Budget Resolutions and Economic Situation

HC Deb 23 March 2000 vol 346 cc1123-204

1.2 pm

The Secretary of State for Education and Employment (Mr. David Blunkett)

I know that the whole House will want to congratulate the Chancellor on Tuesday's excellent Budget statement, and particularly to applaud his announcement on additional investment in education and employment. This Budget will provide not only that additional investment, but substantial investment in the national health service, in tackling crime and in supporting and helping retired people. It is a Budget that really rewards hard work and reinforces the something-for-something commitment that we have been making.

The Budget underpins success in our schools, as it supports our teachers' work, our pupils' commitment and success and the hard work of the Employment Service and of hard-working families across the country. All those people will find that their endeavours are being supported by the Chancellor's announcement this week.

In the Budget, we have a commitment from the Chancellor and the Prime Minister of almost £4.5 billion extra for education in the coming year alone. That is an 8.5 per cent. real-terms increase in England, with more than 10 per cent. in real terms going into schools in the coming year. That is how the Government reward those who have given their wholehearted commitment to raising standards and to building the foundations for further success in the future.

In Tuesday's announcement, the Chancellor said that schools across the country would immediately receive a massive uplift in funding, which would enable them not simply to deal with the deficits that were built up in the 1990s, but to engage in new undertakings, such as obtaining new books and equipment or taking on additional staff. Additionally, heads and governors are to have freedom in determining how the new resources are used, to ensure that the resources not only meet their particular needs, but clearly target the standards agenda that we have agreed with them. For primary schools there will be an uplift of between £3,000 and £9,000 for the coming year. For secondary schools there will be an uplift of £30,000 to £50,000 and for all special schools there will be an uplift of £15,000. Special schools have under 200 pupils so the money will provide a substantial per pupil uplift to support special education.

Over the three years of the spending review, we will see an enormous and sustained commitment to education spending such as we never saw under the previous regime. We have already committed ourselves to reversing the trend of reductions that took place in 1995, 1996 and into the 1997 Budget. We have seen a reversal of the downward trend in the proportion of gross domestic product spent on education and I can announce to the House that the £4.5 billion increase will take the proportion of GDP in the coming year to over 5 per cent. I am pleased that we have been able to make that progress so rapidly.

The £300 million that we agreed to distribute to schools is complemented by a £20 million uplift in the recovery programme for primary pupils to be invested in booster classes, which have been so successful. That will mean a doubling of the investment we had already indicated for such classes, giving children who would not otherwise have the opportunity to do so the chance to recover on what is done in the classroom and in after-school activities.

Madam Speaker—is it still Madam Speaker in the Chair? [HON. MEMBERS: "Yes."] Cough when you leave, Madam Speaker.

The increase for booster classes will put pupils whose parents cannot afford to buy such classes on equal terms with those whose parents have traditionally bought crammer and booster classes for their children, often in addition to preparatory school fees in more affluent parts of the country. That is a major contribution towards the uplift in literacy and numeracy of which we have been so proud over the past year.

When that is taken with the money that we have already located within the Department's budget—the £50 million that tops up the revenue support grant—we genuinely believe that schools will be able to move forward with confidence from 1 April, knowing that their endeavours will be underpinned by the resources necessary to achieve their goals.

A dramatic improvement in the progress of primary schools now needs to be matched by a similar step change in the secondary sector. In my north of England conference speech at the beginning of January and in two major speeches on secondary education this month, I have spelt out how critical it is that we transform the education of those aged 11 to 16 who have often found that the progress they made in primary schools has been reversed in the first year of secondary school. In fact, 30 per cent. of pupils in year seven—the first year of secondary school—have seen their progress reversed. That is totally unacceptable and the substantial increase in resources for secondary education is designed to ensure that the programmes that we are laying out for secondary pupils can now be reinforced by the resources necessary to achieve their goals.

We have said that we will be investing heavily in changes to what is known as key stage 3—the 11 to 14 curriculum. We have laid out the way in which literacy and numeracy will be reinforced, changes to the science curriculum and support for new science teaching, and new and imaginative ways to ensure that secondary pupils can be engaged and retained within the education system. We will be saying more during this year about how we can increase the diversity of provision and opportunity so that vocational education and connection with the world of work can be commonplace to ensure that those who disengage themselves from school, or who are excluded from school, can once again be engaged with the education system and, therefore, with their own future.

We are announcing today an additional £60 million to underpin the fresh start and city academy programmes. That money will be available for existing and new fresh start school proposals and for the city academy initiative that I announced a week ago. For city academies, we intend that the money will partner the voluntary and private sector contributions that will be made. It will ensure that we transform the environment in which teachers teach and pupils are taught.

It is clear that the environment in which teachers work is important and the optimism and hope that decent premises and good equipment can engender make a difference to their professional commitment. That can help a school to re-emerge from failure and the threat of imminent closure.

Mr. Nick St. Aubyn (Guildford)

Is the Secretary of State aware that the Minister for School Standards told the Select Committee yesterday that there were no plans to hold ballots involving local parents when it was proposed to turn a failing school into a city academy? Why does he not abolish ballots on grammar schools, which are about destroying diversity in schools, and introduce a system of ballots for converting failing schools into city academies, which is about creating diversity in schools? That would involve parents in the positive side of education, not the negative side.

Mr. Blunkett

If a school is going to close because it is collapsing around the pupils and parents who are engaged there, the options are dramatic change or closure. That is obvious. Grammar school ballots are about a change in admissions policy. We are not proposing to change admissions policies in the code of guidance that the House has approved for city academies. There will not be a vote on the admissions policy, which includes all the options that are currently available to schools in an area. We want to address the needs of local pupils who have been let down by the failure of the school. Drawing in parents and pupils from somewhere else would simply distribute the problem of the pupils who have been underachieving to neighbouring schools. That is why it is important to address failure where it exists, rather than simply moving the deckchairs on the Titanic as a school goes down.

The aim of fresh start and the city academies is to address a situation in which dwindling numbers, caused by parental preference, leave a school unviable and therefore likely to close in the immediate future. We have seen time and again across the country, particularly in the most deprived areas, that pupils who are left at such schools get a less satisfactory education as the months and years go by, providing them with less opportunity than is acceptable. The new system and the investment that we are announcing today will address that problem head-on.

This is about diversity. Beacon school status involves one school supporting and helping another. Specialist schools have funds specifically allocated for outreach to share their specialism with the community and other schools. Those ideas, together with excellence in cities and the education action zones, ensure that help is targeted where it is most needed and that collaboration and co-operation are at the heart of our programme. Schools have to share with each other the benefits that they gain from extra resources, the specialism and commitment of their staff and the targeted help that they can offer to the community. Rather than operating in a market that knocks one school out or lets one school succeed at the expense of others, schools must be prepared to share their expertise in a way that will enable all schools and all pupils to succeed.

We are proud of the way in which failure has been overcome. We now have more schools coming out of special measures than going in for the first time. Over the past 12 months we have had 91 more schools coming out of special measures than went in. We are turning round schools on special measures in 17 rather than 25 months. That is a dramatic change since the general election. We are doing this to ensure that children in those schools and parents choosing or exercising a preference for those schools will know that they will get the sort of education that others take for granted.

Mr. Jonathan Shaw (Chatham and Aylesford)

Can my right hon. Friend assure me that if a school is in special measures, it will be treated equally when it makes an application for the new deal for capital improvement? A school in my constituency needs that boost for a capital programme but it is concerned that it will not be treated equally when the application is submitted.

Mr. Blunkett

From schools desperate for the doubling of capital investment to which we have already committed ourselves, I hear the grumble, "Why should schools on special measures get preference?" I assure my hon. Friend that there will not be discrimination. We need to be able to invest in the action plan and in the recovery programme of such schools so that the new deal for schools capital and the way that it is targeted is geared entirely to ensuring that the standards in a school can be improved. I am sure that, with my ministerial colleagues, we can ensure that the new deal for schools investment programme will be part of the programme of recovery, as will the excellence in cities initiative, an extension of which I can announce.

With the money that was allocated on Tuesday, we can announce a substantial increase in the number of areas that will be entitled to the programme. The programme includes mentoring and support for individual pupils and their families, learning support units that ensure that children who are disruptive or who have a particular problem are out of the classroom but not out of education, and ensuring that our investment in gifted and talented children to tailor education to the needs of the child, whichever school he or she is in, can be enhanced and increased.

We are therefore announcing that the 450 secondary schools in the excellence in cities programme will be almost doubled to 750, which is one in five schools. It will cover 21 new local authority areas, including Tyne and Wear, Gateshead, Newcastle, North and South Tyneside and Sunderland and the boroughs that make up Teesside: Redcar, Middlesbrough, Stockton and Hartlepool. It will also include major cities that were not included in the original round: Bristol, Leicester, Stoke-on-Trent, Kingston upon Hull and Nottingham. In addition, we shall extend the existing programme of excellence to areas in London, including Barking and Dagenham, Brent and Ealing.

The Parliamentary Under-Secretary of State for Education and Employment (Ms Margaret Hodge)

Hear, hear.

Mr. Blunkett

I am glad that I got a "Hear, hear" from my hon. Friend, who of course had no influence over this decision.

In the north-west, the boroughs of Wirral, St. Helens and Halton, together with Rochdale in Greater Manchester, will be included. The extension will also include a new programme for primary schools. They will now be included in the inner cities programme. About 200,000 primary pupils will initially be included in the programme in existing excellence in cities areas. It will then be extended to the new areas from next year. I hope that with the assistance of my right hon. Friends the Prime Minister and the Chancellor of the Exchequer, and the spending review as a whole, I shall be able to do more through excellence in cities in the years to come. It is a programme that even my most vehement opponents from left and right have not so far denounced, although I am obviously—

Valerie Davey (Bristol, West)

Will my right hon. Friend give way?

Mr. Blunkett

I knew that I had spoken too soon, but not in this case, I think.

Valerie Davey

My right hon. Friend is quite right. I want to welcome the initiative being taken in Bristol, in particular, and to ask whether he will endorse again the nature of this development, which, in sharp contrast to the previous Government's city technology proposals, instead of being divisive and establishing new schools in isolation from the rest of the school community, promotes both excellence and collaboration?

Mr. Blunkett

Yes. That is why I emphasise the crucial nature of collaboration and partnership in all our initiatives to target disadvantage and support achievement. Excellence in cities and the city academies involve partnership and a commitment to working with the most difficult children and not only those who are already succeeding. The measure of the success of our partnership with teachers, heads and parents will be what we have done for those who were previously excluded: those who were outside the system and were least likely to succeed within it.

Mr. St. Aubyn

The Secretary of State talks about partnership in the new schemes. Why did it take 10 years for any Labour Member to visit Emmanuel college in Gateshead, which was stretching out its hand in partnership to the local community and was shunned by the local education authority and by the 10 Labour Members in the surrounding constituencies?

Mr. Blunkett

I seem to remember the hon. Gentleman asking me that question about 12 months ago in Education and Employment questions. The answer is exactly the one that I gave then. I am sure that he will remember it well, given that I remember the question.

Today we are addressing the backlog of neglect for all schools: not only those that were fortunate enough to get extra resources in the past but those that are now getting extra resources for the future. We will further invest in overcoming the backlog of disrepair, neglect and decay in too many of our schools.

As part of the £837 million programme for England, I am announcing a £250 million boost to the new deal for schools capital programme, ensuring that a further 3,000 schools will have investment in overcoming inadequacies such as leaking roofs, windows that let in the cold and wet, temporary classrooms—there are still 10,000 of those—and the neglect of the basic fabric that has led to the deterioration of buildings over the past two decades.

We have already doubled the capital investment in education. The extra money will enable us to do far more in the coming two years, which will be welcomed in constituencies throughout the country. We will shortly announce how it is to be distributed. In the previous round of new deal for schools, we had bids that exceeded the resources available fivefold, so we will not reopen the bidding process, but we will work with schools and education authorities to tackle the priority needs that it was not possible to meet under the previous round. I hope that all concerned will welcome that.

We will also be able to tackle what might be described as the school and classroom of the future and to experiment with how the school day, the school year and the nature of teaching will change in years to come. I stress that we want to work in partnership with both the profession and education authorities in achieving change. We want to ensure that experiments are evaluated and that people are free to take new steps in finding out what works best.

The experiment in Telford city technology college—with the learning day instead of the traditional school day, the use of technology and the provision of teachers as learning managers and mentors—has been extremely successful. We want to learn from such programmes in looking to the future for a secondary school system that matches the aspirations that we all share. It is, therefore, crucial to ensure that the worlds of school and work are developed in partnership together. That is why I wish to stress this afternoon the importance of our investment in skills and in employment. My right hon. Friend the Minister for Employment, Welfare to Work and Equal Opportunities and the Under-Secretary of State for Education and Employment, my hon. Friend the Member for Barking (Ms Hodge) will spell out with me over the next few weeks the way in which the additional resources for employment will be targeted at extending our programmes, and intensifying the new deal programme and the work with young people at an early stage. That will include directed help to particular areas of the country where there are low levels of employment and high levels of unemployment, and will include employment zones, which we announced two weeks ago.

In the months ahead, we shall talk about the development of specific help for those moving from long-term unemployment back into work, including lone parents, and how we can assist that progress further. We shall also examine how we can extend the success of the new deal for the under-25s to the long-term unemployed over the age of 25, including from this April the extension of the pilot programmes for getting the over-50s back to work. The older one gets, the more important the work with the over-50s seems.

We can work closely with the Employment Service and its partners in the private sector on enhancing the work that has been done in the past two years in making the new deal a success, including the progress that has been made with 800,000 men and women in work who previously would not have had a job and the improvement of 70 per cent. in youth unemployment. All that links the ability to learn with the ability to earn one's own living and to have optimism—not simply for those who have been unemployed and who now have a job, but the optimism that is passed from adults to their youngsters, so that generational disadvantage and the decay and misery of lack of aspiration and expectation can be overcome at last. In some of our most deprived areas, that is a critical factor in inspiring young people to believe that working in school is worth while at all.

Incidentally, we are not ducking exclusion from schools, which is difficult for Government and teachers alike. We are not forcing head teachers to keep children who are disruptive in the classroom; far from it. The 200 learning support units that are already in train—the number of which will be substantially increased by the investment that I have announced today—will enable us to continue to give an education to those who would otherwise be on the street. It is truancy and permanent exclusion from schools that lead to permanent exclusion from the world of work and society. That is why more than 70 per cent. of those who have been long-term truants or excluded end up in prison and why the prison population regrettably consists on average of people with a reading age of eight or below. Even those who turn to religion—[Interruption.] On that note, Madam Speaker leaves. I must have said something amiss.

Mr. Phil Willis (Harrogate and Knaresborough)

She has gone to pray.

Mr. Blunkett

I know that she does so regularly, in order that we in the House might get it right and be brief, so I will make progress.

The measures that we have taken today will ensure that we can make that link between the education system and the future of young people. They will also mean that we can take steps to overcome the problem of the variation in teacher-pupil ratios in secondary schools—an issue on which we have experienced criticism from the Opposition. My right hon. Friend the Minister for School Standards dealt with that issue at Question Time, so I do not intend to go over it in great detail. Suffice it to say that the investment of extra money in secondary education from this April will allow for 3,500 extra teachers, if that is what head teachers choose to prioritise. It will ensure that the 10-year worsening of pupil-teacher ratios in secondary schools can be reversed. I want to make it clear that where we ring-fence funds and target them at reducing pupil-teacher ratios or class sizes, we take responsibility for doing so. We have done that for five to seven-year-olds: we have earmarked the money and there is a clear and specific research argument for undertaking that reduction.

When heads have a choice, as they do in secondary schools, about how they organise their classes, which they do, and prioritise the extra money, I do not accept that the Government have a responsibility to order them to spend that money on teachers as opposed to teaching assistants, information technology, books or equipment, merely to make the Government's figures on secondary school PTRs look better. Again and again in this Parliament, I will make it clear that if we mean that heads should have greater freedom to determine how they spend their budgets, we should back that up by being prepared to support them if they choose to achieve our standards agenda slightly differently from the way in which politicians would wish. I hope that the Opposition parties will acknowledge the intellectual rigour of that argument and will stop whining that we have not done what they did not do in 20 years.

Mr. Barry Sheerman (Huddersfield)

This is an opportunity to have a second bite at this question in one day. I thank my right hon. Friend for those remarks because those of us who want progress in education want it to be based on research, good practice and evaluation. The Select Committee on Education and Employment recently investigated this subject and talked to Mr. Woodhead, who asserted strongly that progress must be based on secondary school heads having the flexibility to make their own decisions to get the best quality results that they can.

Mr. Blunkett

I thank my hon. Friend for those remarks. The Select Committee has been keen to ensure that facts influence the decisions that are taken.

Last Tuesday was the first day of spring and now there is a new spring in the step of heads, teachers and non-teaching staff, who are looking forward to increased pay under the new pay and performance arrangements and to increased books, equipment and staffing and, of course, subsequently to increased success. This is what the Budget was all about: reinforcing hard work and achievement, underpinning the successes that have already been gained and providing people with optimism for the future. It is optimism about having the future in their hands, working with us and supported by us, to enable them to make decisions that influence their future and that of their children, and to ensure that they can earn their living and make choices within their family. It will ensure that the Government of the day are seen to be supporting that hard work and innovation.

We are very pleased about the £1 billion extra throughout the United Kingdom for education, the increased investment from the windfall levy for employment—

Mr. Tony McWalter (Hemel Hempstead)

Will my right hon. Friend give way?

Mr. Blunkett

My hon. Friend is just in time.

Mr. McWalter

I am grateful to my right hon. Friend. That is why I jumped up. While I congratulate him on the substantial resources that have gone into education and on his negotiations to achieve that, I am perplexed about the extra money for schools. On average, a school will get £40,000, which is welcome money and it absolutely addresses the issue. However, there may be worries about using the money for extra staff when it may not be forthcoming in future years and those staff may have to be laid off. Will he give an assurance—

Mr. Deputy Speaker (Sir Alan Haselhurst)

Order. This is an over-long interruption of a peroration.

Mr. Blunkett

My hon. Friend the Member for Hemel Hempstead (Mr. McWalter) only just got his intervention in. With the additional £1 billion for 2000–01, it is obviously recognised that the expenditure commitment from this year will have implications for later years. Decisions on funding for schools from 2001–02 onwards will be taken as part of the spending review, but the additions announced in Tuesday's Budget will be additional, on-going revenue. There is no intention that the money announced should be a one-off addition. We will carry it forward as part of the additional funding in the spending review, enabling schools to make decisions now that they can be sure will be carried forward from April 2001.

My right hon. Friend the Chief Secretary to the Treasury is sitting beside me. I hope that his presence will reinforce the assurance that I am giving to the House. How could we possibly start programmes in September 2000, with a view to ending them in March 2001? We are talking about additional funding—additional money going to my Department and additional spending in the future. I look forward to the discussions in the spending review that will carry forward the Government's commitment to education, education, education.

1.36 pm

Mrs. Theresa May (Maidenhead)

I begin by making it absolutely clear to the House that the Opposition welcome increased spending on education. We want more money to go to schools, to be spent on improving the education of children. We have welcomed extra spending announced by the Government before, but that does not mean that we always think that the Government spend the money well, or that the methods of allocation cannot be improved. However, we do welcome extra spending on education.

I am sure that many schools and governors will be very interested in the Secretary of State's response to the intervention from the hon. Member for Hemel Hempstead (Mr. McWalter). The Secretary of State said that the £1 billion extra for 2000–01 announced by the Chancellor of the Exchequer on Tuesday will be on-going additional expenditure. If that is the case, the Secretary of State should ask the Chief Secretary to the Treasury to issue an amendment to the Red Book, which states that that extra £1 billion applies only to 2000–01 and that it does not carry through into other years.

Before I speak about schools and education, I should like to touch briefly on employment issues and the Secretary of State's comments about the new deal. The Government consistently tell us about the success of the new deal, and the matter came up earlier in Education and Employment questions. However, the history of the new deal is worth examining.

The Government came to power in May 1997, having made an early pledge to get 250,000 long-term young unemployed people off the dole and into work. As it happened, they took office at a time when there were only 167,000 long-term young unemployed, thanks to the success of the previous Government's economic policies in getting people into jobs—so the pledge that I mentioned had been broken before the Government even took office.

Since then, the Government have made various claims about the number of young people getting work as a result of the new deal. As we know from the Red Book, those claims are incorrect. The Government do not accept what the Red Book accepts—that 50 per cent. of those who come off the new deal at some stage and get jobs would have found those jobs anyway. Their success in finding work is not a result of the new deal.

Mr. Blunkett

Will the hon. Lady accept that the Red Book's reference is to the research carried out by the National Institute of Economic and Social Research, which used statistics from the first year of the new deal to the beginning of 1999? The institute stated that the figure to which the hon. Lady referred was its best estimate. That estimate was not made by the Treasury or my Department.

Mrs. May

The reference in the Red Book is indeed to "independent evaluation". That evaluation has been accepted by the Minister for Employment, Welfare to Work and Equal Opportunities, who has stated categorically that the figures for the new deal scheme contain at least 50 per cent. dead weight. Therefore, only half the number that the Government claim have got jobs through the new deal have in fact done so.

It is important to make one other reference to the new deal figures. The Government should look at the rate at which young long-term unemployed people have been getting jobs since the new deal was introduced and compare it with what happened under the previous Government. Between May 1993 and May 1997, nearly 5,000 young long-term unemployed people a month were getting employment. Since the new deal started, that figure has fallen to 2,771.

Charlotte Atkins (Staffordshire, Moorlands)

Will the hon. Lady say whether she would abolish the new deal?

Mrs. May

The hon. Lady will have to curb her impatience a little longer. [HoN. MEMBERS: "Answer."] I am answering. The hon. Lady will have to curb her impatience a little longer for proposals to get unemployed people into work. I suggest that before she rises to say what a good job the new deal is doing, she looks carefully at the cost of each job under the new deal. She should look at the reality of the figures for the new deal, which show that it has not been getting as many young people into work as the Government have claimed. She should look at the rate at which young people are getting jobs under this Government, which is nearly half of what it was under the previous Government. She should listen to employers who complain that many people sent to them under the new deal either have no interest in their area of employment or are not suited to it, and that the scheme could work better if the Government actually listened to what employers say. The sad fact is that the Government are making many claims for the new deal, but they are failing to deliver.

Mr. Peter Bradley (The Wrekin)

I am even more confused than I was when the hon. Lady replied to my hon. Friend's intervention. If the new deal is not serving the unemployed and is not serving business, why will she not say that she would abolish it?

Mrs. May

The hon. Gentleman's confusion is not a matter for me; it is a matter for him. Again, I suggest that he looks at what the Government are claiming for the new deal and the reality. [Interruption.] I suggest that the Labour Whip, the hon. Member for Sheffield, Attercliffe (Mr. Betts), is a little patient and curbs his excitement. I can understand why the Government are keen to hear of better ideas for getting young long-term unemployed people jobs—it is because of the expensive failure of the new deal.

I repeat that we welcome extra spending on education, particularly on schools, but then, we welcomed the £19 billion extra announced in the comprehensive spending review. However, it did not take long to realize that it was not £19 billion and that, at the best estimate, it was only £9 billion, and that was before the issues of real terms and the underfunding of teachers' pay awards were taken into account.

The best description of the way in which the Government have manipulated the figures on education spending was given at the weekend in one of the newspapers by a former Member of the House, Phillip Oppenheim. [Interruption.] Perhaps Labour Members would like to listen and understand what their Government have done with the figures. He made the point that if someone was 3 ft and grew by 1 ft a year over three years, they did not end up being 9 ft tall. That is exactly what the Government have done with the figures on education spending—they have double and treble-counted.

I say to the Secretary of State, who finds this so amusing, that the issue for him is the expectations that teachers, parents and governors had of what the schools would receive. Those expectations have been dashed. There is considerable disillusionment in schools among teachers, governors, parents and others because what they thought was going to be an additional £19 billion for education has turned out to be nothing of the sort. We see disillusion setting in because the Government are failing to meet their manifesto commitment to increase the share of national income spent on education over and above that spent by the previous Conservative Government. The extra £1 billion that the Secretary of State announced today will do nothing to meet that commitment and nothing to ensure that, during their term in office, the Government will be spending more as a proportion of national income on education than the previous Conservative Government. In fact, they will be spending less.

