not the hon. Gentleman take that as his starting point instead of considering the individual parts of the programme, as he is doing?
§ Mr. Duncan SmithWhether or not the right hon. Gentleman is, I am a great believer in working from the bottom up, not from the top down, and I believe that the secret of the success or failure of these programmes lies in the detail of their implementation. If the scheme does not work, NERA's general conclusions will be irrelevant.
I have difficulty in understanding how NERA reached the general conclusions of its report. I do not wholly agree that that will necessarily be the outcome. I believe that the problem lies in the details, and I believe that I have a legitimate right to test the Government on those. We shall continue to do so in the next weeks or months.
If Labour Members believe, as they must, that reducing the cost of employing people by giving a subsidy of £60 a week will increase the number of jobs, they must accept that increasing the cost of employing people by introducing a minimum wage has the opposite effect. They are caught on the horns of a dilemma. Labour's welfare-to-work policy directly contradicts its industrial policy. On the one hand, the Department for Education and Employment will busily try to create jobs; on the other hand, the Department of Trade and Industry will be busy destroying them.
526 Worse still, the DFEE's make-work schemes could be temporary, and limited to a few hundred thousand jobs. If, as I and all my Conservative colleagues believe, the DTI's minimum wage comes into effect, it will negatively affect, not hundreds of thousands but millions of people. Obviously, that will depend on the level of the minimum wage.
§ Mr. Julian Brazier (Canterbury)Before we leave the subject of subsidising work, were not the points that my hon. Friend has been making repeatedly made by Labour Front Benchers when we set up schemes such as the youth training scheme? That scheme had the narrow aim of providing work experience for young people. The much less restricted schemes that the Government are proposing—which apparently will be available to people of all ages who have been unemployed for a certain number of months—have none of the safeguards that the YTS has. Why do not Labour Members object to it?
§ Mr. Duncan SmithI am grateful to my hon. Friend; he makes his point powerfully. I shall speak about some of those contradictions in due course, and I hope and expect that the Government will be able to give an answer on one or two of them.
I am sure that the Deputy Prime Minister is bored and fed up with having it thrown back in his face, but he said of the minimum wage:
any silly fool knows that"—meaning that there would be a job shake-out. Apparently that is now not the case.More specifically, however, let us turn to the changes to the responsibilities of the Department of Social Security. The next part of Labour's welfare-to-work proposals concerns lone parents, and I dare say that no one in the House has been more strongly identified with those than the Secretary of State for Social Security and Minister for Women has been for a while, so it is appropriate in many senses that she is at the Dispatch Box today, because that is a core part of the changes.
The Secretary of State has presented to the House proposals in three parts. The first part was to increase the maximum disregard for child care costs for those on family credit with more than one child from £60 to £100, and to increase the maximum age from 11 to 12. The second part was to train up to 50,000 young people to become child carers. The third part was to give up to 500,000 lone parents an interview to help them find a job. Those changes give rise to questions, and the detailed answers will hide or reveal the success or failure of the future programme.
I assume that, to increase the child care disregard beyond the £60 that the previous Government raised, the present Government—the Secretary of State especially—must have received evidence that there is no danger of the extra money being spent only on better-off lone parents. The right hon. Lady's predecessor in opposition as Labour spokesman on social security, the right hon. Member for Islington, South and Finsbury (Mr. Smith), strongly held the view that a disregard for lone parents mainly helped the better-off. He said:
many people in real need already receiving maximum family credit will not be able to benefit from the increase in the disregard."— [Official Report, 29 November 1995; Vol. 267, c. 1217.]527 That is how he attacked our original move on this. Some 310,000 lone parents are on family credit, and £10 million a year will be spent on them. Even if all the disregard went to lone parents—I understand that families where both parents work or where one is disabled will be eligible also—they would each receive only 62p a week. If all the 1 million-plus lone parents receiving Government assistance were to be eligible, they would each receive only 20p a week.How will the Government escape from this problem? They must either promise that the programme will go over budget to provide all those people with a more significant amount, as clearly that is not enough, or they will have to accept that the disregard is likely to go to a small proportion of people—more than likely those who have child care now. After my right hon. Friend the Member for Hitchin and Harpenden created the £60 disregard on which the Government are building, there was a tendency for a large proportion of it to go to people already paying for child care. Those people, by definition, are more able to pay, so the new Government's measure will simply exacerbate the problem.
I repeat my question to the Secretary of State—what evidence has she received to suggest that that will not be the case? The Government seem to have performed a volte-face, and I would like to know why.
The second strand of the programme will finance the training of 50,000 child care workers, and I have some concerns about that. The extra training clearly will not make it cheaper for lone parents to employ carers, because they will carry with them an extra amount of money because of the training. Having made trainers more costly, the Government will also ensure that they are paid the minimum wage—whatever it may be—which also increases costs.
The minimum wage will arguably render less-skilled child carers as expensive as more-skilled trainers are now, and more-skilled trainers will become even more expensive. Who will pay for their employment? If lone parents cannot afford a child carer—and the disregard will help only a small number, or else its help will be nugatory—what will happen to them?
Furthermore, the Secretary of State said that most of the carers to be trained will come from the ranks of young people who have been unemployed for more than six months. The figure we have is that they number 178,000, and she is suggesting that 50,000 of them will be trained as child carers—approaching one third of the group at whom she is aiming. Is that the case? If not, only some of the employers will receive the £60 subsidy, which will push up costs for those who are not part of the welfare-to-work scheme and for whom there will be no subsidy.
That raises bigger questions about training. One of the traditional problems with Government-sponsored training schemes is that, too often, they train people for inappropriate jobs. One of the schemes at which the Secretary of State and her hon. Friends will have looked is the JET scheme in Australia. One of the biggest criticisms of that scheme was that it ended up training many people as hairdressers. When they finished their training, they went back into unemployment, because no hairdressing jobs were available. [Interruption.] As the 528 Minister for Welfare Reform suggests, hairdressing is not something which concerns me. Perhaps, if more people were like me, we would not need hairdressers. Perhaps time will force him down that road also.
People being trained for jobs which do not exist creates major problems, as we have found with the training and enterprise councils. When one sets targets for training, people are often trained willy-nilly, regardless of requirement, to achieve those targets. How will the Government tackle that? Will they be training people only to put them back on the dole with a higher level of qualifications?
In a similar vein, the Secretary of State wishes to ensure that child care is available in different parts of the country. If carers are being trained in one part of the country and the demand exists somewhere else, is she suggesting that we should bus trained child carers from one part of the country to another? One of Labour's documents before the election stated that the party admired the Greek system of mobile child care. Is this where we are going—moving trained carers all over the country to wherever the demand is? Or will we have to focus on the demand and then train the carers?
§ Mr. Duncan SmithMy predecessor, Lord Tebbit, would be interested in that. The big question for the Minister is, who will pay for the bikes?
The Secretary of State's third strand is inviting lone parents in for a discussion, and I would like to know the cost of the initial phase. Presumably the cost will be borne within the figures which have been announced. There are problems with this strand, which is the main part of the programme. To start with, it will involve only 500,000 lone parents, and, by the Government's own reckoning—the right hon. Lady has said this on record many times—some 900,000 want jobs. What will happen to the other 400,000? How will the Government deal with them?
The Government are not even offering anything new, apart from the invitation. The Secretary of State will know that lone parents have always been able to go in for a job discussion or a one-on-one to decide how to proceed. My hon. Friend the Member for Havant (Mr. Willetts) has been told that the Employment Service will not make any new resources available in this area once the lone parent has arrived in the office. In other words, the Government have admitted that the system is in place to deal with the problem. If the Government invite all lone parents in at one go, how will they deal with the peak demand? Surely that will carry an extra cost. How will it be met? Have they thought about that?
The previous Government thought about this problem, and set up a pilot scheme called parent plus, which the Secretary of State has scrapped. The scheme had £20 million attached to it, and carried positive aspects. It was about mentoring, evaluation and—most particularly—rewarding success through the use of the private sector. It was based on evidence from the United States—which the Secretary of State will have looked at—which seemed to suggest that the in-depth follow-up, not simply the interview and advice, ultimately led to success.
There are too many unanswered questions about the three strands, which the Secretary of State must undertake to answer. In the absence of a statement today—which I 529 accept—we will need to hear more in the next few weeks and months. If the questions are not answered, the strands of the programme will begin to unravel, and the Secretary of State's reputation on this matter will unravel with it.
The Secretary of State has embarked on the sort of technocratic small-scale changes for which she and her colleagues attacked the previous Government in the past. For example, she is proposing to cut the time limit for claiming social security benefits from three months to one month. She did not refer to this earlier, as I hoped she would.
We agree that it is important for people to make their claims properly. We are not clear, however, that the Government can claim credit for making life easier for the 3 million pensioners eligible for income support when, at the same time, they are trying to catch some of them out for not claiming extra benefits to which they might be entitled—things for which Labour chastised the previous Government.
This is clearly a savings measure—there can be no other reason for it. How much will it save? How many people does the Secretary of State expect to catch out with this measure en route to the saving? In what categories are they to be found? I wonder whether we will be the main opposition to this proposal once her right hon. and hon. Friends begin to understand what she has embarked on. As Government Back Benchers get to know this policy in more detail, they will have to hold their noses as they go through the Lobby to vote for it, as clearly this is not what they believe they came into government to do.
In another example, on 18 June, the Secretary of State announced in two dedicated press releases that she would not implement our changes to housing benefit. That is clear. One would have expected Labour to support the changes, because they were about not making it more difficult to employ people through the cost level, but the Secretary of State described them as savage cuts, and has now revoked them.
The right hon. Lady told us that she would pay for the change in policy through the Budget, so how will she do that? The press release said that she would pay for it in part by cutting the amount of housing benefit available to people who share a flat or a house instead of living on their own—in technical terms, by increasing the amount of non-dependant deductions. That is one of the more complicated areas of policy in social security, and I am sure that the Secretary of State is aware of that. It certainly hides the reality of the change, but it will hurt people. Because she decided to get rid of the changes to housing benefit, she will have to squeeze another group of people.
I note with interest that the Secretary of State clearly disagrees with her two predecessors as Opposition spokesman who, when we changed the housing benefit system, were straight about their opinion. Her immediate predecessor said:
It will provide an incentive for families to remove adult children from family homes."—[Official Report, 29 November 1995; Vol. 267, c. 1216.]Her predecessor but one said:Why should the non-dependant deduction for housing benefit purposes, to take one other example, be increased well above the rate of inflation? What is the point of that? What will that do to encourage a family to stay together"?—[Official Report, 30 November 1994; Vol. 250, c. 1209.]530 That was the Labour position for a long time, and I suspect that the Secretary of State, if pressed, would admit that she agreed with it. However, to make the necessary savings, she has actually implemented a higher cut. That is what her press release means, and that is another little policy that her colleagues will have to hold their noses to vote for. They disagreed with us when we did it, but now they are making those changes to housing benefit.We still do not know where the money will come from. There is still a gap. The Secretary of State is delaying the implementation of the lone-parent rate of child benefit from April 1998 to June 1998, according to the press release. Where will the money be found? Will it be from the sum total that I have mentioned? We are beginning to whittle away at that rather quickly.
The cuts for housing benefit for adults who share flats will come into effect only in April, six months after we were going to lessen work disincentives for single people, and, even by the Government's own admission, will only in part pay for the non-implementation. How will the gap be made up? We have had no answer.
I tried to intervene in the Secretary of State's speech to ask her about the jobseeker's allowance, because she skated over it quickly. What does the press release mean when it says that the Government will
manage the cycle of … payments to ensure … that nobody would have to wait more than the current maximum time before they received their first payment of benefit.Does that refer to our change from three to seven days, or is it a commitment to go back to three days? Is the Secretary of State staying with seven days, but telling her colleagues that she will keep the time down to three days so the claimants will not suffer?After the Government's rhetoric about hating the jobseeker's allowance and wanting to get rid of it, Labour Members should understand that, far from getting rid of it, the Government have stuck by our later changes. What does the press release mean, and how does the Secretary of State square it with her previous commitments?
The press release also blandly stated that the Secretary of State would find an extra £120 million from maintenance through the Child Support Agency. Where? How? We heard nothing more about that in her speech. Is that a notional figure that the Government have plucked from the air to fill the gap, or is it part of our proposals for the CSA that the Government will now simply implement? We need to know, because those questions all eat into the sum total of money that we were told has been given for the programme. It now also appears that the Treasury has given £10 million more to the Department, anyway—or is it less?
A pattern is being established. The Chancellor seems to set the framework for future social policy. The Minister for Welfare Reform is in charge of reviewing the pensions system, and Mr. Martin Taylor is in charge of reviewing the tax and benefits systems. Furthermore, Peter Davis is in charge of a welfare-to-work task force directing and arranging placements for any lone mothers willing to take up Labour's new deal.
At first I thought that the Secretary of State had been left in charge of one key area—women's issues—and indeed she was for a couple of weeks. However, the 531 Prime Minister spotted that, and quickly appointed the hon. Member for Lewisham, Deptford (Ms Ruddock). As The Economist said:
Scraps of the government's welfare programme are scattered everywhere".I offer my condolences to the Secretary of State. The scraps are scattered, but not at her table. What influence will she have on the future of the tax and benefits systems? That is a big question. For years, she has told the House how in-work benefits, in particular family credit, are a subsidy for bad employers. However, after the election, Mr. Taylor—who has been appointed to think the unthinkable—declared that he is very interested in in-work benefits, and we have been told:Specifically, he says, he expects to consider the US earned-income tax credits.Those do not seem to be the Secretary of State's cup of tea, but she may have to like them now, because that seems to be the formula.Every Budget has losers. We know that there are losers outside the House, including pension funds, pensioners and the general public. Inside the House, we have another loser, and, sadly, it is the Secretary of State. Perhaps the most important climb-down of them all is tucked away on the last page of her press release, in a little anodyne paragraph. In case the Secretary of State missed it herself, I shall quote it:
Withdrawal of entitlement to Lone Parent Family Premium in Income Support for new claimants will take effect in April 1998. Withdrawal of the lone parent rate of Child Benefit is … now expected to come into effect from June 1998.That climb-down signifies that the Secretary of State has lost the battle with the Chancellor and the Minister for Welfare Reform. He has said:Tax and benefit policy was squeezed to help single parents so that single parents gained more help than two parents. That policy has got to be reversed.However, when a Conservative Secretary of State did that, the current Secretary of State described it as wrong. She promised not to implement the changes that we budgeted for in the last uprating statement. When she was asked by Polly Toynbee on 22 January 1997 whether she would go through with the changes, she said, "Of course not." What a climb-down.I shall remind Labour Members what effect the climb-down will have. They may not know, because they may not read the press releases.
The change would have saved £240 million during the lifetime of this Parliament. If we set that against the sum of £200 million that the Chancellor has so graciously given the Department, we find a net saving of £40 million. That is not exactly what Labour Members entered government to do. Perhaps they should ask the Secretary of State to explain herself. Labour Members will have to vote for that change twice more after the Budget, once through primary legislation and again through secondary legislation. They have two more opportunities to question the Secretary of State, and we have two more opportunities to remind them of that wonderful climb-down.
It is becoming more and more obvious that the Secretary of State is in office, but not in charge. For her sake, I am sorry, but it appears that the tigress of the single-issue circuit is becoming the Cabinet trophy on the wall.
§ Mr. Archy Kirkwood (Roxburgh and Berwickshire)I am pleased to have the opportunity to contribute to this important debate. I fundamentally disagree with the proposition that has just been put from the Opposition Front Bench that it is wrong to spread the changes in social security policy throughout other Departments—quite the reverse.
For the first time, we have a Budget that puts anti-poverty measures at the centre of Government policy. That is absolutely right. It is naive and simplistic to expect that simply through the payment of girocheques, the Benefits Agency and the Ministers in charge of it can effect cultural changes right across public policy to the extent that is needed. If that is the approach of the official Opposition, they are looking at matters the wrong way round.
The Budget is a welcome attack on poverty. Considering the number of people in poverty and the obstacles that they face in trying to get out of poverty, it is a relief to see the Government signalling their intent to tackle that problem head on. We shall do everything that we can to support the Government in that. The Budget strategy in that direction is right, but there are short-term problems in other respects.
Although I believe that the long and medium-term strategy is right, I have grave concerns that are informed by constituency work and which I am sure are shared by other hon. Members on both sides of the House. Education is one of my concerns. Another is long-term care, where we still do not have a proper measure of the increase in demand. That is not a comment on the way in which the previous Government attacked the problem. None of us anticipated the increase in demand for long-term care. I am sorry that the Government have not found the capacity to begin to deal with the problem in the immediate future, because it demands our attention.
Mental health is another area in which there will be serious difficulties over the next 12 months. The financial settlement for local government over the next year will create tremendous tensions. Although I welcome the general stance and the long-term strategic approach of the Budget, not enough attention has been paid to the short-term problems that we shall all face in our constituencies.
§ Mr. Bernard Jenkin (North Essex)I invite the hon. Gentleman to reflect on the fact that the changes in the arrangements for advance corporation tax will affect the pension funds of local authorities. His local authority may have to find additional sums to put into its pension fund. Does he think that central Government should compensate local authorities for that additional expenditure?
§ Mr. KirkwoodThe hon. Gentleman anticipates what I shall say later. I entirely agree that local authorities should be compensated. Moreover, as a trustee—the only surviving trustee who is not a Minister—of the Members' pension fund, I must tell hon. Members the bad news that their occupational funds will also be affected. That will mean £180 off your pension fund, Mr. Deputy Speaker, as well as everyone else's. We should not gloss over the matter—we all have a direct interest in it.
The Labour Government face a tax conundrum of their own making. It was very clever of them to say before the election that they would stay within the constraints set by 533 the previous Government, and that they were setting their face against headline increases in income tax. They are now boxed in a corner. It was a mistake, which I regret. They are forced into a corner by their timidity on tax. If they cling to that pre-election line, it will create numerous difficulties. There is no such thing as gain without pain. No Government can magically deliver lower taxes and better services at the same time. One cannot have one's cake and eat it. The Budget shows that proposition for the nonsense that it is.
On the revenue-raising aspect of the Budget as it affects social security, the Government's intention to embark on a welfare-to-work scheme is laudable, but using the windfall tax as one of the means of funding it is highly questionable. My right hon. Friend the Member for Yeovil (Mr. Ashdown) put on record the criticisms of the windfall tax, and did so extremely effectively. It is bogus to suggest that the windfall tax is a harmless, victimless way to raise £5 billion for jobs and training and to produce a subsidy for the young unemployed and for single parents. That will become evident in the weeks and months ahead.
There is an air of unreality about the Government's position that the windfall tax is just an attack on fat cats. I have listened to the Secretary of State for Social Security and Minister for Women on the matter before, and of course she is right that some of the increases enjoyed by the captains of industry over the past few years are indefensible. However, as surely as night follows day, the tax will hit shareholders, employees and customers as well as the fat cats. Others are in the firing line of the Government's plans.
When we speak of shareholders, we do not mean those who were lucky enough to enjoy a windfall in the past. We are talking about those who were unlucky enough to be holding the parcel this year, when the music suddenly stopped.
