Commons Sitting of 18 March 1998

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

Internet
Motion made, and Question proposed, That this House do now adjourn.—[Mr. Betts.]
9.34 am
Mr. Derek Wyatt: Before I open the debate, I should like to declare an interest. I hold two software consultancies—neither is internet—based—with Integrated Communication Projects and with Channel Dynamics.
A copy of my speech will be placed on the website www.iwks.com later this morning. Sadly, that is not my constituency website, which is in preparation.
Mr. Andrew Miller: It will be on the House of Commons website, as well.
Mr. Wyatt:I am sure that it will be there soon.
The internet is the most important peacetime invention this century. We should consider four events that have taken place in this country and across the Atlantic since 1 May 1997. First, the general election results were posted first on the internet. Secondly, following the death of Diana, Princess of Wales, thousands of websites were set up as people around the globe shared their grief; indeed, the worldwide web became for three weeks the worldwide wake. Thirdly, in the Louise Woodward case, Judge Hiller Zobel put his judgment on the internet first. Fourthly, in the Monica Lewinsky affair, the Drudge Report website reported on the alleged problems in the White House before all other media.
The internet's ubiquity continues at a pace that has never been experienced by any industry. If we fail to understand that, and fail to educate and enable our citizens equally, we shall concede economic, social and political advantages to other countries—particularly to America—for ever.
I am pleased that we are holding this debate, and I wondered which Minister would reply to it. At first, I thought that it might be my right hon. Friend the Secretary of State for Culture, Media and Sport, because what travels on the internet is a software issue, and his responsibility. Music sales on the internet in 1997 topped $52 million, and book sales through the likes of amazon.com are set to reach $2.2 billion by 2002.
Then I thought that my right hon. Friend the Chancellor of the Duchy of Lancaster might reply, because he is charged with producing information legislation, which must be internet-friendly, and with delivering electronic services to our citizens, which is just as important. I then suspected that my right hon. Friend the Home Secretary
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might reply, because encryption and pornography come under his wing, and he would be interested in Oracle's work with the American Department of Defense—but no.
I thought that my right hon. Friend the Chancellor of the Exchequer might be present. How people do business on the internet, and where, if at all, they pay taxes is crucial, and electronic commerce is vital. E-commerce business will be worth £20 billion in Europe by 2001. Moreover, and more worryingly, President Clinton wants no taxes on e-commerce. However, my right hon. Friend is understandably busy this week.
As we are putting together a national grid for learning via local internet providers, a university for industry, and lifelong learning initiatives, I thought that my right hon. Friend the Secretary of State for Education and Employment might be present, but I see him not.
Finally, I expected my right hon. Friend the Secretary of State for Social Security to be present. If she is to issue more than 15 million smartcards, which must be internet-friendly, it would be smarter for her to be present so that I could tell her about the new cards that use radio frequency technology. I do not see her.
The Minister for Science, Energy and Industry has been fielded, because the Department of Trade and Industry is in charge of regulation of the internet. I welcome him, and look forward to hearing his reply to the debate.
Mr. Ian Taylor: I am listening with great interest to the list of Departments that could have taken responsibility. Under the previous Government, the issues that the hon. Gentleman raises were focused on by the Department of Trade and Industry, where I was a Minister. I am delighted that my successor is here today. The former Chancellor of the Duchy of Lancaster was responsible for the Government on-line system, which is continuing under this Government.
Mr. Wyatt: I thank the hon. Gentleman for his intervention. I accept that, in this instance, he probably knows more about the subject than I do.
Mrs. Cheryl Gillan: Will the hon. Gentleman give way?
Mr. Wyatt: Let me get going.
Sadly, I do not think that it is possible to regulate the internet. It is possible to regulate the 250 United Kingdom internet service providers, but only if they are connected via a telephone line. Hughes Olivetti, Astra, Eutelsat, Motorola and Teledesic provide satellite services that can deliver the internet with their own return path. It is difficult to know how they will be regulated.
It is also not possible to make some non-European providers pay VAT. We have failed to regulate that, and have therefore failed to provide a level playing field for our own industry. Moreover, while books and newspapers are zero-rated for VAT, internet services, including electronic books, incur VAT at 17.5 per cent. Why is that? Incidentally, the converse is true of regulating broadcasts. As BT has admitted, many thousands of viewers now view UK television via a telephone line through their personal computers, which is actually illegal.
The internet may be hidden in cyberspace, but, as this overview demonstrates, it is all-pervasive. It may be hard to tie down, and extremely hard to tie down within

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Government, but that is not an excuse for no action, and it is not an excuse for the existing scenario in Whitehall, which, frankly, is farcical. Because no single Department is in charge of the internet, it falls into the black hole of cyberspace. Few Cabinet Ministers understand it: many still have no e-mail addresses, and they clearly do not look regularly at their own departmental websites, which are woefully inadequate and make us look like bumbling amateurs.
The editorial in the February edition of a magazine that I know that we all read avidly, Government Computing, put it another way:
"Making the red box electronic without looking at how ministers and their senior civil servants work is like putting satellite positioning on a buffalo cart."
Why is Whitehall not like Silicon Graphics? Silicon Graphics has about 22,000 employees, each of whom has a website. At the end of the day, wherever they are in the world, they leave a short note of their activities. While they are at play or asleep, a series of intelligent agents moves through the sites, reads them and decides who else in the company needs the information. When the decision has been made, the notes are deposited in the relevant website, so that, when a Silicon Graphics employee next logs on, he or she has a fast-track business opportunity. How do we even start to emulate that scenario?
The internet is not new. As an academic and political tool, it is more than 30 years old. It has been rebooted over the past five years, for two reasons. A Briton, Tim Berners-Lee, working in the CERN laboratories in Switzerland, created the underlying protocol for the worldwide web as early as 1991. In any other country, he would be a folk hero, but we hardly know him in this country, and—sadly for us—he now works in the media laboratory at Harvard.
A year later, in 1992, Marc Andreessen, a mere student at the university of Illinois, helped to create Mosaic at the university's national centre for supercomputing applications. Mosaic is what we now call an internet browser. In 1994, Andreessen took his idea to Silicon Valley, and helped to start the company Netscape.
In 1995, a young hopeful by the name of Bill Gates said that the internet would not work; in 1995, a young hopeful by the name of Bill Gates told his senior vice-president of Multimedia, Rob Glasher, that the idea of putting radio stations on the internet was simply nuts. Today, Real Networks, Rob Glasher's company, is listed on the Nasdaq. It parks 650 radio stations—including, I am proud to say, Invicta in Kent—30 broadcast companies, and 35 record labels. Already, 40 million RealPlayers have been downloaded directly from its website. Indeed, as I talk, my speech, with pictures, could be seen across the world—not via cable television in the UK, because only cable viewers in the UK can watch, but via the internet. But hon. Members have guessed: we have no facilities for radio or for broadcasting Parliament on the internet.
Mr. John Maxton: In fact, the BBC's website broadcasts Prime Minister's Question Time live.
Mr. Wyatt: I am aware of that.
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It is to the immense credit of Bill Gates and his brilliant team at Microsoft that he has travelled the road to Damascus and changed his mind about the internet. The pity is that his company now seeks to control every living form that breathes on it.
The UK statistics given by the Internet Service Providers Association are revealing. At the end of 1997, 1.5 million people had access to the internet at home, and 3 million had access to it at work. At the end of this year, the figures will be 2.7 million and 3.7 million respectively. At the end of 2000, they will be 4.2 million and 4.7 million respectively.
The UK market is growing at a rate of 80 per cent. annually. By the end of this year, when four separate companies—BSkyB, British Interactive Broadcasting, British Digital Broadcasting and Cable and Wireless—launch digital television in some form or other, more people in the UK will be on the internet than already watch the existing analogue satellite and cable channels. That social change has been almost totally ignored, especially by BDB, whose set-top box has no internet access.
The internet is what Andy Grove, the chief executive of Intel, called a 10X force for change. Intel was formed 26 years ago, when two men wrote a statement of intent a page and a half long and with it raised $2.3 million. Two businesses were born: Intel, which has become the fourth largest company in the world, and Venture Capital, which now accounts for 30 per cent. of all new businesses in California. The UK is the seventh largest economy in the world; California is the eighth largest. The venture capital market in the UK is worth less than 2 per cent. of our businesses, and much of that is composed of management buy-outs rather than start-up companies.
The internet makes it possible for a virtual venture capital market to develop. As the structure and ownership of the internet is still largely American, the Americans will hear of the opportunities first, and will invest first. As one who lobbied the Chancellor on a venture capital fund, I was pleased to hear in yesterday's Budget statement that £50 million had been allocated. That is a start.
We are late to the dance floor. The Singapore Government have already set about making sure that they lead the world by creating the first internet-based society. Likewise, the Norwegian Government have announced a desire to give their businesses the edge by ensuring that theirs is the first pan-European country to follow Singapore's example, through an initiative termed the public sector network—a joint venture by the Ministry of National Planning and Co-ordination and the Norwegian Association of Local and Regional Authorities.
If we are not careful, the internet will create the biggest brain drain, virtual or otherwise, that Europe has ever experienced. The consequence will be much higher levels of unemployment throughout Europe, especially in the UK.
Let me give an example of the internet business world as it affects our own young people. Orbital Technology is a three-year-old Scottish company whose founders came across the Java language while at their respective Scottish universities. They realised that they could create something special with it, and set about creating what I can best describe as an archive retrieval system. They were lucky: they raised the first tranche of money—

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£3 million—but when they came back for refinancing in the UK, they could not find further investment. In the end, they had to resort to America. I was with them at the venture capital forum at Comdex last November, when they sought an extra £10 million and found it.
Mr. Tam Dalyell: Before my hon. Friend leaves the subject of Scottish universities, let me say that I know something about it, and can reinforce the importance of what he is saying.
Mr. Wyatt: I thank my hon. Friend.
In New York, the elected mayor has just won the rights to a $70 million venture capital fund, because he recognises the need to rival California. In the UK, our new regional development agencies have no venture capital fund attached to them, but they need to. The new sixth cause in the people's lottery has no place for a people's venture capital fund. We must persuade the Secretary of State of its value.
The problems are compounded by the millennium bomb issue. At midnight on 31 December 1999, millions of computers will fail to recognise that the next day is 1 January 2000; instead, they are likely to recognise it as 1 January 1900. I advise hon. Members to avoid flying that week, and to check their bank accounts.
Mrs. Gillan: Does the hon. Gentleman agree that the Government's handling of the year 2000 computer problem is just as chaotic as the scenario that he outlined at the beginning of his speech, involving policies on the internet and the information technology industry as a whole?
Mr. Wyatt: I think that we have made a start; what we have not done is put enough money in. I read in today's Financial Times that the Australians had given all the financial services until 30 January to declare their millennium bomb agenda. If it is not in place by 30 June, they will not be able to trade.
Mrs. Gillan: I saw that article. Does the hon. Gentleman agree that, if the Government do not tackle the year 2000 computer problem, that will pose a great threat to the internet itself?
Mr. Wyatt: I am going to come on to how the internet is affected by the bug.
We have TaskForce 2000 to help to create awareness of the problem. Its parliamentary briefing paper, which was sent to me on 5 March, said:
"The cost to the UK economy is over £50 billion."
Later, it said:
"The Government needs to provide high level leadership now. It is currently not doing so."
We have been concentrating on the millennium bug as it relates to computers and computing, but not on how it will affect the internet or our banks. Tim Sweeney, director general of the British Bankers Association, said that British banks would not be able to prepare for a switch to a single European currency at the same time as they work to prevent a rash of damaging computer crashes on 1 January 2000. I wonder, then, how those European countries that will be first to the euro will manage. So far,
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the Government have allocated £330 million to the whole millennium bug issue; the banks, interestingly, have allocated £1.65 billion.
The national grid for learning has somehow been separated out from the university for industry and our lifelong learning initiatives, which makes no philosophical sense. As the national grid for learning is now constituted, a secondary modern school in my constituency, Sittingbourne community college, with its outstanding headmaster, Alan Barham, and his dedicated staff, cannot shout from the rooftops how it has created a reading scheme for its youngsters who, when they enter the school at 11, have reading ages of just over nine, but, six months later, have caught up. His is a CD-ROM approach. Under the current local mosaic plan for the national grid, no other school would be able to share in that scheme, except those in north Kent.
Another school in my constituency, Fulston Manor, has, through the brilliant work of its head of media, Gwyneth Windsor, developed its own CD-ROM explaining GNVQ provision. It sent it to the Department for Education and Employment. This is the reply that the school received:
"Although an interesting idea…I am
also
"afraid that there is also a lack of technical expertise within the Department to enable us to take you any further forward"—
and that is the Department that is challenged with responsibility for the national grid for learning.
Because the impact of the internet is global, and because it will lead to a fundamental structural change at every level in our communities, I want to make some recommendations for the Government to consider. The first is to create a new Department, the Ministry of Communications, to include responsibility for telecommunications, broadcasting, regulation, software, encryption, libraries, millennium bugs, the Post Office, village halls, community centres and, crucially, the internet.
The second is to charge that Department with the training and education of all Ministers, their Departments, this House and all its Members of Parliament by immediately appointing six internet tsars. The third is to make it responsible for ensuring—and that means giving it the power to ensure—that all Government Departments and agencies become internet led by the end of this year.
The fourth is that the new Ministry will not be created in the style of other Ministries, but will act as the catalyst for change within Whitehall by having a team of 24 Members of Parliament, matched in turn by 24 software experts, who are loaned on sabbatical by the major players in the industry.
The fifth is that the Ministry's philosophy will be based on teleworking, and will again act as a showcase for the rest of Whitehall. Two thirds of the Department would work with the Scottish Parliament, the Welsh Assembly, Stormont—soon, we hope—and the new regional development agencies. Staff would oversee NHS trust hospitals and help local education authorities. They would be flying internet evangelists
The sixth is that, by 2002, every home will be given a computer. That will cost no more than the current expenditure on the millennium dome. The money must be allocated from the lottery. That would be a much better way in which to welcome in the 21st century.

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The seventh and last is that internet access at home would be free for the first 10 hours of every week. Figures supplied by the Media Intelligence Bureau cost the use of the internet at £3.87 per hour, compared with £1.67 for a trip to the movies and less than 12p an hour to watch free-to-air television.
I return to my central theme. The internet is the most important peacetime invention of the 20th century. We can no longer ignore it. It is the key to re-tooling and re-skilling our society. At the World Economic Forum at Davos, 20 per cent. of those surveyed thought that electronic commerce would completely reshape how they do business. Another 59 per cent. said that it would lead to significant change.
If this Government sit on their "internet-free" hands for much longer over this issue, any chance we have of creating a modern, post-industrial society will be lost for ever. The internet is the gold standard of the 21st century.
9.54 am
Mr. Christopher Fraser: The importance of this debate is underlined by the sheer size and scope of the internet and its undoubted effect on society. The statistics are impressive, but I question the figures of the hon. Member for Sittingbourne and Sheppey (Mr. Wyatt), as accuracy in this sector is difficult to gauge.
The purpose of my comments is to consider the concept of the internet from a social and philosophical point of view. I bow to the hon. Gentleman, as he has an intimate knowledge of the technology. I have no intention of commenting on that side of things.
The Government propose to provide resources to give all schools access to the worldwide web, but do not say how they will monitor it when the web is available in those schools. When considering the benefits, Ministers must be prepared to commission research to highlight the educational benefits of such links, and to take responsibility for ensuring that unsuitable material is not available to school children.
There is an obvious need to limit access to unsuitable material from the eager eyes of young school children. Technological tools must be available to teach us to programme what children cannot see, as my hon. Friend the Member for Esher and Walton (Mr. Taylor) advocated when he was a Minister.
Mr. Maxton: May I point out that, if the hon. Gentleman had ever been on the internet, he would know that all the browsers already provide such tools, which stop access to whatever material anyone wishes to use?
Mr. Fraser: Those tools are not overly efficient, and there is clearly no international code available at the moment.
Mr. Brian White: Will the hon. Gentleman give way?
Mr. Fraser: No, I will continue. Many hon. Members want to speak in the debate.
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All parents know that children are inquisitive and naive. They remember things that they should not. Unfortunately, the internet offers a high potential risk that they will come across unsavoury material. We must seek to protect them, and, of course, all society, from the unsolicited advances of unscrupulous people.
I seek assurances this morning that the internet's influence, the ready access of information and easily digestible facts and opinions presented as fact, will be subjected to evaluation within schools, in order to measure how useful the medium is as part of the learning process. There is no guarantee that information obtained on the web is accurate. It must be true that more information is not necessarily better information.
One problem is that anyone can present himself or herself as an authoritative source on the worldwide web. Like junk mail or telephone salesmen, persistence may triumph more often than the truth. I cannot accept the view of computer nerds, as they are called, that the internet is with us, and therefore we must bow before its unstoppable growth and development. I am not against this technological wizardry. We should embrace it, but not be ruled by it.
Appearing before the Select Committee on Culture, Media and Sport, a representative of Microsoft admitted to me that the development of the web had had a cultural impact and produced its own culture. When I asked about the web's cultural impact, he could not do better than acknowledge that it was an interesting question. I asked him whether there was anything in this life that would not be affected and influenced by the new technology. His answer: there was nothing that he could think of. I find that alarming. There is already a booming industry on the internet, with little or no regulation.
Writing in The Scotsman last year, Professor Gordon Graham echoed my earlier theme on the possibilities of a negative influence on the internet. He said:
"I regularly receive, via the Internet, some of the most unadulterated rubbish I have ever read; rubbish that would not pass the scrutiny of even the most careless and indifferent editor, or programme producer. But, of course, on the Net, it does not have to pass any scrutiny at all—the Net has no editors."
Mrs. Gillan: Does my hon. Friend agree that one of the infuriating problems about the internet is unsolicited e-mail, known in the business as "spam", and that the Government probably need to address the problems faced by internet users in that area? In the same way, we receive aggravating, unsolicited faxes through our machines.
Mr. Fraser: I agree entirely.
Gordon Graham also warned that, in an education environment, those using the internet would have to be very discriminating; that was my point exactly. I accept that unsuitable material could be blocked in certain circumstances. None the less, children must not be led to think that messages flickering on a PC screen always represent educational gospel.
How do we monitor internet use, especially in the privacy of a child's bedroom? The internet may help to inform, but it may not always teach. It is no substitute for the subtlety of the pupil-teacher relationship.
When those questioned tell us that they do not know the exact extent of the advances that internet technology will make in the coming year, let alone in the next five years, there is a possibility that society's acceptance of the technology will not keep pace with developments.

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If that is so, regulation—if it is possible to regulate the area at all—may also fail to keep pace. As our children so often know more than we do about the applications of the technology, it is possible that those legislating in this place will know less about the technology and its impact than those whom both the technology and the legislation affect. That would be an extraordinary position, which I have never heard of before.
Some say that the net should be linked free to homes not connected to the telephone system. I heard that suggestion in the Select Committee, when a question was put to a witness about allowing access to the net so as to overcome the problem of the contrast between information-rich and information-poor families.
However, is it right to encourage people with limited resources to be influenced and seduced by goods and services that they can ill afford, promoted in an endless stream? Such people should be encouraged to see the internet as a source of information, to enhance their quality of life, rather than being overwhelmed by everything that it can offer.
Can the Government offer any guarantee that material received through the net will not be subversive, immoral or unethical? I suspect that they cannot.
Dr. Nick Palmer: Does the hon. Gentleman agree that nearly everything he says apples to the print medium too, and has done for many years? Would he expect the Government to give a guarantee that no schoolchild could obtain subversive or pornographic material from a newsagent?
Mr. Fraser: As the hon. Gentleman will know, the difference is that the internet is international, and it would be far harder to sue a service provider thousands of miles away than to get hold of a newspaper editor. Also, as the debate is about the internet, I should like to confine my comments to that subject.
I should be happy for the internet to be available in every home and school in the country, but there is evidence that it is difficult to regulate and police effectively and efficiently throughout the world, with so many diverse ethical, moral, commercial and social standards to contend with.
The Government must consider regulation carefully. I welcome the establishment of the Internet Watch Foundation, and also the report that 2,000 items have been removed from the domestic web as a result of complaints. I support the foundation's work towards setting up an international rating system for legal material that would allow users to deny access to their children as well as to themselves.
However, that will not guarantee that certain information on the internet will not be seen by anybody, because the system has its own leaks. I do not want to be a merchant of doom, but we must address the serious issues of what the internet is, how it operates and how we should legislate to ensure that its standards are acceptable, given the few quantitative and qualitative checks currently in place.
We must not do that alone. The debate must take place on a international platform, with an international agreement to enforce its conclusions. I accept the many benefits that the technological revolution brings, but we must keep a sensible eye on the problems that the worldwide web will undoubtedly produce.
10.3 am
Mr. Ian Stewart: Thank you, Mr. Deputy Speaker, for allowing me to speak in this important debate. It is clear that the internet and informing and communicating technology have revolutionised business and transformed the relationship with customers, but in the public sector their effects have been less dramatic.
We still have to see whether the full benefits of the internet and informing and communicating technology—ICT—can be realised in the delivery of public services. That was the subject of the recent POST—Parliamentary Office of Science and Technology—report, which I welcome as it outlines some of the key issues that we face in dealing with the internet and ICT in general.
I apologise to you, Mr. Deputy Speaker, and to the Minister, because I shall have to leave before the end of the debate to be involved in parliamentary business elsewhere.
I shall draw attention to another paragraph from the POST report "ICT and Democracy", because it clearly describes my own concerns and attitudes towards the internet and informing and communicating technology in that context. If those technologies are to do anything worth while, they must relate to people. That is fundamental to our role as public servants.
The paragraph says:
"In terms of their contribution to the processes and institutions of 'democracy', ICT could 'merely' improve the communication of facts and policies within the Government and with citizens, businesses and other governments. A more fundamental change would be to use ICT to facilitate greater participation and deliberation through formal consultation and informal debate using electronic means. Even more radical, 'reinventing democracy' postulates that the combination of globalisation and local autonomy enabled by ICT will change the entire raison d'etre of national government. In practice most experiments in using ICT in the democratic process have started at the community level, and could well comprise the type of community initiative supported by Lottery funds."
My hon. Friend the Member for Sittingbourne and Sheppey (Mr. Wyatt) referred to the possibility of using lottery funds.
The report identified three key points. The first was
" 'teledemocracy' which could enable people to participate in debates and decision-making from their homes or community centres (e.g. 'citizens' juries')".
The second was the prospect of
" 'fully wired' MPs with public e-mail, homepages, electronic voting and electronic links into information and administrative systems".
The third was
"much improved electronic links between different tiers of Government to provide citizens with a coherent view of their Government and Parliament."
The report also identified some of the key issues facing us as Members of the House in connection with the relationship between us as public servants, and the community.
Now I shall come closer to home, to my city of Salford, and talk about some of the implications for my constituents in Eccles. Some interesting initiatives are taking place, one of which is the GEMISIS—government, education, medical, industrial and social information super-highway—project, run by a partnership between Salford city council, the university of Salford, the further

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education sector, sixth forms and other schools, and the local hospital. Through an initiative called the "virtual chamber", members of the chamber of commerce in Manchester and Salford are linked to the GEMISIS project.
I am the pilot Member of Parliament, linked to the whole network. It is important for me, as a public representative carrying out such a pilot scheme, to evaluate the benefits—and also any aspects which may not be beneficial. Like most of my colleagues in the House, I am keen to enhance public access to Government. However, we must also ensure that we do not create an uncontrollable monster.
Mr. Ian Taylor: I am not sure that the hon. Gentleman mentioned the company that was involved in that project. If my memory serves me well, it was Nynex, which is now part of Cable and Wireless. I draw attention to the project because it is an example—it is not the only one in the United Kingdom—showing that one of the benefits of growth in the cable industry has been local cable franchises working with the community.
Mr. Stewart: The hon. Gentleman has stolen my thunder. He is correct, of course, that Nynex, which is now part of Cable and Wireless, is the key provider in the project. I shall deal with its role later in my speech.
As I am the pilot Member in the project, Cable and Wireless is cabling my constituency office—putting me on line, cabled for video conferencing and e-mail, which I can use both in my constituency office and in my Westminster office. I shall therefore have access to all the partners that I have mentioned; and those partners—especially schoolchildren and other students—will have access to me as their Member of Parliament.
The implications of internet developments for democracy—specifically for local democracy—are immense. They will also force us to revisit our views on our function in society as representatives and to evaluate whether the benefits of such developments outweigh their disadvantages. I do not include in those disadvantages hon. Members' ability to relate and communicate directly and immediately with constituents and organisations; I believe that such direct communication is a benefit. However, hon. Members sometimes need respite, and should therefore ensure that there is integrity in any system we establish.
I hope that my hon. Friend the Minister for Science, Energy and Industry will be mindful of what I said in my maiden speech about the millennium bug. I welcomed the Government's initiative in establishing Action 2000, which stood in stark contrast to the previous Government's inaction on the problem. Although they had long known about the problem, they took no initiative in solving it.
Nevertheless, there is more to do about the millennium bug. Although providing greater finance would be helpful, other action can be taken. As I said in my maiden speech, it would be sensible for the Government to encourage and co-ordinate local partnerships comprising commerce, industry, education and local government. The partnerships could identify good practice, which could subsequently be shared across the United Kingdom.
10.13 am
Mr. Brian Cotter: I should declare an interest in the debate, as I—like other hon. Members—have an e-mail address and was one of the first hon. Members on the international website. However, I do not want to present myself—or lay myself open—as an expert, expected to know an awful lot about the subject.
The hon. Member for Mid-Dorset and North Poole (Mr. Fraser) made a timely reference to the fact that hon. Members have to be well informed on the subject if we are to legislate on it. Perhaps we should all join the recently established all-party internet group. There is great potential for improvements in the delivery of public services by innovative internet use, which will allow savings in tedious and repetitive work.
The previous Government produced the Green Paper "Government Direct", which was warm in words but short in public investment. I hasten to add, however, that the hon. Member for Esher and Walton (Mr. Taylor), who is in the Chamber, was notable in his desire to obtain money to support the Green Paper's objectives. Unfortunately, that money was not forthcoming.
Liberal Democrats very much believe that the state has a directional role to play in setting the agenda for change, in encouraging the private sector to develop solutions, and in explaining to citizens the benefits of the changes that the internet makes possible. The new Government seem to be more enthusiastic about the internet, but I should mention—as other hon. Members have done—the problem of the millennium bug.
Although Robin Guernier was appointed to head an organisation established to deal with concerns about the millennium bug, he was sidelined after highlighting the problems that Government might face in implementing a solution. His organisation was replaced by Task Force 2000, which had only a part-time chairman. Moreover—I do not know whether people realise it—its three top executives were not to be put in place until January 1998. If they were not in place, they were not able to do the job.
Mrs. Gillan: Does the hon. Gentleman agree that the situation is even worse than that? Action 2000 had a one-day-a-week chairman, and it appointed a director only a few days ago.
Mr. Cotter: I thank the hon. Lady for that clarification, and for making the point that I was trying to make. The organisation's top staff have only recently been appointed to deal with a problem that should have been dealt with, and perhaps solved, so that everyone in the United Kingdom knew what to do about it. It is a great concern.
Mr. White: One of the problems with the millennium bug is that—as the hon. Gentleman said—the public debate has been about personalities rather than the real issues. The longer people carry on talking about personalities, the less we will talk about the real issues of the 2000 problem.
Mr. Cotter: That is certainly correct. However, we have to talk about personalities, because people will deal with the concerns.

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I very much welcome the Government's statements on giving children access in school to the internet. It is very important that they should have keyboard access, and not only an e-mail address. We will therefore require more equipment, not only in schools but in public buildings.
Mr. Maxton: Surely it is not a matter only of an e-mail address or of allowing kids occasional access to a keyboard? The state of Texas has taken a decision not to buy any more textbooks. Every child receives a laptop computer, with access to the internet, and receives information in that manner. Is that not how we should proceed with education in this country?
Mr. Cotter: The hon. Gentleman has a very good point, although I am slightly conservative and do not want all paperwork to go out of the door. Books are very available.
We welcome the pilot project in Newcastle, for example, where jobcentres have put vacancies on line, and job seekers can access jobs and call employers directly.
I should like also to put in a little plug for Weston-super-Mare. It is part of a trial area in which information on resorts, bookings, hotels—including pictures and details—and other tourist attractions in the constituency is available on the internet.
I should like to address the following three issues: infrastructure, systems and security. Infrastructure must reach everyone who wants to get on line, especially in country areas. There is a risk of concentration of services in towns where there are many people. With cable companies cherry-picking in towns and cities, there is a danger of a new poverty: the information have-nots—very much in rural areas. It is difficult being unemployed with no car, in a village with no bus service. Electronic job-searching from the local village hall, or eventually from home, will uplift not just the jobless but disabled people, carers and others who, for one reason or another, are tied to the home.
There is huge scope for development in systems, such as in job seeking, finding a way around the benefits maze, lodging tax returns, and many areas of local and national government, such as local government planning applications.
I want to touch on the question of security. I say "touch on" it because it is a very big subject. A BBC News report on the internet, entitled "The Great Encryption Debate", which reminds me of the children's book "The Great Pie Robbery", is a big story on the continuing debate, which has been followed by many on the internet, who are asking what encryption is. It is a system of security, which is of concern.
There is a contradiction between wanting encryption for security, so that messages can be confidential and encoded by the sender, and wanting privacy in personal messages. Most people accept that some limit is necessary. We, like the Government, are concerned about the use of the internet by terrorists, race-hate groups, criminal gangs and the like.
The proposed key system could enable security services to tap into the internet as need be. At the moment, by Government agreement, telephones can be tapped when
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necessary. Encryption will cause difficulty in accessing systems. I do not pretend to be able in today's debate to solve such problems.
Mrs. Gillan: Does the hon. Gentleman agree that one of the problems of encryption is that, once one has a code and can access internet details, one can also access both historical records and any future messages that pass between sender and receiver? A telephone tap is a one-off measure by which one can listen to a conversation. There is no historical record.
Mr. Cotter: I thank the hon. Lady for advancing the debate. She succinctly puts our concern. I shall not in this short debate dwell any longer on the subject, but merely highlight it as a problem. Solutions will be difficult to find, but the matter needs to be addressed. The Government need particularly to address on the one hand problems about who could be going through the internet, and on the other concerns about the privacy to which individuals are entitled.
Commercial companies are already exploiting the internet in many ways. The enterprise zone is very important. This country is very well placed to go forward, because our firms and organisations are technically well endowed. I hope that the Government will address the many problems raised in this debate.
10.24 am
Mr. Andrew Miller: Perhaps the new computer tsars described by my hon. Friend the Member for Sittingbourne and Sheppey (Mr. Wyatt) should be called "caesars". In reflecting on how bad the Government and the House are on the matter, he ought to reflect on what happened before. I pay tribute to the hon. Member for Esher and Walton (Mr. Taylor), who took a very progressive view in very difficult circumstances under a very unprogressive Government.
In 1992, the vision in the House, and indeed in British industry, was lamentable. Computers were things down corridors, dealt with by IT departments. This House was the only one in Europe, bar Turkey, that did not have a fully fledged network. Advances since then have been extraordinary. I was at the recent opening of the House exhibition on computer services, where one of the Clerks pointed out—I shall be more chivalrous than he—that, when Madam Speaker came to the House as a secretary, quill pens were still in use. We have advanced a very long way since then.
In October 1996, as a result of a recommendation of the Information Committee, the House took the decision to put the full Hansard text on the web. That was a very progressive step. At last year's European telework conference in Stockholm, I challenged other European Governments to do the same. Only the Swedish Government at the moment can anywhere near match what we are doing in that field.
I shall touch on just two points, and on one or two others tangentially; it is difficult to wrap up the subject in such a short time. I turn first to trading on the net, or e-commerce. I encourage hon. Members to look carefully at the speech of Lord Haskel, which was made in another place in October 1997, in which he set out a number of answers to the points raised by my hon. Friend the Member for Sittingbourne and Sheppey. I shall not re-run those points.

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In a fairly light-hearted article on e-commerce recently, I set out a point similar to that made by my hon. Friend the Member for Broxtowe (Dr. Palmer) when he intervened on the hon. Member for Mid-Dorset and North Poole (Mr. Fraser). My hon. Friend said that there is not a great deal of difference in the regulatory regime necessary to deal with points about access for children in this respect and that needed to deal with access to hard copy. Exactly the same argument applies to trading.
Trading between two individuals is based on trust. The key issue is how to establish that trust. Are two people simply getting together, one passing over the goods and the other passing over the money; or are there intermediary devices, such as a bank card or, over the telephone, a credit card? If such trading is done by telephone with a credit card, what is the difference between personal trading of goods and services between supplier and consumer on the telephone and on the internet? There is no difference.
The credit card is used as the vehicle for trust. Establishing relationships that will create the same trust is the key factor that will help the evolution of e-commerce. One needs to know that the information is reasonably protected, and the system is not open to abuse.
There were early experiments in e-commerce on the Merseyside web, on which it was possible to buy an Everton football strip five or six years ago. From small beginnings, the system has evolved to the supply of office furniture. Now large-scale trading occurs across national boundaries. There are still many difficulties for the finance sector, which financial institutions are examining in detail.
My hon. Friend the Member for Sittingbourne and Sheppey mentioned the case of my constituent Louise Woodward. A large-scale electronic campaign, of which I was at the centre, has raised many thousands of pounds for the defence. It would be inappropriate for me to go into the many reasons why I am firmly convinced of Louise's innocence. I hope to do that when she is safely back home.
I wrote a letter yesterday to Mr. Al Gore, the Vice-President of the United States, setting out some of the problems we need to address on the international regulation of internet-related issues. First, I brought to his attention an e-mail from an allegedly reputable firm of lawyers in the United States. I cannot read the text of that e-mail, because it would be decidedly unparliamentary. It is obscene, disgraceful and libellous. It has been put in the public domain by a firm of lawyers allegedly representing the other side of the case.
Secondly, my constituent has also received hate mail, including some that purports to come from a prison in the United States. It is not acceptable that hate mail, including death threats, should come from anyone, let alone someone in prison.
Thirdly—perhaps all hon. Members might pay attention to this—how do Members of Parliament deal with being libelled on the internet? I have asked several of my hon. Friends with a legal background, who recommend laying down the writ in the country that will provide the greatest return.
Mr. Clive Betts: For the lawyer.
Mr. Miller: Yes, that is usually the advice.
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A lawyer in Texas—who appears to have lost his marbles, judging from some of what he has written—has made certain accusations against me. He says:
"That is the same Andrew Miller that was standing in the middle of the river of cash flowing from Zurich to the dream team."
The dream team was my constituent's defence. I look forward to him repeating those comments on the streets of London, so that we can make some money for the defence. These are serious issues that need to be considered.
I understand the case made by my hon. Friend the Member for Sittingbourne and Sheppey for establishing a super-Ministry. I believe that that exists in No. 10 Downing street, because the issues cross departmental borders. Departments cover everything from the difficulties of the year 2000 problem, through intellectual property rights, to the law of libel and inciting hatred. They cannot be boxed off to one Department. It would be a neat idea to dump it all on my hon. Friend the Minister for Science, Energy and Industry—
The Minister for Science, Energy and Industry (Mr. John Battle): I should be delighted.
Mr. Miller: I am sure he would, given his interest in the subject, but that would present serious problems for the organisation of that complex issue.
I should like to respond to some of the points that have been made about the year 2000 problem. I acknowledge the work that the hon. Member for Esher and Walton started on that. He took some steps in the right direction. It took a long time to persuade the public, businesses and the House of the nature of the problem. I do not expect an entirely truthful answer, but I suspect that he had great difficulty with his ministerial colleagues, most of whom did not know how to switch on a computer. I note that he is closing his lips tightly.
Public awareness is rapidly increasing. I had discussions yesterday with senior people in the Department of Health about what action they are taking. Like my hon. Friend the Member for Sittingbourne and Sheppey, I am nervous of flying in 2000. Let us hope that convincing proof comes from all areas of industry that they are doing the job that needs to be done.
The problem is particularly difficult for small and medium-sized businesses. I know that my hon. Friend the Minister for Small Firms, Trade and Industry is doing a lot of work on that. There are some complexities with the front end delivery mechanisms of public services, but they are being examined in great detail. I commend to the House the most recent quarterly report from my right hon. Friend the Chancellor of the Duchy of Lancaster, which sets out, in several hundred pages, the action that the Government are taking.
As my hon. Friend the Member for Sittingbourne and Sheppey said, some web tools will be in difficulty because of the problem. Some parts of the web outside the control of this country could come to a grinding halt in 2000. We need to engage in the discussions that are starting with other countries to ensure that the advantages of the evolution of the web are not delayed by the year 2000 problem.
This debate could go on for a long time. We are considering a major subject which impacts on every aspect of Government and every member of society. I am

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pleased that the House is taking the matter seriously. I wish my hon. Friend the Minister well in his endeavours in this exciting time.
10.38 am
Dr. Julian Lewis: In the three or four minutes that the hon. Member for Ellesmere Port and Neston (Mr. Miller) has generously left me, I should like to refer to the impeccable timing of yesterday's Evening Standard report, headed "Police hunt 15 Internet bombs made by children". The report began:
"Police are searching for 15 lethal home-made bombs taken home by London schoolchildren. The explosive devices, copied from a design on the Internet, are from the same batch as one which blew apart a telephone box in Sidcup this month.
They are made of copper tubing packed with a simple but powerful explosive.
A police spokesman said: 'Given the damage to the phone box, which was blown apart, they could maim or even kill."'
Mr. Battle: Will the hon. Gentleman give way?
Dr. Lewis: No, I will not give way in the tiny amount of time I have available: I am sure the Minister will understand.
Another aspect of the internet which can have a lethal effect on a person's reputation is the use of the internet to defame, libel and undermine people, in private or public. I have personal experience of this. The story goes back to 1993, when a magazine called Scallywag thought it would make a reputation for itself by defaming the then Prime Minister, my right hon. Friend the Member for Huntingdon (Mr. Major), by accusing him of having an adulterous relationship with a caterer.
My right hon. Friend took legal action against the editors of the magazine and the shell company which published it, but had to discontinue it because they had no assets. Had he continued, my right hon. Friend would have run up huge costs, which would have been awarded against the magazine and its impecunious editors. The editors would then have gone bankrupt, and my right hon. Friend would have had to pay his own legal costs, which would have been enormous. After that so-called triumph, the magazine decided that anyone was fair game. If the Prime Minister could not stop it, who could?
Every married member of the then Conservative Cabinet became a fair target for accusations of adultery, and every unmarried member became a fair target—in their eyes—for accusations of secret homosexuality. Sometimes married members were accused of that as well. In November 1994, the magazine made allegations of that sort about me. By dint of finding out the identity of the printers and the main distributors—attempts had been made to keep them secret—I was able to take legal action in this country which cleared my name and collapsed the magazine as a going concern.
It was my misfortune that, at that time, the internet had just come into existence, and the magazine went on it. To this day, the same filthy lying allegations about my private and political life are repeated on the internet. I did what anybody would do under the circumstances, and where there was a course of action. I sued the internet provider, Demon Internet Services, in Britain. It promptly closed down the site, and I received a settlement which I felt was a vindication. However, the site, predictably,
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was opened by an internet service provider abroad. There is no effective action I can take to prevent that provider from continuing to blacken my name.
My selection as a candidate was imperilled by this filth. My period as a prospective parliamentary candidate for my seat was damaged by this filth. My election campaign was, to some extent, undermined by this filth. It is filth on an international level. It may bring smiles to the faces of some Labour Members because it happened to a would-be Conservative Member of Parliament. It could just as easily happen to them.
10.42 am
Mrs. Cheryl Gillan: I start by giving hearty congratulations to the hon. Member for Sittingbourne and Sheppey (Mr. Wyatt) on securing this debate. He has been in the House for a short time only, but he has a reputation for taking a great interest in and having great expertise on this matter. I congratulate all those who have taken part in the debate, although I am sorry that some hon. Members who have been waiting patiently have not been able to take part—particularly my hon. Friend the Member for Esher and Walton (Mr. Taylor).
The matter is of great importance to the United Kingdom, not least because we generate more than a fifth of all world internet traffic. We are one of the major players in this field, way ahead of any other European country, and it is important that we maintain our competitive advantage.
Like the hon. Member for Sittingbourne and Sheppey, I am surprised that the Minister for Science, Energy and Industry, the hon. Member for Leeds, West (Mr. Battle), is here to answer the debate, although I welcome him to the Dispatch Box. I thought that the Chancellor of the Duchy of Lancaster might put in an appearance, particularly as he has spent so much time promoting the delivery of Government services over the net and is responsible for year 2000 compliance.
Instead, the Minister—an honourable and generous gentleman—has been put in this position because the Government's policy in this area is clearly a shambles. The policy vacuum was displayed admirably by the hon. Member for Sittingbourne and Sheppey.
The Chancellor of the Duchy ought to be here, not least because he spends so much time promoting his electronic red box. I do not believe that that red box has been a great success with his colleagues. Will the Minister confirm how many Ministers currently use electronic boxes on a daily basis?
In a debate of this nature, it would be unforgivable not to pay tribute to my hon. Friend the Member for Esher and Walton. As a member of the last Government, he made much progress in this area. To be fair, the present Government have continued many of his programmes—so many that they have made no original contribution to this policy area in their 10 months in power.
The hon. Member for Eccles (Mr. Stewart) was a little curmudgeonly when he said that nothing had been done under the previous Government. My hon. Friend the Member for Esher and Walton was responsible for the Central Information Technology Unit, Government on-line, the Information Society initiative, the launch of the super-highways initiative, the launch of TaskForce

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2000 and the launch of the schools on-line project. He made it possible for all schools to connect to the internet, and introduced "IT for all". That is an impressive record. My hon. Friend left the Government a golden legacy, which has not been fulfilled.
The internet has developed rapidly, and has penetrated almost every corner of the world. It has wiped out national borders, and provided a medium of communication which has enabled people to talk and do business between China and Chesham and between Amersham and Addis Ababa. Governments are rightly interested in ensuring that it is used to its fullest potential in education and business. However, some Governments and people are frightened by the implications of free, uncensored communicational transactions. My hon. Friends the Members for Mid-Dorset and North Poole (Mr. Fraser) and for New Forest, East (Dr. Lewis) outlined those problems.
Governments are worried not only because communications can go uncensored, but also, more importantly, because transactions can avoid the tax net. Many global issues—including regulatory regimes and legal implications—should be considered by the Government.
The UK has first-class service providers, and most are doubling their customer base in each year. However, the Government have lost the momentum established by the previous Government, and are not addressing the problems.
I should like to raise a few of those with the Minister. Can he tell the House what progress the DTI is making on encryption, which was mentioned by the hon. Member for Weston-super-Mare (Mr. Cotter)? The DTI's proposals have been met with some concern by providers, including the proposal to register crypto keys with third parties. Perhaps he can tell us how that will work, and why technical experts say it is not feasible.
The Opposition have raised questions about the telecommunications charges between the UK and European countries, which remain disproportionately high. What are the Government doing to address the problem?
Domain names are causing concern to providers. Will the Government be opposing the US Department of Commerce proposals on internet governance, in so far as these involve an assertion of US jurisdiction over the key resources? In a written answer, the Minister for Small Firms, Trade and Industry, the hon. Member for Hornsey and Wood Green (Mrs. Roche), admitted that there was a delay in sorting out the problem, and we need to know what action the Government are now taking.
What plans do the Government have to tax commerce on the internet? If they are working on proposals for taxation, have they considered the ease with which service providers, for example, can operate from other parts of the globe? Are they going to encourage this succesful industry by creating the right framework in which the service providers can operate?
The internet has been growing rapidly. It is entirely based on computers and cyberspace, and computers—in about 95 weeks—will face the universal deadline of the
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year 2000. There can be few problems more serious or pressing than the millennium bomb, which will affect not only the internet but every business and public service in the world that has embedded chips or microprocessors in any of its systems.
As hon. Members have said, it would be wrong of me not to raise the fundamental questions relating to the Government's handling of computer compliance for 2000, which has proved to be disastrous. The Government have lost the impetus that was started by my hon. Friend the Member for Esher and Walton. TaskForce 2000 was abandoned and Action 2000 was set up, but the director has only just been appointed on a full-time basis. Initially, funding was £1 million; that rose to £10 million but, on 30 March, we read that the Prime Minister would write a blank cheque. After 10 months' inaction, the Government are now panicking.
Will the Minister confirm that Ministers first met to discuss this problem only a few weeks ago? The hon. Member for Ellesmere Port and Neston (Mr. Miller) praised the quarterly report of the Chancellor of the Duchy of Lancaster, but, if he read it properly, he would find that the Chancellor of the Duchy of Lancaster was incapable of correctly transferring information from the departmental reports to the departmental summary.
The costs associated with the problem are escalating rapidly; the Government have been remiss in allowing the impetus that was created under the previous Government to be thrown away over the past 10 months. They have neglected the business sector, and many regard Action 2000 as inaction 2000.
I hope that the Minister will show that there has been a radical rethink in Government policy on technology. The internet is only one facet of the computing revolution, which can benefit the United Kingdom and the whole of mankind. However, without a coherent policy and a Minister to consider the whole picture—including millennium compliance—we can look forward only to chaos and mayhem.
We need a strong hand on the tiller to secure the future of the internet business for UK companies and to avoid the inevitable disaster arising from the failure to ensure millennium compliance. The Minister should turn back the clock—just as he has continued the science and technology policies of the previous Government, he should continue their policies on the internet and the millennium bomb. If he fails to do so, this country will be severely affected, and our internet businesses will find that they are operating in a very unfavourable world environment.
10.52 am
The Minister for Science, Energy and Industry (Mr. John Battle): I thank my hon. Friend the Member for Sittingbourne and Sheppey (Mr. Wyatt) for initiating this important and serious debate—my only regret is that we do not have time to discuss it further. As I have been left little time in which to reply to a full debate, I have a suggestion: I have been taking notes on my Psion 5, which I shall load on to my PC, so that what I would have said will be available at tlo.battle@dti.gov.uk—or, indeed, on the websites of the Government, of the Department of Trade and Industry or of the House of Commons. Perhaps we can eclipse space, if not time, in our desire further to discuss these matters.

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My hon. Friend said that the internet would be the key to re-tooling and re-skilling, and that it would reshape how we do business. I underline that, and also give my hon. Friend a clue about why I am here. As a Minister in the DTI, I am responsible for ensuring that the banner above the Department bears the word "competitiveness". For the United Kingdom to be competitive, we must ensure that the internet is a vital tool for business, that youngsters, schools and the whole of society can take advantage of that tool, and, of course, that the Government get the matter right in house. We are moving from the information age into a digital economy, where e-trade and e-commerce will truly transform what we have seen so far.
Some hon. Members have expressed concern about crime on the internet, but I should point out that the police—I cannot go into detail—are using the internet to track criminals. The internet, as I am sure we all accept, is an ambivalent tool. We need Government-wide co-ordination across all Departments to ensure that we can take advantage of the new possibilities that are offered by computing and the internet.
As my hon. Friend said, it is worth remembering that the worldwide web was pioneered by a British scientist, Tim Berners-Lee, at CERN, which is a science project in particle physics that has been, and will continue to be, sponsored and supported by Government—it is important that we remember what comes out of the science base.
When I first entered the House of Commons, I asked for a computer modem point to be put on a shelf that I was given as an office in the Cloisters downstairs. I was told that we were offered the privilege only of a telephone. To link one's computer to one's home or constituency office was unknown at that time. I managed to do so, but, for obvious reasons, I ended up with a rather larger phone bill than everyone else. As Members of Parliament, we need to use the equipment—I think that, especially since the general election, most hon. Members appreciate the need to communicate through computing and the internet.
I shall focus on electronic commerce, as the possibilities it offers for small and medium enterprises to open new markets are of central importance. Today, 27 per cent. of companies in Britain—including nearly 40 per cent. of large companies—have a website, and 29 per cent. of small businesses are developing one. A survey showed that 81 per cent. of the respondents believed that the website would be important to their businesses. Moreover, small businesses buy parts on the internet.
My hon. Friend the Member for Ellesmere Port and Neston mentioned his problem with American lawyers. I suggest that he looks at the web page "Welcome to Helpnet", which offers advice in psychiatry, although it notes that it is not meant to be a substitute for psychotherapy. He mentioned trusts and money. Bay Shore Trust in Canada offers over the internet a loan in 60 seconds to Canadian citizens with a bank account. Finance is an important area; it will be critical for small and medium enterprises to organise back-up finances over the internet. There will be new ways of doing business and finding support for business.
Mr. White: Under Britain's presidency of the European Union, negotiations are taking place with
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the Americans about domain names. Does the Minister agree that it is important that that is sorted out quickly, as it could help to develop commerce?
Mr. Battle: The matter was raised by the hon. Member for Chesham and Amersham (Mrs. Gillan), and I agree that we have to get it right—indeed, we shall take a lead in ensuring that we get it right in international negotiations.
I pay tribute to the hon. Member for Esher and Walton (Mr. Taylor), who initiated schemes such as "IT for all" and the GEMISIS project, which my hon. Friend the Member for Eccles (Mr. Stewart) mentioned. We are enhancing those schemes and pushing them forward, as I am sure that the hon. Member for Esher and Walton will appreciate.
I give an example. My hon. Friend the Member for Ellesmere Port and Neston explained that he was engaged in the GEMISIS project in his constituency. I have met the chief executive of Cable and Wireless, who briefed me on the wide range of the company's projects. The GEMISIS project has the potential and vision for "IT for all" to ensure that everyone has skills and that society is not divided into those with access and those without access. We should emphasise not only business and educational uses, but social and cultural uses.
Despite what the hon. Member for Chesham and Amersham said, we have given a major boost to "IT for all"—our aim is that, by the end of the year, the public will have access to a minimum of 4,000 sites, half of which will form a national network of learning centres where the public can acquire basic IT skills.
Mrs. Gillan: That was our idea.
Mr. Battle: The hon. Lady says that that was the idea of the Conservative party, but we are making it work better, just as we are with the Information Society initiative for businesses, which helps smaller companies to seize the opportunities—there are now 60 such schemes up and running, and 20 more will be opening in the next few months. Either she is in favour or against the programme—I do not understand why she should object to our developing the initiative, using the support of business links.
The enterprise zone is a new idea, which will complement the programme for business. It will link internet sites that have been judged by business information experts to be authoritative, and will be clearly signposted in a language that business can understand. We are helping businesses to access reliable information that they need from the internet, including on how to raise finance, and we have developed new initiatives.
In 1995, in opposition, we conducted exhaustive research into the super-highway and its uses, and published a full report, "Communicating Britain's Future". In government, we have begun to wire up the schools and launched the national grid for learning and the university for industry. Those new ideas, brought to fruition by this Government, were not thought of by the previous Administration.

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The university for industry will be a new kind of institution that delivers courses to adults at home, in learning centres and at work, exploiting the number of homes with PCs and realising the potential for lifelong learning at work.
My right hon. Friend the Prime Minister has committed the Government to ensuring that 25 per cent. of their services are capable of being carried out electronically by 2002. My right hon. Friend the Chancellor of the Duchy of Lancaster has piloted—
Mr. Deputy Speaker (Sir Alan Haselhurst): Order. We must now move on to the next debate.

Community Care
11 am
Mr. Paul Burstow: The fifth anniversary of the introduction of community care is on 1 April, so today is a good time for us to debate the subject. I know that several hon. Members want to speak about some of the issues that come under this wide topic. My intention is to concentrate primarily on services for older people, whereas others may want to talk about matters such as mental health and children's services.
What stands out for me in all the writing on community care is the overwhelming weight of anecdotal evidence supporting the need fundamentally to rebalance our health and social care system. At present, the economics of health and social care has the unintended effect of driving people into high-dependency, high-cost institutional care rather than supporting them at home. I want to illustrate what that means in practice, and to make some suggestions about the way forward.
Few would argue with the aims of community care, but the evidence gathered by the National Association of Citizens Advice Bureaux and others—reflected, I am sure, in the mailbags and surgeries of many hon. Members—shows that community care has failed to deliver, and is better described as crisis management than as care management.
I want to make the case for complementary national and local strategies that involve older people and carers in their conception, implementation and evaluation, are genuinely cross-departmental and multi-agency, and promote improvements in public services through learning and local experimentation.
In its report "The Coming of Age", the Audit Commission illustrated the vicious circle of crisis management that health and social care are locked into because of bed blocking, cost shunting and buck passing. The consequence is that elderly people are funnelled into inappropriate institutionalised care. The report said:
"The pressure on expensive hospital beds and the use of nursing and residential homes is making it hard to free up resources for alternative services that might start to ease the situation."
The number of older people being admitted to hospital is growing. Pressures on hospital beds are increasing. People are being discharged sooner, and more people are receiving expensive residential and nursing-home care. As a result, there is less money for preventive and for recuperative and rehabilitation services.
The number of people using acute services and the speed of their discharge are increasing, and so is the number of people being readmitted. Figures obtained last March by my hon. Friend the Member for Southwark, North and Bermondsey (Mr. Hughes) reveal that as many as 100,000 people a year aged 75 or over become emergency readmissions to hospital within 28 days of discharge.
For far too many older people, admission to hospital is simply the first step to their premature loss of independence. Eight out of 10 new residents of care and nursing homes come directly from hospital. Increasing hospital throughput has, in turn, increased pressure on older people and their carers—often the elderly husband or wife—to make snap decisions about where they are to live out their remaining years.

