Tax Cuts and Public Services

HC Deb 01 March 2000 vol 345 cc476-526

Mr. Deputy Speaker (Mr. Michael J. Martin)

Madam Speaker has selected the amendment in the name of the Prime Minister.

7 pm

Mr. Matthew Taylor (Truro and St. Austell)

I beg to move, That this House notes the continued underfunding of the National Health Service compared to the European average, as recently highlighted by the Prime Minister, the continued underfunding of schools, with average class sizes rising for most age groups since the election of the Labour Government, that government investment in public transport is significantly below that provided by the previous Government, that police numbers are falling, and that the 75p increase in the weekly pension is grossly inadequate; and concludes that instead of tax cuts the Chancellor should give greater priority to further improvement in the National Health Service, schools funding, public transport, the police and a greater increase in state pensions. The House should listen to these words: Nobody wants to pay more taxes but cutting is another matter. What bothers me is whether the money that goes in tax cuts … would be better spent on areas of direct social need. They are not mine, but those of the hon. Member for Liverpool, Walton (Mr. Kilfoyle) in The Daily Telegraph on 5 February. They were bravely and, we believe, rightly spoken and they are the substantive reason for the Liberal Democrats initiating tonight's debate. The Government are failing to meet their election pledges to save the national health service, prioritise education, education, education and ensure that pensioners share in the growing wealth of the nation. Instead, the one thing that we know the Chancellor will deliver in the new financial year is an income tax cut, which is not mentioned anywhere in Labour's manifesto. Not only that, but it seems that rich business men will be the biggest gainers from the Budget.

All the briefings on the Budget, which now appear with monotonous regularity in the press, have one thing in common: the government … is on the side of the risk taker; there will be a "Budget for business"; and the budget will introduce tax breaks for share schemes and new corporate ventures. All of them say that the Chancellor is planning to cut capital gains tax. His previous changes, which were announced in the taper, saved the partners of Goldman Sachs in the United Kingdom alone £500 million, the hon. Member for Coventry, North-West (Mr. Robinson) £1.5 million, and Lord Sainsbury £200 million. In other words, they were tax breaks for the rich, but in his 1996 Labour party conference speech the Chancellor said: While the Tories want a millionaire's tax cut for themselves … a Labour Chancellor will not waste money on boardroom excesses. He attacked the Conservatives for introducing policies similar to his own.

We do not favour tax increases any more than the hon. Member for Walton does if there is no good reason for them, but let us consider Labour's case. Its first point is that it is spending more and taxing less—that is the argument in the Prime Minister's amendment—but that is not true. The question for public services is not the percentage of tax take in the economy, but percentage spending. It was 39.6 per cent. of gross domestic product in 1996–97, but for the first three years under Labour, including this year, it fell to 39.3 per cent. The Chancellor has announced that it will be only 39.6 per cent. even at the end of this Parliament so the public sector spending percentage will be exactly that which the Government inherited from the Conservatives. Conservative spending, not surprisingly, delivers Conservative underfunding.

Labour's second argument is that it is at least spending more on the priorities. Let us consider people's priorities, such as health. Waiting lists rose by 36,000 in December and now stand at 1,108,000, which does not fulfil Labour's so-called early pledge. Even worse, the number of out-patients who wait more than three months has risen from 248,000 to 512,000. Labour's NHS policy is not working. Why? Average spending under Labour will, over five years, be higher by only 0.01 per cent. of GDP than in the last five years under the Tories. It fell from 5.3 per cent. of GDP in the last year under the Tories to 5.2 per cent. in Labour's first year and was only 5.3 per cent. in its second year.

Mr. John Bercow (Buckingham)

Will the hon. Gentleman confirm that the Liberal Democrats believe that the average taxpayer pays too little and should pay more?

Mr. Taylor

The hon. Gentleman has missed the point of the motion and the debate. We are arguing that taxpayers should not pay less than now on average and that the Government should forgo tax cuts at this stage because they have not fulfilled their pledges on health, education, pensions and the rest.

Mr. Bill Rammell (Harlow)

rose—

Mrs. Anne Campbell (Cambridge)

rose—

Mr. Taylor

I give way to the hon. Member for Harlow (Mr. Rammell), but then I must make progress.

Mr. Rammell

I thank the hon. Gentleman for giving way. He may agree that there is a suspicion—I put it no higher than that—that the Liberal Democrats constantly commit themselves to more spending than they justify in terms of where the money would come from. When challenged, their usual defence is, "Refer to our Budget submission." Is he aware that when the Library contacted the office of the hon. Member for Gordon (Mr. Bruce) and Liberal Democrat headquarters, neither was willing or able to provide a copy? Does not that show the degree of Liberal Democrat disingenuousness on this issue, and is not it about time that they justified where the money would come from?

Mr. Taylor

I can help the hon. Gentleman. First, I am now the spokesman on the issue and, secondly, this year's Budget submission has not yet been published.

Mr. Rammell

rose—

Mr. Taylor

I have given way so will the hon. Gentleman let me make progress? He should perhaps be a little more careful in making his points. I want to discuss education.

Mr. Campbell

rose—

Mr. Taylor

I shall give way in a moment, but let me make a little progress.

Class sizes for the five to seven age group have fallen. The Labour pledge on that, although not yet met, is likely to be met soon—not because of extra funding, but because a transfer of resources has meant that class sizes for over-eights have risen every year since Labour came to power. The parents of five and six-year-olds who voted for lower class sizes for their children back in 1997 find that class sizes are higher. Nursery class sizes have also risen and secondary school class sizes are at their highest for 20 years. Why?

Average spending is 4.8 per cent. of GDP, which is lower than the 5 per cent. average in the last five years under the Tories. Even by the end of the comprehensive spending review period, spending, according to the pre-Budget report, will fail to meet the Government's 5 per cent. target, which was only set in 1998. That is the result of the cut in their first two years in office to 4.7 per cent. of GDP, which was lower than in any of the last five years under the Conservatives.

Mrs. Campbell

Is not the reality of the Liberal Democrats in local government different from the scenario that the hon. Gentleman describes? Is he aware that Liberal Democrats on Cambridge city council voted to cut not only the council tax, which was at a standstill, but £170,000 from neighbourhood planning in the ward in which they had recently conned people into voting them in at a by-election? Furthermore, is not it true that Councillor David Howarth, their leader on the council, is an economic policy adviser to Liberal Democrat Front Benchers?

Mr. Taylor

The hon. Lady may see the Liberal Democrats in control of Cambridge city council shortly, when she will learn for herself what the Liberal Democrats do to invest in education when in control. When Cornwall county council was under our control, we increased spending on schools year by year.

There is a similar problem with public transport. There are record numbers of complaints, the number of late trains has increased by 25 per cent., London Underground breakdowns are up by 30 per cent., and spending compared with that under the Tories has been cut. Indeed, on the Government's own inflated figures, they will spend £130 million less of Government funds than they did last year. Their public transport investment is simply going down.

The measly 73p increase for pensioners is outweighed just by the council tax rise, which has been predicted by the Government themselves, irrespective of any other cost-of-living increases. The Chancellor likes to boast of the free television licence for those aged over 75, which we argued for and welcome, but it is not enough to say to a pensioner that he can watch television but cannot feed or heat himself following the 1.1 per cent. rise in the pension.

What did the Labour manifesto say? It pledged to ensure that, like those in work, pensioners would benefit from growth in the economy, yet the income of those in work has increased by four times that of pensioners—so much for sharing the growth of the economy.

In response to all that, the Chancellor comes up with the mantra "£40 billion for health and education." It is there again in the Labour amendment. I hope that the Labour Members who are here and, perhaps more significantly, the much larger number in marginal seats throughout the country, understand that it is not true. It is funny money. A Labour Member recently asked me why people do not understand that it takes time. Perhaps that is because people thought that the £40 billion was true. Certainly, Labour keeps peddling the figure; it does so again today.

The reason people are not seeing the improvements in health and education that they would have expected with such massive investment is that that massive investment is not taking place. NHS spending of £20 billion is reduced to around £12 billion simply by stripping out inflation. Once we strip out triple- counting—adding three years together—the real increase this year will be only £2.3 billion. That is not negligible but, on average over the current Parliament, it is in line only with the investment that the Conservatives managed under the previous Prime Minister. This is a funny-money Chancellor.

Waiting lists are increasing. Labour Members should not be surprised if people are disappointed by the Government's approach. If they had said that it was a hard process that would take time, that we could afford this now but that we would do more when we could, they might have carried the public with them, but the truth is—Labour Members know it—that they raised expectations beyond anything they could deliver. They had not got out of the habits of hype and exaggeration that they had displayed in opposition.

Mr. William Cash (Stone)

The hon. Gentleman may know that I share his concern about the fact that the Labour Government have broken their promises on public expenditure, but will he answer the following question on behalf of the Liberal Democrats? Does he repudiate the Treasury clamp, which in turn depends on the Maastricht criteria, which determine the 3 per cent. deficit rule? Would they refuse to accept that? Would they renegotiate it, or would they accept it, in which case they would break promises in the same way as the Labour Government?

Mr. Taylor

I might have known that the hon. Gentleman would work Europe into the debate somehow. I congratulate him on his ability to do so in any circumstance, but we argued for that disciplined approach to economic management in advance of any European rules. We do not criticise the Government for taking that approach. It is the proper way to manage an economy.

If the shadow Chancellor, the right hon. Member for Kensington and Chelsea (Mr. Portillo), had followed such disciplines when he was in the Treasury team, the Conservative Government would not have faced the boom-bust problems and the huge and growing deficit which led to their being kicked out of office.

The £19 billion for schools is reduced to £13 billion when inflation is stripped out. There is only an additional £2.1 billion this year, but even that is an exaggeration as it counts local authority money that has already been spent. Most of those local authorities have already spent over SSA, so simply raising the SSA, which allows the Chancellor to come up with the phoney figures, does not deliver a single extra penny to schools.

The real comparison is with our 1 p income tax pledge, which would have put more than £2 billion into education every year. Central Government investment in education is down to only £600 million extra this year. The cumulative real total is £4 billion over three years—if they prefer to do it on that phoney three-year basis. That is less than the average under the Conservatives. By comparison, the Liberal Democrat increase would have delivered more than £15 billion extra real money over a Parliament, not the funny money that the Chancellor likes to deliver.

Mr. John Hayes (South Holland and The Deepings)

The hon. Gentleman is making untypical sense for a Liberal Democrat, and I mean that in a kind way. He almost understates the case, if anything. If we take into account the funding of the teacher pay awards in the past two years, the financing of the standards fund and other initiatives, which have been borne by local authorities, the money that is going to schools at the sharp end—at the chalk face—is even less than when we scale it down in the way that he has done.

Mr. Taylor

The Liberal Democrats support the improvements in pay for teachers. We argued that they were needed, so I will not criticise that aspect of spending, but the hon. Gentleman highlights the fact that little discretionary expenditure in schools has flowed through. When hon. Members, from whatever party, go to schools and talk about revenue funding issues, they find the real problems that schools face. With the declining school-age cohort, which means that fewer pupils are coming into school, the pain will get greater because schools' funding will be lost and teacher numbers will fall. Schools in rural areas such as mine are small and have little discretionary expenditure. They will be particularly badly hit.

I turn to the final argument that the Chancellor and Prime Minister present, the latest pledge to nervous Back Benchers: they will deliver in the next comprehensive spending review. In other words, it will be all right on election night. Perhaps it will; we shall see. The Prime Minister promised an increase to European levels of health spending by the end of the second comprehensive spending review period, but did not define Europe, the average or spending.

Then the Treasury told the newspapers that it was not a promise, just an aspiration; but even if the Chancellor does announce that funding—I sincerely hope he will; I believe that he can do it—even another £40 billion, £50 billion or £60 billion will not do if it is funny money. If the same tricks are used as in the last comprehensive spending review, it will not save Labour seats, or schools and hospitals.

What happens on the ground will ultimately determine people's verdict on the success, or otherwise, of the Government. A promise of funny money for schools will not win a single vote if class sizes increase. A promise of funny money for the NHS will not hold a marginal if people cannot get a hospital bed when they need it, or their cancer becomes inoperable while they wait for treatment.

We have heard it before. We heard it from the Conservatives, the inventors of funny money. It is why they lost and it is a mistake for Labour to believe that hype and spin can overcome people's real experience, as the hon. Member for Walton clearly realises. They have failed to convince people over the past few Labour years. Inflated claims of extra funding deliver satisfactory headlines on Budget day, but do not deliver in schools or hospitals. People can see the unsatisfactory reality for themselves.

Worst of all from the point of view of nervous Labour Back Benchers, even real money—I hope and believe that the Chancellor will deliver that in the comprehensive spending review, because he can—will not have an effect until after the next general election. If the Chancellor offers tax cuts today, and jam tomorrow in the Budget and the spending review, it will not help someone with cancer who needs treatment now, or a child in an overcrowded classroom this year.

There is an alternative. The Chancellor has a huge war chest. He could start to spend it now, not on tax cuts but by investing in schools, hospitals and pensions this year, not next. That means that it has to be done in the next Budget, not the comprehensive spending review. An economically responsible programme for schools, hospitals and pensions could be delivered on 21 March if the Chancellor set aside tax cuts.

Mr. Christopher Leslie (Shipley)

rose—

Mr. Taylor

I give way to the hon. Gentleman, who has a marginal seat himself, I think.

Mr. Leslie

It is not so marginal. Will the hon. Gentleman confirm that the Liberal Democrat manifesto for 1997 said: The basic state pension will remain indexed to prices?

Mr. Taylor

The hon. Gentleman fails to mention that it also said that we would give increases over and above that, and that we, unlike the Government, spelled out those increases in our costed programme. Our manifesto also pledged free prescription charges, free eye and dental tests and free television licences for the over-75s. In fact, our package was comprehensively more generous than the one that the Government have delivered. The Government offer pensioners a minuscule 73p increase, despite having the largest funding surplus in history.

Let us stick to health, however, as that was the subject on which I expected the hon. Member for Shipley (Mr. Leslie) to intervene. From among the 70,000 nurses outside the NHS and below retirement age, we could recruit enough to fill 17,000 existing vacancies. The Prime Minister's claim that we must wait because trained staff do not exist is simply untrue. New drugs such as beta interferon are available now for multiple sclerosis sufferers; all we need is funding, and the Chancellor has the money. Not one Labour Member—not even the hon. Member for Shipley—was elected on a pledge of income tax cuts. All of them pledged to save the NHS, prioritise education and give pensioners a fair share of rising wealth. Apart from Labour's hype, exaggeration and mathematical hyper-spin, the next CSR will include not a penny more for anyone until after the next general election.

The Prime Minister has conceded that the NHS is underfunded. He told us we must wait, but a March Budget that prioritised hospitals, schools and pensions would deliver results in April. Bigger pensions, better hospitals and excellent schools are what the country wants, what the Liberal Democrats want and what even members of the Labour party—including many Labour Members—want.

The question is whether the Chancellor will deliver. Labour Members with small majorities should hope so. Patients, pensioners, pupils and parents certainly hope so. But if the Chancellor's newspaper briefings are to be believed, the sad answer will be no. If that happens, the Labour party will throw away something important—the sense in the country in 1997 that the days of Tory lies about spending had gone, to be replaced by investment. To throw away that hope is to lose an opportunity for the Labour party, but also an opportunity to restore faith in politics, but I fear that that is exactly what the Chancellor will do.

Mr. Jeremy Corbyn (Islington, North)

On a point of order, Mr. Deputy Speaker. I apologise for raising a point of order this stage, but it is an important one. A statement has been made to the media to the effect that the Home Secretary will issue a decision on General Pinochet at 8 am tomorrow. Are there any plans for such a statement to be made to the House, and can you, Mr. Deputy Speaker, ensure that the statement comes first to the House rather than the media?

Mr. Deputy Speaker

I have no knowledge of any statement to come before the House this evening.

