Budget Resolutions and Economic Situation

HC Deb 27 March 2000 vol 347 cc41-125

Mr. Deputy Speaker (Mr. Michael Lord)

Before I call the Minister, I remind the House that Madam Speaker has put a limit of 10 minutes on all Back-Bench Members' speeches during the debate.

4.33 pm

The Secretary of State for Social Security (Mr. Alistair Darling)

This is the last day of this year's Budget debate. The debate has shown the clear dividing lines between the Government and the Opposition. We are building a strong economy that allows us to build strong public service, whereas Conservative policies would return us to the boom-and-bust economy of the past. If we want to know what the Opposition think about public services, we have only to look at their plans to dismantle the national health service.

We have strong public finances because we took tough decisions during the first two years of this Parliament. We cut the huge debts that we inherited and we gave the Bank of England independence, something that was opposed by the Conservatives at the time. Our public finances are strong. We are in surplus, not deficit. By getting people back to work and by cutting the costs of social and economic failure, my right hon. Friend the Chancellor of the Exchequer found that he had about £3 billion more available to spend than he would have done but for the change of Government.

For the first time in a generation, social security spending is under control. The rate of growth in this Parliament is less than half the rate under the Conservative Government. Spending will remain under control provided that we continue to reform the welfare state and get more people into work, tighten the gateways to benefit and take tougher action on fraud. By keeping spending under control we can spend more on our priorities, such as helping families with children and supporting pensioners.

Tightening the gateways is important. Because of the action that we have taken, we are already on course to save £1 billion over this Parliament by cutting down on fraud and error in income support alone. We have also called time on the hidden economy which thrived during the Tory years. I can announce that, from next year, there will be 400 more specialist investigators across government to crack down on fraud. Specialist teams throughout the country will check the identities of people claiming benefits and suspected of making fraudulent claims. Following Lord Grabiner's report, the Government will introduce proposals to deal with persistent offenders who work and claim benefits at the same time. There is no excuse for benefit fraud; we will not tolerate it.

Social security spending almost doubled under the previous Government because of their economic and political failure. They spent more and more while the number of households with no one in work doubled and child poverty trebled. It is a scandal that, at the beginning of the 21st century, it falls to this Government to eradicate child poverty, which grew so much under the Conservative Government. They spent more and more as a result of their failure, and their response was simply to leave things to the market. That remains their response today, whereas our response is fundamental reform, and we are now beginning to see the results of those reforms.

The key to cutting the bills of economic failure is getting people back to work. Work provides opportunity and helps to remove children from poverty; and a lifetime in employment makes for a good pension. That is why this Government are determined to help people find work and to make work pay—helping people to help themselves. There is more help now available, with the working families tax credit, the new deals and the minimum wage. Long-term unemployment has more than halved, youth unemployment is down by 70 per cent. and there are more vacancies in the economy. We believe that welfare reform and getting people into work is the key not just to cutting the bills of economic failure, but to making sure that individuals can prosper and do well.

There are 1 million vacancies in the economy. We therefore believe that a new approach—a new culture—is needed by Government to help people fill those job vacancies. That is why, this month, we announced a new agency for work, bringing together the Benefits Agency and the Employment Service. From next year, there will be a single gateway for everyone of working age. We are ending a system that is designed simply to hand out benefits. Instead, we are designing one that is geared to getting people into work and helping them to become independent.

We have active help backed by measures to help work pay, such as the working families tax credit. Some 1.4 million families are gaining about £24 a week, and all of that would be put at risk were there ever to be the return of a Tory Government.

Mr. Chris Pond (Gravesham)

Will my right hon. Friend seek an intervention from Conservative Members? The Conservative party has performed one or two U-turns on these issues, but will he seek a categoric statement as to whether it would retain or scrap the working families tax credit?

Mr. Darling

One only has to read what Conservatives have said about the working families tax credit to see their hostility towards it. I know that they have performed one or two U-turns, such as that on the minimum wage. However, it is hard to believe a party that was so vehemently against the minimum wage, when it now tells us that it is in favour of it. Who knows? The Tories will be calling for an increase in it next.

The Conservative party is still against the new deal, but I suspect that it is quiet now because of its embarrassment. After nearly 20 years in government, and despite all the rhetoric and all the promises to cut social security spending, it managed to double the amount of social security spending. That was not because people were better off as a result of more generous benefits or anything like that: it was simply that the Conservative Government needed to spend more and more because of mass unemployment. What was worse, it presided over a situation in which one generation of the unemployed led to a second generation of people who were unemployed.

Mr. John Bercow (Buckingham)

Will the right hon. Gentleman give way?

Mr. Darling

I shall certainly give way; it did not take long to provoke at least one Conservative Member. The hon. Gentleman must be deeply embarrassed by the fact that, whatever else the Conservatives did in the past 20 years, they manifestly failed to control social security spending. We have done that, and we shall continue to do so.

Mr. Bercow

That was a very long-winded apologia. Is the Secretary of State aware that, on the Government's own statistics for the new deal for lone parents, only 4.5 per cent. of lone parents who were sent invitation letters have secured employment as a result? More than 434,000 have failed to do so. Does the right hon. Gentleman not recognise that, if the new deal for lone parents were a school, it would have been closed by the Secretary of State for Education and Employment?

Mr. Darling

I shall come on to lone parents shortly, but I can tell the hon. Gentleman that nearly 90 per cent. of lone parents who come in for interview under the new deal join the scheme, and a growing number go on to work. A recent report showed that once lone parents are in work, they are more likely than other people to stay in work, and the survey found that nearly half of those who went into work were still in work five years later. Lone parents have a motivation that people without children do not have—the motivation to look after their children. The new deal for lone parents has been a success, and as I shall tell the House shortly, we intend to build on that.

I was saying that not only will we help people into work through the new agency, which will make sure that everyone of working age comes through that single gateway, but we are easing the transition to work. The Budget introduces a new simple job grant, with a benefit run-on for housing costs, which makes it easier for people receiving mortgage support to try out a job: if the job does not work out, they will not lose that benefit.

We are helping people to get work, and 260,000 people have found a job while on a new deal programme. Yet it is worth noting that the Tories were against every aspect of the new deal. We are extending and improving those programmes because so many people have found work. We are reducing unemployment, but there are many people who are not in work who could work and want to work. That is why we introduced the new deals for disabled people and for lone parents.

As I said, 90 per cent. of lone parents who come in for interview join the new deal, and one in three of those go on to find work. Starting this October, and going nationwide from April next year, we intend to roll out national work-focused interviews for lone parents on income support with children of school age. People have a right to expect support, but in turn they have a responsibility to find out what help is available. By 2004, every lone parent whose youngest child is over five will have to come in for an interview as a condition of receiving benefit. We shall begin to implement that next year. We are providing the help and advice that people need, but they should be made aware of what help is available to get them into work.

The Tory alternative, which is simply to cut off all income support the minute the youngest child reaches 11, as well as to remove all help and advice and scrap the new deal and the working families tax credit, will not help; it will only increase poverty. Helping lone parents and, importantly, their 1.7 million children, is an essential part of our drive to eradicate child poverty. We are the first Government ever to commit themselves to halving child poverty within 10 years and eradicating it in a generation. After all their U-turns and policy changes, it will be interesting to find out whether the Tories are prepared to support us in that commitment. No decent society and modern economy such as ours should tolerate so many children living in poverty.

We are determined to tackle poverty and its causes, including the poverty of opportunity and expectation that has blighted the lives of too many children. In this Parliament alone, as a result of all the measures that have been announced in the Budgets since we took office, more than 1 million children will be taken out of poverty. By any reckoning, that achievement should make people proud of what this Government have done.

We are tackling the causes of poverty, not only through education and housing policies, but through extra help such as the sure start maternity grant for mothers with new babies, which rises to £300 from October. We are also helping those children whose parents cannot work with an increase of £4.35 for children under 16 in families who are receiving income support and the working families tax credit.

Mr. John Townend (East Yorkshire)

Is not one of the greatest causes of the increase in child poverty the breakdown of the institution of marriage? What have the Government done in the Budget to encourage marriage?

Mr. Darling

In fact, the biggest single cause of child poverty is parents not being in work for long periods. I would take the hon. Gentleman's remarks more seriously if he had ever paid any attention to, or expressed any concern about, the mass unemployment over which the Conservative Government presided during the 1980s and early 1990s. If he wants to see the problems of poverty at their most acute, he should visit those areas where employment was decimated in the early 1980s, and where parents were given no help to get back into work.

Mr. Darling

The hon. Gentleman can shake his head if he likes. In my 13 years as a Member of Parliament, I have never heard him express an interest in poverty, but if he is now taking such an interest, he should look at what is being done to help children who live in poverty. I commend the report that the Government produced last year, and which we will produce every year; it will enable people to judge our performance on eradicating child poverty within a generation. We are determined to ensure that every child in this country has the best possible start in life.

Mr. David Davis (Haltemprice and Howden)

The Secretary of State picks his statistics carefully. According to his definition, the highest cause of child poverty is families without a working parent, but the second highest is single-parent families. Therefore, will the right hon. Gentleman answer the question asked by my hon. Friend the Member for East Yorkshire (Mr. Townend): does the right hon. Gentleman think that encouraging marriage is an appropriate objective for Government policy?

Mr. Darling

The right hon. Gentleman has inadvertently made my case: for most families, lack of work is the problem. He mentions lone parents, and too many children living in poverty are the children of lone parents who are not in work. About 800,000 lone parents are not in work, and we want to ensure that those who can work do so.

Mr. Townend

What children need is fathers.

Mr. Darling

The hon. Gentleman is quite right to emphasise the role of fathers. The Tories set up a system that collapsed under its own weight, so we are reforming the Child Support Agency—in fact, the Bill to achieve that reform returns to the House of Commons later this week. The result of our reforms will be that nearly 1 million children will get more money than they do at present; in some cases, they will get money for the first time.

We are tackling child poverty on several fronts, including ensuring that absent parents—usually fathers—pay what is due and making it easier for them to do so. We are also helping lone parents into work—giving them help that was never available in the past. Essential to eradicating child poverty is running a stable economy—something that eluded the Conservatives for almost 20 years—creating an environment in which work can flourish, and establishing conditions in which there are more jobs in the economy than ever before. The parents of some children cannot work, so we are helping them, as well as providing an extra £26 a week for children who are severely disabled in early life.

All that help was never available in the past, and most of the measures introducing it were opposed by the Tories. Many of the measures are still opposed by them and would be threatened by the return of a Conservative Government.

Mr. Malcolm Bruce (Gordon)

Will the Secretary of State give way?

Mr. Darling

We have not heard from the Liberal Democrats yet, and since there is only one here—[HON. MEMBERS: "Three."] —I shall give way.

Mr. Bruce

Will the Secretary of State consider the irritation caused to disabled people by the fact that they have to demonstrate how disabled they are and how much their disability costs them in order to claim disability living allowance? Many find that both demeaning and difficult. It goes against the grain of encouraging people to be independent to force them to advertise the extent of their dependency to qualify for a benefit that many of them need.

Mr. Darling

The hon. Gentleman will accept that there has to be a test to determine eligibility for DLA, but he should be aware that we are changing the assessment to determine not what people cannot do, but what they can do. The new personal capability assessment will be introduced from next year; it is currently being piloted to ensure that it is effective. We should always ask of anyone of working age what that individual can do, because many people of working age want to and can do something that will enable them to become more independent. In the past, the test has been too negative. We want to change that.

Mr. Dafydd Wigley (Caernarfon)

In that spirit, is it the Secretary of State's intention to examine the rules of the independent living fund and the way in which that operates as a disincentive for people to remain in work? Glaring cases have been reported in the press and drawn to the right hon. Gentleman's attention. The matter needs to be looked into.

Mr. Darling

We have increased the disregard in relation to the ILF. We are examining the rules for all such benefits and keeping them under review. Our objective is to make it as easy as possible for people who want to work—even to do a little bit of work—to do so.

With regard to children, one of our reforms will make the system supporting children much more effective than it is at present, with the introduction from 2003 of the integrated child credit, which will draw together all the help that we give for children across the benefits and tax system into a single, simple credit paid to the main carer. There will thus be a single source of income to support the poorest families, which they can take with them as they move into work.

If it is right to tackle child poverty, it must also be right to tackle another Tory legacy—pensioner poverty. Later this week I shall publish figures showing that too many pensioners have lost out in the past. We are making reforms to the pension system for the future so that we avoid the situation that we now face. If it had not been for the changes that we have introduced, almost a third of the working population would be heading towards retirement on income support from day one.

We are making long-term reforms, increasing access to pensions and reforming the state earnings-related pension so that the state second pension is more effective. However, there are still too many pensioners who are poor now. Pensioner income as a whole has increased faster than average earnings, but the problem is that too many pensioners have lost out. That is why we introduced the minimum income guarantee, which from this April will be worth £78 for a single pensioner.

We want to reward thrift. Time and again in the House, right hon. and hon. Members have asked us to look at the capital limits that determine whether someone is entitled to the minimum income guarantee. Capital limits had not been increased since 1988. Clearly, that situation could not be allowed to continue, so from April next year the lower capital limit on savings for the minimum income guarantee will be doubled from £3,000 to £6,000, and the upper limit will rise to £12,000 before anyone loses entitlement to the minimum income guarantee.

Mr. John Swinney (North Tayside)

I am grateful to the Secretary of State. He said that he would announce the figures later this week showing how pensioners have lost out in the past. We will be interested to see those figures. On the assumption that that is because many pensioners are unaware of their entitlements and in some cases are afraid to take up their entitlements, how confident is the right hon. Gentleman that the minimum income guarantee will he accessed by pensioners any more than the previous devices that were put in place to protect pensioners from poverty?

Mr. Darling

The hon. Gentleman may be interested to know that the paper that I intend to publish shows a number of reasons why there are pensioners with less income than they should have. Pensioner incomes have been rising faster on average than earnings because the generation now retiring built up occupational pensions in the 1950s, 1960s, 1970s and so on. Part of the problem is that too many people of working age did not have access to an occupational pension. That is why we are introducing stakeholder pensions, which will benefit about 5 million people.

The second problem facing people now retiring is that because too many people have been on low incomes, or in some cases no incomes at all—people who were carers, people with disabilities, and people with broken work records and so on—SERPS did not help them. They did not earn very much, so they did not get very much. The reforms that we are making to the state second pension, which in some cases will double the amount that the low-paid get, will ensure that more and more people are retiring on a higher pension.

Thirdly, many people who are already retired, and for whom it is therefore too late to save, are losing out.

I return to the point about the minimum income guarantee. When the capital limits applicable to the minimum income guarantee are extended, the support received by a pensioner with savings of £6,000 could rise by £12 a week. Half a million pensioners will gain overall.

We want to make sure that everyone who is entitled to the minimum income guarantee gets it. On Wednesday, I shall launch the biggest campaign of any Government for a take-up of the minimum income guarantee. We are determined to ensure that all pensioners get the money to which they are entitled. They should claim it if they are entitled to it.

Kali Mountford (Colne Valley)

I congratulate the Government on making such an effort to ensure that money goes to the poorest pensioners and not necessarily to all pensioners. Is it not the case that the new winter fuel payment, which was not available under any previous Government, helps that group the most, because it is not deducted from the minimum income guarantee?

