HC Deb 22 March 2000 vol 346 cc1000-83 4.34 pm
Dr. Liam Fox (Woodspring)

I would like to begin by asking those on the Treasury Bench to clarify a point that the Prime Minister made in his statement to the House. The right hon. Gentleman said that by 2003–04, national health spending will have risen to 7.6 per cent. of gross domestic product. 1 hope that the Secretary of State for Health and his team will correct that figure, which relates to total health care spending, not NHS spending. The House of Commons Library and the King's Fund have both independently confirmed that the figure that the Prime Minister gave the House was wrong. I hope that a Member of the Treasury Bench will have that corrected as soon as possible.

I welcome the plans for increased expenditure on the national health service. I do so as the shadow Health Secretary, as a doctor and as a user of the NHS. When people who use the NHS and those who work in it opened their newspapers this morning, they will have felt that their prayers had been answered and that everything would be rosy from now on. No doubt people had the same feeling when they woke up on the morning after the Government were elected, saying that they would save the NHS within 24 hours. However, people found that their hopes were cruelly dashed in the following months.

Those people experienced the same euphoria when the Chancellor announced extra funding of £21 billion for the NHS in 1998, only to find their hopes dashed once again as the figure was constantly reduced. We have now been marched up the hill of raised expectations for the third time.

It is a sign of the panic in Downing Street at the Government's low poll ratings on health and the dissatisfaction expressed by the public that the Prime Minister felt he had to come to the House to give us a statement of complete waffle, while the Secretary of State for Health sat, demoted, alongside. The Government now have a timetable of four months in which to think about how they ought to be running the NHS, even though Labour had 18 years in opposition to think about that, and they have now been in government for three years. It seems that the Treasury has come up with the money, so the rest of the Government are trying to work out how to spend it.

That is a sad indictment of how much effort the Government have devoted to the matter. Indeed, it is no more than justice after the sloganising in which they engaged before the general election. We are now told that the £21 billion was not £21 billion—it has come down quite a way. People could rightly be forgiven for asking what difference yesterday's £2 billion would make, if the £21 billion announced two years ago made no difference to the health care that they currently experience. They might wonder whether all was as it seems, given the fact that if one shakes hands with the Chancellor, one has to count one's fingers afterwards.

Mr. Michael Fabricant (Lichfield)

My hon. Friend talks about the sad indictment of the Government. Is not the greatest indictment the fact that when I and others asked the Prime Minister at Question Time whether, with all that extra money, he would intervene to prevent closures, he said no? He said that he could not intervene; there was nothing he could do about the matter.

Dr. Fox

My hon. Friend should not expect too much. In his statement, the Prime Minister made it clear that when hospitals open, the Government have to take credit for our hospital building programme, but that when they close, Ministers must not micro-manage the system. It seems that it is all right for Ministers to take credit when things are going well, but when things go wrong it is nothing to do with them.

When we consider extra allocations to the NHS, we need to ask whether further costs will have to be met that would not have been covered otherwise. The answer is yes, there are. There is the non-funding of the pay award by the Government. That will now have to be met from any extra allocation made to the NHS. There is the working time directive. Prescription budgets in primary care are rising by about 11 per cent. this year. There are the structural deficits, of which I shall say more in a moment. There are superannuation costs; the cost of reducing the hours of junior doctors; and capital charges excess. All those costs put an extra burden on the service, but none of them are recognised when those headline allocations are announced. It is down to those who have to make the tough decisions to carry the can for those costs. Ministers should take direct responsibility for many of those decisions.

There is constant reannouncing. Yesterday, the Chancellor said that there was an extra £2 billion, but it was not immediately apparent to everybody that that amount included the £300 million from tobacco tax announced last year. Many people—including many commentators in today's media—thought that the £2 billion was on top of that amount.

The Government announced yesterday that they wanted 10,000 extra nurses. However, the Royal College of Nursing helpfully pointed out that the Government had previously said that they wanted to recruit 15,000 more nurses. Yesterday's announcement was not new; it continued the Government's existing intentions on nurse recruitment. When the Secretary of State replies, will he tell us over what time scale the new nurses will be recruited? Are they 10,000 whole-time equivalents—that is, full-time nurse posts—or are they 10,000 nurses in total with some working part-time? If the answer is 10,000 nurses in total, how many whole-time equivalent posts do the Government intend them to fill?

Mr. Crispin Blunt (Reigate)

Is my hon. Friend able to throw any light on the £300 million to be raised from tobacco excise duties? When referring to further developments in tobacco excise duties, the Red Book states: Thereafter, excise duties fall slightly as a proportion of GDP largely reflecting the relatively slow growth in the demand for excise goods. The tobacco forecast takes into account the impact on revenues of the direct effects of additional anti-smuggling measures, including the deterrent effects of fiscal marks that will be announced today. As we do not know whether the anti-smuggling measures will work, is that £300 million guaranteed for the health service or does it require the anti-smuggling measures to work?

Dr. Fox

My understanding is that the £300 million depends on the Government succeeding in raising the revenue and making it available to the NHS. I hope that the anti-smuggling measures will work, but if they do not, that money will not be available to the NHS. By a slight irony, if people decide to stop smoking as a result of the 25p-a-packet rise, less money will be available to the NHS. However, I am sure that the Secretary of State has already made the appropriate judgment on whether that would be advisable. I hope that people stop smoking and that the tax rises will dissuade them from smoking.

Mr. Peter Bradley (The Wrekin)

In a sense, the hon. Gentleman has anticipated the point that I wanted to make. Would it not be extremely welcome and be a saving to the NHS if people gave up smoking? The £300 million that would otherwise go towards treating the many respiratory diseases that are brought on by smoking could be saved.

Dr. Fox

It would be nice if the world was as simple as some of the points raised in the House, but it is not quite like that. As the hon. Gentleman knows, those who require treatment for smoking-related illnesses are already out there. Although some may have a reduced morbidity as a result of giving up smoking, many will not and they will continue to cost the NHS large sums of money. Let us hope that, in the years to come, the people who give up smoking as a result of either price increases or better education will reduce the burden on the NHS and the far greater human cost that is associated with smoking-related illnesses.

If the Secretary of State is to provide answers to my questions about nurses, will he also tell us how many of the 10,000 nurses will be taken on to fill existing vacancies and how many will be taken on to fill new posts and new roles as part of whatever modernisation proposals the Government intend to introduce? When the Government consider the priorities, they should consider an important point made by the Royal College of Nursing yesterday. The priorities must include long-term care, to which I shall refer shortly, primary care and improving the essentials of care—dignity, hygiene, nutrition and privacy. They are much more difficult to quantify when we do business, but they are extraordinarily important for patients.

I mentioned the fact that the Prime Minister had given us the wrong level of NHS funding as a proportion of GDP, and I wonder whether Ministers have had time to confirm that so that they will not allow him unintentionally to mislead the House. However, if we are moving towards the level of funding in the European Union, we have to move towards the level that our European partners spend. They currently spend about 9.1 per cent. of GDP on health compared with rather less in the United Kingdom. The figure for the EU comes down when the United Kingdom is added in, but the irony is that the figure will keep increasing as long as we increase the proportion of GDP that we spend on health. It becomes an ever more difficult target to chase.

I urge my right hon. and hon. Friends not to be churlish. If we are getting a large increase in funding over a period and if it is spent wisely, it will undoubtedly help to move the United Kingdom's health outcomes closer to those of the countries that we might expect to have similar outcomes. The Government's figure of 6.4 per cent. for the NHS by 2003–04 would require a 20 per cent. increase in the private sector's spend to bring it up to the figure of 7.6 per cent. that the Prime Minister used this afternoon. It would require the NHS and the private sector to work in partnership and both to expand if we are to approach European levels.

We are not fundamentally different from any other country. If we want our total expenditure on health to rise to the levels found in countries with similar economies to our own, we will require growth in both the state sector, over which the Government have control, and the independent sector, over which they have less control but which can, none the less, encourage those who can afford to do so to relieve pressure on the NHS. I think that people increasingly understand that. That is why 160,000 people bought care outside the NHS last year. I hope that we can find constructive ways of making it possible for those who wish to use more of their post-taxation income to buy care to do so more cheaply. In that way, choice in health care will be not only for those who have large savings, the wealthy or those who would pauperise themselves by using all their life savings.

Mr. Geraint Davies (Croydon, Central)


Dr. Fox

I give way to the hon. Gentleman, as he always attends health debates.

Mr. Davies

Will the hon. Gentleman confirm that the Conservative party is committed to matching the expenditure forecast for health that my right hon. Friend the Chancellor laid out yesterday, and, by the sound of it, perhaps to doing even more? What rebalancing would take place between private sector and public sector health provision? The hon. Gentleman makes great play of the need for a partnership, and it sounds as if there would be at least some privatisation. How much? Would it be half?

Dr. Fox

I am extremely pleased to say that we welcome unambiguously the rise in health spending and it would be matched by an incoming Conservative Government. Private sector provision does not have to be instead of public sector provision. We are talking about additionality. We have agreed to match the expenditure that the Government propose and we want to see measures to encourage additional private sector care. That will help us bring our total expenditure up to the same limits as in other countries. Those measures would be on top of what the NHS spends.

We have a great opportunity in Britain. We have a well-developed state model in the NHS system—better than that in most other countries in Europe. We also have a creative private sector in financial services. One of the problems that we face is that many of the products available for personal private health care are too expensive and inflexible. We need a large change in the quantity and quality of many of the products that are available. Otherwise, individuals will not purchase them and we will not achieve an expansion in the number of individuals who purchase private sector care. That is an important point. Changes in the independent sector as radical as those in pensions in the early 1980s will be required if we are to achieve the growth that I should like to see to complement the growth in the state sector, which we have already announced we would match.

Mr. Davies

I seek clarification. The hon. Gentleman seems to be saying that he will match pound for pound all the public sector investment that we have promised and beat the global total by a significant amount through extra private provision. Is that his pledge for the election?

Dr. Fox

A member of the Labour party has understood that it is possible, by increasing private sector expenditure and state sector expenditure, to achieve a total increase in the health care that is available.

If we are to reach the European average for total health care spending, on the Government's figures for 2003–04, it would be necessary effectively to double the size of the private sector in the United Kingdom. That is a tall order, given what is currently available. I should therefore like to see dramatic and radical changes in what is offered by the private sector in Britain. I hope that it will rise to the challenge, as it has in many other sectors. There is a chance to combine the excellence of most of the NHS and the creativity of the financial services sector. That could give us the best of both worlds. I hope that that is a challenge to which the private sector can rise and which any changes in the NHS can help us to meet.

Mr. Ivan Lewis (Bury, South)

Can the hon. Gentleman explain to the House the consequences of expansion of the private health care sector for the time of doctors, nurses and other essential professionals? We all acknowledge that there is a shortage of them. If there was a significant expansion in the private sector, less of those professionals' time would be available to the NHS.

Can the hon. Gentleman also explain, if we are so far behind the average expenditure of other European—

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

Order. The hon. Gentleman cannot make a speech at this stage—perhaps later.

Dr. Fox

None the less, the first part of the litany contained an important point. It is rather odd that Labour Members should say that it is possible to achieve a 6.1 per cent. increase in real terms in NHS provision without putting a strain on the supply of doctors and nurses, or that it would be possible to bring in more, while saying that it is not possible to achieve a 1.2 per cent. increase overall in the private sector without putting a strain on the supply. Both those assertions cannot be right. As the Government have acknowledged by their efforts to bring nurses back into nursing, there are many trained professionals who do not currently work in the system. A lot of GPs take early retirement, as do many consultants—indeed, the so-called leakage of consultants taking early retirement is greater than the increase in the number of medical students sought under the Government's recent plans.

Mr. Lewis

I seek clarification. Up until this week, Britain's spend on health care was considerably below the European average. What does it say about 18 years of Tory Government that we find ourselves so far down the league table of health expenditure? How can a tax guarantee that taxes will always fall under a Tory Government co-exist alongside a promise of massive expenditure on health care being honoured? The two pledges are contradictory.

Dr. Fox

That will teach me to be charitable. The hon. Gentleman is right to say that we have spent less than the European average. For his information, we were overtaken by the then Common Market average spend in 1963 and we have remained behind every year since—I am sure that I do not have to remind him that the Conservatives were not in office throughout that period.

I do not pretend that we are spending enough. I came to the House of Commons having spent all of my working life in the NHS. I want the NHS to be improved and I have no problem saying that it would have been nice if we had spent more over the years. I am keen to look to the future and to ensure that we achieve an improvement in this country's health care, in both the state and private sectors. To be frank, I do not care where health care comes from; I just want more health care. I want better and more health care for more patients more quickly and more treatments provided as they become available. That is a perfectly simple desire that is shared by most people in this country.

I have no problem saying that the Conservatives did not do everything perfectly, or that we got things wrong. However, it is entirely possible to achieve an overall reduction in taxation at the same time as an increase in expenditure on health—that is what happened in the 1980s. In the Red Book published yesterday, the Government say that the overall tax burden will fall slightly in the middle of the next Parliament, at the same time as they increase health expenditure by 6.1 per cent. in real terms. The Government cannot have it both ways: if it is possible for the tax burden to fall and expenditure to rise under a Labour Government, it is, by definition, possible. Let us have no more such distortions.

We have a great opportunity, but, when it comes to improving health care, it is not only money that counts but how that money is spent. Outside, there is growing disbelief and an unwillingness to listen when politicians throw around figures and the Government talk about £X billion extra being spent; people want to see how the spending affects them, their local hospital and their local health authority.

That point was today well put by the King's Fund, which describes the extra money provided by the Government as a "good sum", but warns the Government against frittering it away on centrally organised grant schemes. It says: The NHS needs to be able to spend this on the things that matter most. These are primary care, good medical care for the elderly and good mental health. While this is a nice amount of money, the question is how the NHS is allowed to use it. That question is central.

The Secretary of State for Education and Employment appears to understand the need to get money directly to schools, and we welcome that; so why has the Prime Minister told us today that the Secretary of State for Health will announce only £660,000 of the £2 billion to be provided, and that there will be strings attached to the money? As the Prime Minister says, it is not up to the Government to micro-manage the service, because politicians cannot second-guess what happens at local level. I hope that the Government will not continue increasingly to centralise every possible decision and so remove from trusts, health authorities and, more important, doctors the power to take decisions. The result of imposing political priorities is the distortion of clinical priorities.

After financing and the trend towards centralisation, the next important issue to raise is the politicisation of the culture of running the service. The report from Dame Rennie Fritchie published today provides a damning indictment of the way in which the Government culture now runs throughout every part our public service, as they appoint every placeman possible. It will come as some disappointment, to say the very least, to many people that as a result of the placing of Labour party activists everywhere, a large proportion of the extra money being poured into the NHS will go into the pockets of Labour party activists who just happen to be lucky enough to have their noses in Labour's NHS trough.

Of appointees who were politically active in 1995, 8.9 per cent. were Conservative and 7.6 per cent. were Labour. By 1998, of those who were politically active, 77.7 per cent. were Labour party activists. That is a disgusting distortion of the system.

Dame Rennie Fritchie stated that appointments were being politicised in a systematic way. She continued: The Secretary of State sets the tone for the process. The principles in her code of practice have been or risk being breached in both their letter and their spirit. What counts is not what appointees do for the NHS, but what they have done for the Labour party.

It is interesting that in the Prime Minister's constituency, Sedgefield, there was an appointment to South Durham NHS trust. He was the bar manager at the local Labour club, but I suppose that unlike many other appointees, at least he had some business experience, and he probably would have been able to arrange the proverbial in a brewery.

Mrs. Virginia Bottomley (South-West Surrey)

Is it not particularly deplorable that whereas the appointment process was essentially endorsed by the Nolan report with the establishment of independent scrutiny, Dame Rennie reports that recommendations from Members of Parliament and often from local authorities were allowed to bypass the independent scrutiny that had been established?

Dr. Fox

Indeed, my right hon. Friend is correct. That is one of the most worrying aspects of the culture of cronyism, which pervades not only central Government, but increasingly local government and every arm that Government touch. I hope that when the Secretary of State replies, he will give us specific assurances that that will stop, and that he will shortly meet Dame Rennie Fritchie to discuss the allegations and the solutions that she proposes.

Many of us in the Opposition were shocked at the way in which the Prime Minister brushed off serious allegations about probity and potential conflicts of interest that Dame Rennie Fritchie identified so well in her excellent report.

Mr. Giles Radice (North Durham)

You did the same when you were in office.

Dr. Fox

As I have already shown, the previous survey carried out in 1995-96 demonstrated that that was not true. There is a culture of rottenness, corruptness and cronyism that pervades this Administration, which has never pervaded any previous British Administration. They attempt to manipulate and control at every level of public life, whether it be the law, the media, through Parliament or the quangos. The Government are obsessed with control and getting their people in place, irrespective of whether they are the best people or not.

Mr. Radice

Will the hon. Gentleman give way?

Dr. Fox

No, indeed not. The right hon. Gentleman made as good an intervention as he will, from a sedentary position.

The Prime Minister's statement this afternoon was trailed as very important. I have never heard a Prime Minister address the House with such a bunch of meaningless waffle as I heard this afternoon. It was a platitude from start to finish. He spoke of a partnership challenge, meaning why do not we all just work together? That is truly remarkable. He mentioned a performance challenge, suggesting that we should all do our best—as though those who work in the NHS would do anything else.

The Prime Minister spoke of a challenge for the professions, and called on staff to be flexible. What does he think they are being, in the face of the Government's hostility? He proposed a challenge on prevention and suggested that people should have a healthy life style—what a revolutionary thought. My right hon. Friend the Member for South-West Surrey (Mrs. Bottomley) espoused that some years ago, when we published "The Health of the Nation".

It was sheer gall for the Prime Minister to tell the House about a patient care challenge to treat the sickest patients quickly, when for three years the Government have presided over a waiting list initiative which every health care professional in the country says has distorted clinical priorities, to the extent that some of the sickest patients are waiting far longer than they need because health managers are being penalised financially if they do not meet their waiting list targets.

That was brass neck, even for the Prime Minister. What a cheek, when we hear that cardiology patients in Bristol have died on the waiting list. The Paymaster General, who used to make so much noise in opposition, was silent when patients in Bristol were dying, and when patients have been paying to get more treatment.

A gentleman who came to my constituency surgery last week had been clinically advised that if he did not have a coronary bypass operation within six weeks, his condition would become life-threatening, but he could not have the operation done in the NHS within a year. At the same time, we are still undertaking more minor procedures, resulting in a distortion of clinical priorities. What the Prime Minister said today is diametrically opposed to the effects of his own policy of the waiting list initiative, which needs to be ditched. If it were not for the Prime Minister's arrogance and his point-blank refusal to believe that he could ever be wrong, even in the face of advice from every part of the medical and nursing professions, people would not have died unnecessarily.

Mr. Nigel Beard (Bexleyheath and Crayford)

Does not the hon. Gentleman recognise that at the heart of the Prime Minister's statement was the concept of medical audit, which is an attempt to overcome the gross disparities in treatment and cost in different regions, which have grown up over many years? Why, over so many years, did the previous Administration, whom the hon. Gentleman supported, tolerate such gross disparities?

Dr. Fox

The figures showing what was happening within the NHS were not always available. It was only the development of the internal market that showed up exactly what was happening, yet the Prime Minister now wants to abolish the source of the information about which he spoke today. The problem with the Prime Minister's statement, as with so many of his statements, is that his words are not the same as his or the Government's deeds. In this case, they are diametrically opposed. The British people will rightly judge the Prime Minister, who has now put himself at the centre of the Government's health policy, not by the words that he uses in the Chamber but by his actions and the effects that they have on patient care. He will be judged not by what he says at Prime Minister's Question Time, nor by his photo-opportunities or by his soundbites, but on whether the sickest patients will now be treated more quickly. I hope that his words are right and that he will apologise for the fact that his policy has been entirely wrong.

Mr. Ivan Lewis

Will the hon. Gentleman give way?

Dr. Fox

No, I have already given way quite a lot.

There are several matters which any party in government has to bear in mind when considering budget allocation for the NHS, the most immediate of which are cost pressures, historic deficits and demand pressures. Let me outline for the Secretary of State one of the cost pressures.?

The Government said that they wanted to attract another 10,000 nurses. What economic model has been used to decide what level of pay would be required to bring 10,000 extra nurses back into the system, and what would be the resulting additional cost for the nurses that we already employ? That cost pressure would be inevitable, given what the Chancellor said yesterday.

The NHS has large and growing historic deficits, so whenever new money is allocated, the first call on that is for the deficit that health authorities have built up, which may be as much as £1 billion. I notice that the Prime Minister did not deny that figure when it was put to him by my right hon. Friend the Leader of the Opposition.

In addition, there are the demand pressures of new pharmaceuticals and new treatments. We are moving towards gene therapy and stem cell transfer—new technologies in medicine which will be extremely expensive. We shall have demand pressures to an extent that we have never known before. All that needs to be considered when planning ahead. I hope that the Secretary of State will say something about that because it is a matter of real concern to health professionals.

It was disappointing to hear nothing in the Budget about long-term care and its funding. We have now been waiting 14 months for an adequate response to the royal commission. I imagine that the excuse is that there cannot be an announcement because we are waiting for the results of the comprehensive spending review, yet the Chancellor did not feel compelled to stick to that when announcing the spending totals for the NHS. As with anything else, if it suits the Government, they will break the rules, but if it does not, they will keep quiet. Each year, under this Government, 40,000 people lose their homes, yet when the Government took office they promised a quick solution to the problem of long-term care. The phrase "quick solution" is used in much the same way as the phrase "dealing with the early pledge", which means roughly the same in their language as "more" or "extra" in relation to the truth. I hope that we might hear something about that when the Secretary of State replies.

We welcome the increased spending on health, but we need to know how it will be spent. When the Secretary of State details today exactly what measures the Government will take to ensure that the money goes to patient care, not to Ministers' pet schemes, we will be able to judge whether it will result in better patient care. The Government must be judged by clinical outcomes, not by input or throughput. Where the Government make the right decisions, they will have the Opposition's wholehearted support; but if they get it wrong and waste this opportunity for the sake of quick progress or cheap headlines, they, and in particular the Prime Minister, will never be trusted again.

5.4 pm

The Secretary of State for Health (Mr. Alan Milburn)

Yesterday, my right hon. Friend the Chancellor of the Exchequer delivered a Budget for a stronger and fairer Britain; a Budget that continues to build steady economic growth, that will modernise our schools, transform our hospitals and support families and communities throughout the country. He announced the right measures at the right time to do what is right for Britain.

The Budget has been widely welcomed in the country. It was welcomed by the Institute of Directors as confirmation of the Government's belief in creating an enterprise economy. It was welcomed by the Trades Union Congress as a generous and much needed boost, and by the British Medical Association as a

major step in putting the health service on a firm, long term basis. I have seen probably eight or nine Budgets in my time in this House; other hon. Friends will have witnessed many more. However, I have never before seen Opposition Members looking so mute and so glum during a Chancellor's statement. Nothing expresses more clearly the distance between today's Conservative party and the public than their respective reactions to the Budget. While nurses and teachers were described as being over the moon, the Leader of the Opposition—with his new, trendy, David Beckham haircut—looked as sick as a parrot. As well he might.

The Budget is for the whole nation, and because it does what is right for Britain, it also does right by the NHS. It demonstrates the Labour party's commitment to the NHS and our determination that it should succeed.

Mr. Blunt

I should like to bring the Secretary of State back to policy, if he can stop inventing Conservative party positions. Why was it satisfactory yesterday to passport money directly to head teachers, but impossible today for the £660 million of the £2 billion to be passported directly to health authorities? Why must it have strings attached by the Secretary of State and his hon. Friends?

Mr. Milburn

If the hon. Gentleman will wait a moment, I shall tackle that point. I hope that he will be satisfied when I have made my announcement.

Mr. Blunt

I doubt it.

Mr. Milburn

So do I, because, like the Liberal Democrats, the hon. Gentleman will never be satisfied. The more we give, the more he wants.

No one—not even the hon. Member for Reigate (Mr. Blunt)—should underestimate the significance of the Budget announcement for the national health service. It constituted a key moment in the history of the NHS.

For more than 25 years, the NHS got by on an annual real-terms increase in funding of approximately 3.2 to 3.3 per cent. a year. The Conservative Government's record during their last two decades in power averaged less than that—approximately 2.9 per cent. Indeed, in their last full Parliament, it was even less: just 2.6 per cent.

Annual growth of 3 per cent. has landed the NHS in its current position. The system, by international standards, is efficient and fair but there are fewer beds, fewer doctors and fewer nurses than in comparable systems. The NHS is, as the Organisation for Economic Co-operation and Development rightly says, a remarkably cost-effective institution.