7.23 pm

The Paymaster General (Dawn Primarolo)

I beg to move, To leave out from "House" to the end of the Question, and to add instead thereof: 'welcomes the fact that the Government is making work pay and cutting taxes for hard-working families; welcomes the fact that, as a result, the tax rate on a typical family will be cut to its lowest level since 1972, and that, on average, families with children will be £740 a year better off; notes that the Liberal Democrats oppose the measures that made this possible, including the Working Families Tax Credit; further welcomes the fact that the Government is making record extra investment in public services, including an extra £40 billion in health and education; notes that this is far in excess of anything promised by the Liberal Democrats at the time of the last General Election; and notes the reckless and uncosted spending commitments made by the Liberal Democrats, which they have no idea how to pay for and which would take Britain back to Tory boom and bust.'. I welcome the hon. Member for Truro and St. Austell (Mr. Taylor), who made his first speech in his new role as Treasury spokesperson for the Liberal Democrats. Frankly, however, he had a bit of a cheek talking about funny money and hype and spin because those words seemed admirably to describe his own speech. The hon. Gentleman was high on headline-grabbing statements, but low on strategy and detail. I was grateful to hear him welcome the Government's disciplined economic management, but he failed—as his party continues to do—to appreciate how our strategy is developing.

Mr. Cash

Will the Minister give way?

Dawn Primarolo

No, but if the hon. Gentleman can apply a little self-discipline and let me make some progress, I shall happily give way eventually to what will inevitably be his second Euro-question of the evening.

Any debate on tax and benefit reform and public spending must begin with the foundation of all modern economic policy-making—macroeconomic stability—and the hon. Member for Truro and St. Austell seemed to agree with all that I am about to say on that. Our first priority, and our continuing commitment, is to deliver and lock in a platform of economic stability, leaving behind the boom and bust of past years. Our new, modern, monetary policy framework, with an independent Bank of England, is ensuring that interest rate decisions are taken in the best long-term interest of the economy, not for short-term political reasons.

Our modern fiscal and public spending framework, based on two clear fiscal rules—the golden rule that we balance the current budget over the cycle, and the sustainable investment rule that, as we borrow only for investment, debt is held to a prudent and sustainable level—is ensuring that public finances are on a sustainable long-term footing. The hon. Gentleman claims to be committed to that strategy, but his speech demonstrated that he is not. He continues to make commitments on behalf of his party without telling us how they will be paid for.

Our transparent policy making is building confidence and long-term security. In monetary policy, there is an open system of decision making through the publication of the Monetary Policy Committee's minutes, a system of voting, and full reporting to Parliament. Already, we are seeing the rewards of creating that new framework for monetary stability. Inflation is historically low and is set to remain close to target, and interest rates peaked at half the level of the early 1990s.

Mr. Denis MacShane (Rotherham)

Will my hon. Friend give way?

Dawn Primarolo

If my hon. Friend promises not to ask a question on Europe, I shall be happy to.

Mr. MacShane

My hon. Friend tempts me, but I wanted to illustrate her contrast between the Government's policy and that proposed by the hon. Member for Truro and St. Austell (Mr. Taylor). We did not need to hear the hon. Gentleman's speech, because we can see Liberal Democrat practice. In Sheffield, the Liberal Democrats won last year on a platform of cutting council tax, increasing public spending on council services and reducing debt. In fact, there has been a 6 per cent. increase in council tax—three times the rate of inflation—massive cuts in libraries, leisure services and other vital services, across the board privatisation and a £120 million increase in Sheffield's debt, which every Sheffield council tax payer will have to pay for. We heard the hon. Gentleman's waffle, but—

Mr. Deputy Speaker

Order.

Dawn Primarolo

I thank my hon. Friend for his intervention, and agree that the Liberal Democrats say one thing when they have no chance of power, but do something quite different when they have an opportunity to exercise it in local authorities.

We have the same openness and disclosure in fiscal policy as in monetary policy, with key fiscal assumptions independently audited and far more information published than ever before to ensure properly informed debate and scrutiny. On the basis of prudent and cautious assumptions audited by the National Audit Office, we are firmly on course to balance the current Budget over the cycle, and, therefore, firmly on track to meet the first of our fiscal rules—the golden rule.

We are also on target on our second fiscal rule—the sustainable investment rule. Under the previous Government, national debt doubled. In the past three years, under the Labour Government, debt as a share of national income has fallen from 44 per cent. to 42 per cent., and is estimated to be 38.2 per cent. by the end of this financial year, and 37 per cent. next year.

Over the economic cycle, we will keep debt below 40 per cent. of national income. As a result of falling debt and lower long-term interest payments, in this financial year we are projected to have almost £4 billion lower payments than in previous years. That is money available for investment in front-line public services.

Thanks to the steps that we have taken to achieve stability, sustained investment and low and stable inflation, more than 800,000 more people are in jobs than at the time of the general election. The hon. Member for Truro and St. Austell made no mention of employment: of developing jobs and ensuring that people can work for their living.

That platform of stability, with the new deal and our measures for investment and regeneration, will enable us steadily to increase employment. Our aim is for a higher percentage of people to be in work this decade than ever before.

Mr. Phil Woolas (Oldham, East and Saddleworth)

Does my hon. Friend recall that the major package of delivering employment—the new deal—was opposed by the Liberal Democrats, who voted against it?

Dawn Primarolo

My hon. Friend is right. The then leader of the Liberal Democrats, the right hon. Member for Yeovil (Mr. Ashdown), with regard to the windfall tax—[HON. MEMBERS: "Ah."] Liberal Members may make noises but they always want to spend money without telling us where it should be raised, and when we make proposals on how it can be raised, they object to and oppose them. Their then leader said: While we understand and support what the Government are trying to achieve in … tackling long-term unemployment and exclusion, we disagree profoundly with their means of funding it—the windfall tax."—[Official Report, 2 July 1997; Vol. 297, c. 326.] [HON. MEMBERS: "Ah!"] Liberal Members who are sitting there sounding like sheep should understand that to replace the windfall tax to fund projects such as the new deal they would need to put 3p on tax. They make no mention of that when they are telling us endlessly how they will spend their 1p. They have spent the magical 1 p a breathtaking number of times.

Mr. Malcolm Bruce (Gordon)

rose—

Dawn Primarolo

I am happy to welcome Mr. 1p to the Chamber.

Mr. Bruce

Will the Minister acknowledge that we opposed the windfall tax in principle as a wrong tax, and not the new deal, for which we had our own package? How do the Government propose to maintain the new deal programme after the windfall tax yield has been spent? Does she have another windfall tax in mind, or some other tax that we have not yet heard about?

Dawn Primarolo

I do not think that the hon. Gentleman has noticed how successful the new deal has been in getting people into real jobs. Perhaps he was not here when I explained how we have created 800,000 new jobs—real jobs—since the general election.

Having come this far, we will not relax our grip. We are doubly determined to avoid the mistakes of the Lawson era, when growth got out of control in the late 1980s, which led to stop/go, and the Major/Lamont mistake of the pre-election public spending spree of 1991–92, which was followed by tax increases in the mid-1990s. Those were attempts to make policies for political reasons that were not sustainable economically.

Mr. Howard Flight (Arundel and South Downs)

Will the Minister give way?

Dawn Primarolo

I will when I have finished this point.

Our emphasis on stability and sustainable public finances has enabled us to introduce two momentous reforms that have made a significant difference to millions of families, children and low-paid workers throughout the country: first, the comprehensive reform of the British tax and benefit system that we are now developing; and secondly, our massive programme of reform in the public services.

I hope that, when I give way to the hon. Gentleman, he will finally tell the House whether his party is still opposed to the working families tax credit and the expenditure that we have committed to public services.

Mr. Flight

The Minister spoke of economic mistakes of the past and the Government's determination to avoid them. Does that include the equivalent of locking into the exchange rate mechanism and interest rates allied to those of continental Europe, which, going in the wrong direction, arguably had the biggest impact on our economy?

Dawn Primarolo

What always amazes me about Opposition Front Benchers is their ability not to be in tune with the public debate, or indeed debate in the Chamber. The hon. Gentleman would not clarify whether his party still opposes investment in the public sector—whether, for example, it believes in privatising the national health service—but seeks to take the debate in another direction. That may speak volumes to people outside the House.

Mr. Edward Davey (Kingston and Surbiton)

The Minister talks about the hon. Gentleman clarifying his position on tax. Will she clarify her position on what the Liberal Democrats are proposing? Does she support extra investment in public services or the 1p off income tax that the Chancellor has announced for the coming Budget?

Dawn Primarolo

I thank the hon. Gentleman for his prompt, as I come to that part of my speech. I hope that I will be able to answer his question as I deal with tax and benefit reform.

Together, our reforms to integrate tax and benefits—the working families tax credit, which the Liberal Democrats opposed; the national minimum wage; the lop tax rate; the cut in the basic rate of tax; the rises in child benefit, which the Liberal Democrats opposed; and the national insurance reforms—are for the first time tackling the causes of poverty and fulfilling our essential commitment to reform welfare to make work pay. Our commitment is that work will pay more than benefits for everyone.

The working families tax credit, introduced in October 1999, is already providing extra help for 1 million of Britain's hard-working families and increasing the minimum income guarantee for every family with children and with full-time earnings up to £200 a week—and 325,000 of those families were not in receipt of family credit at the time of the claim. The average gain to our poorest working families is £24 a week.

The Inland Revenue telephone lines, and the special working families tax credit telephone lines, have received nearly 2.75 million calls from people inquiring about the working families tax credit and the disabled persons tax credit; that is why most people will conclude that the credits are a worthwhile and necessary innovation. People will draw their own conclusion at the next general election when the Liberals and the Conservatives say that they will withdraw the working families tax credit.

As a result of our tax and benefit measures, families with children are an average £740 a year better off. Working households are an average £450 a year better off. No family earning less than £235 per week has paid any net income tax from October 1999. The national minimum wage has boosted the hourly wage of more than 1.5 million low-paid workers—two thirds of them women—by an average of 30 per cent. The introduction of a new 10p rate of tax has halved the tax bills of 2.3 million people, of whom 1.7 million are low-paid employees.

All those measures are opposed by the Liberal Democrats. They are opposed to the working families tax credit, to rises in child benefit, to a new low rate of tax, and therefore to lifting 1.25 million people out of poverty, of whom 800,000 are children. Our tax cut to 10p as the initial rate for savings will also benefit 1.5 million pensioners.

We now have a strategy, through the new deal, to give people new job opportunities and, through the working families tax credit, to make work pay. The child care credit makes it possible for people to work who might not otherwise have been able to; and the tax changes that we are making, including the cut in the basic rate of tax, make it possible for work to pay even more for those families.

In the Budget, we shall introduce further measures that will make it possible for people in areas that have in the past been hardest hit by unemployment to find work. The debate in this country is between fairness—our tax and benefits reforms for families and the low-paid—and unfairness.

On public services, by contrast with the commitments contained in the Liberal Democrats' 1997 manifesto, our three-year spending plans set out in the comprehensive spending review give Departments and our public services the certainty and stability they need to plan beyond a one-year horizon. Based on a platform of stability in the public finances, we have been able to commit significant extra resources to key public services, at the same time as meeting our tough fiscal rules. We have committed £40 billion extra over three years to education and health. That is £40 billion over and above what those services would have got if spending had continued at its 1998–99 level. It is £40 billion pounds of extra investment which our valuable public services would not have got under the Conservative party, or, indeed, under the Liberal Democrats.

Mr. Edward Davey

Will the Paymaster General give way?

Dawn Primarolo

I shall in a minute, so that the hon. Gentleman can respond to the following statements. In their 1997 manifesto, the Liberal Democrats promised to spend £9.5 billion over five years on education. The Labour Government, over three years, are spending £19 billion. In their 1997 manifesto, the Liberal Democrats said that they would spend £3.5 billion over five years on health. The Labour Government are spending £21 billion.

Mr. Davey

I am grateful to the Paymaster General for giving way during her recital of funny-money figures. Will she tell the House how much more would be freed for investment in public services if, in April, the Chancellor did not go ahead with a penny cut in income tax?

Dawn Primarolo

The hon. Gentleman does not appear to understand, which surprises me. The Government do not take a pick-and-mix approach to policy. We have a co-ordinated strategy, consisting of stability in public finances, tax and benefits reforms to make work pay, and investment in public services. We have a poverty strategy, an economic strategy and a strategy of investment in public services. They go together, but the Liberal Democrats do not appear to understand that.

In the last three years of the previous Government, growth in education spending was £7 billion. We have committed additional education spending of £19 billion, which demonstrates our commitment to education as our number one priority. We are delivering a cash injection in health service funding of £21 billion pounds. That is more than double the cash put into the NHS by the previous Government in three years. Contrast that with the Liberal Democrats' manifesto commitment—it promised nowhere near the sums we are spending.

Mr. John Burnett (Torridge and West Devon)

Will the Paymaster General give way?

Dawn Primarolo

No. I have been generous in giving way, but I must make progress. I am sure that the hon. Gentleman wants to participate in the debate.

Mr. Matthew Taylor

Will the Paymaster General give way to me? I did give way to her.

Dawn Primarolo

No, the hon. Gentleman did not. I have not intervened on the hon. Gentleman, unless it was in some other place at some time that I do not now remember. I should make progress, because I am taking up valuable time in the debate.

The extra investment the Government are making in the NHS will help to deliver our 10-year modernisation programme for the NHS, so that there is equal access to high standards everywhere, and faster and more convenient services. Sixty-five per cent. of the population of England already have access to NHS Direct and more than 1 million calls have been received. We have also set up walk-in centres: there have been 36 successful bids, covering approximately 10 million people. The centres are due to open during the first half of this year.

In addition, the Government have committed £115 million to modernise every accident and emergency department that needs it; and we have introduced the NHS modernisation fund of £5 billion or more over the three years of the comprehensive spending review. In addition to that, new money is coming in under the private finance initiative. We have already signed £5 billion worth of PFI deals—that is more in two years than was achieved in the five years of the last Tory Administration.

After many years of neglect, the comprehensive spending review will provide new resources for the renewal and modernisation of the UK's infrastructure. After a 1½ per cent. fall during the last Conservative Parliament, gross investment will total nearly £30 billion pounds a year by 2001–02. For transport, the comprehensive spending review committed £1.1 billion in extra resources to modernise local and public transport, providing more than 150 new integrated transport schemes in towns, cities and rural areas. To make sure that taxpayers get value for money, our public service agreements are a contract with the people—a promise of lasting improvements in public services. In this year's spending review, we shall continue to match investment with reform, increasing the resources available for the NHS, education and our public services.

The Liberal Democrats continually criticise the Government for not spending enough on public services, but the truth is that their figures do not add up—their figures never add up, although they always make interesting statements about their 1p. For example, for the 1992 election, the basic rate of tax was 25p in the pound. Guess what the Liberals promised to do? They promised to put 1p on the basic rate of tax. Before the 1996 Budget, when the basic rate was 24p, the Liberals again promised to put 1p on the basic rate of tax. After the 1997 election, the basic rate was 23p, and the Liberals promised to put 1p on the basic rate of tax. What is the purpose of tonight's debate? It is to discuss 1p on the basic rate of tax.

The Liberal Democrats do not tell us whether they are still committed to raising tax, or whether they now recognise that a necessary part of an anti-poverty strategy is ensuring that people who are trapped in poverty are guaranteed an income that will lift them out of poverty. The Liberal Democrats have opposed every measure that the Government have proposed to ensure long-term sustainable funding of our public services. The House should compare their hype with our proven commitment to macroeconomic stability for the long term, with our commitment to tackle the causes of family and child poverty, and with the way in which we have steadfastly invested £40 billion in our priorities—the nation's priorities—of health and education.

The Liberal Democrats always state the same old message: "Elect us and we will spend more, but we won't tell you where the money comes from. We are committed to economic stability, but we won't tell you how we'll achieve it." The Labour Government are committed to the right reforms for the long-term prosperity of the country, and I commend our amendment to the House.