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Nearly two thirds of social services gross expenditure on the care of older people in England is spent on residential care, but only one in 20 people aged 65 or over currently need long-term care other than in their own homes. The emphasis on residential care is hardly surprising, given the perverse financial incentives. The Audit Commission found that in almost every case, it is cheaper for social services departments to use residential care in preference to devising a care package to support independent living.
The net cost of domiciliary care in 1996 was about £197 a week, which was considerably more than the net cost of a place in an independent residential care home, at £94 a week. The differences are caused by the interplay of a nationally applied means test for residential care, and locally determined eligibility criteria for domiciliary care.
Evidence gathered by NACAB demonstrates how the original objectives of community care have been distorted. Targeting of support is a clear aim of community care, but the reality for far too many people is of care rationing, with longer waits for assessments and care provision, tightening eligibility criteria and more and increasing charges. The consequences represent a false economy for society.
The NACAB report "Rationing Community Care", said:
"Excessive targeting of scarce resources on those in greatest need is leading to inadequate preventative measures in terms of support services in the community for both carers and care users, which may result in more costly institutional remedies becoming necessary."
NACAB has drawn to my attention some cases that illustrate the point. A woman on income support was told that help was available at £7 an hour, and social services suggested that she take out a loan to pay for it. In January, a woman in Wales was told that, under a revised scheme, her charges would double, from £21 to £42 a week, because she was not in receipt of income support. She cannot afford the new charge, as she has high living costs, including the cost of constant heating and of electricity to power her stair lift and other aids. She is refusing to pay the increased charge, and is prepared to go to court if necessary.
Funding for services that promote independence will remain vulnerable to cuts as long as health and social care remain locked in a vicious circle of acute medical intervention and high-dependency institutional care. Two services illustrate the point, and the Minister may be familiar with them, as I have tabled quite a few written questions on them: continence care and chiropody.
Currently, 3 million people in the United Kingdom—5 per cent. of the adult population—are affected by incontinence, which increases the risk of hospitalisation by 30 per cent. for women and 50 per cent. for men. It has been estimated that the cost of health care for incontinence stands at £1.4 billion annually, not including the costs of informal care and of the inappropriate use of long-stay beds for people for whom incontinence is the prevailing condition.
Incontinence is one of the key triggers of admission to residential care, as it places great strain on carers. It makes no sense at all—least of all for the taxpayer—to place such a burden on carers, but Age Concern has found that, increasingly, continence products are being rationed in absolute numbers per month rather than on the basis of medical need.
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The same false economies beset chiropody services. A joint study by the Joseph Rowntree Foundation and Age Concern found that foot troubles constituted the commonest physical health problem associated with chronic difficulties in daily living. Nearly seven out of 10 over-85-year-olds cannot cut their own toenails, and rely on chiropody services.
It is hardly surprising, then, that 70 per cent. of the case load of national health service chiropodists is made up of older people; but it is very depressing to learn that 40 per cent. of NHS chiropodist managers report budget cuts this year. Investment in chiropody services represents value for money, preventing the need for costly emergency admissions to acute beds.
Where do we go from here? The Secretary of State often refers to the need to remove the "Berlin wall" between social and health care services. He is right to some extent, but it is not as simple as that, because there is also a need to address the relationships between Departments.
Changes need to be made in the way in which community care operates. In particular, there need to be clear guidelines and minimum standards for community care provision. For example, guidance on standards, inspection and charging for domiciliary care is long overdue.
The choices about eligibility and charging that are currently made at local level are, in fact, national issues, as they ultimately turn on the question of funding. There is no excuse for this Government to pass the buck, as the previous Government did. The Labour party came to power with a clear commitment to take action on the issue of what people have a right to expect from social services.
The Labour manifesto stated:
"We will introduce a long-term care charter' defining the standard of services which people are entitled to expect from health, housing and social services"—
a laudable aim that we look forward to being delivered. Clear national minimum standards for the provision of continence and chiropody services need to be high on that list to be studied.
It is also clear that structural change at the local level is again on the national agenda. The Select Committee on Health has been looking into it and the Government's Berlin wall rhetoric points to it. It is far too easy to assume that changes to structure will solve everything. Some politicians—I do not exclude my party from this—have an unhealthy interest in structure. Simply aligning health and social care misses the point—it merely moves the interface.
The fact is that many of the services that need to co-operate to meet the needs of older people are already covered by local government. In particular, the aligning of health and social care would leave out the housing dimension, which the Health Select Committee rightly drew attention to before the general election as the
"neglected part of the community care framework".
The problem, both nationally and locally, is departmentalism and a lack of co-operation within, let alone between, agencies. It is a question of culture and accountability, not structure. The debate about structure should not be allowed to divert attention away from the simple truth. Even if it proves possible to make all the different cogs in the welfare system fit smoothly one with another, the level of resources is inadequate to oil the wheels.

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Indeed, the Audit Commission's director of health and social service studies, David Browning, is reported in Community Care magazine as giving short shrift to those who argue for major structural changes, such as setting up a single or joint agency between health and social services. An experimental programme is necessary, trying out different approaches and mixes of multi-agency working—for example, initiatives such as those in Somerset, south-west Hampshire and Wiltshire, where district nurses have started to take on social care management functions and in some cases have direct access to social services funds, following a comprehensive needs assessment. In south Bedfordshire, health visitors can set up meals on wheels for clients via a phone call to social services, and social workers can arrange for elderly people to be visited by one of the trust's district nurses.
I said that a fundamental re-balance between health and social care was necessary. I want the balance to be tilted back towards home-based care, such as occupational therapy, physiotherapy, and rehabilitation. The results can be startling. In a scheme developed in Devon, three quarters of those thought to require residential care on admission to a rehabilitation centre needed no continuing social care support on their return home. When compared to the cost of discharging directly into residential care, the savings were as much as £2,000 per person.
Unnecessary admissions, bed blocking and readmission rates can be reduced, but breaking out of the vicious circle into a virtuous one is a high-risk strategy in a public service where failures are rightly condemned, but successes rarely celebrated. The social services inspectorate and the Audit Commission are working in Devon to try to establish what the crucial success factors of such projects could be. However, the Devon experience is based on a long period of operation, which predates the introduction of community care. Social services departments coming late to such schemes may struggle to find the start-up and running costs of such ventures.
The development of such services lends itself to an experimental approach because it is out of diversity that examples of good practice can become universal. In that respect, the winter pressures initiative is a good example. Imaginative approaches have been tried, particularly around prevention of admissions and rehabilitation, but with the funding due to run out on 31 March, the scope for innovation has been constrained. Furthermore, given the one-off nature of the initiative, some positive schemes may soon have to stop. Simply imposing new conditions on the use of the coming year's special transitional grant is unlikely to sustain existing best practice, let alone spread it more widely.
Government must foster the conditions for innovation. In a recent report entitled "Community Health Care for Elderly People", the Clinical Standards Advisory Group highlighted four barriers to collaborative working. The first is different professional and organisational cultures, and I hope that in that respect, the legal and accounting restrictions that often get in the way of inter-agency working will be removed as that would do much to realise common goals between different agencies.
The second barrier is the fact that the geographical boundaries of health and local authorities are not coterminous. I hope that the Minister may be able to say
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something about what mechanisms he plans to use to realise the national health service White Paper's exhortation to GP consortiums to use boundaries conterminous with social services.
The third barrier is the financial constraints on social care and I hope that the Minister will be able to tell us the Government's intention for special transitional grant in 1999–2000. Will SSA and revenue support grant be adjusted upwards, or will ring fencing continue? I also hope that the Government will consider establishing an innovation fund to pump-prime, for periods of two to three years, joint projects between housing, social and health services and the voluntary sector to test out different approaches to delivering preventive services, which must involve carers and older people right from the outset.
Such an experimental programme should involve the SSI and the Audit Commission in monitoring and evaluation to ensure that the lessons learned and the good practice that emerges are widely shared and understood by managers and practitioners, and should draw on the work of the recently established preventive task group. Perhaps the opportunity could also be taken to pilot the extension of direct payments to those over-65s who want them. That would put them in the driving seat in determining the right care package to meet their individual needs.
The fourth barrier is the lack of shared compatibility of information systems, which is apposite given the previous debate. The decision to withdraw supplementary credit approvals for capital investment in information systems to underpin community care is undoubtedly inhibiting progress in that area. Again, I would welcome an indication from the Minister as to the intentions in that area.
I would add a fifth barrier, which is planning overload. While partnership is undoubtedly the key to achieving both health and social care objectives, the current plethora of planning requirements, ranging from community care plans and health improvement programmes to joint investment plans, can prove a distraction from delivering service outcomes. I hope that the social services White Paper will dovetail with the joint health and social care agenda in the NHS White Paper and rationalise the situation.
The overwhelming weight of anecdotal evidence supports the case for a fundamental re-balancing of priorities between health, housing and social care. The approach should be experimental and should involve older people and their carers. Help the Aged recently published a report called "A Life Worth Living: The Independence and Inclusion of Older People", which contained a sentence that summed up the challenge:
"We are in danger of needing more and more ambulances downstream to fish people out of the river for want of fences upstream to stop them falling in."
Unless we find ways in which to break the vicious circle of crisis management, we shall continue to condemn older people to a life of dependency, when community care should deliver independence and dignity.
11.16 am
Mr. David Hinchliffe: First, I pay tribute to the hon. Member for Sutton and Cheam (Mr. Burstow) for obtaining this debate. In general, I agree broadly with

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virtually everything that he said. It is a great pity that we have precious few debates on such a fundamentally important area as community care. During my time in the House, with the exception of the 1993 legislation, every debate on community care has been initiated by Back-Bench Members, which is a great pity when one considers the crucial impact that such provisions have on our constituents.
I must inform the House that I spoke to the hon. Member for Sutton and Cheam yesterday to establish what area of community care he intended to approach. I did so for a particular reason. In 1995, I was surprised to receive from the Minister's predecessor a parliamentary answer indicating that the Department of Health had established a difference between the formal definitions of community care and care in the community. Having been around community care for a long time because of my work background, I regarded the two terms as meaning the same, but under the previous Government, a new definition arose. Care in the community came to refer to mental health and provision for people who had been in psychiatric hospitals. Community care meant the areas to which the hon. Gentleman referred—elderly and disabled people.
This morning, I will stick to the same area as the hon. Gentleman, but I must place on record my belief that it is important in the near future to debate mental health and provisions for the elderly and the learning disabled. I am conscious that both areas require much attention, and I am aware that the Minister may want to discuss policy initiatives with the House.
The Government face a series of key challenges on community care as a direct consequence of the way in which the previous Government, over 18 years, effectively privatised community care provision in a manner that has directly affected service levels and the nature of provision. The hon. Member for Sutton and Cheam mentioned that in describing the inappropriate care models into which people may be pushed. I want to consider the history of why we are where we are now and why the Government face tough challenges in re-establishing some coherence in community care instead of leaving the job lot to the private market, which was the essence of the previous Government's policy.
I await with interest the shadow Minister's contribution, because he normally gives a robust performance in such debates, and especially his defence of the previous Government's record on care of the elderly. They were responsible for some fundamental changes that were very much for the worse. The policy change over their 18 years stemmed largely from a little-publicised decision in 1981 to allow the use of supplementary benefit to supplement the costs of home provision of private or voluntary care. That later became income support. The decision profoundly affected the nature of community care provision, especially for elderly people. That point was picked up by the hon. Member for Sutton and Cheam.
The direct consequence of the previous Government's decision—I believe that this was deliberate—was, from 1981 onwards, a huge explosion in the provision of private nursing home and residential care in a way that distorted the nature of community care provision, especially for the elderly and disabled. The matter has still to be addressed by the new Government. It will take many
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years to skew provision away from the emphasis on institutional care that was mentioned by the hon. Member for Sutton and Cheam.
I have established from the Library that £3 billion was used for the scheme between 1981 and 1993, when the community care changes occurred. Anyone considering that logically would realise that the money would have been far better invested in the community services that the hon. Member for Sutton and Cheam mentioned rather than in a huge expansion of institutional care, which was on the way out even in the 1970s. We have gone in the opposite direction to most other European countries because of the dogma of the Conservative party, which believes in private medicine, private medical care and private provision. That has been detrimental to properly planned community care which enables people to remain in their own homes. I shall expand later on what we should do about that.
I take issue with one point made by the hon. Member for Sutton and Cheam. He said community care was introduced on 1 April 1993. He understands the point that I am going to make. Community care was not introduced then; there was a change in its administration. It existed in a variety of ways long before institutional care, or even the workhouse, was invented. It has generally been the province of a carer in a family, usually a female relative. He will accept that all that happened in 1993 was an attempt to unravel the shambles that followed the 1981 decision. The National Health Service and Community Care Act 1990 was Treasury-driven because of alarm about how the income support budget had shot through the roof as a result of the 1981 decision.
The 1981 decision had several policy consequences that the Minister understands and will no doubt address later. An outdated model of provision that was on the way out, in cross-party policy terms, as far back as the 1970s has been resurrected by the privatisation of community care. Institutional provision for elderly people is now everywhere. I am not knocking such provision because there are some very good care and nursing homes in the private and voluntary sector. Some are less good, as the Minister will accept. His current review and the White Paper may tackle that in due course.
What concerns me about the privatisation of community care and the development of institutional models is the way in which public perceptions of what elderly people need were narrowed down to focus on such provision. That was unhelpful. For people of a certain age—we all hope that we shall reach such an age—there is now a perception that the appropriate care may be institutional. We should ask serious questions about that, as other countries are doing, and consider how we can use available resources to develop alternatives to give people a proper choice so that they do not have to go into institutional care. I accept the point of the hon. Member for Sutton and Cheam that some resources invested in institutional care could be better used to ensure that people have the choice of remaining in their own homes.
I fear that a consequence of privatisation has been the development of a huge market in private care, both residential and nursing, and in private insurance to encourage the view that we all need to insure ourselves privately so that, when we are gaga, we can be looked after through some institutional provision. It worries me that that perception has been allowed to float around this place without being challenged.

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The hon. Member for Sutton and Cheam mentioned the third report of the Health Select Committee in the 1995–96 Session. Interestingly, his predecessor was a member of the Committee. She was usually—in fact, always—totally uncritical of the Conservative party's performance in government. However, this report exposed a good deal of what that Government did, and stated:
"We are very disappointed with the Government's response, which attempts to shuffle off responsibility and does nothing to meet the needs of some of the most vulnerable members of society."
His predecessor said that, or at least subscribed to it in the report. That shows the extent to which people were concerned about what had happened.
The report also made some profound comments about the idea that there is a great demographic crisis. The first paragraph of its of summary of conclusions said that that belief was based on "unsound evidence" and was "downright alarmist". That alarm has been whipped up by private business interests who want to create the view that we must build more and more institutions for the elderly and pay more and more to insurance companies to ensure that we are looked after in old age. I accept that the royal commission on long-term care for the elderly will examine those issues, but I make a plea for us to move away from such narrow thinking and to broaden our views of care of the elderly in the way, in many respects, in which the hon. Member for Sutton and Cheam mentioned.
The second direct consequence of the changes of the 18 years of Conservative rule was a double whammy for the elderly in that people in their 60s, 70s, 80s and 90s in my constituency have endlessly raised with me their anxiety. that, throughout their working lives, they have paid national insurance and taxation on the assumption that, on reaching old age, free care would be available. They were paying for a national health service that offered them free care.
When they reached that stage, the NHS gradually, with a nod and a wink from the Department of Health, withdrew from free care. Such people were means-tested and found that they had to pay for the care they had already paid for. People are deeply unhappy about that, because they have been misled. People who fought in the second world war and who are still around deserve our consideration. That is a grievance affecting thousands or even millions of people who feel that they have been badly let down.
Mr. Nicholas Winterton: I apologise for not having been here for the whole of the debate. The hon. Member for Wakefield (Mr. Hinchliffe), who is currently Chairman of the Select Committee on Health and whom I hold in high regard, has drawn attention to the fundamental injustice of what has happened. Does he agree that at no stage has the House voted for the change that took place by deceit, which is that services that had hitherto been provided within the health service were ultimately taken out of the health service, so that people who believed that they would be looked after in their retirement now have to pay for their care and perhaps utilise all the savings that they have accumulated during their working life?
Mr. Hinchliffe: I am grateful for that intervention from the hon. Gentleman, for whom I have the greatest respect
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and under whose chairmanship of the Select Committee I served for several years. If I can do half as good a job as he did as Chairman of the Select Committee, I shall be a happy man, because he did a first-class job, to the extent of being removed from that position by his own Government. At this point, I should put down a marker and hope that my hon. Friend the Minister listens when I say that I hope that that does not happen to me.
The hon. Member for Macclesfield (Mr. Winterton) is absolutely right: the changes took place without any statutory change or debate in the House. That brings me to my third major point about the consequences, which is that there has been what I believe is a deliberate blurring of the boundaries between the national health service and local authority social services, which was formalised by the community care changes that took place in 1993. That blurring has taken place in the way described by the hon. Gentleman and I believe that the previous Government and the Department of Health actively encouraged the shunting of costs from the NHS to local authorities, because it meant that local authorities, which were largely Labour-controlled, could be blamed for making a mess of functions that had previously been carried out quite successfully by the NHS.
The key issue in the contemporary policy debate is that, without any debate in the House or serious thought being given to the results, we now have two separate systems impacting on the care of elderly people and disabled people in the community; they often offer exactly the same services, but one—the local authority provision—is means-tested and the other is free. That is absolute nonsense. I would encourage my hon. Friend the Minister to look at some of the evidence taken in the Select Committee in recent weeks. We have asked every witness, including Department of Health officials, to define the boundaries between the NHS and local authority social services. So far, nobody has managed to do it, but that is what faces our constituents daily when they require community care in their own homes and they frequently have to do battle to determine which agency has responsibility.
The best example examined by the Committee in recent weeks is that of a person requiring a bath within the community—a bath within his or her own home. Is it a nursing bath or a care bath? That person wants a bath but, depending on whose argument is strongest, that bath might be a means-tested bath or a free bath. In Yorkshire, we take such matters seriously, because people do not like paying for things that they do not have to pay for. The serious point is that it is absolute nonsense that that is the policy consequence of the previous Government's 18 years of blurring boundaries and shunting the provision of care toward the private sector. We now do not know who is responsible for what at local level.
Last week, the hon. Member for Isle of Wight (Dr. Brand) offered a good suggestion which came the closest yet to defining the difference between a medical bath and a social bath. He says that it
"depends on whether you have medical oil in the bath or a little yellow duck."
That is a pretty good stab, given the nonsensical situation, and I should like to hear the Minister's thoughts on how he intends to unravel the consequences of 18 years of nonsense from the Conservative party.
There are several other areas I should like the Government to address and, knowing the Minister, I am sure that he will respond to these points. He will be

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familiar with them already, given that the social services White Paper is expected shortly. First, there is the question of resources. I sincerely welcome and congratulate my hon. Friend and his colleagues on what was announced in the Budget yesterday and what has been done since 1 May last year. In a sense, it makes my job as Chairman of the Select Committee on Health harder, because I would far rather have the sort of relationship with Ministers that the hon. Member for Macclesfield had with the Conservative Secretary of State and Ministers when he was Chairman. The current Labour team are doing an excellent job in terms of the resources that they have won for the NHS.
I qualify that welcome by making the point that, when we consider community care, we are not dealing only with the NHS, but with the ability of local authorities to provide care. In my area, social services are making cuts of about £5 million this year in addition to £6 million last year and that is happening across the country. My hon. Friend the Minister knows that and what its impact will be on people's ability to obtain services within their own home. Therefore, it is not only my hon. Friend, but his colleagues in other Departments and the Treasury, who ought to be aware of the implications of the current spending restrictions. The needs of carers in particular are directly affected by problems at local authority level.
I make a plea that we should look radically at introducing different models of care. We should do what other countries have done and have a fundamental shift away from the emphasis on institutional care for elderly people. I do not want to end up in wall-to-wall geriatrica in my old age; there should be something different to look forward to, even if I need care. There are models on offer that are preferable to that sort of approach to care of the elderly. For example, Denmark made the provision of care homes illegal in the 1980s because putting people into institutional care is deemed a diminution of human rights. Following the point made by the hon. Member for Sutton and Cheam, let us look at housing models of care provision, because that is surely the way forward, even for people who need a substantial amount of nursing care.
I hope that the long-term care commission will be looking at that issue, but I ask my hon. Friend the Minister to study the possibility of introducing sheltered and very sheltered housing models where, instead of people paying huge care costs from their capital, which uses it up, they can invest their capital in assisting with care provision, so that, when they move on or die, there is some capital left apart from that which has been used to benefit themselves and others during their time in those sheltered establishments.
Finally, there is the question of boundaries. Without pre-empting the Select Committee's conclusions on the boundaries between the NHS and social services, I have to say that the current arrangements are unsustainable, wasteful and extremely expensive. When I look at my local social services departments and community health trust, I, as the local Member of Parliament and as someone who worked in social services for donkey's years, cannot tell my constituents the differences between what they do because they cover the same functions. I cannot understand the reason for having two separate bureaucracies doing the same job, and I hope that the Minister will look radically at those issues and challenges.
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I urge hon. Members to view the care of elderly people in policy terms through our own vision of what we would like to be available for ourselves when we reach the stage of requiring care. I would not want for myself what is currently on offer, so I hope that, over the next 10, 20 or 30 years, my hon. Friend the Minister and his colleagues and successors can achieve a radical transformation that humanises the care of elderly people along the lines that I and the hon. Member for Sutton and Cheam have suggested.
11.39 am
Dr. Evan Harris: I also congratulate my hon. Friend the Member for Sutton and Cheam (Mr. Burstow) on securing this debate. I am pleased to see that the Minister is in his place. I think that everyone recognises that he has made an energetic start to his portfolio responsibilities. He has visited my constituency and the city of Oxford on several occasions, and was well received. The fact that we may cross swords on policy and funding matters from time to time does not mean that I doubt his ability or the high levels of energy that he expends. I also commend the hon. Member for Wakefield (Mr. Hinchliffe), the Chairman of the Health Committee. We hope that he will do such a good job as Chairman that the Government may indeed be tempted to try to move him on.
I am particularly pleased to speak in this debate as I have tried, without success, to secure my own Adjournment debates on social services in my local authority of Oxfordshire and on community hospitals. Oxfordshire county council received a very bad settlement in terms of grant, standard spending assessment for social services and capping limit. Oxfordshire also faces the closure of community hospitals, including the loss of beds at Abingdon community hospital in my constituency. My cup runneth over today, as I have just heard about cuts of up to £12 million to Oxford university funding. That falls outside the scope of this debate, but it seems to me that such bad news stories happen all at once and usually in groups of three.
I shall examine the funding problems of Oxfordshire county council as it is a good model for the conflict and tension between the provision of satisfactory local authority social services care for the elderly and its impact on the health service, particularly in the form of pressure on acute beds. All authorities have stories to tell about the false economies that underfunding of local-authority-provided social services care can cause in the acute sector.
The cuts facing Oxfordshire county council in social services alone amount to £5.55 million—or 7 per cent—this year. Those cuts will effectively mean reduced services in family centres, which support families with young children. They are important preventive measures that help to avoid children being at risk. There will also be cuts to respite centres that offer the carers of multiply disabled children a much-needed break, allowing them to spend time with their other children or simply to have time to themselves.
Cuts in the number of social workers for children and families and for disabled or elderly people across the county will mean delays in assessment, and therefore delays in finding placements and delivering care. Elderly people in residential homes in Oxfordshire will no longer

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be entitled to a reduced charge for their first four weeks. The charge for transport, meals and service for those attending day centres will increase to a flat rate of £5. Charges for relief for carers will be increased—Oxfordshire is no longer able to offer even a few hours relief per month free of charge.
Charges are being introduced for day care for clients with learning disabilities who live at home. The mental health budget, which is already small and overstretched—as it is in many parts of the country, in our shires and inner cities alike—will be cut by 9 per cent. That will mean more cuts in day care for a group of people who desperately need somewhere to go during the day. The food subsidy for meals on wheels will be discontinued, leading to a price increase from £1.40 to £2.10 per meal. Charges for domiciliary laundry will also be introduced.
I shall deal in a moment with the financial causes of what has happened, but we must ask whether the changes are the result of a political decision or whether the county council was forced by circumstances to introduce them. I can inform the House that the cuts were agreed by the Liberal Democrat and Labour groups on the council. The Conservative group disagreed because it wanted to take yet another £1 million from social services for political reasons.
We must recognise—as the Liberal Democrat and Labour groups did—that those people who use social services are less well able to organise campaigns of the kind that are launched in an attempt to save local libraries or museums or to prevent teacher sackings. There is great concern that the most vulnerable people in areas such as Oxfordshire will have to pay the price of the Government's adoption of flawed and insufficient Conservative spending plans for this year and next.
The funding increase for the county council, at 3.1 per cent., is inadequate even to cover inflation and added duties. It takes no account of the demographic changes that have resulted in rising cost pressures. The number of elderly people in the area is increasing. In discussions such as these, we often regret the fact that there are more elderly people needing domiciliary care. However, we should welcome that fact: it is a sign that the health service is succeeding, that public health measures are improving, and that people are living longer in retirement. We hope that people's retirement will be happy, but it will not be if they fail to share in the country's increased wealth and the growth in the economy. The welfare state and social services support should grow accordingly: people should not suffer cuts to services affecting them and their loved ones who may be ill.
The increase in funding for Oxfordshire—I know that this applies to many other county councils—was not sufficient to cover the increase in the number of children, particularly children with special needs, in the area. Cutting children's services and support for at-risk children will have repercussions in the form of disruption in class, for example. The county simply will not be able to achieve the education results that the Government and the Liberal Democrats wish to see in our schools.
Unfortunately, despite every councillor being elected on a platform of not cutting services and raising local taxes, it was not possible for the county council to increase resources and thus avoid cutting social services
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for local council tax payers. I have received many letters criticising the fact that the county council is still capped and so must cut social services support and care in the community. I have received as many letters from people who are distressed that, under the new Government, cuts in social services provision are the same as before—if not worse.
In many care areas, it is not good enough for the Government to have said, "Things can only get better." It is not right to deprive democratically elected local authorities—which in Oxfordshire received a 100 per cent. mandate on the day of the general election for this—of the ability to raise the funds necessary to preserve existing services when the Labour party stood on a platform of seeking to protect and enhance such services.
Mr. Nicholas Winterton: Does the hon. Gentleman believe, from a professional point of view, that there was an adequate transfer of resources from the national health service to social services? The hon. Member for Wakefield (Mr. Hinchliffe) made the point that social services had to assume huge additional responsibilities for functions that were previously provided by the NHS. Does the hon. Gentleman believe that there was an adequate transfer of resources to enable local authority social services departments to undertake those important responsibilities?
Dr. Harris: No, I do not think so. We are now entering the sixth year of the special transitional grant. However, the scale of funding is not enough. I had intended to address that point later, but I shall tackle it now, as the hon. Member for Macclesfield (Mr. Winterton) has helpfully introduced it.
It is not acceptable for the Secretary of State, in an article in The Daily Telegraph, or for anyone else, to claim that community care has failed when many hon. Members feel that it has never been tried—because it was never funded adequately by the previous Government. It was unfair to expect social services to cope, particularly with elderly people leaving NHS care and long-stay hospitals and the mentally ill leaving asylums.
Mr. Hinchliffe: It is important to clarify the Secretary of State's comments in the article, which I read. He was talking specifically about the perception, in relation to mental health, that there were people within the community who were a danger to themselves and to others. The Secretary of State said not that community care had failed but that serious questions remained as to whether, in order to secure the safety, health and well-being of those people and the community, they should have the option of acute psychiatric provision locally.
Dr. Harris: I am grateful to the hon. Gentleman for explaining the Secretary of State's comments. The Department of Health also issued clarification following the publication of the interview, explaining that the emphasis should be on those few tragic cases—which I fear may always occur—involving assaults and occasionally murders in the community.
Since my election, a community care patient has murdered a family in Abingdon in my constituency by burning down a house. There was also the well-known

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Newby case in Oxford. I have read the reports at length. Although they raise questions about adequate communication between the multiple agencies involved—particularly with regard to housing in the Abingdon case—there was a clear problem of underfunding, including in the acute sector. People are pushed out of care extremely quickly in order to free up beds because occupancy levels in the acute sector are well over 100 per cent. in many mental health wards. Hon. Members will recognise that figure.
There are also inadequate resources in the community to keep an eye on people and give them support. The Government will soon have to decide whether community enforcement orders, under which people are supervised and forced to take medication, are the only way out of the problem. I express no view on that, as this is not the appropriate time at which to do so. But no one wants to go back to the days of asylums. Where the changes have worked and have been adequately funded, they have been welcomed.
In the case of Oxfordshire and many other counties, the root cause of the funding pressures facing the county council this year and next has been an inadequate settlement and an inadequate standard spending assessment for social services, which increased nationally by only £91 million, even before inflation and demographic changes were taken into account.
The blame for that does not lie entirely with the Government, because they were wedded—wrongly, the Liberal Democrats believe—to Conservative spending plans, which were a catastrophe for social services. The Government suggested that things would get better after the election, but in Oxfordshire we shall have to wait until the year after next—if then—for things to start being turned round.
That, sadly, will be too late for many people, who will suffer now. When we speak about cuts in care for elderly and vulnerable people, we ought to remember that those people may well die, and will certainly have a reduced quality of life, if they do not get adequate care.
It is difficult for people in my constituency to understand why, in order to fund the commitment not to increase taxes on the wealthy, the most vulnerable—the users of social services—must pay. The two pledges—to improve services and save the NHS, and not to raise taxes—are incompatible. It cannot be done.
I shall deal now with the interaction between care in the community and the health service. There are two problems. The first is the media's concentration on the acute sector in hospital care. Politicians of all parties may be to blame, as the best proxy that we have for measuring how the health service is performing are waiting list figures.
Those figures are flawed, because they do not take account of the time spent waiting for the initial out-patient appointment, the time taken for investigations and then the time taken to see a surgeon, perhaps, to get on the waiting list. They are also flawed because, for many operations that used to be offered, such as those on uncomplicated varicose veins, which used to have a long waiting list, the waiting time is now infinite because the operation is not available. The result is a fiddling of the figures, not necessarily deliberately, by health services that are reducing the number of operations offered.
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Waiting list figures are nevertheless a useful proxy for measuring the health service. Because of that, we tend to concentrate on them—certainly, the media do—at the expense of everything else. Extra effort is put into reducing waiting lists—I understand that there is to be a statement this afternoon expanding on that, as we heard on the radio this morning—but we must ask whether additional resources might be better spent in community care, perhaps to free up beds in the acute sector so that waiting lists can be tackled.
The second problem is the concentration on crisis management in the health service. Money announced in July last year is allocated in November last year to be spent by April this year on avoiding a winter crisis. As any business person or any good public service budget manager knows, money can be spent far more efficiently and to far greater good if notice is given that it is coming and the time constraints are not so tight.
However, we recognise that many innovative schemes were produced by the winter pressures money. Anglia and Oxford health region got a good share of that funding and, by working with the social services departments of all the local authorities in the area, put in place some excellent schemes, such as the hospital at home, step-down care and increased support to stop people being admitted in the first place.
The question is what will happen next winter. Will that funding be continued? I should be grateful if the Minister could tell us whether it will be recurrent or whether there will be a similar exercise next winter, which will not be as efficient as allowing social services some extra funding to pick up the costs of people who have been moved into their budgets in the residential care sector with the winter pressures money.
The pressure on emergency admissions is no longer just a winter phenomenon; it exists all year round, because social services are failing to cope all year round. When we do not offer support for carers, there is an increase in emergency admissions. In hospital parlance those are called social admissions. That is a poor term. In my experience as a hospital doctor, those are people who desperately need to be seen and desperately need treatment, but they are there because they cannot cope with their home circumstances.
Delayed discharge is another aspect of the problem. The figures show increases in delayed discharges, despite the extra money for winter crises.
Liberal Democrats propose a lifting of the cap in local authorities to allow local people democratically to elect authorities to spend money on social services and care for the most vulnerable. We also propose that some health service money should be spent directly on community care, to relieve the pressure on the health service and improve community care.
In a spirit of co-operation, I offer the Minister some ideas about how the welcome extra money allocated in the Budget might be devoted to community care, not only to improve services there, but to save money and create space in the acute sector by tackling the waiting list problems that were inherited from the previous Conservative Government and exacerbated by the adoption of that party's spending plans.

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Unlike other Opposition parties, the Liberal Democrats always present an alternative Budget. Over and above the sum that the Government have allocated this year, we allocated additional money from cyclical surpluses to the NHS, so that an extra £250 million would be spent on three areas.
The money should be used to save community hospitals that are currently under threat in Oxfordshire, Essex, Cornwall and other parts of the country, as the Minister knows from previous Adjournment debates. Those community hospitals can work with social services to provide good community care through the three Rs of community care: recuperation, rehabilitation and respite care.
People who have had their operation can be moved out of busy, noisy, intensively nursed acute wards into more appropriate local care near their families to recuperate before going home. If they need rehabilitation, they can receive physiotherapy or occupational therapy and their houses can be modified while they are in a cheaper bed in a community hospital. Respite care can be given for one in four, six or 10 weeks, according to need, to enable carers to cope more easily and to reduce emergency admissions.
We want more money to be allocated to community care for mental health to take the pressure off the acute sector in mental health, and we want more care for carers, perhaps through specific targeted funding and by implementing the recommendations for the assessment of carers' needs, as laid down in the Carers (Recognition and Services) Act 1995, which has never been properly funded.
By giving more resources to social services departments in local authorities and to the NHS for spending in the community to release money in the acute sector, we can give the elderly and vulnerable people in Oxfordshire and elsewhere the care that they deserve.
11.57 am
Dr. Julian Lewis: As a new Member, it has been a privilege for me to hear for the first time the hon. Member for Wakefield (Mr. Hinchliffe) speaking on a subject on which he has a fine reputation in all parts of the House. If I understood his argument correctly, he said that we should move more in the direction of community care in the long-term treatment of the elderly, much as we have already done in the long-term treatment of the mentally ill.
As some hon. Members present will know, I was fortunate enough to introduce a Mental Health (Amendment) Bill when I was drawn second in the private Member's Bill ballot. I shall refer briefly to three categories of people who are affected by community care for the mentally ill: people who may kill; people who need what might be termed "a periodic MOT"; and people who need a place of refuge.
On his thoughtful speech, the hon. Member for Oxford, West and Abingdon (Dr. Harris) was a little too glib when he attributed to shortage of resources the problem of homicides committed by people released from psychiatric institutions into care in the community. I am sure that he does not mean that generally, because it is certainly not true.
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It is a little strange that people are prepared to take chances with the lives of citizens by releasing people into the community, knowing that there is a significant risk that they may harm others—often members of their own families. By contrast, if one applies the same argument to the capital punishment debate, it is often said that one must not risk accidentally executing one innocent person, even if it means that 99 guilty people escape the gallows.
That shows a slightly different sense of values. There seems to be a complacency about taking the risk of releasing potentially lethal people into the community, but none about taking the risk of accidentally executing someone who is innocent. I am sure that the families of those who have been killed by people who were wrongly released into the community would have a lot more to say on that subject.
One must not throw the baby out with the bath water as one moves in the direction of community care for people who need a periodic MOT. There are people who suffer acute suicidal depression which cannot be coped with through care in the community alone.
There used to be a system which I understand—I am not an expert in this field—was known as "the revolving door." The idea was that people would be encouraged to live their lives normally in the community as far as possible; but, when they felt a crisis coming on, there would be an institutional facility available for them—to give them an MOT, to give them a service, to get them back on track. Then, perhaps, they would not require any more in-patient treatment for another three or four years. That process could continue steadily for the rest of their lives.
I am concerned that the shift towards community care and away from institutional treatment for people who are mentally ill, creditable though it is in general, has deprived such people of the facilities they need from time to time to keep themselves on the straight and narrow.
I refer now to the people about whom I was concerned when I introduced my private Member's Bill, which, sadly, was talked out in five and a half hours of precious parliamentary time, perhaps to little avail, on 12 December last year—people who need a place of refuge. It is often said that there are insufficient beds for people who suffer acute psychiatric breakdowns. That is not necessarily the case.
The problem is that, as a result of the mass closure of institutions, such beds as remain are not sufficiently compartmentalised between different people with different mental illnesses. Even where a bed is available in a psychiatric unit for someone who is suffering from an acute psychiatric, potentially suicidal, breakdown, the GP, or other medical officer in charge, will not want to recommend that that person takes it if he or she will thus be placed in an environment with seriously disturbed people, which could only harm rather than help his or her condition.
I hope that the Government will think again about blocking the Bill that has been reintroduced in another place by Lord Rowallan. I am pleased to say that it has been given the Second Reading there that it was denied in this House. I hope that the Government will think ahead a bit more about creating a strategy whereby those who, from time to time, need admission to a psychiatric unit can have a bed there to enhance their condition, not to make it worse.
12.3 pm
Mr. Patrick Nicholls: I congratulate the hon. Member for Sutton and Cheam (Mr. Burstow) on his choice of subject for debate. He and I might have slight differences about solutions in given circumstances, but nobody could criticise him for having introduced the debate or the manner in which he did so.
The debate so far has been characterised by an understanding—I hope that it will continue in the time remaining—that, although we may disagree from time to time on how to achieve a given end, it is, as the hon. Member for Wakefield (Mr. Hinchliffe) said, ultimately about ensuring that our elderly people receive the care that we expect and hope for. That aspiration is shared by hon. Members on both sides of the House.
When I was preparing for the debate, I recalled having seen many years ago a rather dramatic advertising poster in the maternity unit of a hospital in Exeter. It struck me as rather apposite. It said, "The first seven days are the most dangerous in your life", and some wag had written underneath, "And the last seven are not devoid of hazard." In a sense, that is where I am coming from.
The hon. Gentleman made it clear that, although this is a wide-ranging debate, he wanted to talk about care of the elderly. I shall say a word or two about that as well. We are, after all, living in a greying population. The figures are dramatic. Between 1951 and 1996, the proportion of the population aged 65 or over increased by 66 per cent. The number who are 75 and over has increased by a dramatic 136 per cent.
At present, there are some 10 million pensioners in the UK. Eighteen per cent. of the general population are over pensionable age. Two thirds of those who are over 75 are women and more than three quarters of them are aged 85 and more. In 1993, a man of 60 could expect to live for another 17.8 years and, inevitably, a woman 21.9 years. Old people account for some £20 billion of spending in health and social services every year. Nobody need be in any doubt that we have a greying population, which imposes obligations and concerns on us that were not foreseeable in 1950.
I was particularly pleased to hear the hon. Member for Oxford, West and Abingdon (Dr. Harris) pinch one of my lines. One often hears about this, and it is often presented as a problem, but it is not. Not so long ago—certainly in our grandparents' generation—if someone was 50, their time was virtually up. These days that is not the case. If it were, several hon. Members in the House at the moment would feel more than nervous. It is good news that people are living so long. We are in the business of trying to ensure that they live for as long as possible and that they have a good quality of life for as long as possible—one that we would enjoy.
What people want when they consider care in their old age is affordable, quality health care. They do not want their hard-earned savings, for which they may have worked all their lives, to be gobbled up in their last two or three years. After a life in which they may feel that they have achieved some modest material success, they do not want to have nothing to leave to their children. There cannot be an hon. Member who has not had experience of difficult cases about where the money is going. Sometimes the concern is felt every bit as much by those who will not be able to leave something as it is
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by those who think that it is not right that they will not inherit. Those are the two principal considerations that must be dealt with.
To some extent, community care for the elderly has grown like Topsy; we have not had a firm policy, it has just occurred. We have heard about the way in which community care has developed and about the changing role of local authorities. The Government are to be complimented—I say this quite straightforwardly—on having set up in December the royal commission to examine the short and long-term options for sustainable funding for long-term care for elderly people in the UK, both in their own homes and in other settings, and within 12 months to recommend how and in what circumstances the cost of care should be apportioned between public funds and individuals. That is a succinct statement of what the commission will examine.
The commission has yet to report, so it is early days, but has the Minister had any preliminary thoughts on the matter? He shakes his head slightly, but he must have had, because he has announced a number of other initiatives, for which I commend him. I hope that he will say something about the composition of the commission, under Sir Stewart Sutherland, which represents a roll call of the good and the great. The Minister will know that certain groups, such as care providers, charities and lobbying groups, are anxious because they are not represented on the commission.
Private sector providers of residential and nursing home care are worried that their voice may not be heard in the commission. Barry Hartley, chairman of the National Care Homes Association, said:
"We are extremely disappointed that there is no representation from the private care sector on the Commission or of care practitioners. The private care sector has a wide ranging knowledge of how the current system works and it also has experience and expertise of the funding of long term care which may well not be available elsewhere."
We must take that on board, because it addresses head on the worries of the hon. Member for Wakefield about trends under the previous Government.
I thought for a moment that he had not realised that the Conservative party was no longer in government. I share his confusion, because it takes a while for such things to sink in. I do not intend to attack the Minister yet, because he has not been in post for long enough, but he must say how he sees the future. I understand where the hon. Gentleman was coming from, but do not entirely agree with him. However, I agree with him on some issues.
We would all like to stay in our own homes and among our families for as long as possible in old age, but that will not be an option for everyone. The hon. Gentleman used the word dogma. We should not be dogmatic and say that local authorities should provide care because it is wrong for the private sector to make a profit from it. I do not have the slightest interest in who provides care; I want to ensure that the best care is provided.
Mr. Hinchliffe: The hon. Gentleman misunderstands my point, which is that privatisation of care has led to people taking a limited view of the models available. The private sector has shown a lack of imagination, which is not to say that all private care homes and nursing homes are bad. They offer extremely backward models, and I am

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surprised at the lack of exciting policy development, given that the sector is desperate for challenges such as I have proposed.
Mr. Nicholls: I am grateful for the hon. Gentleman's clarification, which shows that our views are not so far apart. I accept that people should stay in their own homes for as long as possible. Some people, wrongly but sincerely, feel uneasy about transferring community care from the local authority sector to the private sector.
Mr. Burstow: Does the hon. Gentleman think that the bias in the market is a problem? Community care in the home—domiciliary services—costs more than residential care. Surely there should be a level playing field.
Mr. Nicholls: It costs what it costs. Community care is not cheap, but people will demand it if it is the right option. The Government of the day are responsible for its delivery, or for explaining why it is not being provided. Some people think that private sector provision of residential accommodation is wrong.
My mother was a matron for Devon county council, so I have probably spent more time in part III residential accommodation than any hon. Member. Her last appointment was to a purpose-built state-of-the-art old-people's home. I lived there for a time and have no criticism of the standard of care provided. We could compare private sector and local government sector facilities, but it is quality of care that is important. There would be more money to go round if care could be provided more cheaply, and I would not object if it was increasingly provided by the private sector. How does the Minister view the development of private sector care?
Mr. Ivan Lewis: I seek clarification. We all agree that quality of care, not who provides it, is the most important issue. A number of local authority homes closed when the Conservative party was in government, not because they provided care that was not equal to that provided by private sector establishments, but because financial arrangements for community and residential care were deliberately skewed in favour of the private sector so as to stimulate that sector and to disadvantage the local authority sector. Does the hon. Gentleman accept that decisions should have been made on the basis of quality, not on the basis of ideology?
Mr. Nicholls: I would agree if I accepted the premise—but I do not. Once local authority care was properly priced, we could find out what it cost. There are exceptions, but my experience in Devon is that private sector residential care is less expensive than local authority care. Some people are more comfortable in traditional part III residential accommodation, but they must have a choice. I think that I am at one with Devon social services department on that.
I was impressed by the remarks of the hon. Member for Wakefield about people finding it increasingly difficult to understand whether they or the state is responsible for their care. The Minister will correct me if I am wrong, but I understand that the problem stems from the inception of the welfare state. Now, however, more people are more
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prosperous and are living for longer, so they are more likely to need care, but might lose their money by paying for it. Such people tell me and every other hon. Member, "I've paid my dues, I'm entitled to care."
The problem is that the national insurance system gives people the moral right to be looked after in their twilight years but does not provide the funds to pay for it. The Minister's petty brutalisms about not wanting lectures from Conservative Members are an engaging part of his speeches, but how will he deal with that problem?
A Labour Whip said to me the other day, "We are all Tories now." I am not sure whether that is entirely true. I am not referring to the hon. Member for Liverpool, Wavertree (Jane Kennedy). The aura of Toryism sits ill on a number of Labour Members but, ignoring his radical youth, it sits well on the Minister. I have invited the hon. Gentleman to visit my constituency and a hospital there. If he felt able to do so, he would see a number of things that might be relevant to today's debate and he would thoroughly enjoy that, but now we all want to hear—once we have heard the ritual petty brutalisms—how he sees the future.
12.19 pm
The Parliamentary Under-Secretary of State for Health (Mr. Paul Boateng): I have never been accused of delivering brutalisms that are petty, and I do not intend to begin today.
The less said about the speech of the hon. Member for Teignbridge (Mr. Nicholls) the better, but I certainly look forward to visiting his constituency. I shall arrange for a suitably equipped person to ride shotgun as I enter the heartlands of true Toryism.
The hon. Gentleman mentioned the lady Government Whip who had said, "We are all Tories now." I am assured by my hon. Friend the Member for Liverpool, Wavertree (Jane Kennedy)—who is sitting next to me, but who must of course be silent during the debate—that it was not her. I am asked to make that clear, and I do so, being one always to take the advice of my Whips—particularly that of my hon. Friend.
This has been a good debate. In many ways, it has been characteristic of what is meant to happen on Wednesday mornings. On Wednesday mornings, hard-working and committed Back Benchers are supposed to talk about the subjects that they know best, rooting their speeches in experience gained from their constituencies and their lives. All Back Benchers who spoke today did that, and the House owes them—especially the hon. Member for Sutton and Cheam (Mr. Burstow)—a debt of gratitude. The hon. Gentleman brought to the debate a depth of experience and commitment that was especially welcome.
I always look forward to the hon. Gentleman's many questions about incontinence and chiropody. Not only does considering those questions and reflecting on the answers—which I am required to do—pass the time during my journey between the House and my home; they highlight two critical aspects of continuing care, not least the care of the elderly. This Government are committed to opposing and combating social exclusion. In that context, issues relating to incontinence and chiropody are very important in practical terms. If there is no toenail-clipping service enabling an elderly person to go to the local newsagent, that person is being marginalised.

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The Government are concerned about the distinctions between a health bath and a social care bath. I know that those distinctions also concern my hon. Friend the Member for Wakefield (Mr. Hinchliffe), who performs his role as Chairman of the Health Committee in such a distinguished way. We have spent much time considering the matter, but it is not at the forefront of the mind of the person who is waiting for a bath and who wants his or her dignity to be protected. We must ensure that the interface between health and social care is more efficient. We are determined that the boundary should be managed properly and, later in the year, we shall produce a White Paper setting out our thinking.
Such boundaries will inevitably exist. That is the central aspect of reconfiguration: if, by the wave of a magic wand, we were to reconfigure health and social care tomorrow, a boundary somewhere would still have to be negotiated. We want to ensure that we manage the boundary better than we have in the past: that is why it is so important that the White Paper holds out the prospect of pooled budgets. When health and social care can be managed better by that means, it is one way forward—but only one way; of itself, it does not answer all the questions.
The effective pooling of budgets will be helpful and I know that many local authorities and people in the health care sector look forward to the time when they will be able to underpin their joint planning in that way.
Mr. Burstow: The Minister may be about to deal with the issue of conterminosity between GP consortiums and social services departments. What mechanisms will he introduce to provide incentives for coterminosity?
Mr. Boateng: We have made clear in the White Paper that we expect social care boundaries to be taken into account in the formation of primary care groupings, and we have no doubt that they will be. It should be recognised, however, that some of the good practice highlighted by the hon. Gentleman and others in any event involves social workers—whether in the statutory or the voluntary sector—working ever more closely with the primary care team.
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I was interested by what my hon. Friend the Member for Wakefield—backed up by the hon. Members for Sutton and Cheam and for Oxford, West and Abingdon (Dr. Harris)—said about the capacity of health visitors and GPs working in the primary care team to gain access to meals on wheels and other aspects of social care. We want that to be made easier. We need a structure that is patient-focused, empowering people to maintain their independence and giving them choice. We should be keen to provide better care and better outcomes for individuals. We need to be better at measuring what we do in terms of outcomes and the value that we add to the lives of vulnerable people.
In the few minutes that remain, I want to make a couple of points which, I fear, cannot do justice to the breadth and quality of the debate. We have made new resources available. For health alone, in addition to the £500 million announced in yesterday's Budget statement, £1.2 billion has been provided, including an additional £0.3 billion to deal with winter pressures. The hon. Member for Oxford, West and Abingdon should note that Oxford has done particularly well out of that. The good news is that much of the money that has been channelled through the NHS has gone to social services departments, which have used it to build on existing good practice. We are talking about establishing better systems for rehabilitation and recuperation and taking more care with multi-disciplinary assessments in terms of both admission and discharge.
I have mentioned the care of the elderly. This morning I attended a seminar, or conference, organised by the Alzheimers Disease Society. We examined the way in which we could, through joint working, better meet the needs of that particularly vulnerable group. I pay tribute to the ADS for its pioneering work in that sector. There is new money and local authorities and health authorities are learning to use it better, but we cannot be complacent—we must be constantly vigilant.
On mental health, of course, much needs to be done. My right hon. Friend the Secretary of State for Health has made it clear that he regards that as a priority. His remarks on care in the community and its failures were well received.
Mr. Deputy Speaker (Mr. Michael Lord): Order. We must now move on to the next debate.

Employment Agencies
12.30pm
Mr. Phil Hope: Thank you, Mr. Deputy Speaker, for giving me the opportunity to initiate this debate. I raised the problem of employment agencies in my constituency in my maiden speech some nine months ago, and it seems only fitting that we should debate the subject again after the excellent Budget of my right hon. Friend the Chancellor of the Exchequer.
I thank Corby borough council, local employers and schools in the constituency for their work to tackle the problem. I am keen to use this opportunity to describe the problems we face in Corby and to make some suggestions to the Minister of State of ways in which to tackle the issue nationally.
I agree with the words that the Minister spoke in Manchester earlier this year to the Institute of Personnel and Development, when he stated that the Government's intention was to promote skilled, adaptable and motivated employees. He said that the Government's concept of flexibility was qualitatively different from that of the previous Government. That meant that this Government believed that the work force should be adequately trained and continuously developed, and should receive guaranteed minimum standards, enjoy equality of opportunity, be fully involved in achieving business objectives and build their own feeling of job security in the process.
We in Corby share that view, and we are delighted that a review is taking place of employment issues and the employment status of agency workers. I hope that this debate will be an opportunity to contribute to the review that the Department is undertaking. However, the starting point is grim; we have a long way to go.
An employment agency supplies temporary workers to local companies. The Employment Agencies Act 1973 and the subsequent regulations govern their operation. However, working for an employment agency can be a nightmare.
A good example involves John, who was 16 when he worked for an agency. He used to do the twilight shift at a sandwich-making factory from 5 o'clock to 10 o'clock at night. He would go to school during the day and, at 5 o'clock, begin his shift. He would do that on Monday, Tuesday, Wednesday, Thursday and Friday—five nights a week. Not surprisingly, John did not do awfully well at school.
Jane and Sarah, two young women who are older than John, had an appalling introduction to the world of work when they left school. Over one 10-day period, the agency bus—which employment agencies use to pick up workers at 6 o'clock in the morning, for example—failed to pick them up for their assignment. During the same period, they were given a night shift for which they were totally unprepared; they were told simply to be there. One night, they were left to walk home from the factory because the agency bus did not turn up to pick them up. One evening, they had to work a 13-hour shift, which is simply unacceptable. They were promised compensation; that promise was broken.
Ann, a mature worker whose income was the only money going into the family, worked for four days on a five-day assignment, but could not work on the fifth day.
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Her contract said that she would be penalised for not turning up, and she was: by being paid only £1 an hour for each of the 35 hours that she had worked that week. Harsh penalty clauses directly affected her ability to feed her family. Frankly, the 1930s queue at the factory gate has been replaced by the 1990s queue for the agency bus.
House of Commons Library research estimates show that, nationally, there are some 10,000 agencies, covering every sort of employment. In 1995, it was estimated that some 880,000 people were placed in temporary jobs each day.
Mr. Andrew Reed: I particularly thank my hon. Friend for raising this debate today; 880,000 people is a significant number. Does he accept that there are examples of the problem in places such as Loughborough, where hotels that have not sold enough beds overnight send employees back home? Is that the sort of thing that he wants raised in the debate? Will that not ensure that we can raise the profile of those people, who have genuine commitments in terms of bills, but who are turned away from work each day just because there is not enough work for them on that particular day?
Mr. Hope: I thank my hon. Friend for that intervention. That is exactly the sort of problem that exists not just in Corby, but elsewhere. I dare say that, as we speak, the 1995 figure is getting worse. It would not be surprising if today, in Corby and throughout the country, more than 1 million people are going to work on an agency contract and not on a proper employment contract.
A 1997 survey by the Northamptonshire chamber of commerce, training and enterprise in Corby showed that 50 per cent. of medium firms had used agency labour in the past three years, and that 81 per cent. of large organisations had used such labour.
We estimate that nearly 3,000 people a year in Corby get work through one of the 20 employment agencies in a rather small town. Agency working has become endemic; it has become the norm for young people starting work for the first time. It has almost become the way in to work for most people seeking jobs.
There are reasons for that. Agency working is high in Corby—and perhaps elsewhere in the country—because of the diversity of its local industry, much of which is in the food processing and manufacturing sector. Many businesses in that sector have fluctuating work force demands because of changing markets, seasonal demands and so on.
Companies stopped using overtime to deal with those fluctuations, and began to take agency staff on poorer contracts to cope with those changes. Therefore, the pressure has grown in Corby for a largely low-skilled labour force, who are available seven days a week, work a variety of hours and can be hired or fired at will. We have now reached saturation point. Most of the workers—manual or skilled—have signed up with agencies, which means that they have cornered the market, and companies cannot get the labour they require.
The point about agency working is how exploitative it is. In Corby, working for an agency usually means no sick pay, no holiday pay, and poverty wages of £2.50 an hour. One agency boasted in an advertisement that it was the

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highest-paying agency in the area, at £3.75 an hour. Of course, there is no job security—a job one week, and no job the next.
Mr. David Drew: I welcome the debate that my hon. Friend has secured. May I share with him a problem that I had in my constituency?
One of my major employers signed an agreement with an agency and, over time, it decided that the people the agency had employed were worthy of being taken on permanently, yet the agency said that it had an agreement with the company, and refused to release those workers. Thankfully, pressure was brought to bear, and the agency eventually agreed that it would end its contract with both the company and the people with the agency; but it shows the problems where people are prevented from taking permanent jobs because of an agency's actions.
Mr. Hope: My hon. Friend is absolutely right. I have experience of exactly the same problem. Agencies charge what is called an introduction fee. If the agency worker is offered a permanent contract in a company, the agency demands a fee of about £300 to release the individual from his or her contract to take up the permanent contract with the company. That is a straight exploitative practice that we should try to end.
There are other forms of abuse. As well as having no sick pay or holiday pay, earning poverty wages and enduring those blockages to getting a permanent job, workers sometimes have to pay for their own factory overalls, or for cleaning them—all out of the poverty wages that they receive.
We also see confusion over responsibility for health and safety checks. Agencies are supposed to screen workers before placing them with food manufacturers or processors. However, the agencies' quality checks are not always as they should be, which can put at risk not only the agency worker but the consumer of the product that the company sells.
Bad practice, of which I have mentioned some examples, is rife, yet few agencies have been prosecuted, and even fewer closed. The regulatory framework of the 1973 Act is so minimalist that practically anything goes.
It is not only individuals who are affected; the impact on the local economy is profound. Agency work has created a culture which allows people to drift, in which work is not secure or well paid, and which stores up problems for the future. In Corby we are developing a low-wage low-skill economy; we even see people's skills deteriorating rather than improving as we would like them to.
That can lead to a downward spiral. Other employers are not attracted to the area because of the effect that bad practice has on the labour market, and we also see the depression of other wage rates because agency wage rates are low. There can be a climate of fear; I cannot emphasise that fact too much. Ordinary workers in the factories are threatened that, if they do not abide by what the company says, their jobs will be given to agency staff—and agency staff will not complain, for fear of being victimised and never being offered an agency contract again.
Young people, in particular, are victims of those circumstances, and a damaging culture affecting them is growing up. Their working hours are clearly interfering
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with their school work and educational performance. Older students working twilight shifts, and night shifts at the weekends, are lowering their educational performance and expectations. I believe that there is evidence that agency working can also be an incentive to truanting for younger children. In one school in Corby, the head teacher conducted a survey that revealed that 79 per cent. of the sixth form, and 39 per cent. of year 11 students, were working for employment agencies.
Those figures are huge, and they represent a desperately poor introduction to the world of work, because there is no proper training and no career path. I have seen evidence, which I have been exposing to the local press—I have also forwarded examples to the Minister—of abuse of the regulations governing under-age working, night working and so on.
Companies in Corby have complained to me about young people having the wrong attitude to work, saying that they do not have the work ethic that young people used to have. However, some companies are breeding that poor work ethic by using agencies that give young people the experience of starting work with poor pay, no job security, no loyalty and no prospects.
Families are affected, too. Families now relying on agency work rather than permanent contracts have to survive on low wages, and they cannot plan for the future, because of job insecurity. They have no income to cover for periods of sickness or holidays, or for children being ill, or even to save up for their pensions. They have no rights over their working hours, and no opportunities to progress and develop. I have seen examples of men and women who have been working for agencies for years. They may gain skills, but they do not gain the qualifications that they need to progress.
Companies use agency labour because they believe that it saves them money, and the problem of having to recruit. However, in Corby the 1997 survey showed that at least half the companies that used employment agencies were dissatisfied with the quality of people they were getting. That is not surprising. The over-reliance by companies on employment agency labour means that business efficiency suffers. The people they take on are, through no fault of their own, less reliable and less efficient. They also show less commitment—inevitably, because they are always being moved from one factory to another—and need greater investment if they are to progress.
Even more worrying is the impact on Government policy. The new deal for young people will be undermined if young people are excluded from the quality jobs and training on offer because they are taking up poor-quality agency assignments. Our "fairness at work" proposals will all be undermined if agency workers are excluded from the measures.
Our social exclusion strategy, too, will be undermined; wages will be low, insecurity will be high, and the general downward spiral of poor jobs, low skills and lack of personal development will get worse. That all reinforces an anti-learning culture that is the reverse of what we need to promote our social exclusion strategy.
What will be the role for employment agencies in future? At its best, the employment services sector has a significant contribution to make to businesses, by acting as a responsible partner offering a strategic contribution to human resource planning, and as a "best practice" employer of a flexible work force.