The Secretary of State has said that £300 million will go directly to schools and that it will be up to heads to decide how it should be spent. I welcome his conversion to our policy that heads should have freedom to decide how money is spent in their schools. I would like heads to have freedom of decision over the whole of their school's budget, rather than the small proportion that the Secretary of State has announced. It is common sense that heads know best what is in the interests of children in their classrooms.

However, the Secretary of State's comments this afternoon about the importance of freedom for heads to determine how to spend their budget will be met with incredulity by former grant-maintained schools which had that freedom but had it taken away by the Government. Those schools were able to exercise the sort of freedoms that the Secretary of State now talks about over the whole of their budget and they flourished and improved the quality of education. That freedom was taken away from them. One can imagine how they feel, hearing of the Secretary of State's damascene conversion. I should be interested to see what happens when he meets the former grant-maintained school heads who have consistently complained about the removal of that freedom.

Ms Linda Perham (Ilford, North)

If heads were so keen on the freedom that grant-maintained status provided, why did so few schools decide to go grant-maintained? Only 1,100 out of 24,000 schools did so.

Mrs. May

Perhaps the hon. Lady will talk to Labour councillors who, in all too many areas, conducted vendettas against schools that wanted to go grant-maintained and exercise their freedoms.

When he referred to the money that will go to primary and secondary schools, the Secretary of State did not refer to the new requirements that secondary schools will have to meet. I hope that in the reply to the debate we shall hear exactly what the new requirements will be. It is stated in the Red Book that an average secondary school will receive its extra funding only In return for meeting new requirements. Will those be targets set for exam results or key stage 3 results? How will they be measured? I hope that we shall hear when the money will be made available to schools if performance targets are set. Schools will want to know how that money will come to them and how they can succeed in getting it.

The Secretary of State reels off the figures, but there is concern among primary schools with large numbers of pupils—say 400—that will receive £9,000 that secondary schools with similar numbers of pupils will receive £30,000. The Secretary of State will find that many primary schools will question the way in which the money has been divided.

For schools that have in recent years faced a cut in their budget of perhaps as much as £250,000, the extra money will go some way towards relieving the pressure, but it certainly will not meet all their requirements. Schools such as the London Oratory have faced a £250,000 budget cut. I do not know whether the Secretary of State will now advise the Prime Minister on whether he needs to make his parental contribution to the London Oratory, given that an extra sum of money is available.

Mr. Sheerman

I congratulate the hon. Lady on beginning her speech with a welcome for the extra spending. Although she talks about reality and figures, she has not yet said one word about how she balances her criticisms of spending—obviously she intends to spend more—with the commitment given by the leader of her party to cut taxes. Can she square those two matters?

Mrs. May

That is a bit rich coming from a Member whose Government claim that they can cut taxes and, at the same time, increase spending on health and education.

Head teachers should receive their whole budget, with the freedom to control their spending. That is what we shall introduce under our free schools policy—we shall set the school free and, once again, trust the professionals.

This morning, on the "Today" programme, the Secretary of State was interviewed following comments from Sir Jeremy Beecham, the leader of the Local Government Association and a leading, senior Labour councillor, who has expressed concern about the impact on local government—especially local education authorities—of the Government's decision on spending controls. I suggest to the Secretary of State that to have Labour councillors complaining that he is taking responsibility away from them is hardly the best way to spearhead the Labour party's local government election campaign.

The Government are reducing the role of local authorities, by stealth, in various ways. Under the Learning and Skills Bill, the role of LEAs in sixth-form funding will be removed. City academies will be taken away from the direct control of LEAs. The extra funding announced by the Secretary of State will go directly to schools and not be channelled through local authorities.

Mr. Blunkett

rose—

Mrs. May

Will the Secretary of State bear with me? I may be about to answer the question he was about to ask, so he may not need to rise.

Mr. Blunkett

Shall I answer the question, and then the hon. Lady can ask it?

Mrs. May

By stealth—by the back door—in all those ways, the Government are reducing the role of LEAs. However, they do not have the guts to say that LEAs should have a new role and that schools should receive the whole of their budget with the freedom to spend it as they want. That is what we have said we will do under our free schools policy—local authorities will continue to have a role in education, but it will be different from the one they have at present. Schools will be free to spend their budget as they think fit.

Mr. Blunkett

May I clarify the answer to the question that I would have asked if I had been able to intervene a few seconds earlier? If the new Conservative policy involves direct funding to schools, what role would the education authority have in the distribution of those resources?

Mr. Crispin Blunt (Reigate)

None, I hope.

Mr. Blunkett

The hon. Gentleman has answered the question. If he is correct, does that imply that a Conservative Government would set up not only a national funding formula, but an agency equivalent to the Funding Agency for Schools for England to distribute the resources? Would they thus accept full responsibility for the pupil-teacher ratio, the books, the equipment and the running costs of each of the 24,000 schools?

Mr. Willis

That would have been my question, too.

Mrs. May

I am happy to answer the Secretary of State's question and the putative question from the hon. Member for Harrogate and Knaresborough (Mr. Willis). We are considering the formula for funding schools under the free schools policy. Many teachers have told us that a national funding formula should be adopted by the Government. I understand that the Secretary of State said this morning that he, too, might consider such a formula and the adoption of such responsibilities.

What is important is to ensure that money for education is spent in the best possible way—in the interests of children in our schools and of improving education. In order to do that, we need to give heads the common-sense responsibility to decide what is in the best interests of the children in their schools. That is the right approach.

I am interested in the Secretary of State's reference to freedoms. That is yet another Government U-turn in only a few weeks. For example, there were an amazing number of U-turns last week on the issue of selection. The Secretary of State told us today that he was expanding the excellence in cities programme, but I must point out to him that that includes an expansion of selection. Selection is a key element of that programme, with pupils not being selected by aptitude as the Government say they will be for specialist schools, but being accepted on the basis of ability. That will give the 5 to 10 per cent. most able pupils in such schools a different education from that received by the other children in those schools. The Government claim that there will be no selection by examination or by interview. Perhaps the Secretary of State can explain how the children in excellence in cities schools are selected for their ability if it is not by examination or interview.

That is not the only Government U-turn that we have witnessed—there have also been U-turns on freedoms and selection. Last week, the Secretary of State was spinning around in a whirl on the issue of grammar schools. One minute he was against them, then he was not against them and then he was against them again. Grammar schools woke up after the vote in the House of Lords feeling that the pressure on them had been relieved and that their future was once again certain, only to find their hopes dashed by the Secretary of State's intention to reintroduce ballots when the Learning and Skills Bill comes before this House. Grammar schools now know that their future is uncertain and that they are under constant threat directly as a result of the Government's actions.

Another U-turn was made on the issue of city academies. I am sorry that the hon. Member for Bristol, West (Valerie Davey) has left the Chamber. She asked the Secretary of State to confirm how terrible city technology colleges were and I understood him to confirm that point. However, the city academies are very much based on the approach of the city technology colleges. The hon. Lady spoke about division, but, as my hon. Friend the Member for Guildford (Mr. St. Aubyn) pointed out, much of the division—where it existed—was caused not by the creation of city technology colleges, or by their heads and teachers, but by Labour councillors who refused to meet the CTCs. For example, in Bradford, they refused to allow local authority schools to play sports against the CTCs. They froze out CTCs and excluded them from the local community of education and the local community of schools.

Last week, the Secretary of State announced the setting up of the city academies, and we heard in the Budget that £60 million would go to them and other failing schools projects. When the Financial Secretary responds to the debate, will he explain what the legal status of city academies will be, given that they will be outwith the control of local authorities?

I hope that the Government will take the opportunity to applaud the work done by Surrey county council in bringing in the company 3Es to take over the failing Kings Manor school in Guildford. I hope that the Government will also take the opportunity to condemn the actions of the National Union of Teachers in Surrey, which is trying to prevent 3Es from exercising the freedom that it believes it needs on staffing in the school so that it can turn the school from a failing one into one that provides the right quality of education for all children.

Diversity and excellence in education is an issue with which we are particularly concerned. However, it is interesting to note some of the comments that have recently been made about it. The following statements were made: My vision is one of excellence and diversity, a vision of transformation … there are a number of key principles behind such transformation including … increased diversity of provision … schools will be built and managed by partnerships involving … voluntary, church and business sponsors. An alternative statement is: We believe that a commitment to … genuine diversity is fundamental to achieving excellence in education … Partner schools … will be set up by the private sector or voluntary groups or charities. You, Mr. Deputy Speaker, might not think that there is very much difference between the statements. However, the second statement on diversity is a direct quotation from the Conservative party's document on "The Common Sense Revolution in education", which we announced last November and which is about partner schools. The first set of statements is more recent. Again, I welcome the Secretary of State's conversion to diversity in education—this time in his proposals for city academies.

Mr. Blunkett

Perhaps the hon. Lady can recall the name of the document on which the 1995 Labour party conference voted, which caused so much controversy and dealt both with selection and grant-maintained status. The name of the document was, of course, "Diversity and Excellence in Schools".

Mrs. May

Given the policies that this Government introduced on taking office, that document sounds as much of a joke as the Secretary of State claims the comments he made at that conference were. The Government have ceaselessly tried to remove diversity from education, in attacks on grammar and grant-maintained schools. In so many ways, they have cut parental choice and removed diversity.

I welcome the fact that the Secretary of State is now willing and happy to adopt the Conservative party's partner schools proposal—except, as in everything, he wants to restrict that good idea to a few schools and to prevent it from being open to all. I ask him to consider that issue. We should be increasing diversity and excellence in education for all children in every part of the country, not targeting certain ideas merely on particular areas—notably, from the sound of those set out by the Secretary of State today, Labour local authorities.

I shall deal now with the issue of failing schools and the announcement of £60 million for the fresh start programme and city academies. The Secretary of State made several comments on the exclusion policy in failing schools. I want to address that serious matter because it relates to the quality of education received by both the child who is at risk of exclusion or has been excluded, and others in a classroom where a child has not been excluded and continues to disrupt learning.

Those who are dealing with failing schools and difficult schools in inner cities consistently refer to the problem of being unable to exercise the discipline policy that they want and to the fact that that inability to exclude pupils restricts their ability to improve education and turn the schools around. It is right to provide children who are excluded with an appropriate education; they should not be left on one side, because their life chances depend on their receiving an appropriate education. However, keeping those children on site, either in the classroom or in the learning support unit, is not always the answer for either the child concerned or others.

Mr. Barry Gardiner (Brent, North)

Will the hon. Lady give way?

Mrs. May

I shall in a moment.

Not only teachers but pupils to whom I talked the other day in a secondary school in Kettering said that they were concerned because disruptive pupils were being kept in the classroom as a result of the head teacher's inability to exercise the complete freedom to exclude. Head teachers should have freedom to exercise the discipline policy—including exclusion—that they believe is right for their schools, the pupil concerned and others in the classroom.

Mr. Willis

Will the hon. Lady give way?

Mrs. May

I shall finish this point then give way first to the hon. Member for Brent, North (Mr. Gardiner).

No pupil's learning should be disrupted because the Government have forced on a school a target of reducing exclusions, thus tying its hands and reducing its ability to exclude and exercise the discipline policy that it wants.

Mr. Gardiner

Does the hon. Lady accept that in the last three years of the Conservative Administration, exclusions in schools rose from 3,000 to 12,000 a year? Will she join me in congratulating local education authorities such as Brent, which, through its work in targeting excluded pupils, has seen that figure drop by half?

Mrs. May

There is good work in many areas in targeting pupils who are at risk of exclusion, ensuring that they are not excluded. There is a care centre in Birmingham, for example. However, if the hon. Gentleman is saying that pupils should be kept in the classroom regardless of their impact on themselves or others, that is wrong. Heads should have the ability to exclude where that is right for the pupil concerned and for the rest of the children in the classroom.

Mr. Willis

I apologise to the hon. Lady and the Secretary of State for arriving a little late. One of the issues that affects her policy is what we do with those youngsters in free schools. If all 24,000 heads are able to exclude students whom they think are disruptive, what will happen to those students, and how do we get them into another free school?

Mrs. May

It is necessary to ensure that education is provided for those pupils who are excluded, but it might be appropriate for them to be educated not in a formal school environment but in a centre that will meet their particular needs. That is why it is important to consider the interests of the child concerned as well as those of all the children in the school, and not simply to say that there should be a target—which the Government are so keen on—to reduce exclusions and that schools should be financially penalised if exclusions are not reduced as the Government want them to be.

I noted this morning that the Secretary of State is willing to take responsibility when he thinks that schools are doing well, but not when his failing schools programme is failing, as demonstrated by the resignation of three of his 10 superheads in the fresh start initiative. Failing schools are faced with a confusing myriad of initiatives, including education action zones, excellence in cities, mini-EAZs, city academies, fresh start and superheads.

Schools and heads are subject to initiative after initiative. Sadly, they continue to be unable to meet the children's needs because of too much interference from the Government. They are unable to get on with the job that they want to do, which is to ensure that they are providing the education that is right for the children in their classrooms.

It was interesting that, last week, head teachers of the 36 most improved schools in England warned that the Government's educational reforms are in danger of being submerged under red tape. Time and again, schools complain about the bureaucracy and red tape surrounding all the Government's initiatives and say that they cannot get on with the job of improving education in the classroom because of the imposition of initiatives and too much prescription and interference by the Government.

We want schools to be free to do what they believe is right for children. The Government should set schools free, get the budgets to schools and enable heads to decide how to spend them. They should start trusting the teaching profession again, let teachers get on with teaching and increase parental choice. By doing that, we shall ensure that all children are able to achieve their full potential.

2.8 pm

Mr. Ian Pearson (Dudley, South)

Any Budget in the modern era needs to be judged not just on domestic terms but on how it positions Britain in the international economy. Everywhere in the world countries are changing their economic and fiscal policies to meet the challenges of the new millennium. The trend is towards lower business and individual tax rates, and lower debt through tight control and efficient public spending.

In the United States, business and individual taxes are low. The Clinton budget in January forecast the elimination of the national debt by 2013. Germany is slashing its federal business taxes and has started to reduce the top rates of income tax. France, Italy and Holland are all, to varying degrees, adopting similar policies. The accession countries in Europe are following a similar strategy for tight control of public spending and debt, and low business taxes. Even newly developing countries such as Brazil have embraced the golden rule, pledging to borrow only to invest and to balance the books over the economic cycle.

Nations around the globe are embracing the new economy. They recognise that e-commerce and the internet will revolutionise trade between nation states and completely change the way in which we do business in every country. The Lisbon summit is discussing that as we speak. It is clear that, although we cannot make a future for ourselves taking in each other's e-washing—we still need to make and distribute things—the e-commerce revolution will transform businesses and economies over the next decade.

The trend across Europe is leading to a change in the European social model. The European social model is breaking up. It is all very well for some Opposition Members to grumble darkly about the creation of a European federal superstate, but that is not what the future holds. The future is about establishing competitive conditions across Europe, opening markets and ensuring that there is fair tax competition. It will then be for nation states to compete like fury, beneath a Europewide set of rules and trading arrangements. Securing national competitive advantage is the name of the economic policy game.

Mr. Blunt

If things do not turn out as promised by the hon. Gentleman, will he join the effort to establish a body of opinion to support us Conservatives in the quest for a future such as the one he has portrayed?

Mr. Pearson

I do not know how things will turn out, but I do know that the Opposition parties need a great deal of help, and they will not get it from me.

How is Britain doing, and how will Budget 2000 affect our economic performance? We have the highest employment rate in our history: 800,000 more people are now in work than at the time of the last general election. We have high growth rates: the Budget projects rates of between 2.75 and 3.25 per cent. in the new financial year. We have a smaller debt burden than any other advanced industrial nation—smaller than that of the United States, although it plans to exceed us in that respect. We have made Britain an attractive environment, in which businesses want to work and people want to enjoy their lives. In recent times, two thirds of inward investment in Europe has been in Britain.

Budget 2000 maintains our competitive position and, by ensuring a strong economy, allows the Government to proceed with our fairness agenda while maintaining a budget surplus—£14 billion in the new financial year, and £16 billion and £13 billion in the following two years. That is testimony to the importance of running a sound macro-economic system, imposing low business tax rates, and operating a policy that encourages and rewards enterprise.

I welcome the massive boost to the health budget, as do people throughout the west midlands. It is now imperative for a grown-up debate to take place about how the wall of cash that will hit the NHS over the next four years can be spent as wisely and efficiently as possible. The Prime Minister launched that debate yesterday; I fear that the Leader of the Opposition did not want to join in, but I hope that more sensible Conservative Members will play a constructive part in the discussion of how we can strip the NHS of some of its bureaucracy and provide the service that will be needed in the 21st century.

The boost to the education budget will have a big impact in my constituency. I calculate that more than £450,000 extra will go to schools in my constituency alone, while well over £1 million will go to Dudley metropolitan borough council's schools. That is part of the policy of transforming education in this nation. I firmly support the strategy announced by my right hon. Friend the Secretary of State. I strongly suspect that more good news will come as a result of the comprehensive spending review, and that "education, education, education" will remain a priority of Labour Governments.

Significant announcements were made about taxation of charities. Philanthropy is all too often forgotten in Britain. Historically, we have quite a low giving rate, and I think those announcements herald a major step forward. The challenge is now to the charities sector: to embrace the changes and to market itself aggressively in order to reap the full benefits of the Chancellor's largesse.

The Budget also challenges some of the entrepreneurs who have made a lot of money in the new economy to pull their weight, and to use the available tax breaks to invest more and give something back to the community that brought them up and allowed them to prosper.

Mr. Sheerman

Does my hon. Friend think that the Budget will lead to what he and I have campaigned for—a greater propensity to donate money for university research, as happens in America? Does he think that it will bring us nearer to establishing the genuine partnership that exists in the United States between philanthropy and investment?

Mr. Pearson

My hon. Friend makes a good point. Donation rates among alumni in the United States are dramatically higher than those in Britain. The Budget changes will make it far easier for individuals to give to universities, and for businesses to donate assets to both universities and charities. I hope that, over the next 10 years, a far greater proportion of universities' income will be raised from donations from alumni and businesses.

Like every other Labour Member-I suspect that our view is widely shared—I welcome the increase in the pensioners' winter fuel allowance to £150, and the increase in the minimum income guarantee in line with average earnings. Pensioners will also welcome the fact that the price of petrol is to rise by only 2p a litre. They drive cars too, and those who must live on low incomes still need to get out and about. I think, however, that the Government might have been more generous in one respect. The Chancellor referred to the needs of those who are just above minimum income levels and who have to pay the full whack regardless of any benefit entitlement.

I still believe that what pensioners really want is an increase in the basic state pension. It would cost an incredible amount—some £18 billion—to restore the earnings link, and no sensible Government could advocate it. However, as part of their review, the Government should consider on a year-by-year basis whether the economy can afford to increase the state pension in line with earnings.

We should not forget pensioners when we talk about the new economy. The rate of internet take-up by pensioners is low, but new facilities such as internet shopping could be of great benefit, particularly as some of our nation's pensioners become increasingly housebound. I hope that the Financial Secretary will consider in due course the introduction of a scheme whereby pensioners could receive free internet training.

There is much to be welcomed in the Budget's enterprise package and the proposed changes in respect of the enterprise investment scheme and venture capital trusts are sensible. They will be widely welcomed by industry, as will making the 40 per cent. capital allowances regime permanent, reducing the capital gains tax taper from 10 years to four and increasing the range of business assets that qualify. We should not underestimate the significance of those changes and their likely impact. I shall discuss that in a moment.

I also welcome the all-employee share ownership scheme. I did one of the roadshows to promote it in Birmingham recently. Companies clearly want to be seen to be fair to all their employees and recognise the link between employee share ownership and economic performance. I am particularly glad that the Government have decided to continue with the save-as-you-earn share-save scheme, which is very effective. There is no reason to discard it.

The decision to have 100 per cent. capital allowances for buying information technology equipment is novel. It shows that the Government's thinking is going in the right direction—they want to encourage all companies, regardless of the sector in which they operate, to embrace the knowledge economy. However, as I have said before, leasing rather than purchasing IT equipment is often a far more effective option for many companies. Some IT systems become obsolete quickly, which means that it is dangerous to buy assets as they soon end up on the scrap heap. We ought to consider ways of introducing leasing arrangements to the capital allowances regime, which would pass the benefits of leasing on to companies.

I also welcome the enterprise management incentive scheme. Since the pre-Budget report, it has been modified to take account of industry' s needs and now offers decent incentives for small businesses that want to attract and retain high-quality, high-calibre senior employees.

I urge the Government to do more for our manufacturing industry, particularly companies that export. Interestingly, the Confederation of British Industry made little reference to manufacturing industry in its pre-Budget submission. It did not want a package for manufacturing, but called for other measures. No initiatives came from it that would help our hard-hit exporters. At least the Government are doing something and have announced the introduction of regional venture capital funds across the nation.

As someone with a background in regional venture capital, I believe that venture capital is important and that we must maintain our lead in Europe in terms of having a thriving industry. However, I feel that we are missing the point. We are planning to allocate about £100 million to the west midlands region and similar sums to Yorkshire and other regions, although amounts vary, but there is already a properly functioning venture capital market in place. Recently, Greater London Enterprise and West Midlands Enterprise, an organisation for which I used to work, announced a £60 million venture capital fund and this week South Yorkshire Investment Partners announced a £110 million fund. They and the Government's regional venture capital plans are targeted on similar areas.

We are missing the gap, which exists in two respects. First, there is a shortage of decent propositions to back and of proposals from universities that are prepared to work on technology that can be dragged out and exploited by other companies. Secondly, we must do something about companies that will never have spectacular venture capital internal rates of return of 20 per cent. or more, but offer solid growth prospects, even though they may have strained balance sheets and need long-term loan finance. The Government could do more to help businesses if they addressed those issues.

I have three proposals on manufacturing. The CBI has not come up with any, but let me try mine. To be fair, the CBI regards infrastructure as very significant. The previous Government did not pay enough attention to infrastructure and I am worried about whether this Government are paying sufficient attention to its important contribution to Britain's economic performance. I am pleased by the announcement that the Manchester metro extension is to go ahead and I should like the metro be developed in the west midlands, too. Investment in our transport infrastructure has a substantial knock-on economic development benefit for our industries. Let us consider the benefit of building the black country spine road. Industries clustered around it and upgraded their capabilities. We now have profitable companies with modern production facilities that moved from inefficient plant lay-outs to convenient sites. We need to do more for infrastructure, although £280 million is a great start, and I hope that the comprehensive spending review will go substantially further.

We could also help exporters by strengthening the budget and operations of British Trade International so that it can offer packages to help companies to access even more new markets and provide additional assistance with getting projects under way. The Government should consider that, as well as giving more support to regional development agencies and boosting the regional selective assistance budget, which should be targeted on manufacturing industries and companies that export.

I want briefly to discuss the situation at Rover-BMW and Longbridge, which relates directly to those matters. The workers at Longbridge have obviously been badly betrayed by BMW. They are not to blame for the situation. The Government negotiated in good faith with BMW and put a package together. They are not to blame for the situation. Following BMW's announcement, the Government acted extremely quickly. I pay tribute to my right hon. Friend the Secretary of State for Trade and Industry for taking the time and trouble to go to Longbridge to talk to the workers, the trade unions and management. BMW did not extend that courtesy to its work force when it made the announcement. Today, my right hon. Friend is showing his active support for Longbridge's future by having conversations with Joachim Milberg in Germany.

We have established a taskforce, but there is an urgent need for clarity on how the £129 million that has already been allocated will flow. There must be no strings attached to that money. It needs to be able to be spent wherever in the region it is most needed after the decision on Rover Cars. The automotive components supply base will suffer along with Longbridge following the likely loss of jobs there. About 40,000 jobs are at risk in the supply base. We need to ensure that as many of those jobs are safeguarded as possible.

It would be wrong to talk of wage subsidies. Teams of accountants need to look at our supplier companies. Bodies will quickly start to appear on the battlefield. The teams need to take a long hard look at those companies that have a future: those that can, with a bit of bandaging—perhaps long-term loan support—get over cash-flow problems. We need to provide a sensitive, sensible package of financial support, as well as high-quality outplacement support to those workers who will probably not be required in future. The £129 million that has been announced so far should be regarded only as a starter for 10. More cash will be needed if we are to stop the crisis turning into a disaster.