The tax poses a threat to the investment for which the Chancellor of the Exchequer argued so strongly. Hon. Members must understand that the mending of broken pipes, the reduction of leaks, the cleaning up of our beaches and the updating of our transport infrastructure will all suffer as a result of the windfall levy. It says much about the contradictions in the Chancellor's thinking that such an anti-investment measure forms the centrepiece of the investment Budget that he purports to have introduced.
I shall comment briefly on the sleight of hand involved in raiding pension funds to pay for some of the Government's proposals. The windfall tax will have an indirect impact on pensioners, because a considerable part of their pension contributions is invested in utility companies. The £5 billion taken out of the corporate sector in the pension field is even more difficult to justify.
Over the years that I have enjoyed discussing such matters with the Minister for Welfare Reform, he has persuaded me that pension funds must be protected from Government raids. One of his main propositions has been that we must create a system that gives people confidence. In the past, Governments have engaged in sleight of hand and found ways of taking money out of the pension system, thus destroying people's trust and willingness to commit savings for the future, as we are trying to encourage them to do.
What happens in the first Budget? Nine or 10 weeks into a Labour Government of which the right hon. Gentleman is, rightly, a prominent member, £5 billion is 534 taken out of the nation's back pocket by sleight of hand. The sum of £5 billion is not small beer. I do not know how the right hon. Gentleman squares his conscience, in the light of the trust necessary to maintain pension funds. I said that I support the Government in their plans for using the money, but not the way in which they have chosen to raise it. I shall be interested to hear the right hon. Gentleman's explanation.
The House will return to debate the matter next week. I shall listen to the arguments and, if I catch Madam Speaker's eye, I shall make a further contribution. I am gravely worried about the change in the dividend tax credits and the pension fund industry. As the proposals unfold, they will become even more difficult to sustain.
I fully support the proposals to replace welfare with work and I look forward to working with the Secretary of State. It is refreshing to have the opportunity to talk easily with Ministers and to be invited to come in and share thoughts with them. That offer was never extended to us in the past. [Interruption.] If that is an offer of a cup of tea from the hon. Member for Chingford and Woodford Green (Mr. Duncan Smith), I shall not refuse it.
The Government's plans to help the young unemployed and single parents off benefit are ambitious in their scope. We support those objectives, but have reservations about the practicalities and structures. I remain to be persuaded, first, about compulsion. If a scheme is conscriptive—if young people are put in an armlock and marched off to training opportunities or jobs—it will be difficult to persuade employers that they are worth taking on. If we cannot persuade employers to commit, psychologically and politically, to the scheme, it will not work. The scheme will not work if employers are asked to take on young people who are reluctant to participate in it.
My second main concern is the scheme's effect on the dependants of the long-term unemployed who may suffer a penalty. I can see the attraction of the carrot-and-stick approach; many people will say that that is a fair method. However, I am very nervous about it and I hope that it will not diminish the overall value of the scheme.
§ Mr. FieldI am grateful to my hon. Friend for giving way. I remind him that we last heard from the Liberal Benches the argument about freedom or conscription in 1916. Some claimed then that people would not fight at the front if conscription was introduced. Lloyd George won that argument, and we won the war.
§ Mr. KirkwoodI shall think about that proposition—meanwhile, let the argument continue. I hear what the right hon. Gentleman says, but I have tabled my concerns. I am glad that the Secretary of State is prepared at least to look at the scheme in detail as it evolves. I ask only that that question be considered further.
§ Mr. Bernard JenkinPerhaps the hon. Gentleman should now ask who are the lions and who are the donkeys.
§ Mr. KirkwoodI did not do O-level history at secondary school, so this discussion is way above my pay grade. I shall return to social security, as I purport to know something about that. However, I am reminded that General Haig was a leader at that time.
535 I have put my concerns on the record, and now I want to make some positive suggestions. The American experience in this area is pretty mixed—I know that the hon. Gentleman has studied all experiences in detail. In the early start pilot programme, which was conducted in areas of high unemployment, the Americans adopted a focused and individualistic approach. It deserves careful study. I believe that the Government's proposed programme, comprising four or five different options, is a little restrictive. I hope that it can become more flexible, so that schemes may be tailored to individuals. People who come for interviews—which I agree are important—should be categorised as potentially temporarily unemployed rather than potentially long-term unemployed. Different approaches should be taken in different circumstances.
Perhaps the Government should adopt different approaches in inner-city and rural areas. In urban areas, there is often a dearth of jobs. The number of unemployed in our inner cities and the problems that they face are different from those in rural areas. I shall have to address the problem of distance when the scheme is implemented in my constituency: the people who need assistance may live 15 or 20 miles away from a prospective job, with no public transport. Some people may be unable to take up training opportunities or jobs because the positions are too far away and there is no public transport. Is that a reasonable excuse—if that is the right word to use? Will such people incur penalties for non-compliance?
Different circumstances obtain for those who are trying to climb back on to the employment ladder. I should be happier if, instead of applying a flat formula across the United Kingdom—I accept that a degree of simplicity is necessary in order to administer the scheme efficiently—the Government introduced some flexibility and examined individual problems and the different circumstances that apply in inner-city and rural contexts. That would build confidence that the Government were dealing with the issues sensitively and constructively.
I am not persuaded that the amount allocated—I share the scepticism about the £200 million, £210 million or £190 million; I hope that it will be £210 million, although I do not think that that is enough—will be sufficient over five years. I urge the Secretary of State to monitor the workings of the schemes. If she believes that they are suffering as a result of a lack of funding, I hope that she will go into battle in future public expenditure rounds and secure more money. If she does that, she will certainly have our support.
§ Mr. Stephen Hepburn (Jarrow)I welcome this welfare-to-work Budget, which places responsibilities on three specific areas: employers, individuals and the Government. The Government have taken the initiative in launching our welfare-to-work programme. With that in mind, I wish to raise two issues affecting my constituency: the future of the Benefits Agency in Jarrow and the future of the appeals venue in south Tyneside, which is very important to local people.
There is high dependency on benefit in my constituency—which is not the fault of this Government—a high incidence of disability and high 536 unemployment. The people of Jarrow require the services of the Benefits Agency office. I have been informed that files have been removed from there and moved to a Sunderland office and that Benefit Agency officers are becoming increasingly reluctant to conduct home visits.
The appeals venue is extremely important to Jarrow and to south Tyneside. The area has a history of heavy industry, and many employees have suffered injuries at work and have disability problems. Those people must have ready access to an appeals venue. I ask the Minister to consider those issues and to provide an early response.
I congratulate the Chancellor on what the newspapers have described as a "people's Budget". I would go one step further and describe it as an ordinary people's Budget. It addresses the ordinary issues that affect the ordinary people whom we meet every day in our constituencies—the old, young, disabled and the unemployed. Those ordinary people have real interests in ordinary issues, such as jobs, education and health. I am pleased that the Budget will begin to address those matters.
The Labour party fought the general election on the issues of jobs, education and health, and we won an overwhelming mandate from the people to implement the policies that we outlined in our manifesto. I cannot understand why certain sectors of the community and certain individuals who should know better have criticised the Budget. We cannot solve overnight all the problems that have been caused over 18 years. This Budget is only the start. People should act responsibly and give the Government a little support. Ministers should not pretend that they will solve all the problems overnight. We should answer any criticisms by stating that, although it will take a long time to address the issues, at least we are moving in the right direction.
The Budget introduces job-creating measures for young people, who have been ignored for too long. I see youngsters in Jarrow hanging around on street corners: they have no hope and nothing to do. We hope to address their problems at the end of the day. I welcome the Government's renewed commitment to job creation—which is a radical change from the policy that prevailed for 18 years. As I said in my maiden speech, Jarrow has one of the highest levels of unemployment in the country, and youth unemployment is a particular problem. I know, of course, that it is a problem throughout the country.
Let us make no bones about it: the windfall tax is right. I am surprised that the hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood) says that it is wrong. In the past, he has expressed some sound views on benefits. I have listened to his views over the years on welfare issues and have respected them.
Before I came to the House, I was the chair of a superannuation or pension fund—it was a £1 billion fund—for about six or seven years. The issue of a windfall tax was well and truly dealt with by fund managers in the City. They said that there would be no problem with a one-off windfall tax. I would assume that the fund received good advice. It was a substantial fund and it paid for good advice. At the end of the day, fund managers rely on success in the City and on the stock market if they are to keep their jobs.
It is right that there should be a one-off sum of £5 billion. It will be used to help deal with the problems of ordinary people. It must be understood that people were 537 outraged by privatisations. Ordinary people knew that they were rip-offs. That is a fact that could not be hidden from ordinary folk. They became furious when they learnt of the salaries that directors were drawing following privatisations, along with share options. The one-off £5 billion is a victory for the ordinary person, whom we claim to represent. It is just retribution for what went on in the past. It is right that the money should be used to help deal with the problems of the unemployed.
What sort of people will be helped by the £5 billion? In Jarrow, over 500 young people under the age of 25 have been on benefits for more than six months. That is an indictment on the previous Government. Young people have been cast aside and they have had to live in the absence of hope. The Government are now addressing the problem.
If an individual shows us no respect, we in turn will have no respect for him. That applies to young people. If society shows young people no respect, young people will show no respect in return. We are seeing a breakdown in the social order—it has taken the form of riots in various places, but thankfully not in my constituency—because respect has not been shown. Society has not shown respect and no respect has been shown by those on the receiving end.
I urge employers to take part in the welfare-to-work programme. They have a major role to play. I hope that they will accept their responsibilities towards young people and work with the Government to bring about employment opportunities.
I hope that I shall be forgiven for plugging my constituency, but if any company wants to expand or relocate, it should be aware that Jarrow is a real place that has a real asset in its young people. I say that sincerely. Jarrow has some of the highest unemployment figures in the country, but there has not been the social breakdown that has afflicted other areas, where there have been riots. That is because there is a community spirit in Jarrow, which goes back many years. Community spirit has produced built-in discipline. There is the great institution of the family, and the family keep young people in control. Sadly, that social cohesion has been strained over the years because of unemployment. I hope that we can do something for the young people of Jarrow.
I make no apology for making a plea for young people, whose views are not often taken into account. It would do some right hon. and hon. Members a great deal of good to listen to the views of young people and to talk to them. In spite of the hardship that they have faced over the years, they are an extremely tolerant bunch of people. I hope that I have taken on board the tolerance that they have shown over the years. We can learn something from them and, I hope, deliver some programmes for them.
The Budget demonstrates a commitment to young people and a change of direction towards a more tolerant society. That can be only for the good. There must be tolerance towards minorities and women, for example. We must be tolerant also of single parents. There are more than 2,000 single parents in my constituency, and for too long they and others have been treated as second-class citizens. I am talking of decent people. All they want is a chance in life and a decent life for their families. It is our job to try to do something for them.
For too long, there has been the myth that young girls become pregnant so that they might have the privilege of getting a council house. That is nonsense. It is said that 538 young girls get pregnant so that they can get a few extra bob in benefit every week. That is absolute nonsense. It is about time that we moved away from that philosophy and tried to help single parents achieve their aspirations.
I am pleased that we shall be offering advice, training and child care to enable young parents to leave their homes and gain employment. In many instances, their homes are cells because they are stuck in them throughout the day and night with young children. They need some relief along with financial independence, so that they might live their lives with some dignity.
I thank the House for listening to me, especially to my views on Jarrow. I am sure that what I have said about my constituency could be said of many other constituencies throughout the country. I am sure also that everyone in the House has the same aim of trying to do something for our young people. There will, of course, be different views on how the issue should be approached. I believe that the Labour party has the right policy, as set out in the Budget. I look forward to working with my colleagues on this and future Budgets, so that we might implement our policies.
§ Miss Julie Kirkbride (Bromsgrove)Thank you, Mr. Deputy Speaker, for giving me the chance to make my maiden speech during the Budget debate. I am struck, as a new Member, by the camaraderie that exists on both sides of the House. I was given a variety of help and advice when it came to making my speech this morning. I have been told that it is likely to be the most memorable speech of my life. I must say to those of my hon. Friends who sit around me that it is unlikely to have that level of resonance, but I shall carry on anyway.
It is a great privilege to be a Member of Parliament. We sit in the Mother of Parliaments, the cradle of democracy, and it is the bulwark of our freedom. I am proud that I have been elected to this place. I hope that this morning, while making my maiden speech, I shall be allowed to wander a little more widely from the mark of the Budget plans and say a few things on a more personal level, which I should like to have on record in Hansard.
I wish to say a few thank yous, and the first are to my teachers. I was brought up in Halifax and went to the Highland school there, which is now called the North Halifax high school. It is a grammar school, and a first-class school. It does absolute wonders for the children who go there, many of whom are from very ordinary backgrounds, and some of whom come from what might be described as underprivileged backgrounds. As I say, the school does wonders with these children. It teaches them to believe in themselves and to improve themselves academically and socially.
I was lucky enough to go to the school, as were a variety of other children. To be slightly party political, the fact that not everyone can go to the school is not a good reason for getting rid of it. There were a couple of teachers at the school whom I should like to put on record as having been important influences on my life. The deputy headmaster, Mr. Stephen O'Brien, very much helped me in getting my place at Cambridge university, which I believe made a difference to my life and perhaps allowed me to be here today. My history teacher was Mrs. Alice Chapman, who gave me extra tuition so that I could pass my common entrance. I suspect that she would 539 not necessarily approve of my being a Conservative Member. I hope, however, that she will be proud that one of her pupils has arrived in the House. She took great pleasure in teaching me the traditions of this place.
I should also like to thank my family and friends for their love and support. Two years ago, when I told my family that I wanted to be a Member of Parliament, they said that I must be mad. I do not think that they have changed their opinion, but I dare say that they are getting used to it.
The third group of people whom I should like to thank are my constituents, who placed great trust in me on 1 May and sent me to the House as their Conservative Member of Parliament, for which I am grateful. I hope that their trust and faith in me will not be diminished by my performance in the House, and I am pleased that they elected me. I should like to thank in particular my Conservative constituency association, which worked hard to achieve a good result in Bromsgrove. I am particularly grateful to the members of my association for choosing me to be their candidate six months ago, and I do not intend to let them down.
I have some first-class predecessors, to whom I have to live up. Mr. Roy Thomason was my immediate predecessor and a very fine constituency Member of Parliament. When I banged on a variety of doors during the election campaign, I was struck by the spontaneous tributes paid to Mr. Thomason's hard work and effort on his constituents' behalf. I hope that one day—although perhaps not in five years, which is how long he served in the House—I will receive similar, unsolicited plaudits on doorsteps. It was a fine reflection on him, and I am sure that my constituents and hon. Members would like to send him their good wishes for his future career.
Mr. Thomason's predecessor was Sir Hal Miller, who is remembered by many hon. Members. He was a fine constituency Member of Parliament, and I shall have to live up to him also. Nothing was ever too much trouble for Sir Hal, and he has been kind and supportive to me in my efforts to get to know the constituency. He will be remembered by some hon. Members as a vice-chairman of the Conservative party, and as someone who spoke up for the midlands and for midlands manufacturing. He is sorely missed, and I am sure that my constituents and hon. Members would also like to wish him well in his retirement, which he is enjoying.
Since I was elected, some hon. Members have had the temerity to ask me where Bromsgrove is. I am tempted to reply that, if they were to look at a centuries-old map of the Worcestershire area, they would see Bromsgrove emblazoned across it, whereas there would be no mention of our near neighbour Birmingham, which is a more recent invention. But I can tell those hon. Members who still need to know a little more about exactly where Bromsgrove is that it straddles north and south of the M42: it starts in the east where the M40 meets the M42, and finishes in the west where it touches the M5.
Bromsgrove is an old market town, and has some fine traditions. We have an active court-leet, which I do not think other hon. Members can boast of having. Just a few weeks ago, I had the honour of parading through the town centre with the court-leet in all its finery and robes. Despite the pouring rain, it was an enjoyable occasion: 540 it was enjoyed by the people who, like me, were in the procession, and by the people of the town who came out to watch the spectacle. It is a centuries-old tradition, and is great fun.
Bromsgrove is a mixed area. Half the population lives in the town of Bromsgrove and the rest are scattered among beautiful villages where it is lovely to live. There is some farming, but many people work in the service industry or in light industries. Many people show great judgment by choosing to live in Bromsgrove while having their businesses in the black country or working as professional people in the city of Birmingham and elsewhere.
We are something of a mixed bunch, but we share a common agenda: we are proud of our beautiful constituency, we want it to stay beautiful and we want to hang on to our extremely important green belt. We have a wonderful inheritance in the English countryside in our part of the world. We inherited it from our forebears, and we have a duty to pass it on to our children and to our children's children. If we are to do that, we must think carefully about how we proceed into the next century.
There are plans to build 41,300 houses in Worcestershire alone. That is too many: it is almost double the size of the centre of Bromsgrove. Bromsgrove alone must take 7,500 houses, and that is also too many if we are to carry on living in a lovely part of the world. We must challenge the idea that, just because many people want to come and live in the countryside, we should build houses for them in the countryside. The time has come to stop doing that.
At this point, my remarks become more germane to the Budget, which included proposals on the environment. As a Conservative Member, I do not agree that new houses should be built with public money: they should be built privately. I feel very strongly that they should be built in inner-city and urban areas, which would do much to rejuvenate those areas. We should bear in mind the people for whom we are building those houses. They are not only for people like me—I am 37—who have been single all their lives, and elderly people, who are now living longer, but for people who have something to gain from living in communities where they have access to shops and other facilities and can be less reliant on their cars.
The Chancellor referred to green taxes, which potentially have some merit. If we levy green taxes, that money must be put back into the environment and become hypothecated taxes. Brown land in our inner cities should be redeveloped, so that housing can be built to the greater and wider benefit of all of us who want to enjoy both living in cities and having access to our countryside.
If the House would be indulgent a little longer, I should like to raise a green-belt issue that is specific to my constituency. A recreation ground in the centre of Bromsgrove has a charter that was placed on it by King John 800 years ago. It is used by visiting cricket and football teams, who play local people in Bromsgrove. Sadly, my local Labour council want to build an arts and leisure centre on that site. I am opposed to that, as I believe are the people of Bromsgrove. I appeal to the council to stop this act of vandalism, because it is wholly wrong. I am happy for the council to build an arts and leisure centre somewhere else, but not on the recreation ground.
541 If the local council will not listen to me, perhaps it will listen to the Government. Only this week, I received a letter from the Minister for Sport saying that he was opposed to building on the recreation ground. I hope that the council pays more attention to the Minister than it does to the local Member of Parliament.
I also appeal to my local council to stop the declassification of the village of Alvechurch from the green belt. A district inspector has been considering where the 7,500 houses that are due to be built in my constituency should be built. The inspector has suggested that they might be put in the villages of Hagley—I disapprove of that suggestion—and Wythall. Those are sensitive and pretty, villagey areas, which should be freed of the blight of further housing.
I object particularly to the plans to declassify the village of Alvechurch from the green belt, as it lies in a sensitive area between the Birmingham metropolis and the new town of Redditch. It is an area of land that should remain in the green belt. Declassification would be the thin end of the wedge and a dangerous thing to do. When the matter comes before the local council at a full council meeting, I appeal to the council to reject the district inspector's proposal.