Mr. Darling

My hon. Friend is right. The winter fuel payment is extremely popular and provided a great deal of help not only to pensioners on low incomes but to all pensioners. It is perhaps a measure of its popularity that when we announced that we would extend it to households with members who were over 60, we received thousands of calls every week asking about it. It is very useful; it comes in a lump sum before Christmas and thus helps pensioners to pay the sometimes substantial bills that they incur at that time of year. The winter fuel payment benefits all pensioners, but perhaps it has greater value for those on low incomes.

Mr. Gordon Prentice (Pendle)

Before my right hon. Friend leaves that point—

Mr. Darling

I was not going to leave it; it is such a good point that I might stay with it a little longer. However, I shall give way to my hon. Friend.

Mr. Prentice

It worries me that so many pensioners do not benefit from the minimum income guarantee. It would be a simple matter to include a few pages of large type in the pension book. Every pensioner has a pension book, and including those pages would encourage people to claim what was theirs.

Mr. Darling

My hon. Friend will realise later this week that the Government have made several proposals that draw attention to the minimum income guarantee. I do not share his optimism about everyone reading their pension books from cover to cover, and many pensioners receive payments by other means than an order book. We must ensure that they, too, know about the minimum income guarantee.

The Government are determined to do more to lift many more pensioners out of the low income bracket. That is why I shall launch a consultation document on the way in which we can best develop a new pensioners credit for the next Parliament. It will take account of and help those pensioners who have not only modest savings, but modest occupational pensions.

For the poorest pensioners, the scope of the minimum income guarantee will be extended; the pensioners credit on which we launch a consultation document will show how we are helping pensioners who have modest occupational pensions.

We are helping all pensioner households—some 10 million pensioners—through this year's winter fuel payment increase to £150. We should also remember that we cut VAT on fuel whereas the Tories doubled it. We have reintroduced the free eye tests that the Conservatives ended when they were in government. From November, free television licences will be available for pensioners who are over 75. That group comprises some of the poorest pensioners.

We are spending an additional £6.5 billion on new help for pensioners during the Parliament.

Mr. David Ruffley (Bury St. Edmunds)

Will the right hon. Gentleman confirm that the pensioners credit will not be scored as negative income tax in future Red Books?

Mr. Darling

Why does not the hon. Gentleman wait until he reads the consultation document on the pensioner credit? I would have thought that he would be more interested in its proposals for helping pensioners. Most pensioners will want to know about that. Perhaps the hon. Gentleman's question shows the Conservative party's disregard for the welfare of pensioners in this country.

The Budget drives forward our reforms—

Mr. William Ross (East Londonderry)

Will the right hon. Gentleman give way?

Mr. Darling

I am conscious of the 10-minute rule, and that it is not fair to Back Benchers if I speak indefinitely, but I shall give way for the last time.

Mr. Ross

I am curious about the way in which the right hon. Gentleman arrived at the figure of £6,000 savings. Has he simply applied indexation to take account of the inflation rate or earnings since 1988?

Mr. Darling

We simply doubled the figure. Time and again, I have stood at the Dispatch Box and rightly been asked by hon. Members—even Conservative Members, who did nothing about it in their last 12 years of government—to increase capital limits. I wanted to ensure that they were increased significantly. I believed that doubling the figure would make a useful start. The system is relatively easy to understand. The figure starts at £6,000, and goes all the way up to £12,000. I think most pensioners will welcome that, and I am glad to be Secretary of State at the time of its introduction. The pensioners credit will take the policy one step further.

As I was saying, this is a Budget that drives forward our reforms to make the welfare state fit for the 21st century. By controlling expenditure, we are able to do more for the people whom we want to help, including pensioners and families with children. We are helping people into work; we are making work pay; we are eradicating child poverty; we are making pension reforms for the future. We are a reforming Government, and this is a reforming Budget. It is building a strong economy, and we are building strong public services. This is a Budget for all our people.

5 pm

Mr. David Willetts (Havant)

Let me deal first with the figures relating to public spending, which must be at the heart of the Budget judgment and the statement that we heard last week. It is also at the heart of new Labour's claims on social security spending. I remind the Secretary of State that in 1996 the Prime Minister, in order to get elected, said: Our priorities should be to re-order public spending so that we're spending less on welfare and more on areas like education. That is the promise that the Government made in order to get elected, but what is the reality?

The reality—if we use the Chancellor's preferred, although admittedly now notorious, method involving cumulative increases from the 1998–99 cash base—is as follows. Social security spending is up by £32.4 billion, way ahead of education spending, which is up by £19.7 billion, and even ahead of health spending, which is up by £26.8 billion. Far from saving money on social security in order to put more into education and health, the Government are putting more into social security than they are putting into either education or health.

Mr. Darling

As the hon. Gentleman wants to make something of this point, may I ask him a question? Does he not accept that most of the increases to which he refers are discretionary—that we are spending more on pensions and on families with children? That is good spending; what we cut was the bad spending on high unemployment and economic waste.

Mr. Willetts

The Secretary of State is quite right. The biggest single item in the Budget measures comprises increases in means-tested benefits—benefits which, according to any normal person's reading of the Prime Minister's reference to welfare, are exactly what he was talking about. One cannot pledge to spend less on welfare and then claim credit for putting more into means-tested benefits.

The Government have no coherent agenda for saving money on social security. To be honest, I do not think that they even have a coherent agenda for spending money on social security. That certainly seems to be the view of two previous Social Security Ministers, both of whom have helpfully contributed their views on the Secretary of State and his strategy only today. In a book published today, the right hon. Member for Birkenhead (Mr. Field) says: New Labour came to power committed to transform welfare. That revolutionary intent has fractured. He also says: Welfare changes, masquerading as reform, have undermined the principle of work, mocked the idea of saving, and weighted public policy against people who tell the truth. That is the judgment of a former Minister responsible for welfare reform on the Secretary of State's strategy, if we can call it that.

Mr. Frank Field (Birkenhead)

Does not the weakness of the hon. Gentleman's attack lie in the fact that his Government implemented the very same strategy?

Mr. Willetts

I shall turn shortly to the figures relating to means-tested benefits, which the right hon. Gentleman has a long and distinguished record of criticising.

The right hon. Gentleman is well known as a critic of the Government's approach to welfare reform. What is perhaps more striking is what the former Secretary of State, the right hon. Member for Camberwell and Peckham (Ms Harman), said today. She said: There are too many departmental fingers in the pie, but no clear lead, no effective co-ordination and culture clashes between different departments. It can't go on like this. Government policy on the family is incoherent and ineffective. Two previous Ministers who do not agree on much do at least agree on what they think of the present Secretary of State and his approach to social security reform. To have alienated one predecessor may be regarded as a misfortune; to have alienated both of them is distinctly careless.

Let us discuss pensions, to which the Secretary of State referred. The absence of a clear strategy is obvious as soon as we put together the different policy announcements and statements that he has made to the House in the past year. Less than six months ago, his reluctant hon. Friends were whipped through the Lobby to means-test disabled people with modest occupational pensions. How did he justify that policy? He did so on this ground: The first thing that our reforms will achieve is to do more for people who need help most.—[Official Report, 3 November 1999; Vol. 337, c. 306.] He argued for more means testing in other words, but up pops the Chancellor and now we have a universal heating addition to help with winter fuel costs, regardless of circumstances, and a universal free television licence for over-75s, regardless of circumstances. One moment the Government pop up to defend means tests when they hit people with modest occupational pensions; the next moment, the same people are suddenly to receive new universal benefits.

Mr. Pond

Does the hon. Gentleman understand that one role of means tests is to pull some of those people out of the wreckage created by the Conservative party in government? Does he not accept that the figure referred to by my right hon. Friend the Secretary of State—we are giving £6.4 billion back to pensioners during this Parliament—represents a good record, given that that sum is two thirds of the amount that his party took from pensioners over 18 years?

Mr. Willetts

I am afraid that that figure is a typical new Labour spin statistic that takes no account of, for example, the attack on occupational pensions represented by the taxation of the dividends that pension funds receive.

I would accept a strategy that was at least consistent. If the Secretary of State regularly told the House that he believed in more means testing, we could understand that, although we might disagree. If he told the House that, above all, we need more universal benefits, we could understand that. However, we and pensioners up and down the country cannot understand how one week they all have to be means-tested and targeted, but the next they are to receive new universal benefits. Those are the same people. One moment they are being deprived of the dividend credit, which pensioners with modest savings below the full value of the personal tax allowance used to receive, but the next he pops up and proudly announces that he is introducing a pensioners credit. To do what? To help pensioners with modest savings, he says. No wonder this country's pensioners are totally confused by the Government's approach to social security. The previous Secretary of State and the previous Minister of State are right to say that there is no coherent and consistent strategy.

Mr. Jim Cunningham (Coventry, South)

The hon. Gentleman accuses my right hon. Friend the Secretary of State of confusing people on pensions, but would he like to tell us his policy?

Mr. Willetts

What we have said is perfectly clear: we support the increase in the capital limits for pensions, although I have to say that this is the first time that there has ever been a special capital limit for pensioners that does not apply to other income support recipients. We believe that pensioners should become more affluent as a result of a combination of personal and occupational savings, as well as the receipt of state benefits. We criticise the Secretary of State above all because, through his changes in the tax treatment of pensions, he has attacked future pensions and the value of the savings provision of people in funded pensions.

Mr. David Watts (St. Helens, North)

Can we clarify the position? Is the hon. Gentleman saying that he would like the pensions budget to be cut? If so, will he be specific about which parts would be cut?

Mr. Willetts

I shall not go through individual items of the Budget. Before the next general election, we shall set out a Conservative policy for pensions that will ensure that people enjoy rising living standards because of a combination of occupational pensions and savings, which the Government are attacking, and social security benefits.

Mr. Darling

I want to question the hon. Gentleman on one point, as he has made so much of it. Can I take it from his remarks that the Conservatives would get rid of the winter fuel payment?

Mr. Willetts

Before the next election, we shall announce the Conservative approach to pensions, which will ensure that pensioners enjoy rising living standards through a combination of funded savings and assistance from benefits.

I shall now deal with welfare to work and the new deal for lone parents. We want families as well as pensioners to be better off. We particularly appreciate the importance of ensuring that families are better off in work than out of work. That is why the late Lord Joseph introduced family income supplement almost 30 years ago. Baroness Thatcher and my right hon. Friend the Member for Sutton Coldfield (Sir N. Fowler) introduced family credit 15 years ago to boost the incomes of low-income working families, but that is written out of the history books of new Labour.

We believe in ensuring that people are better off in work than out of work. I therefore welcome the important, if unglamorous, measures in the Budget that the Secretary of State has introduced to improve the run-ons for housing benefit and for people on income support, especially those with mortgages. We accept those practical measures to ensure that people move from unemployment into work and are not caught out by administrative hoops and hurdles. In fact, those proposals may be the Secretary of State's last sensible decision before he relinquishes that area of policy entirely to another Minister. We recognise that those measures make sense.

However, our doubts about the effectiveness of the new deal are confirmed by figures in the Treasury's own document, which was published only last month. Chart 3 in that document is revealing, because it shows long-term youth unemployment falling steadily from 1994. I challenge the Secretary of State to get out a magnifying glass and identify any change in the downward trend of youth unemployment since the introduction of the new deal. Anyone surveying that chart would not be able to identify the point at which the new deal for young people came in. The fact is that the downward trend in youth unemployment was established long before the new deal was introduced, and it has continued at the same rate. The new deal has had no effect whatever.

The Secretary of State referred to the new deal for lone parents, for which he is directly responsible. The Government are supposed to believe in evidence-based policy, but their presentation of the statistics on the new deal for lone parents is nothing short of a disgrace. The findings from their evaluation of the new deal are presented in a deeply misleading way.

Let me take the Secretary of State through some of the tricks that he plays, and which I am afraid he played again today. It is extremely difficult to extract information from the Government. We know from parliamentary answers that of the 450,000 single parents sent invitation letters under the new deal for lone parents, only 4.5 per cent.—20,000—have gone into employment.

However, the Secretary of State and his Ministers quote much larger figures. The Under-Secretary of State for Social Security, the hon. Member for Wallasey (Angela Eagle), gave a figure of more than 28,000, and the Minister in the other place quoted almost 41,000. How do they reach those larger figures? Single parents who apply to join the gateway and come knocking on the door of the jobcentre because they are so keen to get into work are not part of the new deal and do not receive an invitation letter. But those lone parents who turn up at a jobcentre are counted as a success for the new deal, even though they are not part of the target group for the new deal and have never received an invitation letter. They have nothing to do with the invitation letters that the Secretary of State sends out. To start with a figure of 450,000 letters and then say that 40,000 lone parents have got work as a result of the new deal is to present the statistics in a misleading way.

That is not the end of the fiddle. Only the other day, in his press release about the evaluation of the new deal for lone parents, the Secretary of State said: the number of lone parents on income support was 3.3 per cent. lower than it would have been without NDLP— the new deal for lone parents. One might feel that it is a rather modest figure, but at least it is a step in the right direction. The evaluation compares the new deal for lone parent pilot areas with areas where there was no new deal for lone parents. When we studied the evaluation, we found that 17 per cent. of lone parents in the new deal pilot areas had moved into work, but that, in the comparison areas, where there was no new deal, 18 per cent. had done so. In other words, more moved into work in areas where there was no new deal, so what it actually did was zero.

The Secretary of State was strictly correct when he said that 3 per cent. fewer lone parents were on income support. Why? In areas with the new deal for lone parents, more lone parents repartnered, to use the language of his evaluation report. More ended up married or cohabiting. He may claim credit for quite a lot of things, but he cannot claim credit for ensuring that lone parents get married as a result of the new deal.

Mr. Pond

rose—

Mr. Willetts

I hope that the hon. Gentleman will explain and justify the misleading presentation of the statistics for which the Secretary of State is responsible.

Mr. Pond

The hon. Gentleman is sharing his confusion over the matter with the rest of the House, but perhaps the Secretary of State will explain the matter to him later.

Once the lone parents in my constituency have waded through the statistics that the hon. Gentleman has thrown them, they will know one thing: presumably, the Conservative party would scrap the help and advice that they get through the new deal for lone parents. They will also be anxious—I am sorry to return to the matter, but I have not had an answer—about whether it would scrap the working families tax credit, too. Please can they have an answer to that?

Mr. Willetts

We believe in helping people into work. At the next election, we will have policies that are a jolly sight more effective at doing that than the new deal for lone parents and some of the other measures that the Secretary of State has introduced. I will now turn to the working families tax credit because it is an important part of the Government's claimed agenda on welfare reform.

The Chancellor says that this is a Budget for hard-working families. Let us look at how it affects such families. What about the 100,000 hard-working families who are brought into higher rate tax as a result of the abolition of the married couples allowance? What about the millions of families who are losing that allowance, with compensation from the children's tax credit coming in a year later? What about the 300,000 hard-working families who will find that they have been brought into a marginal tax rate of 47 per cent. as the children's tax credit is withdrawn? Those families are not rich. They will be earning perhaps £30,000. They would not regard themselves as massively rich. There are 300,000 of them. They face a 47 per cent. marginal rate as the children's tax credit is withdrawn.

What about the 950,000 families—a figure in the Red Book; again, strangely, the Secretary of State did not refer to it—who we know from page 79 of the Red Book will face marginal deduction rates of 60 per cent. or more as a result of Budget 2000? The figure is up by 200,000 from that before the Budget of 1998. What about the 800,000 families who will lose the married couples allowance and do not receive any compensation whatever for that? What are the Government doing to help them?

Kali Mountford

rose—

Mr. Willetts

Perhaps the hon. Lady will enlighten us.