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However, a deregulated labour market that allows unscrupulous agency practices and businesses to flourish must be dealt with. We need action to control the cowboys who simply break the rules, as well as to deal with those who conform to the bare minimum standards. Crucially, the Government need to act to avoid the creation of a two-tier work force that would undermine the strategy for improving employment standards, and thus the nation's economic performance.
It is in the national interest that all parts of the work force have access to minimum standards of employment protection and benefits, and to training and development. Flexibility in business needs to be matched with responsibility.
I have some suggestions about the way forward, to which the Minister may consider responding. I believe that we need a comprehensive audit of what is happening in employment agencies. I have already given some figures, but the Department of Trade and Industry workplace industrial relations survey of 1997 will focus on people employed as the staff of an employment agency but not on the hundreds of thousands of people who are taken on on agency contracts.
There is an urgent need for a review of the scale and impact of employment agency working on families and communities, on the economy and on the implementation of wider Government initiatives. I ask the Government to consider undertaking that audit. We could use the skills and resources of the health and safety inspectorate, or perhaps of the local trading standards officers, who in Corby have been helpful in raising awareness of abuse. Perhaps we could use the Audit Commission. We have the resources, and we could do a comprehensive survey.
We should extend legal protection to agency workers. That should be a vital part of our strategy. I ask the Government to consider ways of applying the new legislation already planned, in such a way as to help agency workers. For example, the statutory minimum wage would, at a stroke, reduce much of the abuse of agency workers. The European directive on part-time workers' equal status, the working time directive, the young workers directive and the social chapter, taken together, could help to deal with the problems.
We are looking forward to seeing the fairness at work legislation on union recognition. There are examples of agencies such as Manpower, which is a national employment agency with a properly negotiated recognition agreement with the Transport and General Workers Union. Perhaps we could ensure that employment agencies are included within the ambit of the recommendations. We should certainly seek to outlaw zero-hours contracts.
Even that will not be enough. The current regulations under the 1973 Act, which is now 25 years old, specifically do not include terms or conditions of employment. In practice, anyone can walk in off the street, put a board up in a shop window and start an employment agency. Such cowboy agencies are giving the better agencies a bad name.
I believe that it is in the interests of the good agencies to have a proper system of licensing, standards and regulation. I ask the Government to consider developing
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new standards of operating guidelines to regulate the industry, drawn up in consultation with all the relevant organisations.
Let us see some operating guidelines that cover wages, statutory sick pay, holiday pay, guaranteed minimum hours, proper job descriptions, parental leave and union recognition, as well as outlawing harsh penalty clauses and introduction fees, and making training an essential part of an agency contract. They should also provide for reference checks to ensure that young people are not working under age, and that, if young workers are at school, the school is fully informed about the work they are asked to do.
We need to take forward a variety of strategies. I should like local authorities to follow the example of Corby borough council, which is leading the way locally in drawing up fair employment charters in collaboration with local businesses and employment agencies. Perhaps local authority trading standards officers could be given the function of monitoring and enforcing the law and the regulations, and of promoting good practice.
Could the Government encourage businesses to recruit young people as permanent staff through the modern apprenticeship system, rather than as agency workers? Perhaps we could encourage more businesses to make their production plans more effective, so that firms can have a trained, flexible work force committed to one company. We could also ask the Department for Education and Employment to publish guidelines for schools to combat the effects of agency working, and to promote a proper balance of work and study for students.
It is 25 years since the law governing employment agencies was created, and now we need new and modern employment laws for a new and modern Britain.
12.48 pm
The Minister of State, Department of Trade and Industry (Mr. Ian McCartney): I am grateful to my hon. Friend the Member for Corby (Mr. Hope) and to other hon. Members for raising the issue of employment agencies in the labour market and specific related concerns, both in their own constituencies and wider afield. In the time available, I shall try to deal with most of the points raised by my hon. Friend the Member for Corby. I undertake to write to him on the matters that I do not deal with in this debate—in which he has given a powerful and sometimes moving description of the world of work for many people in Britain who work in agencies.
Agencies play an important role in a well-functioning and flexible labour market, but some operators give the industry a very bad name. I shall take the opportunity provided by this debate to say something about that matter.
In Committee on the National Minimum Wage Bill, I said that agency working can provide legitimate access to labour markets. In the best examples, it can provide flexibility for employers and employees in the arrangements they make with one another. I do not oppose agency working or its growth in the labour market, provided that it is not used to undermine employees' access to basic minimum standards.
As my hon. Friend the Member for Corby said, a variety of problems can be experienced by agency workers, including low pay, lack of holiday entitlement,

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poor training and absence of sick pay. Some of the better agencies already offer workers those entitlements, but regrettably many do not. The Government have already embarked on our programme to ensure that all workers receive the minimum standards to which they are entitled. When I say "all workers", I include those who work for agencies.
My Department's employment agency helpline has received more than 10,000 public inquiries annually, about 10 per cent. of which are from workers who have experienced problems so serious that a formal investigation by my Department's inspectorate has been necessary. One third of the cases involved a failure, or an apparent failure, to pay workers correctly or on time. A further third of complaints investigated were either of a general nature, or involved issues related to the written terms of a contract or the lack of a contract.
In recent years, some agencies—such as ABC Contracting Services—have had a practice of putting workers on penalty-pay contracts, in which those who become sick or absent for other reasons are paid as little as £1 per hour for work they have already done. That is not an acceptable practice, or the type of behaviour that gives industry a good reputation. Such practices damage or destroy the industry's reputation.
Standards of a few agencies are unacceptably poor. Last year, for example, a complaint investigated by myself involved a worker who had been underpaid in the constituency of my hon. Friend the Member for Corby. Despite assurances that the matter would be corrected, the agency had to be approached by my Department several times before it eventually paid the worker the money that he was owed.
Such poor standards are simply unacceptable. My Department is determined to enforce the provisions of the Employment Agencies Act 1973 in agency standards, and we shall regularly bring prosecutions in magistrates courts to do so.
Two cases that were heard earlier this month included one in which the agent was both fined and ordered to pay a worker unpaid earnings, with interest, totalling more than £3,700. Another case heard this month involved a company illegally charging workers fees for work-finding services. A fine of £5,000 was imposed in that case for only two offences. Current prosecution levels are greater than at any time since the legislation came into force in 1976.
My Department can also apply for orders prohibiting—for up to 10 years—unsuitable persons from running agencies. The first six such applications were obtained during the latter part of 1997, and ranged from periods of three years to the 10-year maximum. Another seven such cases are currently before industrial tribunals. I can announce today that several more cases are in the pipeline.
In addition to investigating public complaints, my Department conducts proactive checks on specific concerns. We make periodic unannounced enforcement checks—sometimes targeted on agencies in specific towns—of agencies' compliance with the legislation. In Corby, on 9 December 1997, 20 such agencies were visited by a team of six of my Department's inspectors. Some of the agencies were found not to be complying properly with the regulations, and have been instructed to take corrective action.
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I make it quite clear to the House that the Government will not tolerate the type of worker abuse uncovered in such cases. Most reputable operators and trade associations, such as the Federation of Recruitment and Employment Services and the Agents Association, welcome our tough approach.
Other measures—such as introduction of the working time directive, which will be implemented by 1 October 1998—will ensure that agency workers receive three weeks paid annual leave. Agency workers will also, of course, be covered by the national minimum wage. Young workers, and agencies, will also be covered by the young workers directive.
Much of the regulatory framework applying to the industry is now 20 years old. Since coming to office, we have intended to consult on updating that framework. More resources are now being applied to the matter, and we hope shortly to publish a consultation document. I am sure that the views expressed in this debate will be considered in that consultation process.
The employment status of some groups of workers is another specific concern. Some employers have attempted deliberately to make employment status unclear, to avoid employment or other legislation. For some months, my officials have been reviewing employment status issues involving various groups of workers whose position is less than clear, including agency workers. The review is almost complete, and we shall shortly consider what action to take on the issue.
The practice of some employers to contrive in creating a bogus self-employment status—so that workers are denied their rights—cannot persist. Confusion in employment status is not only unhelpful to workers, but, equally important, costly for British business. Good employment practices—in which employers invest in training and education, and in skilling, upskilling and re-skilling—should not be undermined by poor employment practices in the workplace, in the labour market or in the provision of goods and services.
Employers require a level playing field in competition. However, as bad employers have been able to undermine the ability of good employers to compete by paying low wages, some employers have engaged also in contractual arrangements with their employees that are based not on improving service quality but on the downward spiral of poor pay, poor conditions and poor training, and on little or no investment in the work force.
Britain must have a high-value economy based not on the lowest common denominator of poor standards but on investment and the highest possible standards. Employers and employees have an obligation to each other. The employee has an obligation to the success of the enterprise in which they work, and the employer has a responsibility towards the employee. Partnership is the only way forward for successful businesses in the United Kingdom. The Government will respond to unfair competition that is based on unfair practices by providing minimum standards for all workers in the labour market.
The "Fairness at Work" White Paper will state our plans for achieving decent minimum standards at work while maintaining a flexible labour market and improving competitiveness. Central to the White Paper is the implementation of our manifesto commitment on union recognition. The White Paper's inclusion of other issues will be decided soon. We have considered many representations on those issues.

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Once the White Paper is published, I am sure that my hon. Friends will be assured that the Government—with industry and trade unions—are searching for a vastly different system of co-operation in the workplace, and want development not only of minimum standards of care and duty to employees but investment in the workplace that involves both employers and workers, to ensure the success of those companies.
Mr. Phil Sawford: I note and welcome my hon. Friend's statements that the regulations—which are now 20 years old—should be reviewed. The main issue is enforcement. My hon. Friend the Member for Corby (Mr. Hope) was correct in his constructive suggestions on how the regulations might be properly enforced. However, I think that a third aspect of the matter is dissemination of information—finding ways in which we can get the message explaining their rights to agency workers.
Will the Minister consider establishing an information programme, so that people working in agencies know where and to whom they can take their complaints if they feel that their rights are being breached? It is an essential part of the enforcement process.
Mr. McCartney: We already do that. That is why the hotline receives more than 10,000 inquiries a year from agency workers who want sound advice and assistance. In addition, on the implementation of the national minimum wage, significant resources will be made available to ensure that employers and employees know of their obligations and rights in respect of the legislation. Every time that we provide new minimum standards in the labour market, it will be our intention to provide information for employers and employees to ensure successful implementation of legislation. I thank my hon. Friend for his comments.
Any hon. Member who has evidence of potential or actual breaches of health and safety issues relating to young people working illegally in the labour market should let me know about it. The Health and Safety Executive will take immediate action to rectify the situation.
Mr. Deputy Speaker (Mr. Michael Lord): Order. We must move on to the next debate.

Street Furniture (Rural Areas)
1 pm
Mr. David Prior: I start by apologising for the rather prosaic title of this Adjournment debate on the Order Paper: the impact of street furniture on the rural environment. By street furniture, I mean the whole clutter of signs, railings, bollards, concrete kerbing, street lights, telecommunication masts, concrete traffic islands, raised roundabouts and the like, which have migrated remorselessly from urban areas, where they may be acceptable, to the rural environment, where they are not. As the Council for the Protection of Rural England has remarked,
"We must not abandon our rural landscape to death by a thousand cuts. It is not always the major attacks—the out-of-town shopping centres, the new dual carriageways—that do the most harm. The slow accretion of smaller alterations ultimately can be far more damaging."
I pay tribute to the Norfolk Society, the Norfolk branch of the CPRE, which first brought the issue to my attention in its excellent and graphic booklet, "Norfolk in Peril", which is subtitled "Halting the Destruction of our Countryside: Our Highways and Byways, an important resource that must be protected for present and future generations before it is too late". I also pay tribute to the Sharrington Society, which brought my attention to the construction of two monstrous new motorway-style signs, measuring 3.5 m wide and 3 m high on the A148 between Fakenham and Holt in my constituency. Sharrington now has six signs, all on the A148, and within a mile—all for a village of approximately 60 houses. The signs are clearly out of place in such a small village.
I am not wearing the mantle of Mrs. Snell of "The Archers". I am not against change for the sake of it; I am rather in favour of progress and of some enlightenment. The battle against street furniture and clutter is not one for prohibition. No one argues that road signs or adverts should be banned altogether. One argues for sensibility, tact, and above all, good design. Good design defies contempt, no matter how familiar it becomes. Bad design, overkill and bad siting, not standardisation alone, is the enemy. One has only to compare a new BT telephone box with an old one, look at a line of orange concrete sodium lighting poles or see a telecom mast on top of a hill to know exactly what I mean. We need designs for the countryside, not for urban environments. We must safeguard our local idiosyncrasies and character; that is what makes our rural areas special.
I shall draw an analogy with agricultural practices. Not many years ago, farmers were being encouraged to rip up hedges, fill in ponds, burn stubble, implement drainage schemes and plough marshes. Intensive production was the name of the game, and huge damage was done to our countryside and wildlife. Today, the pendulum has well and truly swung the other way. For that change we have much to thank my right hon. Friend the Member for Suffolk, Coastal (Mr. Gummer) for.
We now have sites of special scientific interest and areas of outstanding natural beauty; places such as the Norfolk broads have national park status; new legislation protects hedgerows; we have environmentally sensitive areas and nitrate sensitive areas. The Royal Society for the Protection of Birds and the National

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Trust have more members than all political parties combined. Most importantly, a massive countryside lobby is articulating the views of country people. Yet our highways and byways, which snake through our countryside—some 5,900 miles in Norfolk alone—seem almost completely unaffected. I shall cite four examples to illustrate my point.
The first example is the roadside verge. Road widening has destroyed many wide grass verges. Roadside hedges and trees have often been killed through damage to root structure and consequent water deprivation. There is no longer room for walkers, horses or cyclists to get off the road. Ironically, the widening and straightening of roads leads to faster driving, which calls for hazard warnings, white lines and speed restriction signs. Above all, country lanes have become less aesthetically pleasing. Experience tells us that, when new roads are built and old roads "improved", traffic expands to fill them.
The second example is roadside signs. Too many road signs damage the natural beauty of rural areas. One only has to drive down the Al2 in Essex, with its flock of advertising boards, visit Stonehenge, with its melee of road signs, or enter any of the smaller rural towns in my constituency, with town name, speed limit and "please drive slowly" signs, and lights and road markings, to see the damage that has been done. Such over-signing distracts drivers or encourages drivers to ignore the signs. Our villages look increasingly urban. Am I the only one to feel cross at all the byroad signs strewn across the county? They are out of context in the local area and unnecessary.
As one of my constituents pointed out, such new monstrosities were designed
"for the benefit of a driver of a 7.5 tonne vehicle with 90 per cent. sight disability."
The painted aluminium street signs on metal posts are in stark contrast to the traditional white cast iron and wood finger signs. Some brown tourist signs have effectively become roadside billboards—a means of getting around the ban on roadside advertising.
In Salthouse, a tiny coastal village in north Norfolk through which the coast road runs, there is an array of 58 highway signs and dozens of bollards in the space of a few hundred yards. In Sheringham, a lovely seaside town, one is greeted by a raised black and white roundabout surmounted by metal signs. There are numerous examples of grass roundabouts being concreted over, ugly concrete and metal railings around village ponds, and concrete flood pans over fords. They represent in aggregate all the paraphernalia of a people who seem not to care about or be in sympathy with the countryside.
The third example is lighting. There are increasingly few places in England where one can look up into the night sky to see stars in all their transcendental beauty without being suffused by an unwelcome orange glow, which emanates not just from towns but from more and more small towns and villages. What is worse, except perhaps electricity pylons, than columns of tall concrete posts, topped by orange overhead lights? The wonders of a starlit night are as important to many as the finest daytime view.
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My fourth example, on which I shall be brief as I am straying from the subject of the debate, is telecommunication masts and electrical transformers. Those ubiquitous and ugly developments must be subject to full planning permission with more public consultation, and mast sharing must be enforced rigidly where possible. I therefore welcome Cellnet's attempt to improve the design of masts through its student design awards and the fact that it is keen to promote more mast sharing as well as notifying local authorities and holding public meetings before making planning applications. However, the order concerning general committed development needs to be revised to give local planning authorities the opportunity to consult properly on intrusive developments.
Mr. Lembit Öpik: Does the hon. Gentleman agree that light pollution, especially in the countryside, is becoming a serious problem, particularly for Britain's thriving amateur astronomy industry?
Mr. Prior: I entirely agree with the hon. Gentleman. I want to make a few specific recommendations to the Minister, one of which picks up the hon. Gentleman's point.
First, the Government should publish a best practice guide on the design and siting of street furniture. The emphasis should be on minimising clutter and maximising local distinctiveness. Perhaps county councils could run local competitions. I hope that the countryside traffic measures group sees that as an important part of its role.
Secondly, planning controls should be extended to include the impact, siting and design of lighting. Why cannot lighting be traditional in design, be at a lower height, shine downwards and be a natural white, rather than a suburban sodium orange? There should be a presumption against new lighting on all roads. Perhaps the Government and local authorities should consider designating and protecting special dark areas.
Thirdly, the traffic signs regulation orders governing the erection of road signs and their supporting poles and structures should be revised to restrict the number of signs and reduce their visual impact. The environmental impact should also be reduced. A code of best practice should be published to encourage highways authorities to review the environmental impact of their signing policies.
Fourthly, new ways should be sought to reduce traffic speeds with minimal visual intrusion. For example, local authorities should have the power to impose a uniform speed limit throughout a village—possibly as low as 20 mph. Small country lanes could also be designated as quiet lanes. That would be a new category of road, with a lower speed limit than the current national 60 mph on A and B roads.
Fifthly, traffic calming schemes should make use of existing or traditional rural features, such as hedges, walls and bends in the road. Road straightening and verge elimination should be a last resort. Perhaps new research could be commissioned on safety. It is becoming increasingly clear that over-signing and road straightening are not having the desired effect. Indeed, in some cases they are having the opposite effect, as repetition reduces impact.

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Sixthly, national planning guidance on outdoor advertising should be revised to reduce visual impact. The areas of special control should be widened and the current proposal for relaxing advertising restrictions on local authorities should be dropped.
The Department of the Environment acknowledged the problem of clutter in its discussion paper in 1994, launching its quality in town and country initiative. The Department accepted that the
"design and use of roads, the impact of parking, signs and roadside furniture all affect the quality of an area."
It went on:
"The Government wishes to encourage traffic management schemes which show great sensitivity to the impact of a street on the local environment.…Everyone has a part to play…and local people can help identify surplus signs that;can be safely removed."
Some county councils are starting to recognise the importance of the issue. In December 1997, Norfolk county council published a booklet called "Highway Corridor", which states:
"In a county with a strong, rural character as Norfolk, roads are also an integral part of our perception of, and access to, the countryside.…The design of signing, kerbs, lighting and surfacing and realignments will all affect the appearance of the surrounding rural countryside as does the maintenance of roadside boundaries, trees and verges."
I strongly welcome the nascent co-operation of the Norfolk Society and the county council in the design process. I congratulate the county council on reverting to finger signposts in several instances.
I also congratulate Derbyshire county council, which has published an environmental code of practice on highway signs with the aim of creating
"a safe and well-managed highway while causing the minimum visual damage to the environment."
That has to be a step in the right direction, but we cannot rely on a few forward-thinking councils. Central Government need to set an example and bring pressure to bear on councils and the Highways Agency.
I welcome the fact that the Minister of Transport understands that countryside clutter "provokes howls of displeasure", and is determined that traffic management schemes should meet environmental as well as transport objectives. However, we need action, not rhetoric, from the Government. We need a change in the psychology in the Department. The mindset of the Minister's officials must be changed. It is ludicrous that signs on the new Wymondham bypass in Norfolk have increased in size—and, of course, cost. I was depressed to note, as I drove along the A140 from Norwich to Ipswich last weekend, that bigger signs are in preparation.
The Department of the Environment, Transport and the Regions should urgently review the size and design of all road signs and establish a presumption in favour of small, well-designed signs. My right hon. Friend the Member for Suffolk, Coastal started that change. There is a worry that the process has stalled. I hope that the Minister will be able to reassure us today.
I can do not better than to end almost where I started, by quoting from "Norfolk in Peril":
"One of Norfolk's greatest treasures has always been its remarkable network of ancient lanes and roads with their often narrow and winding routes; beautiful hedgerows and wild flowers;
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unspoiled verges and sheltering trees; the old discreet white direction signs; grass verged walkways and lack of urban concrete kerbs; and their unlighted beauty in a wonderful countryscape.
These lanes and roads are the envy of the world. They are relatively unique as they follow, in some cases, very ancient rights of way. Their hedges and verges have been the home to a wonderful and varied wildlife. Their very narrowness and winding nature have served during this age of faster modes of transport to keep vehicles at low speeds. Thus have the wildlife thrived and these ancient ways have, in their own way, created a calming influence on those that might otherwise be tempted to speed through the countryside but simply cannot because of these beautiful in-built and meandering natural designs for traffic calming."
1.15 pm
The Parliamentary Under-Secretary of State for the Environment, Transport and the Regions (Ms Glenda Jackson): I congratulate the hon. Member for North Norfolk (Mr. Prior). He had no need to apologise for or regret what he regarded as the dullness of the title of his debate. The issue that he has raised is of great importance. I am sure that all hon. Members have seen and been appalled by the consequences of ad hoc, unco-ordinated developments and decisions in the countryside.
The Government value the countryside highly as an environment in which people live and work and as one of this country's great assets. We are fully committed to the integration of environmental and transport issues at national and international level and at local level, as is well demonstrated in the topic that we are debating today. This is why we now have a Secretary of State for the Environment, Transport and the Regions, why we are developing an integrated transport policy, and why policy responsibilities for land use and transport planning have been brought together.
We have placed particular emphasis on the development of an integrated approach to transport and land use planning, traffic management and streetscape design in town and country. We have said that consideration of rural issues will permeate all our thinking as our integrated transport policy is brought together. That is why, among other measures, we are giving £50 million a year to rural transport, which will enable a substantial expansion in subsidised bus services in rural areas.
The Government believe that most of the day-to-day decisions that impact on the quality of the rural landscape must be taken locally in consultation with those affected. However, those decisions should be taken in the context of coherent policies and against a background of good practice.
We are actively encouraging good design in the countryside that takes account of the special character of a local area. Revised planning policy guidance note 7 reinforces that emphasis on maintaining and enhancing local distinctiveness. It promotes countryside design summaries and village design statements. Produced with the co-operation of local communities, they can bring greater confidence and coherence to design in a local area, and reinforce a high quality of design—a point that is clearly of particular importance to the hon. Member for North Norfolk.
On a practical level, the Department is a member of, and is actively supporting, the Countryside Commission's countryside traffic measures group—as is Norfolk county council. The group, which was launched last July, aims to take forward, in partnership with local authorities,

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demonstration projects that will investigate the extent to which local traffic management and traffic calming schemes can be effective in meeting their traffic objectives, while being designed with sensitivity to the countryside environment in which they are set, as well as forming part of wider traffic and transport strategies for a rural area.
The village speed control project—in which the then Department of Transport collaborated with the Scottish Office, Welsh Office and County Surveyors Society—showed that gateway features are not effective in achieving sustained speed reductions unless accompanied by additional traffic calming measures within the village. This highlighted the tension between the objectives of achieving reductions in noise and air pollution—as well as road safety improvements—through reducing vehicle speeds, and the direct, visually intrusive, effects of proven speed-reducing measures. The CTMG will provide the opportunity to discuss rural traffic management issues more widely, to share experience and to disseminate good practice.
We are bringing to this the lessons learned from working with the English Historic Towns Forum on the development of more environmentally sensitive traffic management measures in historic town centres. In particular. this exercise demonstrated the value of an interdisciplinary approach from all the professions involved in finding acceptable solutions where aesthetic and traffic management considerations are in conflict, and also the importance of consultation with all interested parties and the implementation of solutions that have the support of local residents and businesses.
Through research based on demonstration projects planned by the CTMG, we will examine and make proposals on the detail of design approaches and guidance which meet wider needs of traffic movement and road safety, while respecting the diversity and local distinctiveness of the countryside. The hon. Gentleman will be interested to hear that the demonstration projects include one to develop low visual impact and low-cost, traffic calming techniques on the A149 between Hunstanton and Cromer in his constituency. Other projects will be implemented in Cumbria, Devon, Hampshire, Suffolk and Surrey.
The Countryside Commission is also undertaking research to investigate a broad range of factors and how road use impacts on them and to identify suitable criteria for determining appropriate traffic calming measures in rural areas. A separate research project will be reporting soon on possible new and more sensitive approaches to design of traffic signs—I trust the hon. Gentleman will welcome that—other street furniture and road layouts.
A basic premise of the CTMG research will be that traffic calming and traffic management design solutions have tended to be applied too systematically and inappropriately in the countryside—a point made by the hon. Gentleman. In addition, the Countryside Commission is developing ideas for reducing the intrusive nature of traffic in the countryside and maintaining the tranquillity of rural lanes as part of a more holistic approach to traffic management.
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The results of all these studies are intended to produce researched recommendations on good design practice which will be made available to highway and traffic authorities generally. The hon. Gentleman raised in particular the issue of sign clutter. We agree that traffic signs should not be put up or left in place unless they are appropriate for safe and efficient traffic management.
We are currently updating and revising the traffic signs regulations so that traffic authorities can use sign designs developed for new traffic management purposes without having to get them specially authorised by the Department—for example, speed camera signs. We shall continue to remind local authorities that they have a statutory duty under the Road Traffic Regulation Act 1984 to have regard to local amenity in placing signs.
We have also reviewed the previous Government's proposals for further relaxations in the design and use of boundary signs. We have concluded that there is no safety or traffic management benefit in signing boundaries of shire district councils, and that we should not encourage a proliferation of unnecessary signs by adding district boundary signs to the traffic signs regulations. We recommend, whenever possible, that local authorities review and audit their signs as an on-going process to ensure that they are still relevant and necessary, and that they are clear, well maintained and achieving their intended purpose.
We published updated guidance last November on the principles of good sign design. Chapter 7 of the traffic signs manual includes examples of how to design signs effectively so that they are not larger than they need to be for the information they contain. It also points out that yellow backing boards can be useful in some circumstances, but that they can also be environmentally intrusive and may be devalued by over-use.
The point has often been made to the Department that 30 mph repeater signs through villages are visually intrusive. However, it remains true that drivers are unlikely to observe the speed limit unless it is clearly signed and reinforced by the general road environment. The village speed control project—to which I referred earlier—was set up specifically to address this problem. Repeater signs are, of course, not required if a system of street lighting is provided—but this in itself is a controversial issue.
Some lighting schemes can appear inappropriate in a rural village, but lighting may be needed to help pedestrians and cyclists to move about safely. Street lighting can also help to reduce crime, and the fear of crime, by improving personal security. We recognise that poorly designed and installed street lighting can be unsightly and can detract from the visual amenity of the area. Uncomfortable, distracting glare and wasteful light pollution can result, but good design practices can reduce or eliminate these undesired effects.
With this in mind, my Department and the Countryside Commission last year published "Lighting in the Countryside: towards good practice". We believe this guide will be a valuable tool in showing local planning authorities, professionals and members of the public the benefits of good practice in this area, and how to a Street chieve it. I trust the hon. Gentleman will welcome that.

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Achieving a high quality of design is particularly important for standardised equipment, which is a familiar part of the street scene in town or country. In sensitive locations, the design and siting of street furniture can be crucial in avoiding an impression of unnecessary or incongruous clutter. Others, including the Royal Fine Art Commission, have also expressed concern about this issue.
I hope I have made it clear that I am fully aware of, and concerned about, the issues that the hon. Gentleman has raised, and that my Department is involved in a continuing process of developing good practice initiatives and guidance in consultation with the local authorities and other bodies responsible for the visual appearance of the countryside.

Iran and Iraq
1.27 pm
Mr. Tam Dalyell: My credentials for initiating what I gather is the first debate in the House on relations with Iran for many years are that, in October, I spent 17 days on holiday with my wife on a bus tour of Iran, organised by the British Museum Travel Company. The tour leader, Raphael Marinello—who expertly led the visit—and Dr. Sheila Candy, the deputy director of the western Asiatic department of the British museum, would agree on the kindness and warmth shown towards us by the Iranian people. It was in no way an official visit, but I did get the impression that there was a good case now for dialogue. The demonising of Iran should be something of the past, and the fatwa and the difficult case of Salman Rushdie should not cut out negotiations with the new political leadership in Teheran. The more locked in we are to commercial relations, the harder it will be for the hardliners to wreck relations.
Against that background, I wish to ask my hon. Friend the Minister of State two questions of which I have given notice to the Foreign Office. What initiative to develop relations with Iran can we expect during the British presidency of the EU? Is a presidency visit to Teheran—for example, at political director level—contemplated? As regards the fatwa, have the Government recently invoked the help of any Muslim leader—for example, President Assad of Syria—at least to downplay that difficult issue?
I referred to my visit in October, and one of the things that would strike any visitor from the west was the war memorials in Tabriz, Hamadan, Kashan, Rashd, Isfahan, Shiraz and Yazd. Those war memorials are of first world war proportions, as 1 million Iranians were lost in that terrible Iran-Iraq war. No one has greater cause than the Iranians to loathe the regime of Saddam Hussein, yet they do not support the American-British military action that was proposed in certain circumstances.
The latest edition of Persia Update reported:
"The Leader said the US pursues a purely American agenda in its confrontation with the Iraqi government, and added that the US bears the responsibility for civilian victims of any military attack on Iraq."
I am glad to say that the Iranian attitude to the Americans seems to be softening—perhaps, after the football World cup, it will soften a good deal more, because, as we know, the two nations have been thrown together. We are at a moment in history when the traditional friendships between the British and Persian peoples might well be restored.
I come briefly to the question of the Shi'ites. I quote from the most recent edition of Dialogue, which is published by the Public Affairs Committee for Shi'a Muslims. It says:
"However, bombing Iraq—still a likely option despite widespread international revulsion"—
that is what it thinks; it is not what I think—
"would be both wicked and futile. It would be unlikely to achieve its goals, whatever they are, but it would dangerously destabilise the region. Healthy Iraqis and a self-confident Iraq are far more likely to bring down the regime. A regime as isolated and psychotic as Saddam's would find it difficult to cope with normal relations with the world."

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I ask, against that background, what progress is being made in New York in discussions with Iraqi authorities on the new British-inspired Security Council resolution to increase the sale of oil for food. If the Iraqi Government prove slow to accept the resolution, should we not aim to improve the conditions of the Iraqi people, as well as readmitting more Iraqi oil to world markets? Should not a European Union delegation go to Baghdad, to show the Iraqi people that the Security Council wants to help them?
In an article in The House Magazine of 9 March, my hon. Friend the Minister wrote:
"Meanwhile, we are looking at what we can do for the Iraqi people. Saddam Hussein's obstinacy in refusing to accept the Security Council demands, or implement properly the oil-for-food programme, has caused the Iraqi people untold misery. Following the Secretary-General's report to the Security Council on 30 January recommending the oil-for-food programme should be expanded, we again took the lead at the UN in drafting and negotiating a Resolution (SCR 1153), which more than doubles the amount of oil Iraq is allowed to sell to purchase humanitarian goods. The new figure is US $5.2 billion every six months. The programme has safeguards in place to ensure the benefits go to the Iraqi people and not the regime."
I suggest to my hon. Friend that, if we do not help specifically with the pumping equipment, the resolution will look like a false gesture. All those who have personal experience of Iraq will testify to the breakdown of vital equipment. I think that Ministers should hear what my hon. Friend the Member for Glasgow, Kelvin (Mr. Galloway) says when he returns from Iraq—he will have first-hand knowledge.
I refer to a question that I asked the Prime Minister on 16 March:
"pursuant to the oral answer of the Secretary of State for Foreign and Commonwealth Affairs of 10 March 1998, Official Report, columns 307–8, what criteria he will use to determine the extent of Iraq's compliance with the recent agreement between Iraq and the UN to allow inspections to take place; and if he will submit these criteria to the scrutiny of the French, Russian and Chinese authorities as members of the Security Council."
The Prime Minister replied:
"Security Council Resolution 1154 was adopted unanimously by the Security Council. All members agreed that further violations of Iraq's obligations under the relevant Security Council Resolutions and the Memorandum of Understanding signed in Baghdad would be followed by the severest consequences.
The question of Iraqi compliance will be dealt with in reports to the Security Council from the United Nations Special Commission and the International Atomic Energy Agency."—[Official Report, 16 March 1998; Vol. 308, c. 450.]
We should be clear about whether the British think that, with the Americans, they have the right, in difficult circumstances, to launch a military attack without going back to the Security Council. The Chinese ambassador to the United Nations and others have made definite statements that three members of the Security Council take the view that no military action should be taken without a clear, unambiguous decision having again been taken by the Security Council. In the light of what Marc Webber and other international lawyers have said, are Britain and the United States entitled under international law to let loose traumatic air bombardment without having returned to the Security Council?
The last time that I had an Adjournment debate to which my hon. Friend the Minister replied, I slightly overran, so I make only one further point. Like many colleagues, I sat through the Budget speech of my right
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hon. Friend the Chancellor of the Exchequer—it was, rightly and justifiably, proposed as a green Budget. I listened to everything that he said about carbon emissions and pollution, and I welcome the anti-pollution measures, including those on vehicles. However, compared with what could be done in western Asia to help the world's atmosphere, anything that we do in western Europe is entirely marginal.
One of the most striking aspects of my visits both to Iran in October 1997 and to Iraq in 1994 was the extent of the pollution and broken-down equipment. In Iran, oil refineries had had to be moved quickly from the Iraqi border to the area between—heaven help us—Shiraz and Isfahan, which created pollution in Pasagandai and Persepolis. Even if we do not take into account the ancient monuments, that is sad—the pollution in that part of the world is terrible.
If we are serious, as I believe we are, about saving the planet, it really is high time that we established fruitful relations even with regimes that we may consider rather less than perfect. I hope that, after Kofi Annan's visit and all that has happened, the tone of the dialogue between west and east becomes somewhat more dignified and that our approach to the Muslim world becomes friendlier. I end with the reflection that there are many, many moderate Muslims in this country who desperately want improved relations.
1.39 pm
The Minister of State, Foreign and Commonwealth Office (Mr. Derek Fatchett): I want to pick up on the concluding comments of my hon. Friend the Member for Linlithgow (Mr. Dalyell) about our relationship with the Muslim community in the United Kingdom and with the religion of Islam. We should avoid at all costs demonising any one religion in the world.
One of the tasks that I have set myself is to ensure that, whatever representations I make, I never fall into the trap of viewing the world as divided between religions. A small but, to my mind, significant event during the recent Iraq crisis was that, for the first time, we had a meeting in the Foreign Office with leaders of the Muslim community in the United Kingdom. I am determined that those meetings should continue and should take place not only during a crisis but as regular events that will give us an opportunity to understand each other much better.
Whenever I have visited the middle east and other parts of the Islamic world, I have taken the opportunity to stress the need for multi-faith co-operation. I had the pleasure of visiting the Sheik of Al-Azhar at Al-Azhar university, which was an important opportunity to make it clear that when we define issues in the United Kingdom, we never differentiate by religion but consider the basic values.
My hon. Friend spoke movingly about the war memorials in Iran and said that the 1 million dead constituted a tragedy on the scale of the first world war. That was a painful but apposite reminder of the scale of the Iran-Iraq war and of the number of lives that were lost—indeed, wasted—in those years.
Iran and other countries in the region have every reason to be fearful of an Iraq with Saddam Hussein and weapons of mass destruction. The Iranians, along with the Kurds, have experienced Saddam's use of chemical weapons. The war memorials graphically underline and emphasise

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the importance of the Security Council resolutions and the world's commitment to ridding Iraq under Saddam Hussein of weapons of mass destruction.
My hon. Friend has been vigilant on the matter, and I congratulate him. It is an important parliamentary function to ensure that there is proper questioning and debate on such issues. He has always made the point that he was opposed to the threat of military action in our dealings with Iraq. I want to put it on the record that I have never had any doubt that he is as opposed to chemical and biological weapons as anyone else. We differ not on objectives but on means.
My hon. Friend must consider how the Kofi Annan memorandum of understanding could have been achieved without the threat of force by the United Nations and the international community. That is the key question. We would all love the world to be able to take rational decisions.
If leadership were always rational, we would not have to deal with crises such as arose with Iraq, but the fact is that we were dealing with a leader who had invaded one of his Arab neighbours; who had used chemical weapons against his own people and the people of Iran; and whose violations of human rights and of traditional processes of international relations were well known to us.
Both in Baghdad and on his return to New York, Kofi Annan said that diplomacy can go a long way, but that diplomacy backed by resolution and force goes a lot further. That is surely a vindication of the position that we took, and poses starkly and dramatically to my hon. Friend the question of what would have happened had the threat of force not been available to Kofi Annan in his negotiations.
On his return to New York, Kofi Annan said that the British Prime Minister was a true peacemaker and peacekeeper for the United Nations. That shows what can be achieved by the intertwining of diplomacy with the threat of force. In international relations, force is sometimes a representation of our failure to achieve our objectives through diplomacy, but sometimes it has to be used or threatened.
We welcome the memorandum of understanding and hope that Saddam Hussein will adhere to the agreements and commitments that he has made, but Saddam's record of keeping his word does not suggest that my hon. Friend could bet on it with any confidence. On each and every occasion in the past, Saddam Hussein has broken the commitments that he has given to the international community. It is in the interests of the people of Iraq and of the wider region that he should keep his word on this occasion, and we in the international community have said that, if he does not, he will face the severest consequences.
There is no doubt about what that means. It is understood in Baghdad. To find excuses for any further breach would be beyond the imagination and wit of any defender of Saddam Hussein. This recidivist has been given so many opportunities that, if he breaks the current agreement, the international community's patience will well and truly have run out.
Last week, I visited Kuwait: a country and a people who know Saddam Hussein very well. People there know what happened when Saddam invaded their country seven
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years or more ago, and they are still extremely cautious, with good reason. They are also extremely grateful for the position taken by the international community and supportive of the position taken by the United Kingdom Government.
I saw our troops in Kuwait last week and took the opportunity to thank them for their contribution. They are living in trying and difficult circumstances, but nobody can doubt their commitment and professionalism. I am sure that I speak for the whole House when I congratulate them, and thank them for the work that they have done in their role as peacemakers and peacekeepers.
My hon. Friend raised some important points about the oil-for-food regime and the need to deal with humanitarian concerns about the ordinary people of Iraq. The fact that we are talking about the way in which Saddam Hussein has been able to pervert the oil-for-food humanitarian regime for his own purposes, rather than using it to feed his own people, is one of the most damning indictments of his regime.
We are determined that the ordinary people of Iraq should not be punished for the decisions taken by their leadership. They are not responsible for those decisions. Indeed, if they were to exercise what we would consider a basic human right and criticise the regime, their lives would be short. We know the regime's record. It is difficult for the people to criticise the regime or to contemplate a change of regime, because the risks are so great. They are clearly not responsible for the decisions of a totally irresponsible and out-of-control leadership, and it is our task to help them if we can. We are determined to do so.
My hon. Friend referred, kindly, to resolution 1153, which the United Kingdom, with consensus, steered through the Security Council. It more than doubles the amount of money available from the sale of oil and oil revenues for humanitarian purposes. We certainly welcome that, and will continue to encourage the process.
In addition, we have announced a European Union conference to look into ways in which we can get additional humanitarian aid to the Iraqi people—my right hon. Friend the Secretary of State for International Development made an announcement last week about additional aid from the United Kingdom to the people of Iraq. The conference is still in the planning stage and is an important initiative and innovation by our Government. However, whatever the European Union does, it is important that it supports Security Council resolutions and in no way contravenes them. Our role is to be supportive, not in competition or contravention.
Mr. Dalyell: Will the Government consider the critical question of pumping equipment, without which it might be impossible to implement resolution 1153?
Mr. Fatchett: My hon. Friend makes a valid point, which I understand. I have regular meetings with representatives of the Iraqi Opposition, and that is one of the points that they have made about the nature of the infrastructure in Iraq. We shall certainly take their points and that made by my hon. Friend into account.
This is a double-headed debate, so I shall now refer to Iran. I probably ought to congratulate my hon. Friend on his technique of opening up two issues in one debate, which shows great parliamentary skill and diligence.

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He made some important points about our relations with Iran and asked a number of detailed questions, which I shall come to.
First, we welcome the changes that appear to be taking place in Iran and the election of President Khatami. We hear the noises and see the potential warming of relationships. We hope that those changes will develop constructively in the region and more generally. There are some positive signs, and we are watching them. We welcome Iran's decision to ratify the chemical weapons convention. It is important, and we certainly applaud it. We also welcome Iran's condemnation of terrorism and the terrorist attacks in Algeria and Egypt. Again, those are extremely positive signs. We hope that Iran will continue to move in that direction. As we have said on many occasions, we are prepared to judge the new regime not by the rhetoric of the past, but by its record and what it achieves and sets out to do in future.
All students of Iran—my hon. Friend probably stands equal to all of us in that respect—will be fascinated by the internal political processes there. Clearly, a struggle for dominance, in terms of values and ideology, is taking place, and we shall watch that struggle and encourage those who want a more open Iran that will engage with the international community.
My hon. Friend asked about the European Union and the United Kingdom presidency; progress has already been made. Our tactics have to be double-headed. We have to ensure that we encourage positive developments within Iran, while being cautious about other developments and characteristics of the regime there, to ensure that we get the balance right between the two.
My hon. Friend will be delighted to know that at the General Affairs Council in February, under the British presidency, European Union Foreign Ministers decided to increase the level of political contact with Iran, by lifting the ban on bilateral ministerial visits imposed after the Mykonos verdict last year. Therefore, the European Union is sending a first, encouraging sign to the regime in Iran that we certainly want to encourage a warmer relationship, but some caution still runs alongside that. We are also discussing how and at what level political contacts with Iran should be enhanced. My hon. Friend questioned the level of those contacts—that matter is under discussion within the European Union. In principle, the issue is how we enhance discussion and not necessarily whether we should do so. Clearly, there is no veto on developing those contacts.
We are prepared to welcome the positive signs, but we want more concrete and positive indications from the Iranian Government in certain areas. We shall be considering the following areas of caution. First, we have to be sure that the Iranian Government are not involved in the development of weapons of mass destruction. If they intend to come back more closely into the international community, they could make it abundantly clear that no programme for weapons of mass destruction is being carried out there. I am sure that my hon. Friend shares that objective. It will be an important element in the development of relationships.
Secondly, we have to be clear that the Iranian regime is not continuing to sponsor terrorist activity on its own initiative. That has happened, and it is crucial that it should not in future. Much of that terrorism has been designed to subvert the middle east peace process. Again,
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we must ensure that the Iranian Government are not sponsoring terrorism with that purpose. My plea on that issue is: yes, we shall be cautious, but we want progress from the Iranians and a clear indication that they are not the sponsors of terrorism within the region or elsewhere in the world.
My hon. Friend mentioned Salman Rushdie and asked whether we could refer to another Islamic country to intervene in the case. The fatwa against Salman Rushdie remains a significant impediment to better relations between Iran, the United Kingdom and the European Union. It is totally alien to our values for one state to declare what is in effect a death sentence against a citizen of another state. It is wholly alien for us to negotiate in any way or conciliate about our own basic values. Salman Rushdie's right to publish and his freedom of speech are crucial elements in our political democracy, and we therefore should not allow those basic rights and principles to be negotiable. Therefore, we await a positive response from the Iranian regime on the issue. We know what the regime has said in the past, and it has not gone far enough.
My hon. Friend's suggestion was constructive—that we should look for a third country—but I do not think that it is the way to make progress with Iran. The best way to make progress on the fatwa and other issues is through direct contact between Iran, the European Union and the United Kingdom. The fatwa and Salman Rushdie will be key elements in the development of the relationship, and they must be tackled by the Iranians in discussions with the United Kingdom and our European Union partners.
It has been a pleasure to respond to the points raised by my hon. Friend, who is a keen observer of the middle east and has a good knowledge of the countries and the region. We are determined to show that we are even-handed in our approach to the region, and have clearly set out our position and our values in relation to Iraq. As my hon. Friend said, we look forward to the day when Iraq will again assume its position in the middle east commensurate with its history, its potential for the future and the abilities and expertise of its people. There could be no better middle east than one in which Iraq was free, democratic and pluralistic and had the ability to play that full role in the region, and one in which Iran was readmitted to the international community and felt part of it, reflecting its values.
On Iran, the signs are encouraging. We are cautious, but we are opening up the relationship. We need to be confident that the Iranians will move in the right direction and make it possible for us to remove that caution.
Mr. Dale Campbell-Savours rose—
Mr. Fatchett: Does my hon. Friend want to intervene?
Mr. Campbell-Savours: I shall wait and see.
Mr. Fatchett: All right.
Again, I congratulate my hon. Friend the Member for Linlithgow on introducing the subject. In the 20 or so minutes that I have been speaking, I hope that I have been able to set out clearly the Government's position. I shall probably have disappointed my hon. Friend yet again in some of my remarks. One thing about our relationship is that at least I consistently disappoint him, so he will

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probably have known exactly what I was going to say on one issue, but perhaps I have managed to say something new and fresh on the other, and he will be pleased with that.
Mr. Campbell-Savours rose—
Mr. Deputy Speaker (Mr. Michael Lord): The hon. Gentleman ought not to intervene after the Minister has completed his speech in a debate of this sort.
Mr. Campbell-Savours: On a point of order, Mr. Deputy Speaker. I understood that under the procedures I was able to do so.
Mr. Deputy Speaker: No, this is not that sort of debate.
Mr. Dalyell: My hon. Friend had my permission.
Mr. Deputy Speaker: Even so, the Minister had completed his speech and summed up. However, if the hon. Member for Workington (Mr. Campbell-Savours) wants to make a brief contribution, he may do so.
Mr. Campbell-Savours: On a point of order, Mr. Deputy Speaker. I have now lost my half a minute and my opportunity to speak, and I strongly object.
Mr. Deputy Speaker: The occupant of the Chair ruled last week on a similar position, and I have made the position clear. This is a half-hour debate for one Back Bencher to put his point to the Minister and for him to respond.
It being Two o'clock, the motion for the Adjournment of the House lapsed, without Question put.
Sitting suspended, pursuant to Standing Order No. 10 (Wednesday sittings), till half-past Two o'clock.

Oral Answers to Questions
  WALES
  The Secretary of State was asked—
  WALES

    Uniform Business Rate
    Mr. Blunt: What representations he has received from Welsh businesses regarding the future of the uniform business rate. [33426]
    The Parliamentary Under-Secretary of State for Wales (Mr. Peter Hain): Several representations, as part of our regular consultations with Welsh businesses.
    Mr. Blunt: When the new national assembly is in place, is it possible that the uniform business rate could be a useful source of revenue for the assembly and Welsh councils, in addition to the resources already provided?
    Mr. Hain: We are, in common with our counterparts in England, reviewing the business rate. We will consult businesses closely about it because several representations have been made on its reform. I am sure that the outcome will assist Welsh businesses, which are benefiting from a Wales run by a Labour Government.
    Mr. Rowlands: Is my hon. Friend aware that companies in my constituency are much more concerned about possible cuts in European structural funds? Will he pay as much attention to that as to business rates?
    Mr. Hain: Yes, I will. My hon. Friend raises an important point because today's news from Brussels is very disturbing. I will make sure, as will the Secretary of State, that Ministers in Wales bat hard for Wales and fight our corner to get a good deal from Brussels on the structural funds. Wales is one of the poorest regions of Europe. Our gross domestic product is only 80 per cent. of the European average, and we should qualify for objective 2 status. Many of our communities in west Wales and the valleys, such as my hon. Friend's constituency, should qualify for objective 1 status. We will bat hard to achieve that.
    Mr. Llwyd: Given that the Government are supportive of local government, should we not now be thinking of giving more discretion back to local authorities in setting business rates? The problem is that there is often not enough sensitivity to smaller firms and firms that have just started up. Is it not time to remove the dead hand of central Government and to revert to the way things were?
    Mr. Hain: Businesses have suffered from the dead hand of a Tory Government for nearly two decades. We are consulting small businesses in Wales about the balance of the new structure. There is a demand for local autonomy, but there is equally a concern that Welsh businesses do not suffer costs additional to those in England. We will consult generally on the matter, and with Welsh businesses very closely.
    Mr. Öpik: Given the difficulties in my constituency following the closure of D. C. Evans in Newtown and
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    MDM in Machynlleth, is the Minister prepared to discuss the uniform business rate and other issues directly with sacked staff on his forthcoming visit?
    Mr. Hain: I am indeed willing to discuss those and other issues. I am due to meet the hon. Gentleman in his constituency. Nevertheless, many Welsh businesses welcomed yesterday's Budget, which was an enormous boost for business and enterprise in Wales. It should give businesses cause for optimism amid the many difficulties from which they have suffered in the past 18 years.

    Farmers
    Mr. Wigley: What steps he has taken during the past four weeks to improve the economic prospects and cash-flow position of farmers in Wales; and if he will make a statement. [33427]
    The Parliamentary Under-Secretary of State for Wales (Mr. Win Griffiths): We recognise that the current problems have created serious difficulties for the industry. The beef export ban is a major factor that we continue to pursue vigorously. The right hon. Gentleman will know that we have recently secured a major breakthrough in lifting the ban in Northern Ireland, which is the first step toward the resumption of trade in United Kingdom beef. On 25 February, we announced that about £70 million will be paid by the Government in meeting the costs of BSE-related schemes for specific risk material controls and the new computerised cattle tracing system for Great Britain. That is in addition to the £85 million we have pledged in aid to livestock farmers to help to counter the effect of the strength of the pound. On Monday, my right hon. Friend the Secretary of State announced a study into ways in which we can speed up common agricultural policy payments to farmers.
    Mr. Wigley: In welcoming the progress made in respect of the export of beef from Northern Ireland to Europe, may I press the Minister to say what prospects there are of making progress in exporting beef from Wales on the basis of a date-based scheme? What is he doing to press that issue in Brussels, and when does he expect to be achieved?
    Mr. Griffiths: We are obviously keen to see the beef ban lifted across the United Kingdom and in Wales, and we are pressing the case strongly in Brussels. I hope to take the opportunity at the next Council meeting at the end of this month to put the case for Wales strongly in Brussels.
    Mr. Alan W. Williams: I congratulate the Minister and his fellow Welsh Office Ministers on their part in putting pressure on the Ministry of Agriculture, Fisheries and Food and the Commissioners in Brussels. The progress that has been made in respect of certified herds will bring great relief to farming in Wales, because beef exported from Northern Ireland will expand demand for beef across Britain. May I echo the point in respect of beef from cattle born after August 1996? We are quite certain that feed was clean after August 1996, so will the Minister exert maximum pressure for the lifting of the ban on that beef as well?
    Mr. Griffiths: My right hon. Friend the Secretary of State has discussed this issue often and regularly with my

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    right hon. Friend the Secretary of State for Northern Ireland, and we are continuing to press as strongly as we can for steps to be taken to get the beef ban lifted as a whole. However, my hon. Friend will appreciate that we have a great deal of ground to make up because of the bad taste left in Brussels by the way in which the previous Government handled the issue.
    Mr. Evans: When will the Minister recognise the depth of the crisis facing farmers and their associated suppliers? The crumbs of comfort that he has announced shrink in comparison with the problems they now face. Their incomes have been cut by a half this year and are still declining. There have been cuts in the hill livestock compensatory allowance, and deadweight limits and lower prices in the over-30-months scheme. Beef on the bone has been banned and now there is the threat to ban green top milk. Yesterday's Budget was a further slap in the face for farmers, with 4.4p a litre on petrol, in addition to the steep 4p increase in July. Finally, the pound is still strong today, which is not helping farmers. How many more farmers is the Minister prepared to see go bust before they get some real action from this complacent Government?
    Mr. Griffiths: It is a pity that Conservative Members did not take sufficient interest in the BSE crisis when it first broke, because, if they had, we would not be in this situation. The Government wish that we had not had to start from this point, but unfortunately, the previous Government left us in a pit about 500 m deep, out of which we are now pulling ourselves. Yesterday's Budget was generally welcomed by farmers on "Fanning Today", which was broadcast at 6.30 am today. I suggest that the hon. Gentleman gets up a bit earlier so that he becomes better informed.