My colleagues on the Conservative Front Bench asked me to say a few words this morning about social security, although I warned them that I wanted to deal with other issues in my maiden speech. It is a little difficult, because a maiden speech should not be controversial. Although the Secretary of State for Social Security and Minister for Women has left her seat, I can say of her social security Budget proposals that I applaud her decision to maintain the previous Government's policy of axing the extra amount of benefit available to single parents. It is right that we stop one-parent benefit and lone-parent premium, which give extra money to single parents—money that is not available to parents who are married and living on benefit. I applaud the decision to keep that proposal, which was made by the Conservative Government, although I do not envy her task when dealing with primary and secondary legislation, when she will have to take her colleagues through the Lobby on a proposal that she originally opposed and that I suspect many of them still do.
§ Mr. Ben Bradshaw (Exeter)I congratulate the hon. Member for Bromsgrove (Miss Kirkbride) on her excellent maiden speech. Speaking for so long without notes is a great achievement and I want that to go on record, as she was far too bashful to do so herself. I will not try to emulate that record. We share a common profession, and perhaps that is a sign that my background is in radio, where one would never go into a studio and try to speak for more than 20 seconds without a script—I shall be more or less following one this morning.
The hon. Lady spoke a great deal of sense on many issues. I have not had the pleasure of visiting Bromsgrove, but it sounds delightful. I am sorry about the trouble that she is having with the new recreation centre. She said a lot of good things about green taxes, with which I am sure all hon. Members would concur.
Many new Members are hoping to speak this morning and, as I have experienced being squeezed out, my speech will be scripted but brief. I have the great honour and 542 privilege of representing the people of Exeter here at Westminster—a privilege that has been enjoyed, sadly, only once by a Labour Member, who is now my hon. Friend the Member for Crewe and Nantwich (Mrs. Dunwoody). For the past 27 years, Exeter was served by a one-nation Conservative of the finest sort, Sir John Hannam. He was a conscientious constituency Member and contributed a great deal to a number of areas of our public life. As hon. Members will be aware, he worked particularly hard in the area of disability, for which I am sure that we would all want to pay him a warm tribute. Sir John was no less active within his party and was, until his retirement, secretary of the 1922 Committee—a somewhat less onerous task now, I fear.
I have another rather more personal reason to be grateful to Sir John. He played no part in—indeed, he was completely absent from—the campaign of my Conservative opponent in the recent general election. I wish Sir John and his wife Vanessa a long and happy retirement on the Isle of Wight.
Exeter, as I am sure you were aware, Mr. Deputy Speaker, is one of Britain's finest cathedral cities. At the risk of being controversial, it is also the county town of England's most beautiful county, Devon. Despite the worst efforts of the Victorians, the Luftwaffe and post-war planners, Exeter remains one of the most attractive cities in Britain in which to live. We have a popular city centre, a large and successful university and a very high number of sunshine hours—second, I believe, only to Eastbourne.
Taken together, Exeter's many assets mean that we usually come top or near the top of those regular quality-of-life surveys. We are also blessed—unlike the hon. Member for Bromsgrove, by the sound of it—with a model Labour council, which has just kept its council tax pegged to a zero increase for the third year running.
Despite Exeter's many perfections, we share with other towns and cities throughout the country some of the social and economic problems that make the quality of life for those who suffer them anything but perfect. This Budget is an important first step towards combating those problems. The release of capital receipts to spend on social housing will be welcomed by the more than 1,600 families in my constituency who are on Exeter city council's housing waiting list.
The allocation of £2.3 billion extra for schools will be welcomed by Exeter parents, who are fed up with their children being taught in dilapidated classrooms, without the books and resources that they need and facing cuts in teaching staff. The extra money will give new hope to parents in areas such as Topsham, who have been waiting for two generations for a new school. Together with the fulfilment of our pledge to cut class sizes, that will make a real difference to the education of our children.
My local health authority, North and East Devon, is one of the many that are in financial crisis. It is proposing severe cuts in front-line services, particularly those for people with learning disabilities. The £1.2 billion extra pledged for the health service should at least help to ease that crisis.
Hundreds of my younger constituents—many of whom have not had a proper job or training since leaving school—will benefit from the welfare-to-work programme. Single parents who are caught in the poverty trap, as we heard, will have the chance to get back into the labour market.
543 Exeter businesses remember well the boom and bust of the 1980s and early 1990s. They welcome the long-termism enshrined in this Budget. They are grateful that under a Labour Government they will be paying the lowest corporation tax of any of our major competitors.
My constituents, along with most economists, the Confederation of British Industry and others, recognise that, at this stage of the economic cycle, revenue-raising measures are essential if we are to avoid the busts of the Conservative years.
Given the Government's commitment to the environment and to improving the nation's health, higher levies on petrol and tobacco are both fair and sensible. My constituents, who suffer the pollution and congestion caused by the large number of private cars carrying commuters into Exeter every day, might have welcomed more green measures, but they will be reassured by the Chancellor's pledge to consider those further before the next Budget.
Exeter drinkers, who are celebrating my city's excellent annual festival, will be toasting the Chancellor for avoiding slapping extra duty on alcohol. They and my superb local cider and real ale producers will await the outcome of his review of alcohol duties with great expectation.
Householders, particularly pensioners and others on fixed incomes, will welcome our fulfilment of the election pledge to cut value added tax on fuel and my gas users will look forward to substantial falls in their bills, thanks to the abolition of the gas levy.
No one, not least my constituents, likes to feel that he or she is living on the backs of his or her children or grandchildren. The last Government's public sector borrowing requirement was unacceptably high for this stage of the economic cycle. On top of everything else that the Chancellor achieved in this Budget, he will have slashed the public sector borrowing requirement from £23 billion in the last financial year to £5.4 billion in the next. That is a tremendous achievement.
I feel privileged to have spoken on this historic Budget, which even The Daily Telegraph struggled to criticise and which has been misconstrued by some people as too careful, even conservative, when in fact it is deeply radical. It is radical because it releases Britain from its short-termist past and sets us on course for stable and long-term prosperity, from which all our citizens will benefit. I therefore commend the Budget to the House.
§ Mr. Julian Brazier (Canterbury)I congratulate the hon. Member for Exeter (Mr. Bradshaw) on his fluent maiden speech and join him in the generous tributes that he paid both to his predecessor and to the excellent speech of my hon. Friend the Member for Bromsgrove (Miss Kirkbride). I must chide him for introducing a controversial note into his speech. I know Devon to be a most attractive county, but Kent is the garden of England. Over the next few years, he and I will, I suspect, exchange some political blows on matters on which we have already corresponded, but I take this opportunity to welcome him on a personal level to the House.
The Minister for Welfare Reform has clearly set out the agenda in relation to his benefit system review. His aim is to reward hard work, honesty and responsible behaviour. 544 Those are aims that I know he honestly holds, and I suspect that most hon. Members support him. During the term of the previous Government, from time to time, in writings and in speeches, I supported some of the specific issues that he raised, sometimes against the actions of that Government. That makes it all the sadder to say that I firmly believe that his programme will fail, and for reasons that are grounded in three different strands of Government policy: tax policy, housing policy and the wider benefit system.
First, we must be clear what it is we are addressing when we talk about the growth in dependency. Opening the debate, the Secretary of State for Social Security made a point that has often been repeated by Labour Members: that one household in five in Britain do not have a breadwinner. That is not a record of which I am proud. As someone who is very proud of most of the previous Government's record, I believe that that was our greatest single failing.
However, we have to find out exactly what that statistic means, because it contrasts curiously with another set of statistics, which show that, on internationally agreed measures of unemployment, we have one of the lowest unemployment levels in Europe. Indeed, it has been dropping for a long time.
The solution to that contrast lies in two words: family breakdown. I am not referring here to any global generalisation about single parents. I am not talking about widows—my grandfather was brought up from babyhood by his widowed mother—or about divorce. I am talking about the rapid growth in one category of single-parent families—those headed by a single woman who has never been married and who depends on the state from the arrival of the first baby. Two thirds of all families that fall into that category are now wholly or mainly dependent on the state.
I suggest, therefore, a benchmark for the review that the Minister for Welfare Reform is carrying out throughout the social security system, excluding the pensioner sector, where the issues are different. The benchmark is this: will each measure in each area of policy tend, among low-income groups—those groups at the margin—to promote or to retard the breakdown of the traditional family?
Of the three strands, I want to consider taxation policy first. I was one of the few Conservative Members to chide the previous Government for increasing taxation on the working poor, particularly the cuts in the married couple's allowance, which we had steadily expanded during the years of the Thatcher Government, but which, over the past five or six years, we steadily eroded, resulting in a heavy penalty on poorer working families. Hence, after the outcry from Labour Members on that issue, I find it particularly disappointing that the Chancellor of the Exchequer has done nothing in the Budget on the taxation side for those families.
A vague generalisation about introducing a 10 per cent. starting rate of income tax when funds allow does nothing now for those poorer working families, who are supporting themselves, struggling to be self-reliant and paying too much tax. The 10 per cent. tax rate is a gimmick, anyway. It would be far more efficient—not least in relation to administrative costs—simply to raise basic tax allowances, to get people out of the tax system and to stop the nonsense of people paying tax and receiving means-tested benefits at the same time.
545 I also want us to return to a system of child tax allowances, side by side with child benefit—most continental countries have both—and to introduce the programme for transferable allowances, for which the Conservative Family Campaign fought for a decade, and which was adopted in the Conservative manifesto.
The second side of the triangle is housing policy. This is the worst aspect. There are two dimensions to it: allocation, and the way in which the housing benefit system works. Housing allocation is critical.
Let us be realistic. As we consider the other two sides of the triangle, we are continually in the business of trying to pick up the pieces and identifying how to get people at the margins back into work and so on. However, the main reason—I disagree strongly with an hon. Member who spoke earlier—that the problem arose in the first place lies in the allocation of housing. It is no good people saying that it is cynical to believe that women become pregnant to achieve the allocation of a council house. The reality is that, for families on low income, the greatest single economic watershed in their lives is the allocation of a house.
Let us take a simple, notional example, which is repeated throughout the country thousands of times every year. Two young ladies of exactly the same age and socio-economic background become pregnant. One either decides to marry her boy friend or is already married to him, and is offered accommodation at home by one or the other set of parents. The other young lady decides to strike out on her own, perhaps simply having agreed with her parents that they write out a slip to say that they are evicting her, which she takes to the council's housing office.
Under the workings of the old Housing (Homeless Persons) Act 1977, which we finally repealed only last year, that second young woman takes priority, perhaps for several years, not just for a place to stay, but for permanent accommodation—usually the most valuable capital asset she will ever control—over the other lady, who is part of a couple trying to set up an ordinary traditional family and who might have to wait years on a housing list. To return to those legal arrangements, as this Government are committed to do, will undo much that people such as the Minister for Welfare Reform wish to achieve.
The other side of housing policy is the way in which the housing benefit system works. This is one of the most complicated benefits in the whole system. I do not want to go into a lot of detail, except to say that, by focusing a higher proportion of the resources within the existing budget on what she calls the most needy, the Secretary of State will only sharpen the taper. The people who will lose are those at the top of the taper, who are nearest to breaking out of the poverty trap. Through housing allocation, more people will enter the trap, and through housing benefit it will become harder for people to break out of it.
The third side of the triangle is the workings of the wider benefit system. I remind the House of those criteria stated by the Minister: honesty, encouragement of thrift and responsible behaviour. I look with despair at the proposed benefit changes as they affect families. I shall focus on what has been said on child care.
546 We have before us two important proposals—or allegedly important: to expand the benefit disregard from £60 to £100, and to create 50,000 child care trainees as part of a national child care strategy.
I worked for some years for a Swedish company and saw the way in which Sweden moved from being the world's most prosperous country in the post-war years to destroying its family structure and a large part of its business structure. That was caused by a series of social mistakes, of which the worst was Sweden's approach to child care.
Sweden had exactly the same elements in place as those towards which the Government are moving—an emphasis on so-called higher standards, which in practice means more expense, and encouragement through the tax and benefits system for more and more people to go for child care. Those factors inflated demand. Sweden also provided state training for people who wished to enter child care, and state places were provided.
By the mid-1980s, Sweden had reached the absurd state where the highest single aspect of municipal budgets was for child care. However, the municipalities were picking up only 45 per cent. of the bill. The Government paid another 45 per cent., and there was a payment by families.
By the time the system reached its peak, the all-in cost of a place in a pre-school creche had reached 60 per cent. of the Swedish average wage. No wonder the country was able to provide places for only one third of its pre-school children. The whole system came unstuck. That is the sort of nonsense upon which the Government are setting their sights.
On a point of detail, it is wrong to believe that an increase in the disregard from £60 to £100 will help one-parent families on the margin. It can benefit only better-off people, and many of those who pay taxes to support the system are struggling, traditional families on low incomes.
I end by repeating my opening comments. The Minister for Welfare Reform has a noble aim, which I share. His three criteria are right. However, all three aspects of the policy that most directly impinge on the family and are touched on in the Budget—taxation, housing policies and benefits—will take us away from the right hon. Gentleman's aims. They will increase dependency and promote further family breakdown and an increase in the underclass.
§ Mr. Ross Cranston (Dudley, North)I congratulate the hon. Member for Bromsgrove (Miss Kirkbride) on her maiden speech. She spoke eloquently, and, as one of the few surviving members of her party in the west midlands, she deserves credit. I also commend my hon. Friend the Member for Exeter (Mr. Bradshaw) for a fluent speech. He fought a difficult and principled campaign, and we welcome him.
In his Budget, the Chancellor emphasised four matters—stability, more investment, more employment and social justice. I shall concentrate on social justice. It is especially appropriate to do that today, because my right hon. Friend the Secretary of State for Social Security opened the debate.
Social justice is at the heart of the Budget, and my right hon. Friend the Secretary of State spoke about the new deal for lone parents such as the job search programme, 547 training and education and generous family credit help. I commend all those measures. The wider context of the measures is the welfare-to-work programme, which is central to the social justice that the Budget will deliver. It was a key feature of our manifesto commitment, as was its funding by the windfall tax.
The hon. Member for Chingford and Woodford Green (Mr. Duncan Smith) said that the Budget contained taxation surprises. The windfall tax was no surprise. The hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood) also spoke about that. I suggest that we accept the tax, and let the debate move on.
The welfare-to-work programme will bring the long-term unemployed back into active participation in the labour market. That will be good for them and for the economy, and will make the labour market work more efficiently. There must be concern about what is sometimes called churning—or the revolving door, as the hon. Member for Chingford and Woodford Green described it. However, there will be controls to minimise that.
As we have acknowledged, the welfare-to-work programme cannot operate in isolation, and that is why we are changing the benefits system to integrate it with the tax system. That is a top priority. Job subsidies, which have been set out by the Chancellor in the welfare-to-work strategy, have a role to play in getting the unemployed into jobs that would otherwise go to insiders.
It is standard practice to refer to tax concessions and allowances as tax expenditures. The term is intended to emphasise the similarity of tax expenditures to direct Government outlays, and to stress the need to subject both to the same treatment. I am not suggesting that tax expenditures are in any way interior to direct outlays as a budgetary technique. The choice between the two must be made on a case-by-case basis, and will depend on factors such as transparency, equity, efficiency and the ease of administration.
The tax expenditure approach is especially valuable in several areas, particularly in social justice. I shall give the illustration of mortgage interest tax relief. The Red Book shows that tax expenditure on that relief in 1997–98 will be £2.7 billion, and will go down to £1.9 billion in 1998–99 as a result of the Chancellor's changes. Similarly, the tax relief on premiums for private medical insurance involves tax expenditure of about £110 million in 1996–97. If the relief were not abolished, the cost would rise to £120 million in 1997–98.
Putting such tax expenditure alongside comparable direct outlays brings out the social justice aspect. For example, one could compare the £2.7 billion tax expenditure on mortgage interest tax relief with the expenditures in the Department of the Environment annual report, on housing, which shows an expenditure of only £1.5 billion on direct capital support for housing. Of course, it is somewhat more than that when non-capital expenditure is taken into account. That illustration shows the importance of looking at tax expenditures to bring out the social justice aspect. It supports the Chancellor's action on mortgage interest tax relief.
The reduction of VAT on fuel is another aspect of social justice. The reduction is especially important to many of the older people in my constituency, because fuel 548 poverty is a very serious social problem. On one estimate, the cost to the NHS of treating illness caused by cold and damp living conditions is £1 billion per annum.
A VAT rate of 8 per cent. on domestic fuel was highly regressive, because the average low-income household spends about 10 per cent. of its income on fuel, whereas the average household spends only 5 per cent. Low-income families often could not afford to pay to heat their homes or to have adequate hot water, cooking facilities or lighting. I therefore commend that tax reduction as another important measure in achieving social justice.
The Chancellor's announced action on tax avoidance will be another important dimension in achieving social justice. Specifically, he announced an inquiry into the introduction of a general anti-avoidance provision. I urge him to examine such measures closely. Other countries have anti-avoidance measures in tax legislation, and they work.
The Budget's second great theme, after social justice, was long-term investment and stability. Capital investment is clearly necessary for growth. There has been under-investment in the United Kingdom for too long, and the situation is certainly not getting any better. Manufacturing is especially vital in generating employment in areas such as the one I represent. Manufacturing is vital in winning export earnings, accounting for 60 per cent. of such earnings.
I commend the Chancellor for the various measures that will have a positive effect on manufacturing, such as reducing corporation tax, temporarily allowing doubling of capital allowances for small and medium firms and permitting carrying back of trading losses. The measures will, of course, deal with only one aspect of the problem.
The problem will not be solved overnight, because, in the United Kingdom, it has many historical and cultural dimensions. In the UK, our market for corporate control fosters short-term thinking and planning, and our education system does not provide a highly skilled work force but promotes a mindset that downgrades the prestige of manufacturing compared with finance.
I commend the Government for their various announcements on education reforms, because they are a part of the jigsaw of promoting a vibrant manufacturing economy. I especially welcome the additional payments to education.
The hon. Member for Chingford and Woodford Green mentioned the abolition of tax credits for pension schemes. Our current credits system derives from our imputation system, which some people believe avoids double taxation of dividends—taxed once when in a company's hand and then a second time when shareholders receive them. However, imputation is not sacrosanct. The United States, unlike the United Kingdom, does not have an imputation system.
It is often said that double taxation is inequitable, because companies have to pay tax but partnerships do not. I do not think that that is a strong argument, because the typical form of business is the corporate form. Therefore, the introduction of the partnership comparison is a false one.
Another argument holds that double taxation of dividends discourages dividend distribution. If that were the case, imputation might well be a good thing. I suggest, however, that dividend payments are not determined solely by the tax regime.
549 Untaxed pension funds have obtained a credit because of the imputation system, and the Chancellor has abolished that credit. As I said, the tax credit is not sacrosanct. As the Chancellor rightly said, many employers have been taking very generous contributions holidays and can afford to cover the gap. Regardless, pensioners on fixed salary schemes are protected, and people contributing to occupational or private pension schemes will still receive generous tax incentives to contribute. The measure, like others, must be seen in the broader context, in which many people do not have occupational or private pension schemes. My right hon. Friend the Minister for Welfare Reform is dealing with that situation.
The Budget also has some important environmental aims, which I commend. Ultimately, I hope that—as my hon. Friend the Member for Exeter said—the Government will carefully consider introducing more green taxes.