In Britain, we rightly take pride in what the NHS does and in what its staff achieve, but we know that it is an institution, which, for too long, has been coping when it should have been thriving. It has been surviving, but it should have been modernising. Now, through this substantial new investment, we have the chance to give the NHS a new lease of life and to reinvent it for the new century.

That is what is now on offer. In our first two years in office, we had to stabilise the public finances. That required a tough approach to spending. I believe that it was the right thing to do. Today the country is reaping the benefit. There are 800,000 more jobs in the economy, a record number of people in work, and a record number of vacancies for work. Investment in manufacturing is growing, and youth and long-term unemployment is falling. A strong and growing economy is providing the foundations for strong and growing public services.

The NHS will now reap the benefit of our approach. Prudence has indeed been for a purpose. We increased NHS investment in our first two years by approximately £2 billion over and above the plans that we inherited. We spent what the country could afford. Yesterday's Budget means that the NHS will have grown by 50 per cent. in cash terms by 2003–04, and by 35 per cent. in real terms. For the next four years, the NHS in England will grow by an annual average of 6.3 per cent. above inflation. That is twice the long-term growth trend.

From today, we can draw a line not only under decades of underfunding, but decades of instability in health service finances. There has been too much boom and bust in the economy, but there has been too much boom and bust in NHS funding as well. We now have a platform of sustained increases in funding which provide a sure foundation for the sustained modernisation that the health service needs.

I do not pretend for a moment that the extra resources that we have provided for the NHS will solve every money problem. Like every other health care system in the world—whether public, private or a mixture of the two—the NHS will continue to have to make tough choices about how resources are best used. It will take time and effort as well as resources to give Britain the modern health service that it needs.

Mr. Owen Paterson (North Shropshire)

Has the Secretary of State considered the fact that advances in gene technology mean that in a short time every citizen of this country will be able to give his general practitioner a profile of his family history and the likelihood of his dying from a hereditary disease? That will lead to an unprecedented demand for health services. How will they be provided?

Mr. Milburn

There is enormous potential in gene therapy and in genetic technology advances more generally. They will require changes in the way the NHS provides its services. I say one thing to the hon. Gentleman, as he is a signed-up advocate of the Conservative Front-Bench policy on private health insurance: that will not destroy the NHS, but it will destroy the private health insurance market, for a very simple market reason. Those with the advantage of access to genetic technology and genetic tests will find out whether they are predisposed to certain illnesses and diseases—perhaps cancer or coronary heart disease. What will be the private health insurance industry's reaction? It will fail to insure those people, which will be a logical and sensible market decision.

Those who pin all their hopes on the private health insurance sector as the future for health care improvement in our country have got it wrong, because that will not work. Advances in genetics, gene therapy and gene testing will, in my view, render the private health insurance market, which is already unstable, even more unstable in future.

Mr. Paterson


Mr. Milburn

Let me continue. The resources provide the chance to address decades of neglect and give the NHS the means to modernise its services. I can tell the House that that process will begin at once. Last week, the NHS Confederation, which represents trusts and health authorities throughout the country, called for a £600 million increase for local health services. Today, I can tell the House that next week I shall make available £660 million direct to health authorities and on to primary care groups, NHS trusts and hospitals in England. They will be able to spend that cash to meet the service pressures that they face and to take forward local spending priorities.

Mr. Fabricant

Will the Secretary of State give way?

Mr. Milburn

In a moment. Let me finish what I have to say. Those bodies will be expected to show consistent progress and improvement. There will be incentives to encourage good performance and to eradicate bad performance. We shall ensure that the cash reaches front-line patient services, but it needs to be spent wisely and well.

The money will be paid at stages during the year. The bodies that deliver will receive their full allocation and be free to spend the funds in accordance with their agreed local priorities. Those that are unable to deliver will still receive the bulk of their allocation, but will have more support and, if necessary, intervention. They will have the opportunity to make up any lost allocation in one period by upping their performance in the next. That is about instilling a new performance culture in every part of the health service in every part of our country.

The new resources will help the NHS to run balanced budgets year after year. They will fund new drugs, improve services for cancer and coronary care and help to speed up treatment for patients. There will be resources to help primary care groups to develop their services and resources to develop intermediate care services, building the bridge between hospital and home ahead of next winter.

I can also tell the House that in the weeks to come I shall make further allocations direct to health authorities, and then on to primary care groups and hospitals. I shall keep a clear eye on ensuring that those allocations help to address the very real health inequalities that scar our nation.

Mr. Fabricant


Mr. Philip Hammond (Runnymede and Weybridge)


Mr. Kenneth Clarke (Rushcliffe)


Mr. Milburn

It appears I have a queue of Conservative Members who want to intervene.

Mr. Fabricant

I am grateful to the right hon. Gentleman for his usual courtesy in giving way. I am sure that he can guess what my question is, because he was present at Prime Minister's Question Time. On the face of it—before we have had a chance to read between the lines—what he says sounds remarkable. It is good news if it is to be believed. Does it mean that he can assure my constituents, let alone people throughout the country, that there will be no more hospital closures?

Mr. Milburn

It is good news. The hon. Gentleman and his hon. Friend the Member for Runnymede and Weybridge (Mr. Hammond) have been asking me all afternoon for an assurance that I will get the money out there. I shall get the money out there: that is what will happen. It will go to health authorities and then on to primary care groups. The primary care groups will decide. Local doctors and nurses are in the driving seat—not bureaucrats sitting in health authorities—and it will be up to them to decide where the money goes.

On the question of whether it is ever right to close a hospital, I do not want to go into the particular case that the hon. Gentleman has mentioned, because I do not know enough about it. If he wants to raise it with me in correspondence, I shall be happy to look into it. Tories have the idea that it is not right to change the nature of local health services—perhaps today's Conservative party is so out of touch that they are becoming modern-day Luddites. Sometimes we must change the make-up of local health services. For example, in Norwich right now we are closing hospitals. Why? To build a brand-new hospital. Why are we doing that? Because we cannot deliver 21st-century care in hospitals that were built before the 20th century.

Mr. Hammond

I understand that the Secretary of State cannot give an absolute assurance that he will never close or reconfigure hospitals, but will he give an assurance that he will not approve any further plans by health authorities that result in a net loss of beds in their areas?

Mr. Milburn

The hon. Gentleman wants to have his cake and eat it. First he does not want me to micro-manage or centralise the service, and then he does. Which is it? I shall give him a clear assurance on one point. For the first time in 30 or 40 years, the Government have bothered objectively to inquire into the number of beds in the system and how many we need. My own view, which accords with the result of the national beds inquiry, is that we do not have enough beds in the system. Indeed, the trend of a huge decline in the number of hospital beds, which the Conservative Government exacerbated, is not sustainable for the future, and we need to address that problem.

As the hon. Gentleman knows, we are consulting on the national beds inquiry, and I hope that he will submit a view. Let us hear what members of the Conservative Front-Bench team have to say about this issue. When the consultation is over, we will produce clear guidelines, which we will expect every health authority to adhere to, so that we can be assured that in all parts of the country we have the right number of beds, of the right sort and in the right places.

Mr. Kenneth Clarke

I was trying to intervene when the right hon. Gentleman was making what I think was an important announcement about how he proposes to distribute this money to health authorities over the next year. I hope that he will correct me if I have misunderstood him, but it sounded as though it was a completely new and highly centralised method of controlling the distribution of money to health authorities.

As I understood the right hon. Gentleman, health authorities will not be able to work on a set and certain budget for the year. The money will be distributed in tranches, according to the Secretary of State's and his Department's judgment of a health authority's performance. Does that mean that once a quarter the right hon. Gentleman and his Department will go through the process of judging the performance of each and every health authority in England, and give penalties or rewards? I do not think that his Department is competent to do that. The process will lend itself to attempts at central direction and political lobbying for the release of more or less money in different parts of the country, which will be one of the first problems that the Prime Minister's reforms in July will have to address.

Mr. Milburn

When the right hon. and learned Gentleman was Secretary of State for Health, and when he was Chancellor of the Exchequer, he was a toughie. He was a tough guy on value for money; he was a hard guy on poor performance. Now he is not. Is he for poor performance, or against it? Which is it?

Let me say something which, if the right hon. and learned Gentleman fully understands it, I think he will commend. Of course I want to get the money out, but I will not throw good money after bad. I want to ensure that the money reaches front-line patient services, in a way that is fair to both patients and taxpayers. As the right hon. and learned Gentleman well knows from his experience as Secretary of State for Health, it is not fair for some parts of the health care system to perform disproportionately better than others; and as my right hon. Friend the Prime Minister made clear today, we are not prepared to allow real differences in performance in some parts of the country to hold back performance in the country as a whole.

Several hon. Members


Mr. Milburn

It is nice to be popular. I give way to the right hon. Member for South-West Surrey (Mrs. Bottomley).

Mrs. Virginia Bottomley

As I am sure the right hon. Gentleman recognises, part of the measurement of outcomes was made possible by the internal market: it was the purchaser-provider distinction that enabled people to measure.

Will the right hon. Gentleman be allocating the resources by means of the postcode lottery that gives people in his area £115 a year more than those in the costly home counties? Although there may be arguments for deprivation funding, the cost of care in areas such as mine is acute. As a result, one in 10 of my constituents waits for more than a year for treatment, while only one in 100 of the right hon. Gentleman's does.

Mr. Milburn

I thought that the right hon. Lady was against the north-south divide. She now seems to want to exacerbate it. As I understand it, she is calling for a transfer of resources from north to south. In the real world, greater equalisation means a transfer of resources around the system, does it not? If the right hon. Lady is calling for a transfer of resources from poorer parts of the country to more prosperous parts, I am afraid that I must sorely disappoint her: that will not be possible.

Mr. Brian Cotter (Weston-super-Mare)

I welcome the extra funding, and also what the Secretary of State has just said. I hope that he will consider what I am going to say constructive.

Mrs. Greed, from Weston-super-Mare, has been denied treatment for hepatitis C by Avon health authority, one of only three authorities in the country that are denying treatment for the condition. Will the Secretary of State give that serious consideration? I think it extremely unfair that Mrs. Greed should be denied treatment.

Mr. Milburn

I am aware of the problems surrounding treatment for hepatitis C, and I think the hon. Gentleman is aware that we are taking action to deal with them. I have said many times from the Dispatch Box that I, unlike previous Secretaries of State, will not sweep the lottery of care under the carpet and pretend that it does not exist. It does exist, and we are taking action to deal with it. That is why, as the hon. Gentleman knows, we established the National Institute for Clinical Excellence. As he also knows, one of the first issues that it is examining is treatment for hepatitis C. It will produce its conclusions in due course, and I expect all parts of the NHS—including the part in the hon. Gentleman's constituency—to take account of its guidance.

Several hon. Members


Mr. Milburn

I shall give way to one or two of my hon. Friends; then I want to make some progress.

Dr. Howard Stoate (Dartford)

My right hon. Friend, like me, will share the Prime Minister's real concern about the enormous variations in care across the country, which are clearly unacceptable in a national health service. What would he say to those in constituencies such as mine, where we are to have a brand-new state-of-the-art hospital, about which we are very pleased? Can he assure my constituents and me that he will examine the position relating to community beds and step-down beds? Could a facility be provided outside the general hospital, which will be dealing with acute cases, to give people convalescent step-down care, thus speeding them through the system and improving efficiency even further?

Mr. Milburn

I give that assurance. Part of the £660 million that I will allocate next week—more details will be available then—will be precisely to develop those intermediate care services. We know that there is a need to build capacity throughout the NHS. We do need more beds in the system, but it is glaringly obvious to anyone who goes to an acute sector hospital that the problem is not just the beds there, but the lack of available beds in the community.

One of the findings of the national beds inquiry is that perhaps 20 per cent. of acute beds in hospitals are occupied by elderly people, who would probably be well enough to leave, provided that they had a period of rehabilitation and recovery. We want that to happen consistently as part of a big national programme to build intermediate care.

Mr. Geraint Davies

Does my right hon. Friend think it strange that the Opposition now say that they will more than match the amount of money that we will put into health, yet have consistently voted against all the economic measures—the new deal, independence for the Bank of England, the end of boom and bust and making work pay—that have enabled us to get 800,000 people back into work and to have the wealth to put the money in now?

Mr. Milburn

My hon. Friend makes an extremely telling and accurate point, but I sound a note of caution. He should examine not just the Conservatives' record in the past, but their prospective record.

Mr. Michael Jack (Fylde)

Will the Secretary of State give way?

Mr. Milburn

May I make a little progress?

The extra resources that we are providing will add impetus to the modernisation that is already under way. In the past three years, we have been laying the foundations for modernisation. The internal market has gone, replaced instead by a system that puts local doctors and nurses in the driving seat to shape local health services. Co-operation between health and social care and other parts of the care system has replaced conflict.

The expansion of the NHS is under way. When we came to office, not a single PFI hospital had been built. Today, 38 new hospitals are under way—the biggest programme in the history of the NHS. When we came to office, accident and emergency services were neglected and rundown. Today, 190 A and E departments are being modernised—all that modernisation is about to start. Again, it is the biggest such programme that the NHS has ever seen.

When we came to office, the number of nurses in the NHS had fallen and the number of nurse training places had been cut. Today, both are rising. Large pay rises for nurses are helping us to begin to turn the corner on nurse shortages. Today, 4,500 more nurses are working in the NHS than a year ago. With the extra money, there will be more increases. The same is true of doctors. Today, there are 2,300 more doctors in the NHS than there were when we came to office.

The modernisation of NHS services is under way. When we came to office, waiting lists were at a record level and rising. Today, they are falling. When we came to office, cardiac and cancer services had suffered years of neglect. Today, those services are getting the investment and the priority that they need. When we came to office, there were no means of setting or policing standards. Today, we have new standards set by one new organisation—NICE—and inspected by another: the Commission for Health Improvement.

All those changes have laid the foundation for a modern NHS. The new resources that we have provided will mean a springboard for improvement in patient care.

Mr. Jack

The Secretary of State used the word "fair" to describe the mechanism by which he would allocate the money. He has just described some of the sectors where he might want to spend that money. I am still unclear as to how what is fair will be adjudicated on. I wonder whether he could give an example of how, under his proposed plan, he would adjudicate nationwide on who received money for, say, cardiothoracic treatment.

Mr. Milburn

Cardiac services are a good example and an important test bed for fairness. The great irony is that this country has a lower number of heart surgery interventions than comparable developed countries. That is the sad truth. It is a consequence of decades of neglect. We are trying to put that right, but there is another unfortunate internal national problem, if the right hon. Gentleman likes: often, precisely those areas that have the highest incidence of coronary heart disease have the lowest number of heart surgery interventions. As he knows, very often, the poorer parts of the country need cardiac services most, but receive them least. That is what we have to put right.

In all candour, I tell the right hon. Gentleman that the consequence of those facts is that we shall be targeting our investment in the areas that most need help. It is unfair that, in this day and age, a working-class, unskilled man has three times the chance of a professional man of developing coronary heart disease. We have to start addressing those big health inequality issues if we are honestly to say that we have a modern health service that is meeting the United Kingdom's fundamental health needs. That is a test bed for fairness, and that is something that we are determined to do.

The national health service needs not only cash, but reform. It does not require one at the expense of the other; it requires the two working together. Big real-terms funding increases must now be matched by big real-terms improvements in services. The Government have met the call for increased funding with a step change in resources. Now we need a step change in results. I believe that, for too long, lack of cash in the health service has masked a lack of consistency. There is too much variation in both practice and performance across the NHS. That is unfair both to patients and to taxpayers.

As the Prime Minister told the House earlier today, there should no longer be any excuses for poor performance. Patients want not excuses, but excellence in their local health services. Hence, in the next few months my right hon. Friend and I will be working to ensure that those new resources are properly used to deliver better health care right across the country. We shall be doing so in discussion with the professions and staff of the health service, with patients and with NHS managers.

Yesterday, when my right hon. Friend the Chancellor of the Exchequer finished his Budget statement, I met leaders of the professions in my office in the Department to kick-start that process. Tomorrow, I will be publishing our proposals on how we intend to take forward the dialogue on developing a new performance culture in the NHS. Over the next few months, we will be working with the professions and meeting NHS staff and patients to determine how we can use those extra resources as a catalyst for change throughout the NHS.

We will construct a national plan for the national health service. The plan will embrace all who share a commitment to the traditional principles of the NHS, and who have an equal determination to modernise its practices. However, it is now glaringly obvious that not everyone shares that commitment. The Budget has exposed the isolation of Conservative Members as the privatisers of the NHS, just as it has demonstrated Labour's commitment as the moderniser of the NHS. That is the divide on health today.

Yesterday, the Government renewed our historic pledge to an NHS that is free, fair and funded from general taxation. The investment that we are making will not only sustain the NHS, but modernise it, so that it meets the challenges of the new century.

The contrast with Conservative Members could not be clearer. The party that voted against the NHS now seeks to turn people against the NHS. Barely a day goes by without Conservative Front Benchers—we have heard them at it today—singing the praises of private insurance simply to bad-mouth the NHS. Last summer, a Conservative Front Bencher, the hon. Member for Meriden (Mrs. Spelman)—who has disappeared from the Chamber—said that she tries to use the NHS … to see what it is like for people who do not have the privilege of private health care. By the autumn, the Conservatives were describing their policy as a "Trojan horse" for private medical insurance. By the winter, the hon. Member for Woodspring (Dr. Fox) was admitting that Conservative health policy meant that hip and knee replacements, hernia and cataracts would no longer be available on the NHS.

As winter turned to spring, Conservative Members' policy turned from tragedy to farce, as the hon. Member for Runnymede and Weybridge declared that people would look to the NHS to provide them with a service when they had serious life-threatening conditions and would look to private insurance for the rest.

Conservative Members do not have a national plan for the NHS—they have a secret plan for the NHS. While we want to expand NHS services, they plan to shrink them. While we plan to improve care services, they plan to reduce the NHS to a core service. While we are building a 21st-century health service to meet the needs and expectations of the public, they want to force the public to go private.

Mr. Blunt

On a point of order, Mr. Deputy Speaker—

Mr. Deputy Speaker

I hope that it is a point of order.

Mr. Blunt

It is indeed. I have sat here through debate after debate on the health service and other matters, hearing direct lies about Conservative party policy being put by Ministers from the Treasury Bench. It does nothing for the credibility of the House when deliberate untruths are repeatedly told by—

Mr. Deputy Speaker

Order. I had an idea that the point that the hon. Gentleman wished to make was not a point of order. Those are matters for debate, not a point of order.

Mr. Milburn

The hon. Gentleman's agitation and concern are not so much directed at me as at his Front Benchers and, perhaps, the right hon. Member for Huntingdon (Mr. Major), the former Prime Minister, with whom he had a former association. [HON. MEMBERS: "Oh."] I did not mean anything bad by that, because I know that they were just the best of friends. While the Budget provides historic real-terms increases year on year in the health service's budget, the Conservatives' tax guarantee is, as their former leader said, "mad", and could only mean swingeing cuts in the health service. The Conservatives have made their choice and it is tax cuts for the privileged few, not investment in public services for the whole nation. Just 10 days ago, the shadow Chancellor said of the Chancellor's Budget choices that he can either reduce taxes or he can increase public spending. He continued:

What I would recommend is that he use that money to reduce taxes. The Conservatives have made their choice. They have already promised billions in tax allowances, tax reliefs and tax cuts for a privileged few. Like a half-witted Houdini, the Leader of the Opposition has put on a straitjacket on tax and spending. He can twist and turn but he cannot now escape. It is the straitjacket of the tax guarantee—[Interruption.] It is no use the hon. Member for Reigate (Mr. Blunt) getting agitated. As surely as night follows day, cuts in health service spending would follow the tax guarantee. [Interruption.]

Mr. Deputy Speaker

Order. I cannot have the hon. Member for Reigate (Mr. Blunt) shouting across the Floor from a seated position. He has raised points of order, but this is a point of order about which I am informing him: he should not do it.

Mr. Milburn

I am grateful for your protection, Mr. Deputy Speaker. The Conservatives' "mad" economic policy dictates a crazy health policy.

Mr. Paterson

Will the Secretary of State give way?

Mr. Milburn

No, because I am finishing my speech. The Conservatives cannot commit to the health service because they are already committed to tax cuts for the privileged few. They could not sustain the NHS so they would have to reduce the NHS. They cannot afford to modernise it so they have to commit to privatising it. That is the logic of their position, and the Budget has made it all too clear.

This is a Budget that has sharpened the great divide in British politics. It is a Budget for economic stability, not for Tory boom and bust. It is a Budget for hard-working families—to help them, not harm them. It is a Budget for fairness—to tackle poverty, not create it. It is a Budget for prudence with a purpose, not perks for the privileged. It is a Budget for those who work in the health service and those who rely on the health service. It is a Budget that no Tory Chancellor could ever have delivered: a strong economy and strong public services; an enterprise economy and a fair society. It is a Budget that the Conservatives cannot even hope to match. It is genuinely a Budget for all of Britain.

Dr. Fox

On a point of order, Mr. Deputy Speaker. I asked at the outset of my remarks whether the Prime Minister had inadvertently misled the House at the beginning of his statement and whether a Treasury Minister could let the House know whether that was so. I noticed that there were exchanges with officials, and I wondered whether a Minister could clarify that point before the debate continues.

Mr. Deputy Speaker

Order. The Minister has finished his speech and I have no control over what he does.

5.39 pm
Mr. Kenneth Clarke (Rushcliffe)

Until yesterday, I thought that I would remain unique among Chancellors in having given a combined Budget dealing with tax and public spending. I presented four Budgets, all of which were in November, under an arrangement introduced by my predecessor, Norman Lamont. We announced the tax changes for the year and the public spending commitments after an annual review which examined carefully the needs of each and every Department. We looked at the consequences for public borrowing or public repayment of debt and all those factors were judged with a view to serving the real purpose of a Budget—trying to create the right climate for a successful macro-economy so that we could continue creating wealth and secure jobs while providing sufficient resources to pay for public services.

I thought that the new Government had gone back to the traditional Budget, in which tax measures were settled in the first part of the year. Every three years there was a comprehensive spending review which considered public spending. For that reason, when I was asked, as previous Chancellors often are, for my predictions for yesterday's Budget I said that I could not think why the Chancellor had given the impression that he had a vast war chest to give away and that he would be most unwise to do anything of any consequence by way of giving away on taxation. I said that if he had a bit to spare—as he has—he should save it for the comprehensive spending review in June or July when the real announcements will be made.

Yesterday's was an extraordinary Budget. It was not a traditional Budget or the sort of Budget that I presented; it was a strange cross between a tax Budget and a spending review, dominated above all by political ambitions for the next election and beyond and a political settlement between the Chancellor and the Prime Minister which led to today's debate.

I shall turn to the Budget in a moment, but the tax measures were, as I had predicted, fairly inconsequential. There were some interesting ideas on welfare to work and the working families tax credit, which we shall no doubt debate on another occasion. There was some interesting but modest stimulus to e-commerce and the dot.com economy. The rest was a bit here and a bit there. I do not think that anyone will look back on this year's Budget and remember anything about it. It was pretty dull, although that may have been wise.

The last few moments of the Budget were dominated by the issue that has taken over today's debate. Suddenly, part of the comprehensive spending review—the part devoted to the health service—was pulled out and spun to the headlines. It has completely dominated the Budget.

Clearly, the Prime Minister, who we saw in a panic on the Frost programme, insisted that something was done on a big scale to try to match up to his promises on the national health service. The Chancellor said that he was not giving all that money to one Department unless he could be sure that something would come of it. So the Prime Minister has personally taken charge, when he can think of what he wishes to do. The result has been a complete U-turn on the Government's policy on health for the past two or three years and the first day of the Budget debate has the Secretary of State for Health coming out with all that wide blue yonder stuff, along with some worrying detail, in order to try to turn the debate back to the health service.

Let me go into a little more detail as it is an extraordinary political operation. Let me turn to the Budget first, as we ought to be concerned with the real economy. Why has the Chancellor been so unbelievably cautious? It is because of his one fear about the current economic prospects, the one fear that he did not mention in his speech yesterday—the consequences of an overvalued pound on key sectors of the economy. The pound's value in the present market is far too high—DM3.20 plus. For most of my time as Chancellor it was DM2.50. The pound's value has been largely driven by the monetary policy of the Bank of England and the Bank's continuing fears of inflationary pressures coming back, and perhaps fiscal indiscipline on the part of the Chancello0r. Although until now both the Chancellor and the Governor of the Bank of England have denied responsibility for the pound—my view is that neither of them should have control over it or target it—they each have a responsibility to act together in paying heed to the currency's value.