    National Assembly
    Mr. Nicholas Winterton: What response he has received to his proposals for the establishment of regional committees within the National Assembly for Wales. [33428]
    The Secretary of State for Wales (Mr. Ron Davies): There has been a very favourable response. We are determined that the assembly will work for the benefit of the whole of Wales and next month, my advisory group will seek views on the number and boundaries of regional committees to help to achieve that.
    Mr. Winterton: I am grateful to the right hon. Gentleman for that response. He will be aware that my constituency of Macclesfield is in the county of Cheshire, which abuts north Wales. Is he aware that, now that he has announced the fact that the assembly is to be located in Cardiff, there are many people in north and central Wales who are deeply concerned that their views will not be heard in Cardiff? Bearing in mind that, from many parts of north Wales, it is easier to get to London than to Cardiff, what assurances can he give the people of north, west and central Wales that their views and their interests will genuinely be taken into account in the new assembly?
    Mr. Davies: I am not sure whether the hon. Gentleman asks that question on behalf of his constituents or those of my right hon. and hon. Friends who represent Welsh constituencies.
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    The question of accessibility was a major factor in deciding to locate the assembly in Cardiff. I am determined to ensure that we have a network of contacts linking the assembly in Cardiff with all parts of Wales, and I am presently holding discussions with the Welsh Local Government Association in order to achieve that. We have a system of proportional representation—which the hon. Gentleman could not find it in his heart to support—which ensures that we have political plurality within the assembly. Of course, we shall also have a system of regional committees, which is at the heart of the hon. Gentleman's question.
    Mr. Donald Anderson: The city of Swansea may qualify for a regional committee, but that will be poor consolation for the loss of the assembly. My right hon. Friend should be well aware of the intense anger in the city at the way in which many people feel that we have been used—particularly because the Secretary of State first broached the subject of Swansea guildhall as an option. If the key consideration was the capital city status of Cardiff, why did the Secretary of State not say that at the start and save us a lot of bother? As together we used to criticise the Conservative Welsh Office for centralising everything in Cardiff, can my right hon. Friend produce any clear evidence—chapter and verse, citing investment or jobs—that that has changed?
    Mr. Davies: My hon. Friend has raised several points. I take this opportunity to express my appreciation to the people of Swansea and the local authorities for the way in which they presented their case, and to my hon. Friend and his colleagues who pressed the case for Swansea very vigorously.
    When it became clear last autumn that the city hall in Cardiff was not available, I was of the view that it would be appropriate to allow local authorities in Wales to make submissions to the Welsh Office offering any buildings in their areas. I believe that the debate in Wales was taken forward because we received many submissions not just from Swansea, but from throughout Wales. During the consultation process on the submissions, it became clear that the overwhelming majority of opinion favoured Cardiff. That obviously bore very heavily on my decision.
    As to the latter part of my hon. Friend's question, I intend to develop—together with my colleagues—an economic strategy that spreads economic prosperity throughout Wales. The need to attract inward investment to all parts of Wales—particularly to the west—is a central part of that strategy.
    Mr. Ancram: Following that answer, does the Secretary of State appreciate what a figure of fun he has become both inside and outside Wales over the location of the assembly? Did he not hear the mockery that met his announcement last Friday? Apparently, having suddenly discovered where the capital city of Wales is, the Secretary of State is now compelled to do what the White Paper told us categorically last July he intended to do anyway and locate the assembly in Cardiff—although he still cannot tell us where in the city it will be situated. Does he accept that his dithering and posturing programme of indecision, sheltering behind what is clearly a sham and bogus beauty contest, has caused great bitterness in various parts of Wales that have been exploited? Will the Secretary of State now apologise to

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    the people of Wales for his crass performance, and will he reimburse those councils that have incurred costs because of it? Will he now make way for someone who can do his job properly?
    Mr. Davies: No, no and no are the answers to the right hon. Gentleman's questions. With an attitude like that, it is little wonder that the previous Conservative Government had a reputation for disastrous financial and economic performance.
    The right hon. Gentleman has consistently urged me to pay more than I need to for an assembly building. He is arguing that I should be both profligate and irresponsible—and I shall certainly not be either. Much as he dislikes it, I am determined to get value for money. I know that the right hon. Gentleman has been a strong supporter of devolution for all of the past two and a half weeks, but he should temper his new-found enthusiasm with a little better judgment.
    Mr. Alan Williams: May I underline to my right hon. Friend the bitterness and disillusionment felt in Swansea at his announcement? Does he not realise that the arguments that he found so compelling last Friday were every bit as compelling before he even launched his consultation process, and have led to the conclusion in Swansea that the low-cost Swansea bid was simply used as a bargaining counter against the two expensive Cardiff bids? Where does Swansea go, now that our Secretary of State has abandoned it?
    Mr. Davies: My right hon. Friend is wrong on two counts. It was not my desire, nor was it the effect of my discussions with Swansea, to use the city as a bargaining counter. He is also wrong to suggest that I have abandoned Swansea. I have done neither of those things. As I told my hon. Friend the Member for Swansea, East (Mr. Anderson), it is my intention to work with the people of Swansea to try to ensure that the economic prosperity experienced by much of south-east Wales is shared in south-west Wales.
    The decision that I had to take in respect of the location of the assembly was not what was good for Swansea, but what was good for Wales and for the assembly itself. During the discussions that have taken place over the past three or four months, it became clear that there was a compelling case for Cardiff. I hope that my right hon. Friend, his hon. Friends and the people of Swansea will understand that it is now in everyone's interests to get behind the assembly project in Cardiff, because that is the way in which we shall have a successful economy and a prosperous Wales in the future.
    Mr. Paterson: If he will make a statement on progress on the Welsh assembly. [33429]
    Mr. Ron Davies: Excellent progress is being made. The Committee stage of the Government of Wales Bill has been completed. Following calls from all parties and the advice of my advisory group, I have tabled amendments to allow the assembly to adopt a cabinet-style system of government, should it wish to do so. My advisory group will publish a wide-ranging consultation document next month on the assembly's
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    internal working arrangements. Last Friday, of course, I announced that the assembly will be located in a new building in Cardiff.
    Mr. Paterson: How can the Secretary of State say that excellent progress is being made, when we have graphic evidence this afternoon from Labour Members that Wales is bitterly divided, following the shambles of the consultation process? Will the right hon. Gentleman, who has dithered all along on the matter, make a clear statement this afternoon about where in Cardiff the assembly will be built, and when? If he cannot make that decision, will he make way for someone else who can?
    Mr. Davies: The hon. Gentleman invites me to take a decision based on short-term political considerations, not value for money. I will not do that. I will make sure that the public interest is properly protected. I am looking for the best deal, not just the quickest fix.
    Ann Clwyd: Does my right hon. Friend agree that the twinning proposal adopted by the Scottish Labour party as a means of achieving better representation of men and women in the Scottish Parliament is an excellent idea and the way forward for Wales as well?
    Mr. Davies: That is a matter for the Scottish Labour party. I fully appreciate the arguments in favour of ensuring that there is a proper gender balance in the assembly when it is elected. I draw my hon. Friend's attention to paragraph 4.7 of the White Paper, which states:
    "In particular, the Government attaches great importance to equal opportunities for all—including women, members of ethnic minorities and disabled people…greater participation by women is essential to the health of our democracy. The Government also urges all political parties offering candidates for election to the Assembly to have this in mind in their internal candidate selection processes."
    That is a part of the White Paper that I personally wrote, and I stand by every word of it.
    Mr. Ieuan Wyn Jones: The Secretary of State will be aware that, during the Committee stage of the Bill, I and my colleagues argued strongly for a European committee to be included in the national assembly. Does he realise how important that is, bearing in mind the future of structural funds? In the meantime, will he take no nonsense from the Department of Trade and Industry? Will he push the case for a new NUTS—nomenclature of units of territorial statistics—designation area for Wales, to make sure that west Wales and the valley areas that need it will achieve objective 1 status? Will he give the House an assurance that, at the appropriate time, he will appear at the Council of Ministers to argue the case?
    Mr. Davies: I discussed the questions that the hon. Gentleman raises yesterday with my right hon. Friend the President of the Board of Trade, and I impressed on her the strength of feeling that exists in Wales. As my hon. Friend the Member for Neath (Mr. Hain) said, the Government believe that we have a strong case for objective 2 status across Wales, and for objective 1 status in west Wales and the valleys. I assure the hon. Gentleman that it will be my intention, and that of my colleagues, to ensure that, when the negotiations start—

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    today's announcement is the start of the negotiations, not the completion—we will continue to press that case as vigorously as possible.
    On the establishment of a European Committee, there was a strong case before today's announcement to have such a Committee in the assembly. During the early part of next month, my advisory group will produce a consultation document inviting views on the nature of the committee structure in the proposed assembly. I very much look forward to the observations and submissions that no doubt will come from the hon. Gentleman and his party on how the internal organisation of the assembly should be structured.
    Mr. Barry Jones: In the opinion of my right hon. Friend, which would fill an empty factory quicker in the town of Buckley—a regional committee, an assembly, or the current Welsh Office? There is concern in Buckley about the 70 jobs that we lost at the Optec factory, which was a grave blow, and we would welcome any help that my right hon. Friend can give to help my constituents back into work at that factory.
    Mr. Davies: I am grateful to my hon. Friend, who has raised this matter with me before. I have indicated that I shall continue to work with him. I have discussed with the Welsh Development Agency what measures we can take to get proper employment into the factory to which he referred. It would be wrong of us to view the assembly as a means of creating job opportunities. The assembly must be a means of creating a new democracy, and that new democracy in Wales will be the means by which we can improve the performance of our economy. We should not view the location of the assembly as a means for economic regeneration or urban redevelopment.
    Mr. Ancram: I warmly welcome the Government's conversion to our proposal for the more accountable cabinet structure rather than the committee structure that was previously in the Bill. Does the right hon. Gentleman realise, however, that there is still considerable—and real—fear in parts of Wales that their regional interests will be submerged by the demographic majority in the south? Will he look again at giving Members of the Assembly real, rather than consultative, powers to protect their regions? In particular, powers with which to ensure significant economic, social and cultural decisions will require positive assent from all the regions in Wales.
    Mr. Davies: No, I will not do that. The right hon. Gentleman has not thought through his case. If we were to give the regional committees the blocking mechanism that he suggests, the cabinet system of government, which he now welcomes, would not be capable of being operated in Wales. Further, he has long argued that the assembly should be seen as a mechanism to strengthen local government. If we were to strengthen the regional system of committees in the assembly, that would be nothing less than an attempt to second guess the role played by local authorities. Because I want to have strong, developing local government in Wales, and strong cabinet government for the Welsh assembly, I am not inclined to accept the right hon. Gentleman's suggestions.
    Mr. Rhodri Morgan: Does the Secretary of State agree that one of the virtues of devolution is that it is a
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    clean break with Tory sleaze and the corruption-ridden semi-colonial past? Does he further agree that one of the two options that he presented for the location of the Welsh assembly—the one located around Crickhowell house—is the very embodiment of Tory sleaze and that corruption-ridden past? A previous Tory Secretary of State, David—now Lord—Hunt, signed the lease with the company of his predecessor Tory Secretary of State, Nicholas Edwards—now Lord Crickhowell—and a building that cost Associated British Ports, Lord Crickhowell's company, £11 million suddenly became worth £22 million, representing 100 per cent. profit overnight to two Tory Secretaries of State.
    Mr. Davies: The substance of my hon. Friend's question is whether we should locate the assembly in one of two sites that we have identified in Cardiff. I have a great deal of sympathy with much of what he said, but my decision must be based on what is good for the assembly, for Cardiff and for Wales.

    NHS Waiting Lists
    Mr. Ian Bruce: If he will make a statement on trends in NHS waiting lists in Wales since May 1997; and what targets he has set over the next four years. [33430]
    Mr. Win Griffiths: The latest information shows that the number of residents waiting for in-patient or day case treatment at 31 December last year had risen by 5.1 per cent. since June 1997. The number of residents waiting for out-patient treatment over the same period had decreased by 0.9 per cent. Reducing waiting lists is a Government priority, and my right hon. Friend the Chancellor announced in his Budget yesterday an additional £25.126 million next year for the health service in Wales, most of which will be used specifically to reduce the number of patients waiting for treatment to below what it was when we took office.
    Mr. Bruce: I am grateful to the Minister, but like the Under-Secretary of State for Scotland, the hon. Member for Strathkelvin and Bearsden (Mr. Galbraith), and the Secretary of State for Health, he refuses to say what targets will be set for the next four years. Reducing waiting lists is a Labour manifesto commitment, but no target has been set. Surely the money given by the Chancellor is too little, too late? Does the Minister accept that, unless he sets targets for the next four years, there is no chance of the health service achieving what we all want it to achieve?
    Mr. Griffiths: In Wales, the Conservative Government lamentably failed. For all their trumpeting of their achievements in the health service, 22,000 more people were waiting for treatment when they left office than when they came in. We shall use the money to ensure that fewer people are on waiting lists at the end of the next financial year than when the Conservative Government left office. We shall work out our targets exactly. I assure the hon. Gentleman that it is our objective to cut waiting lists, not to let them rise hopelessly, as his Government did over 18 years.
    Mr. Hanson: Will my hon. Friend confirm that, since the general election, more than £85 million has been put

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    into the national health service, in addition to money that was allocated by the previous Government? That is more than £1 million for every vote in the majority that the hon. Member for South Dorset (Mr. Bruce) had at the election. In-patient waiting lists increased by 22,000 in the past 18 years, which is why he has a majority of 77 votes and why there is a Labour Government.
    Mr. Griffiths: My hon. Friend is right. The additional resources that my right hon. Friend the Chancellor has made available for the health service in Wales will reduce waiting lists. It is our objective to ensure that they reduce steadily over the lifetime of this Parliament.

    Livestock Prices
    Mr. Livsey: If he will make a statement on the current market prices of cattle and sheep in Wales. [33431]
    Mr. Win Griffiths: Meat prices for cattle and sheep in Wales are significantly below those of a year ago. In addition to the short-term help that the Government are providing to livestock producers, I am discussing with farming unions in Wales how Welsh agriculture can be viable for the long term.
    Mr. Livsey: While acknowledging what the Minister said about the Government's recent assistance to farmers, will he note that more than 1,000 lambs were sold a week ago at Talgarth market in my constituency for between £23 and £27 a head, which is £15 down on last year's price? The main reason for that fall in price is the strength of the pound. The headlines in tonight'sEvening Standard state that the pound is at a nine-year high. Will he ask his right hon. Friend the Chancellor, who is almost beside him, to do something about the devaluation of the green pound to ensure that prices are competitive for farmers and that they can survive?
    Mr. Griffiths: My right hon. Friend the Chancellor is not almost beside me; he is beside me, as the hon. Gentleman should have seen from where he was standing.
    Is devaluation Liberal Democrat policy? We presented a very successful Budget yesterday, and we must look at everything that we are trying to achieve through it. Farmers in rural Wales have welcomed extra money being made available for rural transport schemes. The Welsh Office is paying a great deal of attention to consultation with farming unions in Wales and with other rural interests to ensure that we promote and strengthen Welsh agriculture at a time when aspects of economic policy are not, in the short term, meeting all their objectives. I assure the hon. Gentleman that we shall do everything possible to ensure that Welsh agriculture survives this difficult time and makes good for the future.
    Madam Speaker: That was far too long an answer.

    Student Grants
    Mr. St. Aubyn: If he has met student groups' representatives to discuss the future of the maintenance grant for students in Wales. [33432]
    Mr. Hain: Yes.
    Mr. St. Aubyn: Given the concern about the fall in applications for places in the autumn, what will the
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    Minister do if the number of students taking up places is seriously down this year? What plans has he to make up the shortfall if there is spare capacity?
    Mr. Hain: I was not aware that Guildford was in Wales—[HON. MEMBERS: "Irrelevant."] No, it is relevant. The hon. Gentleman is clearly unaware of the fact that university applications are holding up very well, not just in Wales but throughout Great Britain. In some universities—Aberystwyth, for example—the number of applications has risen by 2 per cent., and there is no reason to suppose that the new funding arrangements that we have introduced are penalising students or deterring them from applying for places.

  The Prime Minister was asked—
  PRIME MINISTER

    UN Security Council
    Q 1.[33406] Mr. Godman: When he last met President Clinton to discuss matters relating to the reform of the Security Council of the United Nations.
    The Prime Minister (Mr. Tony Blair): I did not discuss that particular issue in relation to the Security Council of the United Nations during my Washington visit last month, but we do consult closely with the United States on matters relating to the reform of the Security Council.
    Mr. Godman: Judging by what I heard in Washington last week, it appears that Kofi Annan' s intervention in the Iraqi crisis has upset and angered many gung-ho Republican Congressmen. It therefore seems unlikely that Congress will sanction the payment of the $1.5 billion that is owed to the United Nations. Would it not make sense to alter, or modify, article 27 of the Charter of the United Nations and Statute of the International Court of Justice to allow for the removal of the voting rights of Security Council member states that are in arrears with their subscriptions? The idea might cause apoplexy on Capitol hill, but it is worth considering, is it not?
    The Prime Minister: I think that it could cause quite a few tremors in many places, but I understand the point that my hon. Friend is making. We very much hope that Congress will approve the proposal that is currently before it, so that the arrears can be paid. I strongly support Amnesty International's "Get up, sign up" campaign to mark the 50th anniversary of the universal declaration on human rights, and we were delighted to sign up on 3 February.
    Dr. Julian Lewis: Does the Prime Minister intend to involve the Foreign Secretary in any future discussions on the reform of the Security Council, or does he intend—following the diplomatic disasters involved in the Foreign Secretary's trips to India and Israel—to send him on a third and final trip in the course of his up-coming Cabinet reshuffle?
    The Prime Minister: The hon. Gentleman knows the answer to the last part of his question.

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    Just a couple of weeks ago, Conservative Members were urging us to be more active in ensuring that Israel lived up to its obligations under agreements that had been signed. It is rather unfortunate that the hon. Gentleman should make such a criticism of the Foreign Secretary now.
    Mr. Dalyell: In view of this morning's Adjournment debate on relations with Iran, and the thoughtful and constructive response of the Minister of State, Foreign and Commonwealth Office, my hon. Friend the Member for Leeds, Central (Mr. Fatchett), will the Prime Minister reflect on how we can improve relations with a country containing 60 million people—a country, incidentally, whose pollution problems, along with those of its neighbours in Iraq, are appalling in terms of the release of carbon into the atmosphere?
    Madam Speaker: Order. I do not require the Prime Minister to answer that question if he does not wish to. The main question relates to the Security Council of the United Nations, but I did not hear the hon. Gentleman utter a word about that. Does the Prime Minister wish to respond? If not, he does not have to.
    I believe that questions should be in order. The hon. Member for Linlithgow (Mr. Dalyell) knows full well what the question says, and what our procedures are. I think that he tried to put one over on me, and I am not having that.

    Engagements
    Mr. Whittingdale: If he will list his official engagements for Wednesday 18 March.
    The Prime Minister: This morning, I had meetings with Cabinet colleagues and others and, later today, I shall have further such meetings.
    Mr. Whittingdale: Will the right hon. Gentleman confirm that his own Red Book shows that, as a result of the Budget measures, an extra 250,000 families will face a marginal rate of taxation and benefit withdrawal of 60 per cent. or more? Rather than improving work incentives, will not that considerably reduce them?
    The Prime Minister: No. That is entirely wrong. As a matter of fact, the Budget will increase work incentives dramatically because it will take a whole lot of people out of paying national insurance. It will mean that a whole lot fewer people pay tax and that poverty traps for the vast majority of people will be reduced. I should have thought that a Budget that makes work pay and helps get people back to work would be supported even by the neanderthals in the Conservative party.
    Mr. Savidge: Following a Budget that was focused on social justice and on rewarding work, and given the centrality of a national minimum wage to achieving both objectives, has the Prime Minister had any indication from the Leader of the Opposition as to whether he will now support that Government policy, or whether he will go into the next election campaigning for a return to poverty pay?
    The Prime Minister: We have not yet had a policy from the Conservative Opposition, but I will keep the
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    House informed when we get one. This Budget will mean that no family with earnings of less than £220 a week will pay any income tax at all. Any family with a full-time worker has a guaranteed income of £180 a week. Child benefit is up. There is new help for child care. There are cuts in corporation tax and small business corporation tax. It is a Budget that both helps people back into work and rewards both enterprise and fairness. That is a new Labour Budget and we are proud of it.
    Mr. Hague: The biggest single tax change in yesterday's Budget was a change to corporation tax, which will cost businesses £3.5 billion in the next two years. When he delivered the Budget statement yesterday, why did the Chancellor of the Exchequer neglect to make that clear?
    The Prime Minister: Business has welcomed the changes that have been made. The Budget will mean that, when the changes are through, business pays less tax than before.
    Mr. Hague: Actually, the Confederation of British Industry spoke about the "adverse impact" of that particular policy. The right hon. Gentleman has spoken about the cut in corporation tax, which, according to the Red Book, gives businesses £700 million in two years' time. Other changes in corporation tax, which the Chancellor glided over in his speech, will cost businesses £2,000 million in the same year. That is in the Red Book—or, apparently, in the Prime Minister's case, the unread book. Will he now admit that yesterday's Budget increased the total tax on businesses for the whole of the rest of this Parliament?
    The Prime Minister: "No" is the answer to that. As we have made clear throughout—this is the reason why business welcomed the Budget—it allows us to move to a situation where businesses are going to have corporation tax reduced. Indeed, corporation tax under this Government—a Labour Government, I remind the right hon. Gentleman—is the lowest that it has ever been.
    Mr. Hague: I have to give the Prime Minister a few more details. How can "No" be the answer to my last question when the total tax reductions for businesses shown in the Red Book add up to £1,600 million and the increases add up to £3,800 million? Is the table in the Red Book—which contains the Treasury's own official figures—correct when it shows a large increase in business taxation for the rest of this Parliament?
    The Prime Minister: For the reasons that I have already explained to the right hon. Gentleman and that were explained by the Chancellor last year, the fact of the matter is that, once the changes are all through, there is a reduction in corporation tax, not an increase. As I have said, this Government have cut corporation tax twice since being in power—a rather better record than that of the right hon. Gentleman's Government.
    Mr. Hague: Is it correct that business taxation has been increased for the whole of the rest of this Parliament—yes or no?
    The Prime Minister: As I have just said, the rate of corporation tax has been cut.
    Mr. Hague: It is a pity that the Prime Minister cannot look at a piece of paper issued by his own Government

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    and say that what it says is true. Why was the Chancellor not straight about that when he presented the Budget yesterday? Why should we not have next year's Budget read out by the Foreign Secretary? He does not care what he blurts out or whom he offends, so he should read out the Budget. After five interest rate rises and rumours of more, with the pound at a level that is strangling the life out of exporters, and with manufacturing output down for five months in a row, does the Prime Minister think that this was the time to add billions of pounds to the tax bills of British businesses?
    The Prime Minister: Let me remind the right hon. Gentleman again that we have cut corporation tax and small business tax. As a result of the changes going through, businesses will pay less tax, not more, which is why business has welcomed the Budget. What is the right hon. Gentleman's policy? He says that he opposes all the changes. He opposes all the revenue measures although in the past he has proposed them—the fuel escalator, for example. He wants more money to be spent, although he opposes all the measures to raise it. He wants to cut tax and borrowing, and he wants action to tackle the pound, he says—although the only action to tackle the pound lies in raising revenues, not depleting them. The fact of the matter is that his figures do not add up, and the real loser by the Budget is the credibility of the Opposition.
    Mr. Hague: The Prime Minister says that the figures do not add up, but the figures that I am reading out to him are the Chancellor's figures, out of the Chancellor's own book. The tax rises for British business are yet another step in the step-by-step betrayal of business in this country. After all the hype of yesterday, now, in the cold light of day, businesses face higher taxes, a crippling exchange rate and falling output. Is not the message to businesses that the Government are not on their side?
    The Prime Minister: No; we are on their side, which is why they have welcomed the Budget. The only people who have not welcomed the Budget are the Conservative party. When we hear their figures today—[HON. MEMBERS: "Your figures."] No; we have cut corporation tax and small business tax. When we hear all the Conservatives' comments today, the fact of the matter is that their figures simply do not add up. I can tell the right hon. Gentleman that if he wants to stop raising revenue while at the same time increasing spending, one of the toddlers on the Chancellor's new child care scheme with a set of beads could make a better job of opposition than the present Opposition.
    Mr. Ian Stewart: From what the Leader of the Opposition has said today, it is clear that the official Opposition cannot count and cannot read. [HON. MEMBERS: "Question?"] Does the Prime Minister agree that over the past 18 years the Tories' high levels of taxation have penalised those on low incomes? Does the Prime Minister—
    HON. MEMBERS: "Question?"
    Madam Speaker: Order. If the Opposition had been quiet they would have heard the hon. Gentleman put a question. I have been listening, and he has put his question.
    Mr. Stewart: Does the Prime Minister accept that the taxation system should pay work? Will he ensure that
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    the proposed system of working families tax credit is implemented as soon as possible, so that the families in my constituency of Eccles and throughout the country can benefit as soon as possible?
    The Prime Minister: Yes. The scorn of Opposition Members is due to the fact that they do not care about the low-income families who will benefit from the Budget. We have cut not merely corporation tax and small business tax, but national insurance. The effect of raising child benefit, with the extra help with child care and the working families tax credit, will both make work pay and help families in poverty. The Budget is good for all of Britain.
    Mr. Ashdown: As the Prime Minister knows, we broadly support the new direction set in the Budget. [Interruption.] I suppose we would have to, as more of its provisions were drawn from our manifesto than from the Prime Minister's. However, as the Prime Minister also knows, we regret what we regard as the Government's timidity on the environment, and we believe that the provisions in the Budget are inadequate to deliver the right hon. Gentleman's personal promises on health and education. I ask the Prime Minister a very specific question: are rising hospital waiting lists now at an end?
    The Prime Minister: As the Secretary of State for Health will say, we will lower national health service waiting lists—by spending more money than either the Conservatives or the Liberal Democrats were intending to spend. I should point out to the right hon. Gentleman—because, as he knows, 1 always like to be very welcoming to Liberal Democrats—that, while he is saying that we have not done enough to meet our environmental targets, other Liberal Democrat spokesmen are criticising us for raising petrol prices.
    Mr. Ashdown: The reason for that criticism is very simple: the Prime Minister has cut emission targets from 20 per cent. to 8 per cent.
    However, let us return to hospital waiting lists. The Prime Minister says that hospital waiting lists will be cut, which is welcome, but cut from what level—from the level that he inherited, from today's record level or from the even higher levels that will be reached in the next few months?
    The Prime Minister: Very simply, from the levels that we inherited; that is our promise, and we will keep it. The only way in which we can lower national waiting lists—which have been rising since March 1995—is by putting extra cash into the health service. This year, we have provided an extra £300 million. As was announced in yesterday's Budget, next year an extra £1.7 billion will go into the health service. That is a lot more money—even by the Liberal Democrats' arithmetic—than the £1.1 billion that they were promising before the general election. We will get waiting lists down and deliver on our pledge. We will keep our promise, but we will do it while keeping a tight grip on public spending—because we promised that, too.
    Ms Oona King: Is the Prime Minister aware that the recent genocide in Rwanda of 1 million people in three months is possibly the worst the world has seen? It is

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    worse than, for example, the deaths of 180 million Africans in the slave trade or 6 million Jews in the second world war for one reason: the United Nations did not exist and was not there watching when those horrific genocides occurred. In the light of that fact, although I speak as someone of African and of Jewish descent, I appeal to anyone of human descent to help to ensure that victims of genocide do not go unhelped. Will the Prime Minister give his assurance that the United Kingdom will be a friend and staunch ally to Rwanda? Will he also push for the IMF and the World bank—as a minimum measure—to reduce Rwanda's crippling debt burden? If we do not prioritise genocide, our priorities must be wrong.
    The Prime Minister: I thank my hon. Friend for her question. Since the 1994 genocide, we have put about £190 million of aid into Rwanda. We are continuing to work, both within Europe and with other countries, to ensure that Rwanda gets the debt relief that it desperately needs for its future. Although we have been able to help many of the families who were victims of genocide with the aid that we have provided, I agree with my hon. Friend that more can be done. We will see what we can do—both within the European Union and elsewhere—to increase the help that we are giving.
    Mr. Baldry: Does the Prime Minister know that, this year, Oxfordshire county council has a £3.5 million deficit in its education budget, which is leading to very severe cuts in school budgets, such as that of the Warriner school? The cuts are being made at a time when people in Oxfordshire are having to face a double-digit increase in council tax bills. Given that much of the £250 million for education that was announced yesterday seems to be for inner-city education action zones, is the Prime Minister satisfied that sufficient money is going into education in English shire counties?
    The Prime Minister: I do not doubt that more could go in, but the fact is that—quite apart from yesterday's Budget announcement—in the coming year, an additional £800 million will go into education spending, which will help areas such as Oxfordshire. That sum is £800 million more than the previous Government were, before the general election, intending to spend on education.
    I understand that many schools still face problems. We have always said that our first priority would be to sort out the public finances, which we have done, and that our second priority would be to invest in our schools and hospitals—on the basis that we are not simply throwing money at them but achieving long-term reform that improves standards and makes possible the excellent service that people want them to perform. I sympathise with the current problems of the hon. Gentleman's constituents, but, next year, we will put in extra money, which is a lot more than the previous Government planned to spend.
    Mr. Efford: Will my right hon. Friend join me in welcoming the news that the family of murdered teenager Stephen Lawrence have accepted the Home Secretary's assurances and will take part in the public inquiry? Will he also join me in condemning journalists who have managed to get articles into daily newspapers that have denigrated the people in my constituency and portrayed them all as racist? Does he agree that such reporting does
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    nothing to address the issue, which exists throughout our society, or to bring together the whole community, including the good people in my constituency, which is overwhelmingly not racist, to attack and address the issue?
    The Prime Minister: I am obviously pleased that the inquiry is now back on foot, and I very much hope that it will continue to be so. I obviously understand and sympathise with the position of the Lawrence family, and I am delighted that a suitable agreement has been found. As for my hon. Friend's constituents, I believe that the vast majority of people in this country want to live in a society where, irrespective of people's race, they are treated equally and are of equal status. That is a fundamental principle, which I am glad to say is shared by every single mainstream political party in the House. That is one reason why we can be optimistic about the future of race relations.
    Mr. Gorrie: When traditional Labour voters ask why the Government are sticking to Tory expenditure plans and Tory Treasury rules, which will result in yet further cuts in essential services in the coming year and create the worst services in living memory, how does the Prime Minister respond to such supporters, who feel betrayed?
    The Prime Minister: My hon. Friends tell me that the hon. Gentleman used to be in a Conservative coalition on Edinburgh council some time in the early 1990s, so I do not think that we should be too persuaded by what he is saying. We are sticking to very tight spending plans—that is right—but within those spending plans it is completely wrong to say that we are spending the same sums of money as the Conservative party on the same things: we are not.
    We are actually spending more money on health and education than the Liberal Democrats ever asked for. They shake their heads, but they should read their manifesto. We are spending about double what they wanted on, for example, education and health. It is absurd for the Liberal Democrats to oppose every measure that raises revenue, such as the windfall tax, but end up saying that they want all the spending, or that it all comes out of their 1 p on income tax. I am sorry but, in government, there is a bottom line of credibility, and the Liberal Democrats are not meeting it.
    Mr. White: Given that bus services have been devastated since deregulation in 1985, particularly in rural areas, does the Prime Minister agree that yesterday's announcement of £500 million for transport, and particularly £50 million for rural areas, will be especially welcome in my constituency, but that it is only a start, and more must be done to achieve our sustainable transport objectives?
    The Prime Minister: Yes. About three quarters of our rural communities do not have a proper or regular bus service. That is the legacy that we have inherited. I hope that the rural transport fund will at least give some forward relief to people who need a proper rural bus service and that, in future, we are able to do more. The £500 million over and above what the Conservatives planned to spend is an additional indication of how it is quite wrong to say that we are sticking to Conservative

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    spending plans. We are not sticking to Conservative spending plans, but we are sticking to Labour's tough rules on financial prudence.
    Mr. Greenway: Will the Government's review of child benefit include the option of ending the separate taxation of men and women? Would not that be the inevitable consequence of taxing child benefit?
    The Prime Minister: No, I do not accept that. I hope, from the indication given by the Leader of the Opposition yesterday, that the Conservatives do not object to the review in principle. We have to look at all the factors. If we are to increase child benefit by substantially more than inflation—yesterday we announced a 20 per cent. increase in child benefit, which is the largest for decades—the question of how best to do it is properly on the agenda. I hope that the Conservative Opposition will react constructively to our proposals when we table them.
    Mr. Tony Clarke: Contrary to the official Opposition's announcement yesterday that they support little of the Budget, will my right hon. Friend join me in congratulating our right hon. Friend the Chancellor on his announcement about child care tax credits? The proposal will not only empower those parents who want to go to work but enable them to do so in the knowledge that up to 70 per cent. of the cost will be met by the Government. Will my right hon. Friend announce when the credit will come into force so that my constituents can take full advantage of it? Will he also ensure that the child care offered is of a sufficient standard to give parents comfort about how their children will be looked after while they are at work?
    The Prime Minister: The changes come into effect next year. The £300 million for child care that my right hon. Friend the Chancellor announced some time ago will take effect far sooner. My hon. Friend is right. Many families, even those earning up to £30,000 a year, will benefit from the proposals, which will allow them to afford decent and quality child care. That is why our proposals are important. We do not want to prevent people from staying at home and looking after their children if they wish to, but they should have the choice to go out to work, knowing that they will get some help with the costs of child care.
    Mrs. Spelman: Does the Prime Minister believe in principle that the tax system should favour marriage or be neutral between married and unmarried couples?
    The Prime Minister: Whenever we have this debate, I am perfectly happy to say that, if people can give us a sensible proposal on how to assist marriage, we are prepared to do so. It is as well to be honest about the problems we face. As my right hon. Friend the Chancellor pointed out yesterday in relation to the married couple's allowance, single parents get the same allowance at the same rate as do unmarried couples with children. It does not seem rational to focus the help in that way. It is better to do what we announced yesterday and help children, because that helps all families. That is the best way to do it. Of course I believe in marriage, but
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    every time that we ask for proposals from people who want to assist the process, it is difficult to get one that makes sense.
    Mr. Linton: Will my right hon. Friend reassure my 87-year-old constituent in Battersea, who has had to suffer a five-month delay for her knee operation, that the Government are fully committed to tackling the backlog in waiting lists that grew so rapidly under the previous Government? Will he assure us that the £500 million announced in yesterday's Budget, coming on top of £1.5 billion in last year's, will be dedicated above all to reversing the rise in hospital waiting lists, to honour the pledge on which the Government were elected?
    The Prime Minister: Yes, of course it will. The money that is going in today will be additional money to help reduce national health service waiting lists—again way over and above anything that was asked for by the Liberal Democrats or promised by the Conservatives. However, it will take time—it was always going to take time. Once we have the finances sorted out, as we have done, we shall be able to get additional money in. That is the right way to do it, so that the investment that we put into the health service and our schools carries on year on year. We have to get away from the system under the Conservatives, in which spurts of spending were followed by cuts.
    Mr. Butterfill: The Prime Minister is well known for his concern for the safety of British citizens travelling abroad, and in particular the safety of Members of this House. As hon. Members will want to avoid getting a hostile reception in overseas territories over the Easter recess, will the Prime Minister publish the itinerary of the Foreign Secretary?
    The Prime Minister: The hon. Gentleman and his hon. Friends said during the debate we had on Iraq that we were being remiss in not taking a high-profile attitude in the European Union to ensure that the obligations entered into were adhered to. That settlement was one part of those obligations. My right hon. Friend the Foreign Secretary was entirely justified in doing what he did, and the hon. Gentleman would do better to support him.
    Mr. Barry Jones: Does my right hon. Friend accept that, from time to time, Government Back Benchers will have critical opinions of his Government as well as supportive ones? Does he know that, since he has visited my constituency, the Airbus factory has received £123 million of investment, the Toyota factory has received £130 million of investment and the £40 million Flintshire bridge has been opened, and that, try as I might to be critical, I cannot? Will he accept also that the Budget was magnificent?
    The Prime Minister: On balance, I would agree. Some people may not like some old-fashioned sycophancy—but not me. I am grateful for what my hon. Friend said, although it may mean that I make slightly fewer constituency visits in future. The money has been given on the basis of highly efficient production and it is a tremendous tribute to those who work in the two plants in his constituency. I am delighted they have done so well and I look forward to coming back and announcing new jobs in his constituency later.

ROYAL ASSENT
Madam Speaker: I have to notify the House, in accordance with the Royal Assent Act 1967, that the Queen has signified Her Royal Assent to the following Acts:

Consolidated Fund Act 1998

Fossil Fuel Levy Act 1998

Wireless Telegraphy Act 1998

Nuclear Explosions (Prohibition and Inspections) Act 1998

NHS (Waiting Lists)
3.31 pm
The Secretary of State for Health (Mr. Frank Dobson): Madam Speaker, yesterday's Budget has, rightly, been well received. It confirmed new Labour's reputation for economic competence. It was a Budget for enterprise, a Budget for work and a Budget for families, and it was a Budget for our national health service.
The £500 million the Chancellor announced yesterday takes to £2 billion the extra money that the Government have put into the health service in the 10 months we have been in power. That £2 billion in ten months is about £5 million extra for the health service for every single day of the coming year. That is more than the Tories ever planned, and even more than the Liberals promised.
I intend to put that money to very good use. At the general election, we promised to save the national health service and to modernise it. We have kept that promise, as we keep all our promises. We have saved the national health service; we are modernising it. We are doing that in partnership with the million people who work in the health service. We have asked them to work in new and better ways, and we have matched that by extra funds.
When we took over, waiting lists had been rising since 1995, and record numbers of patients were waiting for treatment. I made it clear that the first priority for the NHS was to ensure that the health service avoided a winter crisis. I asked the people working in the health service to make contingency plans, to break down the Berlin wall between hospitals and community and social services, and to make sure that emergency and urgent cases were treated promptly.
NHS and social services staff responded magnificently. The Government provided an extra £300 million, and, with the help of the 1,500 special schemes introduced this winter, the NHS has treated record numbers of emergency cases and record numbers of people off the waiting lists.
As top priority was given to emergencies, waiting lists have grown despite all the hard work of the staff. I set that priority, and the health service met that priority—I congratulate it on doing so. That effort was not simply a one-off for the winter, however; it was a long-term investment for the future. It has put in place new partnerships between general practitioners, hospitals and social services to tackle long-standing problems, which had denied some people high-quality treatment at home or in the community. Those new partnerships will endure.
Now we shall build on those partnerships. We shall bring the same combination of investment and modernisation to bear down on waiting lists. Today, I can spell out that our top priority for the coming year is to reduce waiting lists, using the extra £500 million that my right hon. Friend the Chancellor announced in his Budget yesterday. That £500 million comes on top of the extra £1.2 billion for the NHS next year that had already been announced.
Of that extra money, £417 million will be invested in the health service in England. Three hundred and twenty million pounds of that will go directly into cutting waiting lists; it will be invested in more operations, more surgical and medical sessions, more doctors, more nurses, and more flexible seven-day working. It should result in the biggest increase in the number of operations in the history

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of the NHS and the biggest ever cut in waiting lists. The money will be earmarked and targeted to deliver what patients most want—shorter waiting lists.
Each health authority and trust will have to play its part, and each will be set a challenging individual target. The waiting lists action team will step up its advice and support, and performance will be closely monitored in every part of the country. Best practice will be identified and spread, and everywhere standards will be driven up. There will be rewards for those who hit their targets and sanctions for those who do not. The chief executive of the NHS, Alan Langlands, will oversee performance in meeting those targets; he will regularly report to me personally.
The rest of the extra money will also be invested in cutting waiting lists. The flow of operations will be maintained by building on the success of the new ways of working that were pioneered this winter, and through better primary, community and mental health services. We shall also start to modernise the waiting list system, which is archaic. Some of the extra money will be spent on pioneering new streamlined appointment systems so that day case patients can book the date that suits them for an operation. Again, we shall manage the new investment closely to ensure that our objectives are delivered.
I said last year that the waiting lists were like a supertanker—it would take time to slow them down, longer to bring them to a stop, and even longer to turn them around. Waiting lists are still growing, but, as our measures bite, we shall halt the rise, and, by the second half of the year, they will be coming down. Through targeted investment, good management and innovative change, we shall do better than the Tories ever did. In the 18 years of Conservative government, the number of people on waiting lists rose by more than 400,000. In the next 12 months of a Labour Government, the numbers will fall, and will continue to fall.
By April next year, I expect hospital waiting lists in England to be shorter than the 1.16 million record level that we inherited from the previous Government. That is the target. Delivering that target will be a significant stepping stone towards fulfilling our pledge to reduce, in this Parliament, waiting lists by 100,000 from the level that we inherited.
The target is ambitious, but I am confident that, provided we do not encounter a dreadful winter or major epidemic, we can meet it. [HON. MEMBERS: "Ah."] Fools opposite apparently think that the system could cope with a major epidemic; perhaps they think that we could cope with the arrival of an asteroid. I am confident that the target can be met, because our ambition to cut waiting lists is shared by the people who do the work in the health service, as well as by the people who need operations.
The Budget was a defining moment, because it showed clearly what new Labour means: enterprise, efficiency and fairness going together. The Government's sound management of the economy has enabled us to find more money for our priorities, and in particular for health. As a result, there can be extra investment.
I am determined to ensure that patients and taxpayers get full value for that investment. That will require modemisation and reform, and I know that the staff of the
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NHS will match our commitment with their own. It was a new Labour Budget for a new health service, delivering on our promises to the people at the general election.
Mr. John Maples: In the general election campaign, the Labour party made a specific promise: to reduce waiting lists by 100,000. The Secretary of State talks a lot about ambitious targets and supertankers, but I wonder whether the electorate would have been so impressed if they had known that it was a five-year promise. Somehow, reducing waiting lists by 20,000 a year does not sound quite so impressive. Even he should be able to turn a supertanker round in less than five years.
Since the general election, far from falling by 100,000, waiting lists have risen by 100,000, and they have almost certainly continued to rise this winter, and will probably do so this summer. Labour made another promise, intimately connected with waiting lists: to spend more money than us, every year. Our spending plans were criticised in the most exaggerated and emotional terms and denounced as inadequate. Has Labour done better? No, it has not. [Interruption.]
Labour Members do not like this figure, but, for 18 years under the Conservatives, the national health service budget increased by an average of 3.1 per cent. a year over and above inflation. Under Labour, the increase for last year and next year will average 1.8 per cent.
Yesterday, the Chancellor said that there would be £500 million more for health, but the Red Book details show that the increase is only £420 million for England, of which only £340 million is being spent on the NHS. Why is England getting only 84 per cent. of the money, when it got 90 per cent. of the winter emergency money? According to the Red Book, which many members of the Government have clearly not read, England is getting £420 million out of the £500 million. What is the other £80 million—the difference between the £420 million allocated to the Department and the £340 million for the NHS—to be spent on?
Will the Secretary of State confirm that hidden away in the Red Book was an increase in the estimate of inflation for next year; that the estimate of the gross domestic product deflator was raised from 2.75 per cent. to 3 per cent.; and that that will reduce real spending in the NHS by £90 million? When that is taken into account, the £500 million becomes not £420 million or £340 million but £250 million extra in real terms for the NHS in England.
The Secretary of State says that he intends to spend £320 million on reducing waiting lists, and that he will get us back to where he started in two years' time. What an achievement: he will have turned his supertanker 360 deg, and gone absolutely nowhere in two years. Will he go a little further and promise the House that his pledge to reduce waiting lists by 100,000 from the figure that he inherited will have been fulfilled by May 1999?
Can the Secretary of State confirm that the national health service budget increased in real terms by only 1.27 per cent. in 1997–98; that, even with the extra £500 million announced yesterday, the increase in real terms will be only 2.3 per cent. in 1998–99; that the average real-terms increase between 1979 and 1997 was 3.1 per cent.; and that, if the NHS budget had continued

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to be increased at the same rate under Labour as it was under the Conservatives, the NHS would have an additional £940 million to spend next year?
The Secretary of State has been all over the media, congratulating himself on the extra £500 million, which now turns out to be £250 million. We should like to know what happened to the £2 billion that was being trailed across the Sunday newspapers a couple of weekends ago. That really would have made a difference, and that is what the Secretary of State wanted, but he failed in his negotiations with the Chancellor. That was new Labour 1, old Labour 0.
Far from crowing about his success, the Secretary of State should be apologising for his failure. Since the election, waiting lists have gone up 100,000 and the cash has gone down by £940 million. Is that what he means by saving the NHS—with longer waiting lists and less money?
Mr. Dobson: It is clear from that response that I need to keep the figures simple, because the hon. Gentleman finds them difficult to understand. Since we got in, we have found £2 billion more than the Tories provided for in the Budget for the current year and that for next year. That is £2 billion more than they intended to spend in their last Red Book.
That money is not unreal money or discounted money, but will go on real operations, carried out by real doctors, in real operating theatres, helped by real nurses and other people, and it will treat real patients. That is why it has been welcomed by representatives of doctors, nurses, NHS managers and the unions representing other people who work in the health service.
There is no point in the shadow Secretary of State comparing chalk with cheese. I am comparing what we are providing in this year's and next year's Budgets with what was provided by the previous Tory Chancellor of the Exchequer in his last Budget. When we take those into consideration, we find that there is £2 billion more than the Tories ever intended. I might add, for good measure, that there is £1 billion more than the Liberals promised.
Audrey Wise: Does my right hon. Friend agree that the full use of operating theatres, which at present stand empty for some part of the week in many parts of the country, would mean that we could use the capital resources of the NHS as well as the professional skills of surgeons and others far more effectively? Has he noticed that, in the days of the Tory Government, when waiting list reductions took place at all, they took place as a result of making people wait to go on the waiting lists? I congratulate my right hon. Friend on a far more straightforward approach to the problem.
Mr. Dobson: I certainly agree with much of what my hon. Friend says. Clearly there will have to be a lot more operations in operating theatres in the coming year. From my discussions with representatives of the people who have to do that work—no one in this House will do it: it will be the people in the hospitals—I am convinced that they are ready, willing and keen to do it. We have now found the money to enable them to do it.
We have to get away from the ludicrous situation that has prevailed, admittedly for years, in the health service, in which theatre crews—surgeons, anaesthetists, nurses
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and others working in the operating theatre—have had to stand down for the last six weeks or two months of the financial year because their health authority could not afford to pay the small additional amount to look after patients after they had been operated on. We have to get away from that nonsense, and we are going to get away from it.
Dr. Evan Harris: The Liberal Democrats welcome this overdue action on the crisis in waiting lists, and we welcome the overdue and tiny extra spending on community care, but does the Secretary of State accept that, if he followed the costed Liberal Democrat alternative Budget, there would be much more than the £1.7 billion available to spend on those problems next year—in fact, double that? He says that he will modernise waiting lists—that is the new euphemism, modernise—but does that mean that he will change the goal posts?
Can the right hon. Gentleman assure me that all operations will still be offered in the NHS next year that are offered now? Can he assure us that in-patient waiters will be tackled, that this will not just be a blitz on day case waiters, and that hips will be done as well as toenails? Will long waiters be tackled—people waiting over a year, whose number has tripled to over 68,000 since May?
Given the recruitment crisis among doctors, nurses and physios—a recruitment crisis not helped by staging their pay award—where will all the extra doctors and nurses and professions allied to medicine come from to do all these extra operations?
Mr. Dobson: The motto of the Liberal Democrats appears to be: think of a number, put it in their election manifesto, and double it when they lose. At the general election, they said that they wanted £540 million a year extra for the health service. We have put £2 billion into the health service over the first two years, which is roughly double what they advocated. It is difficult for them to criticise us for spending twice as much as they would have, had they by some freak of fate won the general election, which they did not.
I confirm that we intend to reduce the in-patient waiting list. We are making a special effort to ensure that the 18-month waiters list is eliminated by the end of this year. As we progress in getting the waiting list down, waiting times should come down as well. It will be a long, hard struggle for the people working in the national health service, but they asked for the extra money. Representatives of the British Medical Association, the Royal College of Nursing and health service managers have welcomed the money. I do not understand why Opposition Members appear to be the only people who do not.
Mr. David Hinchliffe: I warmly welcome today's announcement, and congratulate my right hon. Friend on the manner in which he has won huge additional resources for the NHS, which will directly affect many of the problems that the Government have inherited from the Conservatives.
I urge my right hon. Friend, in using the money, to build on the obvious success of the winter beds initiative to establish closer working relationships between the

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national health service and social services, and to tackle the problems of the Berlin wall to which he referred. The issue is directly related to bed blocking. Will he also consider the problems facing local authority social services departments, many of which are making significant cuts in their budgets? Does he recognise that there is a partnership between local authorities and the NHS, and that local authorities should be enabled to their play their part in resolving these difficult problems?
Mr. Dobson: My hon. Friend, who does such a good job chairing the Health Select Committee and has devoted a substantial part of his parliamentary life to promoting the interests of the NHS and social services, is right to say that we need to draw on the good experience of the way the NHS, social services departments and certain voluntary bodies used the extra £300 million for the winter.
I may be letting out some terrible secret, but it was easier to convince some of my colleagues of the ability of the NHS to respond and to put money to good and immediate use when I could point to the immense success of the initiatives taken in the winter. They are a credit to everyone concerned. More than 1,500 new schemes were introduced, and I asked for reports on them all.
I asked for honest reports, because, if they were put together quickly, it is likely that, out of 1,500, one or two may have turned out to be a total frost. If we are going to learn from one another, we need to learn from the things that work well and the things that go badly. It is on the basis of our experience of the brilliant efforts of the NHS and social services with the money for the winter that I am confident that we can have equal success with targeted funds to tackle the waiting list problem.
Mr. Tom King: Is the right hon. Gentleman aware that, while it may seem a clever debating point here to quote Conservative years two and three as though they were likely to be the expenditure levels in the NHS, every year the Conservative Chancellor for the year in question substantially increased health expenditure, which led to the 3 per cent. increase in real terms in health expenditure quoted by my hon. Friend the Member for Stratford-on-Avon (Mr. Maples)? Is he aware that this year is clearly the most difficult that my local Taunton and Somerset NHS trust has ever faced, and that the trust is likely to be in deficit? I do not see the sums announced in the Budget as likely to make a significant difference to that situation.
Mr. Dobson: The right hon. Gentleman obviously knows better than the people representing nurses and doctors, but he certainly does not know too much about his own Government's spending plans, because we are talking not about years two and three, but about years one and two—the year we are in now started off as a Tory year. There was a Tory Government at the beginning of this financial year, so we are not comparing oddities or theories; we are comparing the amount of money that the Tory Government allocated for this year—we started the year with that and did the allocations for the health service on that basis.
I fully accept that a great number of health authorities and trusts are in severe financial trouble, as they were under the previous Government. When we took over, 60-odd of the 100 health authorities were in debt, as were
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120-odd of the 400-odd trusts, so that is no novelty. We have reduced that debt by reintroducing financial rigour into the health service, at the same time as people are doing more work.
Mr. Dale Campbell-Savours: I warmly welcome the statement, for which we have all called over a long period. However, I have a problem in west Cumberland that has to be resolved, which is that loose talk by consultants in Carlisle Hospitals NHS trust about the configuration of services in Cumbria is totally undermining morale in West Cumberland hospital. That has to stop. Is my right hon. Friend prepared to look into those matters on my behalf? We are very worried indeed.
Mr. Dobson: My hon. Friend raises an important point. When there is any question of reorganisation of the health service, everyone finds it disturbing, but it behoves everyone involved to try to adopt a reasonably moderate tone in what they say about such matters.
Mr. Bernard Jenkin: Like you used to in opposition?
Mr. Dobson: Let me tell the hon. Gentleman—
Madam Speaker: Order. I shall tell the hon. Gentleman something: he will not be called for his question if he shouts from the Back Benches. He is a Front-Bench spokesman.
Mr. Dobson: I can say that I have probably taken a more rational attitude to hospital change in my constituency than any other Member of the House of Commons. I have been in favour of amalgamating two great teaching hospitals and of amalgamating into those two great teaching hospitals a large number of other small hospitals in the area. Not many Tory Members of Parliament can say that.
Sir Geoffrey Johnson Smith: Is the right hon. Gentleman aware that one of the reasons why waiting lists have increased is that some health authorities and trusts have been advised, and in some cases instructed, not to send patients out of area or even to private hospitals—some of them non-profit—which can carry out the surgical or other treatment to a standard equal to that offered by the NHS, and in some cases at less cost?
Mr. Dobson: Generally speaking, if someone is sent for an operation in the private sector, it is not at less cost. Some people running loss leaders may manage it, but generally speaking operations are more expensive in the private sector. However, the restrictions on where health authorities can send patients were part of the system we inherited, and we are getting rid of them because, like the hon. Gentleman, I think that they are stupid.
Mr. Kevin Barron: Will my right hon. Friend tell us how quickly patients currently on waiting lists are likely to see action as a result of the new investment in the national health service?
Mr. Dobson: The people who run the health service will know that money is available. We are telling them that they can start making the necessary plans, and,

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from 1 April, incurring the necessary expenditure in the knowledge that the money is coming. As soon as 1 April arrives, people who would not be treated but for the extra £500 million that the Chancellor has found will begin to be treated. Additional people will be treated.
Mr. Nicholas Winterton: Medical treatment and medical care should not be the battleground of party politics. Does the Secretary of State agree that advances in medical skills and technology mean that, year by year, additional burdens are inevitably placed upon the national health service? The East Cheshire NHS trust in my constituency benefited from the winter beds initiative. If the money that the Secretary of State is spending in an attempt to reduce waiting lists achieves that objective, I am prepared to say from this side of the House that I at least will be eternally grateful, as will my constituents.
Mr. Dobson: Yet again, I thank the hon. Gentleman, who, in days gone by, was a distinguished Chair of the Health Select Committee and member of the Social Services Select Committee. He has always spoken up for the national health service.
I recognise the hon. Member's point entirely: technological changes and pharmaceutical improvements offer a challenge to the national health service. However, I would like to change morale within the service.
From the point of view of patients and clinicians, the new technology is wonderful and brilliant. It means that people who could not be treated in the past may now receive treatment. Those who could be treated in only an inferior manner and were offered palliative care can now receive treatment to cure their condition. We must change the whole approach, so that the national health service feels confident enough, and is sufficiently well funded, to look to and welcome change, and to deploy it in the best interests of patients.
Judy Mallaber: I hope that hon. Members on both sides of the House will offer warm congratulations to the Secretary of State on securing the additional money. Will my right hon. Friend ensure that at least some of the extra £500 million will be used to introduce new and better ways of managing NHS waiting lists?
Mr. Dobson: Yes, indeed. I like to keep statements short, so I referred only briefly to our intention to move away from the archaic manner in which waiting lists are put together and managed. The treatment of patient data and information is a scandalous disgrace. The national health service is the only major institution in the country that stores basic data on fairly scrappy bits of paper that have a tendency to get lost. We must introduce much better information technology, for the benefit of all.
Mr. Crispin Blunt: Is the Secretary of State aware that, at the time of the general election, the Labour party displayed in my constituency a poster promising shorter waiting lists? I have asked my local hospital about the length of waiting lists in each specialty area of treatment available to my constituents. What poster may I expect to see if the right hon. Gentleman fails to deliver shorter waiting lists by the next general election?
Mr. Dobson: We will not fail to deliver. I would be interested to learn whether the hon. Gentleman displayed
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a poster in his constituency at the last general election saying that waiting lists would rise under a Conservative Government—because that was inevitable.
Mr. Dennis Skinner: Does my right hon. Friend agree that it would be much easier to reduce waiting lists if we could start to change more dramatically the dodgy system that we inherited from the Tories in respect of the NHS? I do not think that my right hon. Friend has an easy task—it is probably the biggest nut to crack in government. Did he hear the Chancellor of the Exchequer refer to the extra £500 million that will go into the contingency fund? Will my right hon. Friend keep an eye on that money? He needed some of it last winter, and I think he might need it again this year.
Mr. Dobson: I understand the point that my hon. Friend makes. I am not evading his question if I say that everyone working in the health service shares my view and wants the comprehensive spending review to produce a new approach to funding of the NHS, so that the NHS will know for the next three years what resources it will get, and will be able to plan properly and deal with them. I am reasonably confident that the comprehensive spending review will enable us to do that, to the infinite benefit of the people who work in the health service and, even more so, of the people they look after.
Rev. Martin Smyth: I welcome the statement. I read in the papers in Northern Ireland this morning that £13 million is going there. We welcome that, but unfortunately we cannot question the Minister on how it will be spent.
I underscore the point made by the hon. Member for Wakefield (Mr. Hinchliffe): much bed blocking is due to the fact that social services cannot take people into residential accommodation. Does the Secretary of State agree that the problem does not arise just at the end of the financial year, and that purchasing authorities do not pace themselves properly earlier in the year so that people can be operated on, instead of money being held back lest emergencies develop?
Is it not important that the attitudes of managers and administrators should be changed? Often people get a letter when they are on their way to work, on the morning that they are required to present themselves for an operation. That is a waste of health authority time.
Mr. Dobson: I take on board the points that the hon. Gentleman makes. In Northern Ireland, the national health service and social services have worked closely together, which was extremely helpful last winter. I was privileged not long ago to hand over the nursing innovation of the year award jointly to people in the NHS and social services in Northern Ireland, which I am sure was well deserved. Northern Ireland was also well represented among those who did not quite make the final.
Mr. Peter L. Pike: I congratulate my right hon. Friend on the good news that he announced this afternoon. He will know that one of the waiting lists consists of people suffering from multiple sclerosis, who are considered suitable for treatment with