People who live and work in Dudley borough have benefited from the Budget. Every school in my constituency and all the hospitals in the borough will benefit substantially this year and over coming years as a result of the Labour Government. It is a far-sighted Budget, fit to start the new millennium. I congratulate the Chancellor on his achievement.

2.32 pm

Mr. Phil Willis (Harrogate and Knaresborough)

I should like to return to the theme of education, but I compliment the hon. Member for Dudley, South (Mr. Pearson). It is always a pleasure to listen to him in the House, particularly on the problems that he has experienced in his constituency.

In last year's debate, when the hon. Member for Havant (Mr. Willetts) stood up to speak on behalf of the Conservatives, the Secretary of State's dog was sick. I suspect that, if Lucy had been in the Chamber this afternoon when the present incumbent, the hon. Member for Maidenhead (Mrs. May), was speaking, she would have jumped across the Table and bitten her leg. Fortunately, she was not here.

I am reminded of Tory policy during their 18 years in government. It was about diversity and excellence: basically, it diverted the poor from excellent schools. The Secretary of State and I disagree on a number of things, but we agree on that fundamental issue: we must no longer have a two-tier education system, where the wealthy and middle-classes have quality schools and the poor are condemned to second-rate schools.

Therefore, it would be disingenuous of the Liberal Democrats not to acknowledge that the additional resources allocated by the Chancellor for our schools are welcome. As a party, we have constantly harried the Secretary of State and the Chancellor for more resources for schools. We thank them for doing something about that.

Heads and governors will undoubtedly feel relief that the perpetual round of cuts that they have experienced in the past decade will, at least this year, not happen. However, it is ironic that schools will have already made cuts for next year. They will already have set budgets, taken staffing decisions and, in many cases, handed out redundancy notices. They will have planned accommodation needs. Admissions will have been agreed and appeals heard. We may be ending boom and bust elsewhere, but such a statement would clearly be premature in education. However, we welcome the resources.

The move to extend education maintenance allowances to other areas of England and Wales is positive. I congratulate the Chancellor and the Secretary of State on doing that. I know from personal experience just how difficult it is to persuade young people to remain in full-time education. The idea of putting resources in place to encourage a seamless progression is worth while.

When he taps into the billions in the comprehensive spending review, will the Secretary of State consider the position of disadvantaged young people in rural areas? Often, they do not appear in great numbers, but they have equally severe problems. Travelling to a place of education post-16 becomes a big obstacle for many poor families. I hope that the Government will look at that issue.

We welcome the money for booster classes. Again, we support the idea that youngsters who are failing and who can receive additional support should be able to benefit from that at no additional cost to the school, but we find it difficult to understand why heads cannot make the decision about who should be boosted. In schools that I visit—I am sure that it applies to other hon. Members—sometimes, the real priority is not the children whom the Secretary of State wants to get to level 4 to meet his target and to save his job, because that is what he promised, but children at the other end of the extreme, who are finding it incredibly difficult to access even level 2. It is important for them to have booster support.

We support the announcement about the extension of the excellence in cities scheme, particularly the move to extend it to primary schools. There was always a lack of logic in running the scheme in secondary schools and not recognising that those are incredibly dependent on quality product from primary schools.

I worked in the east of Leeds. The Under-Secretary of State for Education and Employment, the hon. Member for Croydon, North (Mr. Wicks), was kind enough to visit the area when it was looking at the family of schools initiative. That is bearing significant fruit. One of those schools is regarded as one of the most improved schools in the country this year. That is a great credit to all concerned.

At last, there is a clear admission in the Budget statement that the Government have misled schools about spending. For the past two years, we have been bombarded by Department for Education and Employment press releases announcing and re-announcing the £19 billion of "funny money" to put education, education, education into practice. I quote: This is an historic day for education and the country. The Government is providing an additional £19 billion for education over the three years from 1999/00 to 2001/2002. This is the fulfilment of our pledge that education would be our number one priority and that we would increase the share of national income spent on education. Those were the Secretary of State's words on 14 July 1998. It was an historic day—the Government lost their halo and began telling lies to our teachers, governors, parents and children about spending on education. The lie was that £19 billion was additional money, real money, when it was no more than funny money, a series of manoeuvres to count, double-count and treble-count, to announce and re-announce and to disguise the fact that the only way in which education spending targets could be met was if much-maligned local authorities increased council tax by, on average, three times the rate of inflation. That is how the real money got into schools. The lie was that a Labour Government—I quote from the Labour manifesto: will increase the share of national income spent on education as we decrease it on the bills of economic and social failure.

Mr. Blunkett

It is a good phrase.

Mr. Willis

It is. I wish that the Government had meant it, but it was not true. Even after the comprehensive spending review and the Budget, Labour's spending on education over the lifetime of the Parliament will be 4.6 per cent. of GDP. I have the Library note stating that, if the Government go until 2002, in that final year, they will achieve 5 per cent. However, over the lifetime of this Parliament, the average will be 4.6 per cent.

The previous Government, under the right hon. Member for Huntingdon (Mr. Major), achieved an average of 4.9 per cent. We are therefore seeing a real-terms reduction of the percentage of GDP spent on our schools.

We must always welcome a repentant sinner. This week, there was no mention by the Chancellor of the £19 billion figure—it was absent from his statement—and neither was it mentioned today by the Secretary of State. At last, some transparency and an admission that this really is new money! On 21 March, a Treasury official told The Daily Telegraph that This is new money. You haven't seen it before and there's no double counting. Clearly, he has heeded the advice in Nick Davies's recent article in The Guardian. [Interruption.] It is marvellous that the Secretary of State can laugh at what has become a national scandal.

One group of people who will not see that money are those in local education authorities. This morning, on the "Today" programme, the Secretary of State made it clear—I have now looked at the transcript, and I thank him for pointing me in that direction—that he wants that money to bypass LEAs and to go to schools. In their announcement, the Government have taken a giant step towards a nationally funded education system, and perhaps heralded the end of local democratic involvement in our state education system.

Understandably, there will be those—such as Conservative Members—who will rejoice at a direct funding formula, although certainly many head teachers would protest at yet more interference by Government in the curriculum, teaching, assessment and targeting. As a former head, I tell the Secretary of State that I can see the attraction of a centrally funded system, but I know that there are also significant and inherent dangers.

The dangers were certainly flagged up by the hon. Member for Maidenhead. Can hon. Members imagine there being 24,000 free schools in the United Kingdom, each with its own admission authority? That is what we are talking about. The huge mountain of bureaucracy that would be needed to manage such a system is incomprehensible. However, there would be no system to provide special educational needs support or some of the other specialist services that our LEAs provide. Clearly, the good schools—the schools that take the middle class youngsters who have or can afford those types of support—will not need such a system at all.

Mr. Michael Fallon (Sevenoaks)

Could the hon. Gentleman tell the House whether the dangers that he sees in the direct payments to schools that the Secretary of State has started outweigh the benefits, which the hon. Gentleman embraced earlier, of teachers seeing the money in schools, or is he seriously suggesting that the money that the Secretary of State is giving in a direct payment should be top-sliced to the LEAs? Perhaps he would now come off the fence.

Mr. Willis

I am grateful to the hon. Gentleman for that intervention. Despite the perhaps flippant way in which he has raised the issue, it is an incredibly serious issue. It is not an either/or matter. It is not a matter of simply saying either that the Secretary of State can fund all schools directly from the centre, or that all money should be provided via LEAs. I shall develop that point later. If I do not fully answer the hon. Gentleman's question, perhaps he will intervene again.

I agree with the hon. Gentleman that the system of standard spending assessment is as confusing as it is irrational. It is said that only two people at the Department for Education and Employment have ever understood the SSA system—one of them is now dead, and the other works the computer, which is broken. No one could justify the £683 per secondary school pupil gap between Brent and Islington, which are both deprived boroughs, or the £1,306 more that a primary school child in Kensington and Chelsea receives compared with a primary school pupil in Stockport. There is no sense to that.

The report of the senior chief inspector of schools for 1998–99 examined 115 schools with similar proportions of pupils eligible for free school meals and similar proportions of pupils with statements of special educational needs. It found a funding difference per pupil ranging from £1,801 to £3,600. That is not only unacceptable, but grossly unfair. The system is archaic and arcane, and it fails the Government's own test, in the preamble to "Fair Funding", which specifies the criteria of "equity, accountability and transparency".

The Government have confused the system yet further. They have increasingly directed spending through the standards fund, which will have grown from £4 million, in 1983, to a staggering £1.475 billion, in 2001–02. Given that the teachers' threshold payments and the Chancellor's announcements are also to be directed centrally, the Secretary of State now controls £4 billion of schools' expenditure. Add that to the £6 billion that he will control with the learning and skills council from next year, and one begins to see how centralist and powerful this Secretary of State has become. If the hon. Member for Sevenoaks (Mr. Fallon) does not want to see so much power in the hands of the Secretary of State, no matter how benign, he needs to re-examine the Conservative party's policy.

Understandably, ring-fenced resources to education action zones, specialist schools, city technology colleges, fresh start and city academies, plus a culture of perpetual bidding that leaves one in three schools disappointed, have resulted in heads and governors saying, "Enough is enough. Give us the money centrally."

What we need to do is to reform the SSA system. However, we need a reform that will strike a balance between local and national responsibilities. We need transparency, and we need efficient distribution. However, we must be able to respond to local need. An education system controlled by a Government of any political persuasion is a dangerous concept. I put it in the same line as a national police force controlled by a Government of any political persuasion.

The growth of our education system has been a response to diversity and to local needs. Our schools movement originated back in the 19th century, in national schools, the Church of England and the British and Foreign Schools Society and the non-conformists. The movement originated in villages and in schools, as a response to need. Our education system has been built on that basis ever since. Our system is not perfect, but it certainly does not deserve to be thrown away in its entirety.

The distribution of £512 million in this Budget will bring smiles to the faces of many head teachers and governors in my constituency. However, they should beware of Secretaries of State bearing gifts, because there is usually some pain to follow.

We should like to know—partly given the question asked by the hon. Member for Maidenhead—what will happen, next year, to the £512 million that has bypassed LEAs. The Red Book deals with that matter. The Secretary of State indicated that the money would be included in SSAs—although the Red Book does not say that. Will it be part and parcel of a central pot from which the Secretary of State will directly reward schools? How will it be incorporated in future? If the £512 million is to be only one-off funding, in the following year, schools will be plunged into chaos if they have to try to make up a deficit of £40,000 in large secondary schools or £3,000 to £5,000 in small primary schools. The Liberal Democrats will participate fully in any review of resource distribution to schools, but we oppose root and branch a back-door nationalisation of our education system by this or any other Secretary of State.

The most significant part of the Chancellor's speech was that revealing that education is no longer the Government's No. 1 priority. Tax cuts are their No. 1 priority; £1 billion for education compared with £2.6 billion to cut income tax tells its own story of the Government's priorities. The Government, like all their predecessors, know how to sell out their remaining principles when a general election is coming.

What about the rest of the education system? Are all the problems resolved? Why are tax cuts preferable to providing a quality early-years education place for all three-year-olds? I expected the Secretary of State to announce that this afternoon, but there was not a word about it. In all the rural areas of Britain less than 10 per cent. of our three-year-olds have a paid place in early-years education. Outside the cities, thousands and thousands of playgroups have been closing during this Parliament as a direct result of that lack of provision. A total of £390 million would have meant an early-year's education place for every three-year-old. Is that not preferable to a tax cut?

Why are tax cuts preferable to seeing more teaching assistant support in our primary schools? Our primary schools are overburdened. They are desperately seeking some relief from bureaucracy and need to find an opportunity to plan effectively for the youngsters in their charge. Why are tax cuts preferable to building into school budgets some time for primary school teachers to prepare properly?

Why is there nothing in the Budget to remove the inequities of charging English and Welsh students tuition fees when the Government know that the system is having an adverse effect on student recruitment? As the hon. Member for Maidenhead made clear in her contribution, the real-terms numbers are starting to fall in not just further education but higher education, too. The latest figures from the Universities and Colleges Admissions Service show that overall applications are down this year by 1.8 per cent., with the figure for mature students down, for the fourth year running, by over 5.7 per cent.

We find student poverty not just in Scotland but throughout the United Kingdom. A total of 18 per cent. of higher education students now drop out and the majority cite a lack of finance as their principal reason for doing so. The cost of that to our system is about £350 million. That money is utterly wasted and we would rather see it spent on the students.

As a party, we stand firmly behind the Government's aims for the expansion of FE and HE, as, I believe, does the Conservative party. To be fair, one of the Conservative party's proudest achievements over the past 20 years has been the expansion of student numbers at both FE and HE level. We also support the Government's view that that expansion should give greater access to those from poorer homes and that we should end social exclusion in the FE and HE sectors.

We accept the Prime Minister's argument that Britain must develop its human capital more effectively in order to compete on the world market. However, that expansion must be based on offering students a quality experience, and that is not what many of them are getting today. Since Labour took office, the funding per full-time equivalent student in FE has fallen by 7 per cent., from £3,050 in 1997–98 to £2,840 next year. In higher education, the full-time equivalent funding has fallen by 3 per cent. in real terms. That is in total contradiction to what the Minister told us at Education and Employment questions earlier today. That drop means a drop in the quality of the product that we can offer in our universities and colleges.

The Minister's noble Friend, Baroness Blackstone, admitted in a written answer in the other place on 27 January that the previous Government spent 1.29 per cent. of GDP on higher education, but this Government will spend only 1.14 per cent. To match the Tories' level of spending, the Government would need to spend an additional £5.9 billion, but they say that tax cuts come before investment in education.

Mr. Tim Boswell (Daventry)

I thank the hon. Gentleman for his comments and I agree with many of them. Will he note that the figures given in the written answer in the other place included the science budget? We secured some further corrected figures, excluding the science budget which, if anything, made the disparity with the performance of the previous Conservative Government and the adverse trend today appear even more stark.

Mr. Willis

I am grateful for that intervention. The hon. Gentleman is right. The £500 million that the Wellcome Trust poured into research is double-counted by the Government as money that they have given to research. I thank the hon. Gentleman for pointing that out.

Perhaps, as in 1997, the Secretary of State has another plan for higher education after the next general election. Will the Minister confirm that he has already agreed in principle with the Committee of Vice-Chancellors and Principals and the Russell group of universities that, after the next election, the Russell group will be able to charge differential fees to students? If that is not the case, I invite the Minister, who is responsible for this matter, to intervene and say so. Since he is not doing that, the answer speaks for itself. That is the reality. After the next election, the Labour party's solution to the underfunding in education—it was hinted at by the hon. Member for Dudley, South (Mr. Pearson)—is that there should be an ivy league, as there is in America. Charter schools will be imported as academies and we will have an ivy league where students are charged differential fees. I am sorry if that is to be the system used to support access from poorer homes.

The Parliamentary Under-Secretary of State for Education and Employment (Mr. Malcolm Wicks)

rose

Mr. Willis

I am delighted to see that the Minister intends to intervene.

Mr. Wicks

I was enjoying the hon. Gentleman's thoughtful speech, but he is overdoing it a bit now. The Secretary of State has made it clear that we are opposed to top-up fees. We will support no policies that make it difficult for poorer students or students from middle-income families to gain access to our best universities. Our approach is based on fairness and equality. I want to make that absolutely clear.

Mr. Willis

I have no difficulty accepting that assurance from the Minister. I have some real difficulty accepting that that is the view of Her Majesty's Government. Top-up and differential fees are different in terms of semantics and, in reality, the Government are all about semantics. They say one thing to one audience and change a word or two for another. The Minister has not denied that the Government are holding unofficial talks with the CVCP and the Russell group about differential fees. Those talks are going on. If I am wrong, I hope that there will be a clear statement to that effect. That would be a betrayal of many of the principles about which many of us are thinking.

If the hon. Member for Dudley, South is right and we are to be a more generous society with huge levels of bursaries for our universities, good luck to him. However, the giving culture in the United States and the tax system that underpins it is totally different from the culture in Britain and the tax system that underpins it here. Each of the two education systems has approached its position from different directions. I am not saying that one is better than the other, but I would like to think that the British higher education system is more egalitarian than that of the United States.

My party's biggest disappointment with the Budget for education is that it fails to invest in the future of our education system—our teachers. The ICM poll in February this year told its own tale. Even with the promise of more pay, one third of our teachers under the age of 35 said that they wanted to leave teaching within the next 10 years and 50 per cent. wanted to leave within the next 15 years. In only 9 per cent. of cases did those teachers cite pay as the prime reason for leaving the profession.

It is surprising, therefore, that there is nothing in the Budget to assist with teacher recruitment and retention, despite the worrying trend. Figures produced last week show that applications for secondary postgraduate courses in education are down by a staggering 21 per cent. on this time last year. Applications for maths, science and modern languages are now below 1998 levels and, even with the introduction of golden hellos, maths recruitment is 23 per cent. below the Government's target with science not far behind at 19 per cent.

We need an increased supply of quality entrants to teaching. Do the Government believe that the standards agenda can deliver improvements with such appalling statistics? Our schools are starting to experience the same fate as our hospitals, which have an acute shortage of nurses, doctors and specialists, yet the Government have no clearly defined recruitment strategy. Department for Education and Employment bursaries were withdrawn during the recession. They were replaced by the Teacher Training Agency's schemes, now augmented by the golden hellos, but those are not strategies to make teaching the attractive career that it should be in a new knowledge-based economy.

A year before the end of new Labour's first term in office, the Government have delivered cuts in higher education, cuts in further education and cuts in teacher recruitment. They have told teachers what to teach, how to teach and when to teach. They have removed from head teachers the ability to prioritise and sought to manage our schools with centralised targeting. The Budget is a little, too late.

3.1 pm

Ms Linda Perham (Ilford, North)

I am pleased to be able to speak in the debate on the Budget resolutions on education and employment. I shall start with education, because that is where we all start on the path to learning for life. I welcome the extra £1 billion in the Budget for education. It is wonderful news that an average primary school will get £6,000 extra for more teachers and books and the average secondary school will get £40,000 more.

I have been a school governor for 15 years and for eight years I have chaired the board of the large local primary school that my children attended. It will be eligible for £9,000. I know how much hard-working, dedicated head teachers in my constituency and throughout the country will welcome that cash boost going directly to them, particularly as at the recent budget meeting of my local council, the London borough of Redbridge, Labour's plans to spend more than £11 million on education—the highest figure proposed by the three parties represented on the council—were outvoted by the blue and yellow alliance of right-wing Conservatives and fickle Liberals. The Liberal-Tory coalition has also turned down Labour's proposal for a school safety officer to promote safer travel to schools, yet it has still managed to hike up the council tax, with a staggering increase of almost 20 per cent. in two years.

Another welcome boost to education is the £10 million enhancement for education business links from April 2000, as announced in the 1999 pre-Budget report, to encourage young people to consider careers in business. The money will improve existing infrastructures, enhance teachers' professional development and improve the quality of work experience, as well as helping to double the scale of enterprise programmes with a proven track record of success, such as young enterprise. I have been involved for two years as a judge in the running of the Redbridge business education partnership young enterprise competition. I have been impressed with the standard of entries and the understanding that young people in my borough's schools have of the culture of entrepreneurship and enterprise.

As well as acknowledging the Government's efforts on business education partnerships, I welcome the measures in the Budget to build stronger businesses and promote entrepreneurship and productivity, with the reductions in capital gains tax rates, the extension of the 40 per cent. first year capital allowance for small and medium-sized enterprises, regional venture capital funds to give a £250 million boost for investment in London alone and the £50 million e-commerce package to get more small firms online. I am sure that some of the young entrepreneurs whose work I admired in Redbridge will soon be taking advantage of those far-sighted opportunities provided by the Government. From my work on the Select Committee on Trade and Industry, particularly our visits last year to the United States and Sweden, I know how vital it is for British companies, especially smaller and micro companies, to engage with the knowledge economy.

Two weeks ago I spoke to business people in the South Woodford area of my constituency. I am sure that they will welcome the incentives, as well as the £285 million to fight crime, including £100 million to recruit and retain police officers. They and many other local people are concerned about the battle against street crime, shoplifting and burglary.

There are many retailers, local shopping centres and parades in my constituency. They provide an excellent service to the public and convenient employment for local people, but there are still more than 1,400 unemployed people in the constituency. I am particularly encouraged by the extension of the new deal to people beyond the 18 to 24 age group and the enhancement of the gateway provision, with more intensive contact with new deal personal advisers, greater access to support services and improved job search facilities. For those not finding unsubsidised work, there will be flexible access to a period of subsidised employment, support for self-employment, work-based training or a programme to improve key skills or enhance employment prospects, including work trials or work with the voluntary sector.

I am the secretary of the all-party group on ageing and older people and I campaign with a group called Equal Rights on Age. A great deal of my work in Parliament is focused on fighting for the rights of older people, so I reserve my loudest plaudits for the new deal 50-plus, which started in nine pathfinders in October 1999 and rolls out nationally in a few weeks, in April 2000. I was pleased that my right hon. Friend the Secretary of State drew attention to that in his opening statement. There will be personal advice, help with job searching and an employment credit of £60 for full-time or self-employment and £40 for part-time employment for a year, as well as training support to address the dramatic fall in the employment rate of men over 50 in the past 20 years and the fact that women over 50 have generally not enjoyed the opportunities available to younger women to increase their participation in the labour market.

The Government have been a trailblazer in tackling unemployment among the over-50s by pioneering an innovative programme targeted at older jobseekers and aimed at reversing the declining pattern of employment in that age group: Since coming to power, the Government has put in place an array of initiatives on almost all aspects of economic, social and educational affairs. The scale and energy of this is almost without parallel in modem government. Those are not my words, but those of the Third Age Employment Network in January 2000. I endorse them. As my right hon. Friend the Chancellor said in his stirring conference speech, when it comes to getting the country back to work and improving things for all our people, "We've only just begun."

3.8 pm

Mr. Michael Fallon (Sevenoaks)

I cannot follow the content or sentiments of the hon. Member for Ilford, North (Ms Perham), but I pay tribute to her for giving a lead to the House and the country on world book day, which was a most welcome initiative. It was a pleasure to be involved with her local libraries. I hope that she repeats that idea.

I should like to talk more about the business aspects of the Budget than about education, although the hon. Member for Harrogate and Knaresborough (Mr. Willis) has tempted me. I shall come back to the issue that he mentioned. I declare the business interests recorded in the register.

The Budget is not old Labour—it talks a lot of e-commerce and entrepreneurship—and neither is it wholly new Labour, because it has a strong redistributionist flavour in the detail of the working families tax credit and other issues. However, it is certainly real Labour, because it will mean more tax on business and entrepreneurship. It is also real Labour in that the Government can no longer shelter behind the spending programmes that they inherited or take credit for the supply side reforms that we left them. They are striking out on their own.

One striking characteristic of the Budget is that it contains the remedies for a number of mistakes that the Government had already made. The welcome changes on capital gains tax were reforms to the Chancellor's own reforms. It is his mess over the taper and retirement relief that, to some extent, his new proposals clean up. As for vehicle excise duty, he has listened and learned, but it is probably too late for those road hauliers in Kent who have been put out of business by his earlier escalation of the duty on diesel and vehicle excise duty. At least that lesson has been learned.

We are promised an army of Excise officers throughout Kent to chase bootlegged alcohol and tobacco. It might have been easier to tackle the problem at its source and to have done more with the duty itself. At least the right hon. Gentleman has understood the damage that his original mistakes were causing.

The Chancellor has accepted what we told him all along: his replacement of personal equity plans and tax-exempt special savings allowances by individual saving accounts—a less generous scheme—was bound to lead to lower take-up. That is why he is revising his scheme and holding out the promise of a higher allowance for the first year.