Yesterday, the Chancellor was anxious to say that he was going in for even greater fiscal tightening, for this year and next, than he promised last November. The elements of economic policy include taxation, spending, borrowing and debt, but it was debt that dominated the Chancellor's mind.

The figures for the health service that we heard today have to be put alongside the fact that we are repaying £12 billion of debt this year. Next year, we will repay £6.5 billion of debt, and £5 billion the year after that. The surpluses currently planned by the Chancellor are absolutely enormous. I do not know why he is obsessed with paying back debt on such a scale—it is a good thing up to a point, as borrowing is tax-deferred—but he inherited perfectly healthy public finances.

I cannot decide whether the present inspiration comes from Pitt the Younger or from President Clinton, but the Chancellor appears to be dedicated to eliminating our national debt. However, as a percentage of gross domestic product, our debt is miles below the Maastricht criterion, and is at a perfectly healthy level, compared with our competitors.

The tight repayment of debt dominated the Budget. That is why tax continues to rise, as I shall explain in a moment. The Chancellor has done nothing about that. It is also why spending remains an even greater mystery, although I hope that the amazing promises about health service investment over the next four years, which I welcome, come to pass. However, I think that they were ill planned, and that they were driven more by the "Breakfast with Frost" programme than by any careful consideration of what that investment in one Department might mean for the Government's economic and spending policies, or for their political priorities.

If the Chancellor's tight policy were to have the effect of persuading the Bank of England to make a rate of 6 per cent. the possible peak for interest rates it might remove from the markets the impression that British interest rates are going to go higher. That in turn might eventually help to create a climate in which the pound could decline. If that were to happen, I would be glad for British manufacturing—and for British agriculture, which at the moment is being ruined.

I would be glad also for the sake of the prospects of inward investment into this country. For various reasons, BMW is not the best example to cite, as the strength of the pound was only one factor—the others involved all sorts of behaviour by that company—in the Longbridge plant decision. However, when one talks to the president of Sony or to any major inward investor into this country—even to any sensible British investor in a British company that wants to trade in Europe—it becomes clear that the high pound is the biggest problem that anyone is facing.

Dr. Stoate

The right hon. and learned Gentleman is right to point out the problem posed by the strength of the pound to many sectors of the British economy, but does he not agree that the only real mechanism to reduce that strength is to cut interest rates? Would not that lead to inflation and a return to the boom and bust of the 1980s?

Mr. Clarke

I do not think that that is necessarily what will happen. I have debated this matter before. I, too, am a hawk on inflation, but I disagree with the judgment of the Monetary Policy Committee of the Bank of England. There is intense competition in today's global markets, with price-averse consumers and a high rate of technological change. As a result, the inflationary pressures are not as great as the MPC claims.

A true comparison of inflation across Europe, using the only comparative method available, shows that Britain has the lowest rate of any member state of the European Union—so much for the claims that I was profligate, and for the claims that we faced crisis on inflation in the past. I think that our monetary authorities are too hawkish. We need a better and a more genuinely independent Monetary Policy Committee, with a membership drawn from a wider range of people.

However, instead of going further into the question of debt, I shall move on to the public finances. Inflation has remained stable for most of the past four or five years. The Government have created the myth that they had to sort out the public finances. That.is used as the excuse for the Government's complete U-turn on health. It is their apology for starving the health service of funds for their first two years in office, when in fact they had no reason at all to do that.

It is true that the previous Conservative Government, at the time that we left office, would have returned to balance and surplus somewhat more slowly than this Government have achieved. Nothing in the economic outlook has really changed. The borrowing requirement inherited by this Government was well on the way down, and all our assumptions have been justified.

Mr. David Ruffley (Bury St. Edmunds)

Will my right hon. and learned Friend give way?

Mr. Clarke

In a moment.

We were setting a target of the public sector current balance being in surplus by 1999–00. The public sector borrowing requirement was going to go into repayment in 2000–01. We left healthy public finances and there was no need for some of the desperate measures that were taken.

Mr. Ruffley

Will my right hon. and learned Friend confirm that as a result of the policies that he put in place as Chancellor of the Exchequer, the last Red Book that he published in November 1996 demonstrated that the public sector current balance would be in surplus this fiscal year? Does he agree that when the Labour party claims that its policies have brought public finances into surplus, that is yet another example of a great new Labour lie?

Mr. Clarke

I agree. My hon. Friend was working for me in the Treasury. It was no doubt partly because of his advice that we had public finances sorted out. We spent four years doing so. We handed on a healthy economy and healthy public finances to a very fortunate Labour Chancellor, who then found that the global economy began to improve when he first took office.

The Chancellor has remained with tough policies because he has not known what to do about the strong pound. He does not know what to do now, and it is becoming a crisis for farmers and manufacturers. His policy has been too tough on tax. I do not understand why the Prime Minister and the Chancellor think that there is any profit in trying to deny that the tax burden is continuing to rise. It has risen substantially since Labour took office. The Government increased taxes quite sharply initially, using the mythology that they faced a public debt crisis. Actually, they were raising money for a political war chest. However, the Government are continuing to increase tax, certainly on business and on the average taxpayer.

I refer to page 200 of the Red Book, because tax is now defined rather peculiarly by the Government sometimes. It is necessary to choose the right tables because they cleverly use the working families tax credit and the integrated child tax credit, for example, to try to reduce any ordinary, old-fashioned definition of the tax burden. On page 200, there is a current receipts line in table C7. On that basis, it is plain that compared with 37.6 per cent. of gross domestic product that the Government inherited from the Conservative Government, they are anticipating 39.2, 39.6, 39.7, 39.9, and 39.8 per cent. Who knows, the figure might be less in the year 2003. Right now, however, the tax burden is increasing, and that part of the Budget yesterday provided for a continuing burden on middle England, Mr. and Mrs. Average and, in particular, motorists and a great deal of British business.

My main complaint about the tax burden is not only that the Government increased it and continue to increase it, but that much of it involves the wrong taxes. There is too much tax on business. There are taxes on pensions and the tightening of tax relief on savings, with the result that the savings ratio is declining. The tax burden is increasing and a large part of it is economically damaging taxation.

Yesterday, the Chancellor sought to get away from what is in some ways a difficult picture. I accept that the economy will see 3 per cent. growth this year and that we are running exactly in parallel with the Germans and the Italians. However, we just missed a recession 18 months ago. The Chancellor now takes pleasure in that, but boy was he lucky. We had two quarters of flat economic activity. Like the Italians, we were left bewildered as to quite why we had not gone into recession. We are now recovering and we will get what the Germans will get this year, which is about 3 per cent. growth. There might be a steady strengthening, but the Chancellor did not have much to say. He left the tax burden high and the fiscal policy tough.

The Chancellor then went into spending. I thought that he would say, "Leave all this to June and July, when I shall have a comprehensive spending review." Not at all. He announced the parameters of the spending review for three whole years from 2001 onwards. There will be a 2.5 per cent. limit on public spending in real terms each year for three years. That will be somewhat less than the growth of the economy, and not very generous for Departments as a whole or for local government and other public spending. There will be a pretty tight three years after 2001, except—remember "Breakfast with Frost"—for a bonanza for health.

It will not be quite the bonanza that it has been made to appear, but the Government have always oversold their figures. However, there will be a large increase in spending on the health service. It will not take us to the Prime Minister's target of getting up to the European average, but he is lucky because no one knows what his target means. That is because nobody can remotely know now what the GDP of any European country will be in 2004, or the levels of European spending. The proposed increase in spending would not get the right hon. Gentleman to the present levels of European spending by 2004, but there will be a big spending spree.

The Secretary of State suddenly has substantial sums, which I welcome, that will go to the health service. His inheritance is dreadful. I like his predecessor personally, but I shall not vote for him to become mayor of London. I am extremely glad to see him removed from the position of Secretary of State for Health. The first two and a half years of the Government's stewardship of health were a catastrophe, not least because they starved the NHS of money. They pretended that they were imposing the previous Government's figures, but no Secretary of State or Chancellor in the Conservative Government ever avoided having an annual public spending round.

My right hon. Friend the Member for South-West Surrey (Mrs. Bottomley), who succeeded me as Secretary of State for Health, is in her place. If I had gone to her as Chancellor of the Exchequer and said, "We will not have a spending round this year, and the figure that we pencilled in last year is the figure," she would have resigned. Her officials would most likely have taken her through the door and made her resign. They would have said, "This is madness."

The right hon. Member for Holborn and St. Pancras (Mr. Dobson) had not been shadowing the Department, and presumably ignored his officials. He found himself let in for a two-year nightmare while a financial crisis crept over the whole system. Let us not dwell on the past, but after that he did many silly things by tampering with the reforms that he had inherited. Most of that tampering made things worse, including adhering to a ridiculous slogan on waiting list numbers, which has been distorting priorities, sometimes with criminal effect, inside our finance-starved health service.

We need a completely changed approach. The Prime Minister seems not to realise that collaboration with the private sector was banned under his first Secretary of State for Health, and he is now encouraging it. That is helping to ease some of the pressures. However, we are now told we shall have great reforms and a new policy. I, too, have taken through great health reforms, and it is not an easy process. I remember Labour's ferocious indignation when I put forward a diagnosis of the problems of the health service, which I and every Conservative Secretary of State talked about, including the difference in performance from one place to another. Labour opposed the entire diagnosis.

It is no good producing, as the Prime Minister did, a few worthy slogans, thinking that he will have everything sorted out by July. His great friend President Clinton thought that his wife would have sorted things out in America in 18 months on that basis. I think that Hillary Clinton got further when she started than the Prime Minister got this afternoon when he produced a few worthy management school clichés and said that he would have everything sorted out by July.

Various things are needed. The Government must get rid of their obsession with numbers on waiting lists. I agree, however, that there must be the right stimulus for good performance and the discouragement of bad performance. Fortunately for the right hon. Gentleman, he has all the results of the NHS reforms that I and my right hon. Friend the Member for South-West Surrey and other hon. Friends put through. He has management information, a purchaser-provider divide and clinical audit, which we introduced. We used that locally. We gave incentives to fundholding general practitioners and to health authorities so that they could move the money with the patients, choose quality and determine value for money in making the best provision in their areas. They could determine the best way of controlling the process. The contract system may have needed sorting out, but it did not need movement, as the Government have introduced, to a totally centralised health service.

I was appalled when I heard the Secretary of State's description of how he will hand out the money. He has gone one step further from the past practice of having an initiative for this and one for that, a priority there and pots of money out in the middle. It seems that Richmond Terrace, the headquarters of the Department, is now to keep its hands on all the money that is going out throughout the country. It will supervise day-by-day performance and use carrots and sticks according to performance. If the right hon. Gentleman tries to run it all from the centre, he will go back to the worst of the health service 20 years ago. I wish him well. He must give up this policy of centralisation.

There is no disagreement about the need for a better health service. I am totally committed to the principles of a better national health service. All attempts at reform have been to improve it. However, the Secretary of State's reforms go back to the ability to control everything from the centre—politically. Whatever the right hon. Gentleman's management abilities, I assure him that there is not in the centre the ability to reach the right decisions for the largest organisation of its kind in western Europe. The health service will go back to being a bureaucratic and political shambles.

Mrs. Virginia Bottomley

Does my right hon. and learned Friend, who understood how important it was to delegate, appreciate the comment of Nye Bevan? He said: the Minister of Health will be the whipping-boy for the Health Service in Parliament. Every time a maid kicks over a bucket of slops in a ward an agonised wail will go through Whitehall. My right hon. and learned Friend's reforms tried to counteract that state of affairs and ensure that power remained at the local level.

Mr. Clarke

When I first came to the Department of Health in the early 1980s, that is the way it was.

I hear that the Secretary of State is trying to take responsibility for community hospitals here and programmes there. He will be completely mad if he does that, and he will be completely mad if he issues the money according to his judgment of their performance over the last quarter. He will not be able to manage that.

Mr. Geraint Davies

Will the right hon. and learned Gentleman give way?

Mr. Clarke

No, I must get on.

What does this money for the health service mean for the other Departments? My complaint about the Government's policy on the health service, until now, has been that nobody has assessed annually its needs and how it is getting on. That is how the crisis has built up. Now there is provision for the health service, and every other Department has been ignored. The Home Office and transport get peanuts, while the provision for education, which is no longer the No. 1 priority, although not bad, is not enough.

What about local government? What about defence? What about agriculture? Ministers in those Departments are presumably listening to the money being dispensed, with no idea of what it means for them except that they have to fight for what is left within 2.5 per cent. of gross domestic product. It is spread over three years, so we do not know what the GDP is going to be. A cautious view will be taken, so any other political priority will presumably be squeezed into what is left. I presume that the health provisions are in cash terms, so that if the economy slows down, the health service will still get its share. The whale will get bigger, and the bath water will get less for all the minnows who sit around the Cabinet table. That is no way to control priorities in future.

When I was Chancellor of the Exchequer and when I was a Cabinet Minister, my highest priority, in terms of public resources, was always health. My second priority was always education. It was not difficult—that was the position of the Conservative Government during almost the entirety of our 18 years in office. So I do not complain about the health provision. However, we need annual spending rounds. We need to see how the economy is actually performing—the outturn in terms of patient delivery and quality, the outturn in defence, the pressures on Departments. This three-year grandstanding is a bizarre way of deciding political priorities that are now cast in stone. It has been done because the health service is in a mess and the public realise that it has deteriorated since Labour took over. They have to be promised jam tomorrow, so all the talk is about 2003 and 2004—the other side of the election, when the Government will make everything better. That approach has distorted public spending.

We talk about the percentage of GDP in 2003 and 2004, and whether the surplus will last. Of course, if we look clearly at this vision, it is all predicated on forecast. It is all illusion. We have to have forecasts; we always produced them. The likely development of growth, inflation and unemployment are worked out—I used to publish forecasts for unemployment by the end. The public sector borrowing requirement, or cash requirement, as it now is, and public spending are taken into account. But it never works out as expected. Anybody here who knows what the economy will be like in 2002 should make himself a very large amount of money and order the first of his yachts. The fact is that none of us has the first idea what pressures will face the Chancellor of the Exchequer in 2002.

The Prime Minister and the Chancellor are constructing castles in the air. It all depends on what happens to the global economy. Is there another south-east Asian crisis? Are there problems in Latin America? The Chancellor has had such a lucky run that he thinks that he has abolished economic cycles. He thinks that he is going ever onward and upward, running more and more of the government as he disperses the results of his control of the economy. That is illusion; it is as bad as Midas. He will come to disillusion.

We do not know when the economy will next turn down. I think that it is on course for recovery for a year or two more. However, I would like to think that next year, when we see what happens, we might have back a responsible Chancellor who presents a Budget with real figures and tells us why he is tightening or loosening policy. We want a Chancellor who brings back a genuine public spending round that addresses priorities, compares Departments and does not give us fancy, management-school descriptions of how great reforms and great money will give us a health service of a kind that we have not seen before in three or four years' time if only we will re-elect him and give him the time to do it.

This is the strangest Budget I have ever known. The measures are dull; the economic outcome is uncertain. I wish the Secretary of State well in improving the health service, but I do not think that he knows yet how he will do it. Meanwhile, I trust that the British economy thrives, despite the Government's peculiar, political method of running it.

6.6 pm

Mr. Giles Radice (North Durham)

It is always a pleasure to follow the right hon. and learned Member for Rushcliffe (Mr. Clarke). Frankly, we can see the difference between his performance and that of his Front Bench. The Conservatives really should have him on the Front Bench, but that is a matter for them.

I warmly welcome the Budget. I welcome the development of welfare to work, which has provided considerable help for my constituency. I welcome the increase in the working families tax credit, the increase in child benefit—which was of course announced in the previous Budget—and the useful help for pensioners, especially the raising of the savings exemption and the increase in the winter allowance. The new regional fund of £1 billion for economic development is very helpful and will certainly be welcomed in the north-east. I welcome the £1 billion for education, on top of the £3 billion that had already been planned. It is good that that money is going direct to schools. Then there is the £2 billion extra for health, on top of the £2.9 billion that was already announced in the previous comprehensive spending review.

The Government have made a commitment to very large increases in health spending over a number of years. Those increases will be ring-fenced because the Government say that this is a major priority. I have to tell the right hon. and learned Gentleman that if we believe two areas to be particularly important, it is not so strange to ring-fence them in this way. We have not done it in the past; we have not given priority to the areas that we think important in public spending. As a result, when things have gone wrong, budgets in those areas have been cut. There is a case for doing what the Government are doing. This is a very large increase, and the Government are right to want value for money. I am pleased that the Chancellor of the Exchequer and the Secretary of State for Health are putting in place mechanisms for ensuring that the money goes where it should and is properly spent.

As for whether these spending increases can be afforded, the Chancellor is noted for his caution. I think that that is a virtue in Chancellors—those who are not cautious usually come to a sticky end. My right hon. Friend has approached the matter with his natural caution, but there is of course a history. We have only to look at 1987 and 1988 and the horrid example of what happened to Nigel Lawson's strategy: spending increases, tax cuts, overheated economy, increased inflation, and then raised interest rates which plunged the economy into recession. That example is in front of every potential Chancellor, and is certainly in front of this Chancellor. Nobody wants that to happen again.

We had a golden scenario and we threw it away. We do not want to do that again. That is why the Chancellor has locked in his fiscal tightening—paying off £12 billion of the national debt. The right hon. and learned Member for Rushcliffe knows better than anyone how quickly the figure can go from a large surplus to a large debt, so it is right for the Chancellor to be cautious. Of course, by paying off debt and reducing it, my right hon. Friend will release extra resources for public spending. An extra £4 billion will be released this year because we shall pay less in debt.

Table 2.7 on page 32 shows that the overall fiscal impact of the Budget is either a minus figure or only 0.6—that is the only plus figure, which appears for 2003–04. If that table is correct, the Budget is cautious. The Monetary Policy Committee considered the Budget. Today, its minutes stated: Overall, the broad fiscal picture looks somewhat tighter than had seemed probable a month ago. The impact on future activity and inflation seemed to be fairly small, although that would, in part, depend on whether the Budget had any lasting effect on sterling's exchange rate. More analysis would be needed once the full details of the Budget were known. The Budget has not received a thumbs down from the MPC. That is important, because if we want to get interest rates down, the fiscal stance must not be over-expansionary, otherwise the MPC will compensate by putting up interest rates, so the Chancellor did something useful in that regard.

In our report on last year's Budget, the Select Committee on the Treasury explained the tax burden for the benefit of the House. As the right hon. and learned Gentleman, the former Chancellor pointed out, it is true that the figures can be considered in different ways, for example by including the working families tax credit. Incidentally, it is not strange to do that; we used to count in tax credits until 1995 or 1996 when the conventions were changed. The figures show that the tax burden rises and then begins to fall. As the former Chancellor said, it is true that if we remove the WFTC, the tax burden rises. If we include the receipts figure that he cited, the tax burden is rising. However, he is not really in a position to criticise the Government on that matter.

I thought that the right hon. and learned Gentleman might attend today's debate, so I looked at his last Red Book—his projection was that the tax burden would rise. The plan was that it would rise in every year between 1997 and 2002. Of course, he might not have stuck to those figures—just as he would not have kept to the figures on public spending. However, I hope that he would have done so. It is true that, under the former Chancellor, the public debt—the public sector deficit—began to be reduced. I applaud him for taking the tough actions that were required, but the job was not completed.

The problem is that while there is a large public sector deficit, there will always be a problem with interest rates. That is a constant danger. If one can reduce the public sector deficit, it is almost certain that interest rates will go down, too. The Government were right to take action to bring down the debt.

It is no good the Conservatives complaining about the rising tax burden when they were, rightly, planning for it themselves. Then they were in the real world, but now they are not. The only thing they can gripe about from the Opposition Benches is the tax burden.

Mr. Kenneth Clarke

The right hon. Gentleman will recall that I was arguing about the type of taxes that were raised—on pensions, savings and so on. However, my main complaint was that I cannot understand why the Government keep denying the obvious fact that the tax burden is rising and that it will continue to rise after the Budget. The right hon. Gentleman seems to be agreeing that, on any definition we care to choose, the tax burden is rising.

Mr. Radice

The tax burden is not rising if we include the working families tax credit. That is a new wheeze—one that I wholly support—to bring down the tax burden for low-paid workers. The Government are entitled to include that figure as long as they also include the other figures—as they do, to give them credit. The Select Committee on the Treasury will produce a report to give a definitive answer on the matter, I hope by the time the Finance Bill receives its Second Reading.

Mr. Andrew Love (Edmonton)

It will include the right figures.

Mr. Radice


I do not think that the former Chancellor argued for large tax cuts in the Budget, but the shadow Chancellor did. When asked whether there should be increased public spending or tax cuts, the shadow Chancellor was in favour of tax cuts. It is irresponsible to call for large tax cuts, especially when the economy shows signs of operating at the top of output and there are some indicators of overheating. If big tax cuts had been made, the MPC would have had to respond and interest rates would have risen. That is not a sensible policy. I am amazed that the shadow Chancellor argued for it. Perhaps he had to do so because of the commitments that had already been made by the Leader of the Opposition.

Another absurd Opposition commitment that was not mentioned by the right hon. and learned Member for Rushcliffe was the guarantee to reduce the tax burden, irrespective of economic circumstances. If the tax burden is to be reduced, cuts have to be made in public spending. As the former Prime Minister, the right hon. Member for Huntingdon (Mr. Major), pointed out, one would have to make cuts in health spending. The Opposition have put themselves in an odd position: it may be a striking policy, but it is a stupid one.

The Opposition's alternative would be to privatise the health service. Their Front-Bench spokesmen say that they will not do that. However, if that is true, the figures do not add up. That is phantom politics. I shall know that the Opposition are serious when they abandon such approaches.

Mr. Richard Ottaway (Croydon, South)

My right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke) referred to table C7 on page 200. That shows the tax burden falling until 2005, under the proposed levels of public expenditure announced yesterday.

Mr. Radice

Is the hon. Gentleman saying that the tax burden is falling? The Opposition have just been arguing that the tax burden is rising. I said that if we add in the working families tax credit, the tax burden begins to fall at the end of the period. On other indicators, the tax burden actually rises.

Mr. Ottaway

The working families tax credit is an even £500 million throughout, so the trend is exactly the same whether or not it is added in—by 2005, we end up with a lower burden of taxation.

Mr. Radice

What might happen in 2005 is interesting but, as the former Chancellor said, it is not very germane. Treasury officials must make forecasts, but we do not know what will happen in 2005—we may all be dead.

Mr. Ottaway

Does the right hon. Gentleman trust the figures?

Mr. Radice

We can trust the figures for two years ahead; they are genuine. However, the world is uncertain; I do not know whether the hon. Gentleman has learned that in his political life. We do not know what will happen in 2004–05 and the figures are, in any case, a little matter of just 0.1 or 0.2 per cent. They are not very germane, so we should not detain the House any more on this point.

Mr. Ottaway

The point about future uncertainty is exactly the point that my right hon. and learned Friend the Member for Rushcliffe made. The important point is that, yesterday, the Chancellor of the Exchequer said that there would be growth in the economy for several years to come. Is the right hon. Gentleman casting doubt or aspersions on that statement?

Mr. Radice

Even my right hon. Friend, who is a very great Chancellor, does not know what will happen in 2004–05. He hopes for growth, but we cannot be certain that we shall get it. I hope that this will not be the standard of the Opposition's arguments throughout this Parliament because, if it is, we shall not get very far in our debates.

I want to discuss the risks associated with the Budget, because there are always risks with any Budget. I agree with the former Chancellor that the inflation target in the Red Book looks achievable. We have low inflation and the MPC thinks that, on present interest rate policy, the inflation target that has been announced is achievable. However, like him, I hope that the MPC brings interest rates down soon. Inflation may not he such a risk.

There may, however, be a threat to output. We cannot be certain what will happen to world trade, but it is looking okay. What will happen in the United States? Will there be a fallout from shares losing value and from a stock market readjustment? We have been waiting for that for a couple of years at least, but it has not happened yet.

The strong pound is another issue. There is no doubt that it is hurting British trade. The contribution of net trade is negative to national output, and we have seen examples of that and heard what big manufacturers have said about the problem. I am more sceptical than the right hon. and learned Gentleman about what can be done because the answers are largely outside our control. It is true that a reduction in interest rates could have an impact, but we reduced them considerably last year and the pound remained very strong.