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beta-interferon, but who cannot receive it. Will some of those people be able to benefit from the additional money that is being made available?
Mr. Dobson: It may be so, but the decision will have to be taken by the clinicians involved. There are disputes among doctors as to the effectiveness of beta-interferon for substantial groups of patients.
One of the points that I am making to the pharmaceutical industry as it introduces more and better ways of treating people is that it must do its part of the job of identifying patients suffering from degenerative diseases who will benefit from a particular new drug. Often the drug will benefit only 17, 23 or 30 per cent. of patients, and we cannot allow false hopes to be raised in the remaining patients or in doctors. We must have a clearer, more sensible system, so that people are not misled into believing that something that has been discovered will cure them, when it will not.
Mr. Andrew Lansley: I am sure that the Secretary of State is right to say that nurses, doctors and representatives of health trusts will welcome additional resources, not least because they know that the increase in health resources this year and next is below that which is necessary to maintain services and to respond to demography and technology change.
Will the right hon. Gentleman explain why, if the additional resources arise from an underspend in this financial year, they are not being made available to the NHS in this financial year, rather than being carried forward and being made available in the next financial year? Will the additional resources for winter pressures and the additional £500 million of which the Secretary of State speaks be consolidated into the NHS baseline expenditure for negotiation with the Chancellor of the Exchequer and the Chief Secretary for 1999–2000 and beyond?
Mr. Dobson: The hon. Gentleman has clearly consolidated the £300 million into his figures. The fact that we found the £300 million reduces the apparent increase for next year, as he knows, and he has drawn upon that.
On general funding, I know, the hon. Gentleman knows, and everybody in the country knows, that the national health service does not have at its disposal all the resources it needs. That is why we are having a comprehensive review of spending by the Department of Health and all other Government Departments—so that we can change the priorities and ensure that, in future, the national health service has sufficient sustainable funds to be able to do its job properly, which I assume all of us want.
Ms Karen Buck: Will my right hon. Friend join me in paying tribute to the magnificent work done by national health service staff during the past winter, particularly in the hospitals that serve my constituency—St. Mary and St. Charles? Does he agree that the £500 million that he has announced this afternoon will lift pressure from health service staff by giving them the tools to do the job?
Mr. Dobson: It will indeed lift the pressure on health service staff, but they are applying further pressures on
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themselves, because the nursing and medical professions are more dedicated to improving the quality of performance, to measuring outcomes and to having evidence-based medicine for the benefit of patients than they have ever been. It is our job to encourage and sustain them in that, and the £500 million will go a long way down that road.
Mr. Edward Davey: Earlier this afternoon, in answer to my hon. Friend the Member for Oxford, West and Abingdon (Dr. Harris), the Secretary of State said that, by the end of this year, waiting lists will have been cut so that no one will have been waiting for 18 months or more for an operation or treatment. Does he recall that, on Thursday 19 February this year, his Department issued a press release in his name, which said:
"by the end of March nobody should be waiting over 18 months for treatment."
When is it? Is it March this year or December this year?
Mr. Dobson: It would be a bit of a respite for all of us if it was December this year. The hon. Gentleman should know—allowing for the fact that he is a Liberal—that, generally speaking, financial matters and figures in the health service are calculated on the basis of financial years, which end on 31 March.
Dr. Howard Stoate: Does my right hon. Friend agree that one of the most important features of his proposals is that money will now be tied to outcomes? How will he ensure that it is put to best possible use, so that people in my constituency and elsewhere will see genuine improvements in their services?
Mr. Dobson: As I said in my statement, there will be incentives to ensure that people spend the money where it is intended, and sanctions for those who do not.
Mr. Andrew Tyrie: Will the Secretary of State answer at least one of the concerns raised by my hon. Friend the Member for Stratford-on-Avon (Mr. Maples)? In 1998–99, how much of the £500 million is accounted for by the increase in the GDP deflator from 2.75 per cent. to 3 per cent., set out in the Red Book on page 108?
Mr. Dobson: If the hon. Gentleman wants to talk about the GDP deflator, he should know that one does not set it against the £500 million extra; it should be set against the £36 billion or £37 billion that the health service will be getting as a whole. I emphasise yet again that, whatever he may say about Red Books, Green Books, or any other books for that matter, the fact is that the people working in the health service, who will have to do the work, who deal with the operations, welcome this money, because it is an extra £500 million that will be spent on real nurses, real doctors and real operations.
Ms Julia Drown: This extra much-needed money for the health service will be welcomed by my constituents, just as the winter pressures money made a real difference to Swindon patients this year, and made the winter much better than it was last year. Will my right hon. Friend encourage trusts and the waiting list task force to take into account suggestions

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from patients and front-line staff, so that together we can get the best ideas about how services can be provided more efficiently and effectively, and thereby help to reduce the waiting lists?
Mr. Dobson: I entirely agree with my hon. Friend—that is what we are trying to do.
Mr. Tony Baldry: May I return to the point made by the Chairman of the Select Committee? Will any of the money go to local authority social services? If it does not, it will be difficult for Oxfordshire county council to play its part in moving patients on from hospital, and beds will inevitably be blocked. We all welcome extra money for the NHS, but defeating waiting lists will be difficult unless social services can play their part.
Mr. Dobson: The success of the winter initiative was that social services and the national health service co-operated to a greater extent than ever before, and most of it will remain in place. I said in my statement, albeit briefly, that some of the money will go on community services—I thought that I had made that clear. We have ring-fenced the additional money that is going to social services for community care for the coming year, and one of the conditions is that some of it must be spent on improving arrangements between social services and the NHS. I think that we are doing what the hon. Gentleman wants us to do.
Mr. John Gunnell: May I thank my right hon. Friend for his statement and for being explicit about the Liberal Democrats' election manifesto promise of £540 million per year for the NHS? Will he say what he would have been able to do had he been limited to the Liberal Democrats' spending promise, because that would give the lie to the bleating we heard on this subject from the leader of the Liberal Democrats yesterday?
Mr. Dobson: I agree with my hon. Friend. Every Member of Parliament is supposed to be a person of honour, so I would expect every elected Liberal Democrat to say that they do not want funds over and above the £540 million that they asked for to be spent in their areas, and generously to allow the money to be spent in other areas.
Mr. Nick St. Aubyn: Is the Secretary of State aware of the latest research, which shows that, because of the withdrawal of tax relief on health insurance premiums, an additional £60 will have to be spent on operations in the current financial year? According to his party's calculations, that is equivalent to 60,000 operations. Does he accept—as we warned him—that cancelling tax relief on health insurance premiums has led directly to significant increases in hospital waiting lists?
Mr. Dobson: It is difficult to reconcile what the hon. Gentleman says with the insurance industry's
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announcement that the measure has not made a blind bit of difference, and that people are still paying their premiums. I cannot work out what to take notice of.
Dr. Brian Iddon: Partly as a result of the closure of Bolton royal infirmary, which is now a speculative building site; partly as a result of the lack of 24-hour accident and emergency provision at Leigh infirmary; and partly because admissions are brought in from a wide area because new facilities at the Royal Bolton hospital are adjacent to the M61, accident and emergency work at the hospital has increased by 20 per cent. Will my right hon. Friend please bear in mind the fact that Wigan and Bolton health authority must address that problem urgently? I am pleased by yesterday's announcement.
Mr. Dobson: We shall certainly bear that fact in mind, because we do not want local people in any area to suffer as a result of changes in the health service. We want them to benefit, so we shall consider the points made by my hon. Friend.
Mr. John Greenway: Will the Secretary of State tell us more about how the money will be distributed around the country? He knows that waiting lists grow for different reasons in different areas, and can increase because of lack of provision, or because one health trust is not as efficient as another. Rural North Yorkshire, with which he is familiar, has problems, although waiting lists are not as bad as in other parts of the country.
Does the right hon. Gentleman agree that people would be a little happier about the announcement if they were able to cheer because some of the money was coming to them? Can he assure people in North Yorkshire that the pattern of money going from rural areas to inner cities will not predominate in relation to this money?
Mr. Dobson: Let me make two points. First, about 90 per cent. of the money will be allocated according to the usual formula, so that every area gets some; but a certain amount will be held back to deal with crises or to encourage those who need a bit of encouragement. Secondly, as one who represents an inner-city seat within about a quarter of a mile of the House, I can tell the hon. Gentleman that my health authority received one of the 20 smallest allocations in the country. The area that the hon. Gentleman represents received a good deal more in percentage terms—and I know that his hon. Friends like percentages.
Mr. Tom Levitt: I know that my right hon. Friend is a great believer in long-term planning, so I feel I must alert him to a problem that he may face before the end of the life of the current Parliament. What will happen to all the new doctors and nurses who will be recruited, when no significant waiting lists are left to be reduced?
Mr. Dobson: If—as I hope—we hit the target, there will sadly still be more than 1 million people waiting for treatment. I hope that those doctors and nurses will remain in the employ of the national health service, reducing the figure much further.
People sometimes suggest that waiting lists are not important. Some of the academics who write about health care seem to think that, but we can usually assume that

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they are not waiting for operations. Many people waiting for operations are in pain, and their lives and subsequent health may be endangered. I also think that long waiting lists damage the reputation of the health service in a way that practically nothing else does. They are dreary and apparently disorganised, and it looks as though our system—the most efficient in the developed world—is not doing its job properly. That is why it is important to reduce waiting lists.
Mr. Jenkin: After all the irresponsible hype and propaganda that was conducted by the right hon. Gentleman's party in opposition, cannot the British people be forgiven for expecting increased resources for the health service under his party in government, to match, at the very least, what the Conservatives gave year on year on year?
Can I communicate to the right hon. Gentleman the real despair in Essex Rivers Healthcare MHS trust, which is having to close small hospitals around north Essex because it is experiencing the tightest financial circumstances in my memory, if not the tightest for the last 10 or 20 years? Will the right hon. Gentleman re-examine the formula for allocating resources across the health districts, which he has manipulated to favour the inner cities rather than the shires? The same has happened with local government.
Mr. Dobson: Let me make it clear that we changed the formula to reflect need, and added an element to allow for the problems of ambulance services in rural areas. If there has been any fixing of the allocation since we came to office, it has been in favour of rural areas. That is why many people in inner cities are not very happy with the present position, and want it to be re-examined. I must tell the hon. Gentleman that we clearly do need to re-examine the system when areas as deprived as the east end are not getting their fair share.
Mr. Neil Gerrard: My right hon. Friend will know from his recent visit of the serious concern about the way in which Redbridge and Waltham
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Forest health authority is managing its waiting lists and its budgets, and about the cuts that it is making in community services. Does he agree that waiting for treatment for mental health problems in the community matters just as much as waiting for an operation in hospital? Will some of the £500 million go into community services? Will my right hon. Friend ensure that whole-service trusts dealing with community services as well as hospitals do not fiddle their hospital waiting lists by cutting community services?
Mr. Dobson: I can confirm that my hon. Friend's health authority will receive its normal allocation, and that money will go into mental health care. On occasion, people suffering from severe mental episodes turn up at hospitals and have to be admitted to wards where they not only occupy beds but make life intolerable for others, which is bad for them and bad for everyone else. We are trying to deal with that important problem.

Questions to Ministers
4.24 pm
Mr. Andrew Robathan: On a point of order, Madam Speaker. On 15 January, at Treasury questions, the Chief Secretary to the Treasury quoted some figures on pension returns, as reported in column 477 of the Official Report. The figures interested me, so I tabled a parliamentary question. On 20 January, I received a response saying that the question would be answered as soon as possible.
Those were figures quoted by the Chief Secretary. It is now nine weeks since he did so. I have re-asked the question, and have just been told that it will be answered as soon as possible. Is there anything that you can do to encourage Ministers to answer questions more quickly?
Madam Speaker: There is nothing further I can do. I have answered points of order from the hon. Gentleman and other Back-Bench Members on this issue. The Government, I am sure, are very aware of it. No doubt, as he has raised a point of order yet again with me, they will look at it and respond as soon as possible.

Disabled Persons and Carers (Short-term Breaks)
4.25 pm
Mr. Huw Edwards: I beg to move,
That leave be given to bring in a Bill to provide for assessments of health and social needs of disabled persons to include assessments of the needs for short-term breaks for the disabled persons and any carer.
Every right hon. and hon. Member will have in their constituency a silent army of dedicated, selfless carers. They care for people with a wide variety of needs: people with physical disabilities, learning disabilities, mental health problems, chronic sickness and degenerative conditions. Carers can be of any age, and from all walks of life. One in seven of the adult population are estimated to be carers, the great majority of whom are women. Any of us could become a carer at any time.
That army of carers has increased in recent years, with the shift from institutional to community care, with the increase in the number of elderly people, and as a result of medical advances to sustain the lives of many people who would formerly not have survived. Those are the triumphs of our welfare state, but they have led to a disproportionate reliance on informal care, and care by women.
In recent years, our statutory agencies have put increasing responsibility on informal carers as a result of community care legislation. The National Health Service and Community Care Act 1990 gave local authorities a duty to undertake individual care assessments. The need for respite care, or short-term breaks, has increasingly been recognised as a major unmet need, but it is not specified in community care assessments. The Bill's aim is to give people with disabilities and carers the right to be assessed for respite care and to have that care provided, if they are so assessed.
It is important to establish appropriate respite care—to involve carers in decisions about their need for respite care. The Bill therefore extends the Carers (Recognition and Services) Act 1995, which was introduced by my hon. Friend the Member for Croydon, North (Mr. Wicks).
That Act gave statutory recognition for the first time to the role of carers and their right to have their needs assessed, but it gave no right to the provision of services. That is why Lord Rix, chairman of Mencap, introduced a private Member's Bill similar to this Bill in the House of Lords in 1996. I am privileged to have been asked by Mencap to reintroduce that Bill into the House, and I thank it for the help that it has given me in promoting the Bill.
According to Mencap, 100,000 people with severe learning difficulties and their carers are not receiving much-needed respite care. Only 32 per cent. knew about respite care. Almost one in five carers who applied for respite care were refused it by a local authority or health authority.
In recent weeks, I have met groups of carers in my constituency. Those I have met have stressed the value they place on respite care for the person for whom they are caring. Respite care offers an opportunity to meet new people, for personal development, to be more independent, and to enjoy a new environment. In effect, short-term breaks for people with disabilities have the same attractions as they have for all of us.
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Carers I have met say that they need short-term breaks too, to allow them to lead more ordinary lives, to recharge their batteries by going away for a couple of weeks, a few days or even a few hours—to spend time with their partners, their families and friends, to spend more time with their other children, to catch up with the housework, to go shopping, or simply to catch up on their sleep.
However, Mencap's research showed that four out of 10 carers had not been out for an evening in the past six months, and one in five not for the past five years. One mother wrote to me:
"I am very grateful for the 3 hours per week respite that we have through our Mencap Family Carer, but I am conscious of how fortunate we are compared to most others."
A short-term break may be covered in the carer's own home by a sitting service; it can be inexpensive, a small investment, but its value can be immense.
Respite care can be cost-effective, as has been shown by research carried out at the university of Brighton, where I worked before entering the House. The needs of carers were studied, and it was found that supporting carers can maintain their health, thus reducing the cost of hospitalisation and breakdowns among carers.
Respite care enables carers to return to work, which reduces the cost of benefits and increases tax and national insurance revenues. If carers could not or would not care, the responsibility would fall on the state. Official carers would be paid and receive time off and annual leave, whereas informal carers get next to nothing.
There are many forms of short-term break—holiday breaks, emergency breaks, family-based care and sitting services. In many areas, there are good examples of respite care provided through local authority social services and voluntary organisations. The all-Wales mental handicap strategy was a progressive strategy that established good collaboration between voluntary and statutory agencies. It was a progressive programme, with ring-fenced resources, but it lacked the statutory framework of rights that carers, and the people for whom they care, need.
However, respite care is scarce in many areas. Too much depends on where the carer happens to live. The aim of the Bill is to make respite care universally available, to raise standards nationally and to enshrine a right to a specific form of care, thereby imposing a duty on local authorities.
I am grateful for the support that many organisations have given me for the measure—organisations such as Mencap, the Carers National Association, Sense, the National Aids Trust, Age Concern, the British Medical Association and many other voluntary organisations. I am grateful, too, to the hon. Members on both sides of the House who have signed early-day motion 1090. However, it is the carers, more than others, that the House should thank—and society should thank them, too.
The Chronically Sick and Disabled Persons Act 1972 was piloted through the House by Alf Morris, who then represented Manchester, Wythenshawe. That Act was rightly seen as a charter for the disabled. Arguably, it was the most significant piece of legislation on disability in the post-war period, and it was passed by a Labour Government and implemented by a Conservative Government. The present Government have established a royal commission on long-term care, and we intend to make specific representations to it about the need for respite care.

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My Bill will reinforce the work that the Government are doing to enhance the rights of people with disabilities. We need to establish a charter for carers, and the Bill will establish the right of carers to respite care and short-term breaks. It has cross-party support, and I commend it to the House.
Question put and agreed to.
Bill ordered to be brought in by Mr. Huw Edwards, Ms Chris McCafferty, Mr. David Amess, Mrs. Betty Williams, Mr. Roy Beggs, Mr. Dafydd Wigley, Mr. Desmond Swayne, Mr. Paul Keetch, Mr. Malcolm Wicks, Mr. Steve McCabe, Mr. Anthony Wright and Laura Moffatt.

DISABLED PERSONS AND CARERS (SHORT-TERM BREAKS)
Mr. Huw Edwards accordingly presented a Bill to provide for assessments of health and social needs of disabled persons to include assessments of the needs for short-term breaks for the disabled persons and any carer: And the same was read the First time; and ordered to be read a Second time on Friday 24 April, and to be printed [Bill 150]
Orders of the Day
  WAYS AND MEANS
  Order read for resuming adjourned debate on Question [17 March].
  WAYS AND MEANS

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

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

    (b) for refunding an amount of tax;

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

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

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

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

    Question again proposed.

  Budget Resolutions and Economic Situation
  4.34 pm
  Mr. Peter Lilley: Yesterday's Budget was the first that I have heard in which not a single measure introduced by a Chancellor of the Exchequer was costed. He gave no idea where the extra spending that he announced will come from. Overnight, we have been able to examine the small print and determine where the costs will fall. There will be a large cost, and it will fall on ordinary families and on businesses—which, ultimately, will have to pass on that cost to consumers, or reduce the number of those they employ.
  The Chancellor pretended that we would have lots of goodies at no cost. He tried the oldest trick in the book: pretending that there is such a thing as a free lunch. What he really gave us was a menu without prices. I steer clear of establishments with such practices, because, although their presentation may be top class, one gets very small portions and pays very large bills. In paying the bill for the Chancellor's menu, we shall discover that he has, once again, betrayed the Prime Minister's promise to the British people not to impose any taxes other than the windfall tax.
  Before the general election, the Prime Minister promised Birmingham business men:
  "We have no plans to increase tax at all."
  He told the BBC:
  "What I have said is the programme of the Labour party, and that does not imply any tax increases at all."
  Now—as we saw in last week's debate—Ministers are trying to airbrush those pledges out of the picture. They want us to think that the only pledge that matters is their narrow promise not to raise income tax rates. So when the Prime Minister made vows to his party conference,

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  we should have taken no notice of him? When he gave unequivocal answers to the media, they counted for nothing? We should have read his lips, and seen "lots more taxes"? What arrogance from the Government. It tells us an awful lot about new Labour. Although new Labour thinks that words are cheap, British taxpayers will discover that believing Labour's words will cost them dear.
  This Budget is new Labour's second tax-raising Budget. It raises taxes by another £2 billion a year, on top of the massive tax rises introduced in last July's Budget.
  If Ministers are so keen—as they were last week—to direct us to the text of their manifesto pledges, will they tell us where in their manifesto they promised to cut the married couple's tax allowance? Perhaps in the section entitled "Supporting the Family"? Where did they promise to clobber businesses with almost £20 billion in extra taxes? In the section they headed "Promoting Enterprise"? Where did they spell it out that they would cut mortgage interest tax relief? Was it in the section on home ownership? Where did they spell out the increase in employers' national insurance charges for employees earning above the average wage? Where did they spell out three petrol duty hikes in 16 months? Where in their manifesto did they say that they plan to tax child benefit for upper-income families?
  Ms Joan Ryan: Does the right hon. Gentleman agree that BP's announcement that it is reducing petrol prices in rural areas by a further 2p—totalling a 4p reduction in the past month—clearly shows that it approves of the Budget and is responding to the Chancellor's challenge to work with us in helping rural areas?
  Mr. Lilley: That is a bit rich. Although the Government have hiked petrol tax three times in the past 15 or 16 months, Ministers claim credit for oil companies absorbing some of those increases because of low oil prices. They claim credit for that? The Government insult rural motorists by offering £50 million over three years, to compensate for almost £1 billion in extra taxation. Come off it. Read out something else from the brief next time.
  Yesterday, the Chancellor may not have spelt out the cost of any of his policies, but his Red Book makes it clear. It shows that the share of national income taken in tax is set to increase. By the end of this Parliament, he will be taking nearly 3 per cent. more of national income in tax. That is the cost of Labour's tax programme; that is the cost of its stealth taxes. Public finances are strong, but because they are strong and doing even better than we expected, it should be possible to get back to a balanced Budget with fewer tax increases, not by adding to them as the Chancellor is doing.
  The reason Labour is having to put up taxes is that it is breaking another pledge: its promise to cut the cost of the welfare state. Before the election, the then leader of the Labour party used to trail around editors' offices, particularly of right-wing newspapers, saying that, just as it took a Republican President such as Richard Nixon to recognise communist China, and just as it took a white President such as Pik Botha to do a deal with the
  1310
  African National Congress—[HON. MEMBERS: "It was P. W. Botha."] Well, whoever did it. The then Labour party leader said that it would take a Labour Prime Minister to cut the size of the social security bill.
  Many editors thought that the then Labour party leader meant what he said. Indeed, Labour made cutting the social security bill a specific pledge in its manifesto. As part of its top pledge, it said that it would decrease the share of national income spent on the bills of economic and social failure. Labour said that it would cut the size of the welfare state, but since the election, every change that the Government have initiated in the welfare state—not those that they inherited from me—has involved increasing the cost of welfare; increasing spending on the welfare state, not reducing it.
  The Red Book shows that yesterday's Budget will add another £10 billion to the cost of welfare this Parliament. That destroys Labour's promise and its claim that its programme could be financed without increasing taxes. Instead of reducing social security spending, Labour is increasing it. That is why people are having to pay more tax.
  The Government do not even expect the welfare changes that they have introduced remotely to pay for themselves. It is clear from their figures that they expect very few extra people to be enticed back to work by the changes that they have made. I invite the Chancellor to tell us how many people he expects to be taken off the unemployment register as a result of the changes that he announced yesterday. Either he does not know or the number is so small that he will not tell. It is certainly invisible in the accounts that he published yesterday.
  If unemployment is higher in two years' time than it is now, will the Chancellor admit that all his programmes have failed? We said—we have said all along—that we would support the Government if they brought forward the right welfare reforms. If they tackle the poverty trap, reduce the number of people who are dependent on benefit and bear down on the costs of the welfare state, they will certainly deserve the support of the whole House. This Budget does nothing of the kind. It increases spending, extends the number of people who are dependent on benefits and lumbers more people further up the income scale with greater disincentives to work.
  The Red Book shows that the number of families facing a marginal deduction rate of more than 60 per cent. will be increased by 250,000 as a result of the changes that the Government have introduced. Therefore, more people will face greater disincentives, not fewer. As the Financial Times pointed out this morning in its analysis of the Government's child care credit:
  "the assistance tapers so that help will be given for childcare costs for one child in families with incomes up to £22,000 and for two or more children in households with incomes up to £30,000".
  The Government are bringing households with such income into the benefits system. The truth is that extending help up the income scale to people with good jobs will not get people into work.
  People can get off welfare and into work only if there are jobs for them to go to. Our reforms succeeded in creating jobs hand over fist. Before the election, unemployment had been falling month in, month out for more than four years. That momentum has continued. The good news today is that unemployment is down again, as the continued consequence of our reforms.

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  The previous Government bequeathed a golden economic legacy of low inflation, steady growth, rising living standards and falling unemployment, which has come down to 5 per cent.—about half the level of France and Germany.
  The new Government are betraying that golden economic legacy, putting this country's economic achievements at risk. After just 10 months in office, they have already hit pension funds with a £5-billion-a-year pensions tax, which means £5 billion a year less for British industry to invest. They have hit industry with a new quarterly payments regime that will cost companies £2 billion a year during this Parliament. In aggregate, industry will have to pay nearly £20 billion extra in taxes during this Parliament.
  The Government have reduced the rate of corporation tax, but they have increased the burden falling on British companies. Businesses have been hit with higher national insurance contributions for employees earning more than the average level. That will hit high-tech companies, which the Government claim to want to promote. Because the Government have taxed business and savings, interest rates have had to go higher, driving up the exchange rate and hitting our exports.
  Almost every economic decision that the Government have taken has helped to push our manufacturing sector towards the brink of recession. For five months in a row, output from manufacturing has fallen.
  Mr. Geraint Davies rose—
  Mr. Lilley: Doubtless the hon. Gentleman wants to tell us that that is what he was elected to achieve.
  Mr. Davies: Does the right hon. Gentleman agree that, arithmetically, only about a quarter of the exchange rate is explained by relative interest rates? Does he further agree that the real reason for the high value of the pound is the uncertainty over the euro—the fact that the drachma decided to come in and that nobody knows what the rate will be? The fact that people are investing in sterling is a testimony to the prudent policy of my right hon. Friend the Chancellor. People know that investing in sterling is an investment in certainty and stable policies for the future.
  Mr. Lilley: The hon. Gentleman made a brave try, but he is in difficulty because he does not know his Chancellor's policy on the exchange rate. We also do not know the Chief Secretary's policy. He was asked five times on "Newsnight" last night whether he thought that the exchange rate was at the right level. The Chancellor has said that he wants a stable pound. Does he want it stable at the present level, or does he want mobile stability?
  Whatever the Government say, their friends in the Trades Union Congress have become disillusioned with their policy. Their analysis says:
  "Because of the combined impact of the exchange rate, higher interest rates and tight public spending controls, unemployment will start to rise by the end of this year."
  The Conservatives commissioned the Centre for Economics and Business Research, which has one of the best track records in recent years for forecasting the performance of the economy, to calculate the likely
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  performance resulting from the combined effects of the two Budgets that the Chancellor has introduced compared with what would have happened under unchanged Conservative policies. It concludes that the main impact has been on the level of investment, which has been lowered by the taxes on business. As a result, the economy will grow more slowly and unemployment will be 100,000 a year higher under Labour than our policies would have achieved.
  Thanks to decisions taken by our party in government, Labour inherited a buoyant economy that was generating increased tax revenues, taking people off welfare and helping to reduce public expenditure. That means that there was no need for the extra taxes that Labour has thrust on businesses and ordinary people. What it has done will damage investment and enterprise and will jeopardise our golden economic legacy.
  As well as arranging for that analysis of the economic impact of the Chancellor's policies, we commissioned a study of the impact on individual households of the changes introduced in this Budget and the previous one. It shows that the Chancellor got his figures wrong. In the Red Book, a table shows that almost all households are better off as a result of this Budget—although the Government had to publish a corrigendum, showing that all the figures that they published were too rosy. Even the corrected figures are wrong, because they take account only of direct taxes. The Labour Government think that people do not have a car, do not drink, do not smoke, do not have a pension and do not save: all those ways in which this and the previous Budget hit ordinary households were not taken into account.
  We asked the experts to look at a typical family with a couple of children and a mortgage, who contribute to a personal pension and own a car; we shall assume that they are not smokers, because they are a virtuous couple. The study showed that, next year, as a result of the changes introduced by the Chancellor, every household at all levels of income will be worse off. In the year after—when his increase in child benefit and the change to working families tax credit comes into force—only households with an income below £16,000 will be better off. All households of that type with an income above £16,000 will be worse off, as a result of the combined effect of direct and indirect taxes, increased by the Chancellor.
  One thing we have learnt about the Chancellor—from books, of course, and from leaks from No. 10—is that he suffers from a psychological flaw. That flaw seems to inhibit him in consulting people about his policies before he announces them. He does not even consult his own officials sufficiently. We found that in his first Budget—he clearly had not consulted in detail about the plan that they cooked up in opposition, to scrap advance corporation tax credits. The Government did not realise that that meant abolishing foreign income dividends and, in turn, abolishing ACT and, in turn, that they would have to replace it with quarterly payments. They then had to come back yesterday and revise the system, because it was putting too great a squeeze on business. That was muddle enough.
  The Government also had the muddle on individual savings accounts and abolishing personal equity plans and tax-exempt special savings accounts. The original proposals were a dog's breakfast, which would retrospectively have hit the most prudent the hardest. We

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  may not have won the vote in the debate the week before last, but we won the argument. We could see from the expressions on the faces of Ministers that the Government would have to come back with a changed policy. It may be better than what they were proposing last November, but as the Institute for Fiscal Studies pointed out today, the Government could clearly have achieved almost all of that change by adjusting TESSAs, to allow people to take out their money sooner than was previously the case.
  Mr. Gerald Howarth: Was not the original proposal indicative of Labour's total hostility to wealth creation? The Government have done a U-turn because of the arguments promoted by my right hon. Friend the shadow Chancellor and because their focus groups told them that the proposals were not popular. This is not a policy change out of principle—it is a policy change because they know that the proposal is unpopular in the country.
  Mr. Lilley: My hon. Friend is right, but the damage has been done. The Government have revealed what they want to do to people's savings. That destroys trust, and it means that the likelihood of people saving as much in these ways in future is limited, because they fear that the Labour party might come back and change the system retrospectively, to damage them once again. That is why the Government forecast in the Red Book that the savings ratio is set to fall hard and fast in the years ahead. They themselves have undermined the savings culture in this country.
  The Chancellor's failure to consult is revealed by more than the muddle arising from the changes to ISAs; he clearly has not thought out all the consequences of the move from family credit to working families tax credit. He recognises that, in 500,000 households, the woman could on average lose £40 a week to the benefit of the breadwinner into whose pay packet the money will be paid.
  Although people will be given a choice about how the money will be paid, the Chancellor does not say how that choice will be exercised. He says that the choice is for the household, but will it be for the man or the woman? It will be a new source of discord for low-income families. Will he tell the House what will happen if they cannot agree? In her speech to the Fawcett Society, the Financial Secretary was unable to say what would happen, but perhaps she can tell us now. This is another matter about which there has been no consultation because of the Chancellor's psychological flaw.
  Yvette Cooper: Will the right hon. Gentleman give way?
  Mr. Lilley: Perhaps the hon. Lady was consulted—I believe that she was recently married, so she will be able to tell the House how she will reach agreement with her spouse.
  Yvette Cooper: If the right hon. Gentleman dislikes the working families tax credit so much, will he say whether a future Conservative Government would abolish it?
  Mr. Lilley: The question is whether the Labour Government will fulfil the promises in their manifesto
  1314
  last year, not what will be in our manifesto in four years. They promised that they would reduce the cost of the welfare state and not plough further billions of pounds into it.
  We also want to know whether the Minister for Welfare Reform still believes what he said when he commented on the Conservative Government's proposal to pay family credit through the wage packet. In a reasoned and thoughtful contribution, he said:
  "Whatever scheme is enacted, if the parents behave as we hope we ourselves would behave, it would be irrelevant. But we are concerned with that minority—it may or may not be substantial—of families in which money for the children is not paid over to the wife. We must draw on our experience to decide whether it is more likely that the money will go where Parliament wishes it to go—towards the welfare of children—if it is paid to the mothers rather than the fathers. I believe from my experience and that of many other organisations that more money will get to children in those families where something is wrong if we pay the money to mothers rather than fathers."
  The House has a right to know whether the Minister for Welfare Reform has altered his view on that. Conservative Members realise that the problems exist—we listen to reason and do our homework—but the Chancellor has not learnt from experience.
  Again, on the proposal to tax child benefit for those on high pay, the Chancellor is too confused and muddled to spell out the details. He rushes to say that the proposal will be implemented, but he does not know how that will be done. I tell him that he faces some serious dilemmas. If he decides to tax on the basis of the income of the whole household, he must do away with independent taxation and take into account the joint income of husband and wife. However, if he does not do that, and taxes only the recipient of the child benefit—usually the mother—that will be very unfair, as modestly paid women who receive the benefit will have to pay tax on it because they are working, whereas the wives of rich husbands will not pay any tax on it, and will be given it in full.
  The Chancellor hinted at a third option, whereby child benefit will be taxed only if one or other member of the household is liable to the 40 per cent. rate of tax. That infringes the principle of independent taxation and will prove unfair because, unlike at present, the couple will have to reveal to one another which tax band they are in.
  If the Chancellor insists on making those whose household contains one or more members who are liable to tax at 40 per cent. pay a tax on their child benefit, a couple with a combined income of £50,000 might not have to pay, while someone with an income of £30,000 would. How can that be fair?
  Mr. Robert Sheldon: The right hon. Gentleman referred to child benefit. I had something to do with its introduction to replace the child tax allowances. That change was undertaken on the basis of an agreement between our two parties that child benefit would be uprated in the same way as the allowances were. The previous Government broke that promise, and the new Government have tried to restore some of the advantages that we—and, indeed, the Opposition of the day—foresaw.
  Mr. Lilley: That is a fair enough point. The right hon. Gentleman played a distinguished part, and he will remember that child benefit replaced a tax allowance. Is it

  1315
  not extraordinary to tax a tax allowance? That is a strange proposal. It is the sort of idea that the Chancellor cooks up in the Paymaster General's Park lane flat or in one of his country retreats in Italy or France, without consulting officials.
  The Secretary of State for Education and Employment (Mr. David Blunkett): Perhaps the right hon. Gentleman will recall for us the attitude that his party took towards joint and several liability for men and women under the poll tax, and tell us what action he took as Secretary of State for Social Security. Perhaps he will tell us whether he is for or against the proposal in the Budget.
  Mr. Lilley: We abolished the poll tax and replaced it with the council tax. The Government have introduced the biggest rise ever in council tax. Before the general election, the Prime Minister—
  Mr. Blunkett rose—
  Mr. Deputy Speaker (Mr. Michael J. Martin): Order. Both right hon. Gentlemen must sit down. The right hon. Member for Hitchin and Harpenden (Mr. Lilley) is not going to give way.
  Mr. Lilley: I did not want to cause you to rule out of order a long debate on the poll tax, Mr. Deputy Speaker.
  Before the general election, the Prime Minister tried to convince the British people that Labour's days of redistributive politics were long gone, but the more one looks at the Budget, the more its redistributive nature becomes clear. Perhaps the title of the Red Book, "New Ambitions for Britain", provides a clue.
  Yesterday, the Prime Minister was sitting on the Front Bench. His ambition was to win the general election. Standing at the Dispatch Box was the Chancellor. His ambition is to win the leadership of the Labour party. He has his own agenda and needs to convince Labour Back Benchers that he is on their side. That is why the Budget conflicts with the Prime Minister's promises: the Prime Minister made promises to appeal to the British electorate, and the Chancellor breaks them to appeal to the Labour selectorate.
  The Government believe in slick presentation and think that it is more important than keeping their promises. They think that they can tell us that black is white, spending is saving and taxes are good for us. They say that they want to encourage pension provision and they put a £500-million-a-year tax on pension funds. They say that they are the friends of business and they put nearly £20 billion of tax on business. They say that they are really country folk at heart and then slap the best part of £1 billion of extra taxes on motor fuel and gasoline, and believe that they can buy off rural anger by insulting people with £50 million for rural buses over three years. They say that this is a Budget for women and children, but they create a situation in which up to 500,000 women and children could lose £40 a week.
  This Budget betrays the Government's pledges to middle Britain, it betrays their promise to reduce spending on the welfare state and it betrays the golden economic legacy that we bequeathed them. The Chancellor may
  1316
  have seen the waving Order Papers yesterday, but the people of this country will see the bills of his Budget landing on their doorstep in the months and years to come.
  5.5 pm
  The Secretary of State for Education and Employment (Mr. David Blunkett): The official Opposition seem to have gone into a paradox and a paradigm of denial. (HON. MEMBERS: "Which?"] It is both. First, the right hon. Member for Hitchin and Harpenden (Mr. Lilley) cannot remember the poll tax. Then he can remember only that the Conservative Government replaced it, as though they had inherited it from the Opposition. Now, having forgotten the introduction of the poll tax, the Opposition have forgotten the instruments with which they imposed it. They followed that up this afternoon with the most wonderful denial of all—they pretended that we started the process of reducing the married couples' allowance and mortgage interest relief at source, when it was them. Then they invent a new research project in 24 hours that proves that the British people are not on average £250 per family better off, with the lowest 20 per cent. on average £500 better off, but that everyone is worse off.
  Suddenly, all the things that happened yesterday are no more. This is an entirely new political stance. It is not simply a caricature of the Government's position, but a terrible dilemma—waking up in the night, sweating and thinking, "I wish I had introduced those policies," and then remembering that one is in opposition and has to go on the "Today" programme to denounce them. Is the right hon. Gentleman against the policies or in favour of them? Is he envious of them or contemptuous? We are not absolutely sure.
  Mr. Nick Gibb: We are.
  Mr. Blunkett: No doubt during the debate the hon. Gentleman will be able to tell us exactly what the shadow Chancellor actually believes in. is he in favour of the cut in corporation tax? Is he in favour of the cut in corporation tax for small companies and the cut in employers' national insurance for the lower paid and for all employees? Is he in favour of the cut in capital gains tax on long-term investment? Is he in favour of the cut that the Chancellor has already made in value added tax on fuel?
  Mr. Gibb: Of course the Opposition are in favour of the cut in corporation tax. It was the Conservative party that brought down the rate of corporation tax from 52 to 33 per cent. However, we are against the big rises in the burden of corporation tax that this Government have imposed on business in their two Budgets since 1 May.
  Mr. Blunkett: As my right hon. Friend the Chancellor pointed out in his brilliant presentation yesterday, we have cut corporation tax to its lowest ever level. So this not hearing, not thinking, not seeing and then denying seems to be becoming a terrible habit.

  1317
  Let us face it industry and commerce know better about what they feel and think than Opposition Members. That is why the British Chambers of Commerce have said:
  "This is a valuable Budget for enterprise and employment. It is both prudent and positive."
  I will give way to the right hon. Member for Charnwood (Mr. Dorrell) so that he can explain why he does not believe that they are right.
  Mr. Stephen Dorrell: The Secretary of State wants a little clarity. I wonder whether he can clear up one thing that was left unclear at the end of yesterday. During the Budget speech, the Chancellor said first that an extra £100 million would be allocated to tackle the skills gap. Later, he said that an "additional £250 million" would be allocated for education—those are his words, not mine. Arithmetic suggests that that would be £350 million for the Secretary of State's Department. However, when we consult the Red Book in the name of the Financial Secretary, we see that the Secretary of State will get not £350 million as the Chancellor announced at 4 pm yesterday, but £250 million. I would be grateful if the Secretary of State could clarify whether the Chancellor or the Financial Secretary is right.
  Mr. Blunkett: One thing that is certain is that it is £250 million more than the Opposition would have allocated. I am always delighted to give way, because I am not afraid of the Opposition in the way that they appear to be afraid of us. It is £250 million for education and skills that will be spent in addition to the £2.25 billion that my right hon. Friend the Chancellor has earmarked for education since the general election. He has been able to do that precisely because, as the shadow Chancellor said this afternoon, we have done better than the Opposition expected. That is praise indeed, and I hope that he will not be churlish. He should congratulate us and say that he is delighted with our performance so far, and that they are finding it difficult to lay a finger on us or undermine what we are doing.
  The bulk of the British people would want to congratulate us on the Budget. After all, its three key pillars are: work—making sure that people are in work and that work pays; enterprise—enabling small, medium and large businesses to flourish; and reinforcing and supporting children and the family.
  Mr. John Townend: If the burden of taxation on companies was coming down year on year, I would congratulate the right hon. Gentleman, but will he confirm that there will no benefit from reductions in taxation until after 2000? Page 18 of the Red Book shows that companies will pay £1.6 billion extra in 1999–2000 as a result of the quarterly payment of corporation tax. In 2001, they will pay another £2 billion, and only £700 million will be offset by corporation tax reductions. Even in that year, the overall burden of corporate taxation will rise by £1.3 billion.
  Mr. Blunkett: I did not hear the hon. Gentleman denounce the British Chambers of Commerce. I think that he may be the chairman of a Back-Bench
  1318
  committee; if so, he understands the system that applies in other developed nations. The introduction of a phased quarterly payment system inevitably means a phased-in approach and a carry-over point.
  The reason why business and commerce are enthusiastic about what we are doing is precisely because the Chancellor is underpinning a long-term strategy to ensure that this country will never again have the boom-bust that the previous Government inflicted on us. A so-called boom 10 years ago led to the most enormous bust in term of people's jobs, livelihoods, homes and fears, and the large-scale unemployment from which we are only now recovering.
  I would have hoped that the Conservatives would congratulate us on reaching the level of unemployment that we bequeathed to them. The new unemployment figures today show a further 14,000 off the claimant count and that we have got back to the position of June 1980. Some 150,000 people gained jobs in the final quarter of last year, an acceleration of what was happening before the general election. We will support long-term policies to ensure that that continues.
  I want to ask the shadow Chancellor some simple questions, and I will be happy to give way to him if he wants to answer. Does he support the measures that we have taken to make work pay? Does he support the working families tax credit scheme and child care disregard, about which my right hon. Friend the Secretary of State for Social Security will say more tomorrow? Does he support our measures to ensure that the taper is gentler, so that people do not lose out when they take jobs? Two thirds of people who experience the 70 per cent. taper will be better off because of the measures taken yesterday which will genuinely make work pay. Above all, does he support the new deal, which is all about preparing people for the world of tomorrow and equipping them with confidence, skills, social experience and the expectation of having a job?
  I ask those questions because I understand that, in an interview in The Independent on Sunday the shadow Chancellor was asked such questions and, in talking about the Conservatives' attitude, said that a
  "debate at this point would be bad for our party."
  I do not know whether it is bad for his party but I should have thought that the new deal was good for young people.
  To paraphrase the television advert, there may be the odd person who is mad enough to be against the new deal. There may be a couple of people—the Leader of the Opposition and the shadow Chancellor—who are misguided enough to be against it. When they get to a sect of 10 they may think that there is a cult against it. When they get beyond the membership of the Tory party, say 1,000, it is such a movement that it is difficult to be against it. When there are 100,000, it is a revolution and the Tory party will change its mind to be in favour of it.
  The shadow Chancellor must come clean. Will he, in a fortnight's time, take on the challenge? Will he or the Conservative party in Smith square take on a new deal youngster? If they took on rehabilitating the Leader of the Opposition, they would have a lifetime job—no danger of losing it after only six months.
  Mr. Geoffrey Clifton-Brown: Will the right hon. Gentleman confirm that the new deal will be

  1319
  paid for entirely by a one-off windfall tax, and that the number of long-term unemployed has decreased greatly in the past six months? How long does he expect that reduction to go on for, and what will pay for the new deal when unemployment starts to rise?
  Mr. Blunkett: I had hoped that the hon. Gentleman would welcome the challenge and say that he would take someone on in his office as a gesture of good will. He makes a serious point, which I shall answer. Of course the new deal is being paid for from the windfall tax; everyone knows that. The shadow Chancellor condemned the windfall tax. On 3 July last year, he suggested that the windfall tax would either be bad for consumers because it would put prices up or bad for shareholders because, if the regulator held prices down, shares would fall. He was wrong on both counts. Prices have fallen in each of the affected industries, and the share price has gone up by 23 per cent. The FTSE index is now at 5,800–1,000 above what it was on 3 July when he made that suggestion.
  The intention is to ensure that people are prepared for long-term jobs and have the social skills needed. That is why the Chancellor yesterday announced a series of new measures that will enable us to carry our programme forward, making it possible to ensure that work pays but also making it possible for us to extend what we are doing so that more people can benefit from the new deal. Another £100 million will be devoted in the next two years to ensuring that 70,000 people aged over 25 will have the sort of opportunities available to those under 25. We are piloting those programmes to ensure that people can learn from them and gain skills.
  There is £50 million to extend the gateway. Whatever the Opposition are against, they should never be against preparing people for meaningful work through social and educational skills. A substantial part of the extra £50 million will be used to make it possible to help those in the greatest difficulty, those facing particular problems in their lives. They would be expected to be dependent on the welfare state unless their problems are overcome. Inevitably, they would be long-term dependent on the welfare state unless we invested in the gateway.
  For the partners of those who receive jobseeker's allowance we have allocated an extra £60 million to ensure that they have the opportunities that were previously denied them. Couple that with the announcements that my right hon. Friend the Secretary of State for Social Security will make later this week in respect of child care. Couple that with the 12 pilot programmes—six projects from September this year and a further six a few months later—that we are initiating for disabled men and women to ensure that they can get back to work and have an opportunity to take advantage of the disregard brought in by my right hon. Friend the Chancellor.
  All that is a positive programme of change for the future. It secures the long-term gains that my right hon. Friend the Chancellor has already set in place through his changes to the Bank of England and with his Budget of 2 July. It is a long-term programme for a long-term Government ensuring that the economy of this country is in safe hands and that the stability we seek provides stable growth with low inflation. That is a prize worth having, and it is a prize which all of us on the Labour Benches will work to achieve.
  5.20 pm
  Mr. John Townend: The Budget lives up to the reputation of the Government, in that it treats the House of Commons with contempt. At one time, the contents of the Budget were revealed first to the Cabinet and then to the House of Commons. Now, the political spin doctors receive the details first and we Members of Parliament read them in the press. That is done to soften us up for bad news on Budget day, but what really annoys me is that the details are not even spun with truth—they think that in that way, when the Budget is not as bad as expected, middle England will be relieved and welcome it.
  It would be churlish of me not to acknowledge that I agree with some of the contents of the Budget. We all accept that being able get more money on benefit than in work is wrong; we all want the poverty trap to be reduced and eliminated. I have always strongly believed in the concept of a balanced Budget, so I welcome the Chancellor's aspirations in that respect.
  However, those are as yet only aspirations: Labour Members must not forget that, when the Conservatives were in office and Lady Thatcher was Prime Minister, we achieved a balanced Budget—indeed, we had a substantial surplus for several years. It was only when Lord Lawson started to shadow the deutschmark at DM3 to the pound and my right hon. Friend the Member for Huntingdon (Mr. Major) joined the exchange rate mechanism that things started to go radically wrong.
  I remind Labour Members that the current Chancellor was very keen that we should join the ERM, and when we came out of it, he called for us to rejoin it within a matter of weeks. I should be happier if I thought that the Chancellor believed in a balanced Budget for its own sake, but I have a sneaky feeling that his desire to join economic and monetary union and the single currency is the driving force.
  My other major criticism is that the Chancellor's success in reducing the deficit is not the result of taking tough decisions and reducing the excessive level of public expenditure in this country that we have borne for some years, but the result of increasing the overall burden of taxation. Labour is reverting to type: it is, and always has been, a high-tax party. As my right hon. Friend the Member for Hitchin and Harpenden (Mr. Lilley) pointed out, the secret is given away on page 119 of the "Financial Statement and Budget Report", which shows that, in the last year of the Conservative Administration, the total tax take with social security contributions was 36 per cent. of GDP, yet now the graph is going up and up, and the projections show that it will reach nearly 39 per cent. of GDP. The Labour party will preserve its record of leaving office with the overall burden of taxation higher than when it went in.
  The big increase was the boost that the Government tried to hide last year by stealthily hitting private pensions and the corporate sector. The people in the front line of the main tax increases this year are motorists. Again, the Labour party has confirmed itself as the anti-motorist party par excellence. It fiddled the system: motorists expect one increase a year, but we have had two in nine months—4p the first time and 4.4p this time.

  1321
  Anyone who thinks that raising the tax on petrol way above the level of inflation will stop people driving cars does not understand how people live today. I do not know anybody who drives any less; they just spend less on other things, including their family. The only people who actually stop driving are poor people, especially those living in the countryside. Are those the people whom the Labour party wants to hit? Low-income car owners in my rural constituency are to be discouraged from travelling into Hull and York in their cars because of the cost, so they will be unable to get the benefit from the free museums the Chancellor favours so much. What a warped sense of priorities.
  Mr. Don Foster: Does not the hon. Gentleman recall that it was the Conservative party that introduced the 5 per cent. above inflation escalator? Presumably, he was critical of that, but does he agree that if you use that sort of escalator—it is now sensibly set at 6 per cent.—it is important that there is an offset in terms of a reduction in vehicle excise duty? The great pity of the Budget is that it does not contain clear proposals on that subject.
  Mr. Townend: I shall deal with our position in a few minutes. Because of the distances and the infrequency of public transport that one experiences living in a small village—nearly everybody needs a car—£50 million over three years for rural transport is peanuts. Most Labour Members have probably never lived in a village, so they do not realise that, if there is only one bus a day, which is doubled to two buses a day, not only will that cost hundreds of millions of pounds across the country, but people will still need to use their cars.
  The increase in petrol duty will also increase business costs. The Government say that industry should be competitive, but do they think that industry does not use petrol? Do they think that fewer goods will be delivered because they have put up the price of petrol? Will there be fewer calls by salesmen? I suggest that this is an increase too far—enough is enough. It is time that one party in the House started to speak up for the motorist. I hope that my right hon. Friend the Member for Hitchin and Harpenden is listening when I tell him that we should abandon road fuel escalation and say that there should be no more increases above inflation.
  Corporate car drivers are being hit yet again with another penal increase. That increase is surprising, because it hits the very people whom new Labour is always saying it wants to encourage—the managers, salesmen and entrepreneurs who are all part of middle England. What is the sop? We are going to have a £50 reduction in vehicle excise duty for small cars and clean cars, but what is small and what is clean? If it means small new cars, that will hit the poor, who mainly own older and second-hand cars.
  Mr. Geraint Davies: Is the view the hon. Gentleman is expressing his personal view, or does it reflect the wider view of the Conservative party? Is it just an odd little view?
  Mr. Townend: I am speaking for myself, but I would not be at all surprised if on Monday, when I go into the Lobby to vote against Labour's proposals on petrol, my right hon. Friend the Member for Hitchin and Harpenden is with me.
  Mr. Geraint Davies: He does not share that view.
  Mr. Townend: That is a matter for my right hon. Friend. I represent a rural constituency, and I shall fight
  1322
  on behalf of the motorists. Enough is enough. There comes a point when one should not go any further and, when 80 per cent. of the cost of petrol is tax, I believe that we have reached that point.
  The cornerstone of the Government's Budget is the welfare-to-work package, including family tax credit and national insurance contributions reform. While the Chancellor's motives are praiseworthy, there remain many unanswered questions and some serious reservations. First, although I welcome the abolition of the national insurance entry fee—I always thought that it was nonsense—I am a little disturbed about who will meet that cost. It will hit the high-productivity, high-tech and high-wage firms that the Government claim that they want to encourage. Many firms that pay high wages operate—or are trying to operate—in the export industry, and that cost will reduce their competitiveness even further.
  Secondly, as my right hon. Friend has said, the reforms were first mooted as supposedly reducing the cost of the social security budget, which was getting too big for the country to afford—it was getting out of hand. As we have heard today, far from reducing that cost, the Budget will increase it. People do not realise that the pensioners will pay for that. The Government stole £5 billion from the occupational pension funds last year in order to finance it—and it will do that this year, next year and every year. I think that that is awful. Married couples will also contribute £1 billion. That is appalling, as it signals a withdrawal of support from the institution of marriage at a time when most people believe that marriage breakdown is the major cause of many social problems.
  Thirdly, I have doubts whether it should become the accepted wisdom that most mothers should work and their children should be left with child minders. I am old-fashioned enough to believe that the best environment for bringing up children is in the home with the mother as carer. As a result of the costs that we are now incurring, which will increase over time, we could reach the stage where it will cost as much to get mothers into work as it will cost to get them to look after their own children. We must consider that.
  My fourth criticism is that the Government appear to have no policies designed to reduce the growing problem, not of lone parents or single mothers, but of unmarried mothers. I believe that Britain has the highest number of unmarried mothers in Europe—and that number is growing. We must address that situation and encourage young women not to have children outside marriage.
  I must also ask where all the new jobs will come from. The main failure of the Budget is that it does nothing to encourage the Bank of England to reduce interest rates and the value of the pound. Indeed, the market's first reaction to the Budget was to push up the pound even further. That will cause our exporting industries to shed labour.
  Despite all the incentives and the money that will be spent in an attempt to get people into work, I think that the Government will find that a significant number of people are unemployable or do not want to work—I call them the "professional unemployed". Constituencies such as mine have many such people. Unemployed people come to Bridlington from Sheffield, Leeds and Halifax. believing that it is far better to live by the seaside. They certainly do not come to Bridlington seeking work, because there is none.