If the right hon. Gentleman has acknowledged and partially corrected those mistakes, there are others that lie uncorrected. On stamp duty, he still fails to make any distinction between that which is levied on domestic houses and that on commercial property and businesses. The stamp duty that business pays is an increasing burden on business transactions. He still fails to reverse the mean-minded cut in dividend tax credit on pensioners. I thought that the hon. Member for Dudley, South (Mr. Pearson) might have touched on that. He has been eloquent on the subject previously, but now that the cut has gone ahead, presumably he thinks that it is too late to comment further. I do not think that it is. It was a mean-minded cut that affected those who had saved throughout their lives. It unnecessarily took from them sums ranging from £70 to £700 a year.

The Chancellor has not yet listened sufficiently to industry and business on the climate change levy. There are still serious concerns. There are serious concerns also, which have emerged over the past couple of days, about the taxation of controlled foreign companies. I know that the Minister will want to respond to these concerns as swiftly as possible when he replies. It is alleged by these companies' advisers that the Chancellor has made a serious mistake in his initial proposals. Whether he or the companies concerned are right, the House should be told as quickly as possible.

I move on to the economy. The stability and low inflation that we set in train continue. We can argue about the extent to which that was the legacy that the Conservative Government bequeathed, or whether by transferring responsibility for monetary policy to the Bank, the Government have managed to lock it in. I remain suspicious of the method that they have chosen. The interest rate is the sole mechanism for regulating the economy. All the evidence is that the heat is being taken on the exchange rate, with the damage that we are now seeing, especially for larger-scale manufacturing and agriculture.

It is necessary only to go to the north of England, as I did earlier this week, to see the discrepancy within a policy that is supposed to be one size to fit all. There is the difference between north and south, between large businesses and small businesses and between dot.com companies and, as they are already being called disparagingly within the City, not.com companies. Those companies are equally important to the creation of the wealth that we all need. There is the disparity also between those who must rely on pension funds for their income and those who enjoy big City bonuses.

The high exchange rate is damaging business and manufacturing, and is sucking in imports. I do not offer the House any easy answers. I know that the euro is weak, and weaker than it was designed to be. I would have preferred the Chancellor at least to address the problem in his Budget statement. I could find no reference to the exchange rate nor acknowledgement of the real pain that is being felt in manufacturing throughout the hour that he spoke to the House on Tuesday.

On the contrary, it is this Government who have increased the costs of manufacturing. Manufacturing uses diesel, and the Chancellor increased the cost of it. Manufacturing also uses labour. Similarly, the Chancellor has increased the costs of labour as well as stamp duty on commercial property, and all the rest of it.

It has always puzzled me why the Government have got it in for savers. The Government wanted to continue to fuel consumption as soon as they took office, but I have never understood why they wanted to attack savers at the same time. However, they have done it consistently. In the 1997 Budget, they put a pensions tax on dividends. In 1998, they abolished PEPs and TESSAs and replaced them with less generous ISAs. In 1999, they introduced the 10p starting rate of tax, but for the very people who one would think should be encouraged to save, they left the savings rate at 20 per cent.

We are left with the ludicrous position that base rate taxpayers who are paying 23p or 22p on their income have a lower rate of 20p on their savings. Starting rate taxpayers who are paying income tax at 10p must pay double that rate on their savings. That is not logical. Cumulatively, all the attacks on saving help to explain why the proportion of household income that is saved—the savings ratio—has fallen dramatically from 10.6 per cent. in 1997 to 5.5 per cent. now.

I know that in times of low inflation the savings ratio tends to fall, but it has been falling quite consistently and I think that it is now worryingly low. I ask the Government to re-examine ISA take-up. The point of ISAs, as the Government originally intended them—and fair play to them—was to take the PEPs and TESSAs culture to those people who had not yet been affected. They wanted to get new people to save who had not considered saving before. I ask the Government to consider the complexity of the rules. If the Chancellor had addressed these matters, he would have my support. There is confusion between the maxi-ISA, for example, and the mini-ISA.

I urge the Chancellor to do something about the 20 per cent. on savings that the 10 per cent. taxpayer has to pay. Why not scrap the provision altogether? We are talking about the very people whom we should be encouraging to save.

It has taken a long time for the Government to come clean on the rising tax burden. The Chancellor has hedged and hedged before the Treasury Select Committee and it was finally the official spokesman from Downing street who admitted—the Red Book makes no bones about it—that the tax burden has increased. Despite defining the burden as net taxes and social security expenditure as proportionate gross domestic product, the burden has risen from 36 per cent. in the last year of the Conservative Government to nearly 38 per cent. this year, and it will continue increasing.

We were told originally that the burden was falling. Then we were told that it would fall, or the Government hoped that it would. Now it has increased, and the people have begun to notice that. Mortgage interest relief at source and the married couples allowance have disappeared. We have had increases in the price of petrol and all the so-called stealth taxes. My constituents are asking what they are seeing for the extra taxes that they are paying.

As I understand it, Labour was elected above all else to make a difference, yet motorists are paying more for their petrol while public transport gets worse. We are all paying more council tax, yet we have 1,700 fewer police officers and crime rising for the first time in six years. We are all paying more stealth taxes, yet we have 248,000 more people waiting to see a national health service consultant. The Government promised higher quality public services and instead we have longer queues.

Suddenly, three years on, we have the promise of shed loads more money for health and education. Suddenly, the Chancellor is so worried about why people do not think that schools and hospitals have improved that cheques are being sent to schools three years into a Labour Government and £2 billion extra is going to the NHS. Next week, there is to be an 8 per cent. increase for education, and the further £2 billion will make £4 billion in all for the NHS. What were the Government doing before to make them plan public expenditure like this?

Mr. Gardiner

I listened carefully to what the hon. Gentleman said about the 10p and 20p tax rates on savings. Is he not aware that one of the Budget measures is that the extension to savings of the 10p starting rate of income tax will now be effective from 6 April 1999? His point is no longer relevant, and the time differential was accounted for in my right hon. Friend the Chancellor's remarks.

Mr. Fallon

I am sure that that is helpful, but what was the point of the 20p rate on savings for those on 10p tax? I would not tax at all those on the very lowest incomes who pay the starting rate.

Like all Conservative Members, I welcome the increase for education and congratulate the Secretary of State and his ministerial team on securing it. As I recall, negotiations with the Treasury are never easy, and it is a good increase. Is it a one-off payment, though, or will next year's Budget—or even the pre-Budget report—allocate similar annual payments directly to schools? Has a precedent been set?

Unless I misheard him, the Secretary of State said that the one-off payments would be targeted. When he publishes the guidance—he said, perhaps by mistake, that it was already available, but I certainly have not seen it—will he make it clear what the payments can be used for? Are schools free, for example, to use them for teachers' pay? Will they be able to use them to fund the new performance-related pay bonuses, or are they restricted to the non-salary element of their delegated budgets?

Mr. Richard Allan (Sheffield, Hallam)

The hon. Gentleman raises an important point. In Education questions earlier, the Secretary of State specifically related the amount of money to the number of teachers employed, and clearly schools cannot go around employing teachers unless they have some certainty for the future, so I hope that the Minister will clarify the matter.

Mr. Fallon

That is a most helpful intervention. I apologise to the House for not having been present at Education questions. I was speaking to a school group, which I suppose is a better excuse than some. As that intervention demonstrated, if the payments are for the salary side, they will bind schools into commitments that they may not be able to meet in subsequent years.

Mr. Gardiner

Will the hon. Gentleman give way?

Mr. Fallon

I am sure that this intervention will be as helpful as the hon. Gentleman's previous one, so I will.

Mr. Gardiner

Indeed, I intend to be helpful. The Secretary of State said specifically that the moneys were to be used by head teachers in whatever way they chose. He was also specific on the extra £2,000 for performance-related pay and said that it would come directly from central Government as teachers break through the threshold.

Mr. Fallon

In trying to be helpful, the hon. Gentleman is digging the Secretary of State into a bigger hole. If the head teacher can use the money however he chooses and he decides to use it to top up teachers' pay or to recruit an extra part-time teacher, what certainty has he that the money will be repeated in subsequent years? There may be no mystery here, and perhaps the Minister will make it clear that the money is a one-off and head teachers had better look out and not make commitments that they cannot meet in subsequent years, or perhaps he will say that it was always intended that at least that amount and no less should be repeated in subsequent years, but I hope that he will agree that the matter can be easily cleared up at the end of this debate.

As I understand it, the extra payments will be given indiscriminately to every school, irrespective of performance, on the basis of pupil numbers. I have no objection to that, but it is not what the Government said last year, when they produced public service agreements saying—it is all there on page 11—that the money allocated to the Department for Education and Employment would be specifically committed in return for meeting certain performance targets.

That was the whole point of public service agreements. That is the agreement that the Chief Secretary and the Secretary of State signed in blood, but on Tuesday we heard that schools would get their cheques irrespective of whether they had achieved their literacy or GCSE targets. Have the agreements been abandoned? Perhaps the literacy targets have been abandoned. That might get the Secretary of State off the hook, as I think that he promised to resign if they were not met.

The hon. Member for Harrogate and Knaresborough asked what were the Government's intentions towards local education authorities. As it happens, I do not agree with him. He said that one must seriously debate whether one wants Ministers in charge of the system, making all the payments centrally, or whether councillors should be in charge, ensuring democratic accountability. I can only say to him—he has left now, so I say it to the hon. Member for Sheffield, Hallam (Mr. Allan), who may be his parliamentary private secretary, for all I know—that that is not the stark choice. I do not want either in charge of the system.

As I said repeatedly when I was a Minister, and as I have written endlessly since, I do not think that either Ministers or councillors should be in charge of the education system. In the end, parents should be in charge. That is the whole purpose of our free schools policy. Parents should be in the driving seat and able to choose freely the schools that suit their children's particular skills and abilities.

The hon. Member for Harrogate and Knaresborough also tempted the Minister into the field of higher education. He was right to ask for clarification, and I think that he got some, on the fact that the Government do not intend to have top-up fees. He went on to try to draw a distinction between top-up fees and differential fees. I do not think that there is a distinction. I see no objection in principle to the very best universities being able to devise such arrangements, provided that they are supported in other ways, through alumni and business contributions.

I would start at the other end. The cruellest deception, having expanded higher education, is to pretend that the university at the very bottom is delivering the same quality of research, scholarship and higher education as those at the very top. My only regret about our reforms to end the binary line and bring polytechnics fully into higher education status is that we did not go further and introduce more of a market system by encouraging proper publication of the outcomes so that students are not tempted by anecdote, history or the personality of a teacher or head of department to sign up for courses that lead to a worse outcome, with less chance of getting a job at the end.

It can be said in the Chancellor's favour that at least he did not try to triple count the new money he gave the NHS, as he has done before. We did not hear as much about the £21 billion as we did when it was announced two years ago. Indeed, the £21 billion was not only triple counted, but we were told that it was enough to give the NHS all the resources it needed. The famous £21 billion was announced in 1998 and started to take effect in April 1999. Before the first year of all that extra, triple-counted money has ended, the Government have suddenly said that it was not enough. Now an extra £2 billion has to be found and health service spending must jump from 3 per cent. to 6.1 per cent. a year. Suddenly, the NHS needs wholesale reform. What have the Government been doing for the past three full years?

In return for the extra taxes, the public deserve to see better quality public spending. We heard nothing about a reduction in the welfare bill, which is still rising. Less money should be wasted on dealing with asylum seekers, and that problem should be tackled at source. Less money should be wasted on regional bureaucracy and a tougher approach taken to public spending across the board.

I am a little wary of the various small tax breaks that the Chancellor introduced for business. Of course industry welcomes capital allowances and those who are offered free computers or special deals on the leases welcome that. However, too much of the help announced on Tuesday is spread too thinly. Behind that assistance lies the dangerous assumption that e-commerce is now the only form of enterprise on the table. E-commerce is important, but in many respects it is a means to enterprise, not the only enterprise. The Government are trying to be fashionable in channelling extra money to a sector that appears to have much activity and investment already. Do the dot.com companies need that extra public subsidy? They seem to get a lot of attention without it.

The business postbag in my constituency has a different agenda. Businesses complain about the level of business rates, but I heard nothing on Tuesday about the level of the uniform business rate, which is a huge and—with the revaluation—growing burden on business. Above all, I heard nothing on Tuesday about the Government's so-called campaign to cut red tape. We had a deregulation task force. The Government call it the better regulation task force. That is not just semantics, because we have seen no deregulation. We used to have 30 or 40 deregulation orders a year, but the Government have hardly any.

Businesses might have forsaken a penny or so off corporation tax if they no longer had to put up with all the extra bureaucracy of the working families tax credit, the minimum wage, paternity leave, the working time directive and the rest. The Government now expect businesses to be an arm of Government—to be tax collectors, benefit offices and immigration officials, all of which simply adds to costs.

I have some other concerns about the Budget and I was glad that the hon. Member for Dudley, South expressed some scepticism about the role of regional venture funds. Venture capital was a problem four or five years ago, but it is less so now. We seem to be awash with venture capital funds up and down the country, looking for investment opportunities. Rather than putting taxpayers' money into state venture capital funds and investing in regional bureaucracies, we should put it into infrastructure itself.

Mr. Blunt

I am grateful to my hon. Friend, because my intervention will save me making a point in my speech later, if I am lucky enough to catch your eye, Mr. Deputy Speaker. The Environment, Transport and Regional Affairs Committee is taking evidence on the urban White Paper, and it has become clear that there is now a huge variety of funds of one sort or another and many different organisations with overlapping responsibilities for urban regeneration. The situation is so bad that bureaucracy has now become an obstacle to urban regeneration, and that example reinforces the point that my hon. Friend is making.

Mr. Fallon

My hon. Friend is right. When we had highly focused development corporations in specific areas—usually riverside areas, such as Merseyside, Teesside, Tyneside and Wearside—they could channel money where it was most needed, improve the infrastructure and the skills base, and refurbish the industrial landscape. Now we have a surfeit of such programmes, none of which interlock properly, and public money will be poured into bad venture capital opportunities, instead of into the infrastructure on which most business men would prefer it to be spent.

Labour has had the benefit of the doubt. After three full years and four big Budgets, it can no longer shelter behind the legacy that we left them or the great supply side reforms of the 1980s. The Government told the people that a Labour Government would be different. So far, things are not different; all that has happened is that people are paying more and getting less.

3.37 pm

Mr. Piara S. Khabra (Ealing, Southall)

My speech will be brief, factual and relevant to today's debate and the proposals in the Budget on education and employment, rather than being philosophical and speculative. I welcome the proposals outlined in my right hon. Friend's Budget on Tuesday. Employment and education are the lifeblood of the country, and the announcements by my right hon. Friend will give a massive boost to these sectors.

Unemployment is at its lowest level for two decades, and more than 800,000 new jobs have been created since the election. What is more pleasing is that some 80 per cent. of the increase in employment over the past year was in full-time work. In addition, long-term unemployment, which seemed never-ending during the Tory years, has fallen by 67 per cent., and youth unemployment has been cut by 74 per cent. in my constituency. So, at last, it is the Labour Government who are giving the younger generation the opportunities to work, which under the Tories were denied to them.

No one can deny the harmful effects that mass unemployment has on society. For example, all hon. Members will remember how crime rose significantly during the high unemployment of the 1980s under Conservative rule. The link is unquestionable, and I am proud that this Government have been prepared to face up to that challenge. I believe that the Government will step up that fight in the near future.

The announcement that the employment and windfall levy allocations of £455.5 million will be phased in over the next two years to allow the extension of support to get people back into work is excellent news.

Under the new deal for 18 to 24-year-olds, partnerships must ensure equal opportunities for people of ethnic minority backgrounds. That is important in my constituency and I welcome the fact that the Government are asking the equality commissions, working with employers and other organisations, to put together an effective package of support and advice for businesses. I have many businesses in my constituency—medium and small businesses are flourishing there.

I also welcome the fact that the Government intend to intensify and extend the new deal for the over-25s on a national basis from April 2001. Building on the principles of the new deal for the under-25s, it will help those who have been unemployed for 18 months or more to find work. The package will be backed by extra steps to advertise the support and advice available to jobseekers aged 25 and over.

Similarly, the new deal for the over-50s was launched in nine pathfinder areas on 4 November and will be rolled out nationally in April 2000. Pilots for the new deal for disabled people have also been launched. It will help people with disabilities to remain in work. There is also an enhanced package of the new deal to help more lone parents, including all those with children over three, and to offer more options for those considering work, plus an extra £12 million for child care for those in further education, providing an extra 10,000 places.

In addition, the employment tax credit to extend a guaranteed minimum income to people without children, the new job grant of £100 from April 2001 to ease the transition into work for those who have been unemployed for a year, and the package to tackle the multi-billion pound hidden economy are all to be applauded.

On education, the schools in Ealing, Southall will benefit from the extra £1 billion announced by my right hon. Friend the Chancellor. That money will be vital in recruiting more teachers and buying more books. The money includes an average of an extra £45 per pupil next year, and a typical secondary school in England will receive a direct grant of £40,000 extra in the year from April to help in the drive to improve standards in schools.

However, everyone recognises that standards in teaching should be high from the start if we are to improve literacy, so primary schools will receive grants worth up to £9,000 each. The provision of an extra £20 million to help primary schools to provide catch-up literacy and numeracy for the weakest pupils is also good news. That is on top of the £42 million that has already been announced, and it shows the Government's commitment to ensuring that children have the three Rs.

I must mention the Government's commitment to provide section 11 funding to local authorities, which was abolished by the Tories. I also welcome the fact that the Government have not forgotten the importance of special schools, which will also receive a grant of £15,000 each.

The need for skills is very important to our economy, and the Government have clearly recognised that to achieve this more people must go into higher education. That process is already taking place, but the announcement that £53 million of recurrent spending will be used to extend education maintenance allowances and to support a campaign to encourage young people to stay on in education can only add to the list of incentives for young people.

There is something in this Budget to please everyone. It shows a commitment to the Labour party's core values of achieving full employment and maintaining and improving the public services that we all cherish so much. It is a comprehensive package of measures that I warmly welcome, and I am sure that my constituents will also welcome it.

Finally, I believe that the economy is safe in the hands of our ablest Chancellor of the Exchequer—the Action Man of the 21st century.

3.45 pm

Mr. Clifford Forsythe (South Antrim)

At the risk of losing friends on the Opposition Benches and gaining them on the Labour Benches, I generally welcome what seems to be a balanced and fair Budget, in which the Chancellor has attempted to be both even-handed and, in some spheres, relatively imaginative.

That said, I have misgivings about a number of things, and it is on those that I shall concentrate. Although I will naturally refer to matters that affect Northern Ireland and my constituents, I will also speak in general terms as many right hon. and hon. Members throughout the country experience similar problems.

On social security and pensioners—the older folk—there is no doubt that one welcomes the increased social security benefits for families and the extra £50 for pensioners, plus the 1p off income tax. One also welcomes the increases in the personal and age-related allowances and the fact that the £3,000 cash limit and £7,000 overall limit for ISA contributions is to be extended for another year.

Personally, I welcome the affordable warmth programme and the reduction of value added tax on insulation, heating and so forth to 5 per cent. Hon. Members will know of my association with the plumbing industry.

However, there is a downside, which the Chancellor did not mention—indeed, the Government have not mentioned the matter for some considerable time—because the standing charge is to remain for everyone who has a BT line rental. The standing charge is proportionately much greater for people who use the telephone only a little. My hon. Friend the Member for East Antrim (Mr. Beggs) has tabled an early-day motion, which has received 112 signatures, to ask that the charge be reconsidered. I hope that the Government will look at it, although I do not know within whose power it lies.

Another concern relates to the reduction in the television licence for residential homes, as there is an anomaly. Apparently, if housing associations have a vacant dwelling, they are obliged to offer it to someone who may not be a pensioner even if all the other residents are pensioners. If a building is divided into six apartments, one of which is given to a person who is not a pensioner, every person in that building must then pay the full price for the television licence. In such a case, the five pensioners would all have to pay the full licence fee because the building contained one person who was not a pensioner. I know that that anomaly has been examined before and was supposed to have been sorted out, but it clearly needs to be looked at again.

I welcome the training in industry for people who have become unemployed, but I greatly regret the loss of the apprenticeship scheme, as it used to be conceived. The schemes that still exist are slightly different from what we had in the past, when people gained technical knowledge and a great grounding in the industry in which they were to be employed. It is sad that more support is not given to apprenticeship schemes.

Mr. Boswell

All hon. Members will welcome the hon. Gentleman's comments about apprenticeship schemes, and my experience of the modern schemes is that they are very powerful. Does the hon. Gentleman agree, however—in the context of potential redundancies in Northern Ireland, and given what has happened at Rover in the west midlands—that it is extremely important that the Government secure continuity in the education and development of people engaged in apprenticeship schemes who are made redundant?

Mr. Forsythe

That is a very fair point, and I hope that the Government pay attention to it. It is essential that that continuity be secured.

The air passenger duty is a great bone of contention in Northern Ireland. I welcome the fact that for economy class it has been reduced to £5, and that for travel within the European Union it remains at a level £10. People may consider that the business-class price of £40 for people travelling from outside the EU is easily affordable, but Northern Ireland—like other parts of the United Kingdom—wants to attract business people and their industries or businesses into the area. People coming to Northern Ireland, and to other parts of the UK, are being penalised by the cost of the air fare whenever they come back, and that is a great disadvantage.

The highlands and islands of Scotland have been granted a concession over air fares. I welcome that and fully support it. However, the absence of the same concession for Northern Ireland means that the Province is once again disadvantaged, this time by the strip of water that separates it from the UK mainland. I wonder whether the Chancellor of the Exchequer has considered that problem. We in Northern Ireland do not expect jam all the time, but that matter deserves to be looked at.

For obvious environmental reasons, I welcome the fact that vehicle excise duty is to be graduated. The fuel tax escalator is to be ring-fenced, and I understand that it will be neutral this year. As a result, the ring fencing that will give money to other parts of economy will not apply this year. However, if the duty rises in the future, and if the resources thus realised return to the Treasury, will the money be held centrally or will it go to the regions from whence it came?

Moreover, the Organisation of the Petroleum Exporting Countries has raised the price of oil substantially this year, and the cost may rise further. I hope that the Chancellor will take that into consideration in the future.

Northern Ireland shares a land frontier with another EU nation. That is a great disadvantage to filling stations near the border. Other colleagues have told Ministers that before, but the point is worth repeating. The vehicle excise duty also causes difficulty for our transport industry.

I have some reservations about ring fencing. In last year's Budget, we in Northern Ireland were promised extra money for roads in certain parts of the Province. We later discovered, however, that the money was to come from the sale of the port of Belfast. It now appears that, if the port is not sold, the money will not be made available. I therefore hope that, in future, ring-fenced money that becomes available will be passed on.

I mentioned that I welcomed, for environmental reasons, the introduction of graduated vehicle excise duty. Travel by bus and rail must also be considered, if we are to have a better environment. To cut the use of motor cars and other vehicles, we must turn to rail. Putting lorries on to the railway has great financial consequences, but that remains an option, as does the extension of light rail services. However, public transport must be attractive if people are to be persuaded out of their cars. If we make it attractive enough, we may have some success. We in Northern Ireland do not benefit from the free concessionary fare schemes administered by councils in Great Britain. As the House can imagine, that lack does not go down very well with our pensioners.

There is great deal of debate in this capital city among certain people about the railways and the tube. Such a debate can only be good, and we hope that something positive will come from it. Unfortunately, the amount of money spent on Northern Ireland's railway system is miserably low. It was suggested that it needed an investment of £80 million, and better rolling stock, to bring it up to standard. We were then told that the amount spent would be £18 million, after which we discovered that it would be £5 million. I hope that through the auspices of the House, those who are responsible for the railways in Northern Ireland will look again at that investment. If they need to speak to the Chancellor about it, we have his representatives here on the Treasury Bench who I am sure, knowing them as I do, are listening carefully.

We need a planning strategy for the environment and the roads, and everything else that needs to be done. Part of that strategy should be to build more on brownfield sites than on greenfield sites. It is nice to live in the country, and I suppose that when people buy a house in a rural area, they get comfortable and do not want anyone else to join them. I understand that—it is human nature. I do not know yet whether there is a plan in Northern Ireland for brownfield sites. It would be most unfortunate, however, if we got to the stage of digging up graveyards to use as brownfield sites. We should draw the line at that.