The pound's relationship with the euro is the key. I take the same position on the euro as the right hon. and learned Gentleman; I wish that we had joined at the start. I hope that we shall join as soon as possible after the next general election, provided that the circumstances are right. However, there is not a great deal that we can do now, because the pound's relationship with the euro—and not so much with the dollar or the yen—is a problem. We are waiting for the euro to rise because it is in the interests of British manufacturers that it does so. We hope that it will rise as soon as possible and, on any rational ground, it should do so because of what is happening in the European economies. Growth in France is strong and Germany and Italy are now recovering, so the euro should rise. Until it does, we shall continue to have a strong pound, which will not be in the long-term interests of our manufacturing industry. I do not have any answers on when it will, and I am surprised that the former Chancellor thinks that he does.

I do not believe in economic miracles. "Events, dear boy," Harold Macmillan once said, change things a lot, and especially in economics. I do not believe that Chancellors of the Exchequer are perfect. I even believe that Chancellors from parties other than my own can sometimes make a good contribution. The right hon. and learned Gentleman was a good Chancellor. However, a big change has taken place. In the 1980s, public opinion polls showed that the Labour party was not trusted to run the economy. However, similar public opinion polls today show that twice as many people think that we are better at running the economy than the Conservative party than vice versa. There has been a big shift in public opinion. I congratulate my right hon. and hon. Friends on what they have achieved. Over three years, by prudent and sensible management of the economy, by giving the MPC control over interest rates, and by having a tight fiscal policy, they have brought about a low-inflation, low-unemployment, steady-growth economy. That is a big achievement.

The fruits of that good and prudent management are coming through in sensible cuts in income tax. We have a 10p starting rate and the standard rate has been cut from 23p to 22p, but the fruits are even more apparent in the increased public spending on vital national services, particularly health. I congratulate the Government on their management of the economy and I look forward to next year's Budget.

6.26 pm
Dr. Peter Brand (Isle of Wight)

We clearly welcome the £2 billion in the Budget for the national health service, if only because the Government have recognised that the health service was desperately in need of an injection of resources and funds. The Government have abandoned their argument that it was no good throwing money at the NHS until they had completed restructuring and had trained expensive specialists at some point in the next 10 years. The Chancellor of the Exchequer has taken a welcome step. I also welcome the assurance that we shall have extra funding over the next four years, even though it will not take us to the Prime Minister's promise—later translated into an aspiration—of reaching parity with the average level of spending in the European Community.

An infusion of resources is important because it may allow the NHS to achieve something that it has not been able to achieve for several years. We have heard claims that the NHS provides a comprehensive service, free at the point of need and paid for out of general taxation. That has not been true for 10 years at least. It is true that any medical intervention that one cares to name is done somewhere in the NHS, but a comprehensive service is not available everywhere.

From his Olympian heights, the Prime Minister issued challenges this afternoon to the NHS. He said, "These are the five challenges that I set for the health service." The NHS is not just an organisation, but an arm of government. The Prime Minister is the Head of Government, so he, the Secretary of State for Health and all the minions in government have a joint responsibility for the people who work in the health service.

A long list was announced this afternoon of disparities in the health service and of the quality targets for which we should aim. None of that comes as a surprise to those who work in the health service. It is surprising that the Government have only just realised that these things are going on. Often, lack of resources or the pressure of work that staff at all levels in the NHS suffer stand in the way of meaningful change.

I should like to go through the five challenges that were set. I believe that they are challenges not only for people who work in the NHS but for the Government. The partnership challenge is vital, but it does not go far enough. The Prime Minister talked about GPs, hospitals, their consultants, primary care groups, social services and community health services. An important contribution is also made by the private sector, especially in long-term care, the care of the mentally ill and the care of people with learning difficulties. It was a terrible omission that the right hon. Gentleman missed out the voluntary sector. Whether the partnership is formal, through contracting, or informal, through advocacy services or carers, the voluntary sector is a partner within the delivery of the health service.

I hope that in the discussions that we are about to have, both the private and voluntary sectors will be involved. We will not get right the services for people with learning difficulties, the elderly, the disabled and the mentally ill unless we involve the whole gamut of people who are currently involved in them. I am afraid that there are still significant organisational and budgetary barriers to joint working. A great deal was said by a previous Secretary of State about breaking down the Berlin wall—

Mr. Geraint Davies

Is the Liberal position on private nursing homes that no additional subsidy should be given to the private sector, above and beyond what is given to council nursing homes for elderly people?

Dr. Brand

We believe in co-ordinated commissioning of care through the NHS jointly with social services. In fact, we would go further and combine the two functions. We also believe that there is a place for a mixed provider of care. We certainly would not treat providers differently. One of the real problems is that the NHS has locked itself away from the community. It is in the interests of the NHS trusts that provide hospital services to decant people, put them under the care of social services, and hope that some form of community service will pick up the more expert input that is required.

Speaking as a GP working in the community, I know how difficult it is to get specialists to go out to nursing homes, or to have someone admitted to hospital from a nursing home when they need more specialist care, because they are no longer a priority for that hospital trust. Those barriers need to be broken down. The care teams working with patients are keen to break them down, but we have structures that get in the way.

The second challenge is the performance challenge. That is absolutely brilliant. It is a bit like "Challenge Anneka". It is right that we should all strive to do our best, but I hope that the Government, especially when they talk about incentive payments and non-incentive penalties, recognise that different parts of the country are at different stages of development in the modern agenda of team health care, and that often what people need is help rather than to be penalised. I would not want to see patients disadvantaged because a set of consultants or managers or a local authority was not prepared to make the proper contribution to patient care.

The flagship of the Government's changes has been the setting up of primary care groups and trusts working jointly with the local authority and the voluntary sector through a health improvement programme. That sounds splendid and fine. That is how it ought to be. Health care is best delivered by the smallest possible unit that is most sensitive to a community's needs. That is why I am so anxious about some of the central Government initiatives that seem to be the flavour of the month.

A framework has been set up to deliver local health care. National and regional services should interact with primary care groups and health improvement programmes, but often they bear no relation to what is being done by the people on the ground. I am not against NHS Direct, but why should it not be integrated with the out-of-hours co-operative services already provided by GPs in most parts of the country? Why should it not be integrated with the ambulance service and social services out-of-hours emergency services? There are structural issues in the way. It would be much better to give the agenda for delivering a service, and the resources, to the people on the ground and say, "This is what we want made available to your population. How are you going to do it?" Instead, we have a system imposed from the top.

The same argument can be used in relation to walk-in clinics. I am sure that they are appropriate to cities or suburbs with mobile populations. They do not sit easily with the traditional primary care in the rest of the country. If the Government are keen to make primary care walk-in services available throughout the country, I am sure that they can be provided, but there are enormous resource implications. The Government should be honest about how that is to be delivered.

The next aspect of performance is again one of the flagships mentioned by the Secretary of State. We supported the establishment of the National Institute for Clinical Excellence. I hope that it will work closely with systems such as Prodigy, which give best clinical advice to practitioners. I am extraordinarily disappointed that NICE has so far accepted only 13 references and reported on only one case. It is committed to doing only 30 investigations in a year. That will not keep up with new developments and will make it extremely difficult for NICE to have a valid role in looking at clinical effectiveness and cost-effectiveness. That is an important issue.

It is no good Ministers hiding behind NICE, which has a long reporting time on urgent issues on which decisions have to be made, such as the treatment of multiple sclerosis and hepatitis C—so well illustrated by the case of the constituent of my hon. Friend the Member for Weston-super-Mare (Mr. Cotter)—and the scandal that up-to-date anti-cancer treatments are available in one place and not in another. Most of those things are not in clinical dispute. It is a question of establishing a national framework, and it is taking too long to deliver that. NICE will also make an enormous difference when up-to-date anti-psychotic drugs can be delivered so that the mentally ill in the community can have a reasonable quality of life rather than just be knocked out so that they are quiet.

The Prime Minister's third challenge is a challenge for the professions, which he asks to strip out unnecessary demarcations, introduce more flexible training and working practices and ensure that doctors do not use time dealing with patients who could be treated safely by other health care staff. Where has the Prime Minister been? Modern medicine has been a matter of teamwork for the past 10 or 15 years. Doctors do not have the expertise to take on things that are best done by other people. In practice, we have moved on a lot further than the regulations have allowed. The Government are dragging their feet on issues such as nurse prescribing, nurse practitioners and allowing nurses to make referrals to consultants. Why should I have to countersign a referral letter from a nurse practitioner who is more expert than I am in the care of people with chronic asthma? We made local arrangements, but I would be officially in breach of my terms of service if I did not sign the letter saying that I would make all the necessary arrangements. We must move on.

Another aspect that challenges not only professionals but the whole team is the recognition of the value of the wider NHS family. We tend to forget that people such as auxiliaries, cleaners and porters make an enormous contribution to people's sense of well-being. Cleaners also make an enormous contribution to health. It is disgraceful how filthy hospitals now are, and the Audit Commission report on hospital infections came as no surprise to me. We need to get away from the compulsory competitive tendering process, which results in a firm cleaning in the morning and the evening, while in the intervening period bed bottles sit there making the place not only unpleasant but unhygienic. I am pleased that Ministers appear to agree with me on that point. I shall continue in the hope of further agreement.

The fourth challenge is the patient care challenge for hospitals and primary care groups to ensure that they all adopt best practice. No one is arguing with that; what is important is that we have the resources to measure outcomes so that we can establish best practice. One of the changes introduced by the right hon. and learned Member for Rushcliffe (Mr. Clarke) gave us the resources to do that. It is important that the modernisation fund, which appears to have been used as often as our mythical extra 1 p on income tax—

Mr. Love

It certainly is mythical.

Dr. Brand

If we were in power, it would not be mythical; it would be real.

It is sad that, in many health authority areas, the modernisation fund has had to be used for the waiting list initiative rather than for its proper purpose, which is to ensure that electronic communications between hospital departments and between hospitals and local communities get on stream.

The fifth challenge is prevention. We all, at times, pay lip service to the concept of prevention. I am beginning to conclude that some of the public health measures that would do much to prevent illness and improve health are better organised through local authorities than through the NHS. Housing, transport and education measures do much to tackle social exclusion and improve health. Let us take for our example the aim of ensuring that people live in warm homes. This country has an extraordinarily high winter mortality rate: it is the highest in Europe and higher than the rates recorded in Finland and Sweden; I am told that it is even higher than Siberia's, although I do not trust those statistics.

There is no reason why, with better integration, we could not arrive at a cost-effective means of addressing those issues. For example, primary care teams could identify homes that would benefit from better insulation and better heating, and issue a prescription to that effect. That was the subject of a private Member's Bill introduced by my hon. Friend the Member for West Aberdeenshire and Kincardine (Sir R. Smith).

Many interventions that prevent further disease are now possible, but they carry resource implications. It was interesting to hear the Prime Minister refer to lipid-lowering drugs. We are the lowest users of such drugs in the European Community, and we have the highest rate of heart disease; I am sure that there is a link between those two facts. However, lipid-lowering drugs are extraordinarily expensive; capped drug budgets mean that priorities have to be assigned; and priority is often given to the treatment of heart disease rather than its prevention.

Finally, on prevention, the Government take great pride and put huge resources into the prevention of cervical cancer, which is a worthwhile endeavour; but I cannot understand why they will not give people free access to dental checks, given that as many people die of oral cancers as women die of cervical cancer. The simple act of going to the dentist enables people to receive advice and treatment that might prevent oral cancers from developing.

Jackie Ballard (Taunton)

My hon. Friend will have noticed that neither the Prime Minister nor the Secretary of State for Health mentioned dentistry in their speeches today, yet that is the element of the NHS that has been privatised to the greatest extent over the past 10 years. In my constituency, it is not possible to find an NHS dentist as a new patient and, if one is not already registered, one has to travel up to 20 miles to get emergency dental treatment. Does my hon. Friend believe that the Government are committed to restoring access to NHS dentistry?

Dr. Brand

I am not sure: it depends on one's definition of national health dentistry. The Government have some centralised initiatives, such as the phoneand-go clinics, and they have assured us that everyone will have access to treatment for dental pain and emergency measures, but that is not the same as national health dentistry as I would like it to be provided: that is, through mixed-practice general dental practitioners who offer both NHS and private sector dentistry. The expertise and advice that can be offered by such practitioners could be made available to all their patients. Dentistry has changed massively over the past few years. Far more can be done in preventive dentistry—through the use of hygienists and appropriately qualified staff. Such arrangements free dentists up to carry out the more intricate work that we have all needed on occasion.

I have gone through the five challenges. Now, I shall suggest two further challenges, which I hope the Prime Minister or the Secretary of State for Health will take into consideration. The first is resource allocation: the current system is not sufficiently sensitive to enable everyone to move to benchmarks. If those benchmarks are not well established, such a change is unduly harsh and creates great distortion in health services. Many examples have been cited of health authorities that do not now provide the service that they should provide, but which are having to make cuts in significant areas of their budget just to keep up.

My last challenge—which the Secretary of State for Health should tackle jointly with health authorities—is doing more about the welfare of people who work in the NHS. People leave the NHS not necessarily because of money but because they cannot cope with the stress, with the inflexibility and, occasionally, with the unreasonable behaviour of others working in the current system.

It is ridiculous that nurses leave inner-city NHS institutions because they are not offered safe housing or a safe means of transport between the hospital and their home in the early morning. It is ridiculous that people who work irregular shifts at irregular hours are faced with hospital canteens that are closed at all but the most regular hours. It is extraordinary how penny-pinching can destroy staff morale. We all want NHS staff to be paid better, but a small increase in resources can make staff feel far more valued and make their lives far easier.

We clearly support the extra funding for the national health service. I was somewhat sceptical about it being directed from the press room at No. 10 Downing street, but I am prepared to wait to see what happens. We want a clear national framework for the national health service, as well as a locally sensitive health service, locally delivered.

I hope that the Government will not wait until the end of their consultations to release the money for this year. It may be better to take a little longer over the consultations, but provide support for an extremely stressed service for the next 12 months. We do not want little dollops. One can die the death of 1,000 cuts, but having 1,000 plasters does not necessarily help when what one really needs is a blood transfusion.

6.50 pm
Mr. Jon Trickett (Hemsworth)

I am delighted to speak on the Budget today, when we are discussing the national health service. Like all hon. Members, I welcome the large increase in funding for the NHS which was announced by my right hon. Friend the Chancellor. The statement by my right hon. Friend the Prime Minister today helps us to understand better how that money is to be spent.

I welcome the emphasis on a twin-track approach, combining clinical excellence with equality of access. It is important that clinical excellence in hospitals, acute centres and so on should be accessible to the entire population, which is clearly not the case at present. I shall return to that when I discuss the situation in my area, Wakefield.

I do not find the official Opposition's fiscal stance credible, particularly in combination with their undertaking today to honour the spending commitments that we have entered into in the Budget. The Opposition outlined the fiscal stance that they would adopt, were they to be re-elected, which in itself is implausible. They would reduce the overall tax burden, whatever the economic circumstances. It is arguable that the tax burden may decrease as a proportion of gross domestic product in an economy that is growing. However, we heard the right hon. and learned Member for Rushcliffe (Mr. Clarke), the former Chancellor, say that he envisages that the cyclical process will continue, and so do I.

At the moment at which the cycle moves into recession and GDP fails to grow, public expenditure inevitably rises in the welfare budget. That is almost a truism. In those circumstances, when GDP is falling or static or barely growing, and welfare expenditure is increasing, the commitment to reduce the burden of tax is wholly implausible, unless the Opposition are willing to argue that they intend to decouple the link between taxation and expenditure. The public sector borrowing requirement would then grow rapidly and possibly spiral out of control.

I have not heard the Opposition argue that case, and I do not believe that they will argue it. It is therefore not plausible for them to argue that public expenditure will be maintained at the level at which it would historically have been, if the tax burden is to fall. Savage cuts in public expenditure would no doubt be imposed, which would inevitably fall on the health service, as on other parts of the public expenditure budget.

I listened carefully to the arguments advanced by the Opposition today. An alternative strategy is possible. Public expenditure on the health service could be reduced and private expenditure substituted for it, but that was not argued, either. It was argued that the official Opposition would match the increase that we proposed in the NHS through public spending, and in addition they would enlarge the private sector.

Even if the taxation and the fiscal implications could be squared—which I doubt, for the reasons that I have given—and additional expenditure could be provided in times of downturn, it is extraordinary to argue that it would be possible both to expand the public sector to the extent that we are proposing—for example, 10,000 nurses—and simultaneously to expand the private sector.

We know that at present there are insufficient trained medical workers capable of being employed in the health service. One is daunted by the amount of training that will have to be undertaken quickly if we are to spend the money wisely, without incurring a form of health service inflation. The required training can be provided, but a great deal of work needs to be done. To argue that the private sector will expand at the same time is not plausible.

If a Government were committed to expanding the private sector, that would inevitably drain resources out of the NHS—the public sector—thereby bringing about what we have been alleging for some time: a de facto privatisation of the health service.

Mr. Geraint Davies

Does my hon. Friend agree that the simultaneous expansion of both sectors could occur only if the Opposition abolished the provision of minor surgery and the like in the NHS, so that people were forced to take out private health insurance?

Mr. Trickett

It is possible that that is being proposed. We have read press statements, which as far as I know have not been denied, suggesting that certain procedures—not necessarily minor ones—would be transferred to the private sector.

If the NHS is to carry out fewer procedures but is to spend the amount of money to which the Government are committing themselves, and which the official Opposition said that they would support, the corollary is health service cost inflation. The cost of procedures will simply increase. If fewer procedures are undertaken but more money is spent on the health service, that is inevitable.

I do not find the Opposition's position credible. I am not convinced, either, by the rosy picture that was painted of the health service under the previous Administration. In Wakefield, we had the greatest extent of fundholding opt-outs in the country. Fundholding GPs were given financial incentives to seek procedures for their patients outwith Wakefield health authority. That coincided with the lack of investment in the two hospitals in Wakefield. The GPs accepted the financial imperative and looked elsewhere.

Neighbouring health authorities came in to provide health services, resulting in the diminution of health care by one hospital in particular in our area, Pontefract hospital. That, together with lack of investment as a result of inadequate funding through the resource allocation working party, led to a hospital at the east end of the district which provides services to my constituency becoming impoverished. We are living with the consequences to this day.

The competitive regime was not effective in providing the strategic approach to health care in the district of Wakefield. A more strategic approach is developing as a consequence of the abolition of fundholding and the ending of the competitive regime.

I shall deal briefly with the current position in Wakefield. We have two hospitals, as I mentioned, one of which has suffered as a result of fundholding. The other, Pinderfields, suffered as a result of lack of capital investment. The new Labour Government have made it clear that they are prepared to make available capital to invest in the district. The problem is that the district is dispersed, with two population centres, and to provide a new acute hospital for one area will result in a poorer service for the other.

Agreement has now been reached on the provision of services in the district, although it has caused me much trouble and soul searching. Certain commitments were made about the level of health care, cancer care and accident and emergency services in my area, the eastern part. But that agreement was made before the Budget and the national beds inquiry, and I am concerned that, although the debate has moved on, with new, welcome commitments from the Government, Wakefield has been left stranded with a decision that was taken in all good faith just before Christmas.

The district will be submitting a case for fresh investment, which I know the Government will ensure we receive, but I have reservations about our bid and I would like an assurance that we will have time to adjust it in the light of the Budget statement, the national beds inquiry and the on-going debate under the Prime Minister's leadership which he announced today. Without such an assurance, I would find it difficult to support the current bid, and it is only right and fair that I say so publicly.

I want to highlight the situation facing two industries in my constituency. My constituency was almost exclusively based on the coal mining industry. Sadly, that industry was destroyed for reasons which most of us well understand and which I do not need to go into now, but, as a result, my constituents are now largely unemployed ex-coal miners.

The Budget builds on previous Budgets in creating a stable macro-economic framework in which businesses can prosper. The corporation tax changes and others introduced yesterday were welcome in the private sector in my constituency as elsewhere. Hon. Members have already mentioned the strength of the pound and the problems that it is causing some industries, to which I shall refer in relation to the textile industry.

The coal mining industry is now at a critical point. Decisions will have to be made within the next 10 to 14 days if we are not to see the end of the industry altogether, a matter on which I spoke recently in a European Standing Committee. Our colleagues in Europe invest huge subsidies in their mining industries, particularly Germany, France and Spain. In Germany, coal costs five times more to produce than in Britain, and other European partners are producing coal which is substantially more expensive than the coal mined in the United Kingdom; yet our coal is more expensive because, while other EU members subsidise their coal mining industries, Britain has not done so in recent years. I would argue strongly that it is in the national interests, as well as in the interests of the community that I represent, that state aid for the coal mining industry should be considered carefully. The UK Government's position that other European Governments should simply stop subsidising their industries is not entirely plausible. I do not for one moment think that they will.

If Britain is to have stable economic growth in the years to come, we will need indigenous energy supplies to ensure that other energy suppliers do not take advantage of an increasingly monopolistic position. I hope that Ministers, and the Chancellor in particular, will have listened carefully to the voices of those in the coal industry, to me and to other hon. Members, and that the Chancellor will consider whether it is possible within his budgetary strategy to assist the mining industry.

The position is slightly different in the textile industry. Many hon. Members will have excellent companies in their constituencies. Berwin and Berwin in South Kirkby in my constituency provides good employment and high-quality tailoring. I have persuaded many of my hon. Friends to buy its suits from the local factory shop, and I have often worn them myself, although, sadly, I am not doing so today. But, like the textile industry generally, it is being affected by the pound, and by other circumstances which hon. Members will know well.

The Chancellor will want to ensure that indigenous industries, such as coal and textiles, are preserved for the future, and I hope that he, like the Secretary of State for Trade and Industry, will consider carefully the recent report on the development of a strategy for the textile industry.

The Chancellor often tells us proudly—rightly so, and I share his pride—that unemployment in Britain is much improved, with 800,000 jobs having been created and about 1 million jobs currently available. That is true in my region as elsewhere, but unemployment black spots still exist. Some communities are isolated and find it difficult to avoid becoming ghettos, certainly in inner cities, but in many pit villages as well. Regeneration requires attention at a macro-economic level, but we must not forget the local community and neighbourhood.

Many people in communities that I represent lack the self-confidence to seek work elsewhere. The Government have created institutional structures, such as the regional development agencies and the learning and skills councils, to address local needs, but those structures are too far removed from the neighbourhoods where the problems lie. It is regrettable that the Government have decided to abolish the training and enterprise councils, of which I am not a great advocate but which at least had a presence at the district level, and to replace them with countywide bodies. That is a lamentable step. I hope that the Government will put something in place locally to tackle problems such as those in the former pit villages that I represent.

Finally, with regard to the micro-economy, money has been set aside for transport in rural areas, and I hope that communities suffering from severe unemployment and crime black spots will be able to access that fund. South Kirkby, a rural community and former pit village which I represent, has a 100-acre pit site which could bring new and much-needed employment to the area, but the private sector will not provide such jobs without a road link to the A 1. It is important that the regenerative potential of such new highways or bypasses should be examined in detail.

With those reflections, I am delighted to welcome the Chancellor's Budget.

7.9 pm

Mr. Michael Jack (Fylde)

I listened with care to the speech of the hon. Member for Hemsworth (Mr. Trickett). I have heard him wax lyrical about the coal industry in European Standing Committee C. The way he argues the case for that industry does his constituents no disservice.

I was however intrigued by the hon. Gentleman's claim that he was sure his district would receive new investment because of the Chancellor's announcements and the subsequent remarks of the Secretary of State for Health about the amount of money available for the health service. When my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke) pressed the Secretary of State about the precise way in which the allocation mechanism would work, the Government were short on detail. The exact way in which the money will be spread around the health authorities, trusts and primary care groups in the United Kingdom is not clear.

When Alan Langlands, the chief executive of the health service, tendered his resignation, newspaper reports suggested that the Secretary of State was totally fed up with the way the health service was being run. They also commented that the Secretary of State would take over the running of the health service—that he would assemble a tightly knit group of super-advisers and run it. Perhaps today's statement is the first sign that the Secretary of State is in charge.

We are still not clear about whether the money will be genuinely upfront to tackle current pressures or whether it will have to be earned through even harder work—from existing resources—to try to get the carrots that the Secretary of State has thinly sprinkled around. Someone on the Treasury Bench is nodding—

The Parliamentary Under-Secretary of State for Health (Ms Gisela Stuart)

indicated dissent.

The Economic Secretary to the Treasury (Miss Melanie Johnson)

indicated dissent.

Mr. Jack

As when one attends an auction, body language must be kept under control; otherwise, perceptive Opposition Members will assume that a signal has been given of new Government policy. I see that the Whip on duty is now giving the appropriate instructions.