7.48 pm

Mr. Oliver Letwin (West Dorset)

Tonight, unusually, I feel a certain fellow feeling with you, Mr. Deputy Speaker, and the other occupants of your Chair, in that you share with me, the Financial Secretary, the hon. Member for Kingston and Surbiton (Mr. Davey) and my hon. Friend the Member for Arundel and South Downs (Mr. Flight) a certain jadedness. I last arose from my bed 37 and a half hours ago and it might be because of that that I found myself less than entranced by the example of joined-up arithmetic—which, in the hands of the Paymaster General, becomes double-jointed—that was offered by the hon. Lady in her splendid, but entirely unilluminating tirade. She informed us that the Government have done nothing but good for everybody in all circumstances and with the greatest possible prudence.

Dawn Primarolo

He has got the message.

Mr. Letwin

I have indeed got the message—I could hardly fail to do so, seeing as it was repeated at roughly two-second intervals throughout the hon. Lady's speech. However, she could have saved her breath—not because anything she said was less than lovely and elegant, but because, like the nation, we in Parliament have become accustomed to such pronouncements and we no longer need them. I adjure the Paymaster General to ask her speech writer to write a different speech next time, or to get a different speech writer next time, so that her speech addresses the issues.

The hon. Member for Truro and St. Austell (Mr. Taylor) raised an interesting and profound question. I am not sure that I believe that he is able to provide the correct answer; nevertheless, it is to his credit that he asked a good question. What is the Labour Government's policy on tax and spending and what ought to be our policy on tax and spending as a nation? That needs to be addressed and, if the hon. Lady will forgive me, I propose to do so, notwithstanding the fact that it has nothing to do with whether the Government are all things to all men or the miracle cure for life.

As I understand it, the underlying thesis of the hon. Member for Truro and St. Austell, which, oddly enough, is broadly the same as that in the Government's amendment, is that there is a choice between public spending going up in real terms along with the tax burden as a percentage of GDP, or the reverse of that. The hon. Gentleman broadly asserts that the Government claim to be raising the two but are really not doing much in either direction and that we should be raising the two.

Mr. Matthew Taylor

I think that I see where the hon. Gentleman is going, but we are talking about the Chancellor's choices in the short term—what he does about this year's spending. I suspect that the hon. Gentleman will talk about a successfully managed economy delivering extra funding, perhaps allowing us in the long run to cut the tax burden at the same time, with which I would not disagree. The issue at the moment is whether the Chancellor should deliver a tax cut now when that would necessarily mean the sacrifice of extra Government investment in public services.

Mr. Letwin

The hon. Gentleman is right in anticipating part of the burden of my remarks. I still want to dwell on them because it is of the utmost importance that we understand the facts before we discuss the value that we place on them. It is also true that we must address what is to be done this year, or, more particularly, the Chancellor must address that question. I am not convinced that the hon. Gentleman's logic quite works at that point. However, let me pursue precisely the point that the hon. Gentleman traversed.

The Chancellor has been preoccupied with prudence. He could be called "Mr. Gordon Prudence Brown". Prudence is broadly his motto. He is different from all previous Labour Chancellors because he is determined to ensure that his miraculous golden rule and all his other possible rules will be satisfied under all possible circumstances so that no one could anyone possibly accuse him of being anything other than prudent.

I can quite see why a Labour Chancellor wants to do that, but he ignores the deepest truths of economics. It is not just the case that, in the long run, one can reduce the tax burden on the economy as a proportion of GDP and increase public spending in real terms, particularly on essential services; it is also and much more importantly the case that the one cannot be sustained without the other. That is the point on which we have a genuine difference of view with the Liberal Democrats and which I want to address.

A side point, which deserves to be made in advance—the Labour party always seeks to present this as a matter of privatisation, but I want to lay aside the political rhetoric for a moment—is that the crucial public services need not be funded only by public money. Public money is a vital ingredient for certain, and it will need to go up in real terms to anything like fund them, but there are other sources.

One need no longer look to the Conservative party for that because that well known laissez-faire Adam Smithite group of radical lunatic visionaries, the British Medical Association, has now set up a study group to look into what that famous Conservative peer Lord Winston asked it to look into in effect when he made his now famous utterances, which is whether other sources of funding have to be brought to the aid of that particular crucial public service. That is one of the ingredients that needs to be considered.

Mr. Leslie

I understand that the hon. Gentleman is talking about private and independent money paying for health or whatever, but with regard to the amount of public funds raised through general taxation for public services, I understood that his guarantee was that the level of public expenditure would reduce year on year, Parliament by Parliament. Is that not the nature of the guarantee?

Mr. Letwin

No, it is not. I do not expect the hon. Gentleman to agree with our policy, or necessarily even to want to present it as it is in future, but I want to ensure that, at the end of my speech, he knows what our guarantee is, and, much more importantly, why it is that way.

In addition to the question—I accept that it is a different question—of bringing to the aid of the crucial public services extra funding from the private sector, which is a vital ingredient, we also contend that we shall continue to need, as we always did under the Conservative Government, to increase by considerably more than the rate of inflation spending on the crucial public services—not reduce but increase. Spending on all the central public services such as health and education needs to go up. I shall come to the rest in a moment, but I want to get the first point into the hon. Gentleman's mind, because it would be marvellous if one intelligent Labour Member knew exactly what we were asserting so that he can go away and work out whether, as a matter of fact, any economist in the world would challenge the propositions that I am about to make.

The first proposition is that public spending on those crucial public services can and should, before we come to additional funding from the private sector, go up by substantially more than the rate of inflation. Can that be connected with, and consistent with, two other things? First, there is "Mr. Gordon Prudence Brown's" prudence. Can one, in other words, sustainably increase crucial public service spending? Secondly, can it be made consistent with reducing the tax burden as a proportion of GDP? Can those three things be put together?

Let me perform a small piece of mental arithmetic which I hope will for ever liberate the hon. Gentleman from the supposition that this is a miracle when, it is, in fact, extraordinarily simple. It is so simple that it has entirely eluded Labour Members, I think genuinely.

Mr. Leslie

Borrowing.

Mr. Letwin

No, no borrowing is involved. Let us consider the arithmetic.

Mr. Leslie

Interesting.

Mr. Letwin

Yes, it is interesting. However, when one hears it, it is not quite so interesting because it is so devastatingly simple. Public spending is about £370 billion a year. If the GDP, of which it is a part, is growing on trend—I am talking about cyclically adjusted GDP—at about 2.5 percentage points in real terms, which is, roughly speaking, what the Treasury thinks is happening—

Mr. Chris Pond (Gravesham)

The hon. Gentleman has already sent the hon. Member for Arundel and South Downs (Mr. Flight) to sleep.

Mr. Letwin

My hon. Friend has no doubt been asleep for some hours. He knows this already, but Labour Members do not, and it is important that they should. I apologise for using the debate to engage in a serious argument, but it is important to get the matter straight.

If GDP goes up by 2.5 percentage points in real terms each year, as the Treasury thinks it will—the Treasury thinks that the long-term trend rate of growth in the economy is about 2.5 percentage points in real terms compound per annum, as I think the Financial Secretary would agree if called upon to do so—and it is probably about right—give or take a quarter of a percentage point, which is what the economists argue about—and if the crucial public services, which take up about one-fifth of £370 billion, are going up at about the same rate, and if all the other public services taken together, the rest of the £370 billion, are increasing by slightly less than 2.5 per cent in real terms per annum—in other words, are increasing not just nominally but in real terms by 1,1.5 or 2 percentage points each year—it will ineluctably be the case that, without public borrowing increasing an iota across the cycle, there will be a reduction in the need to tax as a proportion of GDP. This is a simple piece of arithmetic.

Mr. Steve Webb (Northavon)

I admire any hon. Member who uses the word ineluctably so beautifully. The hon. Gentleman gave away the Conservative position when he said that the crucial public services occupy one fifth, or whatever, of the total—by which he must have meant health and education alone. He must have excluded the state pension. Clearly, he does not regard that as a crucial public service. Given the demographic pressures on the state pension, which would eat up at least his 1 per cent. or so real rise, is he saying that a Conservative Government would never give pensioners more than the 75p that they got this year?

Mr. Letwin

No, I am not saying that and I will return to the subject. The hon. Gentleman is a serious thinker about pensions and social security in general and asks a serious question. As it happens, the serious dispute between the Liberal Democrats and the Conservatives concerns social security, not health and education. Before I deal with that question, I want to ensure that our friends on the Labour Benches, who have genuinely not understood what we or the world of economists are arguing about, are put in the picture so that, although they may not want to participate in the debate, they at least know what we are talking about when we are participating in it.

Mr. Vernon Coaker (Gedling)

The hon. Gentleman said that we would have a recession.

Mr. Letwin

Yes, yes. We made the most dreadful mistakes: we went into the exchange rate mechanism, we spent too much money in 1990 and we did many other things of which we are deeply ashamed. Yes, that is true. Alas, it does not alter the facts of economics that the Conservatives should have made a mistake at some time. I hesitate to mention this, but I warn the hon. Gentleman that at some time some Labour Government may also make some slight mistake. These things happen. What do not change are the laws of economics. They are governed by the laws of arithmetic, which we all understand. If Labour Members take out their pocket calculators, they will find that every word that I have spoken so far is not merely true but incontrovertibly and uncontroversially true.

Therefore, we are facing the issue that was raised by the Liberal Democrats—most recently, by their spokesman on social security, the hon. Member for Northavon (Mr. Webb), and well deserved that position is too. He asked the interesting question, which is not whether one can raise by a considerable percentage in real terms—indeed, by as much as or more than gross domestic product—spending on the critical public services. By those, I mean health and education when I talk about one fifth of the expenditure, and possibly also the police and defence if one ups the figure a little. One can increase that spending and do so sustainably, with a falling ratio of debt to GDP let alone a maintained ratio, which is probably a more sensible target, and one can increase spending on the rest of the services by 1 per cent. or 1.5 per cent. of GDP each year quite comfortably. I entirely accept the hon. Gentleman's argument. What one cannot do is also to allow the entire burden of social security spending, which broadly occupies £100 billion of the £370 billion a year, to rise by or faster than the rate of growth of the economy on trend—I leave aside the cyclical effects, which obviously complicate the picture on social security. One cannot do that; and that is as true as everything that I have already said.

The dispute between the serious hon. Gentleman on the Liberal Democrat Benches, the hon. Member for Northavon, and ourselves, in which the Chancellor has been an unwitting participant, actually concerns precisely how far it is or is not possible in time to constrain the growth of spending on social security in its various forms, and pensions are a major component—in such a way that one answers genuine social needs, bearing in mind all the lessons that some of us—not, alas, the Government—have learned from the right hon. Member for Birkenhead (Mr. Field), who taught many of us much about this subject. We all accept that the social security budget will grow in real terms, but can one so constrain it that one does not end up either with imprudence or the need to raise taxes?

Before I say why the hon. Member for Northavon and the Liberal Democrat party are wrong on that subject, I have a further observation that undercuts any argument that they might like to deploy: in the end, one cannot fund the crucial public services that I have described, which it is the common aim of all three parties to fund, if one does not have the tax base with which to do it. That is uncontroversial. The Conservative party and I believe that having that tax base is a matter of being able increasingly, in a sort of global Laffer-curve effect, to compete on tax with the most successful economies in the world.

The new economy is changing the industrial paradigm. My right hon. Friend the Leader of the Opposition pointed that out vividly in a speech at the Confederation of British Industry not too long ago. The new economy is making it the case that geographical proximity to one's customers is no longer the advantage that it used to be. That is not true for every good or service, but it is true for an increasing range of them. That means that the factors of production are vastly more mobile than they were. Therefore, a highly taxed economy will not have the same level of economic production that it used to have because that production will have gone somewhere else where the tax rate is lower. One may increase tax rates—not merely income tax, but all tax rates throughout the economy—and yet, paradoxically, one may raise less and less tax revenue. That is not a basis for achieving what Labour, Conservative or Liberal Democrat Members want to achieve; it is a basis for going bankrupt.

Mr. Matthew Taylor

I appreciate the interesting approach that the hon. Gentleman is taking to the debate and the real issues with which he is dealing. However, I want to be clear about how much he speaks on health funding for those on the Conservative Front Bench. Clearly, the spokesman on health and the present shadow Chancellor have both argued that the increases in health service funding that we want cannot be achieved through public funding. They have argued that it is necessary to resort to encouraging people to take out more private health insurance to meet need. Does the hon. Gentleman agree with that view?

Mr. Letwin

I shall explain exactly what that position is, although the hon. Gentleman will also profit from the definitive announcements on the subject that will be made by various of my right hon. Friends in the near future, which will tally with what I am about to tell him. As it happens, I rather agree with them, for unsurprising reasons.

Two propositions need to be separated here. First, can we and should we afford as a nation substantially to increase year on year in real terms public spending on health and education? The answer is yes—that is the view of the Conservative party. Secondly, will that spending in itself be enough to answer the legitimate demands placed in a modern and wealthy society by the consumer on the health service in particular, but also to a degree on the education service and perhaps some others? The answer is, probably not—a view that is shared by the Prime Minister, who made the remarks to which the hon. Gentleman adverted.

Consumers may want to spend more on health than would be implied by merely keeping pace with, or slightly exceeding the pace of, change in GDP. If they want to do that substantially, because they want new and fancier operations endlessly to get better results without the waiting lists that are caused by rationing, the services may need a lot more money than tax alone can comfortably provide if one takes the view of tax that I was taking—which is, that one must keep tax down as a proportion of GDP if one wants to sustain the tax base. Such an increase in spending may require what the BMA has described as infusions of cash from other sources.

Mr. Coaker

Privatisation.

Mr. Letwin

No, no, no! In a serious discussion of these matters, it is not helpful to bandy these slogans again. I have not made the slightest criticism of the Government in those febrile and juvenile terms and I do not intend to. Politics—in particular these matters, which are at the centre of our politics—deserve to be discussed, at least in this place, with a level of seriousness that transcends what goes on in The Sun and other newspapers that the hon. Gentleman may or may not read.

Mr. Coaker

Not the real world.

Mr. Letwin

We are talking about a very real world. We are talking about the world in which Britain is either successful and prosperous or impoverished and trouble struck and in which the services that the hon. Gentleman and I concur in wanting to be preserved fail.

Let me return to the serious argument—the question whether, given the necessity of keeping that tax base up—

Mr. Deputy Speaker

Order. I realise that the hon. Gentleman does not mean to do it, but he has had his back to the Chair for a considerable time, which is against the conventions of the House.

Mr. Letwin

I apologise, Mr. Deputy Speaker. I assure you that the pleasure of seeing you, even in our mutually jaded state, far transcends any pleasure that I have in addressing the adversaries to whom I am speaking through you.

The serious issue is whether the burden of social security can be contained to a level of real growth that is consistent with all the other objectives that I described. That is a common problem for all parties in the House and for any Government who might be ruling the United Kingdom at present. I think that that is also the issue that the hon. Member for Truro and St. Austell and other Liberal Democrat Members are rightly raising.

Mr. Nick St. Aubyn (Guildford)

Does my hon. Friend agree that the recent analysis by the National Institute for Economic and Social Research is very revealing on that point? It said that, if the Government were to try in the lifetime of this Parliament to achieve an increase in health spending—to reach the European Union average—by an increase in general taxation, they would in the process crowd out 2 per cent. of manufacturing output—entailing the loss of more than 100,000 jobs—increase the inflation rate by 1 per cent. annually, and—in the words of the national institute—expose the economy to the "risk of emergency taxation" if their forecasts faltered by even a little.

Mr. Letwin

My hon. Friend gives an accurate presentation of the NIESR' s report. The NIESR is, if anything, probably still behind the curve in understanding the effects of the new economy. I agree with him that those are serious issues. As I said, although it may be perfectly possible to increase, as we must, public spending on health and education by something like as much as the trend rate of GDP growth, it will not be possible substantially to exceed that type of growth rate, if that growth is tax-borne, without it having the effects that he described.