Kali Mountford

Perhaps the hon. Gentleman will tell the House whether it is true that family credit reached only half as many people as the working families tax credit and child credit. While he is on about the married couples allowance, is it not true that the child care tax credit is worth more than that allowance ever was?

Mr. Willetts

To be honest—again, we had to extract the information through parliamentary answers—the answer is that the working families tax credit gets to nothing like twice the number of recipients of family credit. Ministers hope that it will, but it has not reached anything like double the number of recipients of that credit yet.

What about a matter to which the Secretary of State did not refer at all in his Budget speech? In fact, I am not aware that he has ever referred to it in any speech on social security or welfare reform—namely, the tax credit-child credit agenda that the Chancellor launched in his November 1999 pre-Budget statement and that was further carried forward in the Budget statement last week. We have child benefit, working families tax credit, child care credit, children's tax credit, the integrated child credit and the employment tax credit, a set of measures, allowances, credits and tax credits through which, across the country, our constituents will have to wade simply to make any sense of the tax and benefit regime facing them. I do not think that 20 people in the United Kingdom will understand the tax credit regime that the Government are creating. Decent working people—whom we all want to be better off in work than out of work—will not be assisted by that set of measures, but will be totally perplexed and confused by them.

The Chancellor is so restless. Although the working families tax credit has not yet been delivered in the pay packet—that will happen in April 2000—we have already had the reform after the reform after the change that has not yet happened. An integrated child credit will be introduced, in 2003, to replace a children's tax credit that has not yet been implemented—it will be implemented in 2001—which, in turn, reverses payment of the working families tax credit in the pay packet, which has not yet happened but happens next month. Talk about a Government jumping over themselves in their eagerness to reform the tax and benefit system!

I remind Ministers of what they have said about the issue. In a written answer, the Paymaster General said: Payment of WFTC through the pay packet is central to demonstrating the rewards of work and making work pay for families on low incomes.—[Official Report, 15 March 2000; Vol. 346, c. 183W.] If it is so essential, why are Ministers taking all the child support elements in the working families tax credit and reverting to paying them as a benefit to the carer in 2003? If it was so essential when the Paymaster General delivered that parliamentary answer, on 15 March 2000, why is she now taking half of the working families credit tax credit and—lo and behold—delivering it once more as a benefit to the carer?

I think that there is a reason for the sheer perplexity and confusion of the Chancellor's policy: to disguise a humiliating U-turn. Having whipped his troops through the House on the argument that it is essential that those benefits are delivered through the pay packet, he is doing a rapid volte-face, after suddenly discovering that a significant proportion of those benefits should be paid instead as benefits to the carer.

The Financial Times reported the Chancellor's launch of the working families tax credit as follows: The chancellor, who was joined at the launch by Dennis the Menace, Postman Pat and a Womble, said that linking payment to work through the pay packet meant there is "enormous scope to increase take-up". What the report does not say is that the Chancellor invited them back to the Treasury to write his policies, which is what they have done.

The Chancellor will go into the next general election with a pledge to take £50 a week out of the pay packet of people on working families tax credit and pay it instead as a benefit. It is not my job to tell the Secretary of State for Social Security about the Labour party's history, but I should tell him that many people in his party may have longer memories than he has and may remember the reasons why Labour believes it lost in 1970 and 1979. One of the reasons—the right hon. Member for Birkenhead will remember this—was messing around with wallet and purse, getting into the minefield of which allowances people should receive through the pay packet and which benefits should be paid instead to the mother.

The Chancellor, with almost cavalier disregard for either logic or the history of his own party, is entering that minefield again, and he will come to regret it. The fact is that there is no clear strategy. It may be wrong to say that there is no clear strategy, because there is one strategy.

Dr. Stephen Ladyman (South Thanet)

My constituents may well be as confused as the hon. Gentleman suggests about the credit system that the Government have introduced. However, the message that I am receiving is that they are consoling themselves rather well by counting their money and spending it on their children.

Mr. Willetts

The hon. Gentleman can take the view, if he likes, that it does not matter how we help families, provided that overall family income is higher. That would be a consistent point of view. However, in that case, the argument for taking some of the money out of the working families tax credit and paying it instead as an integrated child credit completely falls. Conversely, he could take the view that it does matter whether the money is paid to the husband or the wife. If he takes the view that it matters, he cannot go into the Lobby in favour of the working families tax credit, as it will be next month, and then go through the Lobby—as he will have to—to justify a completely different system. I leave it to him to choose which position he adopts.

Mr. Jim Cunningham

The House would have more respect for the hon. Gentleman if he explained the confusion that his Government created with the 22 tax increases.

Mr. Willetts

On any measure of tax increases, this Government's record is outrageous.

I should give the Government credit—if I may use that word in this context—for perhaps having a strategy. If there is an underlying strategy, it is one of means testing. They criticised the situation that they inherited, in which approximately one quarter—6.5 million—of Britain's 27 million families were on one or more means-tested benefits. They said that that figure was too high. Let us look at what the Government are doing about that.

The working families tax credit adds another 500,000 to the total number of people receiving means-tested benefits. An estimate from the House of Commons Library says that the integrated child credit will add another 3.5 million. The Treasury suggests that the employment tax credit could reach another 300,000 to 400,000 households. We do not yet know how many people will be covered by the pensioner credit, but it extends means testing to the income range in which many pensioners are concentrated. There could well be at least another 2 million pensioners on means-tested benefits.

Taken together, those measures will bring at least 6.5 million more families into means testing, thus doubling the amount of means testing in the system. Not a quarter but a half of all families will be means-tested by the time the Government have finished their business, yet the Chancellor told a Labour party conference: I want the next Labour Government to achieve what in 50 years of the welfare state has never been achieved—the end of the means test for our elderly people. He is not ending the means test—he is doubling it. The Government should be ashamed of what they are doing in the Budget.

Mr. Darling

Can I take it from what the hon. Gentleman is saying that a future Conservative Government would remove all those benefits that have been extended during this Parliament?

Mr. Willetts

In this debate, we are dissecting the Chancellor's Budget judgment. It is clear that the Government have no coherent strategy for welfare reform.

5.27 pm

Mr. Tom Pendry (Stalybridge and Hyde)

I intend to be brief. I join others who have congratulated my right hon. Friend the Chancellor on the presentation of the Budget and on its content. It was a generous and imaginative Budget that struck a chord with the majority of people in this country. It commands support from the Institute of Directors, the Trades Union Congress, the British Medical Association and many others across the political divide. That must be good news for my right hon. Friend.

I particularly commend the resources going to the national health service, which have been widely welcomed by hon. Members on both sides and by people throughout the national health service. Before entering the House, I had the privilege of being a trade union official in the national health service, dealing with the wages and conditions of NHS workers. I know how low their morale has been over the years. I believe that it will be much higher as a result of the Budget, because of the expectation that the Government will carry out their promises, as I am sure that they will.

The education service in my deprived constituency is also looking forward to the extra resources. My right hon. Friend the Chancellor has committed £4.5 billion extra for education in the coming year alone—an 8.5 per cent. real-terms increase in England. I know that that will be welcomed throughout the teaching profession and by parents across the country.

The education service in my constituency will be anxious to acquire a good deal of the new money that is available because of the state of our schools, which have been crumbling over the years as a result of the actions of previous Conservative Governments.

There is inevitably an "however" in any Budget, and I come to my "however". As good as the Budget is, there are one or two areas of concern, and I appeal to my right hon. Friend the Chief Secretary to the Treasury not to close the door on what I am about to say concerning what I believe to be an injustice to my local authority in Tameside, and perhaps one or two other councils, when set against a good and positive move for many other local authorities. I refer to the effect caused by the Royal Assent to the Finance Bill in terms of stamp duty reliefs. Stamp duty reliefs are being introduced for transfers and leases of land and buildings to registered social landlords.

My local authority, believing in Government policy, set about transferring its housing stock. The transfer to a new chartered housing trust is scheduled to take place today. Royal Assent, of course, is not expected until July. Tameside council is likely to lose out on the exemption, as the proposals stand. The decision to delay stamp duty relief until Royal Assent of the Bill was made, I understand, by the Treasury alone, and the Department of the Environment, Transport and the Regions was not consulted. DETR officials may be in the process of trying to obtain an understanding from the Treasury as to why the decision was taken without consultation.

Whether or not DETR officials are taking this matter up with the Treasury, I would like my right hon. Friend not to close his mind to my plea on behalf of my council, and to state that the Government are prepared to receive representations from me and my parliamentary colleagues from the area in order that some assistance can be given to the council.

This is not a question of sour grapes by the council. I am pleased that my right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) is in his place, and I am sure that he would agree with me. The council is pleased that the Government have accepted the argument that stamp duty should no longer be applied to transfers of housing stock to registered social landlords. However, the way in which it has been applied does not meet Tameside's position, as it was in the vanguard of all large councils in pursuing this option. Indeed, it was the first metropolitan district council to do so.

The council's transfer brings in from the private sector some £230 million of investment to deal with much-needed repair to houses in my constituency and those of my colleagues. I request that the Minister take this matter on board and give me and my colleagues from Tameside the opportunity to present the case to him for backdating this change which arises out of the Budget.

It would be grossly unfair if the council—which was so brave and robust in its approach to the Government's initiative—did not benefit from the changes. I recognise that such a change may well be difficult, but certainly it is technically possible. I am sure that the Minister would not wish my council to be treated unjustly. I am sure that, if possible, he would seek ways of getting around this problem.

I conclude as I began by saying that this is a good Budget, one which will command the support of the vast majority of people in this country. Those of my constituents to whom I have spoken since the Budget consider it to be a far-sighted Budget, and the Chancellor should be congratulated on his achievement.

5.34 pm

Mr. Steve Webb (Northavon)

It is disappointing to see the Secretary of State leaving, as my party has some policies on social security from which he might like to learn.

I want to make a brief contribution on what the Budget does for pensioners: it has to be brief, because there was so little for them. Among the measures for pensioners with savings and small occupational pensions, there was a lift in the capital limits. We pressed for that, and the Government have given a little ground. Six weeks ago, we had a debate on the uprating order for capital limits for this April. We said that £3,000 was too low, but the Government forced their troops to vote for that limit. A few weeks later, they changed their mind.

Pensioners will have to wait not until this April, but until April 2001 for the capital limits to be raised. Assuming that we get the predicted May 2001 election, the capital limit will have stayed at £3,000 for the entire Parliament. How dare the Secretary of State criticise the Conservatives for freezing a limit that he, too, has frozen for an entire Parliament? Even with the changes, from £6,000 onwards pensioners will still be assumed to get 20 per cent. interest on their savings: £1 per week per £250 of capital. How can the Government continue to assume that crazy rate?

It gets worse. There were supposed to be measures for pensioners with small occupational pensions. When will we get action on that? Who knows? We are to have a review, with action in the next Parliament, so an elderly pensioner who voted for Labour in 1997 may get action in 2003 or 2004. Why are Britain's pensioners having to wait so long? The Department of Social Security is once again a Department of dither and delay.

The problem is not only with savings. Last April, we were promised a take-up campaign for the minimum income guarantee—the Government's flagship policy. The Minister of State, Department of Social Security, said: we will certainly make the announcement before the end of this month.—[Official Report, 7 February 2000; Vol. 344, c. 77.] He gave himself three weeks. The Secretary of State has just promised an announcement some time this week. How does the Department manage to lose three weeks in three weeks? How can it not tell what it will do a few weeks hence? What goes on in the Department when promises are made only to be followed by dither and delay? What do people do there all day?

There is a fundamental point about the winter fuel money. Yes, there is to be an extra £50 per household, but that is less than £1 a week, shared between a couple. The men aged from 60 to 64, who were brought in by court cases, were first told that there would be an announcement soon, and now Baroness Hollis tells them that they will not have the money soon: it will not even be a summer fuel payment, and they will have to wait for Christmas. They were entitled to it three years ago, but the Government messed up, and they may finally get their backdated payments next Christmas. Why cannot the Government get things sorted out?

The fundamental point is that there was extra money for pensioners in the Budget, and it went on winter fuel payments: it did not go on the basic state pension. In a few weeks' time, pensioners will again get 75p. If a Government with hundreds of millions of pounds for pensioners cannot spend it on the basic state pension this year, will they ever do so?

The Chancellor, incredibly, was reduced to announcing what he guessed next year's retail prices index-linked rise for pensions was likely to be. He knew that this year's rise was so embarrassing that he did not want to mention it, so he said that he thought there would be a rise of £2 or so next April. The best that he could promise pensioners was that, if they were lucky, they would get an inflation-based rise next April. That proves that there is no future under this Government for the basic state pension. When there is money for pensioners, it does not go on the pension. What is wrong with the basic state pension?

5.38 pm

Mr. Peter Kilfoyle (Liverpool, Walton)

I congratulate the Chancellor on a well-presented Budget. There is little doubt that it has been received well by commentators, the public and, not least, the Opposition. It sets out a clear emphasis on the renewal of public services and will be welcomed by those who are heavily reliant on those services. The extra resources for the national health service, in particular, will be welcomed by ordinary people throughout the country, although in my region, the north-west, we will look carefully at how the resources are allocated, given the poverty in the service in the region relative to the south-east of England—at least, in many specialties.

The Chancellor will recognise that, within regions, social class remains a key determinant of good health. He will recall the comments of Lord Patel, who said: Infant mortality rate for social class V births was 70 per cent higher than social class I births. Lord Patel also read part of the report of a recent inquiry. He said: the research interviewers encountered examples of poverty and deprivation of a degree which they could hardly believe was possible in late 20th-century Britain.—[Official Report, House of Lords, 16 February 2000; Vol. 609, c. 1282-3.] The distortions of class appear in health provision as much as in the wider economy, and influence access to many services. Thus, the infusion of resources into the NHS, together with the Government's pledge to eradicate child poverty and their commitment to education, has the potential to transform the lives of a whole new generation. That must be applauded.

However, what of an existing generation, many of whose votes elected the Attlee Government, and whose work and taxes were the key to the founding and financing of the welfare state? Many pensioners hold the view that the failure to link average earnings and pensions has cost them dearly. More importantly, they believe that winter fuel payments and concessionary television licences are a diversion, welcome though they are. What pensioners want is an increase, week on week, in the basic pension.

That is not just a matter of economics: it is a question too of pensioners' dignity. After all, a lifetime of paying tax and national insurance contributions was their part of a bargain with the state to maintain the welfare state. They believe that it is hardly their fault if the state is having difficulty meeting its side of the bargain. They look to a Labour Government to right that wrong, with specific commitments on the basic pension, rather than consultations and aspirations.

I hope that this does not sound churlish, as I believe that I am merely reflecting the views of the pensioners who speak and write to me. I know that the Government have done many good things, for which they seem, at times, to get little credit. The Government have said that they will not pass by on the other side of the road and, generally, they do not. However, I do not recall that the good samaritan extended his hand to the man who fell among thieves only to remonstrate with him that he was the author of his own demise.

I can reel off the official statistics relating to my constituency that show how many more people are in some sort of work or another, the level of investment in schools, and many other things. However, my constituents often feel that they are being chastised for being unemployed. The reality for many of them—we must look at the matter from their perspective—is that the training on offer is often for non-existent jobs.

That should be of no surprise, given the generational, long-term unemployment that exists in many parts of the country, but a claimant count rather than an International Labour Organisation figure does not make the gap between reality and wishful thinking magically disappear. Perhaps if the Government felt able to be less stridently moralising towards so many of our fellow citizens, they would be surprised at the immense good will felt in the country towards their positive policies.