Although the money is welcome, I add my voice to those of my hon. Friends who expressed the Conservative party's solid commitment to the health service. When my right hon. and learned Friend the Member for Rushcliffe was in charge, he pointed out at a Conservative party conference that until we started reforming the national health service, it did not know how many people it employed, it had no idea of its capital, and so on. We started the process to ensure, as my right hon. and learned Friend the Member for Rushcliffe said, that we had proper information on which to run the health service. We were gearing our reforms to improving patient care. Waiting lists were reduced under the last Conservative Government, especially for those who had waited a year or more for treatment.

It is a travesty of the truth for the Government to claim that we are not committed to the national health service. My family has no private health care; I depend on the national health service for my family's health care needs. I therefore have a vested interest in the NHS and I shall continue to fight for it in every possible way.

Mr. Ivan Lewis

Does the right hon. Gentleman believe that the credible solution to the problems in the structure of the health service is either its modernisation and progress or the massive expansion of private health care? Which of those options does the right hon. Gentleman believe constitutes the way forward for health care?

Mr. Jack

I am surprised that the hon. Gentleman asks that question, because a mixed economy of care exists under the health care system that the Government run. Health authorities already use public money to purchase surplus capacity in the private sector so that NHS patients may enjoy faster treatment. The Conservative party believes that there is a place for both. We recognise that the bulk of health care in this country will continue to be funded from public sources and that many companies—

Mr. Love

Will the right hon. Gentleman give way?

Mr. Jack

Before I give way to the hon. Member for Edmonton (Mr. Love), I should like to deal with the point made by the hon. Member for Bury, South (Mr. Lewis), who may be in danger of upsetting his Front Bench by attacking the private sector, which is being used under the current purchasing arrangements. Many companies, and indeed trade unions, have provided private health care for their employees or members. People can thus choose. There is nothing wrong with ensuring a diversity of opportunity for health care in this country while acknowledging that, for the majority of people, including me, the national health service remains the primary source of such care.

Mr. Love

In the light of the Conservative party's commitment to its tax pledge, can the right hon. Gentleman understand why the public remain sceptical about any commitment by the Opposition to an increase in resources for the national health service?

Mr. Jack

The public are naturally sceptical when any politician, even the current Chancellor or Secretary of State for Health, starts talking big numbers. It does not mean a great deal to them. However, they want to know whether the Chancellor's largesse means that, for example, the cardiothoracic unit at the Blackpool Victoria hospital will be safe. I receive letters from people who require triple bypass operations but have to wait a long time for them. Does the Chancellor's announcement mean that they will be treated sooner? That will be the acid test of whether the money will benefit people in a way they understand.

I welcome the Secretary of State's comments on performance criteria for the health service. It is important that they deliver. I agreed with his analysis when he pointed out that there were considerable differences in performance between the best and the worst in the NHS. It is important that lean, mean machines such as the Blackpool Victoria hospital trust, whose output is high on lower funding than many other hospital trusts in the north-west enjoy, receive their just deserts. I will judge the Secretary of State's words when we receive details of the workings of the funding and allocation mechanism, and on whether good hospitals such as the Blackpool Victoria get extra money.

I want to refer to other items in the Budget. The Chancellor gave the impression that he was tackling personal tax burdens. However, if we cost the burden out in standard rate income tax terms, we realise that it has increased by 9p but decreased yesterday by 1p. That is a net increase of 8p.

Much has been said about the tax burden. Let us consider table C7, which shows total Government receipts, on page 200 of the Red Book. My right hon. and learned Friend the Member for Rushcliffe rightly spoke in global terms. The table shows that income tax in the current financial year is 10.6 per cent. of gross domestic product, and that, by the end of the Parliament, it will increase to 10.8 per cent. Corporation tax—the largest tax paid by business—will increase in the same period from 3.8 per cent. to 3.9 per cent. of GDP. Excise duties will also increase from 3.8 per cent. to 3.9 per cent. Current receipts, excluding the windfall tax, are set to increase from 39.6 per cent. to 39.9 per cent.

An interesting feature of the Government's approach to taxation lies behind that. They hide the fact that a parallel development with the Chancellor's activity at the centre is the increases in charges and taxes that people pay locally. In Lancashire, the council tax will increase by approximately 6.5 per cent.—approximately three times the rate of inflation. That is because the Chancellor has decided to squeeze the amount of money that goes to local authorities and he expects the council taxpayer to pay more tax locally for services.

That is not restricted to council taxpayers. One of the most interesting charts in a recent Audit Commission report on the cost of local authority social services showed the rate at which charges had increased. I continually receive letters from elderly people who complain about the rising cost of their home help services. It is a little known topic of debate, but it means that elderly people of modest means effectively have to pay an extra tax because they pay more for their home help services.

On charging, one can go right through the whole piece. On the implementation of the integrated pollution and prevention control directive, for example, industrialists and farmers in England and Wales will pay double the rate of their Scottish counterparts. Why? Because the Environment Agency here has been squeezed by the Government as they pass their costs—taxes—back to another paying unit. That is another example of stealth at work and it is a great pity—

Mr. Ivan Lewis


Mr. Jack

I should like to make a little progress, if I may. It is a great pity that the Chancellor, in his gabble, did not—

Mr. Lewis

Will the right hon. Gentleman give way?

Mr. Jack

In a moment. It is a great pity that the Chancellor did not have the courage to outline his strategy. It seems to be, "I want to appear virtuous at the centre, but I shall continue to squeeze people out there in the sticks."

Mr. Lewis

I thank the right hon. Gentleman for giving way. Is he aware that under the standard spending assessment system introduced by the Conservative Government, it was assumed, and continues to be assumed, that the local authority would collect a particular percentage of its social services budget by charging for the use of services? In terms of the percentage of money going to local government from council tax payers as opposed to from central Government, is he also aware that his Government estimated that the amount taken from local taxpayers would increase and the contribution from the centre would diminish? Has the Conservative party suddenly changed its policy?

Mr. Jack

I did not say that my party was wrong to recognise that some form of charging regime might be appropriate. Before the hon. Gentleman nods, thinking he has scored some great point, I recommend that he read the Audit Commission report and acquaint himself with the chart to which I referred. I have done so. With respect, I do not think that he has made such an exploration. I apologise if he has, but he would find it a great education.

Mr. Robert Syms (Poole)

The advance corporation tax changes in the Government's first Budget hit pension arrangements, particularly for local authorities. Many of them have to face up to paying more to their pension funds, which in turn is hitting services.

Mr. Jack

My hon. Friend takes me to a point that I was coming to, and I shall alight here for a moment. People in local authorities are not the only ones affected; Tesco pensioners have to pay more into their pension funds because of the ACT changes. Putting the emphasis on the individual, not the centre, is another way of changing the tax relationship. The Chancellor made much of the help that he is giving to charities, but they will lose £400 million as a result of the ACT changes and, over a phased period, that money will come out of the charitable pot. There were some fiddly little changes on value added tax for charities, too. They have advocated an end to VAT, or a lower rate, on certain of their purchases, but there was no word from the Chancellor. My hon. Friend has triggered an interesting thought on the Budget's failure to address some important issues.

I have mentioned pensions, which take me on to savings. Intriguingly, the Red Book says that the savings ratio continues to be very low. If individual saving is low, it looks to me as though the Chancellor, because of the high tax burden, is doing the saving on behalf of the individual. Is that good economically? I would say not. Individuals probably have a better idea of where to deploy private capital than the Chancellor, and he should reconsider his savings policy. We have heard nothing about his strategy, apart from individual savings accounts. The Economic Secretary says that ISAs are wonderful, but the industry points to their complexity and people's difficulties understanding them. A sad element of the Budget is that no effort whatever has been made to address the problems with ISAs to make them less complex, and the Government need to outline a long-term savings strategy.

Another sadness is that the Chancellor made no mention whatever of the need to reform and simplify our tax system, although an Inland Revenue press release referred to the work of the tax law rewrite committee, of which I am a member. I was glad that it also mentioned the capital allowances Bill, which is being prepared, but I am blowed if I can see when there will be parliamentary time to present that important step in simplifying our tax system to the House of Commons. More importantly, the Chancellor made no mention either of the committee's work or of the number of extremely good ideas on reforming our tax system and on wider reform. He did not show himself to be a genuinely tax-reforming Chancellor. Were he such a Chancellor, he would have commissioned work to ensure that some of the good ideas coming out of the tax rewrite exercise are used to improve the overall simplicity of the tax system. I understand that the Finance Bill will run to more than 500 pages, and that is not a record of which the Government should be proud. For example, 1 know for a fact that the Inland Revenue would dearly love to get at some complex pay-as-you-earn rules and simplify them.

The Budget mentioned the Government's environmental credentials and I want briefly to consider a number of the proposed measures. Changes in the climate change levy were discussed and I welcome two concessions—one on horticulture and the other on liquified petroleum gas, to stop fuel switching—but I challenge the Government to tell me why on earth they need the levy. I apologise to the hon. Member for Hemsworth for what I am about to say, but the Government's carbon dioxide targets could be met by adopting the Secretary of State for Trade and Industry's suggestions on changing the gas moratorium, by increasing electricity generation from burning gas by 14 per cent. and by decreasing electricity generation from burning coal by 13 per cent. That would save the requisite 2 million tonnes of carbon dioxide at a stroke. That information has come from parliamentary answers. We could get rid of the climate change levy's complexity and still achieve our environmental objectives.

I do not understand why the Government use the stick approach in their environmental activities—there is never a carrot. For example, why did not they introduce double corporation tax relief on the money added to a company's bottom line by the energy it has saved? That would have been a positive encouragement. Instead, they have introduced the incredible complexity of the climate change levy.

Mr. Geraint Davies

Will the right hon. Gentleman give way?

Mr. Jack

For the last time, yes.

Mr. Davies

The previous Conservative Government closed down 90 per cent. of British coal mines. Is the right hon. Gentleman proposing that the rest should be abolished on environmental grounds? That is what he seems to be saying.

Mr. Jack

No. If the hon. Gentleman had done his homework, he would realise that my suggestion is the equivalent of diminishing the output—25 per cent.—of the Drax power station. That would still leave considerable coal-fired capacity for the United Kingdom. I make that point because the Government have taken a complicated view, as they have on the banded vehicle excise duty proposal, which is supposedly designed to encourage more environmentally friendly cars. If anyone wants to see an example of sheer complexity, I recommend to them page 147 of the Red Book. There are four VED bands, umpteen different recommendations for carbon dioxide emissions, and references to the petrol car, the diesel car and cars using cleaner fuels. The difference between the top and bottom rates in this great chart is between £90 and £160. Will that have any serious impact on what cars people purchase? The answer is absolutely and indisputably no. I support the objective of getting cleaner cars on our streets, but the work that car manufacturers are undertaking to improve the technology of their cars will have more impact.

Why have not the Government given manufacturers a carrot for achieving environmental targets? Why do they continue to beat people with complicated sticks that will have no economic impact whatever? The aggregates tax—£370 million—is another example. What will happen? Lorries carrying reprocessed aggregates will tour the country simply to try to miss paying the tax. How much CO, and other pollutants will result from that? We do not know, because the Government have not told us.

The Government's "fiddle me here and fiddle me there" approach to the economy goes on. One of the Chancellor's advisers must have been Martha Lane Fox, because part of the Budget was seriously dot.com. One of the measures was to provide tax relief for people who want to go online. If the Government had known anything about running business in this country, they would have realised that small businesses do not buy their computers, they lease them. Leasing does not come under the terms of that proposal, so it is just more meaningless gesture politics.

The most successful company in the world of software, Microsoft, did not get where it is with barmy proposals such as the Government have introduced to stimulate small businesses. Small businesses want less bureaucracy, less red tape, less interference from government and continuing lower interest rates. Good ideas will find their way forward without the Government's interference.

The other oddity in the Budget was work permits. It will be "open sesame" for any IT expert to come to the United Kingdom. The Financial Times tells me that the Chancellor is to undertake a recruitment exercise. As he is scouring the world for those people, what is he doing to the indigenous IT experts? Last year, innovative, one-person businesses were going to be taken to the cleaners because of tax changes as a result of IR35. I wrote to one of the major suppliers of IT personnel to the Department of Social Security and to BAe Systems in my constituency. It told me that it would lose these people, who were going abroad because it was easier for them to ply their trade in a better tax environment than that created by the Government. It is odd that the Chancellor is now trying to redress the balance of his own economic policy on IR35 by going on an overseas recruitment exercise. If that is not the politics of the madhouse, I do not know what is.

Mr. Ottaway

Is my right hon. Friend aware that the Red Book shows that, as a result of IR35, the burden has this year leapt from £475 million to £900 million? That is one heck of a chunk to take from the self-employed.

Mr. Jack

I entirely agree with my hon. Friend, and I am grateful to him for making that point. I had a meeting in my constituency with 60 people from all over the country who will be affected by IR35. They are the very entrepreneurs whom the Government want to encourage. The Government create a tax system whereby those people can reward themselves by a combination of salary and dividend, and then they decide that they do not like the dividend bit, so they clobber them. Those people are risk takers: they cover their own sickness, their own pensions, their own training and their own investment. What greater characteristic of a one-person business could there be? Yet the Government's answer to IR35 is to recruit from overseas. It is, as I say, the politics of the madhouse.

In my constituency, manufacturing, agriculture and education have also been affected by the Budget. Manufacturers have not been helped one iota. I am old-fashioned enough to believe that manufacturing still has a part to play in this country. The Engineering Employers Federation said that the Chancellor had done nothing to reassure manufacturing industry. The Machine Tool Technologies Association said that the Budget had totally failed to address the serious problems faced by the industry. Mr. John Edmonds of the GMB said: The most serious problem for the British economy at the moment is the value of sterling and its impact on the manufacturing sector. The Government have loaded the manufacturing sector with the climate change levy, the working time directive, the minimum wage and a raft of other measures that have cost the sector dear. The Budget has done nothing for manufacturing. The most the agricultural industry got out of the Budget was a reference to the herd scheme of taxation in an Inland Revenue press release on capital allowances.

On education, the big headline was £1 billion for education. Strip it out, and we find that it is £300 million for schools. That will not help the biggest comprehensive school in Lancashire. I welcome more money, but that school needs four or five more teachers to deliver the new A-level syllabus that the Secretary of State for Education and Employment has outlined. If that school receives the maximum amount of £50,000, it will, at best, buy two teachers. The head teacher is still short of people to deliver the Government's education policy. There is no capital to expand the school's dining facilities: it can accommodate only one sixth of the pupils for school dinners. The school has grown like Topsy: there are lots more pupils, but no expansion of the infrastructure. The Budget was silent on that.

Families facing a £16,000 bill to send their children to university received no help from the Budget. I suggest to the Government and to members of my Front-Bench team that we should get rid of student fees. We are supposed to be getting more doctors, but parents who want to put their children through medical school face a £5,000 bill. What an inducement! How will that give the Secretary of State his extra supply of doctors? The time has come to end student fees.

Regional investment was trumpeted as the next great solution to economic disparity. When I got down to reading about that, I discovered that what was proclaimed as a £1 billion investment turned out to be discussions between the Government, the European investment bank and other regional development quangos on various priorities. It is not real money: it is targets that they would like to see spent in the regions. It is officialdom interfering and trying to pick industrial winners. The Government have gone full circle. They have shown what they want to do, which is to interfere with the wealth-creating process while lacking any understanding of the real way in which business works.

The Budget was like one of those Chinese meals: quite a lot to digest, but rather quickly forgotten, except perhaps for one thing—the bill. The tax bill remains rather large. The Government have done nothing to rescue their reputation in that respect.

7.36 pm
Mr. Bob Blizzard (Waveney)

The obvious question for a Back Bencher to ask about any Budget is, "What's in it for my constituency?" In doing so, we must recognise that the overall state of the national economy is the most important factor in influencing the fortunes of people in my constituency and elsewhere, in terms of the performance of the local economy, employment levels, and public expenditure on local services. What I found most impressive in what the Chancellor said yesterday was his sound management of the economy, because that underpins everything else the Government do. For too long, too many people thought that they had to put up with the Conservative party because the Labour party could not run the economy. We have now firmly set the record straight and will continue to do so.

When we came to power, we were faced with a huge national debt that had doubled under the Tories and there was a £28 billion deficit in the public finances. That had built up over the years when Lord Howe and Lady Thatcher were, in their famous phrase, stretching the meaning of words beyond what was credible, and when the right hon. Member for Huntingdon (Mr. Major) and Norman Lamont were tearing each other to pieces over the Maastricht treaty and the exchange rate mechanism. While all that was going on, our economy was going down hill.

To be fair to him, the right hon. and learned Member for Rushcliffe (Mr. Clarke) did his best to sort out the mess, and I thought that he made a reasonable job of it, but we were left with a £28 billion deficit when we came to power. We have turned that round and repaid debt, so we now have a surplus on the current account, and because inflation is under control we can rebuild the national health service and the education service, put more money into crime reduction and transport, and cut income tax by 1p.

The key to all that has been the welfare to work policy. We have record numbers of people in employment and paying tax, unlike all those years under the previous Government when we had high levels of unemployment and huge social security bills. The Tories always said that they would cut social security: they cut the rates, but they never cut the overall bill.

What history will remember about yesterday's Budget are the huge additional resources to rebuild the national health service and to put into education.

I remember the days—I was a teacher then—when the increase in the education budget for a year was I per cent. It was not 1 per cent. above inflation; it was simply 1 per cent. We were asked to put up with that. There were years when the increase for the health service was not much more: when I led a local authority, we had to put up with years in which the increase was 0 per cent, and we were told that that was a virtue. Now, when Opposition Members complain that the increase is only 6 per cent.—or 7 per cent., or 5 per cent.—we ought to remember those dark days.

It is because of those days that it is taking such a long time to rebuild our public services, but they are already being rebuilt in my constituency. Waiting lists at my local hospital are on course to meet their reduction target. The winter so-called crisis was not a crisis; it was managed extremely well. As I speak, £700,000 is being spent on upgrading the hospital's accident and emergency unit, and the first 20 nurses provided by the Government's new recruitment drive have gone into the hospital. Since May 1997, Lowestoft community hospital has been completely renovated. This year's health authority budget has been set at three times the rate of inflation—and all that was happening before yesterday's announcement.

Nevertheless, people at my hospital—which always heads any league table that anyone might care to construct—have told me that, notwithstanding their gratitude and support for all that we have done, they feel that they need more money in their base budget because some health service costs are rising at a higher rate than that of inflation. We have heard about that, both yesterday and today. We heard today that the new money would go directly to trusts and primary care groups, and they will be very pleased. We are talking not just about the £2 billion for the immediate year, but about the four-year programme—a huge rise from £45 billion to £69 billion. We are on the way to reaching European levels, whatever they are. These are massive amounts. The real question is this: why is so much needed to take us to the level that we would like to reach? The answer is that the national health service was not funded properly for so long.

As for education, I have lost count of the number of schools in my constituency that have received money from the buildings fund to repair leaking roofs, add classrooms and improve facilities generally. This year, both Kirkley and Sir John Leman high schools are receiving six-figure sums for capital works, and Lowestoft college received £900,000 to create a centre of excellence for training in maritime and offshore skills. That is real money—but what we shall see now is real and direct money going into our schools. I taught in schools for many years, and I cannot remember seeing an extra £30,000, £40,000 or £50,000 going straight to a school for a head teacher to spend on the things that mattered. That was unheard of, but now it is happening. Primary schools are also receiving good sums: up to £9,000.

The other priority for my constituency is help for pensioners. It contains 21,000 of them, and they will be helped by the £150 winter fuel allowance. I am particularly pleased about the rise in capital allowances. Many pensioners with small savings have not yet been able to claim the minimum income guarantee, but they will now be able to do so. They will find the guarantee a great help, because it represents a significant weekly increase in what they can claim as a pension through income support. Pensioners will also be pleased that more of them are taken out of tax. The 10p tax rate will help, and that is on top of what we knew before about television licences and eye tests. It all adds up to more than 75p a week.

Nevertheless, pensioners still ask me why the Government cannot simply spend the money on increasing pensions across the board. The answer is this: there are wealthy pensioners who, frankly, do not need the money, and, more important, the poorest pensioners would lose the money pound for pound as they lost their income support. If we adopted that course, we would not reach our target.

I approve of the policy of increasing the pension by at least the rate of inflation, and then using the minimum income guarantee to help more and more people. However, I believe that we do or did—need to consider pensioners with a small second pension, who are not wealthy, who did not receive the minimum income guarantee and who, in their terms, were only receiving the 75p. I am delighted that the Government intend to introduce a pensions credit system enabling such people to obtain more money through a pension entitlement guarantee. I hope that the Government will act quickly, because those people are impatient.

Given that we are raising pensions annually by at least the rate of inflation, I wonder whether we can improve the way in which we calculate the rate of inflation. It is quite hard to give an answer to a pensioner who says, "I have my 75p, but my council tax has gone up by this much, and my rent has gone up by that much". The problem is that the month in which we assessed this year's index gave us a figure of 1.1 per cent. Perhaps a way could be found of producing a figure reflecting the actual increases that such people experience.

For many years, the main issue in my constituency has been the distress caused by unemployment coupled with low pay—and the two tend to go together. Since May 1997, unemployment has fallen by a third in my constituency, owing to a general improvement in the national economy along with the significant effect of the new deal. However, the unemployment rate is still 7 per cent., which is much higher than the rate in the rest of East Anglia and puts us pretty high up on the national league table. We have generally been in the top 20 travel-to-work areas in unemployment terms.

I was pleased to hear yesterday that the Budget would extend the new deal, enabling it to focus in particular on unemployed people over 25. Many of my constituents who were made redundant from the traditional industries of shipbuilding, food processing and engineering, and have found it very difficult to find other jobs, have asked whether they can have a bit more of the new deal. They like it, but they feel that it is young people who are being helped. They ask, "Can you turn to us?". We have been turning to them, and now we are going to focus on them even more.

The idea of spending £40 million on action teams to try to match the vacancies to the unemployed strikes me as very worthwhile. Notwithstanding the unemployment that I have described, in the last couple of weeks three employers in my constituency have said that they cannot obtain the labour that they want.

People have come to my surgeries—and, I am sure, to those of other hon. Members—and said, "I think I have found a job, but I will struggle until I receive my first pay slip." I also like the idea of the £100 job grant to tide them over.

During my early months as a Member of Parliament, after May 1997, many people came to see me, perhaps because I was a new Member or perhaps because they had problems that had built up over the years. The main issue was the number of people for whom work would not pay—who remained on benefits, and did not look for work as hard as they would have wished to if they had not known that they would be worse off as a result. The working families tax credit represents a major step forward in my constituency, and is very helpful to the 2,500 or so families receiving it. The increase of at least £4 a week in the child-related element will not only help people who want to get into work, but reduce poverty.

What with the minimum wage, and the increase in child benefit to £15 a week—I think that about 12,500 families will benefit from that—the Budget has given people much more hope, and improved their lives. Those people, many of whom are traditional Labour supporters—core supporters—will also be pleased with the 1p reduction in income tax. However, if we are to have the jobs, businesses must succeed. Most employers in my constituency run small businesses, so they will appreciate some of yesterday's measures, including the reductions in capital gains tax. Despite what the right hon. Member for Fylde (Mr. Jack) said, those businesses will appreciate the capital allowances on information technology equipment. Not everyone in my constituency leases the equipment; some buy it. The measure will encourage them to do that, which they have not always done before.

When we talk about employment throughout the country, the big issue is disparity. There is not just a north-south divide, but an east-west divide and a coastal-inland divide. Coastal towns, particularly those on the east coast, have high unemployment. There is a disparity within the regions. My constituency is in the same region as Cambridge. Too often, Cambridge is seen to typify the region.

Therefore, I welcome the regional venture capital fund. I hope that it will be used to support enterprise in places that can most benefit from it. I am sure that the regional development agency will have a role in that, but I am concerned about the East of England regional development agency budget, which is the same as it has been historically. When we put together all the money, it showed how little money the East of England received under the previous Government. I hope that the present Government will review the amount urgently, put that right and ensure that the money is directed to unemployment black spots. My constituency is called an unemployment black spot. It is not a pleasant name, but I hope that we will not have to put up with it for too much longer.

I am glad that my hon. Friend the Paymaster General is in the Chamber. I have spoken to her about the construction industry scheme. I was pleased with the Budget's measures to simplify the paperwork on the scheme and to make it easier for companies to get a CIS5 certificate.

I am pleased that there will be an investigation into the system whereby people who run small businesses must travel around personally presenting a plastic card to people to obtain their money. We should use the information technology that we ask those small businesses to use. We need to clamp down on fraud, but some decent businesses in the construction industry are trying to get work in other parts of the country. They have been held back. I welcome yesterday's measure to tackle that.