I support the Budget, because it will contribute to achieving our objectives of stability, investment and fairness for all. Those are the goals that the Chancellor set on Wednesday.
§ Mr. Nick Gibb (Bognor Regis and Littlehampton)I congratulate my hon. Friend the Member for Bromsgrove (Miss Kirkbride) on a superb maiden speech. I totally agree with her views on grammar schools, which I believe do more to broaden opportunity than any of the progressive social engineering policies that, unfortunately, are introduced too often in many of our state schools. I congratulate also the hon. Member for Exeter (Mr. Bradshaw) on his maiden speech. I am grateful that he has re-set the precedent for using notes in making maiden speeches.
I am grateful to you, Mr. Deputy Speaker, for calling me in this debate. It was during the debates on the 1974 Budget that my predecessor. Sir Michael Marshall, made his maiden speech. As I have been told on many occasions on doorsteps across Bognor Regis and Littlehampton, Michael Marshall will be a hard act to follow.
A highly conscientious and caring constituency Member of Parliament, Sir Michael was also a keen parliamentarian, eventually serving as the president of the Inter-Parliamentary Union. He was the quintessential renaissance man, having served as Industry Minister in Mrs. Thatcher's Government, when he became an energetic promoter of science and information technology, while maintaining a keen interest in the arts and in cricket. He has written a number of learned tomes on cricket, as well as books on Jack Buchanan and Stanley Holloway.
Bognor Regis, like its former Member of Parliament, is no stranger to the arts and literature. William Blake was a long-term resident of Felpham, a village on the town's outskirts. The green and pleasant land that he evoked is abundantly evident on the West Sussex coast, although one searches in vain for dark satanic mills.
The resorts of Littlehampton and Bognor Regis combine all the unspoilt charm of Victorian seaside towns with the beautiful countryside of the nearby south downs. On average, Bognor Regis has the most sunshine hours in Britain, and its beach is one of only 22 with the coveted blue flag.
550 Littlehampton, too, is famous for its beaches. Sea bathing began in Littlehampton as early as the 1750s, and it has had a harbour since mediaeval times. Today, Littlehampton—where the River Arun finishes its journey—is home to marinas and to boat builders, including Osborne's, which builds lifeboats for the Royal National Lifeboat Institution.
My constituency has long been a magnet for holidaymakers. G. K. Chesterton praised the strength of Bognor's deckchairs. Sir Robert Peel rested there after the stresses of the repeal of the corn laws. The Leader of the Opposition, now Prime Minister, took time off from the stresses of leading the Labour party and brought his family to that famous Bognor landmark, Butlin's, in 1995.
It would be remiss of me, as the first Member of Parliament for Bognor Regis and Littlehampton, not to draw attention to the visit to Bognor in 1929 by someone even more august and eminent than the Prime Minister. For between February and May of that year the town was honoured by the presence of King George V, who came to convalesce in the fresh, sea air. Whatever the King may or may not have said about the town on his death bed in 1936—the subject of intense academic debate, to which I have no intention of adding—it is thanks to that visit that, from 1929 onwards, the town became known as Bognor Regis, the King's Bognor.
The climate that led King George V's doctors to recommend his going to Bognor has attracted many generations of people to retire to the constituency. Indeed, 36 per cent. of its population today are retired.
The previous Government stood up for the interests of pensioners. That is why the average pensioner today is 60 per cent. better off in real terms than in 1979, not just because the Conservative Government managed to maintain the real value of the basic state pension but because they took steps to assist and encourage the build-up of private pension assets, which now amount to a staggering £650 billion—more than the pension funds of all the European Union countries put together.
The pensioners of Bognor Regis and Littlehampton will find it hard to understand why, rather than taking steps to increase the value of pension fund assets, this Budget will reduce their value. It is not a minor reduction. The Red Book makes it absolutely clear that £4 billion will be raised next year and £5.4 billion the year after from the abolition of the tax credit on dividends. That is the equivalent of confiscating from pension funds and other tax-free funds more than the windfall tax each and every year.
That loss will have to be made up by higher contributions from individuals and companies. Only half of the company pension schemes represented by the National Association of Pension Funds, whose members represent 70 per cent. of all employees in this country, are in surplus. The other half will have to extract higher pension contributions from their employees or from shareholder funds. That will mean that companies will have less money for investment. Many of the funds that are in surplus have been paying discretionary increases in pensions to poorer pensioners. These may well have to stop. Some 5 million people with personal pensions will have to pay higher pension contributions immediately or face a reduced pension.
The change to the dividend tax credits is income tax dressed up as a tax on companies. It is equal to a 2p rise in the rate of income tax. I looked to see what the title 551 was of the Inland Revenue press release that introduced that investment-destroying tax change: it is "Tax Changes to Promote Investment by Companies".
A number of foreign companies have invested in Bognor Regis and Littlehampton. That investment has created jobs much more effectively than the Government's welfare-to-work scheme ever can, and it has brought wealth to the constituency. One hardly noticed aspect of the Budget will make such investment less likely in future.
Before the Budget, an overseas investor, say, from the United States, investing in the UK through a wholly owned subsidiary could claim half the tax credit less a withholding of 5 per cent. on dividends paid to the US, which meant that the effective corporation tax rate in the UK for such a corporate investor was only 28 per cent. The Government have now reduced the refund to almost nothing. Even with the reduction in the rate of corporation tax that was announced in the Budget, it is still less advantageous to invest in the UK than it was before the Budget. And the title of the press release is: "Tax Changes to Promote Investment by Companies". Never has an Inland Revenue press release been more inappropriately titled.
The same press release also announced the end of the foreign income dividend scheme. That was introduced by my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke) to assist UK companies with overseas holdings which had developed a surplus of advance corporation tax that they were unable to offset against their mainstream corporation tax liabilities because the overseas dividends had already been taxed abroad. There is no logic in abolishing that relief. It has no connection with the abolition of the dividend tax credit; it is simply a way of raising further revenue for the Government, and it recreates the problem that the Conservative Government had so imaginatively sought to solve.
The Budget shows that the Labour party's much-vaunted use of focus groups has not taught it to understand or adopt the instincts of the British people, but merely to find the language with which to cover up a tax-raising Budget and a smash and grab raid on the nation's pension funds.
Rather than listening to the instincts of the quiet majority, Labour Members have built up an enemies list: fat cats, pension funds, private health insurance—things that they think that the public dislike. While pretending to tackle the people's priorities, they are attacking the people, particularly pensioners. They are attacking the 62 per cent. of pensioners whose occupational pensions will be devalued by the tax credit reforms. They are attacking the 600,000 pensioners who have taken out private health insurance, at least one third of whom, independent estimates suggest, will terminate their policies and rely instead on the national health service, presenting the state with additional costs far exceeding the £115 million raised by abolishing the relief. They are attacking pensioners who pay electricity and gas bills, whose bills will rise or fall less steeply as a result of the windfall tax; attacking non-tax-paying pensioners who have a few shares and will no longer be able to claim back the tax credit on those dividends. All of that is taxation on the sly. While 552 declaring war on a list of enemies, the Labour Government are in fact picking the pockets of us all, and of pensioners in particular.
The Government have introduced a complex welfare-to-work programme, but every major economic decision that has been taken by the Government in their eight weeks in office will destroy jobs: the minimum wage, the social chapter, higher than necessary interest rates as a result of abrogating to the Bank of England the Chancellor's responsibility for setting rates, abolishing the dividend tax credit and, of course, the windfall tax. The Chancellor's revised assumptions, set out in the National Audit Office report published on 19 June, constitute a confession that under his stewardship the economy will have lower growth, higher unemployment and higher interest rates.
I was disappointed not to hear anything in the Budget statement about the tax simplification project begun by my right hon. and learned Friend the Member for Rushcliffe. All that the new Chancellor has managed to do is to create further complexity in the tax system. If someone saves in a personal equity plan, he receives a tax credit; if he saves in a pension, he does not. If he holds shares directly and is a taxpayer, he receives a tax credit; if he holds shares directly but is not a taxpayer, he does not receive a tax credit.
The Chancellor eventually intends to introduce another rate of income tax. He has announced his intention to reform capital gains tax. Worst of all, he has announced that he might introduce a general anti-avoidance provision, which would give rise to huge uncertainty in the tax law. It would require pre-transaction rulings, it would give too much power to the Inland Revenue, it would hamper corporate activity and it would cause a surge in litigation as taxpayers sought to have the law clarified by the courts.
The Budget is a disappointment. The Chancellor inherited an economy which is the envy of the world and which the British people trusted him to manage. With this unnecessary Budget—which seeks to increase investment, but will reduce it, and which seeks to increase the number of jobs, but will cost jobs—he has failed to live up to the high hopes of so many millions of people who voted Labour, many for the first time, on 1 May. It is a bad Budget, it is not the Budget for which the British people voted and it is one that Labour Members will come to regret.
§ 12.2 pm
§ Mr. Barry Gardiner (Brent, North)I am grateful to you, Mr. Deputy Speaker, for allowing me to make my maiden speech today. I stand before you as the Labour Member for Brent, North. I shall say that again: I stand before you as the Labour Member for Brent, North. The a priori intrinsic probability that I should be here in that capacity is akin to two Brits making it to the quarter-finals at Wimbledon—but then, of course, that has happened. It is perhaps akin to the British rugby team winning a test series in South Africa—but then, that has been done. Perhaps it is as probable as an English cricket team bowling out the Australians before lunch—that, too, has happened. Is nothing impossible under a Blair Government?
Sport is not just about winners and losers: it is about honourable opponents taking part in competition with one another. I certainly could not describe my predecessor in 553 Brent, North as a loser. He was an extremely honourable Member of Parliament and he achieved national renown, not only as a celebrity figure on television and in the media, but because he attained high office in the House as a Minister of State, Northern Ireland Office and, most notoriously, in the Department of Education and Science.
Above all, my predecessor was a hugely popular and respected constituency Member of Parliament. Over the past two years, as I knocked on doors in Brent, North, not a single person failed to tell me what a difficult task I had ahead of me. There was not one person who did not say that Sir Rhodes was regarded not just as a fine Member of Parliament, but as a family friend. Thankfully, all those people also confided that they would be voting for me, but that is another matter. I welcome this opportunity to place on record the gratitude and affection that the people of Brent, North feel towards Sir Rhodes after his 23 years' service to them. I hope that I shall be able to emulate his conscientious dedication, not to mention his length of tenure in office.
I must apologise to you, Mr. Deputy Speaker, because I am constrained from honouring another tradition of maiden speeches. At Prayers this morning, we were admonished by Madam Speaker's Chaplain to seek no party advantage in our debates, but to pursue truth and justice. I cannot, therefore, stand before you and proclaim that my constituency has the highest sunshine hours of any in the country, or that it has the highest peaks or the lowest valleys, or that it is the most beautiful constituency within the British Isles. By my reckoning, that last honour has already been claimed by at least 19 of my hon. Friends when making their own maiden speeches. Nevertheless, I thank all of them for providing me, in Hansard, with what I imagine must be one of the most comprehensive holiday guides to the British Isles. I shall make full use of it over the next few years.
When individuals look at a Budget, they think, "How will that affect me?" For Members of Parliament, that phrase becomes, "How will that affect my constituents?" and that was, of course, my thought on Wednesday. Brent, North is a part of suburban London that grew out of the successful Empire exhibition at Wembley in the 1930s. It developed world-beating technology, as shown by the fact that, for a time, it hosted the global headquarters of the GEC corporation. The loss of that in the 1980s entailed the loss of hundreds of local jobs and especially of many apprenticeships for young people. The profile of unemployment in Brent, North maps that recent loss of training opportunity: there is only 7 per cent. unemployment among older people, but 21 per cent. among under-25s.
I therefore welcome the welfare-to-work proposals announced by my right hon. Friend the Secretary of State, which will enable young people to get a foothold in the world of work and provide them with the training that they need. I am sure that a solid entry and exit strategy for those placements is in place. I am, however, concerned that there is no clearly articulated mechanism of quality control for the training that young people will receive under those proposals. Let us be clear that the Employment Service will be stretched to administer the placement work load; it therefore cannot act as a guarantor for the quality of the placements. It is little comfort to know that employers will be brought to book if and when they abuse the scheme—they will be spotted 554 and weeded out. It would be better if the quality control were there in the first place and we knew that clear programmes of training were in hand with employers.
Earlier in the debate, mention was made of the element of conscription on to schemes, because young people will not be able to continue receiving benefit without going down one of the four proposed routes. That misses the point: it is not how one arrives on such a scheme that is important—it is what happens when one is there and whether it is worth while. Schooling is carried out by conscription—we all have to attend school—but what matters is the quality of the education that we receive there. What matters will be the quality of training delivered to young people, and that is why I ask for further clarification on exactly how training will be delivered.
My constituency also has an extremely high proportion of pensioners, so I paid special attention to the Budget measures relating to advance corporation tax. I waited for the hon. Member for Chingford and Woodford Green (Mr. Duncan Smith) to leap to the defence of pensioners and was ready to note the points that he would make in their defence. When it came to it, the hon. Gentleman spoke of the concerns, not of pensioners, but of pension fund holders. The Chancellor's measures in that area will not hit existing pensioners—their effect will be on those such as myself, with 25 years or so to go before retirement—but in any case they do not attack a long-established concession that pension funds have traditionally come to enjoy and to depend on.
Those tax credits were given by Norman Lamont as recently as 1993, after heavy lobbying from the City. They distort the process of company management because they encourage short-term consumption in the form of dividend payments, instead of long-term investment. That is why it is absolutely right and consistent that the Government should abolish them, and why it is consistent—although, in my view, absolutely wrong—that the Conservatives, who were the Government of short-term consumption, should oppose the measure.
I return to the pensioners in my constituency: what do they want, and how has the Budget helped them? The reduction of VAT on fuel to the minimum level, 5 per cent., is not just a pledge that the Government have redeemed. It is a signal to pensioners throughout the country that the Government understand and care about some of the most fundamental problems that confront pensioners, such as fuel poverty.
I cannot speak of my constituency and the aspirations of the people I serve without talking of the two hospitals that serve them—Edgware and the Northwick Park and St. Mark's NHS trust. A month before the election, the accident and emergency department at Edgware was closed by the previous Government. I opposed that and fought against it strongly. I had hoped that our new Government could reverse it. Later in April, again before the general election, a much less well-publicised event took place—the preliminary works began for the conversion of the surgical block at Edgware. Without a surgical block, it is medically unsafe to have a full accident and emergency department—that medical back-up is needed.
My anger that that occurred under the previous Government is exceeded only by my determination that the health needs of my constituents, especially of 555 pensioners, should be met by the new Government. I have, as Ministers know, possibly to their exasperation, been somewhat focused on that issue since my election. I was delighted when the Minister of State, Department of Health, my hon. Friend the Member for Darlington (Mr. Milburn), agreed to initiate a review of the hospital provision at Edgware. I was especially delighted that the review will include an examination of the alternative provision of emergency care at the other neighbouring hospitals. I shall ensure that, as must be the case, alternative emergency provision is brought up to the highest possible standards, which my constituents rightly expect and deserve. Recently, the Secretary of State for Health was good enough to agree that the Edgware review should be submitted and taken into account as part of the Londonwide review of hospital care. The outcome of that review will be of vital interest to my constituents.
I am delighted that the Chancellor has announced an extra £1.2 billion for the NHS in 1998–99, but I wish to sound one slight note of caution, which I hope will not seem churlish. The other major hospital serving my constituency—Northwick Park and St. Mark's NHS trust—is at present £6 million in debt. The extra £1.2 billion in the next financial year may encourage hospital trusts that are in deficit to run that deficit forward during this financial year. Indeed, it would be surprising if there were no perceptible slackening of the belt in the light of the bounty to come.
However, a warning was contained in the Chancellor's Budget speech, when he referred to the amalgamation of hospital trusts to cut the cost of bureaucracy. Deficits in hospital trusts have resulted not simply from the flawed system of the internal market, but from the poor quality of management. Trusts that do not continue to address the deficits that they face clearly will be subject to the Chancellor's plans for amalgamation to achieve savings on bureaucracy.
One of the other aspects of my constituency is that it experienced the great wave of immigration from east Africa, which enriched this country in the early 1970s. I am proud to say that Brent is the most multicultural borough not just in this country, but anywhere in Europe. The economic stimulus that people from east Africa brought with them to Brent was phenomenal, and they have gone on to set up businesses and corner shops throughout north-west London and the rest of the country. The measures in the Chancellor's Budget to help small and medium-sized enterprises have been a fundamental boost to the people whom I serve, and I welcome those measures whole-heartedly.
Some hon. Members present will be habitual readers of The Times Educational Supplement. Usually, it is a great honour for any educational institution if it is portrayed on the cover of the TES. Recently, as many hon. Members will know, the TES ran a specific article about school lavatories. On the front cover was a quite horrifying picture of outdoor lavatories, to which pupils at a primary school had to walk across playgrounds to use. The lavatories were disgusting, and the paint was peeling. Most of the children at that school—which, sadly, is in my constituency—do not go to the lavatory during an entire day. I can think of nothing more debilitating to a teacher's efforts to teach or to a pupil's efforts to understand and learn than to sit cross-legged and 556 desperate to go to the toilet, but to be unable to do so, for fear of what lies outside. Indeed, on occasion, men have waited in the lavatories. The pupils do not go to the lavatory during the entire school day.
Therefore, the Budget announcement that gave me greatest pleasure was the capital improvement programme in education. That betokens the Government's commitment, not to the sexy topics of computers and glossy classrooms with language training equipment and other high-tech things, but to resolving the most fundamental and degrading problems with which students and teachers in our education system have had to contend in the past 20 years.
On Wednesday, I received a letter from my hon. Friend the Minister for School Standards, confirming the bid by Brent local education authority for support for the school renewal challenge fund for Roe Green infant and junior schools, to put right the lavatories and the disgraceful outdoor classrooms that they have had to endure. That letter fitted beautifully with the Chancellor's achievements in the Budget. The announcement made the Budget an historic one, for me. The Budget shows the Government's commitment to our people, in health, in education and in the care of the elderly. That is why I am proud to support it from the Government Benches.
§ Mrs. Eleanor Laing (Epping Forest)I congratulate the hon. Member for Brent, North (Mr. Gardiner) on his maiden speech. Perhaps he could give us some further advice on the odds that we could get for other unusual sporting events in the next few weeks, because I am sure that other hon. Members would find that information useful. At the risk of sounding inappropriately contentious, I must say that I do not agree with all the points that the hon. Gentleman made about the Budget. I congratulate my hon. Friends who made maiden speeches this morning and I am grateful for the opportunity to make my first speech in the House in such an important debate.
I have the honour to represent the constituency of Epping Forest. Like the hon. Member for Brent, North, I do not claim that my constituency is necessarily the most beautiful in the country, although of course I think that it is. However, it is one of the most ancient, and its charm lies in the contrast between its ancient and modern aspects. It is an easy constituency to find on a map because it lies on the line of the Greenwich meridian and because its centre is at the point where the M25 meets the M11. Not many hon. Members are lucky enough to have two busy and noisy motorways dissecting their constituency, although my hon. Friend the Member for Bromsgrove (Miss Kirkbride) noted in her speech that she has three motorways in her constituency.