For example, my right hon. Friend the Chancellor promised to crack down on fraud. Virtually everyone agrees that it is right to do so, but many fear that there is a Calvinist mindset in Government that associates poverty and deprivation with blaming the victim. We know that areas with no jobs exist, that many people are genuinely disabled, and that some people are too ill to work. To know the truth, all that we need to do is listen.

The sense of injustice might be minimised if we could be harsher with those at the other end of the socio-economic scale who defraud the country and who use lawyers and accountants to cover their tracks. A few determined prosecutions with deterrent sentences for such people might lessen the cynicism felt by easier targets, who increasingly believe that no one speaks for them.

When I resigned as a Minister, I did so because I believed that what are known as heartland issues would gain increased salience, as would matters relating to the regions of England. In many people's eyes, those matters are interchangeable, but I have never claimed that. There is merit in the Prime Minister's argument that there are wide economic disparities. From a political perspective, there are heartlands everywhere.

The present Government have taken a radical view of their role, and they rightly pride themselves on the devolution of powers to Scotland, Wales and—next—to London. The rest of us ponder on what that means for England outside the metropolis. We wonder when we will be afforded the flexibility that a degree of regional autonomy would bring. That would require a change in the colonial Raj mentality epitomised by the Government offices implementing decisions in the regions. It will certainly require a new financial settlement with the English regions.

The current view from the provinces is that key decisions are taken by a very small number of people sitting in Whitehall at the apex of a highly centralised Government. They operate through a civil service machine that mirrors that rigid hierarchy, which stamps its will on the regions, and whose practice is based on what many believe are highly discriminatory financial arrangements.

Why, I am asked, should Scotland and Wales be advantaged by the Barnett formula? Why does the area cost adjustment favour south-east England? How do the changes in derelict land grants and Housing Corporation allocations, taking money to the over-developed south-east, help to alleviate the problems of the north? I cannot answer such questions. That is why I looked to the Budget for some hope of economic relief for English regions that are sometimes hard-pressed, especially in their manufacturing base.

I was disappointed. The Chancellor's reference to regional policy was remarkably brief. Given the agenda he outlined in the Budget, I was surprised that there was no sign of a new deal for the regions of England. Historically, such regions have driven the national economy, but, over the past 20 years, far too many of them have suffered from downsizing or relocation. They still have an economic life, but it is subject to the vagaries and prejudices of decisions taken in London.

Is not it time that we looked again at the different economies of the United Kingdom? After all, wage and house price inflation are more symptomatic of conditions in the south-east than elsewhere. The costs are borne elsewhere in the country through the loss of jobs—"A price worth paying", as the seemingly unaccountable Governor of the Bank of England once said.

Instead of a recognisable economic policy in the regions, we have venture capital, with a target of £120 million for a venture capital fund for the north-west. Having announced that modest target, the Chancellor referred to a regional fund for the formation of local clusters in high-tech industries.—[Official Report, 21 March 2000; Vol. 346, c. 863.] Within an hour of his speech, MPs representing north-west constituencies were told that the Government would not yield on the transfer of the Diamond project—a high-tech synchrotron investment of £500 million—to Oxford. If ever there was a mixed message to a region, the north-west received one on Budget day.

Furthermore, an increasing number of regions are looking to European structural funds to create investment opportunities. Such funding depends on a three-way partnership between national Government, the European Union and the private sector. It is designed to focus studied intervention on the poorest parts of Europe. However, ultimately, it depends on the British Government making a commitment on match funding to draw down money from the private sector and from Europe. I waited in vain for some reference in the Budget to that vital element of regional regeneration—it did not come.

Perhaps there will be announcements before, and at the next stage of, the comprehensive spending review. I certainly hope so. The Prime Minister referred to the differences between north and south, and to the differences within those regions. He should have looked at the work of Anne Power, the deputy director of the Centre for Analysis of Social Exclusion. She found that there is a poverty cluster of 40,000 in Tower Hamlets; in Hackney, the figure is 25,000. Those figures are terrible and they need to be addressed. However, in north Liverpool, the number is no fewer than 250,000; in Manchester, there are 170,000 souls in the poverty cluster. The sheer scale of the problem in regions such as mine gives urgency to the case. The problems cannot and will not be sorted out from Whitehall alone.

That is why I ask the Chancellor—monarch of all he surveys after his Budget—urgently to reconsider regional economic policy and European structural funds. I remind him that political praise is extremely ephemeral—sic transit gloria mundi. I know that these are difficult matters for him to cope with; they will take up much time and effort. However, he has the wherewithal to deal with them. The rewards for success will be great—politically and economically. Failure cannot be contemplated.

5.48 pm

Sir Peter Tapsell (Louth and Horncastle)

I am sure that the hon. Member for Liverpool, Walton (Mr. Kilfoyle) will understand that, because of the 10-minute limit on Back-Bench speeches, I cannot debate with him the many interesting points that he made. However, I agree with much of what he said. The points that he made on regional matters are true and valid. There are geographical difficulties of course. Middle England is found only in the south-east, but the core vote—if by that is meant the people who are suffering—can be found in large numbers in my constituency of farmers in north-east Lincolnshire.

The hon. Gentleman ended his speech with a famous Latin quotation. As the Chancellor drives along in his Treasury chariot, behind him should be the little dwarf who used to say to triumphalists, "remember that you are mortal."

I hope that the House will forgive me if I try to talk about the Budget as a whole—obviously it is impossible to do so adequately in the few minutes available for my speech. The Government managers do their best to dumb down the Budget debate by having the Prime Minister make a great statement on health on the first day of the debates, and then sending him back to make another not-so-great statement about his visit to Lisbon on the day when we wind up the debates.

I have discussed the Budget with a few friends who I have known over many years and who have taken an interest in financial and accountancy matters. They tell me that in recent years they find Budgets more and more difficult to understand. It is only when they hear them discussed on television after the Budget speech that they can begin to make head or tail of them. I have managed to scrape a living in the City for 40 years, paying 83 per cent. in tax on my meagre earnings under a Labour Government, but I share my friends' problem.

I have heard rumours that the Chancellor has got rid of the portrait in his room of Mr. Gladstone and has replaced it with a drawing of Little Jack Horner. I can well understand why he has done that. The right hon. Gentleman is not interested in making money fructify in the pockets of the people. He likes to sit in the corner and pull out occasional plums from what will prove to be an enormous Finance Bill.

It is difficult even for the so-called experts to understand the present Chancellor's Budgets because he has withdrawn many of the old familiar guidelines and building blocks of the past. He no longer includes key elements of information. However, distant and always golden horizons are confidently scanned.

For instance, what is the Chancellor's overall Budget judgment? That used to be the central point of Budgets. Previous Chancellors talked about "a touch on the tiller", "Steady as you go" and "too much port and overripe pheasant", for example. We do not have an overall Budget judgment from the Chancellor. He has not told us whether this is an expansionary, a neutral or a restraining Budget. Is it a redistributive Budget? If so, from whom to whom?

The Chancellor concentrates almost entirely on indirect taxation, which is generally regarded as being regressive. That is to say, it hurts the poor. In relying on indirect taxation, he heaps as much of it as he can on business. That is a perfectly respectable socialist thing to do. Sir Stafford Cripps, when he did the same sort of thing, was honest about it. If the Chancellor is to put big new taxes on business—the most dramatic and the most often mentioned was the £5 billion raid on pension funds, which has caused many of my constituents to complain to me that they will have either lower pensions or will have to pay higher premiums than they previously thought—at least he should explain that it is happening, and why. It may be economically justifiable, but it should be explained.

I was a stern critic of the excessive monetarism, as I saw it, of Margaret Thatcher from 1979 to 1981. I even called for the Conservative Chancellor's resignation on the day of the 1981 Budget. But at least I have always recognised, as a Keynesian, that the money supply is an important component of economic policy. As far as I know—I have not re-read the Chancellor's speech because it was bad enough having to listen to it in the first place—the right hon. Gentleman never mentioned money supply or the trend of it. That is another key factor that we have not heard about.

The state of the reserves was not mentioned. There are many who think that with our enormous trading pattern our present reserves are inadequate and should be built up. Selling gold and using 40 per cent. of the proceeds to buy euros, which have fallen against the value of gold by 18 per cent. since the sale started, does not seem to be a very good way of building up reserves.

Savings used to be a very important part of Budget speeches. There was always a special section in previous Budgets in which great tributes were paid to Lord Mackintosh and the savings movement and in which reference was made to the enormous importance of personal savings. There was no reference to savings in the Budget speech. In fact, savings are falling catastrophically.

There was no mention of the balance of trade. Who would have guessed that in the latest quarter the trade deficit was the worst for 25 years? It is extraordinary that the Chancellor thinks that he can hurry through a Budget speech while omitting fundamentals. The right hon. Gentleman is fond of saying that we will get away from boom and bust, but the truth is that we are in the middle of a boom and that if we are not careful we shall go into another bust situation.

At the moment, when fiscal tightening is required, the Chancellor has loosened the reins. The Budget, as the chief economist of Saloman's has said, will increase public expenditure by 5 per cent., which will be the biggest stimulus for many years. What will the effect of that be on interest rates and on the strength of sterling, which is extremely relevant to what the hon. Member for Walton was saying? Farmers in my constituency, people in the north-west and exporters generally are suffering because of the high level of sterling. It is amazing that the Budget does not address the central threat to the Government's entire economic and European strategy, which is the over-priced pound.

To boast about national health service expenditure three years ahead is complete pie in the sky. I invite all right hon. and hon. Members to re-read Churchill's Budget speech of 1929, and then read Philip Snowden's Budget speech of 1932. That was a three-year gap. The country was at the peak of a boom in 1929, and only three years later there was the most extreme depression, when pensions had to be cut. The Royal Navy even mutinied because of cuts in pay. That is what can happen in three years. I am not saying that it will happen again, but any Chancellor who confidently says that he will have huge sums to spend three years ahead is talking nonsense.

Finally, I direct my remarks to my right hon. Friend the Member for Kensington and Chelsea (Mr. Portillo), the shadow Chancellor, who with his first-class honours degree in modern history, albeit from Cambridge, will understand them. Apropos the volte face on our attitude to an independent central bank and the Monetary Policy Committee, I do not have time to develop my theme as I would like. However, I remind my right hon. Friend that when Pope Pius IX, having lost his temporal constituency, hit back by announcing the dogma of papal infallibility in 1870, the great Roman Catholic historian, Lord Acton, said: I have no intention of changing my religion because the Pope has changed his. That is exactly my attitude on an independent central bank.

5.58 pm

Mr. Robert Sheldon (Ashton-under-Lyne)

First, I join my hon. Friend the Member for Stalybridge and Hyde (Mr. Pendry) in hoping that sympathetic consideration will be given to the transfer of housing stock in Tameside.

We see in the Budget a large and unanticipated increase in revenue. For the year 2000–01, the surplus on the current budget was estimated at £4 billion at the time of the previous Budget. It is now estimated at £14 billion. It is likely that there is still more to come because omitted from the Red Book is the result of the auctioning of telephone licences, which will add £7 billion to £10 billion to the revenue. If my right hon. Friend the Chancellor had accepted that much of that money could be spent, he could have increased spending even more in his prudent and cautious proposals.

My right hon. Friend wants to see not only the spending of money but the effect that it will have on actual outcomes. One of the consequences of that is performance measures. That is something to which we must have regard in the national health service, which will take so much of the extra spending. The unusual feature of the Budget is that levels of tax and tax changes are not the only important announcements. The centrepiece was the large additional sums that will be going into the NHS.

The question that we have to ask ourselves was why that and other expenditure measures did not wait for the spending review due to take place this summer. That announcement, and my right hon. Friend the Prime Minister's unprecedented statement the following day, made the impact that was clearly intended. Due to my right hon. Friend the Chancellor's management of the economy, Budget priorities have been changed to allow for essential expenditure, particularly in the national health service.

The reason for that spending announcement was that, at the heart of this operation of the new financing of the NHS, is the need to ensure that money is spent properly. Secretary of State after Secretary of State has tried to get decisions implemented. There are two extreme scenarios—we could leave it to the health authorities and use cajolery, or we could try get some form of direct control. Given the size and complexity of the NHS, direct control is not possible. Another possibility is a form of halfway house, which in the past has never been properly effective. My right hon. Friend the Prime Minister is now throwing his authority behind the Department of Health, and I believe that that is worth doing.

The Public Accounts Committee has made regular criticisms, and chief executive after chief executive has appeared before us. Only a few years ago, the chief executive of the NHS sent a question to the 191 health authorities, and, after six months, only 133 replied. Almost 60 did not even bother to reply to the chief executive. What sort of NHS is that?

Clearly, the knowledge that the full power of the state is to be put behind the way in which the large increases in expenditure are spent must have some effect. It will not be easy. How that will work out in practice is yet to be determined, but I am sure that, if the money had just been forthcoming without the change in the administration of it, we would have seen, as we have so often seen, it disappearing into expenditures that were only distantly related to the ends that the Government quite rightly seek.

In the debate last Wednesday, the right hon. and learned Member for Rushcliffe (Mr. Clarke) said: I think that our monetary authorities are too hawkish. We need a better and a more genuinely independent Monetary Policy Committee, with a membership drawn from a wider range of people.—[Official Report, 22 March 2000; Vol. 346, c. 1023] The right hon. Gentleman has got something; the MPC needs someone from outside. It does not just fix the interest rates, it determines the parameters of the Chancellor of the Exchequer's room for manoeuvre. All his decisions on fixing tax rates, coming to his Budget judgment and deciding expenditures are constricted by his anticipation of the consequent actions of the MPC and they way that they will impinge on his decisions. The Chancellor of the Exchequer has a joint decision on the economy and the financing of our country with, in important particulars, the MPC having the last word.

Interest rates are influenced particularly by inflation—especially in house prices—in the south and not by industry in the north. Membership of the MPC needs to be more open and its arguments must be more publicly accountable. Who puts the case for manufacturing industry is another question that we must consider.

I also agree with my right hon. Friend the Member for North Durham (Mr. Radice). The rate of exchange with the euro—not that with the dollar, because it has not changed much—is the key. I hope that the euro rises, and I had dearly hoped that one of the early actions after the general election in 1997 would have been to decide to enter the euro at the same date as other member countries. When that did not happen, I urged that we should announce our definite intention to join even though, for economic reasons, the date for that might not be given. That could have affected the euro-pound exchange rate.

We seem not to have taken fully into account the fact that, over the past three years, the pound has risen from 2.50 to 3.15 against the deutschmark—an increase of 26 per cent. One cannot run many businesses with such a relationship, and the increase has taken place over a relatively short time. Few manufacturers are able to overcome such a hurdle—whether in maintaining their exports or in competing with imports. We often forget that manufacturers have the double problem of exporting and competing with much cheaper imports. That is why I consider that the MPC, with its powerful effect on the entire UK economy, needs members with a wider understanding than it has at present. I argue that for reasons of economic judgment and on the much lower level that the ability to justify decisions depends on a much wider outlook.

The expectation in the November pre-Budget report was that the balance of payments deficit in 2000 would be £10.25 million. Only a few months later, that figure is now £20.5 billion. Why has the balance of payments deteriorated so rapidly? We need answers on that. Manufacturing industry is not the size that it was, but it is still important.

My right hon. Friend the Chancellor has quite rightly referred to prudence with a purpose. I agree with him wholeheartedly on that, because 1997 represented the best possibility for the Labour party to show itself as the party of responsibility. Next year, money GDP will be more than £1 trillion. If there were any uncertainty about the firm control of the economy, the trillion-pound economy could have been represented as an inflationary surge. It has been the character of my right hon. Friend to stand ready to refute such an interpretation.