  1323
  I turn briefly to the other taxes in the Budget. Stamp duty on more expensive houses has been increased. That is a return to the traditional Labour taxation of envy: it is a tax on mobility. Why should executives, entrepreneurs, export salesmen—and Prime Ministers—who must move house frequently have to pay that extraordinary level of tax? Someone who buys a house for just over £500,000 must pay the Government £15,000 in tax. That is a tax on mobility, and it is wrong.
  I make it clear that I have a lifetime's experience in the alcohol industry. That industry is facing difficult times because of cross-border shopping and smuggling. The Financial Secretary should not laugh, because she is responsible for that problem. [Interruption.]
  Mr. Deputy Speaker: Order. There is far too much noise in the Chamber.
  Mr. Townend: Not only are the Government losing an enormous amount of revenue but, as I have warned from my own experience, organised crime is taking over the smuggling. Only last week smuggling gangs used guns in Dover. The only long-term answer to this problem—the Chancellor, who is pro-European, should realise it—is a progressive reduction in the differential between our duties and those of the French and Belgians.
  Far from accepting that there is a problem and dealing with it progressively—we know that it cannot be solved in one go—the Government have made it worse by increasing duties on wine and beer yet again. The barriers came down in January 1993 and we have seen a massive increase in smuggling every year since then. Has the differential been reduced in that time? No, it has not. It has not even stayed the same: the differential on wine has increased by 18.4 per cent.
  The same principle applies to tobacco. I do not smoke, but I know that, by increasing the duty on tobacco by more than 5 per cent., we will encourage more people to buy from smugglers. If people buy cheap tobacco, they will smoke more. Is it not incredible that duty is not paid on half the hand-rolled tobacco used in this country? The Government have accepted that there is a problem because they have not increased that duty this year—but they have not reduced it, either.
  The Budget must be considered not in isolation, but together with the last Budget delivered nine months ago. Although I accept and support several measures, I believe that many people have done badly. Savers, pensioners and pension schemes have done badly. Companies have done badly through the windfall tax and the collection of corporation tax on a quarterly basis. Marriage has been undermined. The Budget does nothing to create jobs, as all the emphasis is on getting people to apply for jobs. The motorist has been savagely attacked and the overall burden of taxation continues to rise.
  The Government's Budgets will not be judged now. Hon. Members should consider that the Budgets that receive the most cheers from their supporters on Budget day are often the ones that come home to roost. We shall judge the Budgets in two years' time according to whether unemployment, growth and taxes are higher or lower. Despite some beneficial measures, such as the reform of national insurance contributions, the whole complicated welfare-to-work package will he judged to be successful only if it gets the professional unemployed into work. I regret that I am pessimistic, because I do not think that the carrot will work without the stick.
  5.38 pm
  Mr. Derek Foster: The House has been highly entertained by the hon. Member for East Yorkshire (Mr. Townend). He said that he had lifelong experience in the alcohol industry—which I believe explains a lot about his speech. As if that were not bad enough, he went on to blame my hon. Friend the Financial Secretary for his problem. I have been an almost lifelong teetotaller, and I have been the butt of many jokes in that regard. People say to me, "It must be terribly depressing waking up in the morning and knowing that that is as good as you will feel all day." [Interruption.] I am glad that that entertains my right hon. and hon Friends.
  I have sat through 19 Budget debates in my parliamentary experience. This is probably the first one in which I have taken part. Year after year, I have listened to Conservative Members in government announcing proposals that increased the burden of taxation while claiming great credit for reducing the rate of income tax. It therefore comes a bit rich to hear the Opposition's charges against my right hon. Friends.
  My right hon. Friend's speech yesterday was a tour de force. When I listened to the shadow Chancellor, I wondered why, if things were so magnificent on 1 May last year, we won a landslide victory.
  Mr. Andrew Lansley rose—
  Mr. Foster: I also wondered why, if the Budget was as bad as the right hon. Gentleman said, it has been so well received in the City, by the business community and by families throughout the country. The Opposition protest too much. The language of betrayal is exaggeration in the extreme.
  Mr. Lansley rose—
  Mr. Foster: I shall give way in a moment.
  Just before the Labour party conference last year, my right hon. Friend said that he wanted a crusade against unemployment and poverty. I know that my right hon. Friend is often accused of being ambitious, but such ambition is worthy of the brightest and best of any generation and would have united the Labour party at any time during its 90-year history. It is the reason why I joined the Labour party, and why I am so enthusiastic about the Budget, which has been the first powerful clarion call for a crusade against unemployment and poverty.
  I welcome the widespread improvements offered by all the new deals. My right hon. Friends the Chancellor and the Secretary of State for Education and Employment deserve credit for putting so much drive, energy and money behind those powerful new programmes. Now they are to be extended in a way that the Employment Committee—which, as the House knows, I chair—called for some weeks ago. We asked the Secretary of State to build in sufficient flexibility to respond to the changing nature of the jobs market. We pointed out that there were other groups that deserved priority.
  A few short weeks later, the money and the political drive are there to extend all those initiatives. Now those aged 25 to 50 are being substantially catered for, and the over-50s are being brought into the programme. Now there is a substantial improvement to the new deal

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  for single parents, and the new deals are being extended in various other imaginative ways. I welcome that whole-heartedly.
  I promised to give way.
  Mr. Lansley: I am grateful to the right hon. Gentleman, even though he has moved on a little. He criticised former Conservative Chancellors for, as he put it, increasing the tax burden while reducing the rate of income tax, although perhaps he will acknowledge that Conservative Chancellors left the tax burden as a proportion of gross domestic product unchanged, as compared with 1979. Why does the right hon. Gentleman think that it is such a triumph for the Chancellor of the Exchequer to increase the burden of taxation while not reducing the rate of income tax?
  Mr. Foster: It is a triumph for the Chancellor to increase the burden of taxation and to receive accolades from the electorate for doing so. That was what the Opposition achieved over 18 years, which irritated and frustrated me greatly at the time.
  The new deal is being extended considerably and is entirely welcome. If we are to get large numbers of single parents into work, which is what I want, the child care package is crucial. I am glad that my right hon. Friends have recognised that. However, if single parents are not to be locked into the low-wage, part-time, temporary sector of the jobs market, we must write into the single parents' new deal a substantial education and training option. At least 40 per cent. of single parents have no qualifications. We need to enhance their employability and earning capacity, if we want to make it worth their while to get a job.
  The new deals would not have been introduced by the Conservatives. They still do not know whether to support the programme. The programme to make work pay would not have been initiated by them. I pay tribute to the shadow Chancellor because of the imaginative work that he did to reform the welfare state. Incidentally, most of that was pretty punishing to groups of needy people, but he did tackle the problem.
  We have moved on a little further. The concept of making work pay is an exciting one. It will be extraordinarily difficult to pull off, because the complexities of the barriers to work for various groups of people are beyond the majority of Members of Parliament and perhaps beyond many civil servants to negotiate. I am certain that making work pay will be as crucial to modernising the welfare state as the high and stable level of employment written into the White Paper of 1944 was to the proper funding of the welfare state when it began.
  I have signed up whole-heartedly to the concept of increasing the number of employable people, not just because it is good for them and good for society, but because it makes economic sense. The pool of employable people will bear down on inflation and allow the Chancellor to run the economy at a higher rate of growth than would otherwise have been the case. As Professor Layard said in his evidence to the Employment Committee, the net result of that should be a net increase in jobs.
  Another group who deserve priority are those who are already in work. Some 80 per cent. of the work force over the next decade are already in work. My right hon. Friends
  1326
  are missing a trick, because there is a far greater and earlier payback to the Government from enhancing the productivity of those who are already in work than there will be from increasing the employability of those who will move into work. We must do both.
  Moreover, although the schools agenda has greater political saliency and may have more profound effects in the long term, within the realistic life of the Government—say, within the next decade—there is a greater return if we invest in the people who are already in work.
  In the next Budget, I shall look for tax breaks for companies to invest in training. If we are not going down the levy route, we must make it worth while for companies to invest in training. I shall explain why.
  I have cited before the case of House Thorn Lighting, in Spennymoor in my constituency, whose managing director said, "We discovered that with every pair of hands we got a free brain." That expression highlights the problem that we are trying to solve: we do no more than scratch the surface of the skill and creativity of our work force. It is the companies that are the most adaptable, flexible and able to respond quickly to market situations that release the creativity of their work force and make them partners in the management of change and in improving productivity and quality. Thorn Lighting does that, as does another company in the north-east.
  Nissan spends 7 per cent. of its turnover on training. The average for British industry is below 1 per cent., and for French and German companies it is between 2 and 3 per cent. It is small wonder that, in 14 years, Nissan has made itself the most efficient motor manufacturer in Europe. If we are to make an impact on our competitiveness—which we must—over the next five to 10 years, this is where the greatest return will be made. I urge my right hon. Friend to pursue strongly his lifelong learning agenda, and to remain strongly in favour of encouraging business to train those who are already in work.
  The hon. Member for East Yorkshire and the shadow Chancellor referred to the high pound, which is a severe problem for most of Britain's manufacturing industry. I hope that there is not an enclave of people in the Treasury who still believe that a high pound is good for British industry—that, as a strong currency was good for Germany and Japan, British industry should have to live with the overvalued pound. Such people forget that Germany and Japan achieved a high currency through economic efficiency and economic strength. While those were being built up, they did not have to cope with the problems of an overvalued currency.
  It seems clear that the Monetary Policy Committee will have to raise interest rates. If that is the case, short-term funds will flow into the pound, raising it even further. Some, including the Manufacturing Science and Finance union, warn that 100,000 jobs may be at risk because of the overvalued pound, so we must take the matter seriously. I read that those at No. 10 and No. 11 Downing street do take it seriously, and that they are rather worried about the problem. It is about time that they started to do something about it, because if we lose 100,000 jobs over the next 12 months, it will undermine all the new deals, making work pay and the modernisation of the welfare state.
  Mr. David Willetts: What the right hon. Gentleman is saying goes to the heart of the Chancellor's

  1327
  Budget judgment. I put it to the right hon. Gentleman that he is saying that, because of the Budget judgment, the City expects interest rates to rise, and that that is why the exchange rate has firmed since the Budget, giving rise to his fears about unemployment. What he just said is a fundamental attack on the Chancellor's Budget.
  Mr. Foster: I am pointing out to the Chancellor what many of us know to be true in our constituencies: unless we begin to take seriously the overvalued pound and find some way of dealing with it, it will hit us in the face later this year or next, and could undermine our entire economic strategy. Therefore, it should be taken seriously.
  For the past 40 or 50 years, successive Chancellors have tried to discover an economic strategy in which exports and investment drive forward growth. For a while after we had been blasted out of the exchange rate mechanism—much to the pleasure of some Opposition Members—it seemed as though the Conservative party had stumbled into a half-competent economic strategy: exports forged ahead and interest rates fell. Now we have the opposite problem. The question is, where are the jobs to come from?
  We may end up with a large pool of employable people who are job-ready but without jobs to go to. We must take that seriously, because if we succeed in making people employable and enhance their ability to go straight into work, they will be severely disillusioned if there is no work for them.
  We cannot look to exports to drive growth. Despite the enormous amount that my right hon. Friends have done to encourage business investment, which is why the Budget has been welcomed by the business community, I cannot see that, on the brink of even a mild recession, business investment will drive growth. So what can we look to? Perhaps we should look to public investment—perhaps to the private finance initiative.
  Perhaps at last the PFI will spring into life. I read in the Red Book that there are only £1.5-billion-worth of signed deals this year, and that next year there should be £3-billion-worth of signed deals. With PFI and conventional public investment, growth is still not as high as it was a couple of years ago. The PFI will not drive growth. Perhaps conventional public investment will, but it is reducing and is planned to reduce still further, according to the Red Book.
  It is time for my right hon. Friends to begin to take seriously the problems of the definition of the PSBR. I shall explain why. Let us take Newcastle airport. It is a successful airport in a rapidly growing industry—tourism. It is wholly owned by the local authorities. The commercial banks are bending over backwards to lend money to develop the airport on the strength of its balance sheet or its assets. That investment would immediately produce jobs in the construction industry in the north-east, where we badly need them. Ultimately, it would produce jobs at the airport, too. It would enhance the competitiveness of a regional airport in a rapidly expanding industry. What can be more sensible than to invest in it?
  However, because the airport is wholly owned by the local authorities, it falls foul of the PSBR regulations. Such investment would amount to further borrowing by central Government and is therefore disallowed. None of our European competitors treat such investment in
  1328
  that fashion. It is not required by the Maastricht criteria, so why do we have the most restrictive PSBR regulations in Europe? They were introduced, I believe, in 1976, when we had to bring in the International Monetary Fund. It is time that we reviewed them.
  We could invest not only in Newcastle and Teesside airports but in the Post Office. The Post Office is longing to be liberated by commercial investment so that it can respond to its own rapidly expanding market in a changing marketplace. I know that my right hon. Friends will not be able to respond to my remarks immediately, but I want to open up the debate. Let us look again at the PSBR regulations to see whether there is a way to fuel growth by sensible investment of this nature.
  My constituency contains 600 square miles of rural territory. I wrote to my right hon. Friend the Chancellor last Friday to urge him to introduce compensatory measures to offset increases in petrol prices. We are trying to make work pay for the working poor in the countryside, but increased transport costs are a great deterrent. I asked my right hon. Friend to reduce vehicle excise duty on the basis of post codes in rural areas, although I am not bothered how that should be done.
  I urge Treasury Ministers to take the problems of rural areas far more seriously. I welcome what they have done, and spending the £50 million on imaginative public transport schemes in rural areas would be a good investment. However, the extra money will disappear if it is spread thinly over existing services.
  I make a final plea to Treasury Ministers: £50 million is welcome, but it only scratches the surface of the problem of making work pay for the working poor in rural areas. I make a clarion call for a crusade against unemployment and poverty. I eagerly look forward to future Budgets that will drive ahead with such a crusade so that we become a far more civilised society.
  6 pm
  Mr. Don Foster: I am delighted to speak after the right hon. Member for Bishop Auckland (Mr. Foster), who made a thought-provoking speech that hon. Members will have enjoyed. He and I correspond almost daily: we share surnames and initials and are for ever passing on misdirected post to each other.
  I agree with many of the points made by the right hon. Gentleman and support what he said about the widening of eligibility criteria for the new deal. He was right to stress the importance of training, and used Nissan as an example. I hope that Ministers listened to him carefully.
  The right hon. Gentleman was more provocative about other issues. He was right: we must do more about the vital issue of job creation, and should not just talk about job readiness. Having got people ready for jobs, there must be jobs for them to go to. I agree with him about the controversial issue of redefining the public sector borrowing requirement. The construction industry would benefit from such a redefinition, as would other sectors. Most student loan is repaid as debt, so if it were not treated as part of the PSBR, additional funds would be released for investment in that sector.
  The right hon. Gentleman's most controversial remarks were about the pound. He may have upset Treasury Ministers—especially the Chief Secretary, who spent a great deal of time on "Newsnight" last night trying not to

  1329
  make remarks similar to the right hon. Gentleman's remark about the pound being overvalued. Hon. Members will have noted the right hon. Gentleman's honesty.
  I join the right hon. Gentleman in giving qualified support for the Budget, which is in the right direction. Unlike the official Opposition, I am honest enough to say that we welcome some aspects of it, fundamentally disagree with certain measures and are disappointed by others. Pensioners could have been given additional support to tackle the serious problem of pensioner poverty. The Chancellor rightly made more resources available for children and had the opportunity to do the same to deal with the plight of the elderly.
  This morning's edition of The Guardian quotes a pensioner, who said:
  "I was hoping for a decent hike in the old age pension, especially when he said he was increasing child benefit by 20 per cent.—mind you, at my age I should have known better."
  It is a pity that he thinks that way. Our alternative Budget offered to increase the over-80s pension supplement from 25p a week to £5 a week, which would have helped the oldest and poorest pensioners.
  We are also anxious about the environment. We welcome the £50 million of support for rural transport, but many cuts in rural transport occurred because local authority budgets had been cut. Although the boost to public transport in rural areas is welcome, it will simply make up for local council cuts.
  The Government have made two significant and worrying U-turns. First, the Labour manifesto claimed:
  "We will lead the fight against global warming through our target of a 20 per cent reduction in carbon dioxide emissions by the year 2010",
  but paragraph 5.28 of the Red Book—on page 72—makes clear that the Chancellor is committing the Government only to the European Union's target of an 8 per cent. carbon dioxide emissions reduction by 2010.
  I particularly look forward to hearing the Government's comments on their second U-turn. In 1994, the Labour party, when in opposition, promised an environmental Green Book to accompany the financial Red Book. The Financial Secretary reiterated the promise when she said:
  "We have every intention of keeping that promise from the first full Budget."—[Official Report, 10 July 1997; Vol. 297, c. 1062.]
  Sadly, that promise has been broken. Instead of a book, which should have had several pages at least, we have only one green page—page 78—in the Red Book.
  It is not surprising that the Government broke their promise; the Budget does so little for the environment that there is little with which to fill a Green Book. The Budget contains a modest energy efficiency scheme; there is no carbon tax; there has been backsliding on CO2 emissions; and fuel duties still represent tax rises—they have not been used to bring about a switch from vehicle excise duty as we recommended.
  Cuts in VED are referred to, but there are no details about how they would work. The Liberal Democrats proposed a £10 VED rate for cars up to 1,600 cc to compensate for petrol price increases, whereas the Chancellor's measures will, as the right hon. Gentleman
  1330
  rightly pointed out, leave motorists in rural and other areas worse off. No wonder Charles Secrett, director of Friends of the Earth, said:
  "This Budget is about as green as a smog alert."
  We have other worries. For example, we are disappointed that the anomaly of differential two-tier tax rates on insurance products has been resolved by raising VAT for both to 17.5 per cent. We are worried about higher rates of stamp duty and believe that they could be especially harmful for people such as widows in high-price housing areas who want to trade down to smaller houses. The increase in stamp duty from £5,000 to £10,000 will be difficult for them.
  We welcome many features of the Budget, not least the measures to help small businesses and tighten up on offshore trusts. We welcome measures to tackle unemployment, not least through the boosting of skills—and changes in national insurance contributions. We welcome the introduction of a fiscal responsibility code, which—rather like the independent Bank of England—was first proposed by the Liberal Democrats. We welcome measures to provide attendance allowances for women. That is another move that Liberal Democrats proposed some time ago. We are delighted not only that the Government have accepted our proposal, but that they have now accepted that it should be backdated. They did not agree with that last July.
  As I have said, we welcome the extension of eligibility for the new deal. We welcome the plans that will reverse the Government's earlier proposals for independent savings accounts, personal equity plans and tax-exempt special savings accounts; and, of course, we welcome the fact that, judging by this one, Budgets seem to be starting to plan for the long term. We broadly welcome the Government's ambitious welfare reform package—particularly their introduction of a new system of tax credits, including much-needed child care improvements and a sizeable shift in the tax burden to help the least well off.
  I was disappointed by the reaction of the shadow Chancellor, the right hon. Member for Hitchin and Harpenden (Mr. Lilley), who is not in the Chamber now. He made it clear that he did not favour redistribution. Indeed, we gain the impression from the comments of some Labour Members that they are not particularly interested in redistribution.
  Mr. Tony McNulty: Name one.
  Mr. Foster: The Prime Minister would be a good example, in view of some of his remarks. Liberal Democrats, at least, welcome the redistribution proposals in the Budget and welcome the principle of redistribution.
  I shall ask Ministers two questions about the welfare reform package. First, why is the cut in lone parent benefits, against which we have argued vociferously, to be made in the near future while the offsetting benefits that are due to be introduced through working families tax credit will not reach pay packets until April 2000? We urge the Government yet again to consider whether they wish to proceed with that cut.
  Secondly, I wonder whether the Chancellor is aware of information given by the Institute for Fiscal Studies in a post-Budget presentation today. The institute points out that, although 1.1 million people will have better work

  1331
  incentives as a result of the working families tax credit and other measures, some 2.8 million will have worse incentives. According to the institute—the point was also made, rightly in my view, by the shadow Chancellor—it will now be impossible to predict the net effect of the measures on employment. It is impossible to say whether jobs will be created in the way that both the right hon. Gentleman and I consider vital.
  The Budget contains some measures that we may welcome in principle, but which we do not think go far enough. We believe that there are three reasons why the Government have not allowed themselves to go as far as they should have. First, they have agreed—wrongly, in our view—to stick to Tory spending limits. At least, that is what they said up until yesterday: they told us that they would stick to the overall control total for 1998–99. Those who analyse the Red Book, however, will discover that the Government have broken the clear promise that they made to the House—although it is one of the broken promises that Liberal Democrats welcome.
  The second problem that has constrained the Chancellor and the Government is their refusal to consider raising the level of personal income tax. As has been pointed out, the Government have raised taxation overall in their package, but what has been raised is regressive taxation, not—as we would have liked—progressive taxation. The Government's failure to consider raising income tax levels means that they have no mechanism with which to control the current consumer boom and its effect on the economy.
  The third problem is the Government's continued uncertainty about our membership of the European currency. It was no surprise to read today that the pound had reached a nine-year high, which threatens to create problems for our exporters and to lead to higher interest rates. With no controls on either our membership of the European currency or the ability to raise income tax, the pound will be left bobbing around, out of control.
  Those constraints, with the Government's apparent determination to build up a war chest of money that they will be able to spend in the few years running up to the next general election—it is currently estimated that it will amount to £123 billion by the end of the Parliament—mean that the Budget has simply not gone far enough, especially in relation to public services. The extra cash for health and education falls far short of what is needed: it is just a drop in the ocean.
  The trouble is—the Chancellor did not mention this in his speech—that the extra money he announced was largely offset by the upward revision of inflation, which means the cutting of about £750 million from real public spending next year. That cancels out almost all the spending increases announced by the Chancellor. It also means that the black hole in the Government's finances caused by higher inflation has cut a massive £6.8 billion from the real value of public spending plans for 1998–99, which are now well behind the proposals of the last Conservative Chancellor.
  I shall now mention two aspects of public spending that I consider particularly important. The first is health. We heard much about the Government's commitment to health in today's statement by the Secretary of State for Health and, as hon. Members will remember, the Labour party's manifesto for the last election said:
  "We will rebuild the NHS…cut NHS waiting lists by 100,000".
  1332
  Since then, the pledge has been somewhat watered down. In yesterday's Budget statement, we heard that the NHS would have an additional £500 million, but that is much less than the £2.25 billion that we said was necessary in our alternative Budget. Furthermore, with the higher GDP deflator hidden away in the Red Book, the amount available to the NHS will be worth nearer to £400 million in real terms.
  Given the pressure on the Budget caused by inflation rate trends in the NHS and the millennium computer time bomb problem, it is worrying that the Chancellor seems to believe that that amount will be enough to cut waiting lists in the way described by the Prime Minister today at Prime Minister's Question Time. We do not think it will be possible.
  To sum up my views about the situation in the NHS:
  "Opposition Members welcome any additional resources for the national health service and any plan to break down the appallingly high waiting lists. However…When health costs are rising faster than even ordinary inflation, the sum that the Chancellor has provided today will barely cover the basic inflationary pressures that the health authorities face, far less deal with their huge backlog of structural repairs."—[Official Report, 1 November 1988; Vol. 139, c. 826.]
  Those are not my words; they were spoken by the current Chancellor nearly 10 years ago, when his party was in opposition. What he said 10 years ago we believe today about what this Government are offering to the health service.
  We remember the Government's commitment to make education their number one priority. They also told us that it was their intention that the share of GDP spent on education would rise over the lifetime of a Parliament. With the Chancellor's announcement, unfortunately, they are not making any progress on that promise. The share of GDP has hardly altered over previous years. In fact, if anything, it has made a small downward movement.
  The question is whether the education proposals will deliver much at all. According to the spin doctors, who had a field day up to and including yesterday, much is going to happen, but when the £250 million—that, of course, is in comparison with our Budget proposals for £2.5 billion—was announced, the Chancellor did not mention the effects of the upward revision of inflation.
  Because the increase in inflation affects the entire education budget, the net extra that yesterday's Budget offers for education is, in fact, only £148 million. Of that, £100 million will go to the new skills programme and £10 million to education action zones, both of which we welcome—but that leaves only £38 million extra for our schools. We welcome that, but, frankly, it is not very much.
  Mr. Phil Willis: Does my hon. Friend agree that the Budget announcement—and, indeed, the announcement of the Secretary of State for Education and Employment—included no resources whatever to support the learning age? The idea that we can build lifelong learning in the next millennium on absolutely no resources is hypocritical—sorry, I should not use that word. It is misguided.
  Mr. Foster: I entirely agree with my hon. Friend. I do not know whether he noted that, when the announcement came about the small extra amo,unt of money for education, and it was made clear that there was no extra

  1333
  money for further or higher education, we also had an announcement that there was to be a continuation of the Oxbridge colleges' money. For a Government who concern themselves with providing for the many and not the few, that seemed bizarre.
  As my hon. Friend knows only too well, there is a desperate need for additional money in higher education. Sir Ron Dearing, for example, said that, if we are to address the falling qualities of libraries, teaching facilities and especially information technology, we need £365 million this year, £575 million next year and £1 billion by 2000. The Government have, in practice, offered no new money in the Budget. Before it, they offered £165 million, of which £40 million is to improve access, and they will top-slice higher education budgets by £150 million by reclaiming the new tuition fee element.
  As the Under-Secretary of State for Education and Employment, the hon. Member for Birmingham, Yardley (Ms Morris) will know, the £165 million is not new money; it comes simply from staging Higher Education Funding Council grant payments so that the Government make a saving.
  The House may be interested to know that Baroness Blackstone said:
  "I have tried to say as clearly as I can that we are committed to trying to find additional funding for universities."—[Official Report, House of Lords, 10 March 1988; Vol. 587, c. 188.]
  It is clear from yesterday's Budget that the Government have failed in their effort to find additional funds for universities. Sadly, they have failed also to find any additional money for further education. Baroness Kennedy recently commented that our Cinderella further education sector needed
  "a sustained and massive investment in tackling the backlog of underachievement in the population to create a self-perpetuating learning society".
  The reality from yesterday's Budget is that no additional money is to go into the further education sector.
  There is some additional money for our schools and for skills, both of which are welcome, but there is no additional money for further or higher education. There is no opportunity, then, to start to address some of the problems that need to be tackled in our education service.
  Yes, the Government are committed to reducing primary class sizes for key stage 1 pupils, but we argue that we should reduce class sizes for all primary school children. There is little or no additional money to help tackle the backlog of repair and maintenance work in schools. There is no opportunity to start to put in place early-years education for three as well as four-year-old children whose parents want it.
  There is no opportunity to start to introduce a cap on technology and science class sizes in secondary schools, or significantly to increase the amount of money for books and equipment in schools. There is no additional money really to tackle the problems that I have described in further and higher education and, in particular, to start to give some support to part-time students in both further and higher education. This Budget has moved in the right direction, and for that we welcome it, but it has disappointed in a number of sectors, not least in funding for higher and further education.
  Mr. Tim Loughton: I have listened intently to what the hon. Gentleman has
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  said. Before he finishes, will he perhaps undertake that his Liberal Democrat colleagues will turn up this year during the Standing Committee stage of the Finance Bill and go through the detailed work of criticising and amending the Budget—making the points that he has been making in detail—rather than, as last year, contributing 15 minutes out of the 26 hours of debate, which was undertaken mostly by Conservative Members? The hon. Member for Gordon (Mr. Bruce), the Liberal Democrat spokesman, appeared for just 30 minutes in the whole week.
  Mr. Foster: I am certainly not going to make any commitments on behalf of my hon. Friends. They can make commitments for themselves. Earlier today, one Conservative Member told us what his views were and, when asked whether he was speaking for himself or the party, pointed out that he was speaking for himself. We then heard the shadow Secretary of State for Education and Employment, the right hon. Member for Charnwood (Mr. Don-ell), say that that is the way in which Conservatives always speak, so I shall let my hon. Friends speak for themselves as well.
  We welcome the direction in which the Budget has gone. It has huge gaps, not least its failure to address the need to provide support for pensioners and to tackle this nation's environmental problems. We welcome a number of its measures, but argue that they simply do not go far enough. However, given that there is a movement and direction in this Budget that we support, we give it the qualified support that the right hon. Member for Bishop Auckland also gave it.
  6.28 pm
  Mr. Alan Simpson: I offer the Chancellor of the Exchequer congratulations on introducing four extremely important principles in this Budget, which could easily be overlooked in the detailed exchanges.
  I congratulate my right hon. Friend on raising child benefit. In particular, it is important that the House notes the Prime Minister's comment at today's Question Time—that a belief that tax policy should favour the child, rather than judge the household, underpinned that change. That is extremely important when we place our children in the context of the best assets that a society has. If we can recognise that as a Budget principle, we will be much the better for it.
  The second thing that I wish to congratulate the Chancellor on is his decision to reduce value added tax on the installation of home insulation products. Again, it may involve a relatively small amount in actual terms—perhaps no more than an extra 40,000 properties a year are likely to benefit—but it establishes a tax principle that will be central to how we view economics in the next century. The principle is this: it is wrong for any Government to tax energy-saving more heavily than energy-consuming. Labour fought for that argument in opposition, and I am pleased to see that in government we have stuck to the principle for which we argued, and made the decision to reduce VAT on home insulation products.
  Mr. Loughton: On that point, will the hon. Gentleman admit that the Government have reneged on the campaign

  1335
  that the Financial Secretary to the Treasury led two years ago, in that the VAT reduction applies only to grants from local authorities, not to energy-efficient goods in general, which anyone here, even the Lord Chancellor, could go down to B and Q tomorrow and buy?
  Mr. Simpson: No; I think that we are at the first stage of a process that will move the whole eco-taxation agenda on to a significant point. It will profoundly shift the way in which we think about the relationship between taxation, economics and the environment, and I am pleased that we have made that start.
  That fits in with the third factor on which I congratulate the Chancellor—the beginnings of a framework of green taxation. Spirited as was the defence by the hon. Member for East Yorkshire (Mr. Townend) of the rights of the private motorist, if we are to continue to exist on a planet and in an environment that will sustain us all, we must face the consequences of Kyoto. The principles of contraction and convergence that came out of the Kyoto agreement will force us all down a path which not only will mean that we take seriously our responsibilities for environmental taxation, but will probably become the central pillar of taxation policy for the 21st century.
  Finally, I thank the Chancellor for issuing a pre-Budget consultation document. Many of us complained for years that the House was not taken seriously during the process of Budget formulation and consideration. This year—for the first time to my knowledge—a Chancellor has published a pre-Budget report, and invited contributions and responses.
  I assumed that that invitation included me, and I had the temerity to submit my own Budget to my right hon. Friend about a week ago. Not much of it appeared in the Budget statement yesterday, but I am certain that the Chancellor has tucked it up his sleeve and is ready to unfold it in the next Budget, or perhaps later this year.
  I shall describe some of the "big picture" issues against which the Budget must be measured, which the House has not properly addressed so far. Those focus on three factors—the real prospect of a recession, the case to be made for a reflationary and reinvestment programme, and the relationship between work and welfare.
  When I wrote my Budget submission, I was greatly influenced by several commentators who had written about the changes that had taken place in the global economy over the past year. Those range from—before the Budget—people such as Robert Reich, the former American Secretary for Labour, to—after the Budget—Roger Bootle, one of the most senior economists and commentators in the United Kingdom.
  Neither of those is a known member of the "usual suspects" group in the parliamentary Labour party, but each warns that the world is sitting at the edge at a large unco-ordinated global contraction, of which we have seen only the beginnings. To retain a monetarist obsession with the risks of inflation is to flirt with the real danger of missing the next war, because the serious challenge we face is the risk of an unco-ordinated global recession.
  In that context, we must address some of the contradictions that one finds in almost every modern economy, such as the signs of boom and the signs of bust appearing at the same time—a boom in consumer spending and credit debt, co-existing with a bust in manufacturing output and manufacturing investment.
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  Those are new and difficult problems for any Chancellor and any Government to deal with, but deal with them we must. The likelihood is that the consequences already being seen to follow from the Budget statement will accelerate rather than delay the point at which the contradiction will have to be dealt with.
  The value of the pound has already increased today. That makes it almost certain that, when the Monetary Policy Committee meets, it will raise interest rates. The fall in manufacturing and manufacturing investment that will follow will add to the Budget predictions for manufacturing industry, which have been downgraded from a presumption of 1.5 per cent. growth this year to an assumption of growth between 0 and 0.5 per cent.
  That is all likely to come through in the second half of this year, when the welfare-to-work programme will be producing people who are at the point of looking for work. We shall face a real problem if employers are having to make decisions about whether they can retain existing employees, at the same time that we as a Government are asking them to take on the new trainees and recruits coming through the welfare-to-work programme. At that point we will be asked serious questions about where the work is to be found.
  When the Institute of Fiscal Studies said that, out of this year's Budget, it would be possible for us to release between £3 billion and £3.5 billion for public investment, it was being excessively cautious. The real figure, as the hon. Member for Bath (Mr. Foster) said, is probably more; between £5 billion and £10 billion could have been released. That reinvestment is what we need for a publicly led and publicly financed programme to deliver real jobs in the real economy.
  I looked at several of the newspapers this morning, and saw that one of them announced that the Chancellor had declared war on the work-shy. If we can inspire young people and others among the long-term unemployed to go into the welfare-to-work programme, and if we give them the skills to enable them to participate and the enthusiasm to seek permanent work, where will that work be found, if the economy is on the point of a serious and possibly sustained downturn?
  I believe profoundly in our new deal proposals. There is nothing more important for a society than finding productive, secure and well-paid work. Yet, in the broader economic context in which the new deal is having to be framed, it may be difficult for us to deliver on that. I draw a comparison with the previous and probably better known "new deal" introduced by President Roosevelt after his victory in America in 1932. There are significant factors in what underpins each of the two approaches that are entirely different.
  Under Roosevelt, the new deal programme built 651,000 miles of roads, 78,000 bridges and viaducts, and 38,000 municipal buildings; 2 million young people went into youth conservation work. The Government of the day introduced a minimum wage and price controls, regulated the financial markets and abolished child labour. Huge numbers of teachers were involved in keeping open rural schools that would otherwise have been closed on economic grounds, while the economies that supported their communities were rebuilt, underpinned and strengthened.

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  That all took place around a presumption that public borrowing was not a carnal sin, and did not make one blind. It was the basis on which to rebuild a sensible economy. People in work were themselves tax contributors rather than welfare dependents.
  The Government of the day borrowed to accomplish those goals. The issue was not whether they had debt, but where the debt was owed and how it would be used. Those are still the central issues, and will determine how we underpin a reflationary package to deliver real jobs in the United Kingdom economy.
  There is no point in saying that we can leave it to the private sector. If there is one absolutely clear lesson to be learnt from the Tories' 18 years in power, it is that they gave the free market freedoms to do anything it liked, and that the one thing it did not do was reinvest massively in long-term job security in our economy. In those 18 years, our downgrading of private investment—in which the United Kingdom has always failed to meet the Organisation for Economic Co-operation and Development average—was made worse by the planned collapse of public investment and the planned sell-off of public assets.
  When the Tories came to power in the late 1970s, net public wealth as a proportion of gross domestic product was 70 per cent. When they left power, it had been run down to 10 per cent. It was an exercise in long-term asset stripping rather than long-term reinvestment.
  How will we underpin a real, serious and sustainable new deal programme? Although I do not urge that we build 651,000 miles of new roads—I am not a roads-supporting person—I remind Ministers that there is a rough equivalence in the number of houses in the UK that are miserably insulated and desperately in need of upgrading to modern home insulation standards. In the second appendix to my Budget submission, I outlined the basis on which the Government could begin the first stages of a 15-year programme to end fuel poverty in the United Kingdom.
  The programme would require us to upgrade 500,000 properties a year for each of the next 15 years. Consequently, we would immediately create sustainable work for many of today's unemployed. We would also raise the quality of life of the many households who live in miserable, unhealthy accommodation. We would save money for health service, and raise the standard of the United Kingdom's capital housing stock. Environmentally, the programme would save large amounts of carbon emissions, and it would create a virtuous circle, in which all will win and none will lose. That is how we can create work, wealth and well-being.
  We could also develop comprehensive national programmes to restore and rebuild public transport infrastructures in all our towns and cities, and to serve all our rural areas. However, such programmes will not be created by providing a few market incentives.
  Although the £500 million provided in the Budget will be a start in developing such programmes, it will allow us—if we spread the amount over three years, across the country—only to draw up the plans, not to deliver the networks. Again, we will need a public investment-driven programme, which would underpin welfare to work and
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  provide the arena in which we will allow people who are not work-shy to find a real and useful place in our economy.
  The Chancellor, in accomplishing those objectives, may wish to examine and embrace other tax principles. One principle is very simple: a public stakeholding should be attached to every public subsidy—an interesting notion, which Conservative Governments studiously avoided in their 18 years in office. I shall develop later the point that those Governments were very good at shifting the locus of public subsidy from personal welfare towards corporate welfare.
  Those who say that we should not attach conditions to public subsidies to the private sector might like to examine the United States' community reinvestment legislation, in which the private and financial sectors' social obligations are legally binding, and cover matters such as community reinvestment and not-for-profit work in local communities. Their obligation is one of demonstrating how public moneys will be used to benefit the communities from which that money is drawn.
  Organisations such as Greenpeace, Friends of the Earth and the Association for the Conservation of Energy have all, in their own way, stated the colossal potential of environmental technologies and environmental repair in generating real, sustainable jobs. The sooner we seriously embrace our Kyoto obligations and an environmental agenda, the sooner we will engage in the economics of the next century.
  Accepting those obligations will dovetail with some of the issues and contradictions that we will have to resolve in the transition to a welfare-to-work system. The Chancellor was absolutely right to set himself the task of reducing poverty, and particularly of reducing the outrageous marginal tax rates that fall on the poorest in the land.
  Often, those who move from welfare to work face marginal tax rates of up to 96p in the pound. If they receive passported benefits—such as free school meals or school travel—the reclaim rate may amount to 117p for every 100p they earn. That is crazy. Therefore, trying to connect the benefits system with the wage system is an extremely important idea and objective.
  Connecting the two systems will, however, have some real difficulties, and the House must not be deluded about them. The House attempted twice before to develop its own version of working families tax credits. On each occasion, it failed to enact workable legislation. The first problem—making the proposals complex and unworkable—was the legacy of an obsession with means-tested benefits.
  The problem is not only the administrative difficulties of moving family credit from the welfare system to the work system—by means of income tax—but the relationship between whatever system eventually emerges and the remaining aspects of the means-tested benefit system. If we are left with a legacy of clawing back housing benefit and council tax rebates, we will discover that exactly the same poverty traps remain, but appear at different points. We may try to introduce different tapers and stages at which the clawbacks occur, but it will simply make a monster of the current mess.
  I make those comments not to be critical of the idea of connecting the systems, but to acknowledge the scale of the complexity that we will have to sort out. If there is

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  one possible way in which the process can be made simpler, it is by simplifying the process by retreating from means-tested benefits. The simplest way of delivering a new system would be to return to many of the Beveridge assumptions about universal platform entitlements underpinning the benefits system, and to a progressive taxation structure—however it is constructed—as the means of claiming back benefits from those, at whatever position in the earnings scale, who are deemed not to be entitled to be net beneficiaries.
  Returning to those earlier assumptions would remove the barriers between welfare and work. We remove the complexities of collection not by diving into separate taxation processes on individual benefits but by taxing overall disposable income. It is called progressive income tax—[Interruption.] Yes, it is unashamedly redistributive; but that is what society should do. We cannot tackle poverty without redistribution.
  The idea that poverty will right itself if there is accelerated growth is nonsense. We inherited from the previous Tory Government a wider gap between rich and poor than this country has ever seen. That is because the Tories abandoned a recognition that the market has no interest in redistributing to the poor; it becomes self-serving to the rich. A redistributive tax policy is nothing to be ashamed of.
  In considering how welfare to work and the working families tax credit might fit into the redistributive process, it is important that the House looks at the lessons that must be learned from Canada and the United States before it adopts any particular structure of a scheme. The equivalent to the working families tax credit in the United States has to be underpinned by food vouchers. I have yet to see a case for embracing the reintroduction of food vouchers in the United Kingdom. In Canada, the costs of going down such a path have been extraordinarily high.
  At some point, any Government must ask themselves whether the costs of fundamental change in the welfare system outweigh the specific benefits of that change. The answers are to be found in different variations on this theme: a return to universal benefits and welfare system, tax thresholds that are adjusted to take the working poor out of tax paying rather than in pursuit of a lower rate of tax, and a rise in the initial tax disregard for those entering work.
  The Chancellor has been absolutely right to go down the path of raising environmental taxation. He has been absolutely right to raise the amount of support that goes directly to children. He would also have been right if he had followed the same logic and raised the amount of support that goes to pensioners and disabled people. He would also have been right if he had said that we should go down the route of directed public investment, which would be the basis of a planned reflation of the economy.
  I expect that, at some point, the Tories will say that all this is unaffordable; that the welfare burden is simply unsustainable in a modern economy. I must concede that there might be one sense in which they are right. Cuts in personal welfare under their Administrations effected a shift towards corporate welfare.
  Allowances for and non-taxation of industry must amount to about £30 billion a year—just over £18 billion in capital allowances, £4.5 billion in direct grants, £4.1 billion in export credit guarantees, mainly in export support grants, and a whole series of other packages.
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  In their own way, they are all forms of welfare dependency. If the Chancellor needs to look for money, and if tough decisions are to be made, we should begin by looking at corporate welfare.
  Every day of every week, the Government's spending Ministries are besieged by businesses—mainly big business—saying, "Of course we will come to your country, but we need you to pay us. We need you to put together an incentives package that will make it worth our while. We want you to build the buildings for us, give us the land, train the work force and put in the infrastructure. While you are at it, we would like you to have a word with the local authority and ask them to give us a 10-year exemption from business rates. Don't talk to us about crisis loans; we want grants." If welfare is demeaning, we should try first removing the unaffordable, unsustainable, demeaning burden on business, and allow it to stand on its own two feet.
  If we do not want to do that, we should introduce conditions on the use of public money in return for the investment or non-taxation with which they are graced. The idea of a stakeholder economy ought to extend to the notion that the Government, on behalf of the people they represent, take a stake in—or hand a different form of stakeholding to—the industries that are publicly subsidised by being allowed not to pay tax as the rest of us do.
  It would be interesting to invite the Home Secretary to consider the behaviour of some corporations. Rather than judging lone-parent families, we should look at the morality of some of the lone-parent corporations and their conduct around the globe. They are terribly flighty. They take money in one place, get into a relationship in one country, spawn offspring, and then do a runner to somewhere else. Someone flashes a wad of cash somewhere else, and they are off. The behaviour of lone-parent companies, which have often had multiple partners, does not make them good parents.
  We ought to ask the Home Secretary whether there is a need for lone-parent company classes in parenting. We should ask whether there is a need to curfew capital; whether it should be back in the country by 9 o'clock. There are a series of ways in which we can use the assets that this country still has in abundance to meet all the needs and aspirations that are found in the Chancellor's statement and the new deal.
  Nothing is more important than putting the country back to work. To do so in an environmentally sustainable way is certainly our biggest challenge. That is the really exciting agenda of the next century. If we can shift our spending from warfare to welfare, from speculation to environmental repair and reinvestment, we will find that we have all the resources necessary to deliver not only a new deal but a sustainable deal for a new century. The sooner we embrace that in a Budget, the better society will be.
  6.56 pm
  Mr. Geoffrey Clifton-Brown: This was one of the most over-hyped, over-spun, media-spectacle Budgets that I can remember. Indeed, one is not disappointed by the two opening sentences of the Chancellor's Budget speech. It is a good idea to remind the House that he said:
  "Only once in a generation is the tax system fundamentally reformed. The Budget I bring before the House and the country today begins the task not just of modernising taxation but of modernising the entire tax and benefits system of our country."—[Official Report, 17 March 1998; Vol. 308, c. 1097.]

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  The Chancellor gives himself divine status. A previous Chancellor coined the phrase that a Budget celebrated on the day is often regretted at leisure. History will judge today's Chancellor by whether he lives up to the very high expectations that he set himself in his opening remarks.
  We know that the Budget is delivered against a macro-economic climate of falling growth, rising inflation, falling unemployment and, the joker in the pack, rising money supply—at some 10 per cent. a year, which is unsustainably high. What did the Budget do? It took me some little while to discover—buried deep in the Red Book in table B.20 on page 118—that it is a fiscally tightening Budget, to the tune of £4.8 billion this year and £2.9 billion next year.
  Added to the fiscal tightening in the previous Budget, through the windfall tax and advance corporation tax credits, fiscal tightening amounts this year to £11.8 billion and next year to £9.9 billion. The question is whether that will be sufficient to avoid having to increase interest rates at the next Monetary Policy Committee, bearing in mind the effect that that will have on the value of the pound.
  Part of the macro-economic situation is the City's verdict on the Budget. What happened? The pound soared to a nine-year high. The group chief economist of the Hongkong and Shanghai Banking Corporation, Roger Bootle, said:
  "It's a considerable disappointment that will put a lot of pressure on the Monetary Policy Committee to raise rates."
  So the pound is likely to go still higher. As I predicted in a recent speech on the economy, manufacturing industry is already beginning to go into negative growth. If we are not careful, the economy will go into recession in two or two and a half years.
  We delivered one of the brightest economic situations that this country has seen since the war. We left a golden legacy, in which growth exceeded inflation. It is a bitter disappointment that the rate of growth is falling. The Red Book predictions show it falling from 2.5 per cent. to 2 per cent. this year and to 1.75 per cent. next year, which will be unsatisfactory even if it is achieved. On the day that the Budget was delivered, the retail prices index rose disappointingly from 2.5 per cent. to 2.6 per cent.
  How is the Budget to be judged? There are some welcome elements, but most of the welcome measures come with a "but". One could welcome the decrease in corporation tax for large and small companies to 30 per cent. and 20 per cent. respectively, but that has to be considered in the context of the overall burden of taxation on business, which has considerably increased because of the withdrawal of associated tax credit in the previous Budget and, perhaps more importantly, the quarterly filing of corporation tax for large companies. That will place a burden on companies.
  The Chancellor made much of trying to introduce a climate in which small businesses would thrive. He said that he was trying to reduce bureaucracy, but, nine months into the Government's term of office, I see no sign of them reducing bureaucracy—quite the contrary. As I said in art intervention on my hon. Friend the Member for Maidenhead (Mrs. May) yesterday, the measures that the Government are accepting from the European Commission, particularly in the social chapter, such as the
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  decision at the recent meeting to allow works councils for small firms with fewer than 50 employees, will add considerably to the burden on small businesses.
  The Budget will increase taxation as a proportion of gross domestic product. That can be seen from chart B2 on page 119 of the Red Book. The prediction is that the overall burden of taxation will be 38 per cent. next year. Given that our major economic rival, Germany, with which we compete directly in many markets, has an overall taxation burden of 39 per cent., the situation is serious. The prediction is based on some optimistic assumptions for levels of growth. If those predictions are not sustained, the level of taxation is likely to go over the magic figure of 40 per cent.
  The level of Government expenditure as a proportion of GDP is also mentioned in the Red Book. That figure is also likely to go over the magic figure of 40 per cent. in the near future. With our major rivals such as the United States, Japan and Korea all having a ratio well below 40 per cent., it is bizarre that a Government who claim to be sticking to the Conservative expenditure plans are not doing so, as a detailed examination of the Red Book shows.
  One of the disappointments is that the Government cannot control social security expenditure, contrary to what they are proclaiming publicly. Table B18 on page 128 shows that the social security budget is likely to rise by £4 billion over the next two years. The Government are predicting that they will not be able to stick to the expenditure plans.
  I have already said that the Budget has some welcome measures, but there is always a "but". One could welcome the changes to employers' national insurance contributions. However, the overall rate of national insurance contribution for employers is rising to 12.2 per cent., placing a considerable burden on companies, largely in the high-tech and financial sector, that are the backbone of our economy and are helping our balance of payments. They will be hit by the measure.
  National insurance is an odious tax. It would be more intellectually honest to abolish it and put the burden on income tax. That would be a properly progressive tax, with those who earned more paying more of their share of tax, instead of having a vastly complicated tax that takes up a lot of time for accountants and the Contributions Agency. All that could be abolished if the system were simplified. I welcome the Chancellor's decision to merge the Contributions Agency with the Inland Revenue. I also welcome the measures to ask the Inland Revenue to help new firms setting up payroll tax. Those are two positive measures.
  The Chancellor largely got away with his Budget last night, and the media were on the whole satisfied with it, because he had hyped in advance that middle England—the middle classes and the opinion formers—would be hit. In the event, they were not—or were they? We might just have to wait for the small print. Those of us who know a little about such matters can already divine some of the measures that will hit the middle classes.
  One might welcome the reduction of capital gains tax from 40 per cent. to 24 per cent. for assets that are held for 10 years, but let us think about that. If inflation is 2 per cent., over 10 years the asset will depreciate by 20 per cent. If, as is more likely, the rate of inflation is over 4 per cent., the asset will depreciate by 40 per cent.

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  In other words, the gain caused by inflation will be more than the reduction of tax that the Chancellor is making. By not allowing indexation of gains, we are going back to the bad old days of the high-inflation Governments of the 1970s, which taxed inflation on gains. That is unfair and unsatisfactory. I hope that, by the time the Finance Bill is published, the Government will have had a re-think.
  Another disappointment is that, as the Red Book shows, the savings ratio has declined sharply in the past year—by about 1 per cent. It is predicted to decline again in the coming year. Is that surprising, when a retrospective tax was announced to put a lifetime ceiling on the new individual savings accounts and abolish PEPs and TESSAs? What are small savers to think when they might be taxed later? The Government are breaking faith with small savers.
  It is a tribute to my right hon. Friends the Members for Hitchin and Harpenden (Mr. Lilley) and for Richmond, Yorks (Mr. Hague) and all my hon. Friends, who have conducted a vociferous campaign, based on huge numbers of letters, that the Government have been persuaded that a lifetime limit of £50,000 on the new ISAs is discriminatory, particularly against the young, and unworkable. The Government have listened to the savings industry as well. I welcome that very much.
  Mr. Loughton: A U-turn.
  Mr. Clifton-Brown: Indeed.
  I should like to examine one or two of the largely welcome social measures in the Budget in a little detail. The working families tax credit suffers from a number of defects. The Womens Budget Group, an informal think tank of economists, social policy experts and women's organisations, believes that the replacement of family credit with the working families tax credit will lead to women and their children losing. Because the man is usually the breadwinner, he will get the tax credit, rather than it going to the woman.
  The same would apply to taxing child benefit. It is often the low-earning or non-taxpaying wife who obtains the child benefit. Taxation would be calculated on the man's marginal rate. She would suffer. We welcome the increase in child benefit, but we regret that those on even basic rates of tax will suffer.
  I wish to comment on the increase in petrol duty. The House of Commons estimates that the Chancellor has raised tax revenue by £1 billion this year, on top of the £695 million he raised in last year's Budget. This is a savage rise, which particularly hurts those people in rural constituencies who depend on the car for a lifeline.
  People in my constituency have to use the car to get to the post office to get their benefit, to go to the doctor's surgery, and to do their basic shopping. It is all very well the Government saying that the problem is due to the previous Government's deregulation of the bus system, but there will never be a bus system in a rural area that is convenient for every single person—young, middle-aged and old. That is unrealistic. Those in rural areas need a car, and they are clobbered every time in the name of a so-called environmentally friendly tax.
  There are many other more satisfactory ways of producing a green Budget. One is to reduce VAT on insulation materials. This is a so-called welcome benefit,
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  but it is miserly because it is applied only to Government schemes. Why does it not apply across the spectrum? The Chancellor should talk to our European Community officials in Brussels to see if we can get a derogation to apply the benefit across the spectrum, so that all insulating materials can be free of VAT. In that way, instead of the home energy efficiency scheme insulating 3.5 million homes, it would get to all 10 million homes which need it, and some of the poorest people would benefit.
  The real disappointment of the Budget is that it fails to deliver for the health service and for education. The Government claim that they have a wonderfully reducing debt and a strong economy, but they should listen to the figures. Let us look at the health service. The £500 million which was greeted—or was not greeted—with such glee by Government Back Benchers yesterday is 1.2 per cent. extra for the health service. When we were in government, we put in, year on year on year, 3 per cent. extra in real terms.
  My constituents in Gloucestershire will see their waiting lists rise because the funding is not being increased at the same rate as for urban areas. We have a bed-blocking problem in Gloucestershire, and 100 people who should not be in hospital are there simply because the funding is not available to provide them with a domiciliary, residential or nursing care package. They are in beds which should be occupied by people who need operations. The doctors are there to perform the operations, but they cannot be carried out, because the money is not there to get the people our of hospital. The waiting lists lengthen, and people who need operations do not get them.
  Ms Claire Ward: The hon. Gentleman has a selective memory of my right hon. Friend the Chancellor's speech. He refers to the increase in petrol duty and its effect upon the rural communities. He forgets that the Chancellor also introduced an extra £50 million for rural transport. He referred to the health service, but he forgets that we have put more money into the health service than the Conservative Government ever intended. We have done likewise in education. I am interested to hear the—
  Mr. Deputy Speaker (Sir Alan Haselhurst): Order. The hon. Lady is in danger of making a speech. Interventions must be brief.
  Mr. Clifton-Brown: I rather wish I had not given way to the hon. Lady, but as I did, I will answer in robust terms.
  The Chancellor has raised £1 billion from the extra petrol duty. The £50 million for special rural schemes transport is peanuts in comparison, and my constituents will feel the harsh economic effects of that increase in petrol tax. The £50 million is welcome, and here I make a special plea to the Chancellor. My constituency has an excellent community bus scheme, which has been going for 15 years. I hope that money will go not only to new schemes but to existing ones.
  Mr. Shaun Woodward: Does my hon. Friend agree that the intervention by the hon. Member for Watford (Ms Ward) showed what we all know—that Labour Members have no understanding whatever of the

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  needs of rural communities? Does he agree that they are given to the kind of patronising claptrap which suggests that £50 million for rural transport will solve the problems that the Government have created with their Budget?
  Mr. Clifton-Brown: My hon. Friend is right. He moves in his constituency, and he goes to the local employment service and doctors' surgeries. He knows, as I do—and as every Member who properly represents a rural community knows—the real hardship that the increase in petrol duty will cause.
  Mr. Paul Keetch: The hon. Gentleman knows my constituency very well, and I must say that I find astonishing what he says about the great things done by the Tory Government. Does he remember the village schools, pubs, shops, postal services and bus services closed under the Tory Government? I have no great support for Labour Members who do not understand rural constituencies, but this is one issue that the Tories—who were thrown out of vast swathes of rural Britain—do not understand, either.
  Mr. Clifton-Brown: I was the only Conservative Member of Parliament in the country who had a positive swing towards to me at the election. I do not recall a single time when I was trying to defend a rural school or bus service on which I received support from any Liberal Democrats.
  The Budget is a wasted opportunity in terms of the amount of resources going to the health service. In terms of education, the position is even worse. I calculate that the increase—even with the extra £250 million yesterday—this year will be less than 1 per cent. That is a disgrace, and experienced teachers in my constituency will continue to leave schools and class sizes will rise. Special needs pupils will not get the statementing they need.
  The previous Government were able to provide great public services at the same time as reducing the burden of taxation. I hope that the Government will do better in the rest of their term. Otherwise, when they reach the next election, the electorate will deliver their verdict.
  7.17 pm
  Mr. Geraint Davies: This is an amazing exhibition from the Opposition. In today's newspapers—from The Sun to the Financial Times and everything in between—there has been almost universal acclaim for the brilliance of the Chancellor's Budget. [Interruption.] Conservative Members may laugh, but they are in the minority. It is all very well pretending that the media do not really understand the issues—I suggest that they understand the issues much more than Opposition Members.
  The centrepiece of the Budget—making work pay—goes alongside a number of other themes on which I will not dwell, as the media and right hon. and hon. Friends will articulate them in detail. I want to combat the somewhat pathetic points made by the Leader of the Opposition and other Opposition Members.
  The Budget contains measures for supporting families with children through child benefit rises and encouraging business by lower corporation tax and special concessions
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  for small business. The Budget provides extra cash for education and health, £500 million for public transport, more support for the environment and—all-importantly—the setting of a long-term economic framework for the prosperity of Britain in a global marketplace.
  The Leader of the Opposition said that the initiatives on corporation tax, small business tax, the challenge funds for universities in terms of venture capital, the reduction in national insurance and the reform of capital gains tax were all the idea of the shadow Chancellor of the Exchequer—that they were all your ideas.
  Mr. Deputy Speaker: Order.
  Mr. Davies: I apologise if—
  Mr. Deputy Speaker: Order. The hon. Gentleman must sit down when I am on my feet. I am trying to help him to remember the convention of the House that hon. Members refer to one another in the third person. Remarks must be addressed only through the Chair.
  Mr. Davies: I apologise, Mr. Deputy Speaker—I was not suggesting that you had claimed those tax policies as your idea. The suggestion was that they were the idea of the Conservative party. If they were—and of course they were not—why were they not implemented in the 18 years of Conservative Government? Why, instead, did we have years of drift that ended in £400 billion of public sector debt?
  I come to that well-trodden, pedestrian point that the Prime Minister claimed that there would be no new taxes under Labour. Frankly, no voter believes that a new Government will not reshape the fiscal terrain to deliver their ambitions on poverty, on environmental sustainability, on employment, on security and on building a coherent society and future prosperity. Everybody knew that our pledge was that the lower and higher rates of income tax would not be increased—and they will not be. Indeed, I am confident that the overall tax burden will be less by the time of the next general election.
  Mr. Woodward: The hon. Gentleman says that the overall tax burden will have come down by the time of the next election. Will he explain the Government figures which suggest that, this year, the burden in terms of net taxes and social security contributions is 37.2 per cent., whereas the projection for 2001–2 is 38.5 per cent.? By using simple mathematics, can he explain by what magical trick the proportion will be reduced in the final week before a general election?
  Mr. Davies: There is not going to be an election next year. The key point is that the centrepiece of the Budget is making work pay. Our strategy is to translate claimants into taxpayers—we shall create opportunity where there was despair. By creating an economy based on work, we shall establish a virtuous cycle.
  The Conservative Government characteristically built an economy of spiralling taxation and low success. Their mismanagement meant that there were hidden taxes—for example, the BSE crisis cost £3.7 billion, and the underpricing of shares in the privatisation programme cost £5.7 billion. Moreover, it took the Labour Government to

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  give the Bank of England independence, which is saving £6 billion a year in terms of the repayment of Government debt, as long-term borrowing costs are the lowest for 30 years.
  Another myth is that the Conservatives are the friends of rural areas—we have just heard that claptrap from the hon. Member for Cotswold (Mr. Clifton-Brown). Tory Members scoff at the £50 million for rural infrastructure, but that is not an insignificant amount. Part of the Tory legacy is the scrapping of rural transport as a result of deregulation, which was a complete disgrace. I am glad that our partners in the business community are responding to the challenge of the new Labour Administration. For example, BP today issued a press release saying that it would reduce relative prices of petrol in rural communities, which is a very welcome step.
  Mr. Loughton: We have heard that red herring several times this evening, but will the hon. Gentleman acknowledge that the reduction in the oil price may have something to do with the fact that, over the past six months, the price of a barrel of oil has fallen from $20 to less than $13?
  Mr. Davies: No. I am talking about the urban-rural differential, not the average price. The increases in fuel taxes are broadly in line with those imposed by the previous Administration, yet the Conservative party has now performed a cynical U-turn in an attempt to get more votes.
  The Labour Government are introducing an environmental package. There is a policy shift from taxing the vehicle to taxing use. That is a sensible step, not only for people who work in car factories, but for the environment. Moreover, we are spending £500 million extra on public transport—we hope to continue that policy in future Budgets.
  Mr. Clifton-Brown: Does the hon. Gentleman accept that a shift in taxation from the vehicle to its use is exactly what discriminates against rural dwellers, whom I want to protect?
  Mr. Davies: That is why we are spending £50 million on rural transport, which the Conservative party destroyed.
  On families, child benefit will rise by 20 per cent., which is the biggest ever increase. What is remarkable is that, after the idea of progressive taxation on child benefit had been floated, the Leader of the Opposition called it a betrayal. I cannot believe that the Conservative party, which used to talk about targeting, has changed its policy so cynically—it is outrageous and pathetic.
  The Leader of the Opposition then claimed that we were on the brink of recession—that jobs were at risk because of an overvalued pound and high interest rates. However, the figures for February, which have only just been released, show that an extra 13,700 people are in
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  jobs, and that unemployment is at 4.9 per cent., which is the lowest level for 18 years—since June 1980, in fact, very shortly after Labour were in office.
  Mr. Woodward: Will the hon. Gentleman give way?
  Mr. Davies: I shall take the hon. Gentleman's very predictable intervention.
  Mr. Woodward: Can the hon. Gentleman say what the sterling-deutschmark exchange rate is this evening as a result of yesterday's Budget? Does he agree that the pound is overvalued?
  Mr. Davies: At a guess, I think it is about DM3.2 to the pound. [HON. MEMBERS: "Wrong."] Anyway, it is in that area. I understand the rather simplistic point that the hon. Gentleman is trying to make. He is saying that sterling is too high—
  Mr. Owen Paterson: Will the hon. Gentleman give way?
  Mr. Davies: I shall give way to the hon. Gentleman in a moment, as he is wearing a very nice tie.
  The Leader of the Opposition said that Britain was on the brink of recession because of the exchange rate, but if the export market is in such a bad way, why do the 1997 figures show that Britain has a trade surplus for the first time since 1985? Moreover, that surplus is the largest since 1982—£4.5 billion for 1997, as opposed to £1.8 billion in 1996. That is hardly an export-driven recession.
  Mr. David Ruffley: Will the hon. Gentleman give way?
  Mr. Davies: In a second. Please sit down. There is a big queue and I will take you one at a time, if you can contain yourselves in your seats—
  Mr. Deputy Speaker: Order. I think that I may have to help the hon. Gentleman again. While I am on my feet, I appeal for rather less exuberance on the Opposition Benches.
  Mr. Davies: In difficult trading conditions, with sterling high, goods have been holding their own and services have been expanding, owing to the quality and productivity improvements in the British economy.
  The shadow Chancellor should realise that the exchange rate cannot be explained entirely in terms of relative interest rates. The pound is strong because there is international confidence in the British economy and, not least, in the British Chancellor and his Budget. That is unfortunate in some senses. Everyone realises what a good job we are doing.
  There is also great uncertainty over the euro. Will there be a strong independent bank? Will there be political fudges? Did the fact that it was announced on the very day of the Budget that the drachma would be part of the euro have any impact? Of course it did, because some people feel that it might drag down the average value of the euro, increasing uncertainty and making sterling a refuge currency. We understand that.