The fortunes of the towns and villages around the forest have, for centuries, been closely linked with the fortunes of the City of London. The ancient forest itself was taken into the ownership of the Corporation of the City of London, in the early part of the last century, to protect the forest land from development and to provide an accessible area of countryside for the recreation of the working people of London. I am glad to report that that was a successful strategy. The working people of London now prefer to travel further afield for their recreation, but Epping forest has been well preserved and contains some of the best examples of ancient native British trees. Some 557 of the trees that we now admire are the very ones around which Henry VIII rode when he was hunting, and under which Elizabeth I is reputed to have had her famous liaisons with the Earl of Essex.
A thousand years ago, a church was built in the town that we now call Waltham Abbey. King Harold prayed there before the battle of Hastings and, sadly, was buried there after the battle of Hastings. A hundred years ago, Queen Victoria rode through Loughton during her jubilee celebrations, and modern commuters from Epping, Loughton, Buckhurst Hill, Theydon Bois and Chigwell travel daily to work in the City of London.
My constituency has literary connections. Both Charles Dickens and Anthony Trollope spent time in the Epping Forest area while writing some of their most famous novels. Hon. Members will have every sympathy, I think, with Trollope's great political hero, Phineas Finn, who, in the expectation of making his maiden speech,
took his seat in the House with a consciousness of much inward trepidation of heart.The Chamber seemed to swim round before our hero's eyes.All was confused and there arose as it were a sound of waters in his cars, and a feeling as of a great hell around him.I can only assume that the House was a much less welcoming place in the past century, when Trollope was writing, than I find it now.Since the beginning of the modern political era, which I count as the time when women were given the vote, my constituency—broadly speaking, as there have been boundary changes—has been represented by only three Members of Parliament, all of them very distinguished men.
I am happy to pay the traditional tribute to my immediate predecessor, Steve Norris. There is much to say about Mr. Norris, but I shall not say it now. He was well known and well liked as a great parliamentary character by hon. Members of all political persuasions; indeed, he still is. He served Epping Forest well in his inimitable and high-profile way. He was, and still is, accomplished not only as a politician and a successful Under-Secretary of State for Transport, but as a successful business man, media personality, bon viveur and author.
I was flattered to have been mentioned three times in Steve's famous book. [Interruption.] No, I shall not quote it. He gave me many wise words of advice when I became the candidate for Epping Forest, most of which it would be inappropriate for me to relate to the House. I will relate, however, that he advised me that I should not necessarily feel that, in all aspects of parliamentary life, I had to follow in his footsteps. I have so far adhered to that advice. I can tell by the reactions of hon. Members that they join me in wishing Steve every success in his future business career.
Steve won the by-election in 1988 that was caused by the sad and untimely death of John Biggs-Davison, who had represented the constituency for 33 years. It is appropriate that I should also pay tribute to him.
John Biggs-Davison was a well-respected Member of the House, admired for his impressive personal integrity and deep political convictions. He vehemently championed the cause of the Union with Northern Ireland. I share his views in that respect and I support the work of his organisation, the Friends of the Union. John's family have set up the John Biggs-Davison memorial trust, which provides financial help for those who have suffered in Northern Ireland, so his name and his cause live on.
558 Older people in my constituency still have proud and vivid memories of their most celebrated Member of Parliament, Sir Winston Churchill. I discovered after I had made my first speech as the new parliamentary candidate for my constituency that I had been standing on the very spot where Winston used to stand to address his constituents—I am glad I discovered that after I had made my speech, because I would have been overcome with awe if I had known beforehand. In my family, Winston Churchill was regarded as the greatest hero of all time. One of my earliest childhood memories is of being made to sit for several hours with the curtains closed watching his funeral on television.
I know that it is the fashion in the Conservative party to have spent one's early years listening to Churchill's speeches on the record player. I am afraid to say that in our house we had only one recording of a Churchill speech. I listened to it, but I learned only a few lines by heart—so I guess that I am not destined for great things in the Conservative party. However, it was useful to have listened to that speech because, thankfully, a quotation from it came into my mind as I was thinking about what to say in the middle of giving a certain speech—which all hon. Members gave—in the early hours of 2 May. Comparisons were made between the result of the 1997 general election and that of 1945. Suddenly I could hear Churchill's voice and his declaration, "We shall never surrender." Such is the spirit of the Conservative party and its leaders in our darkest hour.
I am assured by several people who saw and heard Winston in his heyday in Epping that one of the apocryphal stories about him occurred not in Westminster but when he was speaking in Epping Forest from the back of a farm cart. A lady, who was presumably not a Conservative supporter, called out to him, "If I were your wife, Mr. Churchill, I would give you poison," to which he retorted immediately, "If you were my wife, Madam, I would take it." My constituents have been well represented—I cannot presume to emulate any of the great men who were my predecessors.
I am, however, deeply concerned about the effect of the new Government's Budget on families in my constituency. Not all my constituents have the life style of those famous Chigwell ladies, Sharon, Tracey and Dorien, from "Birds of a Feather"—some do, but not all. Most of my constituents work hard and simply want to do the best they can to provide for their families and later to pass to their families whatever assets they have managed to accumulate. I am not unhappy about giving support to single mothers, but what about working mothers? What about women who are struggling to work and look after their families and who happen to be married to the fathers of their children?
I see no support in the Government's policies for ordinary families. They are the very people who will be harmed by this Budget—because they have been prudent and saved, bought their own homes and invested in their own pensions. For example, the increase in stamp duty might appear to affect only a few people, because it applies to the upper end of the housing market. However, a fairly ordinary three-bedroomed house in Epping Forest costs £250,000. Therefore, the family that has worked hard and saved to buy such a property will be the first to be hit by the Government's cruel new taxes. Inevitably, we all know that the present policies will lead to a rise in interest rates, and the cost of mortgages will rise also.
559 Sadly, there is greater disappointment in store for the average working family. Those families think that the savings that they have put into pension schemes will grow and provide an income for their retirement. As my hon. Friend the Member for Bognor Regis and Littlehampton (Mr. Gibb) said, there are more funds in pension schemes in the United Kingdom than in the rest of the European Union put together. That puts us in a very strong economic position for the future.
The effect of the Budget, however, and especially the windfall tax—it is a badly targeted envy tax if ever there was one—is that the investment that people have made in pension schemes will be worth much less than the sums for which they had hoped and planned. The windfall tax is not, as the Government would have us believe, a tax that nobody has to pay. It is once again a tax on the hard-working, prudent ordinary family.
I appreciate that my remarks today should, by tradition, be uncontentious. That being so, I wish to make it clear that I do not criticise the Government for increasing the duty on petrol. The increase is justifiable for many good reasons. It is right to encourage greater use of public transport and, where possible, less use of the private car. If my constituents are to leave their cars at home, however, they need to have a good public transport system.
Epping Forest lies at the end of the Central line. In addition to and in spite of the large amounts of taxpayers' money that have been poured into the underground system in recent years, it is still in need of substantial further capital investment. For reasons that are well rehearsed, that investment can come only through privatisation.
The Labour party has thrown out Conservative privatisation plans. It is talking vaguely about a watered-down version, but it cannot be trusted. Labour's actions speak louder than its words, for we know what Labour has done to the privatised railways.
Passengers are just beginning to benefit from the privatisation of Railtrack, because of the company's ability to invest its profits in improving services. So what do the Government do? They introduce a windfall tax and take £150 million away from Railtrack—yet the Labour party moaned for years about putting more taxpayers' money into the railways while we Conservatives were getting on with the successful business of privatisation.
If the Deputy Prime Minister called for taxpayers' money to be spent once, he called for it to be spent 100 times on the railways. So what is the first thing that the Labour Government do? They take money away from the railways. It does not make sense. There was plenty of talk from the Chancellor of the Exchequer about policies to improve the environment, but what will he do about funding necessary improvements for London Underground?
My constituents will be disappointed with the Budget. Like all the Labour party's rhetoric, it is designed to raise people's expectations, but those expectations cannot be met unless public expenditure is increased. That is the rock on which the Labour party's policies always falter.
To conclude on a properly non-controversial note, we all agree that programmes aimed at getting young people into jobs are a good idea, but how are they to be paid for when 560 the windfall tax moneys run out? Dare I suggest that perhaps we can look forward after all to the new Government continuing with the privatisation programme?
§ Mr. John Bercow (Buckingham)It falls to me to congratulate not one but several hon. Members on their maiden contributions. If I may, I shall begin with my hon. Friend the Member for Bromsgrove (Miss Kirkbride), who is not only my hon. Friend in the House but is genuinely a friend outside the House.
I must say in all candour—I hope that it does not sound presumptuous from one new Member to another—that I have rarely heard a speech of such lucidity, eloquence and comprehensive scope. The fact that it was her first speech makes my task all the more daunting. I hope that the House will understand when I say that, although my hon. Friend is extremely fortunate to be the Member of Parliament for Bromsgrove, Bromsgrove is extremely fortunate to have her as its Member of Parliament.
The hon. Member for Exeter (Mr. Bradshaw), who is sadly not in his place, made a similarly outstanding contribution. I confess that I have not made his acquaintance, but I hope that I shall do so in due course, because he spoke with great sincerity, passion and extreme clarity. Once again, that made my task much more difficult that it might otherwise have been. I look forward to hearing further contributions from him in the future.
My hon. Friend the Member for Bognor Regis and Littlehampton (Mr. Gibb) also made a superb speech. He has a tremendous grasp of economic affairs and long experience of accountancy, despite which he is in no sense a boring character.
The hon. Member for Brent, North (Mr. Gardiner) spoke with great style and precision. I identified with one aspect of his speech in particular. He referred, albeit somewhat controversially from my point of view, to Edgware hospital. I have a particular reason to be grateful to Edgware hospital: I began my life there, with a little assistance from my mother, who is in the Gallery. I have sympathy with and respect for the cause of that hospital, so perhaps from time to time it will be the subject of non-partisan discussion and co-operation.
My hon. Friend the Member for Epping Forest (Mrs. Laing) also made a splendid speech. All in all, it is extremely difficult to follow those hon. Members with anything remotely resembling a respectable contribution. I shall nevertheless endeavour as best I can to do so.
I begin by paying tribute to my predecessor of almost 14 years' standing. George Walden represented the Buckingham parliamentary constituency diligently and effectively, and championed a wide range of important and worthy causes. Throughout that process, George was always intolerant of stuffiness, of pomposity and of the unthinking acceptance of conventional wisdom. It must therefore have come as a great disappointment to him when I was selected as his successor. He was truly a remarkable man, and remains so.
It used to be said that it was dangerous for a Conservative Member to be seen by his party Whips with a book in his hand: to be seen reading it was fatal. During the time he served as Member of Parliament, George, with typical disregard for the sensibilities of the party managers, became a distinguished chairman of the Booker prize committee.
561 One of the most memorable parliamentarians of modern times was Mr. Enoch Powell, who served in the House for well nigh 37 years. He once said:
My mind climbs mountains without any vertigo.If that be true of Mr. Powell, it is assuredly also true of George Walden. He is a literary man who is blessed with a brilliant brain. He had an old-fashioned sense of public service, and he will be missed in this place. I know that the whole House will join me in wishing him well in his future endeavours.The Buckingham parliamentary constituency covers a predominantly rural area, stretching between the two main towns of Milton Keynes and Aylesbury. It comprises more than 100 villages, together with the former county town of Buckingham and the market town of Winslow. The largest of the numerous pretty villages is Haddenham, which is the largest village in the United Kingdom.
The geography of the constituency is interesting and expansive alike. Its northernmost tip ends at the county boundary with Northamptonshire, just short of the Silverstone race track. The constituency spreads eastwards to the border with Bedfordshire, within sight of Whipsnade park zoo, and then moves southwards around both sides of Aylesbury to the Oxfordshire border around Thame. The most westerly point lies at Turweston, where it meets the border with Brackley.
My constituency contains many tremendous and impressive attractions, not least of which is the landscape garden at Stowe, which, as right hon. and hon. Members will know, is home also to the distinguished and famous public school of that name. Waddesdon manor, Ascott house and Claydon house are notable features of the constituency, as is Mentmore Towers, which I can recommend to my right hon. Friend the Leader of the Opposition should he want to avail himself of some decent rest and composure during the summer recess.
The Buckingham constituency, although renowned for its grammar school, is also the home of the once independent university of Buckingham, of which my right hon. and noble Friend the Baroness Thatcher of Kesteven is chancellor. Given that my noble Friend's ideas revolutionised the political agenda not only of my party but of the Labour party, and arguably of the former Soviet empire, it gives me particular pleasure that the university most closely associated with those ideas should be sited in my constituency.
In my view, my noble Friend is not only the finest British peacetime Prime Minister this century: she is also the world's greatest living statesman. I reflected on my noble Friend in preparing this maiden speech, in the context not merely of her chancellorship of Buckingham university but of the fact, of which I am immensely proud, that it was by her example and leadership that I came first to join the Conservative party and become actively involved in its affairs.
As a teenager in the sixth form at comprehensive school in the Finchley constituency, I was struck by two phenomena—first, a feeling of absolute disgust at the desperate and pitiful state to which successive Governments of both colours, but particularly the depredations of the previous Labour Administration, had consigned my country. The second was the passionate and ingrained belief that my noble Friend had the vision and leadership to take this country out of the trough and 562 forward to more prosperous and harmonious times. I politely submit that on that occasion I might have been proved right.
As a result of my noble Friend Baroness Thatcher's leadership, and during the tenure of my right hon. Friend the Member for Huntingdon (Mr. Major), dramatic accomplishments were set in place. We achieved record prosperity at home. We secured respect and acclaim abroad, and, above all and even more significant than those achievements, we rediscovered for ourselves that sense of self-belief, self-faith and conviction that we could go forward, which for so long in the post-war period seemed to have deserted us.
Conservative Governments bequeathed the finest economic inheritance imaginable to the present Administration. I am sure that the Minister would be ready at least in part to acknowledge that some good was done during 18 years of Conservative government. We left the best conditions—low inflation, falling unemployment, cheaper mortgages, prosperous industry, growing competitiveness and a capacity at last to hold our heads high in the world.
Also—I say this in no spirit of hostility or confrontation with the Government but to establish the record accurately—we left this country's finances in good shape. A certain myth is gaining ground about this, but the reality is that the public sector borrowing requirement has been halved as a proportion of gross domestic product in the past three years. Therefore, the Chancellor of the Exchequer and the Prime Minister are fortunate to have come into office at this time, with a thriving free-enterprise, deregulated and competitive economy, the like of which we have not seen in this country certainly in my 34 years on this planet.
What have the new Government done in the two months in which they have held office to sustain that or to add to it? I begin this appraisal of the Government's record on a generous note, because it is right to acknowledge that the two reductions in corporation tax—the cuts in the main rate and in the small companies rate—are extremely welcome. They are good for business. They will be widely appreciated, and they should be the subject of all-party approval in the House.
Those measures would be doubly well received if Ministers had been prepared to acknowledge their failures, when in opposition, in resisting such measures, but I suspect that it is probably naive for a new Member to expect quite so much from Ministers. However, it would have been nice if they had been prepared to acknowledge that, throughout the 1980s and much of the 1990s, we were right about corporation tax and they were assuredly and manifestly wrong. Nevertheless, the Government have done well on that front, and they deserve praise for it.
What has followed since, I regret to say, cannot be similarly applauded. We witnessed in Wednesday's Budget no fewer than 17 new taxes, the yield of which can be anticipated to be about £18 billion over the next three years. Even though it is normal to make non-controversial maiden speeches, those measures appear to constitute the most breathtaking act of betrayal visited on an electorate by an incoming Government in living memory. I say so on the basis not of what we argued, asserted or anticipated, but of what Labour 563 Members said in advance of the election. Just in case they have been afflicted by a temporary but convenient bout of amnesia, I welcome the opportunity to remind them.
On 21 September 1996, the Prime Minister, then Leader of the Opposition, said that there would not be any requirement to raise taxes, and that he had no plans to do so. On 8 April this year, the Chancellor of the Exchequer said:
There is no black hole for the Labour party because we have no public spending commitments that require extra taxes.This week, however, they have come forward with dramatic new impositions.What has changed? The bogus economic excuse for the increased taxation is the alleged black hole that the Chancellor has suddenly and with enormous convenience been able, in the post-election period, to identify, when, sadly, it escaped his eye before the campaign got under way. The genuine political motivation behind this week's massive hike in taxes is the insatiable appetite of Labour Governments—new, clearly, as well as old—to spend other people's money for them and supposedly on their behalf. At least two of the major taxes announced in the Budget directly contradict the pledge of no new additional taxation.
Let me deal with at least some of the examples. Hon. Members have referred to the abolition of the tax credit on dividends. That is a deeply regressive measure, which the Government have taken for short-term political reasons. It will cause grave harm. It pulverises the pensioner. It risks the possibility that people with endowment mortgages at the end of the policy will not have the funds successfully to discharge their obligations.
I should like to be able to say in the presence of the Secretary of State for Social Security, who was here earlier, that it almost—I use the word advisedly—beggars belief that she was able with such equanimity to support the Budget when one reflects upon the fact that her main responsibility is to protect and promote the interests of pensioners who will be damaged by the measure. The right hon. Lady is an extremely talented and ingenious politician, and I hope that it will not be taken in the wrong spirit when I say that she is practised in the art of defending the indefensible and that it comes as no special surprise to me to see that she has been willing to do that on this occasion.
The second regressive measure is the action on mortgage interest tax relief, which will cost the average mortgage payer £10 a month. It contradicts what the Prime Minister said on 5 March 1996, when he criticised Conservatives for such measures. Moreover, the Chancellor's measure has been taken in wholly different and much less appropriate circumstances, because it is one thing to reduce relief when interest rates are low and falling, and quite another to reduce it when rates are higher and rising. I hope that Labour Members will reflect on that point.
The final undesirable measure is one on which we were given advance notice before the election, and it is the imposition of the windfall tax, which will raise about £5.2 billion. It is an arbitrary and capricious tax. It is unfairly and poorly targeted and will be imposed upon a range of companies. It will affect pensioners and, more particularly, it will affect the utilities themselves, as Anglian Water has been ready to point out.
564 That company expects to have to borrow to pay the windfall tax, and it expects that, as a result, its investment programme will suffer. It also anticipates the loss of a significant number of jobs. It is not credible for the Government to argue that the windfall tax will not have a damaging effect, because, however well intentioned, it will have negative consequences of which the House should take note.
The common fashion is to talk about the way that Labour has changed over the past two years. It would certainly be churlish to deny that there have been substantial changes, but it is right to acknowledge that there are substantial similarities between, for example, the Wilson Government, who spoke of the white heat of technology, and the Blair Government, who talk lovingly about the joys of the information super-highway.
I politely suggest that both, lacking a philosophical guide, an anchor on which to base their policies, ultimately resort to what they know, for it is what they know alone—taxing, borrowing, regulating, spending, interfering, mollycoddling; trying to take over the lives of ordinary citizens and make decisions on their behalf which Conservatives believe people can better make for themselves.
I wish the Chancellor well in conducting economic policy on behalf of the country. He may prove to be a better Chancellor than some of us anticipate, but to date, given a choice between advancing the British competitive interest and appeasing the Labour vested interest, the right hon. Gentleman has rushed helter-skelter, with barely a pause for breath, in the direction of the latter.