However, 1997 was the first time ever that the incoming Labour Government had a working majority and the absence of an economic crisis. That meant two things. First, we did not have to take desperate measures to deal with a crisis, and secondly, we could take the long view because of our parliamentary majority. That, indeed, was the basis of prudence, but, as my right hon. Friend reminds us, prudence must have a purpose. Caution is sensible only if it leads to using the fruits of that caution in due course.

In due course, that caution has yielded us low inflation, lower unemployment and a stable-growth economy. That is a great achievement. If we had had a lower pound, the management of the economy would have represented the greatest economic success this century. We have to hope that such a level of success awaits us yet.

In the Budget, my right hon. Friend has made use of his new-found freedom of action. He has had the space to defer the fruits of a Labour Government until they have been earned. He has done what all past Labour Chancellors have wished to do. In that, he has helped to bring about a reconciliation between traditional Labour and new Labour. To his many achievements, this valuable one must be added.

6.7 pm

Mr. John Townend (East Yorkshire)

As could be expected from this Chancellor, we have had a Budget with a high degree of spin. He naturally claimed how well the economy was doing and, on that, he has been supported by the right hon. Member for Ashton-under-Lyne (Mr. Sheldon). However, as my hon. Friend the Member for Havant (Mr. Willetts) pointed out, the Chancellor did not highlight the balance of payments deficit, which is forecast to rise to no less than £28.25 billion, that growth in business investment is set to fall from 7.75 to 2.5 per cent., that growth in productivity is slowing, that manufacturing industry is struggling because of high interest rates and the high pound, that savings are falling and that the tax burden is rising.

The Prime Minister and the Chancellor have told us on numerous occasions that this is a pro-business Government. In the short time that I have available, I want to deal with that myth and to identify the areas in the Budget that are bad for business. The benefits for business, once one calculates what they are worth, do not add up to a row of beans.

First, I wish to refer to the increased tax on DERV. Despite this country having the highest taxes on DERV in the European Union and pump prices being forced up by rising oil prices, the Chancellor has increased the tax by an extra 1.89p per litre. Therefore, the differential between what French hauliers pay in Calais and British hauliers pay here has become even greater. The burden of transport costs hits all industries, but it particularly hits struggling manufacturers and it forces up costs. The small reduction in vehicle excise duty still leaves a massive gap between British and French rates—Britain's rates are no fewer than eight times greater than those in France. Is it any wonder that the British haulage industry is in the doldrums?

Despite the fact that, before the Budget, petrol tax was the highest in Europe, the Government have increased the duty, which will affect all businesses, large and small. It will particularly affect workers who live in country areas such as my constituency of East Yorkshire and who have no alternative but to use a car to get to work and to take their children to school. Is it not incredible that 80 per cent. of every pound that one pays the garage owner goes to the Government?

The increase in taxation on company cars is also bad for business, and will hit representatives who do a high mileage. I find it incredible that the people who will benefit from these changes are those who do a low mileage and who have a company car as a perk. If the Government think that representatives can do an efficient job using public transport, that confirms how ignorant are the vast majority of Labour Members about running a business.

The Budget considerably increased the burden of taxation on business, and mainly did so stealthily. The climate change levy is in a mess, and it would not have been necessary to impose any burden on business at all if the Government had not prevented the building of new gas-fired power stations, which would have enabled us easily to meet the worldwide regulations on emissions.

New tax rules will cost multinational companies billions of pounds and could well drive some company head offices overseas. The Government do not seem to know how much that will cost industry. Their estimate and that of PricewaterhouseCoopers are very different. We learn that insurance companies will have to pay billions more in tax due to changing rules for that industry. That follows the Revenue losing a case before the tax commissioners. That fact has had to be dug out of the papers; it was not mentioned in the House.

The oil industry is annoyed that it will have to pay an extra penny a litre in tax because last year's tax was based not on inflation but on estimated inflation. The change in stamp duty will probably affect businesses more than it will affect householders because most commercial and industrial property sales are for properties costing over £500,000 and will now incur 4 per cent. tax. A small point, but one that demonstrates the Government's attitude to business, is that they have increased airport tax for business travellers, specifically to hit business men.

The Government have talked a lot about the additional tax allowance to help the computer industry, but that is more than offset by the stealth tax of IR35, which is already causing a brain drain and will undermine the e-commerce enterprise culture.

One would have thought that, with the decline in manufacturing industry and the rise in income from service industries, the Government would do everything possible to keep the City competitive. Yet stamp duty on share transfers is higher here than in many of our competitor countries. I know that many people were hoping for a reduction, but they did not get one.

I have been in the brewing industry all my life, and I have declared that interest. Despite the enormous amount of smuggling, instead of beginning to reduce the differential between duty rates in the UK and France, the Government have increased beer duty again by a penny a pint. That will only make smuggling more profitable.

The Chancellor did not put up the duties on spirits, but he did not reduce the differential. He said in his Budget speech that duty on wine will rise only by inflation—by 4p a bottle. I checked at the beginning of his speech, and he said that inflation is 2.2 per cent.—[Official Report, 21 March 2000; Vol. 346, c. 858.] I must assume that he is not very good at mathematics or that he is telling porkies because a rise of 4p a bottle is an increase of 3.4 per cent., which is 50 per cent. more than inflation. However, it gets worse because when one studies the figures one realises that the increase per bottle is not 4p but 4.4p.

The Chancellor has done nothing to reduce the differential between wine and sparkling wine, and there is absolutely no justification for that differential. Sparkling wine is smuggled more than ordinary wine. He will never deal with smuggling unless he reduces the duty differential by about 50 per cent., as Denmark had to do.

A 25p increase in the price of cigarettes will also be a tremendous boost to the profits of smugglers, who now make more money from smuggling tobacco than from smuggling drugs, and will encourage under-age smoking. I find that policy incredible because it hits poor people, who spend more on cigarettes and who cannot go over to the continent in a large car every three or four months and fill up with supplies of cigarettes at a knockdown price.

Agriculture is on its knees, and the Government have done nothing for the industry in the Budget. They have only imposed more burdens in the form of fuel duties, the climate change levy and stamp duty on the sale of farms. What help does the Budget give to the fishing industry? None at all. What help is there for small businesses? Very little. What progress has been made in reducing the burden of regulations? Virtually none.

Every month, more and more regulations are imposed on small businesses by the EU and the Government. They include the working time directive, packaging waste regulations, the social chapter, trade union rights, maternity rights and paternity rights, all of which are causing chaos for small businesses. Now we hear that the Government are considering allowing people who have had a baby to tell their employer that they will return not to their full-time job but to a part-time job. How will a small firm with one accountant get two people to do one job? That is a nonsense, as is paternity pay. If the Government introduce paternity pay, how can a small business let one of its key people go for 13 weeks? That is ridiculous.

One other aspect of the Budget that I find reprehensible is that it confirms that the Government do not believe in supporting the institution of marriage. They are more concerned with the rights of unmarried mothers and homosexuals. That is confirmed by the abolition of the married person's tax allowance and the Government's intention to repeal section 28 of the Local Government Act 1988. Other attacks on the taxpayer which particularly affect the family are the repeal of mortgage tax relief and the increase in stamp duty.

6.18 pm

Mr. Tom Clarke (Coatbridge and Chryston)

In my constituency, as in most, jobs are of the utmost importance. In the short time available, I shall concentrate on the Budget's impact on the objective of full employment, the need for effective training and the importance of small businesses.

I was delighted to hear the Chancellor use the term "full employment", which was endorsed again by the Prime Minister today. Full employment, designed as opportunity for all, is an objective that I very much welcome. I want to look at what has been happening to my constituency since the new Government were elected. The picture is impressive, although I do not urge complacency; my constituents would not allow me to do so, and they would be right.

Since the election, unemployment in Coatbridge and Chryston has fallen by 21 per cent. to 6.1 per cent., which is the lowest level that anybody of my generation can remember. That is still too high, and I continue to make the plea for a reduction. Long-term unemployment has fallen by 59 per cent. Youth unemployment, which I thought so important that I made it the main subject of my maiden speech in 1982, is down by 65 per cent.

As I listen to criticisms of the Government, I am reminded of the fall of the Callaghan Government, when, throughout the country, there were huge posters saying "Labour isn't working". I do not blame the shadow Chancellor for that influential poster, because he was probably advertising Ribena at the time, but we are entitled to compare today's figures for my constituency with the figures that the Government inherited. Under the Conservatives, our oil revenues were squandered on propping up 3 million unemployed people. The huge dissatisfaction that accompanied such levels of unemployment tore our society apart. I am glad that we are improving our employment figures. Judging by the comments of my right hon. Friend the Prime Minister today, we are inspiring other European countries to do the same.

Training is of vital importance. I accept that the definition of a job has changed. Some people argue that the excellent figures we are now seeing hide certain facts, and I concede that not everyone who leaves the dole queue goes into work. However, that argument misses the point. Many people have entered training and education schemes, but such training is essential in the globalised society in which Great Britain is attempting to function. Foreign investors tell us repeatedly that our skills base is utterly inadequate. The most recent "Regional Trends" survey tells us about our skills stocks, and two statistics stand out: only 13 per cent. of the population in any given region of the UK have a university degree, and 18 per cent. have no formal qualifications whatever. Many firms do not take training seriously enough. I cannot believe that people in constituencies such as mine, which once boasted huge skills in engineering, shipbuilding and metallurgy, are incapable of responding to the challenge of training. We must recognise that the lack of commitment displayed by some employers—not all—represents the tightest possible bottleneck around employment growth in Britain.

Opposition Members have spoken of the crucial importance of small businesses and the vital role that they play in job creation. As my right hon. Friend the Chancellor rightly pointed out, the burden of future job creation will fall on small businesses, which now account for nearly 40 per cent. of national turnover, compared with less than 20 per cent. less than a generation ago. That does not sound like complacency. In the past two years, a further 100,000 small businesses have registered in the United Kingdom, which is a tribute both to the general culture of entrepreneurship fostered by the Government and to the Microsoft revolution, which has given companies the capability easily to use modern software to enter markets at minimal cost. The boost given to internet firms by my right hon. Friend, whom history will probably acknowledge as the first e-Chancellor, is extremely welcome in a modern, competitive society.

However, we cannot be complacent. Although we are increasing the number of technology-based dot.com companies, we still have too many "Dot Cotton" companies: well-meaning old things that are poorly equipped to adjust to the challenges of cyberspace and globalisation. Sometimes, I think that too many people who run businesses think that Intel Pentium is a Romanian footballer. We have to change that. It is vital to future employment that we do not shirk the challenges of globalisation, but that we shape and mould the future for the benefit of all of our people.

My great concern, which is reflected in the main thrust of the Budget, is that an economy in which a significant proportion of the population is unable to fulfil its potential is far poorer and far less productive than others. Real hope lies in providing real opportunities through training schemes such as the new deal to all who want—indeed, need—to work. In that spirit, I believe that the Budget truly helps those who have been left out of too many Budgets for far too long, especially families who seek, but who have been unable to find, work and the children of the poorest families—not least in my constituency—who represent the future. I have examined the Budget and I welcome this comprehensive debate. One day, the Opposition might apologise for that long-gone poster, because, after a little less than three years in government, the evidence suggests that Labour is working.

6.27 pm

Mr. David Davis (Haltemprice and Howden)

I would normally have spent a little time dealing with the welcome parts of the Budget, such as the Cruickshank bank reforms; however, given the time constraints, I shall have to focus on the rest of it instead.

I hope to refer to several of the comments raised by the right hon. Member for Coatbridge and Chryston (Mr. Clarke), especially his interesting points about small businesses. I welcome back the right hon. Member for Ashton-under-Lyne (Mr. Sheldon). I believe that this is his first outing since he has been away, and it is good to see him back on form, punching as hard as ever. He will forgive me if I turn his illustration of a glass half full into one of a glass half empty.

The Budget is dominated by short-termism and flawed foundations. The Chancellor likes to charge business with being short-termist, yet he, too, is guilty of that charge. It is difficult to think how else to describe a Budget which, on the basis of rosy economic forecasts, projects a £25 billion adverse change in the fiscal balance on the presumption that the business cycle will not really bite. If it does bite, that will add about £50 billion to that adverse figure. That adds up to a burden with which the country cannot cope, and that will lead to cuts such as those that we have seen under previous Labour Governments.

Laying aside the aggregate fiscal position—because others have already spoken about it—I turn to the overall strategy set out in this and the last three Labour Budgets. Between 1945 and 1979, the Budgets of both Labour and Conservative Governments were highly interventionist. They piled on to the British economy large quantities of regulations, great complexity, and a very high tax burden. The initial effect of that meddling was relatively benign—it took time to bite; but the process continued through the 1940s, 1950s and 1960s and its effects grew until, in the 1970s, it became apparent that they were disastrous. Politicians do such things because the early effects of regulation and of tax and spend are apparently positive. They have explicit benefits, for which politicians get the credit. The simple fact is, however, that the significant harm that is done by over-regulation and over-taxation is both diffuse and delayed. That is what led to the slow-motion crippling of the British economy through the pre-Thatcher years.

I am afraid that this Budget and its two predecessors fall into a similar trap. The Budget contains a wide range of over-burdensome, over-meddlesome and wholly ineffective measures, as several hon. Members have mentioned.

The right hon. Member for Coatbridge and Chryston spoke about the growth in e-commerce and in small businesses. The measures on e-commerce in the Budget are irrelevant to most e-commerce entrepreneurs. The idea that the dot.com companies will somehow change their tactics because of the minor and rather complex proposals in the Budget is laughable.

Furthermore, those measures will do nothing to reverse the effect of the disastrous IR35 measures that are already in place. They will merely add to the complexity of the system and add to the £10 billion of extra regulation that has been piled on British business in the past few years.

The problem of complexity—often to no end—is the real harm of the stealth tax tactic, in which it is used as a way to conceal taxes from the public. Such complexity is harmful in itself. It creates jobs for tax accountants, but destroys jobs for everyone else.

The commitment to high regulation, high complexity and high spend and tax may create short-term political advantage—no doubt that is the intent of the Budget—but it does long-term economic harm. It is exacerbated by other regulations from Europe—perhaps not as many as some of my hon. Friends may assert, but certainly plenty.

Listening to the Prime Minister's comments on the Lisbon summit today, one had to conclude—particularly given what is happening in France, where the French Prime Minister is signing up to the documents about which we heard today—that if the Government believed what they were told there, they do not understand how free enterprise works,

A more accurate view of the regulatory burden from Europe would perhaps be achieved if hon. Members read the comments and the article by Otmar Issing, the German nominee on the board of the European central bank, who stated in the German papers this week that the entire anti-regulation strategy of the European Union was flawed and would fail. It would serve to increase regulation, rather than reducing it.

As well as the risks of short-termism, the Budget contains other fundamental flaws in its underpinning assumptions. The Chancellor advertised the Budget in advance as a crackdown on the black economy. A survey last week showed that only about one in 10 people believed that it would work, and they are probably right.

So far, all the initiatives, of which there have been many, and all the announcements, of which there have been even more, have led to no real change. Fraud levels have not gone down by a penny. The Government are not alone in that, but if they put the crackdown on the black economy at the centre of the Budget strategy, one would hope for better than that.

The introduction of the working families tax credit is likely to make matters worse, because its complexity will make fraud easier. Its predecessor in the United States, the EITB—the earned income tax benefit—is renowned for being subject to both fraud and administrative failure.