There is a pessimism in the Liberal Democrat ranks on social security that is unjustified by the facts. We shall know the truth of the assertion that it is unjustified only in the long run. However, I think that three things have happened. The first is that there has been a significant shift in the structure of our economy. No one knows how profound the shift is, and no one knows whether the supply-side changes—the changes in the level of labour market regulation that the previous Government achieved so painfully in 18 years—have been compromised by the interventions of the current Chancellor and his colleagues.

The claim of the Government—who recognise, to their credit, the value of the labour market flexibility that they inherited—is that their current moves have not substantially affected that flexibility: the new-found flexibility that differentiates our economy from the economy of our European counterparts and makes it more like the economy of the United States.

Let us assume for a moment that the Government's manoeuvres in that respect have not damaged the flexibility of the labour market. If so, we may genuinely have achieved a position in which the long-term sustainable rate of unemployment—the non-accelerating inflation rate of unemployment of our economy—has altered. If so, there is reason for supposing that the long-term, cyclically adjusted rate of expenditure on social security in respect of its quasi-cyclical components—particularly income support and the other passported benefits of a means-tested variety, including housing benefit, so far as that affects income earners and the unemployed—may now quite naturally be inclined to grow rather less fast than we had become accustomed to, because there is a damped cycle to unemployment.

I think that we will find that that is the case, although I cannot yet prove it, because it has not yet happened—we have only the beginnings of the signs of it. There is nothing yet to contradict the thesis, and there is some hope that the thesis will be proved to be valid.

There is a second reason why we should be optimistic about the prospects for growth of the social security budget, which is that the age profile to which the hon. Member for Northavon referred is beginning to turn partly in our favour. Moreover, an increasingly substantial part of the population is subject to the benefit of occupational pension schemes and properly established personal and portable pension schemes. Therefore, on the whole, average incomes—not, of course, across the whole population—for the elderly are doing quite well.

I admit—to end my rather prolonged response to the intervention of the hon. Member for Northavon—that there is a major issue about the basic state pension. I do not believe that, as a country, we shall ever address that issue until we turn our minds to the question of funding the basic state pension so that, somehow or other, people are able to benefit from the growth of the economy. It is a great challenge which no party in the House has properly met.

By those means together—the advantages of our flexible labour market, the demographic shift and a proper approach to the basic state pension—we should be optimistic about the prospects of doing enough to constrain social security spending so that the proposition that I began with may obtain.

If it does not obtain, we are all down the plug-hole. If we cannot meet the demands of our voters and consumers in the essential public services, and if we cannot sufficiently look after those who most need looking after through the social security system without having either imprudently to borrow or to raise our tax burden to the level at which we can no longer complete with the world's most successful economies, we shall not be able to deal with those economies, but will instead end up with a reducing tax base and a vicious circle out of which we will find it very difficult to emerge.

It is therefore not only that I am optimistic, but that I think that we have to try to be optimistic. Otherwise, the pessimism—which is implicit in the view of the world held by the hon. Member for Truro and St. Austell—is profound. It is not a conclusion that I think that anyone in the House should share. It is certainly not the Chancellor's view of life, but that is because he refuses to face most of the economic logic that I have just described.

8.16 pm

Mr. Martin Salter (Reading, West)

It speaks volumes that, when Liberal Democrats Members finally get their place in the sun by securing a debate in the Chamber on the important issue of public services, only 10 per cent. of their total parliamentary strength turns out to support the important and incisive arguments that their Front Benchers are trying to make.

I have become worried about the tone of this debate—I was certainly concerned about it earlier—because, unlike other Labour Members, I quite like Liberal Democrat Members. Many of my colleagues are antagonistic towards the Liberal Democrats. Although they do not say so, many of them oppose their involvement in Cabinet committees. I not only think that the Liberal Democrats are okay: I think that every council should have one. They may be largely irrelevant, but they provide useful entertainment and a useful contrast between the real world and the fantasy world which their politicians inhabit.

Only this morning—as evidence of my fondness for Liberal Democrats—I was working with the hon. Member for Newbury (Mr. Rendel) on an important debate in Westminster Hall. I was a lot more supportive of him than his colleagues were in his abortive leadership bid. I see that the hon. Member for Torridge and West Devon (Mr. Burnett) is leaving the Chamber—leaving us with less than 10 per cent. of Liberal Democrat Members attending the debate.

I should like briefly to contrast the taxation and public services record of Liberal Democrat councils with that of our Labour Government. Liberal Democrat politicians are quite happy to take a brave stance on taxation and to encourage other people from other parties to increase tax. But how do they react when council tax levels increase in their own local authority areas? They do not like it and are not necessarily prepared to justify it, and they whinge as only Liberal Democrats can.

Mr. Mike Hancock (Portsmouth, South)

The hon. Gentleman makes a very interesting point. I draw his attention to the four years for which I led Hampshire county council, when we never once shied away from increasing council tax, sometimes by as much as 14 per cent., to pay for good services. In that time, we recruited and employed 600 more teachers, 200 more policemen—whom we paid for ourselves—and more than 300 more social workers. Before the hon. Gentleman starts to knock Liberal Democrat councils, he should consider the example that we have set everyone in Hampshire, and the way in which the country's largest local authority responded to the real world. We are not shy of tax increases: we are proud of them because they delivered the services in the real world that real people needed.

Mr. Salter

I thank the hon. Gentleman for making that point so well. The Liberal Democrats' record in Hampshire was so successful that they were rejected by the people of Hampshire. Perhaps the hon. Gentleman would care to reflect on that.

I can only speak about the councils that I know about and of which I have direct experience. The town of Reading has far outgrown its earlier boundaries. A third of my constituents had the misfortune to come under West Berkshire council. On the other side of town, a third of the constituents of my hon. Friend the Member for Reading, East (Jane Griffiths) come under Wokingham council, which varies between primarily Conservative control and occasional bursts of Lib-Demery. It is worth looking at the level of public services provided by those councils.

In West Berkshire, which has been Liberal-controlled since 1991, a recent customer satisfaction survey found that more than two thirds of the population considered that the council had an appalling record on public services: they were dissatisfied with the level of services, youth facilities and road maintenance and felt that the council provided poor value for money.

The Liberal Democrats shed a lot of crocodile tears for public services and pensioner services, but what sort of concessionary fares scheme does Liberal Democrat-controlled West Berkshire council deliver for pensioners in my constituency? Reading, which has been Labour-controlled since 1986, provides a free bus pass at any time of the day or night throughout the Greater Reading travel area. What does the generous Liberal Democrat council deliver for pensioners in my constituency? A total of £26 worth of tokens a year. That is worth 50p a week. Someone from the edge of my constituency, which is not particularly large, who had to travel to the Royal Berkshire hospital to visit a loved one twice a week would use up their annual allocation of concessionary travel tokens in five weeks. What does the Liberal Democrat council say to those pensioners for the other 47 weeks of the year? They have to pay the full fare.

When we ran a campaign to extend a proper concessionary fares scheme throughout my constituency and into the urban areas of West Berkshire council, Sally Hannon, the chair of environmental services, said publicly that if those whingeing pensioners wanted to have Labour services, they could move to a Labour authority. That speaks volumes about how much Liberal Democrats care about public services for pensioners. I found it amusing, but sad. The Liberals whinge as only they can. They are blatant opportunists. Liberal Democrats can be easily defined: they are all things to all people.

It comes ill from the lips of people who have controlled local authorities with some of the worst standards of public service to criticise the good start that the Government have made on tax and the development and enhancement of essential public services. The Labour Government have introduced a new lop rate of tax, helping the lower-paid and halving the tax bill for 1.8 million low-paid workers. They have also introduced record increases in child benefit, and the working families tax credit, which will mean an extra £24 a week for lower-paid families.

We cannot consider the Liberal Democrats as a serious party of Government. They are on occasion a party of local government, but they certainly could not be trusted to run our national economy. As was said earlier in the debate, they have spent their 1 p in the pound many times over. In their 1997 manifesto, they said that they would spend an extra £9.5 billion on education and an extra £3.5 billion on health over five years. The Labour Government are investing £19 billion extra over three years in education, and £21 billion extra over three years in health.

The Liberal Democrat sums do not add up. We have seen their hypocrisy on spending and the treatment of pensioners. I shall end my short and friendly contribution—I could go on for a long time—with my favourite quote on Liberals. It was John Diefenbaker who said: Liberals are the flying saucers of politics. No one can make head nor tail of them and they are never seen in the same place twice.

8.25 pm

Mr. Mike Hancock (Portsmouth, South)

I have been caught by surprise being called so early, but it is a pleasure to follow the hon. Member for Reading, West (Mr. Salter), who obviously sees everything through rose-coloured glasses provided by Millbank Tower, which seem to distort most things, including most of the hon. Gentleman's speech tonight.

Let us talk about the real world. At Question Time today, the Prime Minister once again failed to grasp the issues of the day and respond with any authority. He talked about long-term planning for the NHS, but the real issues facing people today are waiting lists. Labour has been in power for nearly three years and people on waiting lists have died. Not everybody can afford to wait another five years for staff to be trained or for facilities to improve.

In the real world—outside the Chamber and away from Downing Street—people are suffering real illnesses. They do not go to the doctor for nothing. They do not say that they do not mind waiting for their operation. There are many people who have been examined by well-qualified doctors, sometimes with years of experience, and perhaps then seen by a second or third doctor as well and been told that they need an operation that could be life-saving. Sadly, they are not getting those operations.

We hear promises of more money being put into the health service, and talk about the money that has already been put in. If so much money had been put in, we would have seen dramatic improvements, but the real world tells us that there have not been dramatic improvements. There is not a hospital in the country that does not have a significant problem. There are shortages of nurses, doctors and consultants, non-existent accident and emergency assessment centres and overworked and overstrained staff—yet still the Government's complacency is beyond belief when they start to talk about what they have done for the health service. If it is so good, why are there so many problems? If they have put so much in, why is there so little to show for it?

It is no good the Prime Minister telling us that 37 hospitals are to be built with the help of the private finance initiative. Five years or more from now, a Government will have to pick up the financial consequences of the PFI bids going ahead today for hospitals and schools. Those projects will screw the health service and the education system and will ruin much of what we have. The private finance initiative may be seen as a short-term solution to get the Government off the hook, but it is not a long-term solution. In the end, the buildings will cost more and less will be done in them because of that. It is about time that the nation woke up to the falsehood of the PFI as a solution for most problems. It is nonsense.

It is the same with schools. I listened with great interest this morning to the Secretary of State for Education and Employment talking about the Government's commitment to failing secondary schools. By 2003, most schoolchildren should expect to leave secondary school with at least five GCSE passes at grade A, B or C. That does not help children now. Those failing schools were there three years ago—I have some in my constituency, sadly. Overcrowded, inner-city schools are desperately short of resources and the sort of assistance that we are told is coming. If it comes five years from now, however, that is no good for today's pupils. Their one chance of a decent education is evaporating, and yet another generation of kids will be served nothing but a second-rate education.

It is no good the Secretary of State saying that he will do more. It takes time. It is a cynical trick: the Chancellor of the Exchequer is known as the Mr. Prudence of the financial world, awash with money, with a money chest just waiting to be used to fight an election. Yet kids in school desperately need better resources, better-trained teachers and better provision of education, from pre-school to higher education. It is no good having the money available now but promising to make it available in the future. It is not good enough to suggest that the majority of people are clamouring to have 1p taken off their income tax. Most of the people whom I represent have never raised that issue with me, but many have cried out for money to be put into the resources that they need.

A constituent of mine, an elderly lady, blames the Prime Minister for the death of her husband. I do not know whether it would have been possible for an operation six months ago to have kept him alive longer, but she is convinced that something went fundamentally wrong in the health service, which allowed her husband to die—that he was failed by the health service. I have told her, "You can't say that. There are lots of unanswered questions." But she believes that the Government, awash with money, did not recognise what was destroying her family. Her tragedy is mirrored thousands and thousands of times across the nation.

Mr. David Taylor (North-West Leicestershire)

The proceeds of taking 1p off income tax are about £1.8 or £1.9 billion. Would the hon. Gentleman care to indicate how he would spread that money effectively to start to reverse the very bleak picture that he paints of a health service that costs about £45 billion a year and an education service that costs a similar amount in the current year?

Mr. Hancock

The hon. Gentleman asks an interesting and fair question. I am sure that he will be convinced of the merits of our alternative budget when it is announced in two and a half weeks' time. Indeed, I think that there is a good possibility that he will be so convinced that he might want to vote for it as an alternative to what the Chancellor will produce. I am sure that secretly, even the hon. Member for Reading, West (Mr. Salter) will have a nagging twinge in his heart come Budget day, suggesting that he might have voted for the wrong Budget.

The proceeds of taking 1p off income tax are not what the hon. Member for North-West Leicestershire (Mr. Taylor) suggested. Taking 1p off income tax takes away resources. We need those resources. We have so much money in the kitty that we can give more and we can also give money back to the public, but the public want us to spend more on the issues that they care about. Taking 1p off comes to more than £2 billion. There is a major difference in valuation here.

Mr. Matthew Taylor

£2.6 billion.

Mr. Hancock

£2.6 billion is the realistic figure. I am sure that when Labour was in opposition, that figure was closer to £4 billion, but it is now down to less than £2 billion. However, realistically, it is £2.6 billion.

I have lost count of the number of pensioners who have written to me in the past two months, unable to believe the announcement that they would get only 70p or so in their pensions. They thought that the press was downing the Government. They did not believe it until it happened and now they are in turmoil. It is an absolute disgrace that pensioners have had such a shabby deal from a party that pleaded with them to vote Labour for a better deal. Instead, the Government have stabbed them in the back, kicked them when they are down and are rubbing their noses in it. That is what 70p means to pensioners who do not have the ability to decide that their rent will not go up by more than the cost of inflation.

Dawn Primarolo

Will the hon. Gentleman confirm to the House that the manifesto on which he stood for election made a commitment to continue to raise pensions in line with prices, and that any resources were to be directed at the poorest pensioners? Is not that precisely what the Government are doing? Are not his comments a little disingenuous?

Mr. Hancock

Unlike the Minister, we have moved on from our manifesto. We realise that we have to do more. [Interruption.] We have to do one thing or the other. We cannot stand still. We cannot stop at the point on which we fought the election three years ago—that would be absurd. The Minister has her hand over her face—even she is embarrassed by her question. She must surely realise that Labour got it wrong.

The Chancellor and the Prime Minister would never have made a commitment to stick to Tory spending limits if they had known how much was in the kitty. They must be kicking each other around Downing Street.

Mr. Webb

My hon. Friend may not realise that the Minister and I share a local newspaper, the Bristol Evening Post. Is he aware that this week, night after night, that paper has published letters from Bristol pensioners who are angry at Bristol's Labour MPs for backing the 75p? Does my hon. Friend agree that the Minister should accept that Bristol pensioners are right to be angry about that? Is the Minister saying that the pensioners are wrong to be angry?

Mr. Hancock

Bristol pensioners are right and Portsmouth pensioners are right but, even more important, the nation's pensioners are right to be ashamed of and disgraced by a Government who offer them such a pittance. Pensioners' outgoings are going up, and are more than the amount they receive from the Government. The overwhelming majority of them have no control over that.

I have discussed three matters—the NHS, schools and further education, and pensions. The fourth is transport. Over the years, going back to 1984 when I was first elected to the House, I have lost count of the arguments about how we could solve transport problems. We all dream that an integrated transport system is up there somewhere, but Judy Garland would have had more chance of finding it by going over the rainbow with the Tin Man and the Lion than we do with the Deputy Prime Minister and his transport team.