As energy policy has been raised by my hon. Friend the Member for Hemsworth (Mr. Trickett) and by the right hon. Member for Fylde, I should say a word about that. I admire what my hon. Friend is doing for the coal industry, but I remind him and Ministers that an awful lot of people are employed in the off-shore oil and gas industries, particularly the off-shore gas industry.

Many fabrication yards are becoming more idle. Thousands of jobs are threatened. We will have the capacity to have off-shore gas and oil industries—although gas will last longer than oil—for about 30 years to come, if we get the taxation regime right.

I know that oil costs $30 a barrel at the moment, so the idea of cutting tax is not politically acceptable, but we must look to the long term and ensure that we can sustain that industry, and not just in a fiscal sense. It becomes progressively more difficult to extract the oil and gas from the marginal fields. We do not want to lose the main infrastructure that supports that.

There is no longer a case for a moratorium, or for stricter consents policies on gas-fired power stations. Many more jobs would be created through building those power stations than would be put at risk by reducing—not obliterating, but reducing—some of the coal use. It meets the Government's environmental policy on CO, emissions. Building those power stations could make an important contribution to meeting our Kyoto targets.

Again, many of the places where the power stations would be built need to be regenerated. Such places around the coast suffer from unemployment. Such building would provide a big input to those communities, as well as sending a positive signal to the off-shore gas industry that this country is committed to the cleanest of the fossil fuels—it is second only to renewables, probably, in terms of environmental acceptability—and is going in that direction.

My constituency is in East Anglia, which is characteristically rural—in fact, my constituency contains a large tract of rural north Suffolk. People have asked what the Budget contains for rural areas. What is in it for those areas? [HON. MEMBERS: "Nothing."]

That is the response from members of the Conservative party in East Anglia. I find that puzzling. Their approach seems to suggest that people who live in rural areas are a different race, a different set of people, but they use the health service and send their children to state schools. Many are pensioners. They pay income tax and will benefit from the 1p off. They claim the working families tax credit and take up child benefit. People do all those things in rural areas, as they do in towns, so to try to pretend that there is some basic difference is ridiculous.

In one particular respect, the Budget was good for rural areas: the measures regarding transport. Before the Budget, I felt that the Government had a choice. They could either continue with a small fuel tax escalator and hypothecate the money, as promised, into transport, or they could have no fuel escalator. We had both. There is no fuel tax escalator—I was pleased about that—but £280 million will go towards transport, so we have the best of both worlds.

Mr. Syms

Is the hon. Gentleman aware of today's announcement that £250 million of that has gone into the Manchester Metrolink? Therefore, for the rest of the country, there is £30 million.

Mr. Blizzard

The hon. Gentleman assumes that the £250 million is out of the £280 million. I am prepared to accept what the Chancellor said yesterday, which is that that £280 million will go towards road improvements and public transport. My plea to the Chancellor and to the Deputy Prime Minister is that a good deal of that money be spent to improve the road infrastructure in some parts of the country.

Anyone who has been to East Anglia will know it still has inadequate roads. Regions in the far end of East Anglia, such as my constituency, which is based around Lowestoft, suffer from that. The economy suffers from it, too. Therefore, there are plenty of possibilities to use some of the transport fund in East Anglia. I hope that it will be used there.

I hope that money will continue to be used for the rural bus initiative because many people in rural areas have no car. The initiative has helped them to gain some mobility. However, I ask that the terms of the funding be drawn fairly broadly, so that transport authorities, county councils or whatever, can use it in the best way for their communities.

In Suffolk, we are told that the money can be used only for new bus routes. I would like the money to be used to protect existing bus routes. We could move more people for our money if we put it into community buses and taxi schemes. All too often, we have empty single-decker large buses rumbling around country lanes. We could do better for the money that we are putting in. However, we must recognise that a serious modal shift will not happen in rural areas. Thousands of buses would have to roam around the villages at regular intervals to offer access that is in any way comparable with that offered by a car. That is important when looking at future policy.

I have already mentioned some of my constituency's employment problems. The Government are making efforts seriously to regenerate my area. We are in receipt of single regeneration budget money, and, in one particular area of Lowestoft, much good work is being done. We are, therefore, not at all pleased that the area's last bank—Barclays bank—is walking away. As the Government are putting in millions of pounds, Barclays is walking away—undermining confidence in the area and making life more difficult for shopkeepers, who have to take their money further to bank. We are also not pleased that Barclays seems to have an uncompromising attitude. However, I am very pleased that, yesterday, the Chancellor said that, in the Budget, he would take the banks to task in a number of ways.

It seems to me that large companies, such as banks, should be working with Governments and for communities. When a programme such as the single regeneration budget is in progress, banks should stick in there and have some faith in that programme. Ultimately, they may reap the rewards of that.

Mr. Fabricant

Does the hon. Gentleman seriously believe that Barclays will reopen its Lowestoft branch because the Chancellor of the Exchequer has taken it to task?

Mr. Blizzard

The debate gives me a very good opportunity to put on the record, in Hansard, what I think of Barclays—so that, next week, when I meet people from Barclays, I will already have made my point.

Yesterday's Budget was a good Budget for my constituency. I believe that it was a good Budget for most of the country. There were winners all round. Yesterday, I was asked on local radio who was a loser in the Budget. Although I can think of people who have to pay more stamp duty on a home worth more than £250,000, I do not think that that change will affect too many people in my constituency.

I remember the days when Budgets were feared—when people braced themselves for two weeks before a Budget, wondering what dreadful things could happen. I remember when people prepared to wince on Budget day, and when Budgets were measured only by the degree of badness and pain that they inflicted. Yesterday's Budget was an occasion of joy, and an occasion when we could see that public services are being rebuilt. We are rebuilding the welfare system for our young and our old. We are rebuilding prosperity for hard-working people not only in my constituency but across the country, so that we end up with a country that we can be pleased to live in.

8.2 pm

Mr. Ian Taylor (Esher and Walton)

The hon. Member for Waveney (Mr. Blizzard), in his peroration, reached almost evangelical tones, and he did an extremely good job at defending his Chancellor's Budget. Indeed, there were times during yesterday's Budget speech when I was quite excited. There were several measures in there—which I shall return to later—that I rather liked the sound of; they sounded exactly like the sort of measures that would be welcomed by certain aspects of the business economy and by those of us who would like a lessening of dependency in our society.

My suspicions were aroused, however, in casting an eye at the now healthy hon. Member for Bolsover (Mr. Skinner), who was beginning to smile at the bits of the statement that I was smiling at. This is a very worrying state of affairs. It was clear to me that the hon. Gentleman had got the full feel of the Budget: it is capitalism with a socialist face. To that extent, the process of the Chancellor's speech led us to his own peroration, which was the huge growth in expenditure on the national health service.

Conservative Members, including me, are not prepared to be categorised as anti-NHS. The NHS is a crucial part of the fabric of our society and has had a remarkable impact on the creation of the self-confidence within families and communities to face up to illnesses. In times of stress, it is very important to know that there is a health care service that can look after us. I hope that that is common ground between both parties. Like my right hon. Friend the Member for Fylde (Mr. Jack), I resent the accusation that we are not prepared to defend a national health service.

The problem is that, over many years, the national health service has not been delivering the quality of service on which people depend. Therefore, there are concerns in communities right across the country that, when they need it, the national health service—albeit funded by taxation—will not give the quality of service that their families require. It is a matter not of whether the NHS might ultimately be able to deliver the service, but whether it is able to deliver it when the family needs it. In my own constituency, the current situation has caused people who are certainly not wealthy to decide to opt for private practice—they would not normally have thought of doing so—because they want the security of knowing that they can quickly receive treatment for their particular illnesses.

Mr. Ivan Lewis

Is the solution to that problem more money and the reform and modernisation of the delivery structures in the health service, or is it massive expansion of the private health care sector? Conservative Front Benchers repeatedly articulate the view that the solution to the problem that the hon. Gentleman has outlined is massive expansion of the private health care sector. Does he support that view?

Mr. Taylor

Expansion of the private health care sector is not a matter of whether the Government or the Opposition support it. I believe that the sectors can co-exist and, in a moment, I shall come back to a point about how they might help each other. However, I tell the hon. Gentleman—who has made two interventions on this point—that one of the periods of fastest growth of the private health sector was under the previous Labour Government, in the latter part the 1970s, when care in the NHS had reached such an abysmal state that people, including trade unionists, were being driven to take out private health insurance policies. Currently, there is a danger that concern about the quality of care in the health service is again encouraging people to move across into the private sector. A week or two ago, I had a constituency case on precisely that issue.

Therefore, I do not believe that any policy that seems to drive people out of the health service into the private sector is acceptable. I certainly do not support that. What I do say is that, in the long run, if the United Kingdom is ever to reach the types of health care levels achieved in other countries, more resources, both public and private, need to be devoted to health care.

Mr. Lewis

I thank the hon. Gentleman for giving way again on this point. The Government have a choice: they can either make tax relief available to stimulate use of the private sector, or they can use tax revenue and public expenditure to improve and expand the national health service. Which of those two choices does he believe a responsible Government would make?

Mr. Taylor

I do not think that that is the dichotomy at all. In a free society, people are free to take out private health insurance. That is not something that we should be disputing. My point is that more resources have to go into the national health service. I welcome the Government's figures yesterday, and I am delighted that the economy is sufficiently healthy for those types of figures, over four years, to be committed. I also hope that the economy justifies that degree of confidence by the Chancellor. However, ultimately, whatever amount of money one puts into the health service, there will be problems.

It was not that many years ago that I was parliamentary private secretary to the then Health Secretary, William Waldegrave, now Lord Waldegrave, and we were implementing the reforms that had been started by my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke), William Waldegrave's predecessor. There were a huge number of issues that we knew we had to tackle, because it was self-evident that the publicly funded, tax-based health care system was simply not capable of proper management. It did not have the management tools. We had the same problem that the Prime Minister mentioned today—disparity of treatment across the country.

Reforms are necessary, and I welcome the Prime Minister's statement today—but with one big caveat. I wrote a speech for William Waldegrave that sounded very similar to that statement, but, as he was an intelligent man, he rejected it as waffle. I hope that the Prime Minister has understood that warm phrases and lots of concepts such as preventive care, partnership and performance are not themselves substitutes for the tough reforms that will have to be put into practice if the money that has been promised by the Chancellor is to deliver the improvement in outputs across the country that all of us require from a nationally funded health service.

I also wonder whether the options that the Prime Minister is considering should not have additional to them the types of concepts that Lord Winston articulated only a few weeks ago. In my view, this is Lord Winston's Budget. I suspect that, if Lord Winston had not articulated those views, the Chancellor's generosity may have been slightly less in this Budget. However, I shall leave that aside as I cannot prove the point. Lord Winston clearly said that additional private sector resources will need to be brought into the health service for the benefit of all, and new ways of improving the management of the allocation of resources in the health sector will also be needed. I did not hear that from the Prime Minister today, and that was one of the great omissions from his statement. I hope that in the next four months he will learn the lesson that tough choices are not just about warm words. The health service has some difficult management issues that must be addressed if we are ever to have the quality of care that all our constituents expect.

Mr. Fabricant

Does my hon. Friend appreciate—because clearly Labour Members do not—that we are already seeing a large expansion in private health care? Is he aware that BUPA has announced that four times as many private operations were performed in the past 12 months as in 1997? That is because of the state of the NHS under the Labour Government.

Mr. Taylor

My hon. Friend is correct to say that the current state of the health service after two and a half years of a Labour Government is worrying, and that that is forcing people into the private sector. However, I do not want to see a conflict between the two. The purchasing criteria in the health service may, from time to time, require the purchase of operations and procedures from the private sector. We need to see the totality of resources devoted to health care, rather than people in the private sector being regarded as renegades, or people being forced out of the NHS because it is not good enough.

I received a letter from the Ember centre, in association with Age Concern Elmbridge, which covers my constituency, listing several people who have received worryingly poor treatment by the NHS. It states: It saddens us to have to make these representations to you but we hope that you will agree that these experiences show that conditions in our Area need to be vastly improved and what is hard to understand is why the Health Authority is not more vigilant and making inspections—or following up complaints—to ensure that this state of affairs does not continue or ever arise again. We do not point the finger and say that the health service is awful because there is a Labour Government, because I know that we faced the same problems when we were in government. What I do say to the Minister is that money alone will not cure the problem. Considerable reform is needed if health authorities are to perform their jobs and the trusts and the primary care groups are to be enabled to provide a proper quality of care. I welcome NHS Direct, for example, because it is a good initiative. However, all the changes must be carefully considered if, in four years' time, after vast amounts of money have gone into the health service, we are not still to have the problems that constituents have experienced with quality of care. That really would be a crisis, and the Government would have proved that money from the state was not sufficient to deliver the quality of service now expected by the public.

During those four years, there will be terrific pressures on the drugs budgets, as new procedures arrive and people expect them. Only one drug, Relenza, has been held back by NICE, but in the future several drugs may be resisted on value grounds and the Government will get into difficulties, especially once the genome project has been realised and the pharmaceutical and biotechnology industries start to produce treatments that arise from understanding our genetic structures.

The welcome news on the NHS is almost a challenge to the Government. They have to prove that their approach will deliver better quality of care. Ultimately, the public worry less about where the money comes from and more, and increasingly, about the quality of care they receive. I would like the NHS to be a service that is broadly free at the point of need, but that service is no longer sufficient if it does not deliver the quality of care.

I said earlier that I welcomed one or two points in the Budget, and that is true. The Chancellor is right to try to stimulate e-commerce, and I disagree with the comments of my right hon. Friend the Member for Fylde (Mr. Jack) on that subject. On occasions, a stimulus in certain aspects of economic development is important. It might be temporary, but it could be crucial. The trouble is that more and more people are now aware of the dynamism of e-commerce and the importance of getting online, but very few have the strategies to do so or the investment plans to enable them to do so. We cannot afford to slip behind—and in internet time, one year is a very long time. Action this day is crucial if we are ever to meet the Government's target of making this country the best place in the world for e-commerce.

Mr. Jack

One of the characteristics of many of the enterprises my hon. Friend describes is that they are yet to make a profit. Therefore, offering them a tax allowance is not perhaps the most relevant approach.

Mr. Taylor

I agree, in terms of the newest dot.coms. Indeed, it is widely understood that their value will go down once they make a profit. At that point, they will be valued in more traditional terms, instead of the multiplication of the number of customers. I am less interested in the dot.coms, which will make a sensational impact for a while, than in companies that are more established moving into a position to offer their services online. The adaptation of offline companies into the online world is one of the biggest challenges we face. Numerically, that includes the bulk of companies in this country.

If we are to achieve the real dynamism that anyone who goes to silicon valley on the west coast of the USA instantly observes, we will have to stimulate entrepreneurs. I do not know whether it is fashionable to say so, but the Chancellor is right to understand that entrepreneurs should not be ridiculed as rich people who, because they have made money, should be regarded as social pariahs. That was old Labour. If new Labour's attitude is that somebody who has generated ideas and made money should be held up as a virtuous example, because they have created wealth in society and the Chancellor has then been able to spend that wealth on other matters such as health, that is a dramatic change and I welcome it.

The Government's moves to encourage wider share ownership and stock options for employees and to improve the treatment of capital gains tax are profoundly to be welcomed. My only caveat to the Minister is, "Don't let the Inland Revenue get at those proposals." I remember the brainwaves of my right hon. and learned Friend the Member for Rushcliffe and my right hon. Friend the Member for Fylde that were designed to stimulate aspects of the economy, but once the tentacles of the Inland Revenue had got them, the details in the Finance Bill showed that the idea had been crucified—so I give the Minister a little bit of friendly advice to be alert. It is good to encourage stock options, but they should not be crucified by a continuing burden of national insurance charges. It is good to have lower capital gains tax, but Ministers should allow it to be exercised instead of wrapped up in red tape and exemptions. In many cases, it is the detail that frustrates businesses. The idea is good, but its application does not make sense.

The new ability to reward up to 15 key people in a company with options is a good scheme and will be much welcomed. If I understood the proposal, and I have not yet read all the small print, the fact that the schemes are over a four-year period, instead of the much longer times that used to apply, indicates that the Government are up to speed with some of the aspects of the new economy. I welcome all those proposals.

Some of the incentives for pensioners, especially those who have been thrifty, are overdue, and the Government have hit the nail on the head. I welcome those proposals. In my constituency of Esher and Walton, pensioners who are not blessed with generous multiple pensions have experienced difficulties and will welcome the incentive in the Budget.

Let me take a slightly wider view of the macro-economic judgment and the fiscal balance. There is some confusion as to whether or not the Government are being virtuous and tightening the fiscal balance, as the Chancellor claimed to be doing. That judgment has yet to be made. There are genuine questions, particularly about public expenditure. They arise from the fact that the Chancellor locked in real annual growth in public expenditure of 2.75 per cent. against assumed economic growth of 2.25 per cent. There are worries about how generous the Chancellor has been. One headline in the Financial Times reads "Prudence or Profligacy?".

I hope that the Monetary Policy Committee genuinely believes, as the right hon. Member for North Durham (Mr. Radice) said, that the Government have been responsible and maintained a fairly tight fiscal balance. If not, there may well have to be interest rate rises and that could create problems. If the Chancellor wants to give Britain the opportunity of joining the euro in the next Parliament, as is his professed aim, our interest rates will need to converge with those within the eurozone. I consider that to be a necessity for other reasons.

It is not sustainable for our short-term interest rates to be at such variance with those on the continent. However, it is likely that short-term interest rates on the continent will rise as the German and French economies are growing at 3 per cent. and there appears to be a positive outlook. That is important for our export markets, given that approximately 50 per cent. of our exports go to the eurozone. The Chancellor must recognise that interest rates will have to converge, and that brings me to the real problem—fortunately, the Opposition do not have to face it now—that there will be more active adjustments to the fiscal balance.

The Government do not control monetary policy and interest rates—they are set by an independent Bank of England and I approve of that. However, the Chancellor has to take that into account and give signals to the Monetary Policy Committee that if the economy does not perform as he expects, he will need to make upward as well as downward adjustments in taxation or spending or vary the savings ratio. That is why the debate about the tax burden has become so sterile. There will be occasions when it is virtuous in the wider economic interest to increase the burden of taxation so that the pressure of anti-inflationary policy does not impact only on monetary policy.

I hope that no party—I cannot think which—pledges to reduce the burden of taxation over the lifetime of a Parliament without taking into account the fact that the Government will be unable to control certain elements in the equation. I direct that warning to Ministers and anyone else who cares to listen.

We are still suffering from the high value of the pound, which is having a serious impact on UK manufacturing. Let us be quite clear that our failure to be part of the eurozone has political and economic costs. That is why I am keen for the Government to organise the economy so that we have at least the chance to join early in the next Parliament.

As my right hon. and learned Friend the Member for Rushcliffe said, it is no accident that one reason for BMW's decision on Rover is the high value of the pound and the lack of clarity about the time scale of the Government's policy for joining the euro. Ford and other car companies are making similar noises. My argument has always been not that we should join the euro today, as we are not in a position to do so, but that we should do our best to make that a possibility. We must also make it clear that such a timetable exists, as any indication that we were likely to remain outside for a protracted period would have considerable negative implications for investment decisions. Those are the key criteria.

Our exclusion from the eurozone is impacting on jobs and unless the Government follow through their warm but vague words about entry, the problems will continue. They could prove to be one of the biggest risks to the Chancellor's confidence in the four-year view that is set out in the Red Book in respect of the way in which the economy will grow, the effect on unemployment and ultimately the balance of public expenditure.

Although the Budget represents good news for the national health service, it is not good news for other Departments. One of the glummest people on the Government Front Bench yesterday was the Deputy Prime Minister, who got only £280 million for all his huffing and puffing. As the hon. Member for Waveney said, transport is a crucial factor in economic growth, as well as enabling individuals to get around. It is vital that the Government realise that, relatively speaking, this year's Budget has starved transport, and that the public will suddenly wake up to the fact that in order to give a Lord Winston settlement to the national health service, other Departments have not done so well. Unless there is a public expenditure review in the autumn, there will be some squealing in the shires and elsewhere—and certainly among business—about the settlement for transport.

It would be intriguing if the Financial Secretary, in her reply to the debate, let us know what is happening to the £3 billion that has been raised so far through the auction of the third-generation Universal Mobile Telephone System—an auction that I devised back in 1996–97. It was in our election manifesto and the incoming Labour Government shrewdly picked it up. I am all in favour of the auction, but as the figure is £3 billion and rising, it would be interesting to know what the Government intend to do with it. Is it to go into e-commerce to stimulate further improvements in the allocation and utilisation of radio frequency? Is it to go into the national pot as a way of bailing out the Department of the Environment, Transport and the Regions for the Deputy Prime Minister? I do not know, but I am sure that the Financial Secretary has it at her fingertips.

Finally, as a south-east Member, I am concerned about property. The Government were absolutely right to phase out mortgage interest tax relief. I have always thought that it had long outstayed its welcome. Of course it will hit people, but it is the right thing to do. I also agree with increasing stamp duty. However, I should like to know how else the Government intend to take the steam out of the property market. Do they intend to increase stamp duty further? If I advocate that, I certainly will not be popular in my constituency, but property prices there have reached such a level that people who have not benefited from previous price increases are finding it difficult to buy. I am not looking for a property crash, but if interest rates come down further, there could be a further push to property prices as mortgages become cheaper.

The Government will have to think of some way to take the steam out of the problem. Raising stamp duty may be one way to do that, but I had hoped that there would be some evidence in the Budget of a change in the value added tax rules on property refurbishment and extensions. New building is VAT exempt, but improving a home still attracts VAT at 17.5 per cent. I hope that the Government will offer more explanation of their true intentions for managing a property market in which there is a possibility that inflation will go off the rails.

8.30 pm
Mr. Ivan Lewis (Bury, South)

I have sat and listened to most of the debate this evening, and one thing has struck me above all—no political party can have a greater opportunity to change the nature of a country's economy and public services—indeed, its whole social and economic policy environment—than one that is afforded 18 successive years in power. The previous Conservative Government's legacy in public services, welfare reform and social exclusion is there for all to see.

In recent weeks, we have been told that we spend much less than other European countries on our health service. What does that say about the underinvestment in health care over 18 years of Conservative Government? We have heard too that the previous Government tried to reform and modernise the health service and other public services, but that the outcome was unsuccessful. The present Government inherited a monumental task when it comes to the reform, modernisation and improvement of public services.

I support the Budget. It is probably the most graphic illustration yet of the Government's belief that fairness and enterprise are inextricably linked in the attempt to create a truly successful and civilised nation. No longer are British people asked to believe that economic prosperity for the few will trickle down to benefit the many. No longer do the Government promote the false belief that individuals have to choose between personal ambition for themselves and their families, and their responsibilities towards each other and the society in which they live. No longer do we tolerate a Britain in which millions of families are excluded from the opportunities that many hon. Members take for granted.

The Government's capacity to reverse the economic and social policy orthodoxies of the Tory years is clearly due to their economic management. One of the frustrations for the Opposition, now and in the medium and long-term, is that this Government have shattered the myth that Labour Governments are incapable of competent economic management.

The facts bear examination. We have tackled the national debt. Inflation averages 2.5 per cent, and 800,000 new jobs have been created. More people are in work today than at any time in the history of our country. Direct inward investment has risen by more than 45 per cent. since the Government came to power.,lb/> Conservative Members have expressed two reservations about the Government's economic record so far. The first is connected to the strength of the pound—and there is no doubt that that is causing difficulties, especially for manufacturing industry. However, no Conservative Member has come up with a credible solution to the problem. No Conservative Member has seriously advocated devaluation, or a significant reduction in interest rates, or—unless something has changed radically overnight—that we should join the single European currency now.

Although it is ironic that we should have to worry about it, hon. Members of all parties acknowledge that the strength of the pound is a problem, but no Conservative Member has advocated a credible alternative economic strategy to deal with it.

Then there is the debate about the tax burden. Earlier, the hon. Member for Croydon, South (Mr. Ottaway) referred to the Red Book. He seemed to imply that there was evidence that the tax burden was falling. That contradicts the suggestion by other Conservative Members that the tax burden under this Government is rising.

The point that needs to be made is that the Government went into the last general election with a very clear commitment on taxation. That was that there would be no increase in the basic and top rates of tax, and that a fair regime would be created for the rest of the taxation system. Conservative Members may shake their heads at that, but that commitment was made crystal clear on the Labour party pledge cards and, as everyone can see, we have honoured it.

Mr. Hammond

Perhaps our problem is that we remember the Prime Minister saying on radio that there were no plans at all to raise taxes.