Many of us on both sides of the House want poverty reduced, but the Government have chosen a complex and probably ineffective way of doing that. Moreover, when the Department of Social Security was doing the preliminary work on the working families tax credit, it cancelled a programme that would have allowed that benefit to be better designed to avoid fraud. We all support the aim, but the mechanism will prove to be flawed.

There are similar weaknesses in other mechanisms. The strategic defence review and the funding in the Budget for the Ministry of Defence is dependent on the so-called smart procurement process. Having observed smart procurement, I have not yet seen an improvement in purchase price or purchase quality achieved by the Ministry of Defence. This weekend's papers mentioned selling off Aldershot to fund the SDR—an extraordinary proposal demonstrating the failure of another underpinning assumption in the Budget.

That brings me briefly to the most high-profile aspect of the Budget—the spending proposals for the national health service. The increases there are made necessary by the failure of the Government to meet their own promises—a failure arising from weaknesses of policy, organisation and management, as well as funding, but exacerbated by the cash starvation over the past two years.

The Prime Minister recognised last week that the NHS could not use the extra £2 billion without sharp changes in its effectiveness. We all agree with that. Let us look at the size of the problem. Suppose that the £2 billion was divided among three possible uses. First, there are those areas that simply need extra money and can be dealt with quickly. The most obvious is the marginal cost of matters such as drugs. We could dramatically improve the drugs policy to make drugs to treat cancer, multiple sclerosis and other conditions available to all patients throughout Britain, so that we could have a truly national health service, rather than the fractured one described by the right hon. Member for Ashton-under-Lyne. It would cost hundreds of millions to put that right, not billions.

Secondly, the money could be used to increase the utilisation of existing capacity. Again, that would cost hundreds of millions of pounds, not billions. That would leave significantly more than £1 billion to spend, with only one possible aim: to increase the capacity of the health service. As the Minister said, we cannot do that through the Government's mechanisms.

When the extra money is spent, it will be interesting to see whether the Government use their new private finance initiative mechanism to bring much more private sector skill and entrepreneurialism into the health service to provide new hospitals and new capacity, and to make their promises on funding amount to something.

All these undertakings and others guarantee an increase in the public service inflation rate. That is one of the effects of increasing expenditure. For a Chancellor who is wedded to the concept of prudence, the Budget is incredibly fragile. Aggregate expenditure—

Mr. Deputy Speaker

Order. The right hon. Gentleman's time is up.

6.37 pm

Miss Geraldine Smith (Morecambe and Lunesdale)

The priorities of my right hon. Friend the Chancellor's Budget are also the priorities of the people of Morecambe and Lunesdale. I warmly welcome the extra money for the national health service and schools, and the additional help for families and pensioners.

The Chancellor has delivered a massive boost for the NHS. The immediate cash injection of £2 billion is part of the largest ever package of spending on our health service. Over the next four years, spending on the NHS in real terms, over and above inflation, will increase by 6 per cent. —double the average of 2.9 per cent. achieved by the Tories.

Whereas last year we spent just over £1,850 per household on the NHS, by 2004 that will have increased to £2,800 per household—a cash injection of 50 per cent. That should be compared with the shabby Tory policy on health, which would provide a two-tier health service in which ability to pay would determine the quality of treatment and care received.

I welcome the additional income for schools in my constituency. The extra £1 billion announced in the Budget will help schools to recruit more teachers and purchase more books and equipment. The money will go directly to head teachers and help them to improve standards in our schools. I know that they have been asking for that for some time.

I am pleased to see measures in the Budget to help pensioners. The further increase in the winter fuel payment from £100 to £150 to be paid to all households where someone is over 60 is most welcome. That will benefit almost 21,000 pensioners in Morecambe and Lunesdale. From 1 November, pensioners over 75 will benefit from free television licences, which will help 8,000 pensioners in my constituency, who will save £104 a year on the licence fee.

I am delighted that the Chancellor is to increase the capital limits on the minimum income guarantee. Everyone will welcome the Government's commitment to developing the minimum income guarantee for pensioners who have made some provision for their retirement. After a lifetime of work, those pensioners' financial position has been steadily eroded. That is unjust and unacceptable. I therefore look forward to the proposals of my right hon. Friend the Secretary of State for Social Security to assist those pensioners who have small second pensions and whose income is just above the minimum income guarantee.

I represent a seaside resort and I am pleased about the decision to remove the annual licence charge of £645 on small amusement-with-prizes machines which cost 10p or less to play. The British Amusement Catering Trades Association, along with the seaside group of Labour Members, has campaigned hard on that. I should like in particular to thank a local BACTA representative in Morecambe, Mrs. Norah Slater. Norah and I spent a sunny afternoon in Morecambe visiting all the amusement arcades on the promenade. It made me realise what a wonderful job I had. I could spend my time mixing with holidaymakers and playing in amusement arcades. It was time well spent because I, like many other Labour Members, made representations to Treasury Ministers. I am glad that the Government listened. Their policy will mean that amusement arcades can expand; it will help seaside resorts and give operators a huge boost. It is further proof of the Government's commitment to seaside resorts.

Many seaside towns have been given assisted area status. Morecambe has been successful in gaining that. That will give an impetus to our resorts, which were so badly let down by the previous Administration.

The increases in the working families tax credit and in child benefit are good news. The 1p cut in the basic rate of income tax next month means that next year, the tax burden on working families in my constituency will be the lowest since 1972.

The Tories bang on about tax having risen as a proportion of gross domestic product in the past two years. Although that is true, they neglect to say that that is largely due to the billions of pounds that the previous Tory Government borrowed. The Government are steadily repaying that. The overall tax position has now stabilised and figures are set to fall. My right hon. Friend the Chancellor was able to announce more for our public services, our pensioners and families because we have strengthened the economy.

Today in my constituency we have stability and low inflation. Thanks to the new deal, youth unemployment has decreased by 77 per cent. and long-term unemployment is down by 58 per cent. since the last election. I believe that the Budget will help to provide security and opportunity for all. It is a Budget for the hard-working people of Morecambe and Lunesdale and I commend it to the House.

6.43 pm

Mr. Dafydd Wigley (Caernarfon)

I shall not follow the hon. Member for Morecambe and Lunesdale (Miss Smith) into the intricacies of the one-armed-bandit Budget that she described. I am conscious that this may be the last time I address the House during a Budget debate, because I am standing down at the next election. The 10-minute contribution that I shall make contrasts with the speech that a predecessor of mine in Caernarfon made in 1909: Lloyd George spoke for four and a half hours, which would constitute the whole of our debate.

Mr. David Davis

Go on, beat it!

Mr. Wigley

No, I shall resist the temptation.

We are considering what appears to be an election Budget. We must welcome aspects of it—for example, its recognition of the need to help children in the poorest families, as well as the much-needed increased spending on health and education.

Mr. John Hayes (South Holland and The Deepings)

Will the right hon. Gentleman give way?

Mr. Wigley

I am sorry, but it is difficult to give way under the circumstances.

I should have liked the Budget to include more spending on specific social programmes, especially housing. In my constituency—and I suspect in many others—there is a massive backlog in house renovation. People have to wait years for work to be done. That backlog is at the heart of many difficult social problems. For that reason, it would have been better if the income tax rate had not dropped from 23p to 22p in the pound, and for the £2,000 million to be available for spending on housing programmes and perhaps for doing a little more for state pensioners. If resources are to be used to reduce the effect of income tax, I should prefer them to take those on the lowest incomes out of the taxation system altogether.

The 9p per gallon increase in the price of petrol will devastate rural areas at an immensely difficult time. People in rural Wales pay the highest cost for petrol anywhere in the world, at a time when our economy is suffering great difficulties. That should be considered.

I want to refer in greater detail to increases in resources for the health service. The Secretary of State for Wales estimates that it will mean an increase of £99 million for health in Wales in 2000–01, and £153 million in the following year. However, that will depend on the way in which the National Assembly for Wales decides to share out the block money that is passed to it. A problem arises with that. I want to consider the way in which the Barnett formula interacts with the Chancellor's intentions in the Budget.

The Barnett formula dictates that the money that goes to Wales and Scotland depends on the size of the population. Expenditure on health in Wales is 9 per cent. higher than in the United Kingdom in general. That is because we have an older population. Many people retire to Wales. That is understandable; it is a lovely place. However, a large proportion of health costs are incurred in the last six months of a person's life. There is therefore a greater demand for health expenditure in Wales. If the increase through the Barnett block is based on population, that means that there is relative convergence and less money to fulfil the needs of the population. The simplistic approach of such a per capita share-out causes difficulties.

Over the next three years, there will be a drop in the proportion of expenditure on health in Wales as compared with the rest of the United Kingdom—from 5.5 per cent. this year, to 5.2 per cent. next year, to 5.1 per cent. in the subsequent year. The Government's correct and laudable Budget objectives of trying to ensure that more money goes to the sharp end of health care will thus not be achieved in Wales because of the workings of the Barnett formula. I hope that we can move towards a more sophisticated approach to the distribution of money by developing need indicators so that resources can be distributed in a way that corresponds to need.

Mr. Hayes

Will the right hon. Gentleman give way?

Mr. Wigley

I am sorry, but I cannot give way because of the 10-minute rule. I am trying to squeeze in what I have to say.

Mr. Hayes

On a point of order, Mr. Deputy Speaker. For the benefit of all hon. Members, could you confirm my belief that Madam Speaker has ruled that interventions add to an hon. Member's time and do not subtract from it?

Mr. Deputy Speaker

The general principle is that the clock stops for an initial intervention and restarts when the hon. Member who is addressing the House responds.

Mr. Wigley

I hope that points of order come into the same category.

Mr. Hayes

The right hon. Gentleman is renowned for his generosity and courtesy. He will be glad to know that I wanted to support him by saying that his points apply not only to health but to education. It is all very well saying that extra money is to be given, but funding should be granted according to need. The Budget announcements did not make allowance for that. The smallest, least fashionable schools in rural Wales and in rural Lincolnshire will benefit least from the extra money, while the big, popular schools will benefit most. The right hon. Gentleman's points on health apply to education.

Mr. Wigley

Restart the clock, Mr. Deputy Speaker! I rapidly move on from that valid point to the effects of the Barnett formula and the way in which it interplays with European objective 1 money for Wales. We looked for that in the Budget, but it was not forthcoming.

Two years ago, before Wales got objective 1 status from the European Union—I congratulate the Government on achieving that—we had a total control budget for the Welsh block of £7,908 million. The basic budget for the National Assembly for Wales remains at that level this year. The original budget that was published in November was £7,909 million. The figures are almost identical. No additional money was available to enable us to provide match funding, or even public expenditure survey cover for the European element.

Wales is supposed to receive £360 million a year from objective 1 spending in areas of acute poverty in the coming financial year, but owing to the operation of the Barnett rules we shall not receive an extra brass farthing. For every £10 million paid by Europe to meet Wales's needs, the Treasury will knock £10 million from the Barnett block. We are no better off than we would have been if we had not been given objective 1 status. I can identify with what was said by the hon. Member for Liverpool, Walton (Mr. Kilfoyle), and the same applies to South Yorkshire and Cornwall.

The Budget has done nothing to deal with that central dilemma. If we are to find match funding and PES cover from within the Welsh block, we shall have to do it at the expense of health and education—the very priorities that the Chancellor tried to promote in the Budget.

That brings me to the central weakness of the Budget. I refer to the problem caused to the economy of Wales and, indeed, other parts of the United Kingdom by the overvalued pound, to which others have referred. It undermines manufacturing industry. We have seen what it is doing to Rover now, and there will be knock-on effects in Wales. We have also seen what it is doing to the steel industry. I do not accept the Government's line that the steel crisis is being whipped up by the media; I know of companies in my constituency whose margins are being hit by up to 30 per cent. because of the level of the pound. They are finding it difficult to compete in export markets, and are being undermined at home by the sucking in of imports. The same applies to farming and tourism. The three bases of the Welsh economy—manufacturing, farming and tourism—are all being hit.

The right hon. Member for Haltemprice and Howden (Mr. Davis) spoke of the danger of inflation. Any inflationary pressure will tempt the Bank of England to raise interest rates again. That will put the pound up again, which will undermine manufacturing, farming and tourism. All the gains that we hope to secure from the strategy of the Budget will then be undermined, and we will be back where we started.

6.52 pm

Mr. John Grogan (Selby)

The right hon. Member for Haltemprice and Howden (Mr. Davis) was right to try to characterise the three Budgets presented by the current Chancellor. Although I disagree with the right hon. Gentleman's conclusions, I think that the Budgets have a common theme. Rather than re-establishing the principle of meddling, they have re-established the principles of European democratic socialism and made them popular for a new generation in Britain.

It is not meddling to provide decently funded public services of a certain quality. It is not meddling to re-establish, once and for all, the goal of full employment as a central element of our policies. Nor do I consider it meddling to make the alleviation of poverty another such goal. One of the things that make me proudest of the Budget is the conclusion by the Institute for Fiscal Studies that those who have benefited most from the three Labour Budgets, taken together, are the poorest 10 per cent.

I want to explore the impact of the Budget on three traditional industries. I shall conclude with references to coal mining and agriculture, but I shall concentrate on a traditional British industry, albeit one that occupies only a small part of the Budget. I refer to betting and bookmaking. Buried in the Budget papers, and given even less publicity initially than the welcome reduction in VAT on women's sanitary products, was a press release headed "Reform of Betting Duty". That was a very definite title: it referred not to a review of betting duty, but to a clear commitment by the Government to reform it according to a tight timetable. Customs and Excise must present its proposals to the Chancellor by July, and he has promised to make his own definite proposals in the pre-Budget statement in November.

Why does the betting industry matter? It is a traditional industry and a traditional British success story, but like many other such industries it is having to adapt to a new age of increased international competition and to the challenges of e-commerce. In the press release to which I referred, the Chancellor has set out his objectives, which are a fair basis for UK bookmakers to compete internationally; a fair opportunity for horse racing to secure financial support; and a fair contribution from the industry towards general tax revenues. I would have added a fourth criterion: a fair deal for the British punter.

I have a bit of an interest in this. One of the first things that I did after being elected was collect my winnings from William Hill in Selby. In an entirely legal form of insider trading, I had obtained odds of 3:1 against myself. Nine per cent. of my bet went to a levy; 6.75 per cent. of that went towards general betting duty. In the case of a bet on horse racing, the extra money goes to the horse racing industry, but in the case of a general bet such as the one I made, it goes to the bookmakers.

There are tremendous opportunities for the British betting industry to expand in the coming years. We lead the world in that respect. Ladbrokes is the biggest bookmaker in the world, and gambling is cross-cultural—that is one of its attractions. An American writer, Heywood Hale Brown, commented: The urge to gamble is so universal and its practice so pleasurable that I assume it must be evil. I would not go as far as that, but gambling must be well regulated, it must be honest, it must protect minors and it must be innovative—and that characterises much of the British betting industry.

Many hon. Members may not be particularly interested in sports betting, but I draw their attention to a column in the New Statesman by Charlie Whelan, who has had comments to make about previous Budgets. Each week, he highlights particularly interesting bets that people can make on politics and other issues. A few weeks ago, he asked which national newspaper Piers Morgan would be editing on 1 October 2000, offering odds of 6:4 on The Mirror, 7:4 on The Express and 50:1 on The Sun. In February, following the resignation of my hon. Friend the Member for Liverpool, Walton (Mr. Kilfoyle), he asked which Labour Minister would be the next to resign. I shall leave hon. Members to look at the odds, given such an unlikely event.