During the past three years, everything that has been done on transport has made matters worse. The Government have tinkered with the problems. I live in a wonderful part of the country—south Hampshire—with Portsmouth as the focal point for 500,000 people. During the course of a week, most of them travel to and from that city—for work, leisure, shopping or just for the sheer pleasure of being in such a great city—but our roads are a nightmare.

There are solutions. A rapid transport link has been proposed by the local authorities and the county council. It needs a large amount—millions of pounds—to give it a kick start. I have twice written to the Deputy Prime Minister begging him to support that scheme, if he is really serious about getting people out of their cars and into public transport. He has failed miserably: "Leave it to the private sector", he says.

What is happening with our railways? We are a ferry port. Every week, thousands of lorries come through our port, but instead of our having a railhead for freight, the rail yard is to be sold off. Railtrack cannot wait to dispose of it—probably for a shopping development. There will be no provision for a suitable railhead for freight. There will be no alternative to the lorries that come through the port from Spain and France.

As a Parliament, we have failed again over our commitment to people on transport. More important, the Government have failed.

Mr. Salter

I have listened to the hon. Gentleman's contribution with the same care with which I am sure he listened to mine. I wish to ask him two questions. First, what is the difference between moving on from the manifesto and breaking one's promises or shooting from the hip? [Interruption.] Calm down.

Secondly, I would like the hon. Gentleman to consider a point that I raised. How should Liberal-controlled West Berkshire council treat its pensioners when it comes to concessionary travel? He has deliberately and disingenuously avoided that point.

Mr. Hancock

The difference between moving on and breaking one's promises is that we have moved on and the Labour Government have broken their promises. That is why the hon. Gentleman looked so guilty when he asked the question. I am sure that what he really wanted me to do was to say what I have just said, so that he would not have to say it and be accused of being unfair to his colleagues.

On concessionary fares, if I were elected to West Berkshire council, I would advocate that it levied a rate that addressed the issues that the people of that area faced. We would try to find out whether concessionary fares were a big enough priority for the people. Unlike the Labour party, Liberal Democrat councillors listen and try to understand what the people are saying. We would prioritise our spending around what the people want and we might be pleasantly surprised. With my intervention on the council—and possibly the support of the hon. Gentleman, who could encourage his constituents to vote for me—we might get a better deal on concessionary fares. That would be my ambition.

This debate gives the Government the opportunity to come off the fence. They should not sit there saying that they will give tax rebates and spend more. The majority of people cannot make that statement add up correctly and they do not believe it. That is why so many people are turning away from the Government. They feel that they have been let down.

The Government should have used the debate to say, "We have got it wrong, but we have the money to do more and to do the right thing in the real world for the people we represent." The Budget and the Chancellor's war chest will give him the opportunity in a few weeks' time to move in the direction in which Labour Members promised they would move in their 18 years in opposition and, more important, in the 18 months leading up to the 1997 election. That is why so many people voted for them. It also explains why so many people are disenchanted with them today.

8.43 pm

Mr. Bill Rammell (Harlow)

I shall make a short speech. I believe in electoral reform and, therefore, in the politics of partnership in the appropriate post-electoral circumstances. With the greatest respect to Liberal Democrat Members, if such an approach is to come to fruition, they will have to grow up as a political party. They must start being honest and straight with people and justify where the money will come from.

Month in, month out and year in, year out, the Liberal Democrats have consistently made spending commitments that go way beyond anything that they have said that they would raise in taxation. Let us consider what has happened since the general election. In debates in the Chamber and in Standing Committee and in those that take place at local level, they have promised extra money for pensions, health, schools, public transport and housing. They have promised an end to tuition fees and to the parental contribution—and so it goes on. That is all to be paid for by 1p on the basic rate of income tax.

On a conservative estimate, the spending pledges that Liberal Democrats have made in the course of this Parliament would mean at least 5p on the basic rate of income tax. That would cost the typical family £600 a year. Do we ever hear Liberal Democrats referring to that as the cost of their proposals? Not for one moment. We see a complete lack of rigour and of basic arithmetic and they fail to square the circle. That is endemic in their politics.

Although I did not know that I was going to speak in the debate, I thought that I would try to seek out the Liberal Democrat alternative Budget from last year. I contacted the House of Commons Library, which contacted the Liberal Democrats' party headquarters and the office of the hon. Member for Gordon (Mr. Bruce). The Library was wrong because it should have contacted the hon. Member for Truro and St. Austell (Mr. Taylor). However, I should have thought that given that the Commons Library was seeking that information from a senior Liberal Democrat, he would have informed the Library about which Member to contact, but he did not. The alternative Budget was not forthcoming, whether or not that was due to the Liberal Democrats' lack of willingness to make it available.

That suggests either that the Liberal Democrats do not think that their alternative Budget is significant in the conduct of their politics, or that they did not want to make it available because it would have revealed that the spending commitments that they have made this evening and throughout this Parliament were not included in the document. The truth is probably a combination of those two factors.

Those tactics are repeated at a local level. A couple of years ago, I received through my letter box a leaflet from the local Liberal Democrats which criticised the Labour-run local council for the level of its council tax and in the next paragraph called for an end to universal capping of council budgets, without suggesting that there was a contradiction between the two statements.

The Liberal Democrats' national projections are disingenuous. It has already been said that in the three-year spending review the Government are committing an extra £21 billion to hospitals and an extra £19 billion to schools. We can compare that to the Liberal Democrats' manifesto pledge of a five-year commitment of £3.5 billion for the national health service and £9.5 billion for education. I am repeating those figures because not once in the debate have Liberal Democrat Members intervened to challenge our claim that although they made those pledges at the general election, they are no longer making them.

Mr. Matthew Taylor

The hon. Gentleman is simply wrong, and he was not listening to my speech. I confirmed our policy position and pointed out that the real Government expenditure on education is nothing like as much as our commitment. The Paymaster General attempts to defend her position by giving cash figures for the Government and real figures for the Liberal Democrats. That should not fool anybody; it certainly should not fool the hon. Lady, whose job must be, if nothing else, to understand the difference between the two.

Mr. Rammell

Nothing in the hon. Gentleman's intervention denies the fact that at the general election, the Liberal Democrats' manifesto contained a commitment to spend an extra £9.5 billion on schools over five years and an extra £3.5 billion on the health service. That is what the Liberal Democrats said they would do; we have done significantly better in a three-year spending review.

There is also a complete lack of coherence in the Liberal Democrats' arguments, particularly on the new deal and the windfall tax. On the one hand, we hear that they support the principle of the new deal, but they oppose the principle of the windfall tax and voted against it. Let us follow that logic: if we had a Liberal Democrat Government, and they did not raise the £5 billion to fund the windfall tax and the repairs programme for schools, the money would have to come from elsewhere, and would cost the equivalent of 2p on the standard rate of income tax. We have never heard from the Liberal Democrats where that money would come from.

One of the Liberal Democrats' most hypocritical positions is on pensions, with their critique of this year's 73p rise, which has been levied in line with prices. I wish that we had been able to do more, and I hope that we will be able to do so in future, but the Liberal Democrats' manifesto promised that pensions would rise in line with prices. If we had a Liberal Democrat Government, a 73p increase would still have been levied this year, so it is audacious of them to attack us on pensions.

A few weeks ago, the Liberal Democrats performed a parliamentary stunt when they voted against the uprating. If they had succeeded in their vote, there would have been no increase in pensions this year. They were indulging in gesture politics, and pensioners understand that.

Mr. Webb

Is the hon. Gentleman saying that if the Government had lost the vote that night, they would not have come back with a further uprating statement?

Mr. Rammell

I am saying that the Liberal Democrats have had an opportunity to present a fully costed alternative to that pension uprating proposal, and they failed to do so, as they consistently fail to do every time the issue is discussed.

There is a total lack of candour in the Liberal Democrats' spending plans. We hear their repeated attack on the penny that will come off the basic rate of income tax on 1 April this year. The Prime Minister has made it clear that the penny off the basic rate of income tax is to compensate for other tax changes in the system. Were the Liberal Democrats to succeed in denying that 1p cut, they would be imposing a burden of significantly more than a penny on the basic rate of income tax, because of other tax changes. However, we never hear that mentioned in debates.

I am a politician who believes in progressive taxation. I want us to build support for progressive taxation. With the greatest respect to the Liberal Democrats, one does not make the case for progressive taxation by constantly promising people more than one plans to raise through taxes.

Mr. Leslie

On the subject of promising more than can be delivered, does my hon. Friend recall the statement made by the hon. Member for Gordon (Mr. Bruce) before he was replaced? The Liberal Democrats wanted to increase the income tax personal allowance to £10,000 per head at a cost of about £28 billion. Does he believe that the penny on income tax will stretch quite that far?

Dawn Primarolo

They have moved on again.

Mr. Rammell

Yes, the Liberal Democrats have moved on, but my hon. Friend exposes the fantasy politics that is always involved in their budget-making.

With regard to our plans for public spending, I do not pretend that everything is perfect in the funding of public services. When we came to power, we had to remove a huge budget deficit that we inherited from the Conservatives. Furthermore, there had been a consistent problem in the funding of public services over 18 years.

I do not pretend that that was due to year-on-year cuts under the previous Government. Instead, there was sporadic funding. In the run-up to a general election, public spending would be jacked up, especially in schools and hospitals, and immediately after the election, the funding would come down. In contrast to that, the Labour Government are introducing step-by-step improvements in the funding of public services.

Let us analyse an example of that step-by-step approach—the £21 billion settlement for the health service over the current three-year spending review period. I asked the House of Commons Library to carry out an analysis based on the percentage increase in real terms of health service spending over the past 25 years. That shows that the current three-year spending increase for the health service is the second best three-year spending commitment over the past 25 years.

I do not pretend that that is the end of the story, and that everything is perfect in the national health service. We never promised the country that we could turn the health service round overnight. We said that we would tackle the task stage by stage. I hope and believe that the current three-year spending increase can be carried forward into the future.

Mr. Paul Burstow (Sutton and Cheam)

From the research that the Library has done for him, will the hon. Gentleman confirm that in the first two years of this Administration, we had one of the worst settlements for the health service in probably 20 years?

Mr. Rammell

That was exactly the commitment that the Liberal Democrats made in their manifesto. They said that they would stick to the Tory spending limits for the first two years. Both parties committed themselves to that tight fiscal framework in the first two years in order to get rid of the budget deficit that we inherited from the Conservatives.

Let me identify some of the other areas in which we are making step-by-step improvements. Under the new deal, £3.5 billion has been allocated to fund the best quality training and job scheme that there has been in this country. The other £1.5 billion from the windfall tax is being used to double the budget for repairs in our schools.

In the first three years of the current Government, child benefit, which was frozen during all those Tory years, has been increased by 25 per cent. As for housing, which particularly concerns me in my constituency of Harlow, the release of capital receipts has made possible a 33 per cent. increase in expenditure in the first two years, and a 50 per cent. increase in the past three years. The working families tax credit has given an enormous boost to people on low incomes: 2,000 people in my constituency are, on average, £24 a week better off.

How have we achieved that progress? Most important, we have achieved it through sound economic management—by removing the budget deficit, not borrowing more than we could afford over the economic cycle, granting operational independence to the Bank of England and introducing transparency and openness to the operation of our public finances. That was crucial: without it, we could not gain the trust and confidence of the business community and investors that we need if we are to secure the economic growth that, over the longer term, represents the only sure-fire way in which we can obtain the extra investment in public services that we need.

Mr. Letwin

If transparency of public finances was the Government's prime aim, why did the hon. Gentleman's colleagues, throughout last night, resist the establishment of an independent body to set accounting standards?

Mr. Rammell

It is difficult to remember exactly what the Conservative party was trying to achieve during its filibuster last night. It is undoubtedly true, however, that our overall management of the economy—involving the operational independence of the Bank of England, and the release of the minutes of the central committee—is introducing a degree of openness and transparency. That creates confidence, which means that investors and businesses have the confidence to invest and which, over the longer term, will generate the economic growth that we need.

If we adopted the Liberal Democrats' approach, that successful management would be blown apart. In a short time we would have a huge budget deficit. We would not be funding our spending plans, and there would be a downturn in economic growth leading to cuts in public spending. However, I do not think that that would happen under a Liberal Democrat Government. If we had a Liberal Democrat Government—and I recognise that it is a big "if"—I do not think that they would act in that way. The spending commitments would not materialise, and that would undoubtedly lead to a degree of disillusionment among Liberal Democrat supporters.

What, then, are the Liberal Democrats doing? I think that they are indulging in that old practice of the politics of gesture and the politics of opposition. They are against everything wherever it occurs, whether it is done by a Labour or Conservative council locally, or by the Labour Government nationally. They have the answer to every conceivable public ill, wherever and whenever it occurs. How do I know that? How do I recognise the beast? Because this was the condition of the Labour party in the 1980s. We learned a long and hard lesson then. We learned that it simply is not possible to treat the public in that way: a party must convince them that it has the competence to deliver on its promises.

That returns me to the critique originally advanced by the hon. Member for Truro and St. Austell (Mr. Taylor). If I recall correctly, he said that during the 1997 general election Labour had promised the earth, exaggerated and over-hyped what it could achieve. Let me say emphatically that that was not my experience when I was a Labour candidate in a marginal constituency in 1997. We specifically said that we would not promise more than we could deliver, and we were criticised for our caution. It is a good spin and a good hype to say that Labour is not delivering on its promises, but the reality is very different. It is not very sensational and not very exciting; it is about bit-by-bit improvement. That is what the people voted for on 1 May 1997, and it is what the Government are delivering.

9 pm

Mr. Steve Webb (Northavon)

Apart from those from Liberal Democrat Members, there has been only one thoughtful contribution to the debate, and it was made from the Conservative Front Bench. Shortly, I shall comment on the measured defence of the Conservative strategy on tax and public spending and identify the flaw in the reasoning.

I shall speak mainly about pensions, but it is important to respond to some of the implausible remarks that the hon. Member for Harlow (Mr. Rammell) made. He talked about irresponsibility and referred to the Liberal Democrat alternative budget. That document is produced every year and is publicly available. If the hon. Gentleman had contacted my hon. Friend the Member for Truro and St. Austell (Mr. Taylor), who is the Liberal Democrat Treasury spokesman—a reasonable first person to approach for a Liberal Democrat Treasury document—he would have obtained it. However, the hon. Gentleman preferred to pretend that the document was not available. If he had asked the right person, he would have got a copy.

An alternative budget is the hallmark of a responsible Opposition party. We sit down and prepare such a budget every year. The Labour party did that only once when it presented John Smith's famous budget before the 1992 general election. It got its fingers burned because when the sums were spelt out, they were not popular with the electorate. The Labour party never produced a budget in opposition after that.

That shows the difference between the two parties. The Liberal Democrats cost and prioritise their policies each year. Our general election manifesto includes a volume of costings so that the price of every pledge is provided.

Mr. Rammell

Will the hon. Gentleman deposit the alternative budget in the House of Commons Library? We can then examine it line by line and add to it the other spending pledges that Liberal Democrat Members made in the Chamber, in Standing Committee and elsewhere but that are not costed in the alternative budget.

Mr. Webb

We would be delighted to place a copy in the Library. The document is published, and we hand it out to the press. It can hardly be regarded as a secret document. We are more than happy to make it available this year.

The hon. Member for Harlow outlined the Government's progress so far in fulfilling their pledges for public services. He kept mentioning three years: this year, next year and the subsequent year. However, the Government have been in office for nearly three years, of which the hon. Gentleman refers to only one. We are more than halfway through the Parliament—we are possibly almost three quarters of the way through—and it is legitimate to consider the Government's achievements. As my hon. Friend the Member for Truro and St. Austell said, the record shows that the Government have spent pretty much what the Tories would have spent. Real-terms increases in spending on health and education are analogous to the Tories' achievements when they were in office.

When the Labour party took office, the mood was "Things can only get better; this is the dawn of a bright new era." However, the Government have more or less stuck to Tory spending plans. The electorate did not expect that from new Labour. People expected genuine improvements in public services; they are clearly not getting them.