Mr. Lewis

The vast majority of British people who voted at the last general election understood the Government's clear and explicit commitment that there would be no increase in the basic or top rates of income tax. One of the frustrations for Conservative Members is that they can no longer credibly portray the Labour party as the party of high taxation. That is one of the reasons why opinion polls show that people continue to support the Government's policies. People recognise that we have achieved economic stability without at the same time increasing the tax burden on the average family. That is an important development in the Labour Government's relationship with the electorate.

Competent economic management by itself is a hollow achievement. What matters is what a Government do with the resulting dividend. In that respect, the differences between the Conservative party and the Labour Government could not be starker.

First, let us consider the health service. We usually judge political success and progress by outcomes, rather than inputs. At the last general election, the vast majority of British people made the judgment that the health service was underfunded, that there was low morale among staff, and that there were shortages of beds, doctors, nurses and essential equipment.

Moreover, the Conservative Government had created a culture in the health service of competition, rather than co-operation and partnership. My right hon. Friend the Prime Minister spoke this afternoon about the reform of the health service. He put at the top of his list of priorities the creation of a partnership culture and the need to work together. I was somewhat amused when the Leader of Opposition scoffed at that. The right hon. Gentleman failed to understand that one of the major problems in changing the culture in the health service is that hospitals and doctors are not used to co-operating and collaborating. The health service culture engendered by the Conservatives was based on the internal market and competition.

That is why the difficult task of changing the culture of the health service is important.

Mr. Ian Taylor

It is a point of interest that, when the reforms were being put through by William Waldegrave, there were several comments to the effect that they were the sort of reforms that would bring people together. For the first time, hospital consultants were prepared to send Christmas cards to GPs. They needed to be friendly with one another.

Mr. Lewis

General practitioner fundholding would certainly encourage consultants to send GPs Christmas cards. However, fundholding created a two-tier health service. It was an iniquitous service. If Members speak to professionals within the health service, and to trust board and health authority board members, they will hear them talk about a significant culture shift within the NHS since the general election: people work together, seek to make best use of resources and adopt a collaborative and partnership approach. We need to build on that. These people condemn what happened, certainly towards the end of the Tory years, when a culture of competition was introduced that was entirely inappropriate for a national health service.

That was the health service that we inherited. It does not matter whether we have debates or arguments about whether some of the health reforms that the Conservatives introduced were positive; whether the internal market was a good thing; whether the perpetual ideological experimentation with the health service was helpful; or whether the then Government were embarking on right-wing ideological experiments. The judgment that we make on the success of political intervention is based on the outcome. The outcome was as I have described, and the health service was one of the major reasons why so many people voted for the Labour party at the general election.

Dr. Brand

Will the hon. Gentleman accept that the perception of outputs after almost three years of Labour Government is even worse, and that is why we are happily blessed with the Budget infusion of £2 billion?

Mr. Lewis

No, I do not accept that. That may come as a major shock to the hon. Gentleman.

We all have discussions with and work with professionals in the health service. They have said consistently that more money is going into the service and that modernisation is moving in the right direction. They have said also that more money is needed to deliver the modernisation that is required to take the service into the 21st century. That is why the Budget was so significant. The increases in spending year on year in the health service over the next four years will be 6.1 per cent.—the greatest ever sustained growth in its history. That is in response to the concerns that have been expressed and the desire of professionals and managers within the service to match the commitment and the energy of modernisation with additional resources.

There is no commitment within the Liberal Democrat manifesto that ever demonstrated that that party was committed to putting the extra resources into the health service that the Government are now committed to investing.

Dr. Brand

No doubt the hon. Gentleman is aware of our shadow Budget, which put extra funding for the NHS at £2 billion.

Mr. Lewis

It may come as another tremendous shock to the hon. Gentleman, but I have not studied your shadow Budget too seriously. One of the benefits of being a Liberal Democrat is that there is never any prospect of you having to make these decisions or to take responsibility in government.

Mr. Deputy Speaker (Mr. Michael Lord)

Order. The hon. Gentleman must use correct parliamentary language.

Mr. Lewis

I apologise, Mr. Deputy Speaker. I move on—

Mr. Hammond

The hon. Gentleman has told the House how well he communicates with local health service professionals. Perhaps he will answer my question, which the hon. Member for Bury, North (Mr. Chaytor) was unable to answer last night: by how much have out-patient waiting lists in Bury risen since the Government took office?

Mr. Lewis

I do not have that information to hand. However, I am sure that I can make it available to the hon. Gentleman, if he will find it helpful. As a result of my discussions in Bury, I am aware of the welcome that has been given to the Budget by the health authority and the health trust. They will be able to demonstrate that it will make a significant difference to the quality of health care that is provided to the people of Bury.

I move on to the Prime Minister's announcement today that there will be significant extra resources for the health service, and a strategic effort to modernise and reform it. There is no question but that there are tremendous disparities of performance in different parts of the country—whether they be in terms of best use of resources or of the number of patients treated.

I shall give two tangible examples. By most accounts, the health care trust in Bury is one of the most efficiently managed in Britain. Health care trusts not a million miles away are considerably less efficient. That gives rise to the question why things are different in Bury. During the Christmas period I was fortunate enough to visit the Greater Manchester ambulance service. When I arrived, I found that there were senior officers from each of the health authorities in the Greater Manchester area at a meeting. I inquired what the meeting was all about and I found that a senior representative from each of the health authorities in Greater Manchester met each week to monitor the availability of beds across that geographical area. That is why health authorities in Greater Manchester did not have some of the difficulties experienced by authorities elsewhere.

This is not simply a question of additional resources. Also important are quality of management, co-operation and collaboration, and spreading and sharing good practice within the national health service. We must also be willing, if necessary, to take on the vested interests in the health service that like to maintain and perpetuate the status quo. Self-regulation among doctors should be seen as a privilege, not a right. That is not a veiled threat. We need the professionals to work in partnership with us, but they have to be prepared to change their working practices if we are to develop the quality health care and patient care that people deserve.

Education is also one of the Government's key priorities. We inherited a situation in which too many of our children were leaving school without the basic literacy and numeracy skills that we take for granted. Morale in the teaching profession was low and schools were crumbling. What sort of legacy is that from a Government who were in power for 18 years?

Yesterday's announcement of an additional £1 billion will make a significant difference. It will give between £3,000 and £9,000 to head teachers of primary schools and between £30,000 and £50,000 to head teachers of secondary schools to spend on books and equipment. That will make a tangible, immediate difference to the quality of education that is available to children up and down the country. If, in the past 10 years, head teachers had been told that they would be given a lump sum to spend so directly, they would not have believed it. When it comes to the resources made available to schools, this is a cultural shift.

We are already seeing an increase in the basic literacy and numeracy standards in our schools. Class sizes are coming down for five, six and seven-year-olds. By next September, we will have achieved our goal to reduce class sizes for five, six and seven-year-olds to less than 30. Tangible and significant improvements are being seen in our education system through a combination of additional resources, modernisation, an improvement of the way in which teachers teach, improvements in the curriculum and the introduction of literacy and numeracy hours. Those factors are changing the way in which we provide public services.

Today, the Deputy Prime Minister was in Manchester and announced a £280 million Government investment in the Metrolink system. That will make a massive difference to the transport infrastructure in Greater Manchester. It will expand the Metrolink system to most parts of the sub-region. It is important in reducing road congestion and is a demonstrable commitment to public transport. It is also vital to the economy of the Greater Manchester area, as it will attract businesses to the area and allow existing businesses to grow. Greater Manchester has the potential to be the first model in the country of an integrated public transport system, and the people there welcome that.

We remember the days under the Conservative Government when 3 million people were out of work, even using fiddled figures. We were told that modern economics meant that that was the price we had to pay. We were told that it was impossible to create an economy with both low inflation and low unemployment. That was the conventional wisdom promoted by the Conservative party. We were told that 3 million people out of work—it was probably 4 or 5 million—was a price worth paying.

Welfare dependency had become the norm in far too many communities. It was believed to be better for a family's quality of life if people chose not to work. At the time, Conservatives used the term "welfare dependency" in a derogatory way—saying that people were skiving and cheating, and abusing the system. There was never a serious strategy to provide people with choices—alternative attitudes or role models. In some families, three generations had never experienced what it was like to work. The conventional wisdom was that it had to be like that. There had to be communities and parts of the country where that was the cultural norm.

Let us consider what has happened in only two and a half years. There is the new deal, which has now been extended to the over-25s, to lone parents and to disabled people. That gets hundreds of thousands of people off the dole and into work. This week, new action teams were announced; they will match the unemployed with vacancies in areas of high unemployment.

That personal service is important, because one of the problems we face is that some of the bureaucracies in our Government agencies have not always provided such an individual, flexible service to support people who are struggling for some reason. Those action teams are another step forward—together with the personal advisers introduced under the new deal—to enable people to maximise their potential and to become a reconnected part of society.

We have increased the working families tax credit. There will be a new employment tax credit that guarantees a minimum income to those without children. That is real welfare reform; it really will end welfare dependency—not by scapegoating those who, for years, have found themselves dependent on welfare, but by extending opportunities so that people see some light at the end of the tunnel.

We must not forget that we inherited a situation in which, by any objective measure, one in three children were growing up living in poverty. That was a scandal, when this country was not poor—it was never a poor country during the 18 years of Conservative government. However, the Conservatives chose to cut the taxes of the very rich rather than to make institutional or structural changes to enable people to see that there was a way out of poverty.

We have increased the children's tax credit and the under-16 child credit in the working families tax credit. The figures are significant. As a consequence of the measures taken over two and a half years, and the Budget statement this week, the poorest two-child family on income support will be £1,500 better off since the last general election. That is an important increase in the standard of living of families on low incomes.

We have increased child benefit by 26 per cent. in real terms over the life of this Parliament. The rate for the eldest child is the highest ever in real terms. On average, families with children will be £850 a year better off as a consequence of the Budget.

We are talking about different priorities. There were times when the Conservative Government could have been objectively judged to be managing the economy relatively successfully. However, during those years, they chose to cut taxes for the very rich rather than spend money for the overall good of society. They took political decisions on economic management that rescued them in the short term, but created the boom-and-bust instability that did so much damage to families and businesses.

One of the scandals of our country was that too many pensioners ended up living in poverty. We do not have a proud record on our treatment of pensioners compared to that of most other civilised European countries. However, the Government have made a real start on raising the standard of living of pensioners—especially those on the lowest incomes. We cannot escape from the fact that there has been a change in the pensions system; certain people receive occupational or private pensions, while others do not. It is important to target help at the pensioners on the lowest incomes.

We have increased the winter fuel allowance from £100 to £150, and we have introduced free television licences for those over 75. An important step forward in the Budget was the extension of the minimum income guarantee to those pensioners who have relatively small savings. We all accept that it is a challenge for the Government—a challenge that the previous Government failed to address—to target support at those pensioners who have just enough that they do not receive income support. They tend to be clobbered. They do not receive benefit and have all sorts of charges imposed on them. This Budget is the first step to targeting help at those pensioners.

The Budget contains measures to support business, and there has been a cultural shift in people's perceptions. The business community no longer believes that the Conservative party has any credibility when it claims to be the party of business. That is another source of great frustration to Conservative Members. The business community not only believes that business is safe in this Labour Government's hands, but that we have modern policies that will enable businesses to develop, to thrive and to grow.

The Budget contains further cuts in capital gains tax. That will create the most favourable environment that the United Kingdom has ever seen to encourage entrepreneurs and to reward risk-takers. My right hon. Friend the Chancellor of the Exchequer announced that he was permanently extending capital allowances to small and medium-sized firms to encourage investment. The new all employee share ownership plan is the most tax-advantaged employee share ownership scheme ever introduced in the United Kingdom. We will ensure that share ownership is available not just to the few in British society, but to the many.

An announcement was made on capital allowances for small firms purchasing information technology equipment. That is significant. We know that many small businesses are not preparing for e-commerce and for the future by considering the implications of the internet and technology generally. The 100 per cent. capital allowance for purchasing IT equipment will be important in encouraging such businesses to prepare. A new lop starting rate of corporation tax will be introduced from April. Corporation tax generally is at its lowest ever rate.

There are disparities within regions and some regions are doing less well than others. All the evidence supports that view. That is why the Government are determined to have an active regional policy. A new umbrella fund will help to finance enterprise across the regions and it will support venture capital. It is important that we target regional assistance in a way that reflects the issues that affect particular regions. An announcement was also made on the new clusters fund, which will enable regional development agencies to encourage innovation and support the growth stars of the future.

In conclusion—I am sure that Conservative Members will be relieved to hear those words—this is not merely a competent Government. It is a Government who are on a crusade to build a new Britain on the foundations of social justice and economic prosperity. This Budget is another landmark on the journey to the achievement of that goal.

8.58 pm
Sir Richard Body (Boston and Skegness)

The hon. Member for Bury, South (Mr. Lewis) has covered a huge number of issues, and I am sure that he will understand if I do not follow up all his remarks.

The hon. Gentleman said that the Budget proved that the Government had a record of economic competence. If the economy is in such a healthy state, I hope that he will accept that there is a two-year time lag between the date of a Budget and its effects fully coming through into the economy. Therefore, when he gives praise, I hope that he will not leave out my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke) who left behind such a bountiful legacy.

I heard the hon Gentleman make a comment to the effect that no Opposition Member had advanced any strategy as an alternative to moving towards a single currency. I think that that was the essence of what he said.

Mr. Ivan Lewis

I said that no hon. Member had advocated a solution to the problem of the strength of the pound. I was not referring to the single European currency.

Sir Richard Body

The pound is no stronger than it was previously compared with the dollar, the yen or any other currency. It is the weakness of the euro that is at fault. If the hon. Gentleman thinks that we should have an alternative to the single currency, I should say that the alternative to committing suicide is simply not to commit suicide. There is not much point in committing suicide if one is having have a rather congenial life. If the hon. Gentleman is right in his praise of his Government and believes that we have such a healthy economy, surely it would be unwise to spoil it now.

I want to home in on what the Chancellor would call a mere detail in his Budget—the beer duty. I am sorry to come down from the great expanse of canvas that the hon. Member for Bury, South has covered to deal with such a minor issue, but it is not a minor issue to those of us who have breweries in our constituencies. I have an extremely good brewery. It makes good real ale and I am glad that it is able to stand up to the competition that is now faced by so many people in the brewing industry.

I noticed that the Chancellor decided that there need be no increase in the duty on spirits in the Budget because there was competition, but there is also competition for the brewers. It seems that the message has not come through yet to the Treasury about the vast quantity of beer that is now being smuggled into this country. Judges have famously said to young barristers that a good argument does not get any better by repetition, but I fear that it has to be repeated. The scale of smuggling is increasing year on year.

It is dispiriting in a constituency such as mine to find not only members of the licensed trade, who are trying to be honest, but cafés, restaurants and other outlets where beer can lawfully be sold, buying smuggled beer at a price far below the equivalent for beer imported legally. The more the Chancellor fails to recognise the problem, the more he tempts cafés, restaurants and other outlets to do deals with smugglers. I am sure that the Paymaster General realises that many hundreds of lorries are coming in. I understand that we are to hear a statement about smuggling and that we shall hear that tough measures will be introduced. I hope that that is so because, unless it is, the loss of revenue will increase.

I hope that the Paymaster General and the Chancellor have digested the memorandum that has been sent by the interested parties not once but several times. It sets out the hard facts about the scale of smuggling and the fact that millions upon millions of pounds are being lost to the Revenue. It seems only sensible that we should tighten up customs checks and recruit more customs officials. It is surely within the influence of the Chancellor to ensure that there is an increase in the number of officials. Their numbers have declined considerably in recent years. Might I add that if we had more customs officials searching lorries, we might not have so many illegal immigrants entering the country in them.

I allude to illegal immigrants because the hon. Member for Waveney (Mr. Blizzard), whose constituency experiences similar problems to mine, mentioned low pay in his constituency. I am pleased that the Government are making it easier for people to work than for them to be enticed on to state benefits, as happened in the past. However, far too many illegal immigrants are coming in to my constituency and working for as little as £1.90 an hour—far less than the minimum wage. The exploitation of such people in the black economy is an evil business, because it depresses wages for our own people. It is appallingly difficult to compete with such practices.

That is an additional reason why the Paymaster General should announce tough new means of tackling smuggling. The evil has to be ended. Beer smuggling is bad enough, but the smuggling of illegal immigrants must be stopped. The Paymaster General must announce the toughest possible measures against both sorts of smuggling.

9.6 pm

Mr. Geraint Davies (Croydon, Central)

It is my great pleasure to join in the chorus of praise for the fourth new Labour Budget.

I am aghast at the brass-necked cheek displayed by the Tories. When our spending on health and education was at the lower £19 billion and £21 billion levels, they told us that such spending was irresponsible and reckless. The right hon. Member for Kensington and Chelsea (Mr. Portillo) said that there was a straight choice to be made between tax cuts and expenditure, but, after our announcements of record spending, he turned up on Radio 4 this morning saying that the Conservatives would match all our extra expenditure—the real-terms increases of 6 per cent. year on year. How would he do that?

During this Parliament, the Government have introduced measures to get more people back to work—for example, the new deal, which the Opposition voted against. We made the Bank of England independent, to provide macro-economic stability and to promote investment and employment, but that, too, was opposed by the Opposition; and we have introduced the working families tax credit to make work pay. Every measure that we have introduced to provide the economic platform needed to fund good investment in health and education for the future has been opposed by the party of boom and bust, economic irresponsibility and social division. Now, the Tories turn around and say that they would match our spending. That is ridiculous. We know their real agenda: Trojan horse privatisation, especially in the health service.

It was interesting to hear the right hon. and learned Member for Rushcliffe (Mr. Clarke). He is very much an old Tory and he came out with some very old ideas. He harked back to the old days, when the exchange rate was DM2.50 to the pound, and he appeared to have the idea that the Conservatives would take back control of the Bank of England. He said that they would set interest rates at 6 per cent., as the remedy to high exchange rates and to revive manufacturing. What a load of codswallop—[Interruption.] If any hon. Member doubts that the right hon. and learned Gentleman said that, he should read Hansard.

Those with a rudimentary grasp of exchange rates realise that sterling is at an eight-month low against the dollar, and the yen is appreciating. The problem is the euro: it is not appreciating at the level one would expect, given the economic growth in the eurozone. My point is that only those living in cloud cuckoo land think that it is possible, in a global marketplace, to retake control of the Bank of England and artificially set interest rates at a level that will automatically bring about equilibrium for manufacturing. That was proved when a former Tory Chancellor said that he would hold down interest rates and, the next day, they were 15 per cent.—Black Wednesday, as I am sure the House remembers.

The right hon. and learned Member for Rushcliffe said that it was all very well for the new Government when they came in, because global economic conditions were good. Does he not remember that a quarter of the world was in recession within a year of our coming to power, and forecasts of global growth rates were halved?

Those were not good, harmonious conditions for economic success as a platform for investment in public services. They were difficult conditions, but we have an extra 800,000 people in jobs, contributing taxes, in sharp contrast to a Conservative Administration who oversaw two recessions when the global economic conditions were relatively benign.

I am picking on the right hon. and learned Gentleman as a former Chancellor, and I am sorry that he is not present. He also said that debt is okay. The repayment on the debts that we inherited was more than we spent on education overall. He said that debt is all right, because it is deferred tax—in other words, someone else must put the tax up. Indeed, the Tories put up taxes 22 times.

We inherited the problem, but we balanced the books, we rebuilt employment, and we provided a sound infrastructure on which to build the health service and other services. The health service is a tough challenge. The demography of Britain is changing. The population are getting older and health demands are increasing. Technology is increasing and expectations are rising.

People expect a hip operation, a heart bypass or a cataract operation. Ten or 20 years ago, no one expected those things—they did not exist. Now, everyone demands such treatment, and if they do not get it, the health service has failed. That is why we are investing 6 per cent. per year in real terms, which the Tories could never have promised and will never deliver. We are introducing innovations and investing for reform. For example, we have introduced walk-in centres and NHS Direct.

As a member of the Public Accounts Committee, I am aware that there are regional variations in unit cost and performance delivery, which the Government intend to sort out. That is one of the reasons why we introduced the Commission for Health Improvement and the National Institute for Clinical Excellence. The health service under the Tories, with the internal market system, became fragmented and heterogenous, with no coherence, no national standards, no benchmarking and no best value. All those have been introduced, with the support of first-class funding growth.

That is the main focus of the Budget. In addition, to support the economic vibrancy in which those public investments are rooted, we have introduced yet more incentives for business to succeed. Capital gains tax is be reformed, and we had already brought down corporation tax to lop. As regards the consumer and incentives to work, we have the 10p rate, another reduction in income tax to the 22p rate, and the working families tax credit, which provides up to £214. There is a minimum income for working families, so working pays. We are providing jobs and pay, and that is why people are making a contribution.

My hon. Friend the Member for Bury, South (Mr. Lewis) mentioned what we are doing for pensioners. That is a difficult issue. We are giving them an extra £50, in addition to the £150 that they are getting in fuel benefit. That alone adds £3 a week to their pension.

Jackie Ballard

Does the hon. Gentleman think that most pensioners in his constituency would rather have £3 a week on their pensions to spend as they like, or have fuel vouchers?

Mr. Davies

I shall not be distracted by that. I must draw my remarks to a conclusion.

We are giving more money for all pensioners. We are giving various benefits in VAT reductions, in eye tests and in the investment in the health service—65 per cent. of beds are occupied by people over the age of 70. We are putting in investment. We are building a better Britain for pensioners and others. I am happy to commend this great Budget for Britain as we enter the new millennium. We should all be proud of it.

9.14 pm
Mr. Michael Fabricant (Lichfield)

I give full marks to the hon. Members for Bury, South (Mr. Lewis) and for Croydon, Central (Mr. Davies) for coming up with every new Labour cliché in the book. It is pretty clear that both boys will go far. The hon. Member for Bury, South talked about social exclusion, but I remind him that the Rowntree Trust has said that the past two and a half years have seen a greater divide between rich and poor in Britain than ever occurred in the 18 years of Conservative Government. What price social exclusion?

The Government have at least admitted, or some in the Government have admitted, that taxes have gone up during the past three years, and that is confirmed by the BBC website. You, Mr. Deputy Speaker, may not know this, but the BBC has a website where one can fill in one's personal details and be told in a flash how much one's tax has increased or decreased. I filled it in, lying only about my name, which I said was Mr. Jones, and I was told that my personal tax would rise by £10 a week as a result of the Budget—and I can believe it.

What does the Budget offer? The hon. Member for Waveney (Mr. Blizzard) said that in rural areas its effect would be extensive, but I think not. It offers agriculture nothing. Dairy farmers receive lop a pint for milk at the farm gate, but it costs them 1 1p a pint to produce. Pig farmers get nothing either. We all know that people in rural areas depend on their cars. A gallon of petrol now costs £3.64 in Britain, compared with just £2.82 in Germany. Motorists will have to pay £274 more for their petrol this year than they did three years ago. That is not even counting workplace parking taxes and congestion charges. Those costs have gone up in rural areas, just as they have in urban areas.

We have already heard about the tax on e-commerce, in the form of IR35, so given the lack of time I shall not go into that. However, I do have a question regarding profit-related share schemes, which I would ask the Minister to address when she replies; if she cannot do so, perhaps she will write to me. The Chancellor claimed that the profit-related share schemes would be extended. What will the position be regarding genuine, bona fide schemes such as that offered by the John Lewis partnership, which has 40,000 employees who, owing to the nature of the partnership, cannot buy shares? The Minister will know, however, that the partners have a fair system of sharing in the company's profits.

Hon. Members have talked about private health care, but whether services are provided by the NHS or by private organisations is irrelevant as long as they are free at the point of delivery. That is the acid test. I simply make the point that private health care organisations have done particularly well in the past two or three years. We have seen a fourfold increase in the number of private operations during the past year compared with 1997, because people are just not prepared to wait as they have to at present under this Labour Administration.

What about the great announcement on health? In the past few hours the NHS Confederation has warned that Ministers should not try to browbeat NHS workers. In answer to the Prime Minister's so-called statement this afternoon, Stephen Thornton, its chief executive, said: Each of the Prime Minister's five challenges relies on changing clinical practice, which will need a style of working which wins hearts and minds, not naming and shaming— which is precisely what the Government have tried to do.

What of the marvellous £2 billion that the Government have announced? Of that, £200 million will have to pay for the unfunded pay award and £300 million will come from tobacco tax. That leaves just £600 million to £650 million out of the £2 billion to be released to NHS trusts and primary care practices.