In another column, Charlie Whelan asked whether the Leader of the Opposition was likely to become a father in the millennium year. He offered 6:4 against that, 6:4 against the Chancellor's marrying, and 8:1 against a certain baby's being called Tony.

Many innovative bets are available, but they face two challenges. One is international competition. Not too long ago, in May 1991, Victor Chandler International set up business in Gibraltar offering telephone bets to the British public, with a levy of not 9 per cent.—which I had to pay on my bet in Selby—but 3 per cent. That posed a big challenge to the British betting industry, to which all three major bookmakers have responded by setting up their own offshore operations. The Irish Government have responded by cutting betting duty from 10 to 5 per cent. Perhaps not unconnected with that is the fact that the Irish Prime Minister, Finance Minister and Agriculture Minister are often to be seen at the Curragh and at Cheltenham—they clearly have a particular interest in the industry. However, the lower levy in Gibraltar is plainly having an impact on the competitiveness of British bookmaking.

On the other hand, there is expansion in e-betting—betting on the internet. At present the figures are quite small, but MMD, a London research agency, predicts that by the end of next year internet betting—on sports alone—could account for £9 billion. Britain has a competitive advantage in sports betting. In America, it is all but outlawed. A Bill presented by Senator Jon Kyl of Arizona, who wants to kill off e-betting, is currently going through Congress.

British bookmakers have a tremendous opportunity to gain that competitive advantage. What should we do? I think the Chancellor was right not to reduce betting duty in the Budget. At present the revenues are holding up— £490 million will be raised in betting duty this year, as opposed to £480 million last year. Nevertheless, I think that he should do what the press release promises he will do, and consider radical solutions such as abolishing betting duty altogether and replacing it with a tax on the profits of the bookmakers. That might be a very effective way of maintaining the revenue, while allowing the industry to compete. At a stroke, it would also abolish any form of illegal gambling, as there would no longer be any incentive to engage in it, and the anomaly in the levy, which means that some of the 9 per cent. levy on non-horse racing bets goes direct to the bookmakers, as with my bet in Selby. I would welcome that small but important measure.

I want to use my final couple of minutes to refer to agriculture and coal mining in Selby. Both those traditional industries are exchange rate sensitive, both are going through difficult times and both are looking for a restatement of that other traditional principle of European social democracy: that we are not afraid, when necessary, to intervene in the market—not to prop up failing industries but to aid transition from one phase to another.

This is an extremely important week for the coal mining industry. My right hon. Friends in the Cabinet have before them a paper that talks of modest state aid—perhaps £60 million to £70 million—compared with the £3 billion of state aid that subsidised the French, Spanish and Italian coal industries last year. That money would allow the most efficient deep-mined coal industry in Europe to bridge the gap between the price that it can offer and the price of internationally traded coal, which is on the increase. The subsidy would last for only two years, until the relevant European treaty runs out in 2003. Although pits will close under Labour and industries will contract, I urge the Government to come to a quick decision on the coal subsidy and to reaffirm the principle that, unlike the Conservatives, we will not allow industries to contract overnight in the completely uncivilised and uncaring manner that characterised the 1980s and 1990s.

7.2 pm

Mr. John Swinney (North Tayside)

The right hon. Member for Coatbridge and Chryston (Mr. Clarke) called the Chancellor the first e-Chancellor. I wondered whether that was a casual remark that reflected the internal politics of the Labour party. Perhaps it was a suggestion that he might be a virtual Chancellor or virtually a Chancellor, but it was certainly an interesting assessment of what the Budget has produced.

My first reaction to the Budget was that never has a Chancellor had so much and given away so little. As the days have passed, my view has not changed. The Budget represents a missed opportunity, and that will become more apparent to members of the public as the issues are debated. If I judge the public mood in Scotland just now, voters want substantial investment in key policy areas—health, education and poverty—and they have made it clear that they want substantial new resources to be invested to counter 20 years of under-investment.

I do not judge the public mood to be enthusiasm for income tax cuts at the expense of valuable investment in our public services, and I want briefly to consider the tax structure. The Government are stretching and moving the balance of taxation so that it is much more in favour of indirect taxation. The Institute for Fiscal Studies says that the Chancellor has made about 40 per cent. of the changes to indirect taxation, which is regressive as it hits those on lower incomes disproportionately harder. What he gives with one hand, such as child benefit increases, he takes away with the other in indirect taxation.

I ask the Chancellor to consider reversing that trend in future Budgets and to make the structure of taxation fairer and more transparent. The grudging way in which the Government have at last confirmed that the tax burden has increased—they were forced to do so—makes a compelling case for greater transparency in the system. With a £60 billion war chest at his disposal over the next five years, he could have achieved so much more investment in our public infrastructure, but has failed to do so.

Aspects of the Budget are to be welcomed, particularly any measures to improve the living standards of those on lower incomes who have children. Measures that make people better off in work rather than on benefits are to be encouraged. We recognise that encouraging work is one the best routes out of poverty and have argued that case, but unemployment is still a major factor. It increased in Scotland in the last quarter, and rates of more than 10 per cent. are common in several Scottish constituencies. The Government's economic strategy must address the issue of getting people into work before they can take advantage of initiatives such as the working families tax credit.

The fact that the Chancellor has left the Scottish economy in a sterling straitjacket is one reason for those pockets of higher unemployment in Scotland. Since the Government came to power, 22,000 manufacturing jobs have been lost in Scotland and a further 600 losses were announced only last Thursday. The pound has appreciated against the euro by a massive 35 per cent. since 1996, crippling manufacturing industry and exporters in Scotland. I was struck by the powerful speech of the right hon. Member for Ashton-under-Lyne (Mr. Sheldon), who argued for Monetary Policy Committee decisions to take much greater account of the economic conditions in areas of the United Kingdom outwith the south-east of England. They are increasingly putting home-grown businesses in Scotland at a competitive disadvantage in relation to a number of our European competitors.

The Chancellor has to be asked, what was in the Budget for jobs in Scotland and for high-quality, sustainable employment? We need investment. Where were the initiatives to encourage growth in manufacturing? Where was the encouragement for research and development in our traditional industries? Although we appreciate and support interest in encouraging e-commerce, a sea change in telecoms pricing, regulation and infrastructure—much more than the package of measures announced in the Budget—is needed to make that possible.

I have commented on low-income families and the measures taken to support people in those circumstances, but we must also address the challenges facing pensioners, who are among the poorest in our society. Measures to reduce fuel poverty through the winter allowance are welcome, but other measures such as the minimum income guarantee for pensioners are unproven in respect of securing the type of income that pensioners truly require. The hon. Member for Northavon (Mr. Webb) amply showed why the Government have failed to get across the importance of the minimum income guarantee and what it does to compensate pensioners, who have been given a wholly unsatisfactory 73p increase in their pension.

I want to comment on the public spending commitments announced in the Budget. The Chancellor is good at using headline-grabbing numbers in his Budget statements, but I want to examine some of the detail of the figures, beginning with health spending. All hon. Members will welcome any increase in investment in the national health service, which is required after 20 years of neglect, but the increase will not deliver health spending on a par with the European average, as the Prime Minister promised on 16 January. The Institute for Fiscal Studies has calculated that UK health spending must increase by 8.5 per cent. to reach the European average in five years. There is still some way to go.

I want to consider the additional £2 billion available next year and how that will translate into health spending in Scotland. According to a statement from the Secretary of State for Scotland, the Scottish public will benefit to the tune of £173.3 million. That should be considered against the reality that Scottish hospitals are expected to be £50 million in deficit by the end of this financial year and all trusts are expected to miss their waiting list targets for next year. Furthermore, above inflation and well-deserved pay increases are already stretching NHS budgets. That suggests that the additional resources provided by the Chancellor could allow the health service in Scotland to stand still rather than take any stride forward.

The 6.1 per cent. increase in health expenditure in the United Kingdom as a whole will not translate into a 6.1 per cent. increase in Scotland because of the Barnett squeeze. Scotland will have slower growth in health expenditure than the rest of the United Kingdom. However, the health of the Scottish public is not improving at a faster rate than that of people in the rest of the United Kingdom. Recent research by the university of Bristol shows the incidence of cancer among men in Scotland to be higher than among men in England. It is also higher among women in Scotland. The Barnett mechanism represents a loss of hundreds of millions of pounds to the NHS in Scotland over the coming five years.

On education spending, Scotland will receive £86.6 million from the additional £1 billion announced by the Chancellor, according to the Secretary of State. Putting that into the context of the cuts made at local authority level by the Labour party shows the damage that has been done to our core educational services. Next year, local authority education funding will be £540 million lower in real terms than it was in the last year of the Conservative Government, when none of us believed that we could go any closer to the bottom. The Chancellor did not mention the long-term position of education funding beyond this financial year.

A number of hon. Members across the political spectrum referred to petrol prices. I have had to make this point in every Budget debate since I was elected to the House to represent a large rural constituency in Scotland. The price of petrol has risen by 25 per cent. since the Labour party came to office in 1997. In our rural communities, car transport is the fundamental brick on which every aspect of activity is built, so is it any wonder that people are feeling the strain of the punitive taxation being applied to the economy of rural areas? That is made even more surreal and nonsensical by the fact that Scotland is the largest oil-producing country in Europe.

The Chancellor will argue that any larger increases in spending would not be in line with fiscal and monetary policy, and would put pressure on the Bank of England to raise interest rates further. That is yet another example of economic policy being led by the overheating of the economy in the south of England and the issues connected with house price inflation. For too long, the Treasury orthodoxy has been high interest rates and a high pound due to overheating in the south of England. The price for that is being paid in the economy of Scotland, where enormous damage has been done to the competitiveness of our key industries—our exporters, who trade on our behalf. Unless we have economic conditions that are in tune and in line with the circumstances that are required in Scotland, and not those that pervade in the south of England, continued damage will be done to the economy of the people of Scotland.

7.12 pm

Mr. Colin Burgon (Elmet)

Over the past few days, hon. Members will have listened to their constituents' views on the Budget. It is good that those views are reflected in the Chamber. The first subject that I should like to cover has probably not had much of a mention in the Budget debate so far. It is the Government's decision to introduce an aggregates levy of £1.60 per tonne, which will come into effect in April 2002—not soon enough for many of us.

The Government have made it clear that the extraction and transportation of aggregates impose real costs on local communities, in the form of noise and vibration, dust, loss of biodiversity and amenity and visual intrusion. My constituency boundary is made up of the river Wharfe to the north and the river Aire to the south. Both rivers have extensive mineral workings in the proximity. The Aire valley in particular has suffered from decades of mineral extraction, and many local people in such places as Methley and Allerton Bywater now want environmental regeneration of the area.

I sincerely hope that the new levy will help in that process. By ensuring that the environmental impact of sand and gravel extraction is more fully reflected in prices, I hope that we will encourage a shift in demand away from virgin aggregates towards alternative materials, such as recycled aggregate.

I am delighted to praise Leeds city council on the recent demolition of its civic hall annexe, which was a vivid illustration of how building materials can be recycled and our environment protected. In my inquiries about the work done by the council, I was told: If normal demolition practices were followed the site would have needed a substantial amount of fill material to raise the ground levels to make the site safe. The hard materials would have been removed to a land fill site for disposal, both of which have a considerable cost implication— and I would add an environmental implication: The process of crushing the hard material on site and using it as fill material to raise the levels, saved on the purchase of fill materials and the costs of tipping … The project started by hand stripping and salvaging as much materials as possible, this included all timber, the roof covering, glazing and non structural metal work. The structural metal frames were then removed for recycling and the remaining concrete structure crushed to be used as fill materials over the site. The Government's stance in the Budget will encourage such an enterprising approach. I hope that where Leeds leads, others will follow.

The second item I want to address is education. In discussions that I had with head teachers in my constituency last week, the Chancellor's policy of extra payments of between £3,000 and £9,000 for primary schools and between £30,000 and £50,000 for secondary schools met with universal support. The heads were doubly delighted that the money will go straight to them. Projects that they were looking to fund from this additional money included general refurbishment work in the schools, expansion of information and communication technology, extra help for special needs children, extra help to develop reading skills, and staff training and development, which is vital given all the changes taking place in education.

Head teachers also told me that they hoped that they would be allowed a fair degree of discretion on spending this extra money. As I cannot envisage many of them either buying a new car or going on an exotic holiday with this money, I hope that we can allow these hard-working professionals to spend that money wisely and effectively. There was also a plaintiff plea that this money should be paid every year. I promised to pass that request on to the Chancellor.

In Wetherby over the weekend I met people involved in Church Action for Poverty. They gave a general welcome to the Budget, but cautioned me that much more remains to be done to achieve the Government's goal of eradicating child poverty within 20 years. They welcomed the fact that the Budget will lift 1.2 million children out of poverty by the end of 2001, but more than 2.5 million children remain trapped in poverty. That is a sobering thought, and shows what a huge task the Government have set themselves.

Those people also welcomed further measures to tackle fuel poverty among the elderly, with the boost in the winter fuel allowance to £150 a year. The minimum income guarantee was also welcomed. I share the general concern that, as last year, almost 1 million pensioners are not claiming their entitlement. I was hoping that the Government would soon launch an effective, high-profile benefits take-up campaign targeted at that group. Hon. Members can imagine my delight when I heard the Secretary of State say that that would start this Wednesday, and I look forward to that.

I am aware that the Government are spending an additional £6.5 billion on our pensioners over the lifetime of this Parliament. However, many of us believe that we still have some distance to travel to address all the concerns of our pensioners, who never lose an opportunity to let us know their thoughts on this subject, and long many they continue to do so.

I was pleased to hear from pensioners and others that there has been widespread welcome for the extra £2 billion for the NHS. It is clear that that step, combined with organisational reform of the health service, commands tremendous support among the electorate.

There is also a recognition that the Labour Government are delivering a platform of stability and steady growth, with low inflation and sound public finances. Their aim of delivering security and opportunity for all commands the support that will enable the Chancellor to continue as the great helmsman of the economy. I commend the Chancellor and all his excellent work.

7.18 pm

Mr. David Ruffley(Bury St. Edmunds)

I detected that the Chancellor's Budget statement last week was received less well outside this place than his previous Budgets. I venture to suggest three main reasons for that.

First, on the macro-economic side, the Chancellor paints a rosy picture in the Red Book, but it contains some flaws. He claims that next year and the year after he is locking in a fiscal tightening. That is not quite what it appears. The Budget contains a 0.6 per cent. of GDP fiscal loosening. If we take the outturn on the fiscal side for the fiscal year we are in, rather than the pre-Budget report numbers and the March 1999 forecast, it shows a 0.6 per cent. fiscal loosening.

Why is that significant and problematical? The answer is that the fiscal boost has meant that GDP numbers will have to be upgraded, and the Monetary Policy Committee will, as a result, have to tighten policy. There has been a significant fiscal stimulus. Total managed expenditure is running at a 5 per cent. real terms increase in the coming year. It is clear that the City is looking at GDP forecast upgrades. As a result of the Budget, there will probably be a 0.25 per cent. increase in base rates.

The second concern on the macro side is that the Chancellor seems to think that he has abolished the business cycle—that he has ended boom and bust for ever. That is his view of the planning horizon in the next Parliament, as stated in the Red Book, but the problem is that he has not abolished the business cycle.