The international airport is in my constituency. It is privately run, and a lot of money has been put into it. The people who run it are doing their best to attract international flights. As part of that operation, they are planning an extension. I was speaking a moment ago about the planning of brownfield sites. It is most unfortunate that the planning service appears to be holding up operations that include upgrading the roads and bringing them up to standard, resulting in a different way of approaching the airport. The current suggestion is to extend one part of the rail system. Sadly, it is then proposed to close down another part. When we are looking at ways of attracting people to use trains and buses instead of cars, it seems ridiculous that the extension of one section of the rail system means that another will close. That should be looked at very carefully.

On the climate change levy, from the point of view of Northern Ireland I welcome the five-year moratorium for natural gas, provided that the European Union agrees. I spoke earlier about air passenger duty. We welcome that gesture towards Northern Ireland.

There is much in the Budget with which the Chancellor, the Government and Labour Back Benchers should be pleased. However, there are problems that the Government must face up to if they wish to achieve their overall aims. My party and I share many of those objectives. By taking my advice, that of my party and that of colleagues in other regions of the United Kingdom whose parties are represented in the House, the Budget can be beneficial to the UK as a whole. That will happen only if the guidance of right hon. and hon. Members is heeded and their comments are given the consideration that they deserve.

4.6 pm

Mr. Jonathan Shaw (Chatham and Aylesford)

I am pleased to follow the hon. Member for South Antrim (Mr. Forsythe). I agree with many of his remarks. He pointed out some of the anomalies in the tax system, particularly for elderly people living in residential homes or sheltered accommodation.

The Budget is very welcome on this side of the House. The investments in education and, in particular, the health service, gave us all considerable cheer. To make those investments in the public services, we have had to manage the economy soundly. We inherited a lot of debt, and had to bring about stability. Some Conservative Members have asked, "Why now?" We have made steady increases over the years, and we do not want to return to a situation of spending today and cuts tomorrow.

The Budget also builds on important social reforms that we have been proud to bring about for a fairer, more equal society. I refer to the minimum wage and the new deal. Many right hon. and hon. Members have mentioned youth unemployment in their constituencies. In mine, it has fallen by 89 per cent. One important feature of the measurement of the new deal that is not contained in the Red Book is its quality. Young people who have been through previous, programmes are cynical because there was little investment to back them up. One young man I knew wanted to go into retail, and his training programme consisted of washing cars on a forecourt. There was nothing about customer liaison or marketing. Not surprisingly, he became disillusioned and gave it up after a few weeks. The quality of the new deal comes through when we talk to young people who have been on the programme.

We have seen paid holidays for workers, and have tackled child poverty. I hope that the trade union reform will soon be enacted. Trade union membership is on the increase. That should be welcomed, as it ensures fairness at work and minimum standards. The working families tax credit and the increases announced by my right hon. Friend in the Budget were very welcome. Even more hard-working families will benefit—there are some 1,500 in my constituency.

One of my local citizens advice bureaux ran a campaign to encourage people to apply for the working families tax credit. The manager wrote to me recently, saying that some families had received more than £100 extra a week and were surprised and delighted by the magnitude of such sums. Those are her words, not mine.

We know that many people are not taking up the working families tax credit. The Government have run a high-profile campaign, but we need to do more. As I understand it, some 400,000 families could be eligible. If our national advertising campaign has not been as successful as we want, perhaps we should look for a more local focus. The Government should perhaps invite local authorities or citizens advice bureaux to spread good practice and there could be some reward incentive for those who produce the best results.

On the welfare-to-work agenda, we have yet to grapple with one piece of the jigsaw—housing benefit. In areas where rents are high and when the benefit clawback can be up to 70p in the pound, people have no real incentive to move into work. They receive the working families tax credit, but then face housing benefit and council tax benefit clawbacks, and perhaps feel that all was not made clear to them. That is a great challenge to the Government. I look forward to the Green Paper, but housing benefit represents a considerable difficulty. It is undoubtedly a cousin of the Child Support Agency.

Housing in the south-east is expensive. There are competing pressures to protect the countryside and ensure that indigenous populations can remain in the towns and villages that they come from and where their extended families are. It is no good any political party saying that it supports the family if families have nowhere to live because they cannot afford rents, because land values are so high or they cannot afford to purchase property. Yet that is exactly what will happen if we do not have planned development.

Furthermore, without housing development, prices will not just go through the roof, as some commentators have said, but in London and the south-east they will go into orbit. People such as postmen are essential in our communities, but how can they afford to buy a family home that costs £100,000 or £150,000? Such sums are beyond scores of ordinary working people. To halt development would be to create a scenario in which prices rise sharply. I welcome the proposal made by my right hon. Friend the Deputy Prime Minister that planning should be reviewed every five years. That is a far more sensible approach than predict and provide, and letting housing development rip.

The competing force is the need to protect the countryside. I have lived all my life in the county of Kent, which boasts some of the most beautiful countryside in the United Kingdom. I will not stand by and allow concreting all over the place, which is what some Opposition Members have suggested will happen. It is obvious and right that we should build on brownfield sites, but it is much more costly to build on contaminated land, so we must consider incentives for builders to deal with those costs.

I know that my hon. Friend the Paymaster General is set to hold a review of how stamp duty could provide incentives for brownfield development. On page 119 of the Red Book, the Government talk about regenerating our cities and protecting our countryside. They say: the Government is attracted to the idea of offering relief from stamp duty for new developments on brownfield land. They say that they welcome the urban renaissance report by Lord Rogers of Riverside. I look forward to taking part in that consultation, but nowhere in the Red Book is reference made to the main recommendation in Lord Rogers' report on harmonisation of VAT levels for new build on greenfield sites, and for renovation and brownfield development. If the statement of intent is to move taxation from goods on to bads, how can it be that building a £2 million mock tudor mansion on a greenfield site is zero-rated—zero-rating is supposed to be for social reasons—when doing up two or three empty terraced properties in Chatham for families on low incomes is charged at the full rate of 17.5 per cent.? The additional costs to the housing association working in partnership with a private landlord are passed on. We know that housing benefit levels are a barrier to welfare to work. Such building is not only environmental but social. It meets all the tests—social, environmental and economic. It is sustainable development.

The Government have not made as much progress as I would want. I have made my contribution in Adjournment debates, ten-minute Bills and early-day motions. My closing remarks in the first Adjournment debate were that the Government should not put the problem in the tray marked "too difficult". That was two years ago. It does not seem to have got out of the tray. Certainly, the Department of the Environment, Transport and the Regions wants VAT harmonisation. Bodies such as the Civic Trust, the Joseph Rowntree Foundation and every conceivable housing body that has a view about regeneration regard it as absolutely essential. I welcome the proposal on stamp duty, but I remain to be convinced that it is the way to deal with the thousands and thousands of empty properties. I shall now move on to more positive things.

By my rough calculations, £600,000 will go to the schools in my constituency. As a governor for many years, I know that they will welcome it. Earlier, we heard the Conservative Front-Bench spokesman complaining about disillusionment. I do not think that people will be disillusioned with the money and I do not see disillusionment when I open new nurseries or computer suites. I do not see disillusionment about the numeracy hour, the literacy hour or raising standards.

I welcome the Government's decision to give resources to head teachers to spend as they want. That is an important point. I shall deal with the restrictions on the standards fund in a moment. I think that we all agree with my right hon. Friend the Secretary of State that head teachers are vital. It is important that they embrace raising standards in schools. In any successful school, one will find an energetic, committed, highly skilled head teacher. It is argued that, in the main, the new money should go straight to schools. Essentially, that is a good idea, but we should not ignore local knowledge. I certainly do not agree with the idea that we should have a national funding formula. I agree with the hon. Member for Harrogate and Knaresborough (Mr. Willis) about that. I caution the Government against a national funding formula. If we lose that local knowledge, we will not necessarily target the money where it is needed.

Some schools in Kent have a large surplus, but others are struggling. The ones that are struggling are often the secondary moderns in deprived areas with up to 60 per cent. special needs pupils. It is not difficult to see how a head teacher in a school that does not have a sixth form and therefore has fewer pupils can feel a sense of injustice when he knows that the well-resourced school up the road receives more money. It is important that LEAs continue to have a role in distributing resources. I see from my notes that my right hon. Friend the Secretary of State said that he was committed to continuing partnerships with LEAs. I welcome that.

My right hon. Friend talked about the importance of enabling head teachers to spend their budgets how they want. Head teachers have told me that certain categories of the standards fund are too rigid. If small sums go from the local authority to the school, it is often difficult for the school to spend them with any effect. One head teacher told me that he received £250 for drug prevention. He was not allowed to buy books with it and there was not very much that he could do with it. But if a number of schools in an area put their £250 together, they could do something far more creative. I ask my hon. Friend the Minister to look into that. There are many other such examples.

If the schools do not spend the money, it goes back to the Department. I wonder how much money comes back each year because of the lack of flexibility. Rather than rigid categories, there should be broad headings with flexibility within them.

Mr. Allan

Does the hon. Gentleman share my concern about some of the comments that have been made about school funding? They seem to suggest that money allocated via LEAs is not entirely in the hands of governors and head teachers. Under the local management of schools system, heads and governors have always decided how to spend their block grant from the LEA. Often, the money from the Department for Education and Employment is more constrained than money from the LEA, which is a block grant for heads and governors to spend at their discretion.

Mr. Shaw

I presume that the money that has been announced will go into the delegated budgets to which the hon. Gentleman referred. Although we want targeted outcomes, with no money wasted on bureaucracy, we need to incorporate some flexibility so that head teachers do not return the money—as some of those to whom I have spoken suggested they might do. We need a broad approach, rather than such strict categories. I hope that Ministers will take note of that point, especially in the light of my right hon. Friend's remarks about flexibility. Overall, however, the extra spending is welcome—£600,000 for schools in my constituency cannot be sniffed at.

Equally welcome is the substantial boost for the national health service. A 6 per cent. increase will take the service into a new era and will meet the aspirations of the country. People want that massive expenditure.

Since we were elected, we have been building up the service. The accident and emergency department at Medway hospital in my constituency was dilapidated; there had been no investment since the 1970s. The final stage of its refurbishment is now being completed. That would not have happened without the additional resources that the Government have allocated.

The Conservatives have committed themselves to our spending commitments on health and—today—on education. However, they are also committed to cut overall taxation if they are elected at the next general election. How will they square all those extra billions of pounds that we plan to put in, if they bring about another recession? How will they pay the dole cheques? Who will be first in line for cuts in the public services? If it is not to be schools or hospitals, will it be roads or local authorities? Who will be first in the firing line? The hon. Member for Maidenhead (Mrs. May) did not answer that question. I do not think that the Conservatives will give us an answer, but the question is legitimate and we shall ask it constantly. The electorate will want to know the answer, because Conservative policy does not add up.

Meanwhile, there will be many calls on the additional resources in the health budget. I shall make my pitch now. The Children (Leaving Care) Bill is being considered in the other place. The Bill is superb. I have worked with young people leaving care and am aware of the many deficiencies in the system. We all have responsibility for that—irrespective of political party. Up to 75 per cent. of young people leaving care have no educational qualifications. Up to 50 per cent. of those young people are unemployed and 20 per cent. experience homelessness within two years.

The Bill is excellent, apart from one aspect—the statutory age is raised only to 18. All the research, including that described in the splendid document, "Me, Survive, Out There?: New Arrangements for Young People Living in and Leaving Care", suggests that the age should be 21. The Government have stated their aspiration that it should be 21, if finances are available. However, if the money is not available now, it never will be. I make that pitch on behalf of those young people.

On average, young people in stable families with a reasonable upbringing leave home at the age of 23. The most abused youngsters in our community leave care at the age of 16 or 17—we are now raising the age to 18. We must raise it to 21.

Recently, I met a young man who had been in care, where he was managing to study for his A-levels—quite unusual among that group—but when he reached his 18th birthday, he was told, "You are leaving, you are going into a bedsit". That was four months before he was due to finish his A-levels. What a disgrace. Not surprisingly, he did not manage to complete his studies, although he has now started again. I am glad to say that the social services department has rectified the matter and he is now in supportive accommodation. But why should he have had to face that problem in the first place? That happens to hundreds of young people leaving care.

Finally, I want to mention the paper industry. Some 1.4 million tonnes of paper and board is produced every year in my constituency. Over recent years, the paper industry has contracted—a painful process, in which many skilled workers lost their jobs, due to overcapacity and the strength of the pound. There have been shut-downs because of global ownership. Last year, a mill in my constituency owned by Kimberly-Clark closed with the loss of 250 jobs. The mill was profitable, but, because of overcapacity, the company decided to close it. The other Kimberly-Clark mill is in the constituency of my hon. Friend the Member for Gravesham (Mr. Pond), who is in the Chamber. He was obviously relieved that his mill was not the one that closed. There are similar examples of mill closures in Kent and throughout the country.

However, there are major opportunities for the paper industry—not only through job creation, but in the protection of our environment. I refer to paper recycling. The UK's current recycling rate is relatively low compared with those of other major EU nations. We recycle about 40.5 per cent., compared with Germany's 70 per cent. and the Netherlands' 62 per cent. Figures from the Paper Federation of Great Britain Ltd. show that, for every thousand tonnes of paper that we recycle, we create 13 jobs—not necessarily at the mill itself, but in street collections and other processes in the green-collar industry.

Everyone is committed to recycling. We all think it is a good idea, nationally and locally—for example, through local Agenda 21 programmes. Local authorities in my constituency are no exception. However, in order for councils to collect paper or other goods for recycling, there must be somewhere for them to take the material—there has to be a processing site. At present, all the recycling mills in the UK are full to capacity. There are three such mills—one of them is in my constituency. If the councils have nowhere to take the material and cannot set up long-term contracts, recycling will not happen.

We need to consider other ways to finance recycling. If we could make more imaginative use of the landfill tax—perhaps by considering hypothecation to local authorities so that they can set up recycling schemes—there would be the capacity to provide mills and the paper companies would have the confidence to invest. It costs about £250 million to set up a mill with a capacity of 350,000 tonnes—that is about the minimum needed to make those operations work. The landfill tax is innovative, but we need to consider other measures. We need to involve local authorities, which will have to collect the waste paper, so that they can provide the amounts of paper needed by large mills to make the process viable.

Failing that, under the comprehensive spending review, the Government might consider providing financial assistance to companies who want to set up mills. At present, the risk is too great. If there is no revenue stream for the local authority to collect the paper, the step between collection and mill operation is too wide. Companies are not prepared to risk that investment and there is no sign that another mill will be set up.

That is my shopping list for my colleagues on the Treasury Bench. The Budget is welcome. It is a landmark for the NHS; it will provide more money for schools in my constituency and will continue to raise standards—all brought about by my right hon. Friend the Chancellor's excellent stewardship of the public finances.

4.30 pm

Mr. Crispin Blunt (Reigate)

It is a great pleasure to follow the hon. Member for Chatham and Aylesford (Mr. Shaw). I have done that before and have learned to respect his expertise and experience in child care issues. I listened to his remarks on that and on the Bill going through the Lords with great interest.

I was delighted with the central section of the hon. Gentleman's speech and what he said about urban regeneration and the different taxation levels that there should be for brownfield and greenfield sites. He nearly said that the Budget was woeful in that respect; that is clearly what he implied. It has been a grotesque missed opportunity and it is not good enough for the Government to say—two years after they began to consider these issues—that they are attracted to the idea of offering relief from stamp duty for new developments on brownfield land. Such a proposal could and should have been in the Budget.

The hon. Gentleman said that he would oppose the concreting over of Kent. I take it that his speech was the start of his opposition to that. We shall learn on Monday the number of new houses that will be imposed on Kent by central Government. I hope that he will join me and many other Members in opposing the way that central Government have imposed extra houses on areas without seeking the consent of local people. The Government have not paid regard to the environmental consequences that will flow from new developments, to the infrastructure that needs to be built and to the quality of life of our constituents that the hon. Gentleman and I seek to protect.

Mr. Shaw

I hope that the hon. Gentleman remembers my other point. If we do not have any development, the indigenous population will be simply priced out of the market. A policy that says that only local authorities will provide planning permission is tantamount to saying, "Get off my land."

Mr. Blunt

I am afraid that I do not agree with the hon. Gentleman. Local authorities have a responsibility to all local people. If they fail to discharge that responsibility and fail to provide sufficient houses for the whole range of the population—including nurses, teachers, policemen, cleaners and all the other parts of our society that have to find houses even though they have different levels of income—they will fail in their duty to their community. If local authorities fail to make proper judgments in the interests of their whole community, they will pretty rapidly, and properly, be voted out of office. Local people will feel the consequences if services cannot be provided because people in the jobs that I have mentioned have been priced out of the market. There is no reason why local authorities are any more incompetent to take such decisions and face up to the facts than central Government are capable of somehow being omniscient. That is part of the problem with the Budget.

To pick up a final point from the hon. Gentleman's speech, he asked what the Conservatives would do if we had the tax guarantee and we went into recession. We would borrow in a recession, and not tax. That is what we did in the previous recession. We would ensure that the pattern of taxation did not rise unsustainably, and remained constant. Obviously, in a recession, the pattern of expenditure rises because of the demand from areas such as social security. However, we would try to keep taxation rates relatively stable, and we would worsen the recession if we did not borrow in such circumstances. However, such borrowing is not sustainable in the long term, and I shall return to the issues of debt and of borrowing.

It would be useful to consider the Budget in its historical context. We have been told that history began on 1 May 1997, but it did not. We need to examine the state of the United Kingdom economy and what we should be doing in the era in which we find ourselves. We are in a uniquely beneficent era for our country. We are at peace in the sense that there has not been a world war since 1945 and we have probably reached the stage where we have cleared off the debts of two world wars. Our country was bankrupt; it cost a quarter of the total wealth of the country and the empire to pay for the second world war. That was the cost of that conflict and, at that stage, we were still paying off the costs of the first world war.

Since 1945, we have had to find the costs of empire and the withdrawal from empire. Until 1989, we had to find the costs of combating the Soviet Union in the cold war. They were heavy costs borne by our country, which has proudly taken a leading role in the defeat of tyranny in the 20th century.

In addition to having unloaded the burdens of war, empire and the retreat from empire, we are now in a period in which there will be a unique boost to our economy. That boost is similar to the introduction of canals and tarmacadam in the 18th century, to the introduction of the railways in the 19th century, to the introduction of electricity and what that meant for telegrams and telephone communications in the late 19th century and to the introduction of the internal combustion energy and what that meant for the 20th century. For now and the 21st century, the revolution in electronic communication is as profound, if not more profound, than any of those.

All those changes to society brought with them above-trend economic growth. That is what we are enjoying now. However, in all those industries, individual companies sometimes found themselves in difficulty. People rushed to invest in new industries—railway stocks were all the rage in the 19th century—but they caught a pretty severe cold if they overestimated their worth. We might be seeing that happen to dot.com shares, but we are at an early stage of the electronic commerce revolution.

That revolution is providing a unique lift to our economy. That is why the United States has enjoyed an unparalled period of economic growth without recession. It is not that President Clinton has somehow managed to find a magic way to run an economy; there has been a profound change. The nation that is most exposed to electronic communication has been the first to enjoy its benefits. In Europe, this country is the leading nation in that respect and our economy is benefiting the most. That is a good thing and to be commended.

We should also consider changes in society and in the nature of ownership of assets in the past 100 years. We have seen the rise of the middle class and most people now own most of the assets. It is not like the 19th century when 1 per cent. of the population owned 60 per cent. of the assets. We have gone through a profound change. Most people have a pension fund, life insurance and own their own homes. Of course, there is a problem with what people have termed the "underclass". It makes up a significant section of the population, but it is not a majority. That is the change in the nature of the challenge that Government must face when they finance the services that they must provide to the nation.

We should remember that the glittering success of the 1980s in terms of personal pension provision has led to two great benefits for the United Kingdom. First, it has benefited individuals who now have a substantial amount of savings for the future that they would not otherwise have had if they had not been encouraged to save. Secondly, London and the United Kingdom manages more money that is invested for the United Kingdom around the world than any country except the United States of America. For example, a country such as Mexico has no particular link with the UK, but the second biggest investor in Mexico is the UK. That position is repeated all round the world and it is a result of the success of establishing a regime in the 1980s that encouraged people to save.

The Budget failed to address the big problem of the fall in the savings ratio from 11 per cent., which the Government inherited, to 5 per cent. That ratio is not predicted to change significantly; I think that it is to move by 0.1 per cent as a result of the Budget. That is a long-term serious problem for the UK and its people, who will have lower savings.

Mr. Gardiner

Does the hon. Gentleman accept the fact that, when interest rates in advanced economies have been low—it is reflected now—savings as a ratio have always decreased?

Mr. Blunt

I do not necessarily accept that. I would want the hon. Gentleman to produce evidence. I do not understand how interest rates can be directly linked to savings in equities. People invest in pension, life assurance and trust funds, but not nearly as much as they used to in building societies and cash schemes, simply because the historic rate of return is far better if one is free to invest directly in assets. That is what we should be encouraging people to do.

By worsening the taxation regime for savings, the Government have encouraged fewer people to save. If the tax regime were as generous to savings as it was in the 1980s and 1990s under the previous Administration, the ratio would not have fallen as much. We could all debate the effect of interest rates at the margin, but the fact is that the Government have made the position worse.

I listened with care to the arguments of the hon. Member for Dudley, South (Mr. Pearson), who appears a convert to the merits of competitiveness and competition. He had a vision of the future of competition and trade in the European Union that is slightly at variance with most of its member countries. I only hope that he is right and they are wrong; time will tell.

There should certainly be broad agreement on the fact that socialism and central planning, as a way of managing the economy, has failed, and that capitalism and free markets by and large work. Happily, Labour Members now admit defeat of the position that they would have held as recently as 10 years ago. They have undergone the necessary thought revolution—not in the most exemplary fashion by the hon. Member for Dudley, South. We have seen how they have changed and how Governments no longer own industries, departing from the business of managing them.

Despite such a lesson, the most disappointing aspect of the Budget is the recurring theme of "Nanny knows best". Every time that the Chancellor gave out a bit of money, there were strings attached. Even those over 75 years old were given not money but free television licences. That is no good to someone over the age of 75 who does not want to watch television. It is no good if one's little gift from the Government is in the form of an asset that is of no use.

There are endless more schemes for enterprise funds and consultancy and investment incentives. The Chancellor is an accountant's dream. Life is now so complicated for businesses and entrepreneurs that they will spend far more time looking for pots of Government investment than working on ideas and investment that properly belong to them. During the speech of my hon. Friend the Member for Sevenoaks (Mr. Fallon), I drew attention to how that approach is replicated in the variety of different funds, organisations and people who are responsible for elements of urban regeneration.

The Chancellor could not resist doing the same with health. Having announced the £2 billion for the national health service, the Prime Minister told us yesterday that there were strings attached to £660 million of it and that there would be quarterly reviews of the performance of health trusts before they were allowed the next tranche of money.

What has happened to the rest of the £2 billion that has been promised for health? I presume that it has gone to pay this year's accumulated debts of between £500 million and £1 billion, the £200 million underfunding of the most recent health service pay round and the £300 million that has to be reinvested in the health service pension scheme. That pretty much accounts for the £2 billion. Therefore, all that the NHS will receive next year is £660 million with strings attached. Again, that is central Government demanding control.

What was the reason for the difference in treatment of health and education? Why was the Chancellor so keen to passport money directly to head teachers? The answer, of course—this point was made by the hon. Member for Harrogate and Knaresborough (Mr. Willis)—is that £4 billion of education spending is already tied up with Government schemes of one sort or another. Such has been the outcry of pain among head teachers at the deluge of paper from Whitehall that the Government seem to have got the message. As a result, some schools are to receive £9,000, and some more. That money will go directly to teachers, and we of course say hooray for that.

Given the unprecedented benign conditions, we ought in the last Budget of the 20th century—those who think that the 20th century ended in 1999 should question whether they are right—to have begun repaying our national debt. If we do not do so now, we never will. I therefore welcome the steps that the Chancellor has taken towards that, although, given the circumstances, he has not gone far enough. Let us at least hope that that approach continues because the benign position will not hold for ever. We have not abolished the business cycle, whatever the Chancellor may think, and I fear that we have not abolished human nature and the need for Governments to perform the fundamental duty of protecting their citizens from internal and external threats.