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  There is uncertainty in Asia and a recession in Japan, and Europe—I am thinking of Germany in particular—has been depressed by having to fulfil the Maastricht criteria quickly. All that has contributed to the strength of the pound, alongside the fact that we are at the top of our economic cycle. The United States is in a similar situation to ours, and our exchange rate with the dollar has been steady for about 15 months.
  The pound is holding up, as a function of the good job that we are doing; markets are up; pension values are up; and things are looking good.
  Several hon. Members rose—
  Mr. Davies: I shall give way to the chap with the pink tie.
  Mr. Deputy Speaker: Order. We are not chaps. We are hon. Members in the House.
  Mr. Paterson: I am touched by the gallant comments about my tie, but I am shocked that the hon. Gentleman should dismiss as simplistic a question about the exchange rate. Does not he realise that 20 per cent. of the British economy is based on manufacturing and that tens of thousands of people are worried stiff about the exchange rate, which, for his information, has gone to DM3.05?
  Mr. Davies: I realise that there is concern, but it is worth looking at the trade figures and at how well we are doing under difficult conditions. The uncertainties that I described are temporary—they may take a year or so to get out of the system—but we are creating conditions, with long-term policies, in which we are doing well despite the strength of the pound. Employment and prosperity prospects will continue to improve.
  Mr. Ruffley: What reasons can the hon. Gentleman give the House for the downgrading of the gross domestic product forecast for 1998, from 2 per cent. to 2.5 per cent.?
  Mr. Davies: As I said—[HON. MEMBERS: "Resign."] Unfortunately, I have no job. There has been a modest reduction in growth prospects, and I do not deny that that is partly linked to the prevailing exchange rate, but that does not contradict anything that I have said.
  The introduction of working families tax credit is greatly to be commended. As with almost every other measure, we still do not know whether the Opposition support it. The 10p tax rate has not yet been introduced, and Opposition Members may scoff, but we inherited a legacy of a £400 billion deficit, and at the right time we will introduce the lower rate.
  The Leader of the Opposition and the shadow Chancellor suggested that everybody loses, but among those who gain are families; the unemployed; the low-paid; small, medium and large businesses; the environment; people in education; and people in health. Almost everybody gains. It is a brilliant Budget: a Budget for jobs and work. After 18 years of drift, uncertainty and U-turns, we have a framework for success. I am proud to be here to support it.
  7.34 pm
  Mr. Tim Loughton: It is always entertaining to follow the hon. Member for Croydon, Central (Mr. Davies), so I shall not take offence at the fact that he failed to comment on my tie, of which I am rather proud. I apologise to you, Mr. Deputy Speaker, for any over-exuberance among Opposition Members, but we have certainly had far better entertainment than anything that is on television this evening.
  This is a Budget of prudence and stability. We know that because the Chancellor found it necessary to repeat it 17 times yesterday. It was mirrored in the green Budget and last year's ISA consultation paper, in which the Paymaster General constantly referred to the "prudent and sensible" savers from under whose feet he was so keen until yesterday to pull the rug. As William Blake said:
  "Prudence is a rich, ugly, old maid courted by Incapacity."
  The trouble is that we are never treated to any clue as to what prudence and stability in the Chancellor's economic dictionary actually amount to. What is a stable and prudent level for the ratio of public debt to national income, for example? What is a stable and prudent level for the public sector borrowing requirement at a time when yesterday's edition of The Sun—on the reverse of a rather fetching picture of Melinda Messenger—was briefed to say:
  "The Iron Chancellor, Gordon Brown, will use today's Budget to raise a fortune in taxes to start paying off the £420 billion national debt"?
  Of course, that did not happen. The complete failure of that to happen as The Sun had been briefed did not deter it from printing a picture of a dwarf Chancellor today under the headline,
  "Hi-ho, Hi-ho, it's off to work we go".
  Mr. Ruffley: Gordon Messenger.
  Mr. Loughton: It could be Gordon Messenger. I do not know whether it is Dopey or Grumpy; it certainly is not Bashful. The article refers to
  "a revolutionary Budget designed to get every jobless person in Britain back to work."
  Perhaps it has something to do with the lapdog nature of certain elements of the press that they should be completely misled on one day and be perfectly happy to go along with what they are told the day after.
  In not reducing the national debt, the Chancellor missed a golden opportunity to go into public sector surplus. Instead of any explanation, we were treated to additional alliterative variations on prudence, with the glorious phrase:
  "prudence for a purpose: to meet the people's priorities."—[Official Report, 17 March 1998; Vol. 308, c. 1112.]
  Despite the hype, the soundbite frenzy and the alliteration, the Budget will more accurately go down as the transvestite Budget, for it is not what it seems: it has undergone an unprecedented tarting up by the spin doctors.
  Yesterday, we heard an implicit threat to tax child benefit. Child benefit has had a bit of a makeover: a little blusher here, a lot of lip gloss there, and it is known as modernisation of the welfare state, dependent on that old

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  favourite, the children's review, which we were promised yesterday, to add to the 150-odd reviews that are already in the pipeline.
  The Budget was hailed originally as a triumph for businesses, but by the end of the day, when the foundation and mascara had started to crack and run, many burdens on business were revealed, not least the working families tax credit, the assessment and verification of which will be down to the companies themselves.
  A major reason why that Conservative idea was dropped in 1985 concerned the additional burdens on small businesses, in particular. In addition, there are bad employers who will deliberately hold down wages now that they have a greater knowledge of their employees' entitlements.
  Yesterday, we also had a variation on the nanny state—it has become the subsidised nanny state, quite literally, and the proposals for generous child care put far greater reliance on anyone other than the parents looking after children.
  We also saw some tokenism on museum charges. I greatly welcome free admission to museums, but what were we treated to? Just £2 million, which is a drop in the ocean and, in any case, does not apply to all national museums. The National Art Collections Fund said that it is more like a stop gap than a long-term solution. It is a betrayal of another Labour election manifesto pledge, when only last week it was hyped that we would need at least £40 million to guarantee free admission to our national museums.
  Of course, we had the prospect of the 10p starting rate of tax dangled alluringly in front of us yet again, but not today. Again, it is jam tomorrow, or in this case, jam tart.
  I could go on, but I want to mention three main features of the Budget that are seriously flawed. The first is tax and in particular the changes to capital gains tax. The second is ISAs and the third is another example of the soundbite and presentation triumphing over reality and substance, in the form of the supposed environmental measures.
  Mr. Geraint Davies: I know that hon. Members bring to this Chamber personal experiences, which they weave into their words. I wonder where the references to transvestites and tarts and so forth come from in the hon. Gentleman's past.
  Mr. Deputy Speaker: Order. That is an unworthy comment, which the hon. Member would do better to withdraw.
  Mr. Davies: In that case, I shall withdraw it.
  Mr. Loughton: I should like to declare a rather relevant interest, Mr. Deputy Speaker, as I have worked in a merchant bank for the past 14 years, dealing in particular with personal equity plans and managing private clients' funds.
  On CGT and tax, it was a watchword of successive Conservative Chancellors on tax to "keep it low, keep it simple". Indeed, when the noble Lord Lawson was Chancellor, he made a virtue out of abolishing a tax in every year that he delivered a Budget. The proposed changes to CGT represent a minefield of confusion and
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  complication, which can be welcomed only by the accountancy profession and those engaged in producing new computer software for the finance industry.
  By my calculations, before yesterday's Budget, we already faced the prospect of five different income tax rates: 20, 23 and 40 per cent. for most incomes, and 10 and 32.5 per cent. for dividends. If that were not complex enough, under yesterday's proposals for CGT tapering, there will be no fewer than 18 new different rates of CGT for private individuals, on non-business assets alone. That makes 23 different rates of tax for dividends and CGT alone—hardly, "keep it simple."
  The indexation system may not have been perfect, but it was certainly straightforward and workable. Now it is to be replaced by a far more complicated system. As my hon. Friend the Member for Cotswold (Mr. Clifton-Brown) said, it is a swiz. The freezing of indexation for the next 10 years will amount to much more than the reduction of 16 per cent. in CGT rates for higher rate taxpayers and 9.2 per cent. for basic rate taxpayers, for those who are prepared to lock away their equities in a cupboard for the next 10 years and leave them untouched.
  The changes are a nightmare for fund managers, who already face the prospect of spending millions on new computer systems to deal with ISAs and will now have to adapt their computer systems for a far more complicated taxation system than I have ever experienced. They will have three weeks in which to do it before the proposal starts on 6 April. I know of no other country that has such a complicated system. I cannot believe that it will survive the full rigours of the Finance Bill Standing Committee—I certainly hope that it will not. It represents a major flaw in the Budget, and other implications stem from it.
  Taxation considerations will now wag the tail of the dog of investment prudence. People will hang on to shares for all the wrong reasons. What is the problem with holding shares in one blue-chip pharmaceutical company, for example, or even a food producer—the hon. Member for Croydon, Central had great and detailed knowledge of that industry before he left its employ some while ago—for the space of two years? If the value has gone up a lot, one takes a profit and reinvests it and the capital in another United Kingdom blue-chip company, such as engineering. That is what managed fund managers do all the time, but under these proposals, people will be clobbered for the full extent of CGT, at the 40 per cent. rate.
  I am also greatly concerned about the confusion that will be caused and the extra expense that will fall on shareholders, let alone the fund managers running their funds, with the ending of pooling. One would have to work out the exact date on which each stock, scrip dividend or whatever it might be was acquired and which level of the tapering CGT rate applied to it. That will be a field day for accountants.
  Also, the proposal gives no incentive for badly performing companies to perform better if they know that shareholders are locked in, fearful of taking a higher capital gains tax rate. If there is no threat of selling, why need a managing director get his act together?
  I am also concerned about the ending of bed and breakfasts. Bed and breakfasting has been legitimate for the ordinary investors of middle Britain, so that they can take advantage of an annual CGT allowance without

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  having to dispose of decent blue-chip investments. The impact on smaller shareholders with pooled funds would be that, if they were investing in a good, performing blue-chip unit trust and they wanted to take advantage of their annual CGT allowance, they would not be able to bed-and-breakfast it and buy it back the following day, but would have to sell it and look for an alternative investment, regardless of how well the fund was performing and how much they would like to stay with that fund manager. Otherwise, they would risk facing a much bigger CGT bill when they sold a larger holding at a later date. All that was done yesterday with no warning, and the sum total of the proposals will be severely to limit people's ability to manage their assets.
  On ISAs we saw the biggest U-turn of all. I cannot recall a time when so big a U-turn has been conceded by so few in the face of such a tremendously bad reception by so many discontented investors. Let us be charitable. We welcome the Damascene conversion in the wake of a concerted and professional campaign by the finance industry and Conservative Members. However, it is more than a touch ironic that the Government have caved in to the campaign by the City, or that self-regulatory trade body in the City to which the Chief Secretary referred just two weeks ago in regard to putting an end to the nonsense of self-regulation, which was too often more a matter of self-interest than of public interest.
  Certainly the self-regulatory organisations have won the day over the Chief Secretary and the Paymaster General in this case. I hope that that sets a good precedent for listening to the professionals and climbing down accordingly in the future, on other highly flawed measures contained in the Budget. It will be good to see a repentant Paymaster General when he reveals himself from behind the Speaker's Chair later in the Budget proceedings.
  What a climbdown it has been. Alongside ISAs, PEPs and TESSA holdings will keep their tax-free status, and in the light of their success, people will be able to add an extra £9,000 full contribution to them in the next tax year. There will be no lifetime limit, and the £6,000 general PEP contribution that we have been able to make in the past 11 years will simply be replaced by a £5,000 contribution into ISAs over the next 10 years, and one's capital will be fully accessible. ISAs will be free of CGT and income tax.
  What I have just described is little different from the PEP regime, which still prevails under a different acronym and has done so well for the past 11 years. In other words, we could have avoided all this upheaval and all the costs of the consultation process—I shall be interested to learn how much the Government have had to spend on the farrago that it has turned out to be. We could have avoided all the uncertainty caused to investors, who, as my hon. Friends have said, have been a major factor in the drastic slippage in the savings ratio from 11 per cent. to the 9 per cent. forecast in the Red Book.
  We could also have avoided all the hassle among PEP providers, who are faced with little time and a big bill to install new systems, and at the same time face competition in Germany, Luxembourg and Dublin, which has been hotting up and taking advantage of the vacuum in the savings market in this country. We could have avoided all that by amending and simplifying the current, successful PEP system. 1 would have liked modifications on merging
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  single-company PEPs with general PEPs, and improving their attractions and accessibility to cash. It could have been done by a little adjustment without the cost, upheaval and hassle that we have had.
  Not content with substituting acronyms—the term ISA was always a sign of hope for divine intervention, because it is the Muslim word for the prophet Jesus—the Paymaster General made the new system much more complicated. There are many unanswered details for the Standing Committee to consider. How will the separate elements that will comprise the ISA be regulated? How can people get the best advice in the hurly-burly of the Tesco queue while paying for their frozen peas and totting up their discount vouchers on this week's star yoghurt bargain buys?
  Will uninvested equity cash in ISAs be liable for interest or will it not attract any, as promised in the consultation document? If the latter, does the interest go to the stockbroker, who obviously needs it? What best advice will be available for fledgling investors, to deter them from staking all on, for example, a Thailand single-country fund or an Australian uranium mine? That can happen now, and it may happen in future unless best advice is available at an affordable cost, particularly to new savers.
  There is also the problem of benchmarking and kitemarking, which were flagged up by the Chief Secretary and have apparently been outlawed by the European Union because they represent pre-authorising financial products.
  The Budget has left little time for providers to get new computer systems for ISAs up and running by April 1999. Most of the Investment Management Regulatory Organisation cases, and the fines that resulted from them, came about because of bad, inadequate administration. The proposals will be a bonanza for computer software manufacturers. I welcome that; it is a recommendation to buy shares in companies involved in that part of the market.
  Only two weeks ago, the Government were arguing that the major problem with PEPs and TESSAs was the tax relief lost to the Treasury, which amounted to some £1.5 billion. As the Chief Secretary said, there is no point in continuing to give tax relief to people who can already afford to have significant sums locked up for long periods.
  In several long-winded contributions, Labour Members have railed against the fat cats who had as much as £50,000 invested in their PEPs. What has changed in the past two weeks? The proposals now allow PEPs and TESSAs to continue and allow holders to take out ISAs as well. As well as attracting new ISA investors, that will result in a rather greater loss of tax relief to the Treasury. What is new? What has happened in the past two weeks? I do not understand it, but I welcome it. I am glad that the Government now admit that, if they are to achieve the necessary objective of deepening everyone's savings pot, they must forgo tax relief on savings, because that is the major incentive to save.
  Even the new proposals are a major missed opportunity. There is still no real incentive to attract this elusive band of new savers. The Prime Minister said on 3 December:
  "There will be 6 million extra savers as a result—6 million people who will be able to save but at present cannot."—[Official Report, 3 December 1997; Vol. 302, c. 349.]

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  That was not refuted in yesterday's Budget speech. I trust that it still holds good, but why? Who are the heaving horde of 6 million awaiting the Paymaster General's signal to throw their money at new Labour's new savings plan? Where are they? Are they too shy to show themselves? Perhaps they are the people who will inhabit the spurious 4.4 million new dwellings that are supposed to be needed.
  Mr. Clifton-Brown: My hon. Friend makes a serious point. Does he agree that there are considerable dangers in the supermarket selling of ISAs? Customers will be encouraged to invest in ISAs by someone without any financial experience. They could be an unsuitable form of investment for them.
  Mr. Loughton: My hon. Friend makes an apposite point. Even if the mechanism is more sophisticated than the potential investor struggling through the checkout queue, good advice may be available at the point of entry, but what guarantees that good advice will prevail thereafter? Who will give best advice, especially to new investors, when it is time to switch out of that supermarket's financial product into that of a rival? There is no guarantee of continuity of best advice. As people in the financial industry know, best advice costs. The proposals take no account of such costs.
  I am keen to identify the elusive horde of 6 million. Are they the 6 million crowd that will queue up to explore the internal organs of the millennium dome's androgynous figure? It is a mystery greater than Loch Ness or anything on "The X Files".
  For the less well-off, there is no attraction in replacing a capital gains tax allowance of £6,800 with an ISA with no CGT implications. Most such people get nowhere near capital gains like that. The income on a £5,000 portfolio of equities at a yield of 3.2 per cent.—an average market yield currently—would be £128 in net dividends plus a £14 tax credit for the next five years only. That is highly likely to be wiped out by charges alone. Instead, it is likely that most new savers will use ISAs as tax-free bank accounts, to transfer existing cash from non-tax-free bank accounts. They will use them as a short-term savings plan to save for Christmas or summer holidays, and thereby not add a penny of new money to savings—and especially not to long-term savings.
  The absence of a bonus credit system or a link to the benefit system means that there are no incentives in the ISA proposals for new savers. It is a lost opportunity. The Paymaster General has failed, although he has considerably redeemed himself by not putting the PEPs and TESSAs system to the torch, as he had proposed. The whole exercise has been a shambles, a lesson in how not to rush into things dogmatically; if it ain't bust, don't fix it. The industry has been left with a more complicated system, and the consumer is left confused and disoriented without even the compensation of the thrill of the promised monthly prize draw, which has now, alas, been dropped.
  I am a member of the Environmental Audit Select Committee. When it was set up, it was described by the Deputy Prime Minister as a terrier to snap at the heels of Government, but only last week it turned into a savage rottweiler, with the report that it issued. I am glad that the Financial Secretary is here, because she was dragged
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  kicking and screaming to give evidence to us and has had to reverse her opinion of us. The Budget's environmental content, contrary to some of the spurious claims made in verbose terms by Labour Members earlier, is purely tinkering, and has already been given the thumbs down by the environmental groups. Their summary was that Brown is going green only at the edges.
  The Budget is not what it seems. Of the £500 million extra of public transport money, at least £290 million will be gobbled up to patch up the London underground. The VAT reduction on energy-saving materials applies only to people claiming grants under existing Government efficiency schemes. Again, I am glad that the Financial Secretary is here because, ironically, she led the vote to try to get VAT exemption for all energy-efficiency products. Of course, the Government have not done it; it is not even a halfway house, but is a token measure.
  The Financial Secretary to the Treasury (Dawn Primarolo): I shall return to the subject of energy-saving materials and the campaign against the Conservative Government later, but, as Conservative Members have commented on the fuel escalator, will the hon. Gentleman tell the House whether he supports the recommendation of the Environmental Audit Select Committee that the escalator should be set higher than the Government have set it?
  Mr. Loughton: The Select Committee's report was a joint effort, when many of us made representations, but the report as a whole has been endorsed by all of us on the Committee. However, I am happy to speak on the subject of fuel. As the Royal Automobile Club has pointed out, the Budget has brought in £2.75 billion extra from motorists, which is 14 times the enhanced sum that is to be given to public transport. Motorists pay £30 billion a year in taxes, yet less than a third of that comes back to transport. The Budget was described by one environmental group as not much better than a smog alert.
  Nothing in the Budget backs up in any way the speeches made by the Deputy Prime Minister, about the need to move to greater use of brown-field sites for housing development. Rhetoric is one thing, but nothing will happen unless it is backed up by tax incentives for developers to take advantage of that form of land for future house-building requirements. Nothing in yesterday's Budget advanced that policy at all. All that is a long way from the Select Committee's recommendation that environmental taxes should be recycled into incentivising environmental improvements. It is a con: the Government are unashamedly using the environmental concern tag to justify increasing taxes on general consumption.
  The real test of the Budget will be the impact on the pound and on interest rates. The hon. Member for Croydon, Central failed to understand that the Budget has caused the continuation of the relentless rise in the value of sterling. It now stands at more than DM3.05, which is a nine-year high; and it is up against the euro and the dollar. The value of sterling is crucifying manufacturing exports: in the three months to November, exports to non-EU countries fell by 1.6 per cent. and imports rose by 3.8 per cent. If that trend continues, it will be absolutely disastrous for this country's manufacturing industry.
  The Chancellor displays an attitude of, "Not me, guv—it's not my fault; it's all down to the Bank of England. It is responsible for the sterling rate and for interest

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  rates—they are nothing to do with me." It is a disgraceful indictment of the Government that the Chancellor is prepared to stand by and do nothing as industry is squeezed by the pound. The Budget also makes interest rate rises far more likely, as several Labour Members mentioned. The gilt market fell heavily after hours last night and fell again this morning. Consumer spending is likely to rise by more than 4 per cent., as the Government's figures showed yesterday.
  I started by saying that the Budget should go down as the transvestite Budget. I trust that, by the end of the Committee stage on the Finance Bill, the Chancellor will have allowed us to amend it, so that it is a more palatable bedfellow for those on both sides of the House and for all parts of the United Kingdom.
  8.2 pm
  Mr. David Prior: No Chancellor since the war could have come to the Dispatch Box with a better economic background, consisting of the most successful economy in Europe, low inflation, falling unemployment and strong public finances. Judged by the Maastricht criteria, we probably have the only economy in Europe that could have passed without smoke and mirrors. As the Chancellor—perhaps we should now call him "the guardian of the people's money"—said, this is a "once in a generation" opportunity for radical change, and it is against that background that the Budget must be judged.
  There are parts of the Budget that I welcome, but the macro-judgment will ultimately overwhelm the micro-parts. If the Chancellor has read the economy wrongly, the resulting recession will overwhelm his policies on trying to get people back to work. I fear that he has it wrong. He seems utterly unaware that manufacturing industry, which employs about 4 million people directly and 8 million indirectly, and which is responsible for two thirds of total exports, has been suffering for several months.
  As Graham Mackenzie, the director general of the Engineering Employers Federation, said:
  "The key issue for engineering and manufacturing remains the exchange rate."
  There is a growing weight of evidence that UK manufacturing companies are now reviewing their investment plans. Jack Smith, the chairman of General Motors said only a week ago:
  "sterling's strength has turned the UK into a high-cost economy for inward investments".
  The same has recently been stated by Honda.
  Many companies that have struggled to export over the past year and have taken lower margins on their exports so as to retain markets are now concluding that at DM3-plus to the pound, they will have to review their activities. We shall soon see companies such as British Steel making a final decision on capacity in the UK. British Steel's view is:
  "The undue emphasis currently placed on UK interest rates to combat inflation is resulting in the UK manufacturing sector—and within it the UK steel industry—bearing the brunt of the anti-inflation medicine…yet the manufacturing sector is itself exhibiting few signs of inflationary pressures."
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  The problem of the high pound has been aggravated by two policy mistakes by the Government. The first is that interest rates, which have gone up five times since Labour came into office, are too high and the inflation target of 2.5 per cent. is too rigid, failing to take into account the fact that inflation is running at about 0.5 per cent. in the manufacturing sector, as compared with 4.5 per cent. in the service sector. The great risk that, in the process of trying to stamp out that 4.5 per cent., a large part of British industry will be condemned to death. That is exactly what happened in the early part of the 1980s, as Labour Members may remember.
  Interest rates alone are not a satisfactory way of addressing the problem, and the Chancellor, by failing even to mention that during his Budget statement, has missed an opportunity to tackle it. It is widely accepted that Britain currently has a two-speed economy; why are the Government persisting with a policy that is unnecessarily damaging British manufacturing industry?
  The second policy mistake was to tax pensions and savings heavily and put pressure on companies' cash flow through the abolition of ACT. The tax on pensions will cost about £5 billion per annum. Corporate cash flows will be hit to the tune of £20 billion over the lifetime of this Parliament despite the welcome reduction in corporation tax and some alleviation for small and medium companies.
  My fear is that we are about to enter an unnecessary recession with rising unemployment, rising imports and falling exports and that, for all the Chancellor's exhortations about ending the stop-go cycle, he is contributing to it. We need a better balance between fiscal and monetary policy to allow a progressive reduction of UK interest rates, which would lead to a more competitive and realistic exchange rate. If we do not do that, export order intake will continue to weaken as it has for more than a year now. Imports will rise and unemployment will stop falling. All that will be compounded by the problems in south-east Asia and stagnant growth in Japan.
  I shall now deal with some of the micro-aspects to the Budget. I have already said that I am concerned that unemployment will start to rise at the end of this year. Despite that, I welcome the Chancellor's attempts to remove the poverty trap and to make employment more attractive, but how does that square with the minimum wage and the adoption of the social chapter—two measures which will, over time, push up the cost of employment to employers and counteract the policies to remove the poverty trap?
  I am also concerned that those measures—especially the increase in national insurance contributions over £81 a week—will work against skilled higher-paid people. Against a background of tuition fees and loans for student maintenance, it is vital that the labour market provides real incentives for the individual to learn skills through higher education.
  I am disappointed that there is no change to business rates. Of all the taxes raised from small businesses, business rates are the most damaging, because they are a fixed charge unrelated to profitability. A reduction in business rates for small companies is long overdue, and I am sad that the Chancellor has not taken the opportunity to alter the rates in this Budget.
  I am particularly concerned about rural transport as I represent a rural constituency. Many poor people in the country have no access to public transport and no

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  reasonable prospect of securing such access. They already find it extremely difficult to run a motor car. The increase in the tax on petrol of 4.4p per litre is a real blow to many of my constituents, who will not view the £50 million rural transport fund, spread over three years, as any solution to their problems. That fund is a triumph of presentation over substance—and it also says something about the Government's obsession with presentation.
  The Budget does not mention the most unkind tax hike of all—the increase in council tax bills, especially in rural areas. Council tax has increased by an average of about 8.5 per cent. this year. In many rural areas, including my constituency, it has risen by more than 14 per cent. at a time when services—especially social services and education services—are being cut. The increase in the landfill tax from £7 to £70 per tonne will have another knock-on effect for local government.
  What should I say to the pensioner in my constituency who wrote to me last week? He will now pay an extra 4.4p per litre for his petrol, higher council tax and more for a pint of beer. In April, he received an extra £1.96 on his basic pension. He told me not to take any political hogwash from this Government—although he supported them at the last election. After this Budget, it will be difficult to give an answer.
  I support some aspects of the Budget. For example, I support the reduction in corporation tax rates and the Government's genuine efforts to reduce the poverty trap and to get people back to work. I am pleased that the Government have ended the retrospective tax on PEPs and TESS As. However, judged against the economic background and the opportunities that the Government had in this Budget, it is disappointing and uninspiring.
  The Budget does not begin to recognise what is happening in the real manufacturing economy of this country. It does not do enough for small businesses and it continues to discriminate against rural areas. Perhaps above all, the Government have missed an opportunity to take a real, radical look at the tax and benefit system.
  8.12 pm
  Mr. Shaun Woodward: Rarely has the House been subjected to a Budget that has been so highly trailed, so widely leaked and based on so much rhetoric and so little substance. As my right hon. Friend the Leader of the Opposition said yesterday, the Budget makes many claims but is ultimately a step-by-step betrayal both of the Labour party's election promises and of the British people.
  The Government have produced a Budget that I believe will be viewed as an abdication of responsibility. It will go down as a Budget delivered by a Chancellor who ducked the real challenges of the British economy and confused opportunity with opportunism. It will go down as a Budget of which the magician Paul Daniels would have been proud.
  Yesterday the Chancellor made much of the fact that this is a once-in-a-generation Budget. Yet, if we examine the Chancellor's claims, something appears to be missing—perhaps the Budget's centrepiece has been left out. One can only conclude that the right hon. Gentleman and the Prime Minister had conversations at Chequers last weekend that led to some distortions of the Budget statement.
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  The Chancellor told us yesterday that the Budget would end the unemployment and poverty traps—indeed, much has been made of the working families tax credit. However, it is difficult to see how, at a cost of just a few billion, it will be possible to wipe out poverty. That is a laudable aim with which all hon. Members agree, but it is difficult to see how it will be achieved with that sort of money. How will it be funded? Funding this year will be provided largely by the road fuel escalator. We must consider that many of those at whom the working families tax credit will be directed will also be hit hardest by the increase in fuel duty.
  I know that that is the case in my constituency. I have received many letters today from constituents describing their real worries about how they will get around in rural areas. Those worries are not alleviated one jot by the promise of an extra £50 million spread over three years. I am afraid that that simply shows that the Labour Government do not understand the real needs of the countryside and the rural areas of our country.
  This Budget has ducked the true challenges of our country. It has exercised opportunism at every turn. The Government could have taken many opportunities to help this country, but they did not do so—undoubtedly because the focus groups did not reveal to the Chancellor and the Prime Minister that the time was right.
  I take the example of the proposed reforms to capital gains tax. The report entitled "Budget 98 Alert" produced by Ernst and Young and released this morning states:
  "The taper does not encourage risk taking since it benefits success but offers no relief for losses. In fact, losses on investment become less valuable, as they reduce gains before tapering."
  The devil is always in the detail, and I suspect that, as the details emerge, we shall identify many faults with this Budget—just as we did with the last Budget.
  The Chancellor announced yesterday a cut in corporation tax—a move welcomed by all Conservative Members. Yet, as my right hon. Friend the Leader of the Opposition revealed this afternoon, if one looks closely at the figures, one can see that, while the Chancellor gives with one hand, he uses the hands of every Minister on the Treasury Bench to grab back. Business will lose as a consequence.
  This Budget does nothing to address the imbalances built up in the economy as a result of the appreciation of sterling—imbalances that have worsened significantly since July. It appears that the Chancellor thinks that he has washed his hands of short-term macro-economic policy since last June. Ernst and Young describes that as "benign neglect". The Opposition will hold the Chancellor to account for that benign neglect because it is an abrogation of his responsibility as Chancellor.
  Yesterday the Chancellor had nothing substantial to offer manufacturing. The figures for the fourth quarter of 1997 show that manufacturing grew last year by 0.9 per cent.—less than 1 per cent. Next year, it is estimated that output growth will be between zero and 0.5 per cent. Last November—just four months ago—the Treasury issued the optimistic projection that manufacturing output would grow by 1.5 per cent. to 1.75 per cent. There has been a pretty dramatic revision in just four months, and that is a serious problem for manufacturing in Britain. What hope did the Chancellor hold out in his Budget to those in manufacturing?

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  The Prime Minister this afternoon made much of how business welcomed the Budget. Perhaps it would be better if he stopped reading the newspapers and went out of his bunker in Downing street and his anaesthetised road shows, and met some of the people whose incomes he is clobbering so hard. What would he see, if he went out? The hundreds of thousands of people who do not have subsidised jobs but real jobs, and who are facing the prospect of real unemployment.
  Those are the kind of people throughout the country who know that sterling is overvalued. Labour Members were unable to tell us this evening what sterling closed at against the deutschmark, such is their disregard for the consequences of their Budget. Those people face the prospect of a life on the dole. It is all very well for the Government to invent wonderful schemes such as the welfare-to-work scheme, but at the same time they must guarantee the jobs of the people who are in work at present. The Budget will not do that.
  If the Chancellor and the Prime Minister had taken the time to read the releases from the Engineering Employers Federation, they would see that it gives a cautious welcome for the cuts in corporation tax, but the real issue for the EEF is the exchange rate. Export orders have been severely declining over recent months and matters are expected to get worse over the coming year.
  Last night, as Ministers were offering soundbites all over the media, the Chief Secretary was pressed repeatedly by Jeremy Paxman on "Newsnight" to say whether he believed that sterling was overvalued. Could he give an answer? No. Five times he was pressed for a simple yes or no, and five times we were subjected to paragraphs of verbose effusion but no simple answer.
  If the Chief Secretary spent a little more time out of the television studio and travelling round the country, he would see the damage that the Government's terrible policy is doing to our country.
  We do not have to take hon. Members' word for it. Numerous firms today produced their reports of the consequences of the Budget, and it is very bad news for manufacturing. Goldman Sachs expects at least two quarter point rises in the coming weeks. Charterhouse expects the same. The Hongkong and Shanghai Banking Corporation describes the Budget as a "considerable disappointment" in its approach to macro-economic policy. As KPMG say, unless the Budget is quickly followed by interest rate falls, the problems of manufacturing industry will remain and the prospects for economic activity this year and next may end up looking even more pessimistic than the Chancellor's own forecast.
  That means that there is the prospect of recession. Manufacturing output is at record lows. Alongside that, we have the problems of managing a dual economy, with the service sector output up almost 4.5 per cent. last year.
  Co-ordination of monetary and fiscal policy in the medium term is a matter for a Chancellor, yet yesterday we saw the Chancellor abdicate that responsibility because he believes that, since last June he no longer has responsibility. He gave it away. The problem is not for him now, but for those in manufacturing. The Chancellor had the opportunity, but he threw it away, leaving the prospect of a hard landing.
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  The Chancellor said that he wanted stability, but what sort of stability is there for those in manufacturing who face the prospect of a return to boom and bust—the stop-go policy that the Chancellor claimed yesterday he intended to eschew?
  What sort of stability is it, when the Government revise their figures in just four months, from a growth of manufacturing at almost 2 per cent. to zero. Even on their own figures, a recession is in sight, but what did the Chancellor do?
  We must look at other challenges, not least the challenge of controlling a consumer boom. It still exists in the high street, although the figures are marginally declining. The Chancellor again ducked the issue, because he wants to be the iron Chancellor, and he has his eye on the house next door. Consumer spending this year is forecast to grow between 3.75 per cent. and 4 per cent. That is higher than previous estimates, and the Budget has done nothing to restrain demand.
  The combination of strong consumer demand and low industrial output is projected to lead to a deterioration in current account balance. After a surplus of £4.5 billion in 1997, the current account is now projected to fall to a deficit of £6.5 billion this year and £6.75 billion in 1999. The glossy book entitled "New Ambitions for Britain" will all too soon become for many people an ambition to survive in Britain. [Interruption.]
  Hon. Members may laugh, but the laugh will be removed from their faces when they must answer the questions from those in manufacturing whose jobs they will have destroyed through the Budget. Betrayal is the hallmark of the Budget. Step by step the Government are betraying each of their promises. Step by step they betray the British people.
  Labour Members make much of what the Government are doing with taxation. The hon. Member for Croydon, Central (Mr. Davies) was unable to understand from the Red Book that not only is the tax burden going up next year, 1998–99, but that it goes up in 1999–2000 and 2001. Unless I am wrong and the hon. Gentleman expects the quinquennial Act to be repealed, at the next election we will see that the figures have gone up and up. Under Labour, as sure as eggs is eggs, taxes go up. The tax burden of the United Kingdom will go up with this Government.
  People were led to believe that there would be no new taxes under Labour and that the tax burden would fall, but the reality is quite different. Over the next few years, measures will be announced whereby the personal sector will be hit by tax increases of at least £4 billion in 1998–99, which is equivalent to 2p on the basic rate of tax. What kind of way is that to honour a pledge? The Government are putting taxes up and pretending to the public that they are doing nothing of the kind.
  Despite the smoke and mirrors of the Budget, taxes are going up as a percentage of GDP. Even before the Chancellor stood up yesterday, taxes had gone up by £790 a year for the average family. It will not stop there. On 1 April, mortgage interest relief will be cut from 15 per cent. to 10 per cent.—another hit at middle Britain. Furthermore, there is the not too thinly veiled promise of child benefit being taxed in the future.
  The British people should be warned that the Chancellor is after their money. He has only one ambition—to use his office to move to the house next

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  door. [Interruption.] Hon. Members want me to sit down. They do not like hearing the truth. They do not like hearing that yesterday they tried to persuade the country that they were being generous on the health service. What did you do on the health service? You promised—
  Mr. Deputy Speaker: Order. The hon. Gentleman may have to join the same class in procedure as the hon. Member for Croydon, Central (Mr. Davies).
  Mr. Woodward: I am grateful for the correction, Mr. Deputy Speaker.
  Hon. Members may like to know that the £500 million that they were promised yesterday for the health service will do little to get near the annual increase of 3 per cent. that the health service received under the Conservative Government. What will happen to hospitals such as Burford and Witney community hospitals in my constituency? They will be closed. Hon. Members may not like to know that, under their Government, that is what will happen. The reality is that the community health trust budget in Oxfordshire has been cut by £1.5 million. The county has been told to find the savings, and community hospitals will be closed. The proposal is an attempt to hoodwink the public, as is the Government's paltry promise of £50 million to deal with rural transport.
  It is sad that so many people in this country will be disappointed by the Budget. Many in this country will see that this step-by-step betrayal of the people will result in unemployment, hospital closures, and closures of more village schools. The Government have misled the people. Sooner or later, the people will reject the Government.
  8.30 pm
  Mr. Owen Paterson: Thank you, Mr. Deputy Speaker, for calling me to speak in the debate on the Budget.
  I speak as someone who, until 1 May, spent his whole career in manufacturing industry, travelling the world in a business that exports 95 per cent. of its production. I also speak for North Shropshire, which is a hard-working part of the country that depends on agriculture and small industry.
  The Government do not bring credit on the House in their approach to the current economic situation. The people of this country are not stupid; they know perfectly well that it was Conservative policies that brought 23 consecutive quarters of growth, that created 1.4 million jobs and that halved the number of unemployed 18-to-24-year-old males—down to 40,000 in the last year. It is childish of the Government to make out that the great economic revolution has occurred since 1 May. Doing so does not bring credit on the House or the Government.
  We are in our present position because hideously difficult decisions were taken from 1979 onwards by four Conservative Governments. Most of those decisions were taken in the teeth of the bitterest opposition from Labour Members—and from Liberal Democrats, represented at the moment by a solitary soul.
  We heard a splendid speech this evening from the hon. Member for Nottingham, South (Mr. Simpson), which showed that the Novosibirsk tendency is still there. In my experience, a country prospers if it has fewer politicians,
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  fewer bureaucrats, less Government interference and, ultimately, less taxation, but there are still some glorious old dinosaurs in the Labour party who would regard me as hell on wheels.
  We have to recognise that the Government have made some of the right noises and that there are elements in the Budget that free-market capitalists such as me might welcome. One of the most interesting innovations is amalgamating the Contributions Agency with the Inland Revenue. As one who would like government reduced and costs reduced, I think that that may be an interesting, innovative measure. It will be desperately complicated for the Government to bring about, but if they do, well and good. If the Government want to be really radical, I suggest that they study the possibility of amalgamating national insurance contributions and income tax. As someone who has been in business, I know that the complication of filling in forms and serving Government takes an inordinate time.
  I do not want to be churlish. There are elements in the Budget that show that the Government have learnt a little, but they still do not understand how a business and a capitalist economy work. Everything in the glorious Red Book may come to naught. Someone has gone to tremendous trouble to produce these figures, which, sadly, may all be absolute rubbish because of two desperate blunders made by the Government soon after they came to office. Handing over independence of the Bank of England to a small group of advisers has deprived the Chancellor of one of the vital tools in controlling the speed of the economy. Every week the Prime Minister gets in the phrase "boom and bust". It is a good phrase and it goes down well with the focus groups, but he has taken away one of the most crucial brakes on the economy—the ability to handle interest rates.
  We also had the quite unnecessary Budget after the Government came to power which, according to the Confederation of British Industry, lobbed £22 billion-worth of extra taxation on the country, including the iniquitous £5 billion on pension funds. When consumer spending is running ahead, it was ludicrous to load the extra taxation on the productive sector—the savings sector—and not to try to reduce consumer activity. Those two blunders have come to a most dreadful head in the exchange rate.
  It has been interesting to listen to Labour Members, particularly the hon. Member for Croydon, Central (Mr. Davies), who quite obviously do not understand the impact that the exchange rate is having. It is extraordinary that they did not know that the pound has today gone to DM3.05, the highest figure for nine years. To turn up to a Budget debate and dismiss as childish the intervention made by my hon. Friend the Member for Witney (Mr. Woodward) is bizarre. Manufacturing industry is on the brink of a serious recession. I hope that the Minister is listening carefully.
  We heard eloquent speeches from my hon. Friends the Members for North Norfolk (Mr. Prior) and for Witney, with figures from the Engineering Employers Confederation. In my industry, plants are closing and jobs are being lost. The potteries in neighbouring constituencies are suffering badly. Orders are down as much as 40 per cent.
  There is an extraordinarily naive passage in the Red Book that says, in effect, that the Government are not quite sure why orders have been holding up. That is not

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  surprising from a Government who have never been in business. There is a run-over. These are long-run contracts, but that period is coming to an end and the Government must understand the impact that the exchange rate is having on manufacturing industry.
  Agriculture has hardly been mentioned. I represent a rural seat and am on the Welsh Affairs Committee. Every time I go to the market, farmers tell me that they are desperately worried about the exchange rate. That was when the pound was under DM3. There are now 3.05 deutschmarks to the pound. In agriculture, it is simply not possible to switch production when producing one product. There is no flexibility of production. Farmers are tied into a world market and are going bust.
  There are knock-on costs and a multiplier effect. What about feed merchants? What about agricultural implement suppliers? I know some who have not sold a tractor or plough for six months. They are in desperate trouble, yet the hon. Member for Croydon, Central turns up to the Budget debate and does not understand the impact of exchange rates. It is disgraceful. That was the main topic of conversation in Oswestry market today. I rang the local National Farmers Union representative and I have talked to farmers. They are frantic because they believe that the Budget does nothing to lower the exchange rate.
  On television last night, the Chief Secretary refused five times to say whether the pound is at the right level. That is pathetic and totally unacceptable. His boss, the Chancellor, when prodded by Mr. Humphrys on the "Today" programme, also refused to give an opinion on the exchange rate. The Red Book is worthless if the man in charge does not have control of or some influence over the exchange rate.
  The Red Book presumes that manufacturing will continue to grow at a stable rate, but it casts a horrible shadow. Growth is forecast to go down from between 2 and 2.5 per cent. to between 1.75 and 2.25 per cent. next year. There is a huge question mark over the stability of manufacturing. I have no doubt that manufacturing will go into recession. According to the Red Book, inflation is still stubbornly high at 2.75 per cent. That will have a further impact and it will bite into the figures.
  The minimum wage and the social chapter, both of which are inflationary, will have a huge impact on businesses. If employers are forced by the Government to pay people more to produce the same amount of product, that is inflation on wheels. If they are forced to make employees redundant, the state will have to pick up the tab, and that is inflationary.
  The Red Book does not mention the sharply inflationary impact of the minimum wage and its impact on differentials and social spending. The horrific indication is that the Government, who planned to cut social spending, will increase it. That is clear in the Red Book, but we know full well that Labour Members, from the Prime Minister down, have not bothered to read it properly.
  Other elements will also drive up social spending. The Budget introduced the flagship innovation of the working families tax credit. Similar schemes have been tried in Australia and Canada, have proved extremely expensive and have not worked. When the Conservative Government considering such a measure, the Minister for
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  Welfare Reform and the Chancellor dismissed it out of hand. If the Minister were here tonight, it would be interesting to hear why they have now changed their mind.
  I want less Government involvement in business. The working families tax credit will put a huge burden on the personnel and finance management of relatively small businesses. I rang up a business that employs about 100 people. The finance director was extremely concerned. He will be required to have detailed figures on the circumstances not just of his employees but of their spouses, other members of their household, or their partners. Do we really expect finance managers, who have budgets to meet, bank managers to deal, with, customers to talk to and suppliers to visit, to ring round and find out the circumstances of each new employee?
  Dawn Primarolo: No.
  Mr. Paterson: I am delighted that the Minister says no; I should be grateful if she would explain the measure. Labour Members were quick to criticise the Child Support Agency: hon. Members have daily received a flood of correspondence on the problems thrown up by the CSA. The Budget requires finance directors in small businesses to take on a burden similar to that of the CSA.
  I come from a rural constituency where transport is a key provision. Nothing in the Budget will be good for North Shropshire. My constituency contains 98 villages. The car, the van and the lorry are basic to the functioning of the economy, and without them it does not work. It is inconceivable that a comprehensive scheme of public transport could be created in an area such as North Shropshire, where there is economic activity in every one of those 98 villages.
  Lobbing a huge increase on fuel tax will not make North Shropshire businesses competitive. The Chancellor's humbug words about competitiveness come at a time when there has been a dramatic fall in the price of crude oil from $20 to $13 a barrel. It is ridiculous to impose increases to the tune of 23p a gallon: unleaded petrol is now £3.08 a gallon. We should talk in gallons, because litre is a weasel word and conceals any increase. The increase on diesel is 29p a gallon, which is even worse. Labour Members made polite reference to my tie. This tie was transported in a van burning diesel. All hon. Members are wearing goods that were carried by road. This ludicrous prejudice against motor transport is unacceptable to me as a representative of a rural constituency.
  The Budget will jack up motorists' costs by £2.75 billion. To take £30 billion a year from motorists and claim that a pathetic £50 million for rural transport will help is childish. Each bus that may be aided by that little £50 million fund should bear a memorial sticker reading, "Funded thanks to the countryside march." This is clearly a panic measure introduced as a desperate attempt to obtain a press release in rural areas. It simply will not wash.
  The other big issue in Oswestry market this morning was the cost of fuel. It is a crippling tax on farmers and small businesses in my constituency, and I strongly oppose it.
  Finally, I want to say something about taxation. It was clear in Prime Minister's Question Time today—revealingly—that the Prime Minister has not read his own Red Book. I remind him of the words of Lord Dunrossil,

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  who said in the 1955 Budget debate, with admirable clarity, "all taxation is bad." We in North Shropshire have had to suffer a 13 per cent. hike in council tax because Labour Members voted for a Bill that has grossly switched funds from rural areas to northern and inner-city areas. I consider it iniquitous that Sedgefield received a 13 per cent. increase in standard spending assessment while Shropshire received only a 3 per cent. increase.
  I know that others wish to speak but, before I finish my speech, I invite Labour Members who have not read it to turn to page 116 of the Red Book, which features the real bite in the Budget. There, tragically, we see taxation rising from 38.1 per cent. of gross domestic product to 40.1 per cent. in 2002–3.
  In all my experience, I have never visited a country that has been over-governed, interfered with or taxed to prosperity. This is a thoroughly bad Budget for North Shropshire, and a thoroughly bad Budget for Great Britain.
  8.46 pm
  Mr. Andrew Lansley: I am grateful for the opportunity to speak towards the end of a debate in which forceful points have been made. I am pleased to follow my hon. Friend the Member for North Shropshire (Mr. Paterson), who has experience of the manufacturing industry—as has my hon. Friend the Member for North Norfolk (Mr. Prior).
  There are Conservative Members with direct experience of manufacturing who speak with feeling and conviction about the circumstances in which industry is now being placed by the rise in interest rates, and, more particularly, the level of the exchange rate. I think that it would be wrong for us to debate the Budget without dwelling not only on the measures in it, but on the consequences for industry, particularly manufacturing industry.
  Many of my hon. Friends have referred to the Chancellor's opening remarks. He said that Chancellors had a once-in-a-generation opportunity to reform tax law. The right hon. Gentleman might have referred to a once-in-a-cycle opportunity; once in a generation might be stating it a bit too strongly. This Budget, however, was characterised, both before and during its presentation, by what is colloquially known as hype—much of which was not subsequently found to be justified.
  In so far as the Chancellor had a once-in-a-cycle opportunity to reform tax law, I fear that he did not take it. He took only part of the opportunity, in relation to welfare reform. I shall say more about that later. I feel, however, that, at this stage in the economic cycle—with the benefit of the dramatic increases in tax receipts that occurred both last year and this—he had a once-in-a-cycle opportunity to achieve a one-off downward shift in the proportion of gross domestic product taken in tax.
  Alternatively, if it was to be taken in tax, it could have been used in a way that, in the longer term, would reduce the extent to which the public sector had to meet future obligations. Damagingly, however, there was no evidence of that—quite the reverse.
  As my right hon. Friend the Member for Richmond, Yorks (Mr. Hague) forcefully mentioned at Prime Minister's Question Time, table 3.3 of the Red Book, on page 48, tells us that an increase of a quarter of a
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  million in the number of families with high marginal deduction rates occurred as a consequence of the Budget. I know that the Prime Minister was told the best figure to offer, and talked about the marginal deduction rate of 70 per cent. or more, where two thirds of people have the effective marginal deduction rate reduced. None the less, paying 60 per cent. or more as an effective tax rate is a high figure for 1 million-plus families, an increase of 250,000 families. As a consequence of the Budget and of the withdrawal of benefit, they are brought into a situation, effectively, of welfare dependency and relatively high marginal tax rates.
  Dawn Primarolo: Does the hon. Gentleman accept that he is missing the point, because all those families will be better off as a result of the working families tax credit and child care tax credit? He has not made any reference to that at all.
  Mr. Lansley: The Financial Secretary is being uncharacteristically ungenerous to me, in that I had only started, and was certainly planning to come on to the working families tax credit.
  I make no bones about it: it has to be proven whether the working families tax credit is an improvement on family credit, but, when one makes the comparison, one has to take into account the fact that the working families tax credit and the child care credit in particular, which goes alongside it, are going to consume—well, the Financial Secretary will know the numbers, I hope, better than me, as the Red Book is in her name. I will not do her the injustice of suggesting that she did not read it before she published it.
  We are talking of £2.5 billion extra in total costs, including tax credits, going through this system. There is every possibility that, if £2.5 billion were expended even through the family credit system, it would have lifted many of those families out of some of the poverty trap consequences of the interaction between family credit and housing benefit. I do not dispute her point that those families will be better off. However, I hope that she will not dispute the fact that many of them will, as a consequence of the withdrawal threshold and the withdrawal of credit over £90, effectively pay quite a high marginal rate of tax as their earnings increase.
  Dawn Primarolo: There have been many references by Conservative Members to the Institute for Fiscal Studies. Will the hon. Gentleman welcome the fact that the institute agrees with the Treasury, and that the Chancellor's Budget proposals have reduced the number of people who face very high marginal rates of tax—that is, above 70 per cent.—by over two thirds, reducing the worst effects of the poverty trap?
  Mr. Lansley: I am sorry that I did not explain myself. I thought that I had made precisely that point. Far from missing that point, I had acknowledged that, as table 3.3 shows, the number of families affected by 70 per cent.-plus marginal rates of tax has been reduced by two thirds.
  However, I also make the point, which is made in the same table—which the Financial Secretary published—that, at the 60 per cent. rate of withdrawal, the figure goes up from 750,000 to more than 1 million. Therefore, one has to take those two points together and balance them. It would not be reasonable to take one without the other.