The hon. Member for West Dorset (Mr. Letwin), in a characteristically thoughtful contribution, explained the way in which he reconciled Conservatives' pledges on health and education spending with the so-called tax guarantee. He reasoned that if the economy grows at the rate of 2.5 per cent. in real terms, and one prioritises a fifth of public spending, one can provide more than 2.5 per cent, for that fifth, if one provides less than 2.5 per cent. for the rest. That is an arithmetic truth. The hon. Gentleman prioritised health and education; he mentioned defence and perhaps the police in parenthesis. However, he did not mention social security, describing it in his characteristic fashion as not a priority public service.

The hon. Gentleman knows that the state pension accounts for approximately half the entire social security budget. To make his sums add up, it would be necessary to freeze the state pension in real terms, and simply provide for inflation-linked increases. The hon. Gentleman rightly said that occupational pensions are increasing, but that does not save the Government a penny on the basic state pension, which is not affected by such increases. The basic state pension depends only on the number of pensioners and, to a limited extent, on contributions records, which are improving systematically every year as more women retire on larger pensions. There is therefore a real-terms, upward pressure on the state pension over and above inflation. There are more pensioners and higher average state pension receipts. A state second pension is proposed as well as SERPS. There will be pressure on the state pension.

If the hon. Member for West Dorset believes that the only way he can justify decent increases in health and education spending is through squeezing social security but he is not prepared to squeeze the state pension, what else will he squeeze? That is the unanswered question when Conservative Members claim that they will pay for their goals out of savings on welfare. Other items of public spending could be squeezed, but the hon. Gentleman said that the money would come from squeezing the social security budget. Is he willing to cut the state pension?

The hon. Gentleman mentioned funding the state pension, but surely that is a matter not for the people who will be 60, 70 or 80 in the next few years, but for people years down the line. The circle will not be squared for many decades to come because the Conservative party would have to cut the state pension or not deliver on either health and education or its tax guarantee.

Mr. Letwin

Let us return to the figures. Does the hon. Gentleman agree that they stack up perfectly well if the social security budget is rising broadly by 1, 1.5 or 2 per cent. in real terms—that is, below the trend rate of growth of gross domestic product?

Mr. Webb

That will not happen if the biggest single social security item, which represents about half the budget, is rising substantially faster than that because of demographic pressures and the increased average retirement pension.

Mr. Letwin

The hon. Gentleman is one of the acknowledged experts in the House. Does he not agree that the trend in pension growth through demographic factors has been roughly 0.5 per cent. in real terms?

Mr. Webb

One of the key differences in the coming decades will be the shift in the age structure of the pensioner population from the young elderly to the old elderly, who place a particular financial burden on the pension regime through the minimum income guarantee—the means-tested top-up--and social and health services.

Mr. Letwin

rose—

Mr. Webb

Will the hon. Gentleman bear with me for a moment? The pressures caused by the increase in the number of very old elderly people will mean that an increase of 1.5 or 2 per cent.—not only on pensions but on health—would not even allow standstill. That is the distinction. The hon. Gentleman says that the economy grows at 2.5 per cent., which provides leeway for good increases on health and education, but 2.5 per cent. on health does not even represent national health service inflation, leaving aside the growing number of very old elderly people. In my judgment he would need far more than 2.5 per cent. The Prime Minister talks of 5 per cent. Once those levels are reached—and the hon. Gentleman would not increase the basic state pension—the sums do not add up.

Mr. Letwin

The hon. Gentleman's argument has shifted to a point at which it becomes true, but it is different from mine. If he is arguing that health and education increases—not only those in real terms, but ones that are much greater than the GDP trend rate—cannot be achieved without either raising tax or bringing in money from outside, he is right. He takes one view of the right way to solve the problem and we take another. Now we agree on the empirical fact and simply disagree about the policy choice.

Mr. Webb

To paraphrase that intervention, the hon. Gentleman is saying that delivering what the public want and expect from a health service in a growing economy requires beyond what the Conservatives are prepared to find in tax and that that has to come from the individuals themselves. The interesting distinction is that the Liberal Democrats say that health has to be paid for according to ability to pay, whereas the Conservatives say that private money has to come in through private insurance. Insurance, of necessity, is related to the risk of someone needing the service. Typically, older people would have to buy insurance. The non-urgent surgery to which the hon. Member for Woodspring (Dr. Fox) refers is older people's surgery and they would have to fork out because of their medical need. However, we think that people should pay for health care through general taxation according to ability to pay.

Mr. Letwin

rose—

Mr. Webb

I have probably taken enough interventions from the hon. Gentleman.

The working families tax credit has been mentioned several times. Labour Members have been briefed on how many of their constituents benefit from it and the Paymaster General well knows the Liberal Democrats' views. We argued that the Tax Credits Act 1999, which introduced it, contained only one measure—the credit should be delivered through the pay packet. That is why we opposed it. None of the rates or the tapers were mentioned and the words "child care tax credit" did not even appear when the legislation was drafted. We would not remove the working families tax credit.

Dawn Primarolo

The hon. Gentleman attended the debate on the working families tax credit and knows full well that I gave the House a very full explanation of its design and intention. He led his party into the Lobby, on his recommendation, to vote against its introduction and he has to explain to the young families in his constituency why he wants to take that money away from them.

Mr. Webb

I shall be delighted to do so. It is a matter of record that we voted against the decision to pay tax credits through the pay packet, and the Government have admitted that we were right. The new integrated child credit or whatever it is to be called will merge family premiums, family credit, child credits, the child care tax credits and all the rest of it. How will it be paid? Through the pay packet? No. It will revert to the parent with care. They have admitted that the central issue of principle on which we objected when they were reforming tax credits was correct.

Dawn Primarolo

The hon. Gentleman is a very active and respected hon. Member, but he seeks to rewrite history to get his party off the hook for the fundamental error that he made with regard to the working families tax credit, as he did when he voted against the child benefit increases for parents in his constituency.

Mr. Webb

The hon. Lady has performed a U-turn that she is graciously trying to cover up. She is right to say now that the child credits should be paid to the parent with care. She was wrong then to try to drive that measure through the House.

Pensioners are surely the group that feels most aggrieved at the Government. I refer to correspondence in my local newspaper, the Bristol Evening Post, from Bristol pensioners who are livid that their Labour Members have voted for the 75p increase.

One of our Bristol neighbours—the hon. Member for Bristol, South, I think—recently wrote what has proved to be a rather inflammatory letter to the newspaper, saying essentially that pensioners should stop complaining because they were £4.75 a week better off.

Dawn Primarolo

rose—

Mr. Webb

Will the hon. Lady allow me to finish the point?

Dawn Primarolo

It was not me.

Mr. Webb

I am sorry. I meant the hon. Member for Bristol, East (Jean Corston), the Parliamentary Private Secretary. Perhaps the Minister wants to disown what the hon. Member for Bristol, East wrote. She said that pensioners were £4.75 a week better off and cited the winter fuel payment.

Obviously, no one is going to say no to £100, but what is the money for? We are in March. We are talking about the April uprating. The Government appear to be saying that pensioners can look forward to the winter fuel money. Unless I am mistaken, has it not just been spent on winter fuel? Is that not what the money has already gone on?

This April, that money has gone. All that the pensioners are receiving this April is 75p. Some of them in October will receive free television licences, but, this April, they will receive just 75p. I will reveal something even more dramatic than the fact that the 75p is an overstatement of what pensioners are getting.

Mr. David Taylor

Is the hon. Gentleman not being a little disingenuous in relation to the income increases that pensioners will receive, because they and the Government are looking at the financial year that starts on 1 April 2000 and ends on 31 March 2001, which includes a range of extras to their income? Therefore, what my hon. Friend the Member for Bristol, East (Jean Corston) wrote in her letter was fair.

Mr. Webb

In the coming financial year, pensioners will get a winter fuel payment of £100. That is the same as they received this year, so it is not extra. They will get 75p extra. Some will get a free television licence so, next year, half the pensioners will get 75p more than this year. Some others will get the free television licence. That is what is happening.

I reveal a fact that has passed commentators by in all the discussion of the 75p rise. A quarter of the pensioners in the land will not get 75p. They will not even get 50p.

One million married women have such poor national insurance records that they get pensions not in their own right, but on their husband's contributions. They are category B pensions, which are worth the grand sum of £39.95 a week. When the Government trot along and say, "You can have 1.1 per cent. on that," a bit of mental arithmetic reveals that that is 45p, so 1 million married women will receive not 75p but 45p this April.

Mr. Paul Tyler (North Cornwall)

You cannot buy a pasty for that.

Mr. Webb

My hon. Friend mentions the difficulty of buying a pasty for 45p. I am not sure about the Bristol equivalent.

Not only will 1 million married women receive only 45p, but another 1.5 million pensioners, mostly women—widows and single women—receive state pensions of less than £40 a week because of their poor contribution records. They will receive 1.1 per cent., and, since some get even less than £40—perhaps £30 or £25—they will not even see a 50p piece in April. A quarter of the pensioners in the land are affected by that.

Mr. Kevin Hughes (Doncaster, North)

What about the minimum income guarantee?

Mr. Webb

It is good to hear a Government Whip going on the record to stand up for pensioners. The 1 million married women who will receive 45p are almost certainly ineligible for the minimum income guarantee because they are married. A husband and wife will almost certainly rise just above the reach of the means test. The hon. Gentleman appears to be saying that it is all right to give married women 45p because their husbands will look after them, but they can have a few pennies of pocket money. Perhaps they can blow their 45p on two first-class stamps, if they feel extravagant and want to dip into next week's money.

Mr. Malcolm Bruce

The increase does not buy two first-class stamps.

Mr. Webb

That is why I said they would have to dip into next week's money.

Those women will not be entitled to any more support from the Government, and that is why my postbag groans every day with letters from pensioners complaining that we keep saying the increase is 75p but their pension books show that it is 45p. A quarter of the country's pensioners—250,000 pensioners in the south-west, which has a particular concentration of older pensioners—are receiving only 45p. Is it any wonder that there is genuine anger about what the Government are doing?

The question is whether the Government could have afforded to do more about the basic pension. The answer, patently, is that they could. The national insurance fund has a record balance of £16 billion, and the rather cautious Government Actuary says that only £8 billion is required. In a year in which the Government have the money, they have chosen not to use it. Pensioners know that a sentence of death hangs over the basic state pension. If the money is not being put into the pension when the Government have it, it certainly will not be when they do not have it.

The basic state pension should reflect the cost of living for pensioners, and 75p does not do that.

Mr. Kevin Hughes

Absolute nonsense.

Mr. Webb

Is the hon. Gentleman saying that it is absolute nonsense to suggest that the basic state pension should reflect the cost of living for pensioners? Which part of what I am saying is nonsense? Is it the idea that pensions should reflect the true cost of living? In fact, older pensioners, who are often the poorest and who are currently being forced through a means test, should receive substantial rises over and above the cost of living.

Mr. David Taylor

To suggest that the basic state pension has gone into decline and become nugatory since 1 May 1997 is a simple mis-statement of fact. Does the hon. Gentleman agree that the process began when the pension was decoupled from increases in pay, which was the meanest act of the Thatcher era?

Mr. Webb

I suspect that we could collect several hundred election addresses by Labour candidates berating the Conservative party for breaking the earnings link. Perhaps the hon. Gentleman's election address did so. Labour thereby raised pensioners' expectations that something better would come along. Specifically, the Labour manifesto pledged that pensioners should share in the rise in general prosperity, but 75p is not such a share. Pensioners are angry with the Government. They feel that they have been let down, and they are right.

9.19 pm

Mrs. Anne Campbell (Cambridge)

I had not intended to speak tonight but was so overwhelmed by the hypocrisy of Liberal Democrat complaints about the Government's spending plans—the Liberal Democrat manifesto clearly stated that that party's spending plans involved far less than ours—that I felt compelled to say something.

In my constituency, the Liberal Democrats habitually send out leaflets berating the Labour party for not spending more on education. The Liberal Democrat promises of £9.5 billion over five years, as compared with our £19 billion for education over three years, make a mockery of those leaflets.

The people of Cambridge should realise that if we had had that fantasy-land Liberal Democrat Government, they would not have got the increases in education that we have been able to produce. Cambridgeshire has had an increase in standard spending assessment year on year at more than double the rate of inflation. From April, the SSA per pupil will be higher in real terms than it ever was under the Tories.

It is true that schools are still feeling the pinch and feel that they do not have enough to spend on education, but while the Government have increased their spend on education, the Tory county council has reduced its contribution. Cambridgeshire education has lost £3 million overall, which has not been passported from the Government's generous increase. In 1998–99, the county council did not passport the full increase to education but kept back £1.6 million. In 1999–2000 it kept back £3 million. Next year will be the first in which the full increase has been passported to the education budget. Schools will certainly begin to see the benefit of that.

In addition to the increase in SSA, schools in Cambridgeshire have benefited from many other resources. This year, for example, we had £1.8 million for the reduction of infant class sizes, which delivered 11 new classrooms and 69 teachers, so now only 7 per cent. of infants are being taught in classes of 30 or more, as compared with 37 per cent. the previous year.

Cambridgeshire has had a huge programme to remove asbestos and update classrooms and has received £2.3 million from the new deal for schools and a massive £11.2 million from the standards fund, which has gone into numeracy, literacy, school improvement, school leadership, ethnic minority teaching and many other investments that all lead to much higher standards.

My hon. Friend the Member for Reading, West (Mr. Salter) said that the Liberal Democrats are all things to all people. That is true: they say one thing in one place and take an entirely different line in another. They appear to be opposing a tax cut here, and on Cambridgeshire county council they have proposed a 9.5 per cent. increase in council tax, but on the city council they propose a reduction in council tax. There is not much consistency.

It must be difficult for the Liberal Democrats in places such as Cambridge, where there is an excellent city council that has managed to keep council tax steady for several years running. Not only did they con voters in Arbury ward at the recent by-election, but they sent round a newsletter promising: All you have to do is tell us what you want to spend the money on. What happened when the Liberal Democrat councillor was elected? At his very first council meeting he voted to axe the funding for much needed facilities—new basketball and BMX facilities and closed circuit television for improved security—amounting to £170,000 over the next two years. Residents had asked for all those things. All the proposals had been discussed with the residents and agreed, and then the Liberal Democrats, en bloc, voted against them.

Councillor David Howarth, economic policy adviser to the Liberal Front Bench and a great economic literate, was quoted in the Cambridge Evening News on 18 February as saying: We are only cutting the future investment, not the past. What the Liberal Democrats will do once they get in a position to make decisions beggars belief.

I listened with great interest to the exposition by the hon. Member for West Dorset (Mr. Letwin) on the way in which the Conservatives would keep to their promise of reducing the total tax take while achieving increases in services. The weakness in his argument lay in the assumption that Conservatives could achieve a consistent growth rate of 2.5 per cent. It takes a big leap to go from "We've got 2.5 per cent. now," to "therefore, a Conservative Government would produce 2.5 per cent. growth year on year."

Mr. Letwin

I am sorry that the hon. Lady did not catch my phrase. I was talking about the trend rate of growth, which is measured across 15, 20 and 25 years and has been measured by the current Treasury as having been, on trend, 2.25 per cent. throughout the Conservative period of Government.

Mrs. Campbell

The hon. Gentleman will be lucky to find a Conservative Government that lasts 25 years. In view of the mistakes made by the last Conservative Government, any Conservative Government would be extremely lucky to achieve a growth rate of 2.5 per cent. even for five years. As a Member of the last Parliament, I remember a former Conservative Chancellor saying that unemployment was a price worth paying—that was the Conservative philosophy.