Defence from external threat is the first duty of the state. The defence of collective interests was the reason why people in the end came together in this thing called the nation state. It is also the duty of the state to defend people from internal threats, through the criminal justice system. We accept that another proper duty is to protect people from extreme poverty and deprivation. That is why we have a social security system. The matter is all about security.

These days, the state provides great public services in education and health, but we must sit back and ask whether we should accept that it is its duty to underwrite such provision. There is a proper debate to be had about that, and a proper test to be done to find out whether the state should provide health and education services or simply underwrite access to those services.

In the national health service, the United Kingdom has very socialised, or socialist, health provision. In his statement on Tuesday, the Chancellor announced that there had been £49.3 billion of health spending in 1999–2000. I checked that figure in the Red Book and found that it was £40.5 billion, and I wondered what had happened to the difference. Of course, the difference is accounted for by Scotland, Northern Ireland and Wales. So much for devolution: the Scottish Parliament, the Welsh Assembly and the Secretary of State for Northern Ireland—or the Assembly, depending on who is in power—have been told exactly what to spend their money on and are not entitled to decide how much to spend on health and education in their own area.

In The Times today, Anatole Kaletsky makes a powerful case for a national health service, and gives four reasons for making such provision. First, he says, medical treatment is regarded as a basic human right in almost all modem societies. That, of course, does not answer the question of whether the state should be underwriting access to the service or providing the service itself. He continues: Secondly, there is a huge inequality of knowledge between the consumers of medicine and the suppliers, the doctors and hospitals. His third argument is that the consequences of making a wrong decision in choosing a type of health care can be fatal. Finally, he says, our lives and the lives of our families are so valuable, that our willingness to pay for even a small chance of survival knows no rational limit. Mr. Kaletsky's conclusion is that the balance of market power is tilted so far in favour of the producers and against consumers that there is a strong case for a national health service. That is clearly where the balance of argument lies in our country today, so if we are to spend an enormous sum on the NHS, we have to find the best way of putting it into health care.

Historically, as societies have got wealthier, they have tended to spend an increasing proportion of their nation's wealth on health. The United States spends 14 per cent. of its wealth on health care and in EU countries the average is 9.1 per cent. Yesterday, the Prime Minister claimed that the Government will raise NHS expenditure to 7.6 per cent. of gross domestic product. Sadly, that is not the case. The Government's plans will take NHS expenditure up to only 6.5 per cent. of GDP; 1.1 per cent. of health expenditure is in the private sector.

Labour Members need to appreciate that only the Conservative party can get to the EU average, because only the Conservatives have a commitment not only to spend the amount that Labour will spend on the NHS, but to find the mechanism to release money into the private sector through private health insurance and other schemes and to enlarge that sector.

Mr. Gardiner

I suggest to the hon. Gentleman that the only way that the Conservative party is likely to reach the European average is by cutting this country's GDP.

Mr. Blunt

The hon. Gentleman made a facile stab at an intervention. This is a serious point. The Government are to spend only 6.5 per cent. of our GDP on health and are so hostile to private health insurance that the Prime Minister said: A modernised health service, not private medical insurance, is the future.—[Official Report, 22 March 2000; Vol. 346, c. 984.] That means that the UK does not have a cat in hell's chance of beginning to approach the EU average of 9.1 per cent. of GDP. We must find mechanisms whereby we encourage private as well as public provision. That is the lesson that must be learned about the future of health.

In education, the arguments are different. If we could find the mechanism whereby individuals could make marginal decisions about how much money they want to pay for their children's education, we could release a vast amount of extra money into education. We are left with the irony that, if the state controls people's choices about health and education, less money will be spent on those services than would be spent if people were able to make those decisions for themselves, according to their circumstances.

There is a rather perverse argument about the future prosperity of our country, which is that, if the state can act to depress expenditure on health and education in that way, people will be better able to save their money and it can be reinvested in the productive parts of the economy, to generate wealth further down the line. Those are difficult arguments for any Government to balance.

The basic job of Government is to ensure the security of our country and its people. The Chancellor told us that there would be 2.5 per cent. growth in public expenditure. The Secretary of State for Education and Employment told us today that his budget has gone up by 8 per cent., which I presume is a real-terms figure, but he may want to correct that. Health spending is going up by 6.1 per cent. a year over the next five years. The Government are faced with crime and asylum issues, and sorting them out will require a great deal more money than has been allocated at present.

The Deputy Prime Minister will have to have more money for transport if he is serious about restoring the roads programme that the Government have decimated. Moreover, the Government must deal with issues such as social security. If they believe that they have abolished the business cycle, they will have a rude shock when it turns down. In this context, the difference between boom and bust—Labour's favourite expression—is pretty fine. If the economy starts to turn down, the Government's figures will look enormously bad in comparison with the position that they and the country apparently enjoy now.

There is alarm and despondency at the Ministry of Defence. Defence is the one subject that has not been mentioned so far. It is clear that, if there is only a certain amount of growth in public expenditure and a huge amount has been devoted to other matters, defence will either receive no money or will pay for some of the extra spending. The Select Committee on Defence has said that the wheels on the strategic defence review are starting to wobble alarmingly.

In this uniquely benign era of peace and security for our citizens, the Government should remember that their first duty is defence. If the Government undermine the armed forces by failing to pay them properly, by failing to fund their equipment properly and by watching them descend into a spiral of decline as the good people leave and they become a demoralised body of soldiers, sailors and airmen, less capable of defending our country, their action will constitute a betrayal.

4.57 pm

Mr. Paul Goggins (Wythenshawe and Sale, East)

It is a pleasure to follow the hon. Member for Reigate (Mr. Blunt). We may not share political views, but we share an office corridor. I have found from my contact with him that he has strong views, which he always expresses clearly. He may be interested to learn that, although he and my father may not agree on many political issues, they would at least agree on the way in which the centuries should be counted.

You and I, Mr. Deputy Speaker—along with Members in all parts of the House—spent a very special couple of hours yesterday attending the installation of Cormac Murphy-O'Connor as the new Archbishop of Westminster. In his homily, he described going on holiday to the outer Hebrides and finding a memorial stone dedicated to "pilgrim Cormac". Carved on the stone were the words He went beyond what was deemed possible. I thought that the archbishop displayed characteristic good humour and humility, but I also reflected later on whether the Chancellor had drawn on the same Celtic spirit for his inspiration. He clearly went beyond what most commentators deemed possible.

Since Tuesday, most of the attention has rightly been focused on health. There is to be an extra £2 billion next year, and a 35 per cent. real-terms increase over the next four years. The agenda, as set out yesterday by the Prime Minister and the Secretary of State for Health, is no longer about how much is spent on the NHS; it is about how we spend money on the NHS.

I want to deal with four issues. The first is education, which is a considerable beneficiary. It is vital to my constituency. The constituency contains Manchester airport, which is bringing many new jobs to the area. The main obstacle that remains in the path of many of my constituents is what the Secretary of State for Education and Employment described today as poverty of aspiration. The huge challenge of raising standards while extending horizons remains to be met.

The excellence in cities initiative is going down extremely well in my constituency and throughout the city of Manchester and today we heard how it will be built on. We have an education action zone in Wythenshawe, which puts an extra £1 million a year into local schools. However, it brings into play not only money, but new energy and new partnerships in the education of our young people. This week's announcement means that the six secondary schools, the four special schools and the 35 primary schools in my constituency—one of which was attended some years ago by my right hon. Friend the Minister for School Standards—will collectively receive about £600,000 next year. By happy coincidence, a similar sum is going to schools in the constituency of my hon. Friend the Member for Chatham and Aylesford (Mr. Shaw).

That money will go straight into local schools, but there has been some debate about whether it should have been routed through local education authorities. I thought that it would be a good idea to ring up the head teachers of some schools in my constituency to find out what they think. Let me share one or two of their observations with the House. The head teacher of a secondary school told me this morning: This will let us buy books and equipment to enable youngsters to engage in quality learning. It is a boost to teachers' morale when they feel properly resourced. The head teacher of a primary school said: We will be using this money to help fund our new information technology block. It will go directly to support children in the classroom. Finally, another secondary school head teacher said: We will be able to strengthen the programme for disaffected and low-achieving pupils at key stage four. It will give a much-needed boost to the school's new library. It is clear that the new cash is very valuable to head teachers and pupils in my constituency.

Mr. Graham Brady (Altrincham and Sale, West)

In the spirit of further informing the debate, did the hon. Gentleman also ask the heads whether they favour all their school budget or only that part of it being sent direct to them rather than routed through the LEAs?

Mr. Goggins

The head teachers in my constituency value the partnership with the LEA and they certainly value the cash that they are receiving from the Government in the Budget.

My second point—on transport—may also interest the hon. Member for Altrincham and Sale, West (Mr. Brady). Yesterday, my right hon. Friend the Deputy Prime Minister announced investment of up to £250 million in the metrolink tram system in Greater Manchester. That will have a huge impact across the county as existing routes from Bury to Altrincham, which cuts across the western side of my constituency, and out to Salford Quays and Eccles will be transformed. The new links will go out to Oldham, Rochdale and Ashton-under-Lyne and could be routed through to Stockport via Didsbury. That investment, particularly in the links to Manchester airport and the communities of Wythenshawe, will give a massive boost to my constituents.

In the Wythenshawe area of my constituency, 50 per cent. of households do not have access to a car, so metrolink will provide people with much better access to work and to leisure opportunities. Manchester airport is pledged to have 25 per cent. of its passengers and work force arriving and departing by public transport and it projects that 40 million passengers a year will pass through by 2015. Clearly the additional capacity provided by metrolink will be vital. Metrolink will revitalise Wythenshawe town centre as the trams will pass directly through it and provide access to Wythenshawe hospital, which has benefited from a £120 million modernisation investment from the Government. The hospital is not only local, but a regional centre of excellence. As my right hon. Friend the Prime Minister said yesterday, metrolink is good for the economy and good for the environment.

On my third point—on employment—Labour Members and, I hope, all hon. Members rejoice in the fact that there are 800,000 more people in work than before the general election. Unemployment has fallen by 30 per cent. generally and there has been a 70 per cent. fall in youth unemployment. Those are dramatic changes and the trends are reflected in my constituency.

We have seen the impact of the new deal. It is depressing that the Opposition Front-Bench team remains hostile to it, instead of rejoicing in the fact that young people who would otherwise have been on the dole and on the scrap heap are in productive employment. A total of 900 young people in my constituency have joined the new deal, 400 of whom are in employment. I rejoice in that fact.

None the less, unemployment remains a problem for many people. Barriers to moving back into work remain for many. The Chancellor acknowledged that in his pre-Budget statement, in which he issued a statement asking all of us—Members of Parliament, private sector organisations and local authorities—to find new ways in which to reconnect people who have been outside the work force for long periods to employment.

In that spirit, I recently brought together a group of people in my constituency—long-term unemployed people, representatives of agencies such as the Employment Service and several significant employers—at a conference to discuss what the obstacles were to the employment of long-term unemployed people and what proposals should be made to the Chancellor and to other Ministers to remove them. I have communicated them to the Chancellor. I should like to raise a number of the points and recommendations that arose from the conference; some of them are dealt with in the Budget.

The first recommendation was that there should be greater flexibility in managing the exit from benefits. One of the things that people often face when moving from benefits to work is debt. They do not have an immediate cash flow and feel almost worse off in work. We must find ways in which to bridge the gap.

Those people will be delighted at the announcement of the job grants. The cash boost of £100 for anyone who has been out of work for more than one year will give a little extra help at that important time. They will also be pleased at the announcement that the disregard on income support is to be lifted from £15 a week to £20.

The second recommendation was that the Government should introduce a 24-hour freephone advice line to provide people who are considering taking employment with immediate calculations to show what the net benefit would be of the working families tax credit and other payments with regard to national insurance and tax: a better-off calculation over the telephone. It has worked with NHS Direct. The idea could be well worth considering.

The third recommendation was that, as far as possible, the restriction on eligibility for training and job-finding support should be lifted. I was pleased that, during Education questions, the Under-Secretary of State for Education and Employment, my hon. Friend the Member for Barking (Ms Hodge), reinforced the fact that the Government have a flexible approach to training. In the Budget, it was announced that the new deal would be extended next year to people over the age of 25, so that its benefits could be extended to other groups.

The fourth recommendation was that greater financial incentives should be given to employers to take people on. The idea was put forward of, for example, paid work trials and, based on the experience in Wythenshawe of using the European social funds, wage subsidies, which can give extra encouragement to employers to take people on and to take them off the dole.

As I say, some of those ideas have been reflected in this week's announcements. Ministers will assess the merits of those ideas, but the important thing to emphasise is that all the people at that meeting—agency staff, long-term unemployed people and local employers—shared the Chancellor's aspiration of full employment. What is more, they believed that it was achievable.

The fourth area that I want to cover is poverty and the Government action to tackle it. I must set the context. In 1997, one in four people in Britain lived in poverty. One in three children were born into poverty. Reputable studies at the time showed that, with the possible exception of New Zealand, the United Kingdom had become the most unequal society in the industrialised world. That is the starting point for the Government.

We know that enhancing employment opportunities is the Government's main tool for tackling poverty, and that that is the best way of boosting personal and family incomes. It has the additional beneficial effect of increasing tax revenues. If more people are off the dole and in work, more people are paying taxes, creating a virtuous circle. The fact is that 780,000 fewer people are dependent on income support now than in May 1997. As we heard in Tuesday's Budget statement, the amount spent on economic failure has decreased by £2 billion.

The Budget is not only about work. Extra help is also being targeted at specific groups, with families with children and pensioners as the obvious priorities. In a way, it is new Labour redistribution. It is not slicing or re-slicing a shrinking cake, but prioritising the poorest in the allocation of the extra resources emerging from a growing economy. That approach is certainly this Government's hallmark.

The practical consequences of the Government's approach are higher child benefit; the provision of working families tax credit to 4,000 families in my constituency; child care credit; and next year's introduction of the child tax credit, which will be worth £442 to each family. The main consequence is that 1.2 million children will be lifted out of poverty. Every hon. Member should rejoice in that.

It was also announced this week that the winter fuel allowance for pensioners will increase to £150, and that there will be increases in the minimum income guarantee. However, I am particularly delighted about the announcement of extra help for pensioners who currently just miss out on the type of special help being targeted at the very poorest pensioners. Capital limits for people claiming income support will be lifted. Those limits have not changed since 1988. Now, however, the lower limit will be doubled, from £3,000 to 6,000, and the upper limit will be raised to £12,000. That is tremendously good news for people who just fail to qualify for benefit because they have been prudent and saved a little money. It is a very welcome development.

The announcement on pensioner credits was another welcome development. They will be targeted at pensioners who are not in the poorest group of pensioners, but whose income does not exceed perhaps £100 per week for single pensioners, or £150 per week for pensioner couples. Although such people are above the minimum income guarantee level, they are by no means well off, and the credits will target extra help at them.

Those measures—in addition to free television licences for over 75s, extra winter fuel allowance and extra spending on the NHS, much of which will be enjoyed by older people—will ensure that pensioners benefit from improving living standards.

I shall leave the last word to the Institute for Fiscal Studies, which has produced, as it always does, a post-Budget analysis. The IFS is a very reputable organisation and produces very accurate analyses, and this is its conclusion on the Budget: Before the 2000 Budget, the three previous Budgets produced cumulative gains of around 6 per cent. for the bottom two deciles … The measures announced by Gordon Brown in his recent budget speech amplify and accentuate this pattern. The poorest decile now gains by 9.2 per cent, or around £9 per week on average. The second decile gains by around 8 per cent. and the third and fourth deciles by around 5 per cent. and 3 per cent. respectively … Overall then, new Labour has been a redistributing government. Progress and justice was the slogan that won Labour the general election. In practice, it means policies being delivered that give practical solutions to millions of people who, until now, have been consigned to poverty. Those millions of people were cast aside by the Conservatives when they were in power, but they are a priority for this Government.

5.14 pm

Mr. Chris Pond (Gravesham)

I am grateful for the opportunity to contribute to the debate. I apologise for the fact that I may have to leave before the winding-up speeches, but I have been here since the beginning of the debate. I understand that the House considers that that practice should not be encouraged and I hope that Front-Bench spokesmen will recognise that it is an inevitability, not a discourtesy.

It is always a pleasure to follow my hon. Friend the Member for Wythenshawe and Sale, East (Mr. Goggins). I do not share a corridor with him, but I share the same views, especially his concern about poverty and inequality. I share neither a corridor nor the same views as the hon. Member for Reigate (Mr. Blunt). I was encouraged by the fact that he seems to have been persuaded by an article in The Times that there is a case for a national health service. We have a national health service and Labour Members intend to keep it.

The hon. Member for Reigate, like the hon. Member for Sevenoaks (Mr. Fallon), suggested that the circumstances in which the Chancellor was able to deliver his Budget were the result of the golden legacy left by the previous Government. If that is a golden legacy, it is fool's gold. When we consider the circumstances that we inherited, especially the level of debt, it is somewhat rich for them to suggest that they are responsible for our current position.

I want to concentrate on education aspects of the Budget and the speech made this afternoon by my right hon. Friend the Secretary of State for Education and Employment. I want to pay tribute to the schools in my constituency and all those who make up the partnership of the schools, including the staff, governors, parents and students. I am proud of their achievements in providing high standards of education, despite often having to operate in deprived sections of the community.

In her opening remarks, the hon. Member for Maidenhead (Mrs. May) said that we should set the schools free. I do not think that the schools in my constituency considered that they were set free by the previous Government when they were struggling with inadequate buildings, leaking roofs and outside toilets and without facilities such as computer equipment or books. Three primary schools in my constituency were on special measures, as was one secondary school, which has since closed.

The hon. Lady also suggested that grant-maintained status gave schools rather more independence than they might have in partnership with the local education authority. When the secondary school in my constituency was in severe difficulties, it found itself, as a grant-maintained school, with no visible means of support. It had slipped deeper and deeper into problems until it was forced to close.

There is still much to be done for the schools in my constituency, but the children now have the prospect of obtaining the quality of education that they deserve. In the past few days, one of the secondary schools in my constituency—Northfleet school for girls—was honoured at an event at No. 10 Downing street as the fifth most improved school in the country. It achieved that despite the fact that when it asked for extra classroom space, Conservative-controlled Kent county council sent along two aged portakabins with unsafe floors and leaking roofs. Meopham school in my constituency this week celebrated an excellent Ofsted report, which is not the result of anything done by the previous Government or Kent county council.

The Secretary of State talked about schools coming out of special measures. Recently, three primary schools in my constituency have lifted themselves out of special measures and they deserve tribute. They include Westcourt school, which is a fine primary school and Chantry school. When I first met the head teacher of Chantry school on taking over as Member of Parliament he proudly showed me his stock of books—I should say "book" since he had only one book in the school. He had leaking roofs and draughty windows. That school has been highlighted in The Times Educational Supplement as one of our finest, having come out of special measures.

In the past few weeks, Northcourt primary school has received a letter of congratulation and encouragement from the Prime Minister for coming out of special measures. Its latest Ofsted report praises it for the improvements in attendance and behaviour, for the progress that pupils are making in 95 per cent. of the lessons and for the fact that attendance rates have increased dramatically. The school is an important focus for a deprived local community, but Kent county council wants to close it. The community and I consider that to be an act of wilful vandalism. It is now up to the independent schools adjudicator to decide whether the proposal should go ahead.

Those schools will welcome the announcement of the extra capital and revenue provided in the Budget. We have all been doing our sums and I reckon that schools in my constituency will be well over £500,000 better off. I hope that that matches the figures calculated by my hon. Friends the Members for Chatham and Aylesford (Mr. Shaw) and for Wythenshawe and Sale, East.

Schools will also applaud the decision to pay the funds directly to them. In the past, although there has been a significant improvement in funding for schools, Kent county council seems to have found that some of the money has stuck to its fingers. The figures published by my right hon. Friend the Secretary of State for Education and Employment show that last year Kent county council increased its spending on pupils by only 3.1 per cent.—half the average increase for England as a whole. Among county education authorities, only Hertfordshire increased its spending per pupil by less. Among all education authorities throughout the country, only the Tory boroughs of Bromley, Kensington and Chelsea and Wandsworth spent less, along with Hackney council, whose education authority had been suspended. That is why schools in my constituency will very much welcome the fact that they will receive the funds allocated to them by my right hon. Friends the Chancellor and the Secretary of State.

My right hon. Friend the Secretary of State talked about the need to ensure that children are not excluded without access to education. That is welcome, as is his statement that there is no intention to force schools to keep children whose disruptive behaviour may damage the educational prospects of others in the class. I fully support the policy of inclusion, particularly of special needs children. Too often, the special needs of children are not recognised and cannot therefore be properly addressed. In my constituency surgeries, I have met many parents who are at their wits' end, because they know that their children have special needs, but those needs are not recognised by the education authority.

That puts pressure on schools, which have to deal with those children without the extra resources that they need to ensure that their needs are catered for as well as the needs of other children in the school. At one school in my constituency, the special educational needs co-ordinator has found the pressure too great and has resigned. In another school, staff feel that they are struggling against impossible odds because of the behavioural difficulties of children. Another told me last week that pupils' disruptive behaviour is one of the biggest challenges facing schools.

In Gravesham we are fortunate to have Ifield school, which is a special school in every sense of the word. It has been praised by Ofsted and received a letter in the past few days from the chief inspector of schools congratulating it on its achievements and apologising for the fact that it had inadvertently been left out of the list of excellent special schools.

Ifield school has developed an initiative that I refer to my right hon. Friends the Secretary of State and the Minister for School Standards. It tries to provide to all schools in the borough the additional support that they need to deal with children with special needs. That should be non-judgmental advice and guidance that will help inform teachers and individual schools to deal with some of the behavioural difficulties that are created by children with special needs. It may help them to cope and to ensure that other children in their schools also receive the attention that they deserve.

The hon. Member for Maidenhead argued that schools must have the right to exclude disruptive pupils. As a parent whose daughter was excluded from a nursery at the age of three, I do not share that view. However, I recognise that schools sometimes face real difficulties because of the behaviour of some children. We must recognise that difficulty and provide them with the support that they need to keep those children within the mainstream environment wherever possible.

The ability of schools to deal with children with special needs is inevitably diminished when they are operating on the edge of financial viability. The extra resources that my right hon. Friends the Prime Minister and the Secretary of State have announced will help schools to provide the education that all our children deserve, and I very much welcome it.

5.26 pm

Mr. Graham Brady (Altrincham and Sale, West)

I am pleased to have the opportunity to speak in this debate. I am pleased also to follow, even if at one remove, my constituency neighbour, the hon. Member for Wythenshawe and Sale, East (Mr. Goggins)—I am not that touchy about the small error made in the name of his constituency by the hon. Member for Gravesham (Mr. Pond).

The hon. Member for Wythenshawe and Sale, East seemed to be suggesting that the Chancellor's Budget was not really possible. I was wondering whether he would suggest that if it were not possible, perhaps it was all based on spin and unreality and that some discrepancies might emerge as it is unpicked. He promptly corrected that impression and returned to the loyal fold.

I support the hon. Gentleman in welcoming the investment in metrolink, which, as the Member for a constituency at one end of the existing line, I can wholeheartedly confirm is an excellent system. It demonstrates the advantages that good public transport systems can bring. It gets people out of their cars and on to the public transport network. In doing so, it has made an important contribution for my constituents and for others who have benefited from it already. As the hon. Gentleman said, it will be a great advantage having links to Manchester airport. From the point of view of my constituents, it will be important to have a link to Wythenshawe hospital, which currently has poor transport access links. It is good to see the Government building on the excellent start that was made by the previous Administration in the development of the metrolink.

Much has been said about the new deal. I know that some Labour Members think that the Opposition are churlish and that we do not accept the undoubted and unarguable benefits of the scheme. As a member of the Education and Employment Committee, I have taken a close interest in the new deal. I do not immediately discount the possibility that such schemes can bring benefits. However, there are some serious problems with the new deal—there are targeting problems, and there are certainly problems in evaluating the benefits that it is bringing and what benefits might have arisen regardless.