The former right hon. Member for Birmingham, Sparkbrook, now Lord Hattersley, wrote a telling article on 13 March 1995, if my memory serves me correctly, in The Guardian—where else? He said:
Labour now has a clear choice. It can either be the party of higher taxation and proud of it; or the party of higher taxes which it is ashamed to describe, afraid to admit and incapable of calculating with any accuracy. Labour cannot be the low taxation party.Until I read that article, I never thought that the day would come on which I would agree with Lord Hattersley. To be fair, however, it must be acknowledged that, after he ceased to be a Labour Front Bencher, he blurted out the truth with admirable clarity. I suggest that he gave a telling description of the truth of Labour Governments once they have to apply decisions and to make choices among the options of tax, spend and borrow, and that that truth bodes ill for the United Kingdom.I hope that Ministers will reconsider their position, although I doubt they will. If they were to do so, the United Kingdom would benefit.
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§ Mr. Geraint Davies (Croydon, Central)I apologise for missing the introductory speech of my right hon. Friend the Secretary of State for Social Security and Minister for Women. I was speaking to a business audience in my constituency explaining the merits of the Budget. I should say that my comments were very well received by a large business audience in Croydon, which is the hub of business activity in the south-east. I thank the hon. Member for Buckingham (Mr. Bercow) for his brief remarks, which were very interesting and entertaining to hear.
565 I should like to respond to what I can describe only as the ragbag of rubbish from the Leader of the Opposition and shadow Ministers in their reply to a bold and creative Budget. We should state clearly the framework and strategy behind the Budget, which is to achieve the long-term future success of UK plc in the global economy. We want to establish the capital investment, infrastructure and skill base that will enable us to compete, so that we can create the prosperity that will be necessary to change Britain for the better.
We have inherited a portfolio of endemic problems which must be grasped with vigour and immediacy. Those problems include a history of under-investment in physical capital compared with our competitors. Of the 15 European Union countries, Britain is in the humiliating position of having lower earnings per head than every country except Greece, Spain and Portugal. Ireland passed us in the league just before the general election. Our position is an appalling disgrace, and it is a legacy from the Conservative Government.
We are spending £25 billion of public money annually to repay debt. That is more than we spend on schools. We should be investing in schools for the future productivity of our economy. Moreover, an extra £30 billion will enter the economy because of building society flotations, posing a danger of overheating the economy. Skills shortages and bottlenecks could result from the situation that we have inherited, which is a complete mess.
The Labour party was elected with a mandate which has no historical precedent, to implement change on the back of our clear manifesto pledges. Our manifesto pledges included introducing a windfall tax as the pump-priming means of getting people back to work. Therefore, people who criticise the windfall tax are criticising the will of the British people. Nevertheless, the precedent for a windfall tax was set by the Conservatives. Our obligation to the electorate is to build economic strength so that we can deliver the health, education and other benefits that have been so neglected. The solution to that is long-term investment in physical and human capital in the British economy, combined with stability, which enables foreign as well as domestic capital to be invested in jobs.
Almost immediately on taking office, the Chancellor delegated to the Bank of England the operational responsibility for setting interest rates. Some Opposition Members criticised that, but in fact the cost to British industry of borrowing went down overnight and the value of shares went up. Incidentally, the value of pension funds also went up, so when we hear all the Opposition rubbish about pension funds, let us not forget that.
In the Budget, corporation tax has been reduced to the lowest level in British economic history—indeed, the lowest level in Europe. It is all very well for Opposition Members to say, "Hear, hear, we all support that," but we want to know why they did not reduce corporation tax to support British industry, British jobs and British prosperity for the new millennium. They did not.
Moreover, we have reduced tax on small and medium-sized businesses, which will be the engines of future prosperity for Britain. If every small business took on one extra worker, there would be zero unemployment. The Labour Government will support the entrepreneurial culture of small business—I have been a small business person myself—which will be a new engine for growth in the future.
566 We have tackled long-term youth unemployment by giving incentives to employers to bring on board people who are in danger of being dislocated in society and outside the job market. I gave a speech earlier today to a business audience who were very receptive to the opportunities that they have been given to lower the marginal costs for taking on new workers, to increase productivity and thus to expand their businesses. The accusation that this will have a short-term, substitutional effect is clearly not the case.
What is more, we are investing in education and in a university for industry, so we are investing in human capital as well as physical capital. I put it to the House that the package of measures will not only secure greater domestic investment but attract what is inherently mobile international capital into the British economy to make us even stronger. That will be the secret of success.
One does not have to listen to me to know that that is true. One simply has to read the financial press to know that immediately after the Budget the stock market jumped 80 points. What did that do to the value of pensions? They all went up. We hear all this stuff about how the Budget is a tax on pensions and that it will all be awful, but the financial markets have delivered. First the Bank of England change sent the stock market up. Then the stock market went up following the Budget. Everyone's pensions are secure because the financial markets respect what the Chancellor has done as being in the long-term interest of the British economy.
All this stuff that we hear, such as "Your pension is ruined," and so on, is quite wrong. The reality is that the value of people's pensions is determined to a certain extent by what they put in now. But their contributions are put into shares, into companies, and the profitability and growth of those companies in the future will determine what the pensioners of tomorrow—who are the workers of today—can take out. We are creating the conditions in which those companies can succeed, and in turn those pensioners will be secure. If we did not do that, they would not be secure.
We heard that the Budget was anti-home-ownership. The Conservative Government reduced mortgage interest relief at source in the past, and the housing market is now beginning to go out of control. If MIRAS had not been reduced and used to fund the huge deficits that we inherited, or used for meaningful expenditure, the Governor of the Bank of England would have raised interest rates anyway. It is obviously better for MIRAS to be cut because the customer—the person with the mortgage—will pay the extra price in any case. I very much welcome that.
Historically, investment in British industry has been distorted by the enormous subsidy that is put into mortgages, which has made people in Britain invest in houses instead of in industry. That is one of the weaknesses that we would face if we had greater European monetary union. We are creating better conditions for industrial investment while holding down consumer demand.
The Budget's central proposition is one of investment for the long term and the creation of stability for the future. It is designed to put the people of Britain back to work. It is clear that the Budget is good for jobs, good for consumers, good for pensioners and good for Britain.
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§ Mr. Robert Syms (Poole)It is a great pleasure for me to contribute to today's debate because so many hon. Members and so many of my personal friends have made great maiden speeches. I particularly congratulate my hon. Friend the Member for Buckingham (Mr. Bercow) on his impressive debut in the Chamber. A few years ago he was in competition with me for the constituency of Bristol, South. This is the first time that I have heard him speak and I now know why he beat me. I congratulate him on his remarkably good contribution.
The story of the British economy over the past three, four and five years has been one of great success. We have been growing rapidly—certainly, more rapidly than most of our continental competitors—with low inflation and falling unemployment and without the usual balance of payments crises or problems of overheating. Much of the credit for that success should go to the previous Government and to the policies of my right hon. Friend the Member for Huntingdon (Mr. Major) and my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke), who took some tough and sensible decisions to set the economy in that direction.
The present Government inherited an extremely favourable economic position. Indeed, if the previous Government had been a little less concerned about putting the national interest ahead of party interest there might be more of us on the Conservative Benches. The tough decisions that were taken were doubtless good for the nation, but some of them may not have been so good for the Conservative party.
Existing problems stem from a successful economy, not a failing economy. Fast growth inevitably leads to some pressures in the system, but overall the Government have inherited a good economy. I am not sure that there was any need for a Budget at this time. I can understand that after 18 years in opposition a party wants to come in and set out its policies, but there was no economic case for a Budget—certainly not a Budget with 17 tax rises. It is a major tax-and-spend Budget.
The Chancellor spoke in his preamble of his concerns about overheating in the domestic sector, particularly in terms of consumer spending, house prices and broad money. Yet his tax rises hit primarily the corporate sector, not the domestic sector. Therefore, by his own standards, he must have hit the wrong target.
The Government's overall approach has been wrong. This country's future must lie in a low-tax, flexible and growing economy, perhaps less regulated than its continental competitors. The Government's major impositions on the corporate sector have set back the prospects for the economy. The comments in papers such as the Financial Times certainly suggest that the measures will lead to higher interest rates and—something that we already have—a higher exchange rate. The overall combination of higher taxes on corporate business and higher interest and exchange rates will not be good for the British economy or for jobs over the next few years.
In particular, the Chancellor took the wrong approach with his tax on pensions and the abolition of the dividend tax credit. Ultimately, the price will be paid by pensioners because the pensions are provided for them. There are more than 12 million people with corporate pensions and 7 million with personal pensions. The tax will affect them all. It is estimated that it could cost £195 per year per 568 pensioner, leaving multi-million pound gaps in the funds. The Pensions Act 1995 contains provisions to maintain minimum pension fund requirements, so there is no doubt that pension funds will have to act to make up the gap.
Estimates of what the tax will raise increase from £2.3 billion in the current year to £4 billion next year and £5.4 billion the following year. Peter Murray, chairman of the National Association of Pension Funds, estimates that the measure will take more than £50 billion of extra pension contributions from the public and private sector over the next 10 years. That is a substantial change in the taxation of what has been a successful industry for this nation, and it is sad that the measure has to be implemented.
Not only that, but there may well be a double hit. Many actuaries value pension funds on the income stream from dividends, which means that when they come to value the shares—irrespective of what happens to share values on a day-to-day basis—they may well reduce the value of the pension funds. That double hit will mean that still more money will have to be raised from pensioners and those contributing to pension funds.
Local authorities will also be hard hit. Many local authorities, including that in Poole, are capped. When they have to find the extra hundreds of thousands of pounds that are necessary, services will suffer. Many local authorities will therefore be in great difficulties.
I especially oppose the windfall tax. I know that it was well trailed in the Labour party manifesto, but I am personally against retrospective taxation. The tax will raise £5.2 billion and is bound to have an effect on investment, jobs and ultimately the prices faced by the customer. When I served on the water consultative committee in the early 1980s, the real problem facing the industry then was the pollution legislation of 1980, which required major investment. Such investment is still needed, but the industries hardest hit by the tax will be the water and electricity industries.
I am also greatly concerned about the scrapping of tax relief for private medical insurance for the over-60s. More than 600,000 currently benefit from medical insurance and the scrapping of the relief could mean that more than 200,000 will join national health service waiting lists when they suffer health problems. The cost of the scheme is only £140 million—a relatively small amount in Budget terms. The typical cost of private health insurance for a pensioner aged 60 to 64 is currently £50 per month. It is likely that that will rise to £65 per month as a result of the change. There is certainly great concern among my constituents, many of whom have written to me on this aspect.
Overall, the Government have failed the test. The best thing would have been to allow the economy to grow and create jobs, but they have intervened, brought in 17 tax increases and raised more than £6 billion in the current year—mainly from the corporate sector. That burden, plus the additional costs of the minimum wage and the social chapter, could well spell disaster for businesses in this country. We shall have higher interest rates and we already have what appears to be an uncompetitive exchange rate; the effect will be to slow down the British economy.
In the long term, the best prospect for jobs and job creation is a prosperous corporate sector and a growing economy. The Government have not underpinned that as 569 much as they could have done. Like my hon. Friend the Member for Buckingham, I welcome the reduction in corporation tax, but that is relatively small beer compared with what is being taken from the corporate sector. I shall therefore vote against the Budget.
§ Mr. Christopher Fraser (Mid-Dorset and North Poole)I compliment my parliamentary colleagues on their excellent speeches. I am proud to speak as the first Member of Parliament for the new constituency of Mid-Dorset and North Poole—a constituency carved out of four previous constituencies. It is a tradition to speak about one's constituency at the beginning of one's maiden speech and I am afraid that I shall not disappoint the House.
I greatly regret that, because of his sad death, I shall no longer be able to call on the services of Sir Nicholas Baker as a neighbour and friend. Part of his constituency is now mine. Sir Nicholas was an industrious parliamentarian and was well respected on both sides of the House; he will be sadly missed. However, I look forward to working with his successor, my hon. Friend the Member for North Dorset (Mr. Walter). I am also fortunate to share boundaries with my hon. Friends the Members for Bournemouth, West (Mr. Butterfill) and for South Dorset (Mr. Bruce), some of whose former constituents I have inherited and whose support and advice I received throughout my time as a candidate, in addition to that of John Ward, the retiring Member for Poole, and of his successor, my hon. Friend the new Member for Poole (Mr. Syms).
The parliamentary map certainly changed on 1 May, in Dorset as elsewhere. Before the general election, there were six Tory-held seats in Dorset; on 2 May there were eight. Dorset has received, and with that clean sweep will continue to receive, first-class representation from all its Tory Members. I am honoured now to be among them.
Mid-Dorset and North Poole is two-thirds rural and one-third urban. It incorporates the outstandingly beautiful Wareham forest towards the Isle of Purbeck, with a large industrial base centred on the Saxon-walled town of Wareham, and in north Poole. We are bordered by the Rivers Frome, Piddle and Stour. The area is steeped in history.
Bere Regis is a village in the north-west corner of my constituency—the first place in the country to be given a regal suffix, in recognition of the fact that King John had a hunting lodge in the parish. It is now part of the Purbeck heritage area. The novels of Thomas Hardy feature many landmarks in my constituency.
When the boundary commission created this new constituency, many people were alarmed that the commission appeared to have thrown together parts of four disparate constituencies. However, we are making it work, and since I was selected, we have worked tirelessly to bring together four different traditions, resulting in many people joining our new Conservative association, thus helping us to our tremendous victory on 1 May.
There are seven secondary schools in my constituency, all with active sixth forms, including two grammar schools—Parkstone and Poole, which regularly feature at the top of the league tables—and Canford school, which is independent. As a former local councillor and school governor, I am very much aware of the hard work and 570 dedication shown by people working in all types of education and skill centres, and I look forward to supporting their work as a Member of the House.
A sound educational base and the acquisition of vocational skills are essential if my constituents are to become part of a well-qualified, well-equipped, flexible and competitive work force, embracing the technological revolution of the next millennium and continuing to enjoy the success already seen in Mid-Dorset and North Poole.
Dorset parents and teachers are understandably proud of our achievements. We turn out intelligent, skilled young people, many of whom are recruited into engineering, marine and related enterprises. Opportunities abound, for Mid-Dorset and North Poole has a larger industrial base than the rest of Dorset put together.
Those of a sporting disposition, such as myself, are well catered for in mid-Dorset. We have the splendid golf courses of Broadstone, East Dorset and Knighton Heath. There is a new Dorset Racquets club and wonderful countryside for outdoor activities. There is a very active field sport following, with the South Dorset hunt.
Like many other constituencies, the constituency has local environmental issues to be addressed during the life of this Parliament. They include the site of an industrial waste incinerator at Holton heath, the growth of Poole harbour, the proposals for Poole harbour bridge and, more especially for mid-Dorset, the route of any link roads and bypasses. We must find ways to ensure that such infrastructure projects do not threaten the wildlife and natural habitats which make mid-Dorset the beautiful place that it is and which encourage tourism to the county. However, that is for the future.
It was the previous Government's objective that Britain should become
the enterprise centre of Europeand that objective was being met. I can say with certainty that Mid-Dorset and North Poole is firmly establishing itself as the enterprise centre of Dorset—one has only to consider companies such as Cetrek, Southern Print and Hamworthy Engineering, which produce excellent, competitively priced products, selling throughout the world. They have invested in Mid-Dorset and North Poole, creating employment and success.Small businesses were the backbone of economic success in the 1980s and will continue to be in the 1990s. It is imperative that in places such as mid-Dorset we continue to work with the training and enterprise councils—for which I have much admiration—Wessex Institute of Directors and the local chamber of commerce, to achieve further success in that sector.
As a result of the efforts of local companies in my constituency and the economic climate created by the previous Conservative Government, our economy is thriving. Unemployment in the Poole area has fallen by 20 per cent. in the past year—a compliment to the employers and employees who have worked towards increased productivity in a wide range of areas.
Europe is, of course, an important and large export market, and cross-channel links are especially important for us in that regard, but we are competing on a world stage, and our businesses and work forces, as well as the products that they produce, must be competitive, and free from job-destroying legislation. The wish of the majority of people in my area is that we trade with Europe, but are 571 not absorbed by it. The Government are taking Britain into European policies such as the social chapter and the minimum wage, which will generate unemployment.
I intend to work in partnership with local companies in Dorset. As patron of Firmlink—Dorset's business forum—I shall seek to promote business, employment for young and old alike and enterprise in mid-Dorset. The intention is to become an effective voice for industry and commerce in the county, to ensure that we retain our status as the enterprise centre of Dorset.
My constituents are well served by the national health service. We have excellent local hospitals, the largest of which is Poole Hospital NHS trust, which serves my constituency and that of my hon. Friend the Member for Poole. Since becoming a trust in 1992, the hospital has increased the number of its nurses and consultants and is treating nearly twice as many in-patients and 150,000 more out-patients. Dorset has many fundholding GPs, and I wish to refer to the opening of the new health centre at Corfe Mullen—a sister to the Broadstone practice—with facilities to carry out operations. I know from experience that local people welcome those developments and recognise the improved service, whereby money is spent close to the patient. I request that the Government tread carefully and with sensitivity if they seek to change the system.
We are also fortunate to be served by Pramacare, Dorset's largest independent local charity, of which I am honoured to be the appeals chairman. We help people in need who do not qualify for social services assistance, ranging from help with household tasks to more full-time care. Short-term residential care is offered to disabled people and their carers by the Holton Lee centre, set in 350 acres of natural landscape near Poole harbour. The centre has just been awarded lottery funding towards the cost of a feasibility study to develop existing care provision. I am very excited by the possibilities that will be created if the balance of the cost can be found.
My priority is to do all I can to ensure that the people of Dorset, and my constituents in particular, get as good a deal under this Labour Government as they did under the Conservative Government. Government interference and bureaucracy must not stifle the success that we are seeing in mid-Dorset. Governments do not create jobs—businesses do.
When we look back at the first Budget from a Labour Government for 18 years, we shall remember two things—more taxes and more spending. That used to be called a "tax and spend" Budget. Who said old Labour was dead? The most serious aspect is that it is a short-term Budget. The Chancellor wants us to take seriously his conversion to low tax and enterprise, but he must understand our remaining scepticism.
There are, of course, some things that we can welcome. Reduced corporation tax should help small companies build on their recent success, and we all know that it is a dynamic private sector which funds the public sector. However, the elements of the Budget dealing with social provision give rise to concern. First, the end of tax relief for private health care for pensioners means that those pensioners may now decide to go back to the NHS, which will put an extra burden on the service. When put in that light, the extra resource is not as good as it sounds.
572 Secondly, I wish to refer to the tax on private pension funds. As my right hon. Friend the Member for Hitchin and Harpenden (Mr. Lilley), the former Secretary of State for Social Security—with whom I know the Minister for Welfare Reform often agrees—said, this is the "Robert Maxwell memorial Budget". We have more money invested in funds than the rest of Europe put together, so this is no time to hammer those who manage—in the true sense—the future of private pensions.
Thirdly, I wish to refer to welfare to work. Leaving aside the dubious nature of a retrospective windfall tax and its possible implications for investment, I should say that I approach this with an open mind. However, I would rather it was approached with an open market. As hon. Members know, youth unemployment has been falling sharply recently. That is due to the actions not of the Secretary of State for Social Security, but of wealth-creating and risk-taking entrepreneurs the length and breadth of Britain.