The Labour Government have got 800,000 more people in work and we have a great deal to be proud of. We have created pathways out of poverty for millions of people. Lone parents who were trapped on benefits throughout the Tory period in office are now being encouraged to return to work when their children start school. Work is being made to pay through the working families tax credit. The long-term unemployed—many of whom have not worked since leaving school—are finding a new life and new security with work that was previously unavailable to them. At the same time, we have introduced the national minimum wage, which also helps to make work pay. Family-friendly policies are helping people to manage work and home, as do increased child care facilities and investment in public transport—for millions of people, the only way to get to work.

The great advantage of all that is that more people in work mean more revenue for the Exchequer. All the Liberal Democrats talk about is 1p on tax, which would put more people into the poverty trap and do nothing to increase employability. They oppose the new deal and offer no long-term policies to keep our economy sound and stable while achieving steady increases in GDP. I think that the electorate see through the Liberal Democrats and know where a secure future lies—with the Labour Government.

9.28 pm

Mr. Nick Harvey (North Devon)

It is a pleasure to wind up the debate. I start by focusing on the difference that has emerged during the debate between those who account for things in real terms and those who account for things in cash terms. That lies at the bottom of all the wriggling that Labour Members have been doing during the debate and which they have to do every day, every week, in every radio interview and in every press article.

The mess is entirely of the Labour Government's own making. At the start of the Parliament, they took the cynical decision that, for the first two years of the Parliament, they would leave in place Conservative spending plans. They did so in the hope that electors would blame the Conservatives for all the pressures and strains that emerged in public services—it would be the legacy of the Conservative years. They planned to switch the money into public services in the latter half of the Parliament so that, at the next general election, the good old Labour Government would have saved the day, with the result that voters would sweep them back into office out of gratitude for their policies. There has never been a clearer example of bust-and-boom policies.

The most uncomfortable point of a strategy of that shape is felt around the third year, when the public become cheesed off about the lack of improvement in public services and rather more doubtful that all the problems can be blamed on the previous Administration. At that stage, there is no sign of the improvements that the general election campaign led them to expect. They optimistically look out for such improvements every time they collect their child from school or suffer the misfortune of being put on a waiting list to go into hospital.

The Paymaster General either does not understand the difference between real terms and cash terms—I rather doubt that—or she hopes that the rest of the world is too stupid to understand the difference. However, it is not. People hear all about the Government's marvellous multi-billion pound expenditure, but when they go into hospitals they look around and wonder where on earth it has got to. They are beginning to suss that the £18 billion and £21 billion are funny money.

A doctor put the matter to me in this way: "Mr. Harvey, if my son grows three inches in one year, another three inches the second year and another three inches the third year, after three years he will have grown nine inches, but in the eyes of the Chancellor of the Exchequer, that child has grown 18 inches." That is the difference between the figures that are being bandied between one side of the Chamber and the during this debate.

The Liberal Democrat manifesto, which the hon. Member for Harlow (Mr. Rammell) is more than welcome to look at, talks about real terms increases in spending over and above anything that could be accounted for by inflation or growth in the economy. The Government are bundling together successive years' worth of inflation, adding them up in compound form and then comparing that with what we were committing to as a real terms pledge.

There was an interesting exchange between the hon. Member for Reading, West (Mr. Salter) and my hon. Friend the Member for Portsmouth, South (Mr. Hancock), who wanted to know the difference between moving on and breaking a manifesto promise. The difference comes down to whether one does more than one promised in a manifesto or less. We are saying that, in the light of the fact that growth in the economy has been much better since the election than we might have predicted at the time, it is only reasonable that people should be doing more than they said they would do in 1997. The Government are doing much less than they were going to do then and they are resorting to spin, confusion and trickery to put people off the trail.

I listened with great interest to the Secretary of State for Health when he introduced the finding of the NHS beds inquiry. Everyone knows that we have far fewer beds than we had years ago. We now have 95 per cent. bed usage, whereas 20 years ago, it was 75 per cent. During a winter crisis such as we have just had, the strains are all too clear to see. That inquiry compared the number of beds per head of the population here with the figures in every other civilised country, from which the Secretary of State concluded that Britain is making more efficient use of its beds than any other country. If I have ever heard new Labour spin, that is it. It is a fine way of explaining that we have far too few beds and that the situation here does not stand comparison internationally in any shape or form.

If we focus on the health service, many announcements have been made in just the past couple of weeks. One fifth of patients are waiting four hours or more in accident and emergency departments, and 57,000 operations were cancelled on the day last year. Those on in-patient waiting lists rose by 36,500 in January. In my region, the south-west, there are more people on in-patient waiting lists than when the Government took office. The Government's usual con is to try to pull the wool over people's eyes on the difference between out-patient and in-patient waiting lists. But for all the Government's trumpeted achievements, in the south-west there are more people on in-patient waiting lists than there were when the Labour party took office three years ago.

The number of people waiting more than 13 weeks for their first out-patient appointment—the true measure of how long people have to wait—has grown from 248,000 in March 1997 to 512,000 in March 1999, and those are the Department's own figures.

Returning to the efficient use of beds, it is worth remembering that each year in the national health service more than 100,000 people catch potentially fatal infections, 5,000 die of such infections and they are implicated in a further 15,000 deaths. That is the efficient use that we are making of beds in the NHS—we are pushing people through hospitals so quickly that the places are filthy and infections spread.

I have no doubt that that is a further example of the efficiency that the Secretary of State for Health will proclaim, but the cost to the NHS may be as high as £1 billion a year, according to the National Audit Office.

In the midst of confused recruitment policies, the bill for agency nurses stands at £344 million. It has increased from £264 million in one year—extraordinary growth for a completely unnecessary budget head.

During the national beds inquiry it was concluded that more intermediate care beds were needed, for example, in cottage hospitals. However, the Government have been going full steam ahead to close down such hospitals. Two have closed in Lincolnshire, two in Oxfordshire and two in Devon, including one in my constituency, which is theoretically still open, but when one visits one finds it closed—although it is still being paid for, heated, lit and cleaned. Once again, all that is being done in the name of efficiency.

People who go to hospital, or indeed to schools, see only too clearly that, for all the billions of pounds that the Government so lavishly trumpet as having been spent, there is not much improvement. Head teachers ask why the £19 billion for education is not reaching their schools. They are fed up with hearing: "Trust me, I'm a politician. The cheque's in the post. There'll be more money in your budget because the Government have allocated £19 billion." The fact of the matter is that head teachers can all see through that. It is no wonder that Labour Members are wriggling—they have not got away with the con on which they embarked at the start of this Parliament.

For all the Labour talk of fair funding, in education in particular the Government have not put right some of the grotesque geographical anomalies as between funding in different areas. It cannot be right for a primary child in Derby to be funded at £1,000 less than a primary pupil in Lambeth, or for there to be a gap of £1,370 per pupil between the best—Kensington and Chelsea—and the worst funded, Bradford. Even in two adjacent Labour-controlled London boroughs—Tower Hamlets and Hackney—there is a difference of £300 a head between secondary pupils. However, we hear that the Government are taking national initiatives: the national curriculum, national tests, national league tables, and inspection of schools according to a national framework.

Funding disparities that have become grotesque remain in place and the Deputy Prime Minister says that he intends to do nothing about it for three years. There is a distinct lack of equity, in addition to the lack of transparency to which I referred, in the Government's presentation figures.

I listened with interest to the contribution of the hon. Member for West Dorset (Mr. Letwin), who spoke for the Conservatives. I did not agree with his prescription, in particular for the health service, where the Conservatives seem determined to ensure a large increase in the number of people who take out private health insurance. I am not sure which of the three strategies that I can identify they will pursue. The first would be to compel everyone to do it; the second, to use taxpayers' money to bribe everyone to do it; and the third, merely to continue to run the health service as the Labour party is doing and to drive them to do it out of sheer desperation. It must be one of the three.

However, the one thing on which I did agree with the hon. Gentleman was that, unlike those on the Government Front Bench, he was ready and willing to accept the difference between cash-terms increases and real-terms increases. He had a different estimate from ours of what we would be able to afford out of economic growth, but at least he recognises the figures for what they are and has his own response.

Throughout the debate we have also heard from the Government that the Liberal Democrats make spending commitments, but never say from where the money will be paid. For goodness' sake, the point of today's debate is that we have tabled a motion to say exactly where one could get £2.6 billion for whichever public service one chooses. The Government are in power and they can decide which are the highest priorities. I have given examples of the state of the health service, and every hon. Member will appreciate the accuracy of my description of the situation in schools from visits that they have made to schools in their own constituencies. The Government will have to decide which matter to make their top priority. Can anyone really doubt that our public services require investment of £2.6 billion?

There is also absolutely no evidence that the public want a tax cut now—the very opposite is the case. All recent polls have produced the finding that 80 per cent. of the public would prefer that sum to be spent—now, in the coming year—on public services to a tax cut.

It is also interesting that, month after month, the Bank of England is having to increase interest rates, partly because of its great concern about a consumer spending spree. So how on earth could it make any sense whatever to put £2.6 billion into consumers' pockets? A tax cut makes no economic sense, the public does not want it, and an array of tasks in the public service are waiting to be done.

Labour Members made other untrue statements about the positions adopted by Liberal Democrats Members on various issues. It is absolutely nonsense to say, for example, that we opposed the minimum wage.

My hon. Friend the Member for Northavon (Mr. Webb) explained particularly accurately not only why we voted against the legislation introducing the working families tax credit, but why we have no objection whatever to the principle of it. The Paymaster General replied that, in the debate on the legislation, she had explained in great detail how the system would operate. Undoubtedly she did so, and did so very well. However, when the votes on the legislation were cast, they were cast simply on the system that it proposed as the method of payment. The Government themselves have now accepted that that system was a mistake. They have also said that they will make new payments by a different system.

The Paymaster General was therefore expressing the hope that, at the next general election, Liberal Democrat Members will be going round the country arguing for removal of the working families tax credit. She could not be more wrong about that. We have not opposed it in principle at all.

The Government are in a bit of a bind. They have a comprehensive spending review coming out in July, but the sum that that review will produce—which undoubtedly will be exaggerated, compounded, multiplied and goodness knows what else—will not be available before the general election, if it is held next spring. Their problem—assuming that opinion polls are still propitious for a general election next spring—is that, if they have only a four-year Parliament, and if the electorate examine the boiled-down, hard reality of the results of their year-on-year public expenditure increases, they will have barely achieved the public expenditure increases that the Conservatives achieved in their years in office.

If the Government manage to include a fifth year in this Parliament, they will manage to surpass by only a short nose the previous Government's achievements in public expenditure increases. On current expenditure, however, the Government will struggle even to be able to boast that.

Mr. Matthew Taylor

It shows.

Mr. Harvey

It does show; it shows in all the public services. I have already discussed health at length, and mentioned the problems in education. Other Liberal Democrat Members talked about transport, which is another issue on which the public—in opinion polling and, as all hon. Members will know, based on anecdotal evidence—are grossly dissatisfied. The public believe that transport has become appreciably worse since the general election. Although they are disappointed that there has not been more progress in many other spheres, they believe that transport has become worse.

There we have it: a Budget coming up; an opportunity to reverse a £2.6 billion tax cut that people do not want and for which there is no economic justification; an opportunity to put money into any of the public services that the Government choose: and Liberal Democrats saying where the money should come from. The Government are not so much guilty of having made exaggerated claims at the previous general election—the promises that they made were very modest: progress in health, in education and for pensioners—as of proposing to deliver a tax cut. They never said that they were going to do that. People did not want it then and they do not want it now. The Government will be judged on polling day not on the tax cut that people did not want, but on the state of hospitals, schools and the pension. On their record so far, I am certain that they will be deemed to have failed on all three.

9.45 pm

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

The Government's vision for the public services rests on the new foundation that we have built—the new platform of stability in our economy that is almost without precedent in our history. What a contrast that is with the position that we inherited after the general election. The Tory legacy was £28 billion of debt after 18 years of boom and bust. We have turned that round. The Conservatives said that we could not do it, but we have. The Tories tried and failed, but we have succeeded. Our challenge now is to lock in that new stability for good so that we can build on it for the long term. We are determined to do that.

That is why my right hon. Friend the Chancellor was able to set out with optimism in November's pre-Budget report our new ambitions for the coming decade. We should be catching up on productivity with our major competitors after decades of slipping behind under the Tories. We should have a higher proportion of people in work than ever before. After less than three years of this Government, we have more people in work in Britain than we have ever had, but we are aiming even higher to achieve the highest proportion ever, and to do so on a durable basis.

We want to halve the number of children in poverty in the next decade, on the way to achieving my right hon. Friend the Prime Minister's target of the abolition of child poverty within 20 years. Another aim is that, for the first time, more than half of our school leavers should go on to study for a degree.

All those ambitions are achievable if we lock in the new-found stability and build on it for the long term, as we are determined to do. We cannot afford to abandon swathes of our people, as the previous Government did. Younger people and older people were dumped on the scrap heap when they could have been providing for themselves and contributing to the economy. We are building a fair society with employment opportunity for all, where everybody has the chance to develop to their full potential and nobody is left out.

Mr. Letwin

The hon. Gentleman is customarily courteous in giving way. On a matter of genuine interest, will he tell me whether he believes that he and his colleagues have abolished the economic cycle?

Mr. Timms

I am glad that the hon. Gentleman has asked me that, because I wanted to ask him about the economic cycle. We have had an interesting debate— much more interesting than the one that he and I participated in during the early hours of this morning, together with some of my right hon. and hon. Friends. I was interested in the hon. Gentleman's presentation of his party's tax guarantee and the mechanics of how it would work—setting aside cyclical effects, as he added in an aside.

That brings us to the point that the hon. Gentleman has just put to me. What about the cycle? The right hon. Member for Huntingdon (Mr. Major), the former Prime Minister, will have made the calculation that the hon. Gentleman put to the House during the debate. It may have been made with the advice of the hon. Gentleman—I do not know what his role was in the 1992 election campaign. On that basis, the former Prime Minister promised that there would be no tax increases under his Government. That is the same basis that the hon. Gentleman has spelled out in the debate. Within a few months of that promise being made, we had 22 Tory tax rises. The failure to achieve stability in the economy caused a huge problem for the previous Government. Our success in securing stability over the past three years has made all the difference and allows us to plan for the future with confidence.

Mr. Letwin

rose—

Mr. Timms

I shall not give way again, because I want to make progress. I am encouraged by the article in The Times on 10 February about the Tory tax guarantee, which said: Mr. Portillo's economic team is working on proposals to make the guarantee more believable. We look forward to hearing those proposals. No doubt we shall return to the subject before too long.

My hon. Friend the Member for Reading, West (Mr. Salter) made a telling contribution, for which we were grateful. He pointed out the reality of what often happens with Liberal Democrat administrations. My hon. Friend the Member for Reading, West, along with other hon. Friends who spoke in the debate, pointed out that Liberal Democrat representatives take entirely contradictory positions in different parts of the country. Their sums frequently do not add up—my hon. Friend is absolutely right on that score.

The hon. Member for Portsmouth, South (Mr. Hancock) also made an interesting contribution. He said that people cannot wait for doctors to be trained. Well, new doctors have to be trained, and that is what we are doing. It is a necessity when it comes to improving the health service. The hon. Gentleman was right to say that it takes time. There is no short cut, however—we want high-quality staff in the health service and we are taking steps to ensure that we get them.

The hon. Gentleman also criticised the Government's programme of hospital building. I do not agree one jot, and I do not believe that the country does. We have the biggest hospital-building programme in the history of the national health service, and that is what the people of this country want.

The hon. Gentleman made a very interesting point—one of the most telling contributions to the debate, in fact—when he told us that his party had moved on since its manifesto. We will deliver on all the commitments in our election manifesto, and that is what we are doing.

Mr. Hancock

The Minister is extremely courteous in giving way, despite being on dodgy ground. I am not against building hospitals—I just think that they should be built the right way. Is the hon. Gentleman seriously saying that private finance initiatives are the best and only way that we can build the hospitals that we need?

Mr. Timms

I am glad that the hon. Gentleman is hedging on what he said before. The PFI is a very successful mechanism, which is why we have secured the biggest hospital-building programme in the history of the health service.