Where does that leave authorities such as the South Staffordshire health authority, which are badly in debt? Throughout the United Kingdom, area health authorities owe approximately £1 billion. That figure has accumulated in the past two and a half years; it will not be paid off.

How are those problems reflected in the microcosm—South Staffordshire—that I represent? At Prime Minister's questions, I made the point that South Staffordshire health authority has announced that Hammerwich hospital and Barton hospital are to close and that services at the Lichfield Victoria hospital will be severely curtailed. The maternity wing and the dialysis unit at that hospital will close, while the services provided by the minor injuries unit will be greatly reduced.

We also experience postcode differentiation in my area. Why do people in Lichfield have to wait three times as long as people in Birmingham for an operation at the Good Hope hospital? I wrote to a Health Minister about that more than a year ago. The Minister replied swiftly and said that it was unacceptable. I was pleased with that reply. The Minister promised to direct full attention to the matter. It now appears that nothing can be done. These dilemmas have occurred since the Labour Government were elected.

The public have been unable to trust past spending announcements by the Government. We find that the £2 billion has been reduced to £650 million. The money will not reach patients; it will be swallowed up by ever-increasing NHS costs. In Staffordshire, we have 83 more police officers, but we have already lost 250. It has been claimed that the NHS will receive an extra £2 billion, but we will lose two and a half hospitals in Lichfield. Tax is down by 1p but has risen by 9p. The Budget is entirely characteristic of the Government's performance: they have taken three steps backward and only one step forward.

9.22 pm
Mr. Robert Syms (Poole)

We are considering the 9p up, 1p down Budget. To return to our position in 1997, the Government would have to reduce taxes by £15 billion. The tax ratio continues to increase; that is a burden on all parts of the community. We need only consider the allowances that have gone: the married couples allowance and mortgage tax relief have been abolished. IR35 makes a great difference to high-tech and engineering. The construction industry scheme has been messed up. It is good that the Government are reconsidering it, but it was ridiculous that people had to drive hundreds of miles around the country to show their certificates. The Government were warned about that; they received many letters. It caused great problems.

The first Budget about which I spoke was in 1997. The Government then changed the advance corporation tax rules and took £5 billion a year off pensions. That is regrettable. We are starting to experience its effects. For example, Tesco announced that its employees would have to contribute more. There has been a big impact on local councils.

Poole borough council in my constituency is suffering because it has to contribute hundreds of thousands of pounds more to pension funds. This year, the council tax increase is 12.3 per cent. Many pensioners tell me, "I had a 75p increase, yet I had to pay a 12.3 per cent. increase. That is not fair." I agree with them.

Poole local authority receives the lowest level of support for education. Although I am sure that it welcomes the increase in the amount of money that will go to schools, that does not alter the fact that, year on year, far fewer resources go to schools in Poole than in many other areas.

I regret that the savings ratio, which was 10.6 per cent. when we were in office is now down to 5.5 per cent., and, according to the Red Book, falling. That does not bode well for the future.

The average British motorist pays £274 more than when the Labour party came to power. Overall, pre-Budget, the Government were taking £36 billion a year from road users, but spending only £6 billion on roads. In the Budget, they increased that amount by £715 million through tax and £60 million through vehicle excise duty; yet they have put only £280 million back. They announced today that they had spent £250 million on the Manchester metro.

Although we pay a heavy price for road congestion—£20 billion a year, the Confederation of British Industry estimates—many road and important bypass schemes across the country have been cancelled. The hon. Member for Waveney (Mr. Blizzard) mentioned problems with the condition of the roads that take people to his constituency, and many of us appreciate that without investment in roads we will not get the country moving and business will not be able to make a better job of employing people.

The Government's record on transport is disgraceful, as they are milking the motorist and not putting the money back. People would feel a little happier if public transport were an alternative in most places. That may be a prospect in London, certainly in north London, but not in Dorset or Poole. The car is a necessity for most people and hitting motorists means hitting some of the poorest people with marginal incomes who need a car for the necessities of life. The Government must rethink what they are doing. The fact that they are not continuing with the escalator was trailed a great deal. There has been less of an increase this year, but the increase, on top of previous increases, has made the burden on the motorist heavy.

I have a further point to make on advance corporation tax, which has hit charities to the tune of £400 million. People tend to consider charities as a group, but there are different sorts—those that can raise lots of money and those with lots of investments as a result of bequests. After making the ACT changes, the Government have tried to make the regime for giving a bit easier. I welcome that—it helps the newer, more fashionable charities—but some older charities with big investments, such as the most respected medical charities, have still been hit hard. Great disquiet has been caused among the charities and the Government need to reconsider.

We are all pleased that the economy, which started to grow in 1992, has continued to expand, and the public sector surplus which is largely due to that continued growth, represents the difference between two large figures. Although we hope that that expansion will continue, we cannot be complacent. I welcome the fact that we shall continue to run a surplus, which is the right thing to do at this stage of the cycle, but I have worries.

The Government were very meddlesome in yesterday's Budget. Simple taxes are best, but there was a great deal of fiddling about with capital gains tax and, when we look into that, we see that it will not give an awful lot back to businesses and will make the system more complicated. It would have been better if the Chancellor had gone for much simpler solutions that people could understand.

I welcome the additional money for the health service, but there was a whiff of panic about the Government's announcement today. They have been in office for nearly three years, but what is happening in our hospitals is of great concern to us all. Our postbags inform us of constituents who are exasperated by the service they are receiving. It has deteriorated, but money is not the only factor; management and the way our hospitals are run have also to be considered.

I make a special plea. Many of my constituents work at Poole hospital as technical staff—they are members of the Manufacturing, Science and Finance union—and they have not been treated as well as some other national health service staff. Patients see a doctor when they need a test, but those tests are carried out by the technical staff. They receive a great deal of criticism when they get a test for cancer wrong or some scandal blows up, and many are not paid terribly well, even though they have degrees. They need a better reward and a better career structure if we are to achieve the back-up in our hospitals that will allow doctors, nurses and consultants to do their jobs properly.

Overall, I am glad that the economy has continued to grow, but it is a pity that the Government are still raising taxes, as many of my constituents will find them hard to pay. I look forward to hearing what my hon. Friend the Member for Croydon, South (Mr. Ottaway) has to say from the Front Bench.

9.29 pm
Mr. Richard Ottaway (Croydon, South)

One needed to do no more than listen to today's opening speeches to get some feel for the contrasting approaches to the Budget. My hon. Friend the Member for Woodspring (Dr. Fox) opened with flair and imagination. He repeated our party's full commitment to the national health service and said that we would match spending and expand the private sector. He drew attention to the scandalous report by Dame Rennie Fritchie, and he pointed out that the Government have said nothing on long-term care.

In complete contrast, the Secretary of State for Health continued where the Prime Minister had left off, with nothing but waffle and spin. They tried to reinvent the wheel. The Secretary of State was completely floored by the intervention of my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke), who asked him about performance and how the extra funding would be reallocated to health authorities. As my hon. Friend the Member for Poole (Mr. Syms) has just said, it is clear that this pledge has been introduced out of panic. The Secretary of State failed to recognise that it is not the amount that is being spent on the health service that is important, but how it is spent.

My right hon. and learned Friend the Member for Rushcliffe, in his excellent speech, said that this was the strangest Budget that he had ever known. Many of us agree with him on that. He rightly drew attention to the fact that the Budget emanated from the "Breakfast with Frost" programme, when the Prime Minister blurted out that he was going to increase expenditure on the national health service to take it up to the European Union average. From the figures that were announced yesterday, it is clear that that will not be achieved. My right hon. and learned Friend also drew attention to the spending parameters, and pointed out that this announcement covered three years, yet performance will be reviewed year by year.

In the exchanges I had with the right hon. Member for North Durham (Mr. Radice), he made it clear that he does not believe the Chancellor's figures showing that growth will continue year on year. By implication, he disagreed with the Chancellor about there being no more boom and bust. He is right to argue that the strong pound is hurting British trade.

We agree with the hon. Member for Isle of Wight (Dr. Brand) that NICE is taking too long in its assessment of new drugs. The hon. Member for Hemsworth (Mr. Trickett) said that the Government's position on the coal industry was not entirely plausible—he was right to criticise them for that. We also agree with him that their position on TECs is lamentable.

In an excellent speech, my right hon. Friend the Member for Fylde (Mr. Jack) emphasised our solid support for the NHS, and he was right to query whether his local hospital was safe. He asked when the tax rewrite plan would be debated. He rightly brought up the issue of the simplification of the tax system, which I would have addressed if I had had more time. This Budget is not is simple. My right hon. Friend rightly drew attention to the continuing problem of IR35.

My hon. Friend the Member for Esher and Walton (Mr. Taylor) described this as Lord Winston's Budget, and that was aptly put. He also made constructive comments on the regulation of the housing market. The hon. Member for Bury, South (Mr. Lewis) admitted that there are problems with exchange rates. Curiously, he started his speech several feet further down the Bench and moved to the left during his contribution—he was almost over here by the time he had finished.

In a delightful little cameo speech, my hon. Friend the Member for Boston and Skegness (Sir R. Body) could not resist a reference to the euro, but rightly drew attention to the problems of smuggling and beer duty. My hon. Friend the Member for Lichfield (Mr. Fabricant) drew attention to the Rowntree report and the fact that the gap between rich and poor is greater than ever. My hon. Friend the Member for Poole rightly said that this was the 9p up, 1p down Budget.

After the general election, the Government, with their huge majority, were confident, poised and ready to sweep all before them. They called their first Red Book "Equipping Britain for our long-term future". They set out clearly in black and white their long-term tax objectives. I shall begin by measuring this Budget and its predecessors against those objectives.

The first thing the Government said was that they wanted to keep the overall burden of tax as low as possible. Well, that is out of the window. They went on to say that how and what is taxed sends clear signals about the economic activities which governments believe should be encouraged and discouraged. What signal does it send when they tax pension funds, so that Tesco says it cannot meet its pension obligations? Do they mean to discourage marriage when they eliminate the married couples allowance? What do they mean when they leave the typical working family £600 worse off as a result of their Budgets? Are these the values that they want to entrench in society?

But the verbiage in that initial policy statement continues. The Government say that tax policy is based on clear principles. These are to encourage work, savings and investment and fairness … it must keep tax-payers compliance costs to a minimum … and attention must be paid to any implications for the United Kingdom's international competitiveness. They have not done very well on that lot either. How are we doing? Savings are down; we have slipped from fourth to eighth in the international competitiveness league, and it is not necessary to look far for the reason. Compliance costs are rocketing, which is having a damaging effect on small businesses. The Budget provides very little help, apart from £50, which is utterly inadequate, given reports to the Inland Revenue about the cost of compliance to small firms.

One thing that this Budget is not—like its predecessors—is simple. Even The Sun says: The Sun has given a whole-hearted welcome to three Brown Budgets only to find there was hidden bad news on taxes. This time we're taking a leaf out of his book. We're being prudent. We're giving this Budget the seven-day test. It may look different next week. My right hon. Friend the Member for Fylde illustrated that point.

Nor is the tax and benefit system simple. As my hon. Friend the Member for Havant (Mr. Willetts), the shadow Secretary of State for Social Security, said the other day, Only a few experts can master the complexities of the elaborate tax and benefit schemes which the Treasury is designing. Social policy is becoming like nuclear physics. Personal taxes are paid by individuals on their annual income, but means-tested benefits are paid to households for their current needs. Trying to merge them in tax credits has absurd and unpopular effects.

We already have the working families tax credit, which includes a child care credit. Next year we shall have a children's tax credit; after that we shall have an integrated child credit; and then we shall have an employment credit. Each will involve different rules of entitlement and different methods of means-testing.

I think we can conclude from what I have said that the Budget has failed every long-term test that the Government have set themselves; but, as usual, it is more about what the Chancellor did not say than about what he said. It is about what he said he would do, and what he did not do. The list is becoming glaringly obvious. The Chancellor did not end his war on the motorist; he raised fuel prices yet again. Britain has far the highest petrol and diesel taxes in Europe. Why should it cost £50 to fill a Mondeo in the United Kingdom, and only £14 in the United States? With the 2p-a-litre rise producing £715 million, but with only £280 million extra for transport, hypothecation is clearly out of the window. It is not surprising that the Deputy Prime Minister looked so fed up during the Chancellor's statement.

The Chancellor did not take the opportunity to end his assault on marriage. He is phasing out the married couples allowance, but we will get no child tax credit until next year. We have a new definition of the gap year. Not only is there no compensation for the phasing out of the married couples allowance; there is no recognition of marriage in the tax and benefit system, something that a future Conservative Government will recognise.

The Government failed to deal with the collapse in savings. They could not resist tinkering with, and abolishing, personal equity plans and tax-exempt special savings accounts, the most successful share-owning and savings schemes that the country has ever had. It is all very well for them to say they will extend the £7,000 for another year; PEPs and TESSAs combined would have allowed £11,000 per person. Given artificial caps of that kind, no wonder the savings ratio is collapsing.

But it is on the new taxes that the Chancellor lives up to his reputation as the stealth Chancellor. Did we hear any mention in the Budget of the new aggregate levy, which will hit the construction industry hard, and will hit first-time house buyers especially hard? Did we hear about changes to double taxation relief for corporations? Did we hear about the extra taxes on insurance companies and Lloyd's? Did we hear anything about the abolition of the approved profit-sharing scheme which will affect the employees of many of Britain's old economy firms? We have heard from Tesco employees how they feel about the erosion of their pension scheme by the Government. How does the Chancellor think others will feel about the abolition of their profit-sharing schemes?

Just when everyone is worrying about new stealth taxes, we have increases in the old stealth taxes on tobacco and stamp duty on share transactions. What is the Chancellor trying to achieve by increasing stamp duty on property? It will hit business. With house prices rising at 15 per cent. a year, a 0.5 per cent. increase in stamp duty will not make any difference to housing demand. It is a return to the old politics of envy: attacks on those who have made enough money to the benefit of the British economy but with no thanks from the Government.

What is there for manufacturing in the regions? Not a lot. As my right hon. and learned Friend the Member for Rushcliffe said, while the Chancellor is saying that exchange rates are a consequence of interest rates set by the Bank of England, and Eddie George is saying that they are a matter for the Chancellor, Rover is going bust in the midlands—and the Chancellor calls it a Budget for enterprise.

There is nothing in the Budget to decrease the burden of £30 billion-worth of business tax over the Parliament. National insurance contributions are rocketing. Will the Paymaster General take the opportunity to explain why the costs of IR35 have been doubled by the Red Book: from £475 million in 1999 to £900 million this year? Nearly £1 billion out of the pockets of the self-employed is serious money. The brain drain could develop into a mass emigration.

There was nothing to resolve the current crisis of employer national insurance contributions on the exercise of share options. The Minister for Small Business and E-Commerce said in Committee that the Government would consult, so we had a novel situation: the first reannouncement, probably, of a consultation.

Probably the stealthiest tax of all is the miserly increase in personal allowances and tax bands of approximately 1.2 per cent. They may meet statutory requirements, but, when the Chancellor says that inflation is running at 2.2 per cent., the man in the street expects his bands and allowances to go up by the same amount. With thresholds and allowances going up by 1.2 per cent. and with earnings rising at 5 per cent., the tax burden is bound to grow. If ever there were a breach of the Prime Minister's undertaking not to raise taxes, that is it. It is a 9p up, 1 p down Budget. It comes as no surprise that tonight's Evening Standard poll says that the Chancellor's Budget has received the worst reception of any of the four Budgets that he has delivered.

The Parliamentary Under-Secretary of State for Trade and Industry (Mr. Alan Johnson)

The poll is pretty good.

Mr. Ottaway

I suggest that the Minister looks at the figures in the poll.

There is a certain irony in the Government's stealth taxes of the past three years. We all know that the Chancellor has increased total taxes by more than £40 billion over the lifetime of the Parliament. We know that taxes have gone up on pension funds, cars, petrol, diesel, charities, mortgages, marriage, medical insurance, house buying, cigarettes, alcohol, insurance policies, savings, betting, employer benefits in kind, the self-employed and on retirement: £1,500 extra taxes per taxpayer, a rise in the overall tax burden of almost 2.5 per cent.

All that is now in the public domain, but how many people have noticed how regressive many of the taxes are for those on low incomes? Who would have thought that it would be a Labour Government who left the basic and higher rates untouched, but raised indirect taxes by such a level that they hurt most of all the people in their heartlands? The irony is that it should be a one-nation Conservative party that must articulate on behalf of and stand up for their people.

When those people realise that it is a Labour Government who are imposing those burdens on them, and that it is a one-nation Conservative party that is coming to their defence—a party that believes in one nation of rich and poor and equal and fair treatment for all—it is the sign of a Labour Government who have lost touch with their core electorate and of a Conservative party that speaks for the nation as a whole.

Dr. Fox

On a point of order, Mr. Deputy Speaker. At the beginning of the debate, I pointed out that, in his statement, the Prime Minister had apparently unintentionally misled the House with one of the figures that he gave. Is not the convention that, when Ministers of the Crown mislead the House, they should return to the House and correct the matter as soon as possible? I have given Ministers several hours' notice of the matter, and the figure has been confirmed by the Library and by other independent sources. I am sure that it would be helpful to the House if the Paymaster General could confirm that the Prime Minister made a mistake and gave a misleading figure on the Government's health care expenditure for 2003–04.

Mr. Deputy Speaker

I was not in the Chair when those earlier exchanges occurred. However, as the hon. Gentleman is well aware, figures can sometimes be a matter for debate. I have no doubt that Ministers have heard the point of order.

Mr. Fabricant

On a point of order, Mr. Deputy Speaker. I am sorry to delay the Paymaster General's reply to the debate. You will know that a usual courtesy of the House is that Front Benchers who attend a debate's opening attend its conclusion. Have you received a message—no apology was made to the House—explaining why the Secretary of State for Health is not in the Chamber for the end of this debate?

Mr. Deputy Speaker

I have received no such notice. However, whether Ministers attend the conclusion of debates is entirely a matter for them.

9.46 pm
The Paymaster General (Dawn Primarolo)

The hon. Member for Croydon, South (Mr. Ottaway) concluded his speech by saying that the Conservative party is the one-nation party. However, as we have seen in our debates in the past two days, the Conservative party is incapable of speaking with one voice even in this Chamber. We have heard from Conservative Members some very interesting and varied, but contradictory, speeches on the Budget.

In the short time that is left, I shall try to answer some of the questions that have been asked in the debate. I apologise to hon. Members who spoke in the debate, but whom I may not be able to mention because of the shortage of time.

Yesterday's Budget was about building a stronger and fairer Britain. The Budget provides significant resources to improve key priority services, particularly for our schools and hospitals. It also takes further action to tackle child poverty, to support pensioners, to promote enterprise and work, and to protect the environment.

Many of the speeches in today's debate—which has followed the statements by my right hon. Friends the Prime Minister and the Secretary of State for Health—were on the national health service. Nevertheless, it is worth reminding the House now of the reaction to the Budget.

The Trades Union Congress described it as "a good Budget". It said: The strong economy meant the Chancellor could afford to be generous and he has been. The Confederation of British Industry said: This is a positive Budget for small and medium-sized enterprises.

The Institute of Directors—that well-known socialist enclave that always supports Labour Governments—said: It is not just the tax measures which are significant—welcome though they are—it is confirmation of the Government's belief in creating an enterprise culture. Many hon. Members on both sides of the House made very thoughtful speeches today on the national health service. There was general agreement in the House in welcoming the extra resources for the NHS. Hon. Members concentrated also on the issue of improving quality, and particularly on the issue of the dramatic variations in cost and performance across the NHS. They spoke also about the action that needs to be taken, in partnership with those who plan and work in the NHS, to build success in the service. Opposition Members were surprised that my right hon. Friends the Prime Minister and the Secretary of State for Health should use the word "partnership". I remind Opposition Members that partnership is necessary because the health service over which they presided was divided through secrecy and competition, by the use of the internal market.

The right hon. and learned Member for Rushcliffe (Mr. Clarke) made an interesting speech. I was especially interested when he said that health was always his priority as Chancellor, but that real spending on health fell during that time. I was pleased to hear him welcoming the statements made today.

Mr. Kenneth Clarke

I wish to react to a somewhat startling assertion. I do not think that real spending on the national health service has fallen at any time for the past quarter of a century. The last time that spending fell was in 1976.

Dawn Primarolo

I would not wish to pick a fight directly with the right hon. and learned Gentleman, but I would ever so gently point out to him that the real terms annual growth in national health service expenditure in England in 1996–97 was minus 0.1 per cent. By 1998–99, that had risen to 2.3 per cent. He will find, on closer scrutiny of the figures, that his first assertion was right.

The right hon. Member for Fylde (Mr. Jack) and several others raised the issue of IR35 and service companies, and I shall put one or two facts clearly on the record. In the tax system, rules govern whether one may designate oneself as self-employed or whether one counts under the PAYE definitions. The category in which a worker falls dictates the reliefs and tax that need to be paid. No one—including consultants in service companies—is allowed to choose their category. People may wish to be self-employed, but that is determined by the terms and conditions of their contracts.

IR35 deals with the massive avoidance of national insurance and a considerable amount of tax in which some of those service companies have engaged. It does not impose a new tax: it merely requires them to pay tax in the same way that millions of other taxpayers—companies, the self-employed and individuals on PAYE—pay tax. It is suggested that such consultants will form a mass exodus, but that does not bear scrutiny because other countries have similar mechanisms to those that we are introducing to the UK system. In fact, I have been amused by the postcards that I have been sent by rather silly consultants from the countries in which they claim they have settled because the tax regime is easier. I am disappointed that they do not give me a reply address, because then I could write back to them to explain how the tax system of Germany or the USA, for example, requires people to pay their fair level of tax.

My hon. Friend the Member for Waveney (Mr. Blizzard) and several other hon. Members referred to the construction industry scheme. I think that the right hon. Member for Fylde will have some sympathy with me on that, although I do not wish to try to tie him in to any criticisms that have been made. The construction industry scheme was designed under the previous Government to deal with the specific problem of tax avoidance that was occurring in that industry. All of the consultation about what the new scheme should look like was conducted under the previous Government. Questions were raised about why the scheme did not work and some Opposition Members said that the Government had been warned. However, the Government were not warned until the scheme had been introduced. I am glad that hon. Members welcome the changes that we are making.

There was considerable discussion of our transport policies and whether the Budget was sympathetic to motorists. By chance, this morning I met representatives of the Automobile Association who told me that they very much welcomed the Budget. In fact, they told my right hon. Friend the Chief Secretary to the Treasury that it was the first Budget in nearly 10 years that the AA had welcomed. That takes the shine off some of the more unreasonable points made by Opposition Members.

The hon. Member for Esher and Walton (Mr. Taylor) made an extremely thoughtful speech—I invite him to come and join us. He was quite right to say that we need confidence in our national health service and that people are entitled to know that they can get treatment when they need it. As he said, there have been difficulties in respect of NHS care and the quality of care declined under the previous Government. He said that there was a shift towards private medical insurance at the time because people lacked confidence in the national health service. I am sure that all my right hon. and hon. Friends agree that confidence in the national health service is also about the challenge of providing better quality care. I took particular note of the hon. Gentleman's cautionary tales about the Inland Revenue, which really is quite friendly. It only requires Ministers who know what they are driving through.

In conclusion, let me turn to the points made by the hon. Member for Boston and Skegness (Sir R. Body) about smuggling. He concentrated on beer smuggling, but I am sure that he is aware that the problem is much wider. Smuggling systematically challenges our health policy and spreads criminal activity throughout our communities. Today the Government announced expenditure of an additional £209 million over three years on Customs and Excise, employing nearly 1,000 extra customs officers at ports and inland. That is in addition to our commitment to increase penalties, provide better equipment and X-ray machines and develop a strategy to disrupt inland activities. The hon. Gentleman will welcome the fact that we can now employ extra staff to deliver on that commitment.

The Budget that my right hon. Friend the Chancellor presented to the House yesterday was based on clear visions and basic sensible principles that Conservative Members seem unable to understand. Economic efficiency and success are central to our strategy. By building a platform of stability we also build a platform for social progress, as economic efficiency and social progress go hand in hand. Conservative Members never understood that and they have demonstrated that they still do not understand it.

We continue in our aim to deal with unemployment and head towards our goal of full employment. In contrast, the Tories said that unemployment was a price worth paying. The right hon. and learned Member for Rushcliffe even said that he had had to provide figures on unemployment because of the problems that had occurred.

We are dealing with child poverty and pensioner poverty and investing in the national health service. We have presented a Budget for all the people which is based on stability, public services, enterprise and investment to make sure that our economy grows and people have secure employment.

Debate adjourned.—[Mr. Clelland.]

Debate to be resumed tomorrow.

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