No one disputes the need to ensure that as many young people as possible enter the world of work at the earliest opportunity. We all agree with that. However, the Government do not seem to have thought the proposals through, nor taken heed of the failed attempts in other countries to implement welfare-to-work schemes. The Australian experience was not a happy one—large amounts of public money were spent to little long-term effect. How will the schemes help school leavers looking for their first job? How many people who are not eligible for the proposed subsidy will find their jobs taken by those who are? The devil is in the detail.
I have fears and a hope. I fear that the temptation to interfere, to spend and to regulate will prove too much for the Government to resist and I fear that they will destroy the wealth and job creation that we have created. My one hope is that I am wrong, but only time will tell.
§ Mr. Damian Green (Ashford)It is a privilege to speak in such a debate after so many excellent maiden speeches from hon. Members on both sides of the Chamber. It was that great and wise man Iain Macleod who first coined the nostrum that a Budget that appears good the following day will appear bad six months later. Like many such nostrums, that is now dismissed as a truism, but like many truisms, it is a truism because it is true.
I have deep sympathy with all those who have had to comment instantly on the Budget. As a financial journalist for 15 years, I know that Budget day is one of the more terrifying of the year, because one has to come up with an instant and coherent judgment on the evidence only of the Chancellor's speech and a series of Whitehall press notices. As my hon. Friend the Member for Bognor Regis and Littlehampton (Mr. Gibb) has already pointed out, those press notices often bear an Orwellian relationship to truth and the use of language. It is, therefore, probable that the instant reaction of the media, business and the stock market to any Budget is wrong, and it is certainly wrong in this case.
We have had a day and a half to absorb the full effect of the Budget and the reaction to it. We can now begin to see the cracks in the Chancellor's propositions. Most importantly, we can see that the Budget has put a time-bomb under the British economy. When it goes off, it will blow up the Chancellor's reputation and, more 573 important, it will cause enormous damage to the prosperity of the British people and the prospects of job creation in the next few years.
I shall start with the macro-economic aspect of the Budget and its overall judgment. The thrust of the Budget is clear and even Labour Members have had to admit that it will put taxation up hard. It contains 17 tax rises and will take £6 billion a year out of the hands of private individuals and companies so that the Government can spend it. The ostensible reason given by the Chancellor for his enormous grab at people's wealth is that the economy is growing too fast and overheating. He says that he wants to encourage investment and not consumption, but that is a peculiar attempt at justification.
The Chancellor's first act on taking office was to hand independence in setting monetary policy to the Bank of England. The purpose of that move must be to give the Bank of England the power to regulate the economy when it seems to overheat. This country's experience, especially in the days when Chancellors tried to use the tax system to fine-tune the economy, is that the fiscal system is an inappropriate way to turn the economy on and off. The use of monetary policy, however, is appropriate. If the Chancellor believes that the Bank of England should be independent, so that it can take a non-political and non-partisan approach to the regulation of the economy, it is self-evidently absurd to say, six weeks after that decision, that he will use the fiscal system. So we can dismiss that argument.
In the Budget, the Chancellor has fallen down a hole of his own making, because it will not reduce consumption. The hon. Member for Croydon, Central (Mr. Davies), who briefly graced us with his presence earlier, spoke about the reaction of the stock market to the Budget, and claimed it as a great sign that out there in the markets the Budget is considered a success. I suggest that he look behind what is happening on the stock market. The stocks that are going up are those of companies that most depend on consumption—the high-street stocks that depend on retailing. The manufacturing and exporting stocks are not doing well. With this Budget, the Chancellor has not reduced consumption at all.
There may be Labour Members who are more distrustful than the hon. Member for Croydon, Central of the stock market as a sign of what should be done in the economy. I refer them to the Chancellor's Red Book where, on page 59, they will find table 3.2, which gives the game away. It states that this year consumer expenditure will rise by 4.5 per cent. and after all the Chancellor's measures, allegedly to reduce consumption, next year it will go up by 4 per cent. He is not reducing consumption. Incidentally, the savings ratio is projected to fall between 1997 and 1998. This is supposed to be a Budget that encourages saving and discourages consumption. On the Chancellor's own figures, it fails to do that.
My second point is that the areas that the Chancellor is attempting to support are precisely those that will be most damaged. Because no one believes his nostrum that he is reducing consumption, the markets believe—one can see that from what has happened to the pound—that interest rates will have to go up. The next increase in interest rates, which will probably occur during the next couple of weeks, will damage the exporting sectors of the economy—the manufacturers whom the Chancellor says he wants to support. Again, on his own terms, he will fail.
574 The gap between what the Chancellor preaches and what he practises is huge, because his is the love of tax raising that dare not speak its name. He knows that he must raise taxes on the middle classes and the hard-working classes; but he desperately wants them not to notice. Instead of an honest tax-raising Budget, he has presented a dishonest tax-raising Budget, hoping that no one will notice. Because he is afraid to tax consumption directly, he has missed his target of cutting consumption. Manufacturers and exporters will have to pay the price.
In the years to come, the Chancellor will be seen to have taken huge sums out of the pockets of individuals, cutting growth, not consumption, damaging exporters and job prospects and putting a greater strain on the welfare state.
The failure of the macro-economic strategy is reflected by the inevitable failure of many of the individual measures proposed by the Chancellor. His actions on advance corporation tax, which will damage pension funds, and on removing tax relief on health care insurance for the elderly go against all the nostrums propounded by the Minister for Welfare Reform, in his honest and decent attempt to reform his party's attitude towards the welfare state.
It is a matter of non-partisan agreement among thoughtful Members that if we are to have a decent, compassionate welfare state into the 21st century, we need a closer partnership between the public provision of welfare and private funding of welfare. Each individual who can afford it will have to pay more towards his or her own welfare provision, especially in old age. To achieve that will be one of the most difficult tasks facing this Government and future Governments.
The one clear fact about the Budget is that it goes in the opposite direction. It discourages people from making private provision for welfare in old age or when they fall ill. That is the background against which we should judge any speech by any member of the Government over the next few years about modernising the welfare state and making it fit for the 21st century. With the first decision that the Government have taken, they have marched smartly in the opposite direction. The essential incoherence in the Chancellor's message will be seen as one of the most damaging long-term effects of the Budget.
Other aspects of the Budget also damage the desire for individual thrift. I recommend to connoisseurs of weasel words Inland Revenue press release No. 4, which says that the individual savings account
will extend the principle of TESSAs and PEPs to encourage people, through tax reliefsto raise the level of their long-term savings. "Tax reliefs" is an interesting phrase to use in that context. TESSAs and PEPs are currently tax-exempt, but will they remain tax-exempt after 1999? Will the new individual savings account remain tax-exempt? The honest answer is: probably not. If they were to remain tax-exempt, the Government would say so now: they would reassure existing holders of TESSAs and PEPs that their positions would not be disadvantaged in the long run. I think that the House and the country will draw their own conclusions from the fact that the Government cannot bring themselves to say that at this stage.Similarly, anyone holding an endowment mortgage has just cause to feel extremely worried, because it is worth significantly less today than it was worth 48 hours ago. 575 That means that some people will not pay off their mortgage within the time frame that they envisaged originally. At the end of their working lives, they may have to find significant capital sums with which to pay their mortgage. It is a disgraceful measure.
The alleged spending increases for health and education have generated much enthusiasm on the Government Benches. We all know that that is sleight of hand, but we must emphasise the danger involved. It has been the practice for years to reduce the contingency reserve as the new financial year approaches. In a November Budget, the £5 billion contingency reserve for the financial year starting in the following April is reduced by about half to £2.5 billion. The Chancellor has implemented that measure six months early.
Contingency reserves do not exist so that they may be raided by Chancellors of the Exchequer who want to raise a cheer on Budget day: they are there to deal with contingencies. By halving the contingency reserve six months before that would normally occur, the Chancellor has taken an enormous risk. As a patriot, I hope that he is right; I hope that nothing untoward requiring the unexpected expenditure of billions of pounds of public funds will occur in the next six months. If it does, he and we are in an enormous bind, because the money has already been spent. The Chancellor will have to either renege on his commitments to the health service and to schools or find money from other programmes to deal with the unexpected. I do not think that that is the action of a responsible Chancellor who bids to be an iron Chancellor.
The Budget does many damaging things—not least being the way in which it damages attempts to modernise the welfare state. I am sure that Social Security Ministers have good intentions: they are attempting to steal the one-nation ideal to which many Conservative Members have always adhered. However, this Budget will ensure that they will fail. It will make life more uncertain for the thrifty; it will make it harder for exporters and tougher for home owners. It is a meretricious Budget that deserves to fail—and it will fail.
§ Mr. Paul Burstow (Sutton and Cheam)I pay tribute to and congratulate the hon. Members who have made their maiden speeches today. Those speeches were impressive in content and delivery and—as many hon. Members did not refer to notes—were quite intimidating for those who, like me, will have to use notes on most occasions.
I delivered my maiden speech during the Queen's Speech debate. The Liberal Democrats supported the Queen's Speech because we supported many of the aims that the Government set out in that speech. However, we said at the time—we still believe it today—that the real test would come with the Budget, when we would see whether the Government would deliver the means of achieving their ends. We do not believe that this Budget does that.
We believe that the Budget fails the modest test of the Queen's Speech, which was accepted only six weeks ago. Although we supported that speech, we want to take things further than the Government seem willing to do in 576 this Budget. We have criticised the Government over their self-imposed straitjacket and the fact that they have chosen to stick, by and large, with the previous Government's spending commitments.
What do we have with this Budget? In my constituency, and in many others throughout the country, we face another winter of crisis and chaos in the national health service. The Budget, when implemented, will do nothing to tackle lengthening waiting lists. It will do nothing to stop the cancellation of operations. Similarly, it will do nothing to deal with the underlying deficit in the health service. Nothing will be done to deal with those matters this year.
The Budget provides no new funding to deal with health or social care during this financial year. The money will come next year. The jam will start to come, albeit thinly spread, over the next few years, and that will be too late. Of course, any extra money is welcome, but the £1.2 billion that the Government have committed to the NHS represents only 2.5 per cent. growth in real terms.
When in opposition, Labour shadow Ministers rightly criticised the Conservative Government for undermining and underfunding the NHS, but the previous Government increased resources, on average, by 3 per cent. a year. If 3 per cent. a year was not enough under the Conservatives, how can only 2.5 per cent. be enough under the Labour Government? My constituents did not vote for a Government or a party that would not tackle the crisis in our health service this year. They faced the nightmare, under the previous Government, of waiting for hours on hospital trolleys for want of a bed. We need action now, and the Budget does not offer it.
For all the talk of greater co-operation between health and social care services, the reality is that the Government, in their Budget, still continue to treat the two sectors as if they operate in splendid isolation. With the exception of education, local government—where social services are provided—looks set to suffer probably one of the worst settlements in living memory. As a result of the Budget, local councils such as Sutton, in my constituency, will be faced with presenting their council tax payers with a double whammy of higher council taxes and still further cuts in public services.
All the evidence points to the forthcoming winter being an especially bad one for community care and social services. A survey published earlier this year by the Association of Directors of Social Services and the Local Government Association found that eight out of 10 English and Welsh local authorities were increasing charges for services as a result of the previous Government's final Budget. It found also that four out of 10 councils were introducing new charges. In addition, most social services departments were introducing stricter criteria for access to services and changes to the conditions under which services would be provided.
We face the unedifying prospect this winter of local trusts and social services departments playing pass the parcel with people's lives as they struggle to make do with inadequate budgets. Pressures on community care budgets will increase because of bed blocking in the NHS, with all the implications that that has for waiting times, while pressures on the NHS to avoid the spectre of people waiting hours on trolleys in accident and emergency departments this winter will lead to the cancellation of non-urgent elective surgery such as hip replacements and cataract operations.
577 Cancelling those sorts of operations in turn places pressure on community care services because those concerned find themselves disabled in the community and needing support. The vicious cycle must be broken, and clearly the Budget does not provide the resources even to scratch the surface of the problem.
The Government's welfare-to-work proposals raise several questions for disabled people. The welfare-to-work press release in the Budget bundle refers to £200 million being provided over the lifetime of this Parliament to help incapacity benefit recipients and the university for industry's start-up costs.
What will that £200 million be used for, and how much of it will go towards helping disabled people to get out of dependency and into paid employment? Will some of the money be used to increase the access to work budget, or to assist organisations such as Remploy? Will Ministers clarify how the money will be used?
The inclusion of disabled people in the welfare-to-work programme is welcome. Disabled people have the same aspirations as the rest of us. They want to be economically independent, yet often they are trapped in dependence on benefits. Only 40 per cent. of disabled people are economically active, compared with 83 per cent. of non-disabled people. Although some disabled people may never be able to enter or re-enter the work force, many can and want to do so. The inflexibility of our benefit system and widespread discrimination deny disabled people the opportunity to work.
Discrimination against disabled people will end only when the House votes for and delivers comprehensive and enforceable civil rights legislation. I hope that such a proposal will be included in a future Queen's Speech, and that the House will finally deliver the long-standing commitment that Labour made in opposition. The Disability Discrimination Act 1995—the weak and limp legislation which crawled its way through the House to try to make amends for the lack of comprehensive legislation—fails to tackle the employment needs of the vast majority of people because 96 per cent. of employers are not even covered by its employment provisions.
Anti-discrimination legislation on its own is not enough: we also need reforms to the benefit system. Currently, the benefit system treats people as either fit for work and thus not eligible for benefit, or unfit for work and eligible for benefit. It does not treat them as they are: we need a benefit system that recognises their needs. The crude categories currently used are not acceptable.
The Government could make small and technical changes to smooth the transition from benefit dependency to paid employment. For example, they could examine the earnings disregard on means-tested benefits for disabled people. At the moment, people are allowed £15 a week: that figure has remained unchanged since 1988. Such a low disregard is a barrier to the labour market, and makes it impossible for people to develop the required skills. As a consequence, for every pound people gain, they lose a pound. The Government must make changes to deal with that problem.
Another change that would make a difference is a change in the therapeutic earnings rule for incapacity benefit. At present, work can count as therapeutic only if it improves, prevents or delays deterioration in someone's condition, so a disabled person whose condition is stable has no chance of qualifying. As a result, people who are 578 visually impaired or have spinal injuries are excluded from receiving the disregard. Surely a more flexible approach to the definition would enable such people to receive the benefit, provided they had acted on the medical advice of a general practitioner to promote their rehabilitation.
Those small measures could make a difference to many thousands of disabled people. However, I hope that the Government will go further than that and will be more ambitious for disabled people. The Jobseekers Act 1995 introduced powers to pilot changes in social security. Those powers are already being used to test the earnings top-up scheme. If the Government are serious about being inclusive, they should not hesitate to pilot partial capacity benefit schemes. Different pilots could test levels of benefit, duration and conditions of payment. A partial capacity benefit could make a difference to the lives of thousands of disabled people. It could be that helping hand out of dependency and into independence, which is what they want.
The disability working allowance has not been successful. In April 1996, only 9,500 people received it, against a Government target of 50,000. Disability working allowance is not an effective incentive. It does not deal with the needs of the majority of disabled people. Disability Alliance estimates that 2.2 million people are in work or on incapacity or disability benefits, but want to work. The disability working allowance is paid to less than half of 1 per cent. of those 2.2 million people.
Finally, on disabled people and the Budget, the Government announced capital receipts initiatives on Wednesday and figures of £200 million for this year and £700 million for next year. If the Government are committed, as they say they are, to taking action for disabled people, they have to ensure that that initiative releases resources to local authorities that will provide accessible housing through renovation and new build programmes, whether in partnership with the private sector or with the voluntary sector. If the Government do not do so, it will be a travesty and a great betrayal of the many disabled people who have high expectations of the Government.
Disabled people want an extension of part M of the building regulations, which have been out for consultation for two and a half years. We are still awaiting that much-needed extension of the regulations. I hope that today we will get a Government assurance that that will happen soon and that it will be implemented through the capital receipts initiative.
The Budget is destined to disappoint not only the disabled but the many thousands of people throughout the country. It does nothing to deal with the underlying problems in public services, whether the health service or education. It does not even live up to the modest pledges that Labour gave while in opposition. For those reasons, the Liberal Democrats will not be able to support it.
§ Mr. Howard Flight (Arundel and South Downs)I will be brief. My hon. Friend the Member for Ashford (Mr. Green) has it. The Budget has been greeted well by the markets and got quite a good reception in the House, but in time it will be seen to be extremely bad. It cannot meet its objectives of stimulating investment or, despite the good intent, of increasing employment. Investment is 579 about whether companies are cash rich or not, and the Budget will take cash from companies. There is no problem with the British mechanism for organising investment for British companies.
The unspoken objective, on the advice of new-found friends from manufacturing industry, was clearly to try to tighten the economy fiscally and reduce the extent to which interest rates would need to go up or the exchange rate would depreciate. I argue that the Budget will not influence those at all. Not only is an independent body fixing those rates, but as was pointed out, the Budget will not slow consumption in the next year. To slow consumption, one should stimulate savings, and the Budget has done the opposite.
I am most worried about the reversal of the most successful trend that this country has had. Why do taxes here take only some 40 per cent. of national income, when it is 50 per cent. in Europe? It is because we deliberately gave tax incentives to accumulate the pension funds. What will be the reaction of taking those incentives away? It is not merely the money. I anticipate that companies will put in money-purchase schemes and will look to saving the costs that they would otherwise have to increase as a result. We will move to less generous pension provision, which will result in lower accumulation for the future.
How will people behave with their portfolios? The incentives are to increase holdings in bonds and to forgo the equity benefits of long-term, prudent, equity investment. It is a time-bomb. The demographics of society argue for continuing generous pension provision. If we do not change this measure, the taxation demands on the state for pensions will gradually rise and we will slip down the same mistaken path as continental Europe.
Was the advance corporation tax change really motivated yet again by the European Union? Was it because of the court cases and claims that are coming up, because EU corporate investors feel that they too should participate in ACT refunds?
What has really happened is that a ragbag of tax rises, which the Chancellor felt he could get away with without dishonouring the specific—not the underlying—promises in Labour's manifesto, have been used in the hope of some short-term fiscal tightening to contain interest rates and exchange rates. That will not work. It has set some dangerous trends which will be difficult to reverse. This is a bad Budget, not a good Budget, as the markets, foolishly perhaps, think.
§ Mr. John Redwood (Wokingham)We have had an excellent debate and I pay tribute to all the hon. Members on both sides of the House who have made their maiden speeches: my hon. Friends the Members for Bromsgrove (Miss Kirkbride), for Bognor Regis and Littlehampton (Mr. Gibb), for Epping Forest (Mrs. Laing), for Buckingham (Mr. Bercow) and for Mid'Dorset and North Poole (Mr. Fraser) and the hon. Members for Dudley, North (Mr. Cranston), for Exeter (Mr. Bradshaw) and for Brent. North (Mr. Gardiner), all of whom made superb contributions and observed most of the maiden speech traditions, most of the time.
I am worried about only one contribution—that of my hon. Friend the Member for Epping Forest. She seemed to imply that my heroine, Elizabeth I, should be 580 investigated by tabloid newspapers on some kind of sleaze charge. I should like to assure her that nothing untoward happened in Epping forest, but I was not present at the time to be absolutely sure.