Our commitments are to economic stability and sustainable public finances. That is what has provided us with a foundation for two hugely significant programmes, modernising our public services and integrating tax and benefits. On public services, which we have said a lot about in the debate, the new stability has allowed us to make record extra investments in our public services, including the additional £40 billion for improvements in health and education provision. That is new investment for the future, reflecting our priorities and the nation's priorities, to build a modern Britain and a decent society. It is far in excess of anything that was promised by the Liberal Democrats' manifesto, even though they have since moved on from it.

Health spending is improving every year. There are real-terms increases of 5 per cent. every year of the comprehensive spending review. Spending on health is now 10 per cent. higher in real terms than it was in 1997. We are building more than 30 new hospitals, the biggest hospital-building programme ever. We have introduced modern delivery channels, such as NHS Direct and walk-in clinics, and we have set up the National Institute for Clinical Excellence to take the lottery element out of health care. Every accident and emergency unit in the country that needs it is being upgraded. We are employing more nurses and doctors. There is an immense programme of investment and improvement in the health service. People using the health service and working in it would not recognise the grim picture painted by the hon. Member for North Devon (Mr. Harvey).

On schools, with our 16 per cent. real-terms increase over three years, we are getting 6,000 more teachers into schools and 800,000 more students into further and higher education. We are modernising 15,000 schools with extra money from the new deal and connecting every primary and secondary school to the internet. This is very telling: in 1997, barely one school in 10 was connected to the internet. Now two thirds of them are, the highest figure in any G7 country. The number of primary schools connected has increased fourfold just in the past year. By 2002, every school in the country will be connected to the internet. That is the scale of our commitment, and we are delivering on public services.

On tax and benefit reforms, we are cutting the taxes of hard-working families across the country and making work pay so that it pays to do the right thing and get a job. Too often in the past, people have faced unemployment traps and poverty traps. The Tories built them into the system; we are designing them out. Our policies are tackling those problems; we are raising the incentives to do the right thing and building a fairer society, with employment opportunity for all.

The national minimum wage—the first in our history—was opposed by the Liberal Democrats. It is boosting the hourly wage of 1.7 million low-paid workers and helping to ensure that it is worth their while to be in work.

We have introduced income tax reforms; the 10p starting rate and the cut in the basic rate increase the rewards for work, especially for the low-paid. That is our priority and it is right. We are improving incentives for work.

National insurance contributions are being reformed to lift the burden on the low-paid and on employers. The working families tax credit is helping to make work pay for about 1.4 million working families—giving them, on average, £24 a week more than they would have received under family credit.

Together, those reforms are guaranteeing a minimum income of £200 a week for families with a full-time earner. No family earning less than £235 a week—that is about £12,000 a year—will pay net income tax.

That is why the unemployment total has been falling month after month. The claimant count is down 30 per cent. The employment rate in the UK is now higher than in almost any other OECD country. We have a strong economy and there are vacancies in every region of the country. Work incentives are being sorted out. People are able at last to move off welfare and into work.

The new deal was opposed by the Tories; the financing mechanism for it was opposed by the Liberal Democrats, as they confirmed today. The new deal focuses on helping our youngsters to build the future that the Tories always denied them. Long-term youth unemployment—of more than six months' duration—has fallen by a staggering 70 per cent. since the election. It is lower now than it was at any time under the Tories. If any Tories were in the Chamber, they should be listening—as should the Liberal Democrats—because they opposed the policies which made that fall possible. Of course, youth unemployment is lower than it was during the Tory busts, but it is also lower than it was in any of their booms—lower than at any point during the 18 years of Tory government.

Tens of thousands of young people who, in the past, would have been dumped on the dole for years—quite often for ever—have now been given a hope for the future. They are able to get used to the idea of going out to work every day, and have been given the chance to build a decent life for themselves and for their families.

Julie Haydock is from my area in East London, which my right hon. Friend the Chancellor visited yesterday. After 15 years of unemployment, she is now in a job thanks to the Government's initiatives. She was quoted in a newspaper today. She said that she has a new sense of self esteem. She is speaking for thousands.

We have not finished yet. There is more to do. As my hon. Friend the Paymaster General said, there is more help to come for unemployed people so that they can make the most of the opportunities that our economy is creating. About 1.25 million people are being lifted out of poverty by our reforms—800,000 of them children. We are building the fairer and more modern society that we all want to see.

Nearly three years ago, we inherited a pattern of large budget deficits, a steeply rising burden of public debt and massive neglect of public services and public investment. At present, we are delivering what Britain has been crying out for years. After the cynicism of the past, there is a new conviction that we can change things for the better in our nation and in our time. Our ambitions—the nation's ambitions—are for enterprise and fairness and for a decent and modern Britain. Those are no longer hopeless pipe dreams; they are being delivered in every part of the country.

Of course, there is more to be done, and in the coming weeks, in visits to every region of the country and then in the Budget, we shall be setting out the next steps in our programme. There will be more jobs; more opportunities; better services and a better future. That is our pledge and we are going to keep on delivering it.

Question put, That the original words stand part of the Question:—

The House divided: Ayes 39, Noes 280.

Division No. 93]	[9.59 pm
AYES
Allan, Richard	Keetch, Paul
Ashdown, Rt Hon Paddy	Kennedy, Rt Hon Charles (Ross Skye & Inverness W)
Baker, Norman
Ballard, Jackie	Kirkwood, Archy
Beith, Rt Hon A J	Livsey, Richard
Bell, Martin (Tatton)	Maclennan, Rt Hon Robert
Brand, Dr Peter	Michie, Mrs Ray (Argyll & Bute)
Bruce, Malcolm (Gordon)	Moore, Michael
Burnett, John	Oaten, Mark
Burstow, Paul	Öpik, Lembit
Campbell, Rt Hon Menzies (NE Fife)	Rendal, David
	Russell, Bob (Colchester)
	Sanders, Adrian
Cotter, Brian	Stunell, Andrew
Davey, Edward (Kingston)	Taylor, Matthew (Truro)
Feam, Ronnie	Thomas, Simon (Ceredigion)
Foster, Don (Bath)	Tonge, Dr Jenny
George, Andrew (St Ives)	Tyler, Paul
Hancock, Mike	Webb, Steve
Harris, Dr Evan
Harvey, Nick	Tellers for the Ayes:
Heath, David (Somerton & Frome)	Sir Robert Smith and
Hughes, Simon (Southwark N)	Mr. Tom Brake.

NOES
Ainger, Nick	Burden, Richard
Ainsworth, Robert (Cov'try NE)	Burgon, Colin
Alexander, Douglas	Butler, Mrs Christine
Allen, Graham	Byers, Rt Hon Stephen
Anderson, Donald (Swansea E)	Caborn, Rt Hon Richard
Anderson, Janet (Rossendale)	Campbell, Mrs Anne (C'bridge)
Armstrong, Rt Hon Ms Hilary	Campbell, Ronnie (Blyth V)
Ashton, Joe	Campbell-Savours, Dale
Austin, John	Cann, Jamie
Banks, Tony	Caplin, Ivor
Barnes, Harry	Casale, Roger
Bayley, Hugh	Caton, Martin
Beard, Nigel	Cawsey, Ian
Begg, Miss Anne	Chapman, Ben (Wirral S)
Benn, Hilary (Leeds C)	Chaytor, David
Bennett, Andrew F	Clapham, Michael
Benton, Joe	Clark, Rt Hon Dr David (S Shields)
Bermingham, Gerald	Clark, Dr Lynda (Edinburgh Pentlands)
Berry, Roger
Best, Harold	Clark, Paul (Gillingham)
Blizzard, Bob	Clarke, Charles (Norwich S)
Blunkett, Rt Hon David	Clarke, Rt Hon Tom (Coatbridge)
Boateng, Rt Hon Paul	Clarke, Tony (Northampton S)
Borrow, David	Clelland, David
Bradley, Keith (Withington)	Clwyd, Ann
Bradley, Peter (The Wrekin)	Coaker, Vernon
Bradshaw, Ben	Coffey, Ms Ann
Brown, Rt Hon Nick (Newcastle E)	Coleman, Iain
Brown, Russell (Dumfries)	Colman, Tony
Browne, Desmond	Connarty, Michael
Buck, Ms Karen	Cooper, Yvette

Corbett, Robin	Hutton, John
Corbyn, Jeremy	Iddon, Dr Brian
Corston, Jean	Jackson, Ms Glenda (Hampstead)
Cousins, Jim	Jackson, Helen (Hillsborough)
Cox, Tom	Jamieson, David
Cranston, Ross	Jenkins, Brian
Crausby, David	Jones, Mrs Fiona (Newark)
Cryer, Mrs Ann (Keighley)	Jones, Helen (Warrington N)
Cryer, John (Hornchurch)	Jones, Ms Jenny (Wolverh'ton SW)
Cummings, John
Cunningham, Jim (Cov'try S)	Jones, Jon Owen (Cardiff C)
Dalyell, Tam	Jones, Dr Lynne (Selly Oak)
Darling, Rt Hon Alistair	Jones, Martyn (Clwyd S)
Darvill, Keith	Jowell, Rt Hon Ms Tessa
Davey, Valerie (Bristol W)	Kaufman, Rt Hon Gerald
Davidson, Ian	Keen, Alan (Feltham & Heston)
Davies, Rt Hon Denzil (Llanelli)	Kemp, Fraser
Dawson, Hilton	Kennedy, Jane (Wavertree)
Denham, John	Kidney, David
Dismore, Andrew	Kilfoyle, Peter
Dobbin, Jim	King, Andy (Rugby & Kenilworth)
Donohoe, Brian H	Kumar, Dr Ashok
Doran, Frank	Ladyman, Dr Stephen
Dowd, Jim	Laxton, Bob
Drew, David	Lewis, Ivan (Bury S)
Eagle, Angela (Wallasey)	Linton, Martin
Eagle, Maria (L'pool Garston)	Lloyd, Tony (Manchester C)
Efford, Clive	Lock, David
Ellman, Mrs Louise	Love, Andrew
Ennis, Jeff	McCafferty, Ms Chris
Etherington, Bill	Macdonald, Calum
Fisher, Mark	McDonnell, John
Fitzpatrick, Jim	Mackinlay, Andrew
Fitzsimons, Lorna	McNulty, Tony
Flint, Caroline	MacShane, Denis
Flynn, Paul	Mactaggart, Fiona
Follett, Barbara	McWalter, Tony
Foster, Rt Hon Derek	McWilliam, John
Foster, Michael Jabez (Hastings)	Mahon, Mrs Alice
Foster, Michael J (Worcester)	Mallaber, Judy
Foulkes, George	Marsden, Gordon (Blackpool S)
George, Bruce (Walsall S)	Marsden, Paul (Shrewsbury)
Gerrard, Neil	Marshall, David (Shettleston)
Gibson, Dr Ian	Marshall, Jim (Leicester S)
Godman, Dr Norman A	Martlew, Eric
Godsiff, Roger	Maxton, John
Goggins, Paul	Meacher, Rt Hon Michael
Golding, Mrs Llin	Meale, Alan
Gordon, Mrs Eileen	Merron, Gillian
Griffiths, Jane (Reading E)	Michie, Bill (Shef'ld Heeley)
Griffiths, Nigel (Edinburgh S)	Miller, Andrew
Grocott, Bruce	Mitchell, Austin
Gunnell, John	Moffatt, Laura
Hain, Peter	Moonie, Dr Lewis
Hall, Patrick (Bedford)	Morgan, Ms Julie (Cardiff N)
Hamilton, Fabian (Leeds NE)	Morgan, Rhodri (Cardiff W)
Hanson, David	Morley, Elliot
Heal, Mrs Sylvia	Morris, Rt Hon Ms Estelle (B'ham Yardley)
Henderson, Doug (Newcastle N)
Henderson, Ivan (Harwich)	Mountford, Kali
Hepburn, Stephen	Mullin, Chris
Heppell, John	Murphy, Denis (Wansbeck)
Hewitt, Ms Patricia	Murphy, Rt Hon Paul (Torfaen)
Hill, Keith	Naysmith, Dr Doug
Hinchliffe, David	O'Hara, Eddie
Hodge, Ms Margaret	Olner, Bill
Hoey, Kate	Organ, Mrs Diana
Hood, Jimmy	Palmer, Dr Nick
Hoon, Rt Hon Geoffrey	Pearson, Ian
Hope, Phil	Pickthall, Colin
Hopkins, Kelvin	Pike, Peter L
Hoyle, Lindsay	Plaskitt, James
Hughes, Ms Beverley (Stretford)	Pollard, Kerry
Hughes, Kevin (Doncaster N)	Pond, Chris
Humble, Mrs Joan	Pope, Greg
Hurst, Alan	Pound, Stephen

Powell, Sir Raymond	Stringer, Graham
Prentice, Ms Bridget (Lewisham E)	Sutcliffe, Gerry
Prentice, Gordon (Pendle)	Taylor, Rt Hon Mrs Ann (Dewsbury)
Primarolo, Dawn
Prosser, Gwyn	Taylor, David (NW Leics)
Purchase, Ken	Thomas, Gareth (Clwyd W)
Radice, Rt Hon Giles	Timms, Stephen
Rammell, Bill	Tipping, Paddy
Rapson, Syd	Todd, Mark
Raynsford, Nick	Touhig, Don
Reed, Andrew (Loughborough)	Trickett, Jon
Roche, Mrs Barbara	Turner, Dr Desmond (Kemptown)
Ross, Ernie (Dundee W)	Turner, Neil (Wigan)
Rowlands, Ted	Twigg, Derek (Halton)
Ruane, Chris	Tynan, Bill
Ruddock, Joan	Vis, Dr Rudi
Russell, Ms Christine (Chester)	Walley, Ms Joan
Salter, Martin	Watts, David
Sarwar, Mohammad	Wicks, Malcolm
Sawford, Phil	Williams, Rt Hon Alan (Swansea W)
Sedgemore, Brian
Sheerman, Barry	Williams, Mrs Betty (Conwy)
Skinner, Dennis	Wills, Michael
Smith, Rt Hon Andrew (Oxford E)	Wilson, Brian
Smith, Angela (Basildon)	Winnick, David
Smith, Rt Hon Chris (Islington S)	Winterton, Ms Rosie (Doncaster C)
Smith, Miss Geraldine (Morecambe & Lunesdale)	Wise, Audrey
	Woodward, Shaun
Smith, Jacqui (Redditch)	Woolas, Phil
Smith, Llew (Blaenau Gwent)	Worthington, Tony
Snape, Peter	Wray, James
Soley, Clive	Wright, Anthony D (Gt Yarmouth)
Starkey, Dr Phyllis	Wright, Dr Tony (Cannock)
Steinberg, Gerry	Wyatt, Derek
Stewart, David (Inverness E)
Stewart, Ian (Eccles)	Tellers for the Noes:
Stinchcombe, Paul	Mr. Clive Betts and
Strang, Rt Hon Dr Gavin	Mrs.Anne McGuire.

Question accordingly negatived.

Question, That the proposed words be there added, put forthwith, pursuant to Standing Order No. 31 (Questions on amendments) and agreed to.

MR. DEPUTY SPEAKER forthwith declared the main Question, as amended, to be agreed to.

Resolved, That this House welcomes the fact that the Government is making work pay and cutting taxes for hard-working families; welcomes the fact that, as a result, the tax rate on a typical family will be cut to its lowest level since 1972, and that, on average, families with children will be £740 a year better off; notes that the Liberal Democrats oppose the measures that made this possible, including the Working Families Tax Credit; further welcomes the fact that the Government is making record extra investment in public services, including an extra £40 billion in health and education; notes that this is far in excess of anything promised by the Liberal Democrats at the time of the last General Election; and notes the reckless and uncosted spending commitments made by the Liberal Democrats, which they have no idea how to pay for and which would take Britain back to Tory boom and bust.