The new deal appears to be an expensive scheme in terms of the cost per job created. I know that Labour Members do not accept the figure of £11,000 per job that we have suggested, but they are not always credible when they produce their own figures. Recently, we heard from a Minister that the new deal for lone parents seemed to be costing several thousand pounds per job created. It seems that that is not the only part of the new deal that entails costs of that order.

Few would dispute that the scheme carries with it also an element of dead weight. The fact is that many jobs are created anyway in the economy, and inevitably a percentage of those who are on the new deal would have found employment without the benefit of the scheme. Whether it is 50 per cent. or 40 per cent. is hard to evaluate, and that is one of the things that the independent studies attempt to assess.

What is clear is that the rate of decline of unemployment—especially youth unemployment, which was the particular target of the new deal—was greater before the introduction of the new deal than it has been since. The new deal may have brought benefits for some people, but it has done so at a great cost and it is hard to quantify who has benefited and who would have found employment in any case.

The Government persist in saying that the new deal is working well and repeatedly ask whether we would get rid of it. My hon. Friend the Member for Maidenhead (Mrs. May) made it clear that they will have to be patient to hear what we think. I am getting a little impatient to learn what they would do. Thankfully, it is looking less likely that the Labour party will form the next Government, but it is not clear what it would do with the new deal if it did. The Government say that it is an unalloyed success and has brought undoubted benefits, and they contest any suggestion that it is an expensive scheme that is not worth retaining, so would they retain it, and if so, how do they intend to fund it?

The Budget did not make it clear what the funding programme for the new deal would be, rolled out over a period of years. If the Government intend to maintain the new deal, do they plan to fund it through another windfall tax? Do they want to take another £5 billion from the utilities or, as they do not much like them at the moment, from the banks? Alternatively, will they look to raise £5 billion in taxes from other sections of the population? If they are asking us what our proposals are, it is time that they started to roll out in a little more detail what their long-term plan is for the new deal.

A lot has been said about health. As many Conservative Members have said, where there is new money for the national health service, we welcome it without question or reserve. In previous Budgets the Government have engaged in some creative accounting, and the figures announced for the money to be used for the benefit of patients have not always been accurate.

Certainly, when one starts to analyse the £2 billion increase for next year, it starts to look less generous than at first glance. We have to consider the fact that perhaps £1 billion of it will go to fund deficits, that £200 million will go to deal with unfunded pay awards and that £300 million is contingent on the possibility of an increase in revenue from tobacco duty.

That begs an enormous question, because the previous Government's policy, which this Government have continued, of increasing tobacco duty considerably above the rate of inflation, has not achieved the objectives that one would have expected. It has not increased the revenue coming into the Treasury in proportion to the increases in tax revenue.

The Financial Secretary looks puzzled, but the Red Book figures show that the outturn of revenue in 1998–99 was £8.2 billion, and the projected outturn in 2000–01 is £7.4 billion. The steady increase in tobacco duty is not leading to a steady increase in the Government revenue derived from it; yet £300 million of the money supposedly promised to the NHS is contingent on the premise that there will be a commensurate increase in revenue from tobacco.

That point was confirmed to me a couple of weeks ago in a written answer from the Secretary of State for Health. It was made clear that the NHS was using the figure of £250 million as a planning assumption, and that that was how much the Government expected to be available from that source. The Government also do not appear to have achieved a cut in the number of people smoking. It is counter-intuitive, but seems to be the result of the dramatic increase in the levels of smuggling of tobacco.

We welcome genuine increases in health service spending when they find their way to hospitals and patient care, but the Government's measures will have to be judged by the quality of the NHS's output, not just on global figures for expenditure. The public are becoming more sophisticated in their judgments on the NHS. They now look for genuine performance, not only at statements from the Government about how much money they claim to be spending on the NHS.

In the past year or two, the realisation has developed that the situation in the NHS has not just been bumping along the same as before but has been getting worse. That point was made, of course, by Lord Winston in the interview in the New Statesman, in which he said categorically that the health service was getting worse. I hope, as do Labour Members, that the funding that has been announced will reverse that. I do not want to see the NHS continuing to get worse and I do not want more of my constituents joining the 160,000 who have had to pay for private treatment. They have done so out of their own pockets—not from insurance, but from savings. That is one of the most tragic and shocking occurrences of recent years.

For political reasons, the Labour party likes to claim that we want to privatise the health service, but our constituents are encountering an inadequate NHS that is not able to meet the health needs of the public and is not improving and providing treatment faster. The NHS is making people wait longer. They may be waiting longer to see a consultant rather than waiting after seeing a consultant before they get treatment, but the waits are still unacceptably long. Some 160,000 people have now waited for so long that they have had to find the cash from their life savings to buy operations in the private sector. The Government should take that seriously and stop trying to suggest that there is some false political debate between the two sides of the House about belief in the NHS. We do believe in the NHS, but the Government's record is not one of which they can be proud.

I am sure that hon. Members would be surprised if, after I have spent so much time trying to bring to the attention of the public and the Commissioner for Public Appointments the Government's policy on NHS appointments, I did not mention that issue briefly. When the Prime Minister made his non-statement about the NHS to the House yesterday, in which he raised a few questions and offered no solutions, one thing that was clear from his remarks was that to achieve real improvements in the NHS, it would be necessary to have good leadership, good control and good delivery in the management of health authorities and trusts. That is something that the Commissioner for Public Appointments made clear in her report yesterday is happening in some cases, but not all. It is worrying when an independent body suggests in a report that people who are entrusted with the management of our national health service are not always appointed on merit. It is a cause of grave concern. The commissioner spoke of a "disconnection" between the role of an NHS board and the ability of its members, which raises serious questions and must be tackled.

Education is the principal theme of this part of the Budget debate. We have heard from the Secretary of State the figures for investment in schools. All hon. Members—whatever their party—welcome investment in their schools, but it is no good if money is given with one hand and taken away with the other. We have heard that primary schools will receive between £3,000 and £9,000 and secondary schools between £30,000 and £50,000.

What about the other side of the equation? What about grant-maintained schools, to which some hon. Members have referred? Nearly all the secondary schools in my constituency were grant-maintained, and in most that status was voted for by large majorities of the parents who were consulted. Schools in my constituency have lost £80,000 or £90,000 in revenue as a result of the loss of GM status. That was not what was promised during the passage of the School Standards and Framework Act 1998.

Mr. Vernon Coaker (Gedling)

Yes it was.

Mr. Brady

The hon. Gentleman, who is a parliamentary private secretary I presume, suggests that I have misled the House. I have not. I was a member of the Standing Committee that considered the Bill, as it then was. I can assure him that Ministers were clear that they intended to raise revenue levels up to those being given to grant-maintained schools. They made it clear that there would be no reduction in funding for such schools.

There were excellent grant-maintained schools in my constituency. I have frequently referred to one of the best, the Ashton upon Mersey school, which has been described by the Secretary of State as a beacon school. It has lost between £80,000 and £90,000 from its budget as a result of the loss of grant-maintained status. It might be small beer compared with the loss suffered by the London Oratory school and I am pleased that schools in my constituency have not yet asked parents to contribute, but the picture is typical—grant-maintained schools have lost the freedom to control their budgets as well losing as a considerable amount of revenue, which has meant the loss of teachers, facilities and the ability to do some of the wonderful things that they were achieving.

As I was able to mention during Education and Employment questions this morning, a further counterbalance to any increased funds that the Government say they are providing for the secondary schools in my constituency is the fact that Trafford borough council, which is under Labour control, is not funding the change in the post-16 curriculum—some hon. Members have tried to suggest that Conservative councils are not passing money on to their schools.

The Department for Education and Employment made it clear to all local education authorities that the change would result in a £35 million cost throughout the country and that funding was provided in the standard spending assessment settlement, yet Trafford borough council has told its secondary schools that there will be no funding to help to cover the extra staff costs or the cost of books and new examinations. That is a significant burden on schools in my locality.

The joint committee of heads in the borough estimates the cost to be £400,000. It wrote to the Secretary of State for Education and Employment on 7 March to express concern. I hope that it receives a prompt response—and a fuller response than that given by the Minister for School Standards to my question this morning. It is a grave concern for Trafford heads that they are being asked to implement a major change in the post-16 curriculum at the behest of the Government and yet they are being given no funds with which to do it.

Money is welcome, if it reaches the schools and increases pay for good teachers. It must not be countered by a loss of morale, of the sort that can arise when schools are reorganised.

The constituency of the hon. Member for Wythenshawe and Sale, East covers part of the borough of Trafford, and includes Sale grammar school. We are on different sides of the debate, as he has made clear on many occasions. However, he will agree that the unfortunate effect of uncertainty for schools, parents and children is that the education system is put in the balance. The confusion apparent in our education system is causing morale to be lost and the direction that should be focused on achieving continued excellent results to be neglected.

The Government have other proposals regarding selection in some of their own pet schemes, which include city academies and initiatives promoting excellence in cities and in schools. I hope that the Government will give up their ideological view that selection in schools is always wrong, but they must make up their mind.

It is not acceptable for the Secretary of State for Education and Employment to say on one day that selection is completely wrong, only to claim on the next that he was only joking, that the Government have a different attitude and are not out to get grammar schools. Then, when the House of Lords amends legislative proposals, it was made clear that the Government would steamroller that decision and ensure that they got their own way.

The Government are all over the place with regard to selection in schools. A clear policy is needed, and I hope that it is one of the mature policies that the Secretary of State occasionally puts forward. He should recognise that some selection, in some circumstances, can be a good thing and can achieve good outcomes. However, we have not arrived at that stage yet. It would be a great tragedy if some of this country's excellent grammar schools and high schools were to be lost in the period between the Government abandoning their ideological obsession with abolishing selection and adopting the more enlightened view that selection is not always a bad thing.

I turn now to regional policy. The hon. Member for Weaver Vale (Mr. Hall) is on the Government Front Bench. As a Whip, he cannot contribute to the debate, and that must be frustrating. In a spirit of good will, I shall tell the House that he has done much to fight for the retention of the synchrotron at Daresbury.

There is great concern in the north-west, among all local Members of Parliament and our constituents, that the Government have decided to invest in Oxford rather than in our area. The decision represents a massive loss to the economy of the north-west, as more than £500 million is involved. It has enormous implications for the scientific community in the area, and could be called a regional policy in reverse. It is a very negative outcome for people in the north-west.

The Government's policies in other respects are not in keeping with the broader regional agenda. An important example is the climate change levy, whose effect on manufacturing industry will be greater than on other sectors of the economy. The Government say that the levy has no net revenue implication, and I see that the Financial Secretary to the Treasury is nodding his agreement. There may be no net revenue implication for the Government, but there is for the people who pay the levy, regardless of whether they are in the manufacturing, agriculture or horticulture sectors.

The Budget contained some specific proposals regarding energy efficiency schemes, but it is absurd to apply the climate change levy to agriculture or horticulture, as those sectors, far from emitting damaging greenhouse gases into the atmosphere, actually remove them. To hit a sector of the economy that has a beneficial effect on climate change is absurd. I am disappointed that, having recognised the argument in respect of giving energy efficiency grants, the Government have not understood that there is no justification, in environmental terms, for taxing those sectors.

The climate change levy will have a negative effect on the north and the midlands. The cuts in employers' national insurance contributions, which are supposed to compensate for it, will have a disproportionate benefit for the service sector—more likely in the south than the north.

The overall effect of the Budget remains to be seen. It is encouraging that the press and other media have given it a more thorough assessment, and more quickly, than previous Budgets produced by this Government have received. There has been a more sceptical approach, and this Budget has been dissected a little more thoroughly, and there has been a greater readiness to look beyond the rhetoric and the headlines to understand what the real, detailed effect will be.

The overall effect, which the hon. Member for Wythenshawe and Sale, East was happy to acknowledge and to trumpet in his speech, is that of a redistributive Budget that increases taxes. Labour Members may be happy with that; Conservative Members may be less happy. However, this tax-increasing Budget will prove acceptable to the British people only if those increased taxes are matched by increased delivery of services. So far, if we look at the Government's record, that has not been the case.

So far, a typical working family has paid some £600 a year more under this Government. Next year they will lose the married couple's allowance and mortgage-interest relief at source. The rate of savings is going down dramatically, which will have a serious long-term effect on the economy. We have not, however, seen a balancing improvement in the quality of services. Nowhere is that more apparent than in the health service.

I conclude with a challenge to the Government. They have produced their Budget, setting out their strategy, in what is probably the last full year before an election. What is crucial is delivery of services. It has not happened yet—the public are waiting.

5.53 pm

Mr. Barry Gardiner (Brent, North)

The Budget Red Book has the title "Prudent for a Purpose". That raises two obvious questions. How have the Government been prudent, and what is the purpose?

We have been prudent in putting in place a new framework for our economy—or, rather, three new frameworks. We have a new monetary framework in which to deliver our low inflation target of 2.5 per cent. We did that principally by giving the Bank of England responsibility for setting interest rates in line with the target set by the Government. We have put in place a new fiscal framework that regains control of public finances by adhering to two strict fiscal rules. There is the golden rule that over the economic cycle we borrow only for investment and not for consumption, and the sustainable investment rule that net public debt as a proportion of gross domestic product should be held at a stable and prudent level.

Labour inherited a £28 billion borrowing requirement when it came to power in 1997, with the national debt running at 44 per cent. of GDP. This year, the national debt will be just 37.1 per cent. of GDP. and by the end of 2001–02, that figure will represent almost exactly one third of GDP, at just 33.6 per cent. We have already paid off £30 billion of the debts of failure that we inherited, and this year we will make a debt repayment of £12 billion.

The third new framework is the one that we have set for public spending. We have moved to three-year spending plans to provide, through the comprehensive spending review, a basis for long-term planning in the economy to give the certainty that business needs for investment.

Last night, when I was driving home in my car on the A40, I had a frightening experience. I heard the voice of the right hon. Member for Kensington and Chelsea (Mr. Portillo) delivering his shadow Chancellor's Budget message on the radio. Among many of the inaccurate things of which he accused the Government, he talked of their muddled spending. We have done more to pay back the debt that this country built up as a result of his muddled spending than his Government ever repaid. Today's Labour surpluses are paying back yesterday's Tory debt.

So, yes we have been prudent, to answer my first question. What about the purpose? In this Budget, the purpose is the same as it has always been. The newspapers label Budgets. They have labelled this one the NHS Budget. The Budget last year was for working families. The one before was about the new deal for the unemployed. Nonsense. All Labour's Budgets have had the same objective. This one is no different. That objective is to achieve high and stable levels of both economic growth and employment. Only if we have a stable economy do we have the basis for long-term success. Only if we have economic growth do we have the resources to achieve all the other aims of the Government of creating a fairer society with real economic opportunity across the board for all—a better society with the public services to which a modern country should aspire.

Education occupies a unique position in the relationship between wealth creation and public service expenditure. It is a key public sector recipient of Government spending. Critically, it is also the very engine of wealth creation that provides revenue to the Exchequer in the first place. It is because the Government have always recognised the interdependence of education and economic growth that so much has already been achieved in our schools. It is also why the Government's aspirations for our children are so far from being exhausted.

My right hon. Friend the Secretary of State's announcement that we are now spending for the first time more than 5 per cent. of our gross domestic product on education is one that every hon. Member should applaud. They should applaud it as teachers, heads and parents applauded up and down the country when the extra £3,000 to £9,000 for all primary schools and £30,000 to £50,000 for all secondary schools was announced on Tuesday. May I tell my right hon. Friend what that shot in the arm will mean for just one school in my constituency of Brent, North?

Wembley high school was the only secondary school in Brent, North to remain with the LEA when all the others went to grant-maintained status. Much was said earlier by the shadow Education Secretary about grant-maintained schools and grammar schools. It seemed to me that we were replaying the arguments of yesteryear. The Tories are obsessed with the structure of schools when that argument has moved on. The argument is about standards—how to raise the educational achievement of all children in all schools.

Wembley high school was the only secondary school in Brent, North to remain with the LEA. Because of the disparities in funding, introduced by the then Conservative Government, the school found itself with growing deficits as neighbouring schools accumulated substantial surpluses. Wembley high faced the coming financial year with a dynamic new head teacher and a dedicated teaching staff, to whom I pay tribute; and a deficit of £400,000 and a recovery programme.

The extra money for schools announced by my right hon. Friend the Chancellor on Tuesday will make the most enormous difference to that school. It will enable the school to wipe out a large chunk of that deficit—if it chooses to do so—and to take on an extra teacher, because the school has struggled to maintain its staffing level.

I welcome the excellence in cities programmes and their extension to my borough. New initiatives such as those—creating learning support units and mentoring schemes—will complement the splendid work already undertaken by Brent education authority in matters such as pupil exclusions. The additional £33 million for excellence in cities announced by my right hon. Friend the Secretary of State for Education and Employment is one of the most effective ways of tackling social exclusion; I am delighted to support it.

On Tuesday, my right hon. Friend the Chancellor did not link only education and economic growth; he linked support for children and the family with a healthy, productive society. He said: A sure start for all Britain's children is not only right but it is the best anti-crime, the best anti-drugs, the best anti-unemployment and the best anti-dependency policy for this country's future.—[Official Report, 21 March 2000; Vol. 346, c. 865.] That is what the Conservatives fail to understand. The hon. Member for Sevenoaks (Mr. Fallon) displayed that lack of understanding when he insisted that the Government should cut the social security budget, as he claimed they had promised to do. He sees the increase in maternity grant from £200 to £300 as a 50 per cent. increase in unnecessary spending. He sees the massive 40 per cent. increase in child benefit since 1997 as a failure. The Labour Government see it as an investment in our children and in the future of our nation.

The Budget will make a low-paid, two-child family, earning £10,000, better off by £2,700 a year under Labour than they were under the Tories. To Conservative Members, that 27 per cent. rise in family income is reckless spending, but to Labour Members, that is exactly what the phrase "Opportunity for the many and not the few" is all about.

The Government did not promise to cut the social security budget; they promised to cut the cost of social and economic failure. Our measures have created 800,000 new jobs. They have reduced unemployment to its lowest level for 20 years. That is the way to cut the cost of failure—not by keeping four in every 10 children living in poverty, as they were when the Government came into office.

Social security spending is right and proper when it gives a guaranteed minimum income to pensioners and when it gives pensioner households an extra £150 with which to face their winter fuel bills. It is right and proper when it rewards families for going out to work, rather than sitting idly at home on benefit.

Social security spending is part of a decent, caring society—a society that cares for the old, the sick and the vulnerable. My right hon. Friend the Chancellor and the Government are proud of the increased provision that they have made for those groups, but they are equally determined that social security spending should not be a soft touch for the idle or a pacifier for those who are there as a product of economic failure.

The real question about social security spending is not whether it is rising or falling; it is why it rose by 4 per cent. a year under the Conservative Government and is rising by only 1 per cent. under Labour. The real question is whether we are spending rightly on protecting those in our society who need it, or wrongly on paying the cost of economic failure and for millions of people unemployed and on the dole.

This morning, I held a Budget breakfast for businesses in my constituency. I was delighted that my hon. Friend the Financial Secretary to the Treasury was able to come to speak to the business community there. I was delighted to organise the event with a well known firm of accountants, BDO Stoy Hayward. I confess that I was somewhat less delighted when the first speaker rose to say, "As an accountant, I do not vote Labour." However, he won me back when he said, "But, as an accountant, I judge people on their results and I have to say that young unemployed people are now going back into work under this Government." That is what we mean by cutting the cost of economic failure.

I want to discuss some of the Budget's specific measures for business. The hon. Member for Reigate—and codswallop—(Mr. Blunt) called the Budget an accountant's dream in its complexity. That was certainly not the view of my Tory accountant friend from BDO Stoy Hayward this morning. His words about the capital gains tax provision—I think that I quote him exactly—were, "I know this may put me out of a job, but there are fantastic privileges for business asset ownership here. This is going to change your lives, guys."

Instead of a complex system of tapers over 10 years going down to 20 per cent., my right hon. Friend the Chancellor has cut capital gains tax to just 10 per cent. after four years—the lowest rate in the developed world and even below that of the United States of America. That is more than a radical simplification of the tax, it is a dramatic fillip to business investment. It is likely to bring massive liquidity into the business transfer market. Critically, it is also likely to have a saving effect on the businesses of many farmers for whom the tax impact of selling their businesses will now be halved.

The making permanent of the 40 per cent. rate for capital allowances was welcomed by many businesses. However, I am aware of at least one business that was incensed by the 100 per cent. capital allowance for information technology equipment. That business went out and purchased its new IT equipment yesterday on the strength of Tuesday's Budget. I remind hon. Members and other businesses that the 100 per cent. allowance comes into effect only after 5 April this year.

My right hon. Friend the Chancellor and his Treasury team colleagues have listened carefully to business representatives. I cite as an example the enterprise investment scheme, which was limited to qualifying trades and excluded those where income came in royalties. That therefore excluded software companies whose incomes come substantially from licensing deals. Under the new provisions in the Budget, such companies will now qualify for scheme relief, providing a real boost for the IT sector.

Another example of how my colleagues on the Government Front Bench have listened to business has been the change to the regulations governing group relief. A non-resident parent company with two subsidiary companies in the UK was previously unable to obtain group relief where one subsidiary made a loss and the other a profit. Now, such an offset can be made and assets transferred within companies without any gain arising. Those are not the marks of complication, as alleged on the Opposition Benches, but simple changes that will simply make Britain a more attractive place to do business.

I recall the story of the man who went to his bank manager in the early 1990s under the Conservative Government. He asked what he needed to do to set up a small business. His bank manager advised him to buy a large one and wait. Under Labour, and with this Budget, small businesses are growing organically into large ones.

I come to the billing that the media have given the Budget: the NHS Budget. Of course, like all hon. Members, I have pressing constituency needs in health care. My local hospital, Northwick Park, witnesses unacceptable queues at its accident and emergency department. The Government have just given £800,000 of capital investment for the refurbishment of that department, but even when that building work is completed and five new cubicles have been arranged, it still will not be good enough.

There are managerial and structural problems in that hospital. There are problems about the provision of beds beyond casualty, which are two floors above—not on the same level, not easily accessible. The blocking that therefore occurs must be taken care of by different managerial and structural arrangements—by modernisation not simply of the hospital's fabric but of the processes and protocols in it.

Although I welcome the 6.1 per cent. a year increased spending on the NHS up to 2004—double what it was during the Conservative years—and the £2 billion that is being put in this year, I welcome far more the Prime Minister's statement yesterday, in which he linked that investment with the process of modernisation that will bring best practice to all NHS hospitals.

The past few weeks have been dogged by sterile political debate of whether the burden of tax in this country is rising or falling. It has not centred on whether living standards are rising or falling, but that is what is most important to people. Living standards, particularly for those who have suffered so long from the polarisation of wealth and poverty over the past 20 years, are inexorably rising under this Government. Indeed, we have heard that Institute of Fiscal Studies figures show that living standards and the income of those in the poorest decile have risen by almost 10 per cent.

The focus of the Budget, and what the debate should be around, is not whether we are paying more or less tax but what we are spending that tax on. Are we spending it on a society that is becoming increasingly divided, and in which the costs of unemployment and failure are rising, or on caring for the people who need care in our community and on making sure that the engine of education and investment in the economy is providing the sustained long-term growth that we need?

6.15 pm

Mr. David Heathcoat-Amory (Wells)

This is the third day of the Budget debates, and already a number of unexpected and unannounced nasties are emerging from the Budget and the Red Book. I shall refer to those in due course.

The overall picture that has emerged from this and previous debates is that the Government use the rhetoric of modernisation, but in practice they have a huge, growing sum that they recycle through the state. That is best illustrated by the enduring fact that, whatever the temporary balance between taxation and expenditure, and whatever the temporary surplus or deficit, those two giant pillars of public expenditure and taxation are getting ever higher. In the coming year, the Government will break the £1 billion-a-day public expenditure barrier with no comparable improvement in efficiency.

We would argue that this entire churning mechanism, whereby ever greater sums are taken from taxpayers, filtered through the state and given back to people in benefits, allowances, reliefs and services, is itself a cause of inefficiency. Instead of people making choices and judgments about their expenditure patterns and preferences, the state makes those choices for them. That is building up into a national overhead, not only on businesses, which have to grapple with the increased complexity of the tax and benefits systems, but on everyone who is ensnared by the tax system through work or the benefits system.