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  May I characterise the Budget overall? When I had an exchange with the right hon. Member for Bishop Auckland (Mr. Foster)—he will forgive me if I have got his constituency wrong—
  Mr. Derek Foster indicated dissent.
  Mr. Lansley: Good. I would not like to commit an indiscretion and get the constituency wrong.
  When the right hon. Gentleman was speaking, he was kind enough to give way to me. The impression I gained from his answer was that he felt that the Budget had gone well.
  When talking about the work of Finance Ministers, a French Finance Minister said that the art was to pluck the goose with the least amount of hissing. The impression I got from the right hon. Gentleman was that he felt that the Chancellor had got away with plucking the goose with relatively little hissing. I must remind him that all past evidence suggests that the goose does not hiss straight away; it can take time. The right hon. Gentleman ought to consider the Budget carefully and remember the old saying, which is a bit of a cliché, that the Budget that is cheered on the day is the Budget that people are sorry about some time later.
  I shall trespass on the patience of the House further, if I may, and refer again to table B8 on page 116, which my hon. Friend the Member for North Shropshire (Mr. Paterson) also mentioned. It is significant that the tax burden will rise, and the table shows an increase from 38.1 per cent. of GDP to 40.1 per cent. by 2002–03.
  Two other rather more significant political facts are also to be gleaned from that table. First, the bulk of the increase occurs between 1996–97 and 1998–99. We are now in the throes of a substantial increase, by more than 1.5 percentage points, in the amount of GDP taken in tax, at a time when total GDP has been growing relatively strongly—certainly in the early part of that period, although less so now.
  That implies that the Budgets of last July and of yesterday are impacting in the short term to increase taxes substantially, yet there is no offsetting reduction in the tax burden that will come later. As successive Budgets come along, and the Chancellor feels that he has to assuage the demands, not least by Labour Members, for public expenditure, we shall find that the tax burden continues to rise beyond the figures in the table.
  There is a second interesting point in the table. When we look at the disaggregation between different kinds of taxes, we see that the biggest increases are not in corporation tax. As we know, there have been changes in corporation tax and large cash flows out of industry in tax because of the consequences of changes in ACT, but also some offset through the reduction in the main rate.
  The biggest increases as a proportion of GDP are in income tax, which increases from 9.5 per cent. at the beginning of the period to 11.1 per cent. at the end, and in excise duties, which rise from 4.1 per cent. to 4.8 per cent. That is pretty significant, because for the poor benighted goose—that is, in this context, the personal sector that pays taxes—it is through income tax and excise duties that the pain of taxation is felt.
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  Over the next two or three years, we shall find that it is in precisely those areas of personal taxation and excise duties that the public will begin to feel the costs beginning to flow through to them, and they will not be remotely sanguine about the Chancellor's Budgets.
  The Chancellor has gone for a Budget designed in the main to make everybody feel good. It is a "feel-good Budget", because it would be difficult to object to help for families as the centrepiece of a Budget. However, over time, that feel-good factor will be translated, in the individual personal circumstances of families, into a judgment about whether they will lose in the long run, and whether they blame the Chancellor for the changes in their personal disposable income. Labour Members will learn painfully, as the Conservative party learned in government, that it is not the spin doctors who get one into or out of trouble, but performance, economic management and outturns.
  At the heart of the Budget is the problem that such things will turn out badly for the Chancellor, not least in that people's net disposable income will not in future reach the levels they had hoped for.
  The Chancellor talks of suppressing wage inflation and trying to hold down increases in wages. No doubt that will happen, as many people will be chasing fewer jobs when the jobs market is depressed by the recession in manufacturing, the impact of the national minimum wage and other factors. Moreover, the Chancellor will take a greater proportion of whatever money they earn.
  It might be interesting to consider the Labour party manifesto, as Labour Members have so much to say about it. The manifesto states:
  "How and what governments tax sends clear signals about the economic activities they believe should be encouraged or discouraged."
  The Chancellor's past two Budgets have sent us a very clear message: he wants to discourage profits. Profits will take the pain of the Budget, because of the disadvantages of the ACT change to cash flow, which will be hit hard. Presumably, because of his reduction in the married couples' allowance, the Chancellor wants also to discourage marriage. By his own admission, if he wants to tax something, he wants to discourage it.
  Like many Opposition Members, I was worried that the Chancellor seemed to take it for granted that, in the long run, taxing child benefit for higher earners would be the right thing to do. A strong point was made earlier in the debate about the character of child benefit and the fact that it was introduced to replace a tax allowance. Therefore, by extension, the idea is illogical that child benefit received by higher-rate taxpayers should be taxed away, as the benefit was designed to replace a tax allowance that recognised, in the benefit system, the cost of looking after children. The benefit also reflected the value that all stratums of society place on bringing up children.
  Undermining the universality of those benefits would be regrettable. There are few instances in which a single benefit can so readily and generally be targeted against those sections in society where costs fall, where poverty or financial hardship arise, and where, very often, child benefit plays a particularly valuable part in family incomes and in ensuring that sometimes relatively low-earning wives of high-earning husbands have an addition to their income that is expressly available to them, for spending on their children.

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  The shift from family credit to working families tax credit has already been dealt with in the debate, so I shall not dwell on it. However, if it is the centrepiece of the Budget and a key welfare-to-work policy, two questions arise.
  First, how can the Government present a Budget containing such a major measure, but not present that measure within the context of the Government's overall welfare reforms? Why has not the Government's Green Paper on welfare reform been presented either before or with the Budget, so that we might understand whether—somewhere in the structure of their welfare reform—there are elements to off-set significantly increased welfare expenditure and extension of dependency to higher-earning families? If the measure falls within the context—as I should certainly hope that it does—of wider welfare reforms promoting self-provision and acting to stem otherwise longer-term growth in liabilities in the welfare budget, we were not told about it. That is a pity.
  Secondly, how will the measure—particularly the child care tax credit—impact on demand for work? As has already been briefly mentioned in the debate, it is not at all obvious that the measure's consequence will be to enable many women to look for work who were previously unable to do so for financial reasons. There are several reasons for that consequence.
  First, a substantial part of the measure's impact may be to persuade currently working mothers that it is better to take part-time rather than full-time employment because of the extent to which additional earnings will be clawed back with withdrawal of the credit.
  Secondly, the measure may create circularity within communities, in which substantial benefit is derived from looking after one another' s children rather than one's own children. Everyone registers as a child minder; everyone receives their £150; and everyone claims back their £105. We might create some rather closed circles of people taking in, as it were, each other's washing, but not create any net external benefit to the economy.
  I do not dispute that families with children will derive financial benefits from the process by virtue of the taxpayer subsidy, but that does not mean that some of the claimed benefits for the wider economy will necessarily be achieved. Even if, as a consequence, a larger active population seeks work, it does not follow that the number of jobs available in the economy and the number of people entering work will increase.
  Let us remember how the process works. If labour supply in the marketplace increases, demand is normally stimulated by a reduction in the price of labour. Yet we know that, by the time the measure is introduced, the Labour Government will have introduced a national minimum wage. Thus the price of labour will not be able to adjust downwards in order to encourage employers' demand for it. Employers may find that more people are seeking work, but that it is not necessarily in their economic interest to take those people into work. The net consequence will be rises in unemployment, not necessarily rises in employment.
  I shall quote again from the Labour manifesto, just to see whether I can keep irritating the Labour party:
  "An explicit objective of a Labour government will be to raise the trend rate of growth".
  It struck me that, when the right hon. Member for Dunfermline, East (Mr. Brown) was responding to the Budget in the debate on 30 October 1996, he criticised
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  the then recovery because it was not investment-led or manufacturing-led, but was too much consumption-led. Yet we have the same now. There is a failure in investment, and a failure to support manufacturing so that it can lead the recovery on the part of the Government.
  The right hon. Member for Dunfermline, East has reduced his expectations for the trend rate of growth. I shall not bore the House with the figures—suffice it to say that the rate is predicted to go down to 2 per cent. or below in 1999, compared with well over 3 per cent. in the early part of 1997.
  A whole page of the Red Book is devoted to an apologia for the Government not achieving the investment-led growth they were anticipating. Business investment is predicted to fall from a 7.75 per cent. increase in 1997 to 4.5 per cent. to 5 per cent. in 1998, to 3 per cent. to 3.5 per cent. in 1999 and to 2.5 per cent to 3 per cent. in 2000. Far from investment driving forward, it will not sustain the economic cycle. The Treasury is making its excuses for the trend rate of growth not being higher. It says that the level of investment in capital productivity is not sufficient to achieve it.
  I conclude with two specific points. The first relates to health spending; it is something of a pedant's point. It is very strange that the Government have found that, towards the end of the financial year, principally as a result of demand-led expenditure not coming up to predictions, £1.5 billion will be left over.
  The proper way for the Government to proceed would be to reduce public borrowing in this financial year by £1.5 billion. Then, if they wanted, they could raise public spending next year above the pre-existing control total by £1.5 billion. It is a bogus manoeuvre to carry forward the money from 1997–98 to 1998–99. All they are doing is pretending that there will be less public spending next year and more public borrowing this year—which they will be able to reduce next year. It is a device to massage the figures for the Government's benefit—a bogus device.
  I am pleased to see an Education Minister on the Government Front Bench. Yesterday afternoon, not exactly under cover of darkness but under cover of the Budget, the Government pushed out an announcement on Oxford and Cambridge college fees. I have the honour to represent two Cambridge colleges. The Government's decision was regrettable. From 1999, it could take more than 8 per cent. of the value of the addition to college fees, year by year, from the additional grant.
  The Government talk about excellence, and announce a university challenge based on research excellence, but they hit at part of the independence of colleges in Cambridge and Oxford that has been at the heart of the maintenance of standards and excellence in those two fine institutions. It is a disappointment to Cambridge university. It will also be a disappointment to many in the House and beyond. It is a pity that the Government chose so transparently to push the measure out at a time that suggested that they were ashamed of their plan.
  The measure was in the character of the Budget, which is more redistributive and egalitarian than the Government would have people believe. Sometimes, the net result of egalitarianism is not to benefit those whom it is intended to make prosper, but to diminish us all—and to diminish our economic prospects.

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  That brings me back to my goose. The Chancellor was able to call on many golden eggs that have been laid by the goose of economic prosperity created by the previous Conservative Administration. He has set about strangling that goose, after having gently plucked it.
  9.11 pm
  Mr. David Heath: I recall an amusing book written by Jane Austen in her early days, called something along the lines of, "A Partial and Prejudiced History of England". The subtitle promises that the history will contain very few dates. I hope to make a partial—but, I hope, not prejudiced—speech on the Budget that will contain very few statistics. It is more important to concentrate on the outcomes of the Budget statement than to bandy about figures in the sterile way that is so often evident in such debates.
  As we have already said, the Liberal Democrats applaud many of the measures in the Budget. Many of the policies are moving in the right direction, although some are not moving far enough and others are not quite in the right direction, but veering off to one side. However, there is much to recommend and many policies that we have advocated over many years. I hope that the moves on child care are as successful as the Government intend. The reforms to national insurance, the long-overdue support for carers, the also overdue change of heart on the ISA—on which many of us have argued with Treasury Ministers—and the help for the unemployed are welcome.
  The outcomes are what counts. My constituency is a genuinely rural constituency—not green welly rural, but black welly with mud on rural. The Budget will not have all the effects that the Government desire in my constituency, simply because so much is not applicable to the area. To borrow a phrase from my hon. Friend the Member for Torbay (Mr. Sanders), the Budget seems to have bypassed Somerset in many ways.
  There is nothing for pensioners. I have more pensioners in my constituency than the average. Nothing in the Budget commends itself to them or makes their lives easier. Instead, measures such as increases in petrol costs, which affect people on fixed incomes more than others, work in the opposite direction.
  I see nothing in the Budget on housing. Housing in rural areas has been a problem for a long time. The right-to-buy policy denuded many of our villages of any social housing for ordinary people, and the housing stock tends to be older, in more exposed positions, and damp. We should have seen a Government initiative to change the structure of VAT on home insulation—not just for specific schemes, but on a wider basis—to make a real difference to the lives of many people.
  Farming communities in my constituency have never had it so bad as they do now. The strong pound is a major influence on the difficulties that farmers face, yet the Budget has been judged in such a way that the pound has risen to a more unsupportable level than previously. That will make life more difficult, yet we have received no satisfaction from the Minister of Agriculture, on the specific help that he will give to the dairy or beef sectors in areas such as Somerset.
  The Budget will not help the smallest businesses, although there was welcome help for smallish companies. It is hard to see where help is coming from, for the small
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  companies in the non-incorporated sector. Some measures should not have formed part of the Budget, but should, of necessity, have formed part of the Government's overall programme—for example, the major reform of the uniform business rate, which is positively inimical to small business.
  Mr. John M. Taylor: The concept of a small business is one that we are all fond of, but it may have a plurality of definitions. What does the hon. Gentleman think is a small business?
  Mr. Heath: The hon. Gentleman is right to say that there is a plurality of definitions. It depends on the context and the sector that we are talking about. I am talking about small, non-incorporated businesses, such as a lone trader, a partnership or a small retail business that has been crucified in recent years and to which the Budget is of little assistance.
  I wish to refer to car tax. It is absolutely right that we should stress the difficulty in the Government's proposals. As is common knowledge, we have campaigned for a long time for a shift in taxation, so that we increase the proportion on fuel, and balance that by a substantial reduction in vehicle excise duty. That is not only environmentally friendly, but means that for many people in rural areas who depend on their cars as the principal means of transport, there is a neutrality or even a benefit because of the typical mileage done in a year.
  Many households in isolated villages have to have more than one car to allow people to live a life at all. The cars tend to be older, and the people will not be helped by the speculative Government suggestion about changes in excise duty. Most important, they will not be helped by the fact that the Government have gone ahead with an increase on petrol duty immediately, but are not prepared to change vehicle excise duty for another two to three years, if at all. That is the crux of the proposals.
  Mr. Adrian Sanders: My hon. Friend mentioned farmers, small business men and the problem of increased petrol duty, which affects tourism. He has not mentioned pensioners, but I am sure he will. [HON. MEMBERS: "Yes, he has."' Does my hon. Friend agree that, from a west country perspective, this is not a good Budget for the south-west?
  Mr. Heath: I agree. My hon. Friend may have missed the passage of my speech in which I mentioned pensioners, but Ministers on the Treasury Bench have noticed that I mentioned them once or twice. He is absolutely right, however, in saying that the Budget is not good for the south-west.
  I commend the Government for at least making a start on the important issue of public transport. It is extraordinary to hear Conservative Members talk about the iniquity of providing only £50 million for rural transport. Rural transport is so atrocious because of deregulation, which the Conservative Government introduced, and because they starved local authorities of money for years, so that public transport could not receive the necessary support. Nevertheless, £50 million will not go far in providing adequate support to meet the needs of people in rural areas.
  The additional expenditure on the health service is welcome but, again, it does not go far enough. I am worried that, because of their pledges, the Government

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  will concentrate on waiting lists to such an extent that there will be a reduction in primary health care and in the number of community hospitals in rural areas. Moreover, there seems to be nothing to improve policing in rural areas, which is another major issue.
  My prime concern, however, is education, in which I have been involved for the past 12 years, as leader of a county council and chairman of a local education authority—it is something about which I care passionately. I welcome the extra money for education, but once the various elements—the effects of inflation and the adjustment to the deflator—have been taken into account, that money is whittled away and little benefit remains.
  Setting aside the total amounts and the general picture, I must ask about the distribution of the money that will be made available. In this respect, I shall be openly parochial about Somerset. Recently, the Under-Secretary of State for Education and Employment, the hon. Member for Pontypridd (Dr. Howells), visited schools in my constituency—I hope that he liked what he saw—but those schools are working against a background of a starvation of funds that has continued year after year.
  We hear the Government's rhetoric and their promises of additional money for education, but that money does not come to Somerset schools. Last year, the council tried to spend more on the education service, but it was capped—by a Labour Government applying Conservative policy. We looked to this year's local government settlement for extra expenditure, but we found a real-terms reduction. We applied for money that was released as a result of the scrapping of the assisted places scheme, but we were given nothing.
  The effect is that teachers are being lost and class sizes are becoming larger. Children, including my own, in Somerset schools have seen no benefit from the change of Government; indeed, things have got worse. Until people start to notice a difference in our schools, why should they believe the Government's rhetoric?
  People see that the local education authority is spending massively above its standard spending assessment—they do not doubt its commitment to education—but also that the expenditure per child is low. They also see that, on any register, the authority's efficiency is high—in Somerset, the number of vacant places is among the lowest in the country, and the administration costs per child are, by a long way, the lowest in the country. They ask why Somerset and the west country are not receiving the benefits that the Government have promised.
  I make a plea to the Government. Things can only get better in Somerset. Because of the Government's commitment to Conservative spending limits, we have had 19 years of Conservative government. That is long enough, and we want a change. The Budget should have provided the opportunity to make that change—my regret is that it has failed that test.
  9.23 pm
  Mr. David Willetts: I begin by commiserating with the Financial Secretary, who seems to be rather light on support this evening. Three Labour Back Benchers have spoken in this debate, and two of them criticised the central macro-economic judgment of the Budget.
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  I have just had the pleasure of listening to five successive speeches by Conservative Members. I did not expect such a pleasure when we returned on 1 May in rather depleted numbers. There are enough Labour Members to go round, and they have just been told by the Chancellor that this is the biggest, most exciting and significant Budget for a generation, yet his performance seems to have emptied the stalls.
  I cannot believe that that is because the Financial Secretary is in any way unpopular with her colleagues, so I can only conclude that it is because the Budget is unpopular with them. That is the only remaining explanation.
  Mr. Blunkett: It is because they did not want to listen to you.
  Mr. Willetts: The Secretary of State says rather discourteously that it is because they did not want to listen to me, but it is not as if they were in earlier and left when I arrived: they have not been around all day, and have not spoken up for the Budget.
  The right hon. Member for Bishop Auckland (Mr. Foster) made it clear that he was worried about a Budget that had led to an expectation of interest rates having to rise further, leading in turn to upward pressure on the exchange rate and to a threat to manufacturing industry. That was also the central argument of the hon. Member for Nottingham, South (Mr. Simpson). Of the three Labour Back Benchers who have made speeches today, two criticised the Budget, which was meant to be a once-in-a-generation affair.
  By contrast, my hon. Friends the Members for Cotswold (Mr. Clifton-Brown), for East Worthing and Shoreham (Mr. Loughton), for North Norfolk (Mr. Prior), for Witney (Mr. Woodward), for North Shropshire (Mr. Paterson) and for South Cambridgeshire (Mr. Lansley) all made effective contributions.
  I want to ask the Financial Secretary about the Government's commitment to what they rather pompously call "best accountancy standards" in the presentation of financial information. I want to find out to what extent she will live up to that grandiose commitment and whether she can explain the Chancellor's rather baffling passages on national insurance contributions.
  The Chancellor said:
  "I am abolishing the perverse entry fee that every employee pays to be part of the national insurance system and, in doing so, I am cutting national insurance for every employee in the country."
  We understand that, but he went on to say:
  "Further reforms will also ensure that no one pays national insurance for the first £81 of their weekly earnings. All employees earning between £64 and.£81 will have their right to benefits protected."
  He then said:
  "So, from next April, 20 million employees in Britain will benefit by paying £1.28 a week, or £66 a year, less in national insurance."—[Official Report, 17 March 1998; Vol. 308, c. 1106.]
  Because of those remarks, many newspapers claimed today that the Budget involves the lower earning limit for employees' national insurance contributions being increased from £64 to £81, but I cannot find that anywhere in the Budget arithmetic. Indeed, the paragraph about the saving of £1.28 a week refers solely to the entry fee.

  1377
  The Financial Secretary has put her name to a Red Book that is supposed to be committed to high standards. Where will we find in it the costing of increasing the employee's lower earnings limit from £64 a week to £81 a week? If it is not there, how will it be included in future Budget arithmetic—if, indeed, the Chancellor intends to deliver the measure?
  I have some questions about the working families tax credit. The other week, I had the pleasure of listening to the Financial Secretary giving a speech on that very subject to the Fawcett Society. Unfortunately, she was not able to stay to answer detailed questions. We understand that—she was in Budget purdah and could not be drawn further. It was a desperate attempt to show that the Treasury was not being run by the lads and that people were fighting the women's corner. Now that she has the Budget out of the way, she can tell us a bit more.
  My first question concerns wallet versus purse. When I was a single male policy wonk in the policy unit—probably the sort of person who is the bane of the Financial Secretary's life—I was rather keen on the earned income tax credit. One of the reasons why it did not happen was wallet versus purse. If the money was paid to the man—it still normally is the man—through the pay packet, what would be the chances of women in certain circumstances receiving the money to spend on the children?
  The Government claim to have solved that problem, but it is clear from statements in the "Financial Statement and Budget Report" and elsewhere that only if both partners in the marriage agree will the money be paid to the wife, whereas, under the current arrangement, it is specified in law that the wife is the claimant, and the family credit is therefore paid to the wife unless she specifies otherwise. That is a significant change, and it is not one that is good for family life.
  Mr. Blunkett: The right hon. Gentleman has had several hours to think about the question that I put to the shadow Chancellor earlier: if the Conservative party invented joint and several liability, why are Conservative Members so exercised about finding a way forward under the working families tax credit scheme, which allows us to ensure that that situation is reversed, so that we have the mirror image of it?
  Mr. Willetts: That is a complete diversion from the central issue. I was raising the problem raised by the present Minister of State, Department of Social Security. As the shadow Chancellor explained, when these measures were debated last time, the Minister of State said that of course, for most families this would not be an issue—I accept that, because for most families it is not—but
  "we are concerned with that minority—it may or may not be substantial—of families in which money for the children is not paid over".
  That is the point on which we have not had a clear response from the Government. It concerned the Minister of State 10 years ago, and it should concern the Financial Secretary now.
  What about marginal rates and the notorious table 3.3 on page 48 of the FSBR, which shows that the number of families facing marginal deduction rates of 60 per cent.
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  or more has increased from 760,000 to 1,010,000— an increase of about 250,000—under the Government's new proposals? The gain that the Government make under these proposals is that they will have got rid of the high marginal rates—those over 90 per cent.—which would largely disappear. However, the Minister must recognise that the Government are paying a high price for that.
  Many families that have an income which means that they are beyond entitlement to family credit will now face withdrawal of working families tax credit combined with income tax and national insurance contributions that mean that their marginal rates will go up. Rather conveniently, the table stops at the 60 per cent. figure, when the working families tax credit taper is 55 per cent. It would be interesting if the Minister would add another line to the table and give the deduction rate at 50 per cent. or more, and give the figures both under the current and her proposed system. I fear that there will be a massive increase in the number of families facing the combined deduction rates of more than 50 per cent. That would have a serious impact on the labour market, and the Minister should deal with it in her reply.
  Thirdly, on two-earner couples, family credit goes to two distinct family types at present. The first type is the married couple where the wife normally does not work; the second is the single parent. As a result of the big extension of working families tax credit, this type of assistance will for the first time go to two-earner couples. We know that working wives—it is normally the wives—are particularly sensitive to changes in marginal rates. We want some assurance from the Minister that the Government have considered seriously the implications for patterns of labour force participation of extending high marginal rates, particularly to a pattern of two-earner couples who previously did not experience such rates.
  Finally, let us hear about the burdens on business—a point so ably put by my hon. Friend the Member for North Shropshire (Mr. Paterson)—because it is a very significant issue indeed. That is the other reason why the earned income tax credit was not implemented in 1986; it was partly the feminists worried about wallet versus purse and partly businesses worried about being unpaid benefit payers as well as tax collectors for the Government.
  Some curious things will happen as a result of the tax credit. Those wives who succeed in getting the credit paid directly to them will find that great, bold innovation, an Inland Revenue order book. The Inland Revenue will pay cash direct to non-working wives. I will be interested to hear how that is supposed to be delivered in practice.
  I have a few questions about the Budget's child care provisions. I recognise that the child care disregard in family credit has not had a high take-up. We might expect single parent take-up to be high, but I understand that only 25 per cent. of them have taken it up, and then only for a modest amount. The Minister could go on and on about the low rate of take-up of child care disregard for family credit, but will she try to explain why she thinks it is so low? It is easy to say that it is because of the way that the system has been constructed, but is that the whole story?
  Is it perhaps that families might prefer informal arrangements for child care rather than formalised ones? Many families do not want the pattern of child care which is eligible for the disregard under family credit, and which will be eligible for assistance under the new child care credit. Many families prefer the neighbours, the

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  grandparents, the mothers-in-law or a network of people on the same estate. Either the Government will face continuing very low take-up rates or they will increase the financial pressures on such informal networks to be converted into institutional arrangements, which may not go with the grain of what many families want.
  Another reason for the low take-up is that it is easy to focus on the demand side, to come to the House with ingenious ideas on vouchers, credits, benefits or tax credits that are supposed to help child care, but what about the supply side? It is difficult to set up a child care facility through a local authority planning system. What about the regulatory burden that some local authorities impose on people trying to set up such facilities? What about the way that VAT affects people who provide child care?
  I will be interested to hear whether the Government have any proposals to make it easier to supply child care. If supply of child care remains restricted while demand for it is encouraged through these further incentives, the Minister will find only that the price goes up and that hefty profits are made by the small number of regulated providers who meet the requirements of her child care credit. The benefits will not go to families but will be passed on to the small number of people providing the services.
  I do not want go on too long, but perhaps I can make one or two wider points. There is an old Treasury story, which I think is told of Lord Healey, although I cannot believe it is true of him.
  Mr. Blunkett: It is bound to be true then.
  Mr. Willetts: Who knows? Lord Healey was said to treat his speech writer rather badly. He delivered one of those speeches that we used to hear from Chancellors of the Exchequer in which he read out an account of how the British economy faced the most appalling problems and the rate of inflation, the balance of payments deficit and the public sector borrowing requirement were too high. He continued, "But this Government has a set of policies which will solve these problems." As he turned over the page, there was a note from the speech writer saying, "From now on, you are on your own".
  The point is that this Government are now on their own, but it is the other way around. They have inherited a strong economy, with low unemployment and declining PSBR. They have, thank heavens, left my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke) as Chancellor of the Exchequer for a while in control of public expenditure.
  What do the Government get up to as soon as they are on their own? They get up to introducing expensive measures, which are carefully planned so as to avoid being counted as public expenditure. We heard how the entire new deal and welfare to work do not fall within the control total. We are told that people participating in the scheme will receive not a benefit, but an allowance equivalent to the benefit, which means that, helpfully, they do not count as unemployed for the purposes of the claimant count. Perhaps that is one of the reasons why the Government lost their nerve and decided not to change the definition of the claimant count after all.
  When and if unemployment starts to rise, Ministers will discover one of the uncomfortable consequences of those expensive measures. That is what has blown apart similar
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  schemes in Scandinavian countries where they have been tried before. When unemployment is low, it looks fine to spend large sums on a relatively small number of unemployed people and a number which, thank heavens, is falling—but wait until the cycle turns and the number of unemployed people starts to rise. Wait until the Government suddenly find that their commitments of thousands of pounds per person have to be delivered to rising numbers of unemployed people. Wait and see what the business sector will say when the corporation tax increases, which are so blatantly revealed on page 16 of the Red Book, start to bite—the transitional measures just happen to involve an extra £15 billion in corporation tax payment over the next four years.
  If the economy slows down and the Government find their welfare-to-work measures costing even more and the corporate sector being squeezed between a high exchange rate and an increasing burden of corporate taxation, at that point the picture will look rather different. At that point, the Chancellor's mettle will really be tested.
  9.41 pm
  The Financial Secretary to the Treasury (Dawn Primarolo): I shall try to deal specifically with the questions asked by the hon. Member for Havant (Mr. Willetts) in the short time left in the debate.
  Mr. Clifton-Brown: There are 20 minutes left.
  Dawn Primarolo: I do not need prompting by Conservative Members.
  Those questions involved, first, purse-to-wallet transfers; secondly, marginal rates; thirdly, what happens to two-earner couples; fourthly, the burden on business; and fifthly, take-up of child credit.
  It is noticeable that, for all their concerns about the independence of women, no Conservative Member has mentioned the fact that it was a Conservative Government who introduced joint and several liability for the poll tax. Despite being repeatedly asked by my right hon. Friend—[Interruption.] I am happy to discuss at any time the poll tax and the £14 billion that the Conservatives wasted on it. I paid my poll tax and I am sure that Conservative Members pay all their taxes—at least, I sincerely hope they do.
  However, to return to the debate, I shall try to answer the questions asked by the hon. Member for Havant. There will be no compulsory transfer from purse to wallet. That has been made clear. Partners will be able to choose who receives the payment and we shall adapt the family credit rules. I know that the hon. Gentleman is knowledgeable about family credit, so I shall not read out the fact that couples on family credit can already choose the person to whom it should be paid. We are already looking at the family credit rules to ensure that there is no compulsory transfer from purse to wallet.
  Mr. Woodward: Will the Financial Secretary give way?
  Dawn Primarolo: I shall answer the five questions asked by the hon. Member for Havant and then take interventions.
  On the question of marginal rates, the hon. Gentleman fundamentally misunderstands—or chooses to misunderstand—that the working families tax credit and the child care tax credit will mean that more people will

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  gain and will be better off. That means that more people will have support from the child care credit, particularly women who do not currently receive such assistance. There was little reference during the debate to their experiences. The hon. Gentleman also asked what would happen to two-earner couples. Clearly, they can choose to whom the credit is paid.
  The hon. Gentleman also asked about the burden on business. The Government are very good at consulting with business, as we have clearly shown in a number of areas—particularly regarding proposals in this Budget. We shall consult extensively with business, as we did in extending the pay-as-you-earn advice and support that business will receive from the Inland Revenue regarding the merger of the Contributions Agency into the Inland Revenue, which will reduce burdens on business.
  As regards the take-up of child tax credit, the hon. Gentleman speculated about the child care strategies that families adopt. He should remember that the new deal allocates money to assist with the provision of 50,000 training places for child minders. My right hon. Friend the Secretary of State for Education and Employment will make announcements in the next few weeks about the national child care strategy on which his Department is working extremely hard. It will deliver on women's desires for a comprehensive child care strategy.
  Let us look at the comments in support of the Budget. The Kids Club Network says that it is very pleased with the amount that the Chancellor has announced. It says:
  "We think it is very realistic and very generous. He has listened to parents."
  The Parents at Work organisation says:
  "This is a major breakthrough. For the first time, the Government has recognised the high costs of child care and that they have been a real obstacle to the opportunities for women and will keep millions of children out of poverty."
  The Government's proposals are widely supported and welcomed by millions of women in this country, yet no Opposition Member—with the exception of the hon. Member for South Cambridgeshire (Mr. Lansley)—commented on that. It speaks volumes about the lack of women on the Opposition Benches that the Opposition have failed to understand the importance of our contribution to women's lives.
  Mr. Don Foster: The Minister will recall that I welcomed the Government's child care proposals—as did my hon. Friend the Member for Somerton and Frome (Mr. Heath).
  The Minister referred to the Kids Club Network. Does she acknowledge that, in its remarks on the Budget, it also points out that, in order to meet the Government's aspirations, there must be an additional 90,000 qualified child minders or people in similar positions? How do the Government plan to ensure that training courses will be provided to meet that need? Under their current plans, it will take 36 years to find 90,000 additional child minders.
  Dawn Primarolo: The Government are aware of the scale of the problem that we are facing as a result of the neglect by the previous Government in making any investment in child care. We clearly need a longer-term strategy. This is only one Budget, which simply lays
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  the foundations for our policy. My right hon. Friend the Secretary of State for Education and Employment has made it clear that we must develop a five-year strategy. He will set out that strategy and how it will be achieved.
  In spite of all their scoffing, Conservative Front-Bench Members when in government failed absolutely to put in place any training or provide any child care places. They did not give any support to women who were excluded from the work force because of the lack of available child care places—and now they laugh at us.
  Mr. Willetts: I ask the Minister to clarify one point. She repeated one sentence from the Government's document on the working families tax credit and said that there will be no compulsory transfer of resources from women to men. The next sentence says that couples will have the right to elect to whom the credit is paid—the man or the woman. Is the Minister saying that the woman who is currently the claimant of family credit has the right of veto—yes or no?
  Dawn Primarolo: I made it clear that couples can elect to do either. The payment can go to the woman. The transfer of the rules from family credit into the working families tax credit will need to be fine-tuned.
  The Government have laid down the principles for the operation of the working families tax credit. I will take no lectures from Conservative Members about the benefits for women. For 18 years, they forced women back into the home unpaid, drove down their wages, created an insecure labour market, made no investment in child care and left women on their own struggling; yet they now claim to be the guardians of women. That will not wash, and that is why the reports in the press today welcome the Government's proposals.
  Various other issues were raised in the debate. For all that Conservative Members have said, small business reaction to the Budget has been favourable.
  Mr. Paterson rose—
  Dawn Primarolo: I will give way in a moment.
  Small businesses welcomed the Budget. They said:
  "The Chancellor has delivered a Budget for both employers, employees and consumers. Small businesses with long-term investment will benefit. More people will be encouraged into the jobs market and at the same time consumers will have more money in their pocket."
  Those were presumably not the small businesses in the hon. Gentleman's constituency to which he spoke on the telephone this morning. Perhaps he could tell us what his party's policies are to help business, if he does not support what the Government have done.
  Mr. Paterson: I can inform the Minister that the Federation of Small Businesses, to which I spoke this morning, is extremely concerned about the cost and difficulty of administering the new scheme. Will she please give me an answer to my question, which was posed by the financial director I mentioned, who reckons that he will have to take on one extra person purely to administer all the extra paper required by the new scheme? From a sedentary position, the Minister said no. I should be grateful if she would answer in detail from a standing position, so that I can tell the financial director tomorrow morning.
  Dawn Primarolo: The hon. Gentleman can tell the financial director tomorrow morning that the Government

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  will be consulting business on the administration of the working families tax credit, and that the Government's track record is to reduce the burdens on business, not to increase them.
  I urge the hon. Gentleman to read the press release put out today by the Federation of Small Businesses. It welcomed the merger of the Contributions Agency and the Inland Revenue as a help to business. It welcomed the inheritance tax threshold being raised to £223,000, and the employers' start to national insurance contributions being raised to £81.
  The Federation of Small Businesses welcomed the 40 per cent. first-year capital allowances; the Inland Revenue's new role to assist businesses in setting up payrolls for their employees; and the downward taper on charging capital gains tax. It welcomed the review of national insurance contributions paid by the self-employed; the review of industrial and commercial use of energy to gauge the method of taxation; and the £50 million venture capital fund to invest in small businesses.
  Mr. Paterson rose—
  Dawn Primarolo: While I am on the subject of what was welcomed—the hon. Gentleman can address himself to this, from a standing position—today the UK's bus and coach industry welcomed the Chancellor's decision to give an immediate cash injection of £50 million to rural transport. In a second press release entitled "Tax break joy for buses and coaches", the industry welcomed the Government's restoration of the bus fuel duty rebate. Perhaps the hon. Gentleman wishes to reply to that point.
  Mr. Paterson: I am grateful to the Minister for giving way a second time. Will she please tell us who will analyse the status and the affairs of the relations of employees in small businesses?
  Dawn Primarolo: I advise the hon. Gentleman to go and lie down in a dark room, rest for a little bit and then familiarise himself with the current family credit scheme. If he then re-reads the proposals in the Budget, he will be suitably embarrassed by the ridiculousness of his proposition. He would do well to take lessons from the shadow Chancellor, who, when asked to comment on why he would not be putting forward any alternatives to the Budget, particularly on employment creation, told The Independent on Sunday that that would be difficult at the moment because it
  "would be bad for our party."
  He said that it would divide them, and would only reopen discussions about what their policy should have been at the last election.
  The Budget that my right hon. Friend put before the House yesterday cut taxes for all employees and helped families with business. It particularly assisted the 20 per cent. of the poorest families with children, who will gain on average £490 a year. Over the next two years, families with children will gain up to £1,500. No family earning less than £220 a week will pay income tax. Any family with a full-time worker is now guaranteed a take-home pay of at least £180 a week. Couples with two children, on an income below £17,000 a year, will receive 70 per cent. of their eligible child care costs. That is a first, and it will improve
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  the opportunities for parents, particularly women, to return to the labour market, and ensure that people are lifted out of the poverty trap.
  Mr. Lansley: Will the Financial Secretary now answer this question? The Chancellor of the Exchequer said yesterday:
  "Further reforms will…ensure that no one pays national insurance for the first £81 of their weekly earnings."—[Official Report, 17 March 1998; Vol. 308, c. 1106.]
  The Red Book, at paragraph 3.31, says:
  "The lower earnings limit for employees will remain unchanged (at £64 in 1998–99)."
  Which is accurate?
  Dawn Primarolo: I have just covered that point. I am not sure that the hon. Gentleman was listening, so I shall repeat it. There is a tax cut for all employees who pay national insurance contributions—a gain of more than £65 a year.
  The hon. Member for East Yorkshire (Mr. Townend) referred to smuggling. The Government announced a wide-ranging review in the Budget last July, to look at smuggling and fraud involving alcohol and tobacco. The Government take the effects of smuggling and fraud extremely seriously, which is why the review was set up. We continue to take action to crack down on smuggling and on the criminals who take part in this pernicious activity. We will not let up in our efforts to stop smuggling and smugglers, and our efforts are increasingly successful. The House can rest assured that we will act to make life even more uncomfortable for those who flout the law and defraud the honest taxpayer.
  I am disappointed that the comments from the trade today appear to condone smuggling. Mr. David Swan of the Tobacco Manufacturers Association said:
  "We estimate that more than a million smokers are already buying black market cigarettes and tobacco."
  Gallaher said:
  "This is a green light for bootleggers."
  The Wine and Spirits Association said that this is a "crime-boosting Budget." The Brewers and Licensed Retailers Association said that the Budget
  "sends a clear signal to criminals that crime really pays."
  Those comments are irresponsible. There is no change in tobacco duty until 1 December, no change in alcohol duty until 1 January, and no change in spirit duty at all. It is unacceptable for those organisations to encourage people to believe that duty has already been increased.
  This is a Budget for stability, for reform of the tax system and for a modern welfare state that lifts people out of poverty rather than trapping them in it. We want a modern economy, modern schools and modern hospitals in an environment where investment and reform go hand in hand. It is a Budget for enterprise, for families and for a safer environment. It is a Budget for the future, and casts off the doubts, insecurities and the poverty of the past that were created by the Conservative party in government.
  It being Ten o'clock, the debate stood adjourned.
  Debate to be resumed tomorrow.

  Domestic Violence
  Motion made, and Question proposed, That this House do now adjourn.—[Mr. Robert Ainsworth.]
  10 pm
  Dr. Vincent Cable: I am grateful for the opportunity of this Adjournment debate. At first sight, it has little or nothing in common with the Budget debate, but having listened for the best part of three hours to hon. Members discussing the conflict between the wallet and the purse and gender conflicts over finance, I realise that there is a direct link between the Budget debate and a discussion about what happens when families break down.
  Like many Adjournment debates, this is prompted by a local constituency concern, although it has wider implications. My hon. Friend the Member for Richmond Park (Dr. Tonge) and I represent the borough of Richmond. Like many boroughs, it established 10 years ago a forum for domestic violence under the police-community consultative group. More recently, it established a women's information centre to deal with domestic violence. I have been increasingly involved in the centre's work, and as a result have been educated on some of these problems, and have drawn several conclusions.
  I have been struck by the fact that the women's information centre is an extremely valuable and important part of the local community. It handles roughly 1,300 cases a year, and is vastly over-subscribed. The professions who work there have a hand-to-mouth existence. They devote an enormous amount of their time to fund raising and to fighting their way through the thickets of the different agencies that are responsible for women's welfare. The system for dealing with cases of domestic violence does not work.
  Having become involved in the work of the forum and the women's centre, I have learnt at first hand the horrific statistics and facts about domestic violence, of which I suspect many people are unaware. It is now well established that about one in 10 women are victims of physical violence that leads to hospitalisation. Domestic violence is mostly against women: there is some violence against men, but it is a small problem. About one in three women experience some form of violence; about one in eight experience violence throughout their relationship; and about two in every five murders of women are the result of disputes involving domestic violence—roughly one every three days. Those are horrific statistics.
  It is important to have this debate not only to highlight my constituency concern and the work and problems of the local women's groups, but to give the Government an opportunity to explain how they intend to approach this problem. I am well aware that this problem has a history: it did not suddenly arise.
  For the best part of two decades, women's groups have established refuges, and public consciousness of this matter has gradually increased. In 1993, the Select Committee on Home Affairs produced a valuable report, which provided many of the recommendations on which current policy is based. The 1995 inter-agency report from the Home Office took the matter one stage further, as did the family law reform in 1996. We are dealing with an incremental process.
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  I thought it important—given that a new Government were in office, and given the possibility of a burst of energy and reforming zeal—that some outstanding points on the agenda would now be tackled. In the rest of the time left to me, I want to suggest—in an aggregate sense, and subsequently in more specific ways—some of the problems that I hope the Government will tackle. I am glad that both the key Ministers have taken the trouble to be here.
  I feel that two key philosophical points need to be made. First, it should be recognised—I think that such recognition is now widespread, but the need for it should be reiterated—that we are dealing with a serious crime. Domestic violence is not just an accident or a faux pas; it is a crime. It has taken a long time for that to be accepted. It is rather like drunken driving or rape, in that it is a crime that needs to be punished. It needs to be dealt with appropriately by the courts, and by the judicial process generally.
  The other point is more subtle, and perhaps less generally appreciated. It is much better to deal with matters such as this with preventive action than to deal with them subsequently. I have been staggered by the vast amount of public resources absorbed by problems of domestic violence that, with a little imagination, and perhaps better policy, could have been avoided.
  A valuable study conducted in Hackney—I am sure that the Minister is aware of it—suggests that some £5 million a year is spent as a result of domestic violence being unchecked, the subsequent action by social services departments and the necessary process in the courts. It has been estimated that the aggregate cost in London is about £300 million. That expenditure is not necessary, and it could be avoided if policy were approached in a slightly different way. Let me suggest a few ways in which we could deal with the problem.
  I want to concentrate on funding. Ministers may imagine that, as a Liberal Democrat, I will suggest a new tranche of public expenditure, but that is not my objective. I recognise that there is already quite a lot of public expenditure in this area; the issue is how to use that expenditure better within existing budgets.
  As one who has come to the problem from outside, I am struck by the number of agencies that exist. There is the safer cities programme, to which some boroughs have access and some do not; there is the single regeneration budget; there is the national lottery, which is available to some parts of the country but not others.
  The women's refuges—I have discussed the matter with them— are in the extraordinary position of having to deal with some 25 different revenue streams, potentially, in order to fund their activities. The Department of the Environment, Transport and the Regions provides quite a few; the Department of Health provides others. I do not know whether the Minister knows this, but I gather that one of the key services—the help line—is due to finish on 31 March as a result of the ending of the Department of Health grant.
  The issue, however, is not simply one of money being available or not available. It is about the vast complexities of funding in the sector, and about ways of reducing those complexities. Let me make some specific suggestions.

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  First, the Home Office could simply keep track of all the expenditure, some of which is in the domestic violence budget and some of which is not. That would give us a comprehensive picture of how much was being spent, where it was going and why it was being allocated.
  My second suggestion rather goes against the grain of my belief in the unshackling of local government. I think that, as long as we have capping and close central direction, some ring fencing of central Government money may be a helpful way of dealing with such matters. For example, specific allocation of social services training funds to domestic violence would be one way of ensuring that all boroughs had access to proper funding. Alternatively, money could be ring-fenced for special provision for looking after children in refuges. I know that that is another concern of the women's movement. Ring fencing could also apply more generally to refuges.
  Those are all temporary fixes, however. My main recommendation in regard to funding is that it would be very desirable if the Government arranged for the Home Office to have a fund—a pot of money—for which different projects could compete in an open market and a transparent process.
  That was the main concern of the groups in Twickenham. They are not asking for more money or for the Minister to take out his cheque book. They ask for a clear process in which they can compete on merit with other projects for a pot of Home Office money that is available to all parts of the country, and demonstrate the merit of their work. In that way, they could provide some sustainable long-term funding for their activities.
  One of the key criteria in judging access to that pot of funding, which could be existing money that is put under a different heading, is that projects should be preventive, rather than dealing with problems after they have already occurred. I hope that the Minister will seriously consider that point.
  The other sets of recommendations are not to do with money—I am sure that they have already been debated within Government. The first involves public awareness. Over the past few years, there has been a campaign, directed almost exclusively at women, under the heading, "Don't stand for it". One could argue that the audience should be men rather than women, but the campaign has raised awareness. Much has been done, but it is clear that much more could be done, in terms of good leadership from the Government and to increase public awareness.
  Let me take a few examples. As I understand it, few hospital accident and emergency wards collect statistics on injuries sustained as a result of domestic violence. That information is vital to get a picture of how serious the problem is and the type of families that are most vulnerable. However, at no stage, as far as I am aware, has any effort been made to make the Department of Health conduct that sort of statistical collection.
  It is clear to those of us who work closely with the police that, in recent years, their awareness of these problems has enormously improved. Just as with race relations, the police are among the more sophisticated agencies in dealing with these problems, but there is an enormous gap between the best police officers, who are, in many ways, probably the best agents, and the worst, where the canteen culture is still alive. A lot more needs to be done with the police.
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  The same is true of the judiciary. I am talking not about the crass judges who think that a good beating may be the best way of dealing with a domestic situation, but more sophisticated problems of how judges deal with the award of access to children in a situation of domestic violence. Those are the sort of issues that need to be discussed with the professionals and that I suspect have not been adequately dealt with.
  Finally, a whole raft of legal initiatives could be taken forward by a Government who were determined to be innovative and to reform in this sector. They already have the Family Law Act 1996 to build on, but a whole set of other things seem highly relevant. It appears that a woman who is not on benefit would have to pay, for example, about £1,000 to get a court injunction to stop her partner committing violence. Access to the courts is extremely difficult.
  Legal innovation is possible in another area. We could borrow from some of the experience in the United States. There is, I think, a well-known experiment in Duluth, Minnesota, where victimless prosecution is being launched. The woman is not required to go through the whole process of enacting her horrific experiences, but the police take a proactive role in prosecution.
  Probably the key issue, and one that my constituents have raised with me directly, is the role of the Crown Prosecution Service. It is notorious that very serious offences, including grievous bodily harm, are downgraded to lower charges, so that they can be taken through lower courts, probably for genuinely intelligent reasons of trying to increase the chances of securing a conviction. However, that effectively undermines the seriousness of the crime. I hope that that is something else that the Government, in their review of legal processes, will consider carefully.
  I thank the Government for taking a close interest in the debate. I hope that they will exercise some leadership. I particularly hope that they will reconsider funding, which is excessively complicated and creates serious barriers to some agencies at grass-roots level, such as those in my constituency that are trying to work in this sector. I hope that the Government will make a fresh attempt to examine some of the consciousness-raising and legal reform issues that are at the heart of this complex and tragic problem.
  10.14 pm
  The Minister of State, Home Office (Mr. Alun Michael): There is a tradition in the House of congratulating any hon. Member who is successful in obtaining an Adjournment debate. On this occasion, however, I would rather congratulate the hon. Member for Twickenham (Dr. Cable) on the use that he has made of the debate, and on his constructive and thoughtful contribution, to which I am delighted to be able to respond positively.
  I am also pleased that the hon. Gentleman noticed that, as well as my being here to answer the debate, my hon. Friend the Member for Lewisham, Deptford (Ms Ruddock), the Under-Secretary of State for Social Security and Minister for Women, is also present. The existence of my hon. Friend's role, and the close co-operation that we are giving to the task of examining domestic violence and other violence against women, illustrate the Government's approach and the importance that we attach to the issue.

  1389
  The hon. Gentleman was right to describe the statistics as horrific, because domestic violence continues to be the single most common form of violence against women, accounting for 17 per cent. of all violent incidents recorded by the 1996 British crime survey.
  Recent new research published by Crime Concern reports that, in some parts of Britain, one woman in nine are the victims of severe beatings by partners each year. That is slightly worse than the statistics that the hon. Gentleman cited. He was right to say that domestic violence must be regarded, and underlined, as a serious crime, rather than, as it was in the past, as less serious than other forms of violence.
  The hon. Gentleman stressed the need for prevention, which touches on one, indeed two, of the Government's major themes in dealing with crime. One of our favourite themes is to prevent crime wherever possible, and we are considering all sorts of ways of creating partnerships to understand and deal with the problems of crime at local level. The second is the idea of dealing with problems quickly when they arise—to nip things in the bud rather than allowing them to drift on for a long time until they become so serious that nobody can ignore them.
  The hon. Gentleman mentioned the value of voluntary organisations, many of which make a tremendous contribution to publicising the issues and in giving help, support and advice to people who find no help elsewhere. They also help in developing the forum activities that have helped with exchanges of views, with the education of the public, and with mutual education about how to tackle the problems.
  I certainly agreed when the hon. Gentleman said that the process of growing awareness of the problem of domestic violence had been slow. That growth in awareness has been inexorable, but it has taken place over a long period. Awareness is far greater among the police than it was a few years ago, and most police forces now have carefully thought-out policies, and work much more closely with local welfare organisations and voluntary organisations representing women. None the less, they are aware that they still need to do more. That sensitivity, plus the will to continue to improve their standard of response, is the keynote for the future.
  The hon. Gentleman showed great financial restraint, for a Liberal Democrat. He did not spend the same penny again and again, and tell us that we simply needed to re-order the money already available. He was right to say that there is a variety of sources, and that the availability of finance is complex, and it is difficult to find a way through. The trouble is that changing funding is complex, too, and if we are not careful we could accidentally shut off the sources of supply to some valuable organisations.
  Some sources of funding, such as single regeneration budgets, already embed concern about issues of violence, including domestic violence, within a wider context. It is important to see domestic violence not as existing in a backwater but as part of the wider picture of society in terms of dealing with crime and with other social problems.
  I underline a very clear theme in the Crime and Disorder Bill—which is currently wending its way through another place, and will soon reach this
  1390
  House—which is a local partnership approach in identifying local problems of crime. Such an approach must include identifying the local nature and profile of crimes of domestic violence, promoting the joint responsibility of police and local authorities to identify those problems in a crime and disorder audit, and considering not only statistics but people's experience—by working with voluntary organisations and those with direct experience—to get to grips with the reality of domestic violence and produce a strategy to deal locally with crimes and the causes of crime.
  The hon. Member for Twickenham also mentioned the courts. There are many ways in which domestic violence issues are dealt with in the courts, and he was right to seek both simplification of that process and improved access to the courts. The Government believe strongly in such improvements. However, we are looking also for ways in which we might deal with the gaps in legislation.
  For many years, we campaigned for legislation to deal with stalking. We were delighted to be able shortly after the general election to implement the Protection from Harassment Act 1997. Precisely in accordance with a belief in prevention rather than cure, the Act goes rather wider than its title might suggest, by allowing a variety of forms of harassment to be dealt with.
  An order may be granted, for example, on the basis of evidence not only from the victim but from professional witnesses, thereby allowing certain activities to be forbidden. Serious criminal penalties may apply to the breach of an order. We are including similar provisions in the Crime and Disorder Bill, and are generally improving legislation to make our systems work well.
  Downgrading cases is always a difficulty, and the matter requires much attention. One way of dealing with it is an improved relationship between police and the Crown Prosecution Service. My right hon. and learned Friend the Attorney-General is pushing through reforms on the matter as quickly as possible. The reforms will lead to an improvement generally in how crime is prosecuted, and will provide significant benefits in dealing with domestic violence and violence against women.
  It is certainly true that violence against women remains a blot on society, and that tackling it must be a priority. We must not tolerate a culture in which it is accepted, or in which its victims are afraid to speak out. The hon. Member was right to say that, although things have improved, there is still acceptance of violence in some areas and in some cultures. I have been working with my hon. Friend the Minister for Women because of concerns about that situation. Moreover, my right hon. Friend the Secretary of State for Social Security and Minister for Women recently announced in the House a national strategy to tackle all forms of violence against women.
  We are certainly determined that domestic violence will be dealt with effectively. To that end, Home Office Ministers are working with Ministers from other Departments to review all policies dealing with domestic violence. The hon. Member rightly said that men can be victims of domestic violence. Although that matter should not be overlooked, a person's sex is a significant factor in the likelihood of his or her being a victim or perpetrator of domestic violence, and in the seriousness and impact of domestic violence attacks. We must therefore concentrate on the experiences of women.

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  Tackling domestic violence—both causes and effects—is a huge task, and much of the work will have to fall to local agencies. However, Government have a part to play. We provide court funding to the Women's Aid Federation in England, Wales, Scotland and Northern Ireland, and revenue funding for women's refuge spaces. Through the special grants programme, we have made funds available to the Women's Aid Federation (England) to develop training opportunities, resources and facilities for local refuges. Other funding supports projects in Scotland and Wales. Local projects in England are funded through the single regeneration budget challenge fund.
  Future funding issues are being examined in the context of the increased priority being given to the matter by the Government, and the interdepartmental strategies that are being developed to combat domestic violence through both prevention, and information and support for those who have already been victims. It is very important that the issue is dealt with across Government; it is not an issue just for one Department—not even the Home Office, with its responsibilities for crime or the Department of my hon. Friend the Under-Secretary of State, given her concern for women's issues.
  All colleagues in all Departments need to recognise the relevance of health, education, local government and a variety of Government responsibilities to deal with the matter. We are at the moment looking very carefully at the best way of developing a new interdepartmental campaign of information and publicity to ensure coherence that aids understanding, so that people know how and where to get help.
  I should mention—the hon. Member for Twickenham mentioned the domestic violence help line—that we have recently given the Women's Aid Federation (England) extra funding to enable it to continue to run the domestic violence help line. The federation will have financial difficulties in the coming year, as I was told when I met its representatives earlier in the week, but it is looking for ways to continue to run the operation. Very often, due to the patchwork of provision, people need somewhere nationally to go, if only to ask where they can get help and be given advice.
  We said in opposition that care and concern for victims would be one of our priorities in government. That is absolutely right. There needs to be a switch in the attention that the criminal justice system, as well as the public service, gives to needs of victims. Within weeks of coming to office, my right hon. Friend the Prime Minister kept that promise by announcing an increase of £1 million a year for Victim Support, which will enable it to establish a national telephone help line for victims of crime, and to develop its court-based and local services.
  On 1 October 1997, to help victims further, we brought into force the provisions of part IV of the Family Law Act 1996. That is a very important enactment, which provides
  1392
  strengthened powers of arrest where violence is used or threatened. It also amends the Children Act 1989, so that, when an emergency protection order or an interim care order is made for the protection of children, an exclusion order can be attached, permitting the removal from the home of the suspected abuser, rather than the removal of the child. Those provisions are important.
  Partnership between agencies at a local level is extremely important. I have already referred to the partnership required between local authorities and the police in developing local crime prevention partnerships. We certainly expect the crime audit required under the Crime and Disorder Bill to identify the level of domestic violence in an area. Local partnerships will be required to develop a strategy for addressing it in the wider strategy for crime reduction needed in the area.
  In June, we set up an interdepartmental review to identify ways of improving the situation of all vulnerable witnesses. That includes victims of domestic violence—although it includes a number of others as well. Sometimes people are affected by domestic violence but not in ways that are easily recognised. I am thinking of adults with learning difficulties, disabled people, and people who have speech difficulties or language problems. For that reason, the review is very wide-ranging, and will consider the whole process from the investigation to the trial and beyond. It looks at the role of many of the agencies and professionals involved.
  There are many issues to be addressed. Many, if not all, are relevant to the needs of victims of domestic violence, among the ranks of vulnerable witnesses and defendants. Such people have a right not to be intimidated. Unfortunately, some of the weakest and most vulnerable in our society have found it most difficult to see a fair trial. We expect to receive the working group's report very shortly. We shall certainly want to respond to it as quickly and as positively as possible. It will make a considerable contribution to improving the standard of justice.
  The hon. Member for Twickenham has opened a wide-ranging debate. Indeed, the subject would have justified a debate of hours rather than half an hour. I congratulate him on packing a great deal into his speech, and I hope that I have been able to give some indication of our approach.
  Domestic violence is not an issue to be dismissed as though it were a natural part of a women's personal life. It is not an issue that has been exaggerated by a few extremist campaigners. It is a blot on our society that affects victims physically and emotionally, directly and indirectly, in the short and long term. It wrecks lives. We want it to be recognised for the crime it is, and we are determined that it will be tackled effectively.
  Question put and agreed to.
  Adjourned accordingly at half-past Ten o'clock.