I also pay tribute to all hon. Members who, in good spirit, paid fine tributes to their predecessors in the House.
My hon. Friend the Member for Chingford and Woodford Green (Mr. Duncan Smith), the shadow spokesman on social security, raised some crucial questions, which have of course, as so often, gone unanswered. There will not be time for the Paymaster General to answer all the detailed points that my hon. Friend rightly raised, but I hope that the Secretary of State for Social Security will do him the courtesy of writing with detailed replies to his fundamental points.
I hope that, in the few minutes that remain in the debate, the Paymaster General will pause to answer a question on a fundamental problem that Labour faces with its combined Budget strategy and other policies: how can it be right for the Treasury, through the Budget, to try to cut the costs of employing people to promote more employment, while, at the same time, the Department of Trade and Industry proposes regulations and legislation to raise the costs of employing people in all sorts of ways? Will the Paymaster General tell us why the two different Departments responsible for the economy are pointing in two different directions? What will be the net result of all their changes? Our calculations imply that it will be dearer to employ people, so the impact on employment prospects is bad rather than good, if we consider the Government's overall record.
It is sad that the President of the Board of Trade cannot be with us today, or indeed on any other day, during this crucial Budget debate. That is why I am replying to the debate, rather than having the opportunity to debate with my opposite number, the President. It is a disgrace that DTI Ministers are not present and that the President will not come to the House to defend the Government's lamentable record, already manifest in the Budget, on industry, commerce and trade.
§ Mr. RedwoodThe Chief Secretary to the Treasury dares to say from a sedentary position, "Silly ass." I hope that he will withdraw that remark. It was not gracious or sensible and it shows how little he understands the courtesies of the House or the importance for business of this Budget. Surely, when at the heart of the Budget there is a massive tax attack on British industry and commerce, a DTI Minister should explain the Government's conduct to the House and how it is that business can be raided for all this money without any damaging consequences—in the Government's view.
As my hon. Friend the Member for Ashford (Mr. Green) rightly pointed out, the City has said clearly that this Budget, coupled with the Government's economic policy, is extremely damaging to exporters, manufacturers and industry. Today's Financial Times says:
The list of losers in the Footsie was also a list of Britain's foremost engineering stocks. Exporters were badly hit".It quotes a trader who said:Overseas earners are being smashed to bits.581 The losers are led by the great names in British engineering—Tube Investments, GKN, Rolls-Royce and many other fine companies and include big manufacturers like ICI.The stock market is telling us that there is already a treble whammy on profits, investments and jobs in British manufacturing as a result of weeks of Labour government. The treble whammy consists of the higher exchange rate, which throttles the prospects of exporters in continental markets; the higher interest rates which have already occurred—undoubtedly there will be more, as my hon. Friends have said—and higher taxes in the Budget.
The Budget does not give money back to business. It is idle to pretend that, because corporation tax has been lowered a little, business will be better off at the end of the Budget. The Paymaster General should come clean with the House and explain how much of the massive extra taxation will come from industry and commerce. He should comment on the impact on manufacturers and exporters and on engineering and chemical companies.
The tax measures will have a swingeing impact on all the large companies that have employee-employer pension schemes. They will undoubtedly have to increase their contributions, thereby increasing the cost of employing people, to make up for the lost tax credits that would otherwise have supported future pensions. That is a savage attack on companies and pensioners. It is a great pensions takeaway and there is, as my right hon. Friend the Leader of the Opposition said a few days ago, no free lunch. Loophole closing is destined to raise £1.6 billion over the forecast period. That also represents a substantial increase in corporate taxation which the Paymaster General should explain.
Unlike the other tax increases, the utility tax was heralded in Labour's manifesto. It is badly designed and is a tax on current shareholders and on the current situation in their companies for the alleged sins of earlier shareholders and executives. Far from being a tax on the so-called fat cats, the executives who received good remuneration from their companies, it is, of course, a tax on shareholders and customers. The only people who can ultimately pay the tax are the customers. That is where the businesses get their money, and the tax will have to come from customers' income to provide the revenue that companies will need to pay this large levy. It is a one-off levy to pay for a long-term programme—a rather surprising mismatch which will come back to haunt the Government in future years when they can no longer raid the utilities on the pretext of some past windfall.
The Chancellor has been guilty of sleight of hand in presenting a so-called black hole in the nation's finances. In his Budget documentation, he makes it clear that an £8.3 billion improvement in the borrowing requirement for 1997–98 is only partly the result of his Budget measures. The Budget supplies £5.5 billion of net additional revenue—a massive tax increase. That means that £2.8 billion of lower borrowing has resulted from the excellent economic policies that were pursued by the Conservative Government.
Far from inheriting a worse black hole that they could not foresee from the Budget documentation that was issued in the autumn, the Government have inherited sharply improving finances, which means that their borrowing forecasts are much lower than they had any reason to believe they would be from reading the autumn 582 documentation. The same is true for the following year, because an £8.2 billion improvement in the borrowing requirement—£8.2 billion less borrowing—comes only partly from Budget measures, which raise £4.75 billion net. The other £3.45 billion improvement comes from the strength of the economy that the Government have inherited from the excellent Conservative policies which, in some measure, the Government are following.
My right hon. and hon. Friends and I have another worry about the preparation of the Budget, and I hope that the Paymaster General will clear it up in response to my questions. Yesterday, during Trade and Industry questions, there was considerable confusion on the Treasury Bench. Between those questions and business questions, Opposition Members felt that we received three rather different answers to a very simple question: has the Minister for Trade and Competitiveness in Europe—whose duties we believe straddle DTI and Treasury responsibilities—sold all his shares, cleared all his options and ended all his business interests? If he has not, are we sure that he is not participating in sensitive issues?
The first reply was from the Minister for Science, Energy and Industry, who implied that there was no conflict and that all was well. The second reply was from the President of the Board of Trade and Secretary of State for Trade and Industry, who said that she did not know. She thought, however, that the Minister concerned should abide by the Nolan procedures. Of course she should have told us that he must obey "Questions of Procedure for Ministers", which is rightly considerably more rigorous and restrictive than the Nolan procedures, which apply to Back Benchers in either place. A Minister makes or influences real decisions in a very direct manner and must, therefore, be under much closer scrutiny and much more rigorous control.
A hole was blown in both those answers, however, when the Leader of the House told us, I presume accurately:
My noble Friend the Minister for Trade and Competitiveness in Europe is in the process of complying with the rules in 'Questions of Procedure for Ministers', which takes time. During that time, he has not been involved in discussions that would be relevant or relate to his particular interests."—[Official Report, 3 July 1997; Vol. 297, c. 427.]Why was the President of the Board of Trade unaware of the situation? She must have chaired most of the meetings that the Minister concerned would otherwise attend. Surely she had been told that there were meetings that he could not attend, because he was not complying with the necessary requirements.Today, in the absence of the President of the Board of Trade, will the Paymaster General tell the House whether the Minister for Trade and Competitiveness in Europe has had involvement of any kind in the Budget's preparation? The Budget deals with the most sensitive matters governing corporate taxation and the future of British industry and commerce. Will the Paymaster General assure us now that the Minister concerned has attended no meeting, entered no ministerial discussion, written no memo or letter and seen no Budget papers in the Budget's preparation? The House must be reassured that all was conducted properly in the preparation of a Budget that will raise massive taxes from British industry.
We know that the Labour party has taken very lightly a senior Minister leaking the contents of part of the Budget before its delivery to the House. I hope, however, 583 that the Labour party will not be so unreasonable in answering those questions, because they go to the heart of how government must be conducted in those most important financial matters.
Pensions and pensioners are sadly damaged by the Budget. As we have heard from Conservative Members, there will have to be a day of reckoning if one removes large amounts of money from pension funds by eliminating tax reliefs.
§ Mr. GardinerWill the right hon. Gentleman please enlighten the House? If "raids on pension funds" by removal of advance corporation tax and tax credits are such important issues, why did the Conservative party not think it fit to introduce such tax relief until 1993–14 years after first being elected to government?
§ Mr. RedwoodThe hon. Gentleman has not done his homework. During its periods in government, the Conservative party has extended most generous tax reliefs to the pensions business, consequently generating the most enormous growth in pension funds and pension investment for the future. The growth in pension funds is one of the proudest achievements of those Conservative years and means that most of our fellow citizens will retire with a decent second pension, for which they and perhaps their employers have saved. Money has been in a fund and can be paid out.
What we now see is a smash-and-grab raid from the Labour party, which is taking away from those funds the tax credits that had been paid in over many years. It is not as difficult a concept to understand as some Labour Members seem to find it. Every quarter, a pension fund gets a cheque from the Inland Revenue that reflects the tax already paid by the company on those dividends. If this measure become part of the Finance Act, those funds will suddenly no longer get that cheque each quarter. It is a very savage blow to pensions and pensioners.
The measure has a very direct impact on the amount of tax and the pension contributions that an individual will have to pay if he or she has his or her own pension fund or, as an entrepreneur or small business person, a self-employed fund. There are several million such people in this country. They will immediately see the impact of this measure, because they will have to make good what the Inland Revenue does not pay into their pension fund. It is effectively a direct increase in their income tax burden.
My hon. Friend the Member for Ashford asked an extremely good question, which I hope the Paymaster General will answer when he winds up, on TESSAs and PEPs. The words are weasel words indeed. The Inland Revenue press release leaves us in no doubt about whether the tax reliefs that go to TESSAs and PEPs will continue for all those who have savings in them so far. We are left in doubt about whether the new regime will be as generous as the old one for people who wish to take out new investments under the new plan, which we trust will be revealed soon.
The Minister should have done more homework on the plan earlier and should have done the House the courtesy of telling us what was intended for TESSAs and PEPs, as they have such a direct impact on the savings rate in this 584 country and on the long-term savings plans of many people, especially all those who do not have large savings and to whom the TESSA or PEP is the most important part of their worldly wealth and their future security.
I do not know whether the Chief Secretary wanted to answer that point immediately. He seemed to indicate that he wanted to intervene; now he seems rather lost as to whether he knows the answer. [HON. MEMBERS: "Answer."] The Chief Secretary was having a private conversation instead and not listening, although he had previously implied that he knew the answer to my question. We now know that he does not, which underlines my point: Treasury Ministers do not, even today, know whether people will keep their tax relief on TESSAs and PEPs, and what tax relief will be available for savers thereafter.
The Budget is bad for business, bad for savers, bad for companies, bad for pensioners and very bad indeed for pension funds. The Labour Government came to power promising that they would not raise taxes. They told us that they saw no need to raise taxes and that they could find the money for health and education by other means. Indeed, they have done so out of the contingency fund in a way that doubtless we would have done—probably more generously—in a couple of years when we reviewed spending in the autumn. They said that they would not review spending; they have changed their mind. They have now reviewed two items of spending. They have raided the contingency fund and invented an entirely fictitious black hole in the finances of this nation.
The only genuine black hole is the one that Labour created. Labour promised us before the election that it would carry forward our privatisation plans so that no money was lost from that source. In these Budget papers, we see that that was untrue and that £1.5 billion of privatisation proceeds will be lost next year. That is a genuine Labour black hole, which the Government now have to fill from higher taxation on the corporate sector.
The big betrayal, the reason why the British people cannot now trust the Government just a few weeks into their period in office, is that they propose a massive tax increase in the next two years, a huge raid on pension funds and business. It proves that Labour is bad for business, bad for taxpayers, bad for pensioners. It is high time that Ministers accepted that they have got the Budget wrong and apologised to the British people.
§ The Paymaster General (Mr. Geoffrey Robinson)There is not a great deal of time in which to reply to the debate. As the shadow Secretary of State for Trade and Industry said, many of the detailed points can be dealt with in Committee. Although we shall not be welcoming the right hon. Gentleman to that Committee, there will be plenty of time to debate the detail then. I am led to believe that we shall have two full days' debate in the Committee of the whole House, followed by two weeks in Committee, so there will be no shortage of time in which to debate every aspect of the Finance Bill.
Some sour and prissy notes crept into the right hon. Gentleman's speech—perhaps that is what cost him the leadership of his party. If he wishes to impugn the integrity of any Member of the House, he should have the courage to do so in a substantive manner. Will he kindly therefore either withdraw what he said about my noble 585 Friend the Minister for Trade and Competitiveness in Europe or take this opportunity of saying that he was not impugning his integrity?
§ Mr. RedwoodI did not impugn anybody; I asked questions. The House needs to know whether the Minister for Trade and Competitiveness in Europe has sold all his shares and got rid of all his business interests, or whether he is debarred from undertaking certain discussions and making certain decisions in the Government. That is a fair question, and the Leader of the House has admitted that the Minister has not regularised his position.
§ Mr. RobinsonThat is an attempt to distract attention from the proven sleaze among former Conservative Members, outlined in the recently published report. I am surprised at the right hon. Gentleman raising the subject in that way, as I had not thought that he was that sort of Member of the House.
The right hon. Gentleman also grumbled rather prissily that the Secretary of State for Trade and Industry was not here to reply to the debate. Yesterday, the shadow Chancellor of the Exchequer grumbled that there was no Treasury Minister present to reply to him. If Conservative Members can get their act together, we shall willingly respond in the most appropriate way.
§ Mr. Redwoodrose—
§ Mr. RobinsonNo, I shall not give way again.
I am pleased to say that while, in his grumpy reply to the debate, the right hon. Gentleman was talking down British industry and British engineering, the stock market rose a further 20 points at 12.30 pm today.
We have heard many maiden speeches today, all of which have been outstanding. I shall mention those which contained points for me to take up and I hope that other maiden speakers will forgive me if I do not mention them.
My hon. Friend the Member for Jarrow (Mr. Hepburn) raised the subject of the Benefits Agency in his constituency. I am pleased to say that there will be the fullest consultation exercise before the decision is implemented.
The hon. Member for Bromsgrove (Miss Kirkbride) made an excellent speech without notes and with touching modesty. She spoke of the camaraderie of the House. I fear that when she reaches the Front Bench, as I am sure she will, she may not find that that spirit always prevails. Given the present state of the Conservative party, she may find more camaraderie across the Floor of the House than among her own Benches in the immediate future.
My hon. Friend the Member for Exeter (Mr. Bradshaw) made another appropriate maiden speech. I know that it was his second or third attempt to do so, but it seemed all the better for the wait. He talked about the excellent weather in Exeter. I have checked the records and I understand that Exeter has just suffered its wettest June for 50 years.
The hon. Member for Canterbury (Mr. Brazier) spoke about families in his usual fashion. I can confirm that one of the purposes of tax and benefit integration is precisely to get rid of the anomalies that he mentioned. The matter is now the subject of a consultative exercise carried out by Martin Taylor, the chief executive of Barclays bank.
586 The hon. Member for Bognor Regis and Littlehampton (Mr. Gibb) showed a degree of technical competence and I hope that we shall be able to welcome him to the Committee stage of the Finance Bill. He raised an important point about foreign income dividends. He will know that the measures do not come in until 1999. We want to encourage—I am sure that the hon. Gentleman and the House will support this—multinationals to have their bases in London, thus confirming it as the primary international centre for business. That is why we shall ensure that international holding companies can continue to pay dividends without advance corporation tax. The necessary legislation will come in in the spring of 1998. We are also looking sympathetically at the position of UK-based groups with a substantial amount of foreign income.
My hon. Friend the Member for Brent, North (Mr. Gardiner) also made his maiden speech today, and I am pleased to be able to tell the House that he became a father for the fourth time during the course of our debate—clearly maiden speeches and fatherhood go together. My hon. Friend's wife has given birth to a son, and I am sure that the whole House will join me in congratulating them. I assure him that, in the design of the new deal, we are working with those who are experienced in running training programmes, to make sure that we deliver the quality that he seeks.
The hon. Member for Epping Forest (Mrs. Laing) gave a well-researched and highly cultured account of her constituency, and I compliment her on it. She raised the issue of the London tube and I can assure her that we are seeking a partnership with the private sector that will not be a rip-off. We want something that is based on practicality and pragmatism and not on the ideology that made such a mess of the private finance initiative under the Government of which she was, luckily, not a member.
The hon. Member for Buckingham (Mr. Bercow), in his maiden speech—which, like that of the hon. Member for Bromsgrove, was delivered without notes—told us that his mother was here. I thought that I could identify an admiring gaze in the Gallery, which spoke volumes for her rightful pride in her son and which I hope will beam down on him on future occasions.
The hon. Member for Mid-Dorset and North Poole (Mr. Fraser), also making his maiden speech, referred to the excellent national health service trust in his constituency. I am sure that he will welcome the extra £1 billion of resources that we have made available to the NHS.
I am pressed for time, but I want to answer one or two of the points arising from the debate relating to the windfall tax and corporation tax. I am sure that it will come as a relief to hon. Members who are preparing for Committee that we are making the draft clauses for the windfall tax available this afternoon. It may be helpful if I make it clear now that I intend to table an amendment to the provisions relating to the windfall tax. Hon. Members should not worry—it is a small matter of ensuring that our policy of using post-privatisation profits to derive a taxable value is implemented as intended, and that the legislation does not inadvertently take into account profits that arose while companies were in the public sector, in circumstances where profits for the financial year straddling flotation have to be apportioned. It is quite clear what is intended. [Laughter.] I do not know why Conservative Members are so surprised—that is the whole 587 purpose of Committee stage. We could all heave a mighty sigh of relief if that was to be only amendment I proposed—I only wish that it was and that that was what I could announce today.
One of the best views on the Budget came from the Federation of Small Businesses, representing more than 100,000 members. The federation welcomed the
Re-introduction of 50 per cent. first year capital allowance which will benefit 3.5 million businesses".We heard nothing of that from Conservative Members, nor of the fact that it covers 99 per cent. of United Kingdom businesses. The federation also welcomed theReduction of the small companies corporation tax from 23 per cent. to 21 per cent",which complements the reduction in the general corporation tax rate from 33 per cent. to 31 per cent. I think that the Government can claim an historic first—we are the first Government ever to have reduced corporation tax before they got into office: the change will become effective from April this year and we took office only in May. I am sure that that measure is also welcome; I regret Conservative Members' lack of alacrity in welcoming any of those positive measures introduced in the Budget.The federation also welcomes the £75 a week subsidy for employers taking on those who have been long-term unemployed and what we are doing for youngsters between 18 and 25 who have been out of work for more than six months. That is a positive reaction, and I am pleased to say that there has also been a tremendous response from the private sector to the welfare-to-work scheme and its placement programme. Hon. Members on both sides and those who have been involved in running similar schemes in the past will be aware that our success will exceed that achieved by previous schemes only if we can get the private sector behind us. I am confident that that will happen.
588 Some Conservative Members referred to the position of local government bodies and the implications for them in 2000. We are prepared to consult and discover what, in the best judgment of those concerned, will be the position then.
This is a Budget for the future; it will lead to more investment and greater growth, and it has a social dimension in the action that we intend to take by means of the windfall tax. It has the purpose of getting our young people back to work and of giving our younger-still people schools that are decent to learn in in the next millennium. The Budget was designed for that millennium.
§ Debate adjourned.—[Mr. Robert Ainsworth.]
§ Debate to be resumed on Monday 7 July.