All of that is well demonstrated by the short history of the working families tax credit, which was the flagship benefit or tax credit to which the Government first referred. I am afraid that the Red Book, which the Chancellor published on Tuesday, continues the by now familiar fiddle of treating the working families tax credit not as an item of public expenditure but as a tax cut. That is how it is laid out in all the tables in the body of the Red Book, even though at the back, in the small print, it is explicitly referred to as an item of public expenditure.

Page 220 refers to income tax credits which score as public expenditure under national accounting conventions. That could hardly be clearer. The treatment of the working families tax credit in all the Chancellor's pronouncements and in the rest of the Red Book completely conflicts with that. It is laid out as a tax cut, most noticeably in table C7 on page 200. The reason that the Government have done that is not hard to divine: they are trying to show that they have not raised taxes.

Even if one does not include the working families tax credit, it is clear from that table that the burden of taxation has gone up. It was 35.3 per cent. when the Government took office in 1997—that figure comes from another table in the Red Book—and in the coming year it will rise to 36.9 per cent. As I said, if we add another 0.5 per cent. for the working families tax credit, in line with the Government's convention, we arrive at an even higher figure. It amounts to the equivalent of an extra 8p in the pound on the rate of income tax.

The story of the working families tax credit does not stop there. However justified its aims may be, the fact remains that it is creating a fearsome complexity in the zone of interaction between low incomes, the benefit system and taxation. The overall system is becoming incomprehensible. Perhaps that is why the working families tax credit is to be scrapped. After a short three-year life, it is to be no more. It will be replaced, we are told, by some other system of tax credit, as yet not fully defined. This shows that the Government have got themselves into an almighty muddle.

The Government started out with the view that taxation was not just a matter of raising revenue; it influenced behaviour. We agree with that. At least, we agree with the part of the Labour manifesto for the last general election, which stated: Taxation is not neutral in the way it raises revenue. How and what governments tax sends clear signals about the economic activities they believe should be encouraged or discouraged. I agree with that. I also believe that taxation can have damaging social consequences, and the Government must believe that as well. In the past fortnight, they have spoken of the importance of marriage. That has arisen from the fiasco of their attempt to abolish section 28, which has at least forced them to recognise that marriage has a social value. Why, then, are they persisting in the abolition of the married couples allowance, which sends exactly the opposite signal?

Let us take another example: criminality. We all want to suppress or reduce criminal activity, but why are the Government pushing excise duties to breaking point? My hon. Friend the Member for Altrincham and Sale, West (Mr. Brady) mentioned tobacco. Tobacco smuggling has become something of an epidemic. The Government are doing nothing to suppress the smoking habit—the number of young people taking up smoking is rising—and the revenue is also being hit. The yield from tobacco duty in the current year is substantially lower than last year's yield. The Government's action is not only inducing criminal behaviour—smuggling, and gangs crossing the channel—but causing tobacco and cigarettes to be sold to young people and others in uncontrolled outlets and, moreover, hitting the public revenue. These are the economics of the madhouse.

The Government came to office promising to be tough not just on crime, but on the causes of crime. One of the causes of smuggling is the large and growing differential, in a single market, between our home taxation system and that on the continent. Rather than dealing with that cause of crime, the Government are making it worse by widening the duty differential.

Mr. Blunt

According to a report that I have seen, the Government propose to spend £209 million on anti-smuggling measures. If the increase in tobacco duty works, it will yield only £300 million.

Mr. Heathcoat-Amory

My hon. Friend makes an additional point to bolster my argument and I am grateful to him. All the extra civil servants and customs officers in the world will not prevent smuggling when it is so clearly advantageous to buy cigarettes at £2 a packet less on the continent and resell them in this country illegally. That is a serious and growing criminal activity. Ministers recognise that in parts of their speeches, but do nothing to tackle the root cause.

The uprating of fuel duties is a mystery. The Chancellor said in his Budget speech that he would increase the duties on diesel and petrol in line with inflation, but now that we have had a chance to examine the Budget documents it seems that they are going up by about 3.2 per cent. Inflation is not 3.2 per cent. The mystery deepens when we notice that the inflation-based increase in personal allowances is only 1.2 per cent. When it suits the Government to have a nice low uprating of personal allowances, they use an inflation figure of 1.2 per cent., but when uprating benefits the Revenue they use 3.2 per cent. We have discovered a new stealth tax and it took us only two days to find this one.

Plenty more stealth taxes are still being discovered, but the House of Commons Library has done a quick estimate. It believes that the extra revenue from that over-indexing of fuel duties will net the Treasury £472 million a year. That is practically the definition of a stealth tax. The Chancellor asserted in terms that those duties would rise only with inflation, but, to the enormous benefit of the Exchequer, they are increasing by far more than that.

My other points about the damaging effect of taxation settle on savings. The significance of the savings habit was well described by my hon. Friend the Member for Reigate (Mr. Blunt), who pointed out the importance of a vigorous savings culture to funding the necessary investment and encouraging desirable social ends. We cannot responsibly kick people off welfare and withdraw their benefits unless we encourage them to save and make saving attractive to them, but everything that the Government have done has undermined that. They have abolished personal equity plans and tax-exempt special savings accounts and have hit pensions with a continuing extra tax burden of £5 billion a year. What message does that send to the public? It says, "Don't save. The Government will always let you down."

The Government have also skewed the income tax system away from saving, particularly by low-income groups. That is not theory—it has had an effect already. The savings ratio is down from more than 10 per cent. when we left office to 5.5 per cent., which is lower than predicted in the 1999 Budget. The savings ratio is collapsing under the Government and that will have serious social and economic consequences.

Leaving that aside, I want briefly to explore the tax relationship between business and the Government. It is beyond dispute that the tax burden on business has gone up. That is clearly laid out in the Budget arithmetic—they are at it again. Stamp duty has gone up. The Government pretend that it is all paid by people with large houses, but that is completely untrue. Most is paid by the commercial sector. It is a straight business tax.

It is also a tax against mobility and flexibility. When the Prime Minister—or even the Chancellor—dilates on the subject of the British economy, he likes to pretend that we are following the American model of wage and price flexibility, adaptability and enterprise, but everything he does converges not on that economy, but on the European Union economy. He talks about the Anglo-Saxon model, but his actions are all European. Again, it will have severe consequences for the competitiveness of the British economy.

Not just traditional industry, but the service sector will suffer from another omission. The Government have failed to do anything about the stamp duty on shares and we are now way out of line with other tax jurisdictions. We have the highest stamp duty, or equivalent, of any G7 country. Increasingly, transactions and deals will take place not in the City, but in Germany, where there is no stamp duty on share dealings.

Mr. Gardiner

Is the right hon. Gentleman aware of the technique of avoiding stamp duty on shares? On the purchase of shares, the stamp duty is only 0.5 per cent., but it can be on a very substantial price; he properly makes that point. However, consideration takes the form of convertible debt with a low face value, and the duty is charged on the face value. The debt converts to shares at full value after, say, one year and there is then no duty. That was the standard technique for the avoidance of stamp duty on shares. From Royal Assent, that will be stopped. Does he not applaud that?

Mr. Heathcoat-Amory

The situation is even worse. That tax is being avoided, too. The Government are ignoring the big avoidance: the moving of transactions overseas altogether. They are attempting to stop a comparatively minor avoidance scheme, while ignoring the overall point: the measure will undermine the City of London as a place where those deals can take place.

The Government are fond of talking about the need for a partnership with industry. The quarrying industry is important in my constituency. It thought that it had reached a partnership deal with the Government over higher environmental standards. It discussed those with the Department of the Environment, Transport and the Regions and came up with an imaginative and far-reaching package on the extractive industries, after-care of sites, the transport of stone and other aggregates. However, at the last minute, the Treasury stepped in, completely sabotaged the discussions and is about to impose a new tax: the aggregates tax, a blunt instrument, which will make no differentiation between extractors and quarrying companies that are good and responsible, and those that are not. That is another clear instance of the Government instinct to tax, rather than to engage in thoughtful discussion with an industry that genuinely wishes to raise the environmental gain.

That sends a bad message to other industries that the Government have in their sights. The Red Book describes the possibility of not going ahead with the pesticides tax. It says that, instead, the Government want to reach a voluntary agreement with that business sector. Based on the experience of the quarrying industry, I seriously advise the sector not to bother. If it does discuss those matters with the Government, particularly a Department outside the Treasury, there is no assurance whatever that the Chancellor will not step in at the last minute and simply tax in order to spend.

One issue has been raised several times in the debate: the rules governing controlled foreign companies and the system of double taxation relief. My hon. Friend the Member for Sevenoaks (Mr. Fallon) made a truly outstanding speech. He demanded to know, among other things, exactly where the Government stood on their revenue forecast from that supposed tax reform. The Government have, in summary, been found out on this one.

My right hon. Friend the Leader of the Opposition mentioned a news release from PricewaterhouseCoopers, which shows that the Government's estimate of an extra yield of £300 million a year from those two reforms is a grotesque underestimate. I trained at PricewaterhouseCoopers, so I must declare that interest, but I had absolutely nothing to do with its comment on this issue.

I was quite interested that the only excuse that the Inland Revenue could come up with was to suppose that the difference between the Revenue's estimates and those of PricewaterhouseCoopers was accounted for by what the Revenue called "behavioural changes". What that means is that the Government are relying on the fact that those companies will not lose quite so much money, because they will simply leave—they will not be here at all.

Therefore, in future, perhaps companies such as Rio Tinto or—a better example—the new companies from South Africa that have set up in the United Kingdom with London as a headquarters will not lose too much revenue from the measures, because they will not be in London at all. Is that really what the Government mean by a partnership with industry? Is that really what they mean by trying to encourage the competitiveness of British industry?

PricewaterhouseCoopers is not the only company to have come up with alternative figures. Deloitte and Touche—another very well-known and very large accountancy firm—has calculated that the two changes, but particularly the one affecting double taxation relief, will cost well over £1 billion, rather than the £1 million claimed by the Government. Deloitte and Touche released that information today. Its specialist corporate tax partner, Mr. Stephen Charge, is quoted as saying: Contrary to government estimates, the abolition of dividend mixing will cost business well over a billion pounds a year. At a time when European competitors such as Spain and Germany are reforming their tax systems to attract commerce, the UK is set to become a much less favourable location for international business. The point is that those companies are not seeking a privilege. All they are seeking is to be taxed on the same basis that they would be if they were based on the continent or in the United States. Those other countries do not have the concept of taxation by source. In other words, multinational companies based in America are already able to mix their sources of revenue, and to be taxed accordingly, without the need to establish those so-called offshore mixing companies.

Therefore, by signalling their abolition of that taxation planning route, the Government have disadvantaged companies in the United Kingdom as against what they experience in those other tax jurisdictions. It is a very clear signal to multi-national companies: "Do not bother to locate in the United Kingdom. If you do, the Government will kick you in the teeth."

There have been many references in the debate to the extra £1 billion being provided next year for education and to the larger sums that have been announced for the national health service. Yesterday, we had an admission from the Prime Minister that the money spent so far has been largely wasted. The £21 billion that was announced in 1998, which also was described by my hon. Friend the Member for Sevenoaks, has not led to any necessary improvements, but has largely been wasted. The Prime Minister had no answer to the question of how those improvements are to be made.

In announcing those extra measures in a Budget statement, the Chancellor has breached his previous assurances that all that should be done in the comprehensive spending review. In last year's Red Book, he pointed out that there would be no short-term planning of public expenditure, but that it would all be done subject to firm multi-year limits covering a three-year period. Instead of that, for purely political reasons, he has released some sums of money with none of the supposed disciplines and constraints of the comprehensive spending review. That is why the failure to deliver, which has been such a marked feature of the first half of this Parliament, will continue into the second half.

6.40 pm

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

On Tuesday, my right hon. Friend the Chancellor set out for the country the next step on the road to a stronger and fairer Britain. Building on the platform of stability that we have been creating over the past three years, he explained how we are able to meet our rules of fiscal prudence—locking in the fiscal tightening over the next two years to an even greater extent than projected in the previous Budget—while at the same time, releasing significant new investment for the nation's priorities, which include boosting jobs and enterprise, improving services, tackling child poverty and helping pensioners.

The problem for Opposition Members—it has been evident in this interesting debate—is that they know that the economy is being immeasurably better managed today than at any time under the previous Government. I am talking not about the last five years of Tory Government—there would be no dispute about the fact that the economy was badly managed then—but about any time during their 18 years in office.

After the election, our first economic objective was to achieve a new stability after the decades of boom and bust. The Budget speech confirmed how, in a remarkable way, that has been achieved. We are delivering a platform of stability and steady growth. We have low inflation and public finances are under control. That is how the Chancellor intends it to stay.

Inflation in Britain today has been lower for longer than at any time for over 30 years. It is now the lowest of any member state in the European Union. For the first time, after many years of weak investment which left us lagging behind, Britain is now investing a bigger share of our national wealth than any other major EU competitor and more than the United States. More people are now in work than ever before in our history. That factor was mentioned by my hon. Friend the Member for Ealing, Southall (Mr. Khabra). The rate of unemployment is at its lowest for 20 years and 1 million vacancies are on offer across the United Kingdom's regions.

I want to draw the House's attention to just one immensely significant change resulting from the success of the new deal—it was referred to by my hon. Friend the Member for Wythenshawe and Sale, East (Mr. Goggins). Youth unemployment has fallen by 70 per cent. since the election. The number of young people now unemployed for more than six months is lower than at any time since the middle of the 1970s and at any time under the previous Government. I ask the House to reflect on the incalculable gains that we will see from that one huge change since the election. It is a gain for young people, but it is a huge gain for our entire society. We are all affected by what happens to those around us, especially our young people. There is such a thing as society and gains today mean incalculable gains for years to come.

The young people of this generation have been given a chance. They have not been abandoned on the scrap heap like far too many youngsters over the past 20 years. Young people are used to getting up in the morning and developing the habits and confidence that come from working. They are able to look forward to a lifetime of independence and being able to support themselves and their families. As my right hon. Friend the Secretary of State for Education and Employment said, they are enjoying an optimism that will be passed through the generations.

That is what has been achieved through the new deal and, with the Budget, we are extending that approach and recognising people's rights and responsibilities. We are extending that approach to older people, lone parents and those who have been written off in the past.

A few weeks ago, launching his pre-Budget tour, my right hon. Friend the Chancellor visited my borough of Newham in east London. He met many of the people who have benefited from the new deal. He had the sorts of discussions to which my hon. Friend the Member for Chatham and Aylesford (Mr. Shaw) referred earlier. Some radio journalists were trying to persuade some of those youngsters to complain about some aspect of the new deal, but they replied: All we can say is that it has worked for us. It has worked for them and for nearly 200,000 other young people across the country.

These are seismic changes, beyond the wildest dreams of the Tory years. We are determined to lock them in for good and to reap the benefits for the long term. As my hon. Friend the Member for Brent, North (Mr. Gardiner) said, our prudence has been for a purpose. That purpose was at the heart of the Budget and on Tuesday we took the next steps towards our four ambitions set for the coming decade: our prosperity ambition, to bridge the productivity gap with our competitors; our full employment ambition, to achieve employment opportunity for all and the highest rate of employment that we have ever had; our education ambition, to get half our youngsters going on to university by 2010; and our anti-poverty ambition, to halve the number of children living in poverty within 10 years, on the way to meeting the Prime Minister's target of eradicating child poverty within 20 years. Those four ambitions encapsulate our commitment to a modern and decent Britain in which opportunity and security are not just for a few, but for all.

I shall to respond to a number of points that have been made in this interesting debate. My hon. Friend the Member for Dudley, South (Mr. Pearson) made a particularly interesting speech. He welcomed the substantial boost for the health service. He appealed for more sensible Tories to engage with the process of planning for how what he described as the wall of cash will be used. We have not had too much encouragement that his appeal will get a positive response from the Conservatives, but who know? There were not many Conservative Members present today and there may be others who will respond more positively.

My hon. Friend rightly welcomed the changes for charities. They are a big step forward. My hon. Friend the Member for Huddersfield (Mr. Sheerman) intervened on him to point out the particular opportunities for universities. I know that universities are alive to those opportunities.

My hon. Friend the Member for Dudley, South rightly argued that there is more to be done for manufacturing. As he knows, I very much agree with him on the potential for the commercialisation of research ideas in our universities. I have visited Warwick university, with which he is familiar, and a number of others in recent months. We are making progress in encouraging commercialisation to get new ideas into business and made them successful, creating new jobs and new enterprise.

My hon. Friend also called for more investment in infrastructure. As a result of my right hon. Friend the Chancellor's announcements, net public investment will more than double over the period 1997 to 2003–04 from 0.7 to 1.8 per cent. of gross domestic product. That will create the infrastructure for which my hon. Friend rightly called. There is an additional £1 billion of capital spending within departmental expenditure limits for the coming financial year.

The hon. Member for Harrogate and Knaresborough (Mr. Willis) generously and rightly welcomed the additional education spending. He was also right to point to the massive bureaucracy that would be required to support the Conservative idea of a centralised body to direct all funding to schools. He also criticised what he described as the centralisation involved in establishing the learning and skills councils. I do not agree with him on that. There will be 47 learning and skills councils and a lot of local discretion will be available to them. Local people will rightly take decisions in the light of local circumstances.

I apologise to my hon. Friend the Member for Ilford, North (Ms Perham), because I was not here when she addressed the House, but I know that she gave a well-informed and thoughtful speech. She has a long-standing interest in the problems of age discrimination and has repeatedly pressed the Government to do more about it. She was right to welcome the new deal for the over-50s and the improvements that we are making.

The hon. Member for Sevenoaks (Mr. Fallon) appeared to be unaware that the 10p starting rate of tax had been extended to savers. He complained that e-commerce appeared to be the only form of enterprise on the table. That is not the case. It was evident from the business breakfast to which my hon. Friend the Member for Brent, North referred that it is recognised that the massive, ambitious and fundamental changes in the Budget to capital gains tax, the permanent capital allowances and research and development tax credit will be available to businesses across the board. They will extend to manufacturing firms and other businesses of all sorts. That is why those proposals are welcomed, especially by growing businesses.

The hon. Member for South Antrim (Mr. Forsythe), who is a fair man, rightly welcomed a number of features in the Budget. I was pleased to hear him refer to the new arrangements for graduated vehicle excise duty. I am glad that he is pleased about the proposals. They will bring about a good change for the environment. Under the new arrangements, 95 per cent. of new cars will attract a lower vehicle excise duty than they would under the existing system.

The hon. Gentleman asked what would happen to the ring-fenced transport fund, given that there has been an inflation rise only in fuel duty. The £280 million fund is being provided for transport improvement. Under the normal arrangements, there will be an element for Northern Ireland. I think that the House will agree that the sooner that we have again a Government in Northern Ireland who will be able to make decisions about allocating funding in Northern Ireland, the better. All of us hope that that will happen soon.

I was glad also that the hon. Gentleman welcomed the five-year exemption from the climate change levy for gas supplies in Northern Ireland, to encourage the development of that new business. I am grateful to him for many of his remarks.

The hon. Member for Reigate (Mr. Blunt) made an interesting speech. He argued that, when there is a downturn, we need to start borrowing to pay social security bills rather than doing anything with tax. That reflects the previous Government's thinking. It explains clearly why we ended up with a £28 billion deficit under that Government, whereas we are this year making a £12 billion debt repayment. Clearly the hon. Gentleman does not believe in the golden rule that the Government have set, and to which we are adhering. The policies that he was promoting would take us straight back to the days of boom and bust.

Mr. Blunt

I thought that the golden rule was something to do with the cycle. Has it somehow changed?

Mr. Timms

The hon. Gentleman is right. The golden rule refers to the cycle as a whole. If he is saying that he supports the golden rule, that would be a step forward. However, the hon. Gentleman appeared to say that, as soon as there is a need to start spending more on social security, it is necessary to start borrowing for it. That is not the approach that we have taken. We want a sustainable level of debt, and that is what we have achieved and will continue to achieve. We will not go back to the days of boom and bust. That has been a key element in our success in managing the economy.

I draw the hon. Gentleman's attention to the radical implications of our changes in capital gains tax. After four years, with the accelerated taper for business assets, the rate of capital gains tax will fall to 10 per cent. That will undoubtedly unleash a huge new wave of enterprise and investment in every community throughout the country. We should all be pleased about that.

My hon. Friend the Member for Wythenshawe and Sale, East referred to the complimentary remarks of the new Archbishop of Westminster about the Budget. I am glad that he did that. He welcomed particularly, as did the hon. Member for Altrincham and Sale, West (Mr. Brady), the new investment in Manchester metrolink. I was interested in what my hon. Friend had to say about the work that he has been doing in bringing together unemployed people, employers and others in his area, to discuss how best we can together tackle the barriers that still face people in moving into employment, and in his proposals, which were based on the discussions that have taken place. I shall examine them closely.

My hon. Friend is right to say that the really significant change over the past three years is that there are nearly 800,000 fewer people on income support now than there were at the time of the general election. All those people are no longer receiving benefit and are paying taxes. That is why we are able to make the huge new investments in education and the health service.

As well as welcoming the Manchester metrolink announcement, the hon. Member for Altrincham and Sale, West said—I think that I have this right—that he does not immediately discount the possibility that the new deal may have done some good. He got really carried away later on and said that it had probably brought some benefits. That is as close as we will get to a recognition from a Conservative Member of the triumph that has been achieved through the new deal.

Mr. Brady

I have been consistent in the Education and Employment Select Committee and in the House in recognising that some benefit may have come from the new deal, but one expects quite a lot of benefit if one is spending £5 billion of public money, and it is far from proven that the Government are getting the bangs for their bucks.

Mr. Timms

The evaluation shows clearly that we are. The figures are in the Red Book. Long-term youth unemployment is 40 per cent. lower, according to the independent evaluation, than it would otherwise have been. That is a massive change for the better in the life chances of tens of thousands of young people who were abandoned by the previous Government and who can now look forward to a decent future. The whole House should welcome that. The hon. Gentleman has had the benefit of examining the details in the Select Committee. We are grateful to him at least for some grudging welcome of what we have achieved, but he has not recognised its true scale.

Mr. Blunt

The Labour party in opposition had a target of taking 250,000 young people off benefit and into work. The only sour fact is that the total was collapsing so fast when the Government came to office that there were only 187,000 people in the entire group. They inherited the welcome trend of a collapse in youth unemployment.

Mr. Timms

The hon. Gentleman misunderstands. We will have achieved 250,000 youngsters going from benefit into work in the life of this Parliament, as we said that we would.

I was grateful to my hon. Friend the Member for Brent, North for what he said about the excellent business breakfast that he organised this morning. The occasion was encouraging and useful.

The right hon. Member for Wells (Mr. Heathcoat-Amory) talked about the aggregates tax. The Treasury and the Department of the Environment, Transport and the Regions have worked closely together on the matter. My right hon. Friend the Chancellor said at the time of the pre-Budget report that we were minded to introduce an aggregates levy unless there were a substantial improvement in the voluntary package that had been put together by the industry under the leadership of the Quarry Products Association.

The QPA has undoubtedly worked hard. It has had difficulties, because some of the smaller quarries defected and made it clear that they did not like the package that was being developed. It then started to add new strings to the package, and one aspect of its proposals was seriously anti-competitive and not compatible with European Union law. The reality is that, when the time came for us to reach a decision, which we said we would do in time for the Budget, there was no viable package on offer from the industry, so we went ahead, exactly as we had said in November that we would, with the announcement of a revenue-neutral aggregates levy to take effect from April 2002.

There was some confusion among Conservative Members about tobacco smuggling. The costs of the Budget announcements on that are indeed £209 million over three years, but the yield could be as much as £2.3 billion over the same period, massively exceeding the costs. Our approach—being tough on smuggling and ensuring that the benefits of higher tobacco charges are carried through into the health of the nation—is absolutely right.

We have made important announcements about how we will create stronger, more enterprising and innovative British business. The significant measures that we have announced include the radical changes on capital gains tax and the 40 per cent. first-year capital allowances being made permanent for small and medium-sized firms—a measure that has been demanded by such firms' representatives for a long time. We have—

It being Seven o'clock, the debate stood adjourned.

Debate to be resumed on Monday next.