We must remember that, in previous Budget statements, the Chancellor mentioned what was happening in the major economies—Japan and the United States, the two biggest in the world—and what the outlook was. He did not say it in the statement, but, burrowed away on page 25 of the Red Book, he says something revealing: there are downside risks to economic growth, on which the whole Budget is predicated. The Red Book says: the risk remains of a sharp slowdown in the US and continued weakness in Japan with adverse effects on UK prospects. Let us remember that, in the second half of last year, Japan went into recession.

That is important to remember. The Budget should have come with a health warning. Other straws in the wind concern City analysts. House prices went up by 15 per cent. last year. Equity withdrawal is at 3.5 per cent.—not 5 per cent. as in the 1980s, but it is rising. There was a trade deficit of more than 5 per cent. in the last quarter of last year. The Chancellor inherited a 0.5 per cent. of GDP trade deficit at the beginning of 1997. It is now bigger than at any time in the boom in the 1980s. These concerns are not flagged up. If the GDP numbers are not delivered in the next three to five years, all the wonderful suggestions that he puts forward on public spending will not come to pass.

My second reason for being concerned about the Budget, and why there has been a relatively tepid response to it, is that the Chancellor uses the rhetoric of being pro-business and business friendly, but the reality is otherwise. Christopher Humphries, director general of the British Chambers of Commerce, said after the Budget: Businesses have learnt not to be fooled by the Chancellor's headline announcements. Brown has not done enough to ease the increasing tax and administrative burden on business. Of course he has not. He has done nothing to sort out IR35, which is driving entrepreneurs out of this country, or to tackle the national insurance contribution liability on employees who exercise share options in non-IR approved share option schemes. He has done nothing to cut the 3,000 new regulations that have been imposed on business since the 1997 general election—nor the £5 billion a year increase on business that the CBI has described in relation to the Chancellor's three previous Budgets.

What does the Budget amount to? It amounts to much gimmickry, instead of tough action on the things that I have listed. There are gimmicks on research and development. There is R and D for small businesses when everyone knows that the lion's share of decent and proper R and D is by bigger players, who are not catered for in the Budget. The R and D fiddly tax credits are ill targeted and add complexity to the system, as the Institute for Fiscal Studies has demonstrated in the past few days. Small businesses that have to administer the working families tax credit are being turned into unpaid tax collectors for the Government. According to the Inland Revenue, one case of working families tax credit will cost a small business £135 in manual administration. What are the Government doing about that? Nothing.

We would have liked to see more emphasis on non-hi-tech small businesses. Constituencies such as mine would have liked simple measures to cut business rates for small businesses: village pubs and small independent retailers in the market towns of East Anglia and rural Britain. It could have been done in a tax-neutral way, increasing the poundage for out-of-town superstores and giving relief at the bottom end for small shops. There is nothing for the small business man in the Budget—the type of business that I represent.

The third reason why it is a problematical Budget is that it contains the same old nonsense and deception on taxation. It is a redistributive Budget. There is nothing wrong with that in and of itself, so why does the Chancellor not tell the people that the benefit is going to unemployed couples with children and to single parents, as the IFS distribution tables clearly demonstrate?

The reason why the Chancellor does not talk about that is because middle Britain has been clobbered to pay for that. It is the 9p up, 1p down Budget. It is true that a typical family is some £600 a year worse off. It is £100 a year worse off because of average council tax increases. It is £200 a year worse off because of the personal pension tax. Cuts in the married couple's allowance and MIRAS increase the cost of living for the typical family. Following the Budget measures on increasing petrol duty, people will pay £175 a year more on average.

I remind hon. Members that the Red Book demonstrates that the tax burden will be higher at the end of the current Parliament than the burden that Labour inherited at the beginning of the Parliament. We know that Alastair Campbell coughed to that truth. It is about time that the Labour party owned up to it in the House in this debate.

We have the problem further down the track of the tax burden in the next Parliament. The Labour party will doubtless observe that it flattens out a bit. Why? Because borrowing will take the strain. In this fiscal year, public sector net borrowing is £11.9 billion in surplus. Fair enough, but what happens in 2004–05? Lo and behold, there is a public sector net borrowing deficit of some £13 billion.

What is going on? Is it true that the Government are letting borrowing take the strain, rather than see the tax burden rise ever higher in the next Parliament? The evidence shows that that is exactly what the Government are up to, so sensitive are they to the charges of increasing taxation under their Administration and on their watch.

The Budget paints a rosy picture on the macro side. It should come with a health warning. It comes with promises about cutting tax. It gives nothing back to middle England. It comes with the news that there is little here for small businesses in rural Britain. It is a sign that it is not a Budget for hard-working people of middle Britain, let alone its rural areas.

7.26 pm

Mr. Jim Cunningham (Coventry, South)

I start my Budget speech, perhaps, a little unusually. In the midlands, the Rover situation predominates. I am sure that hon. Members on both sides of the House are concerned about that and would not try to make any political capital out of it.

I want to focus on regional funds. I hope that my right hon. Friend the Chief Secretary will talk about those in his winding-up speech, or talk to his colleagues about it. I understand that about £500 million is available in what is known as the umbrella fund—the national and regional fund. I hope that my right hon. Friend will take that on board and look at it, given the Rover situation. Admittedly, it is too early to say what rescue package can be put together—I recognise that—but we should be a little more vigilant with regard to the fund.

Equally, I should like my right hon. Friend to take on board the surrounding clusters. For the House's information, clusters take on board regional development agencies, which could play a significant part in rejuvenating Longbridge and in what happens after Longbridge. Clusters and RDAs could also encourage the development of business incubators and infrastructure for small business.

All those issues are interrelated and they can be a little complex, but it is useful highlighting some of them—especially given that many hon. Members will have constituents who could be affected by Rover: not only jobs at Rover's distribution centres will be affected, but—one can pluck a figure out of mid air—between 20,000 and 50,000 other jobs could be affected, depending on how the situation develops. It is a serious issue which is well worth raising right at the beginning of a Budget speech. If my right hon. Friend does not want to address the issue now, he could discuss it with his ministerial colleagues when considering possible action.

I welcome the Budget, particularly the extra spending on education. Over the years, certainly under the previous Government, education and health provision suffered. After the previous Government's 18 years in power, we are still trying to pick up the pieces. It is not always possible, in three years, to pick up the pieces and end the predicament in services that have been damaged over 18 years. I also welcome the vital help for small business, which has created 3 million jobs, and possibly 3.5 million jobs. It is not always generally appreciated that, these days, small businesses are the engine of the economy. They are certainly the engine of the west midlands economy.

I welcome the fact that more money is being provided to fight crime. We often debate crime in the House, and we all have our own views on how it should be fought, but it is vital that the public, police and drug traffickers see that we are prepared to provide more money to tackle crime. I am sure that the parts of Coventry that I represent will welcome any additional expenditure on fighting crime.

The Opposition have made great play today about the Government omitting something from the Budget or trying to hide something in it. However, when they talk to us about new taxes or tax increases, it is well worth reminding them who introduced 22 new taxes. They also mentioned the abolition of mortgage interest relief at source and the married couple's allowance. However, who but the previous Conservative Government started attacking MIRAS and the married couple's allowance? The Opposition have double standards.

Mr. Webb

Using the same method to calculate that Conservative Members introduced 22 tax increases, how many tax increases have the current Government introduced?

Mr. Cunningham

It is not for me, but my right hon. Friend the Chancellor to answer that. If the hon. Gentleman asks him, I am sure that he will tell him.

It ill-behoves Conservative Members to attack the Government on those issues. Opposition Members suggested that we have hidden the extent of our borrowing—what about the £28 billion that the previous Government borrowed, or the £40 billion that they borrowed just to fund unemployment? How do they answer those questions? Ultimately, the British people have had to pick up the tab for that borrowing. The Labour Government have not only reduced borrowing, but delivered public services—including the new expenditure on the health service and on education that I mentioned.

The Opposition should reflect further on their comments. I noticed that the Opposition spokesmen were very good on the attack, but very poor on policy and suggesting alternatives. One or two of my hon. Friends tried to elicit from Opposition spokesmen what they would do in the same circumstances, but we are still waiting for an answer. They gave us the usual reply, "Wait and see what we put in our general election manifesto." It will be very interesting to see what they include in their manifesto.

Opposition Members also mentioned agriculture and fishing. Need I say more than "BSE"? Who made a mess of that? Who made it very difficult for Britain to export beef? The previous Government were certainly not forthcoming either in reporting on or dealing with that matter. A couple of weeks ago, we had a debate on the fishing industry. As hon. Members pointed out in that debate, who—more than 18 years ago—agreed the quotas that have created problems for our fishermen? Not Labour Members, but Conservative Members agreed those quotas, and they should be reminded of it.

The issue of the state earnings-related pension scheme has crept into the debate. It has been debated in the House on very many occasions. However, who caused the confusion with SERPS? We still do not know what Conservative Members would do to remedy the situation. The Government have cleared up the SERPS issue. Although the SERPS and general pensions mis-selling issues have been around since 1986, I do not hear Conservative Members saying very much about them.

An issue on which we should reflect—it is too late to do it in this Budget, but it should be food for thought for the next Budget—is an increase in the basic state pension. The Chancellor will have to have a look at that. In the next Budget, we must also address the issue of links or produce an alternative to them that will convince the United Kingdom's many pensioners. Although it is not the Chancellor's fault, after 18 years of the previous Government many pensioners feel hard done by. We have to clear up those issues as soon as possible and say what will replace SERPS.

Conservative Members were also complaining about the increase in the social security budget. I do not mind real terms increases in the social security budget if those who need help receive it. Previously, the Tories made cuts in the social security budget—they thought that it was more about cutting public expenditure than about helping the needy.

This Budget is a good and a balanced Budget. Although all Budgets are very difficult, I hope that this one is another step down the road of addressing the grievances that people have felt because of the previous Government's 18 years in office.

7.37 pm

Mr. William Ross (East Londonderry)

I listened today to the right hon. Member for Ashton-under-Lyne (Mr. Sheldon), who said that the Government were in a very happy position because they have had a surge in revenue. I think that he was referring, at least partly, to the fact that we are now repaying debt, rather than having to borrow. I remember the roars of joy from Conservative Members—and even from Ulster Unionist Members—when, a good many years ago, we first had a public sector repayment situation. However, that disappeared. It also did not arise for quite the same reasons that the current one has arisen: because of a surge in revenue.

The Chancellor expects that revenue surge to continue. His projections show that, for the next few years, public expenditure as a proportion of gross domestic product will decrease. That makes it clear that he expects revenues to continue to increase. I just hope that his hopes are realised. However, I should not be so confident about it. As has already been said in the debate, even at the best of times we cannot forecast very far ahead.

Mr. Owen Paterson (North Shropshire)

I am grateful to the hon. Gentleman for giving away some of his limited time. Has he seen table C4 on page 196, which shows that by 2004–05 borrowing will increase to £13 billion?

Mr. Ross

That is exactly what I mean. I remember that, one year, there was a £50 billion overdraft that no one had really expected. I therefore do not think that any party should crow too much about the level of future danger. Those dangers are real, and it takes only a relatively small percentage change to put a Government into surplus or deficit.

I am looking for a Chancellor and a Government who will establish a programme that will, so far as is humanly possible, lead to a steady reduction in the nation's public debt. If we could get rid of that debt, even if it took 20 or 30 years, what a wonderful benefit it would be to the community and to the country generally.

Mr. Andrew Tyrie (Chichester)

Will the hon. Gentleman give way?

Mr. Ross

No. I am sorry, but we each have only 10 minutes to speak. The hon. Gentleman may get a chance to make his own speech.

Hon. Members have referred to the fuel allowance for the over-60s. No doubt the £150 is welcome, as are the concessions on television licences that were announced some time ago, but I do not favour that way of supporting pensioners. It would be much better if we lumped together the £150 for the fuel allowance and the £70 or £80 for the television licence and gave pensioners an extra fiver a week throughout the year. It would be much better to allow people to decide how to spend their entire pension income rather than giving them money for a specific purpose. It is not the right way to do it—it smacks of grandmother looking after the children and doling out so much money for sweeties and so on. People should be allowed to make up their own minds. They do not suddenly lose the capacity to manage their affairs when they reach 65.

I welcome the increase in the savings limit from £3,000 to £6,000 before income support is affected. When, earlier, I asked the Secretary of State for Social Security how he had arrived at the figure of £6,000, he told me that he had just doubled the previous figure; he had just plucked a figure out of the air. If I told my bank manager that I needed £20,000 and, when asked why I wanted it, said "I just thought of the figure", I do not think that I would get an overdraft. The House deserves a better explanation than the laughter that I got when I questioned the Secretary of State. I asked whether the figure was indexed, and if so whether it was linked to earnings or inflation. I do not think that he knew.

I went to the Library and picked up one of its excellent booklets, which shows the value of the pound from 1750 to 1998. I noticed that from 1988 to 1998, which is the period that we are interested in, there was a 52 per cent. increase. We can take it that 160 per cent. or 165 per cent. would have been sufficient indexation for that period. On what basis will the Government increase the savings limit before entitlement to income support will be affected next year and the year after? Can we be told? Has anyone thought that far ahead? If not, it is time that someone did, because the answer that I received was not good enough.

The costs of care for the elderly in nursing homes has not been addressed. A Committee of this House produced an excellent report some years ago; action on it is long overdue. When will it happen? When will something be done for British pensioners overseas, some of whom live in penury for many years? It is time that that was addressed if we are really trying to do something for our pensioners.

I am also concerned about road fuel. The right hon. Member for Caernarfon (Mr. Wigley) and the hon. Member for North Tayside (Mr. Swinney) referred to the cost of petrol in Scotland and Wales. Lucky fellows—they do not know how lucky they are. I am sorry that they are not here to hear me say this. They do not have a land frontier. A friend of mine happened to be in Londonderry one day and his medium-sized car was nearly empty of diesel. He drove across the frontier and saved £13 in one fill. The savings on filling up a lorry would run to a lot more. The practical result of that is the destruction of the fuel retailers within 20 miles of the border. They have gone or are existing on a small income from groceries, praying that something will happen to improve their position. The Government have to take action. I heard of one firm that drives its lorries across the border once a week and saves £11,000 a month. That is in addition to the smuggling that helps the terrorist organisations that control the trade. When will the Government do something about that dreadfully serious situation?

The other related issue that concerns me is the 25p increase in tax on a packet of cigarettes. That does no good and we have argued against such increases for years. The cigarettes go out of Gallaghers in Ballymena today and are on the market stalls in two weeks. It is time that this counter-productive tax was stopped and the Government reached a common-sense arrangement.

I am also concerned about the reduction in air passenger duty for economy flights in Europe. That is all well and good, but those of us in Northern Ireland who want to get to Great Britain in a day have to fly. I cannot get from my constituency to Westminster by ferry and car in a single day, yet we are not given the concession that the Government have found for the highlands and islands. The Chancellor's excuse for that concession was that it would reflect the importance of air transport to the daily life of that remote region. Twenty miles of water makes Northern Ireland a remote region. It is time that the Government recognised that we have a problem that cannot be resolved except by a reduction in that tax. It is a nasty discrimination against the people of Northern Ireland.

I welcome the money that is being made available for schools and roads, but I should like to know what sums are involved. I should also like to know whether the funding is a one-off or will be repeated. We need to be told. I want to know how much money is available for roads. Are we still expecting to sell Belfast city harbour? It is time that we were given that information.

No mention has so far been made of the fact that landfill tax is going up by 10 per cent.—far more than the level of inflation—from £10 to £11 a tonne. That is another of those little figures plucked out of thin air with no explanation. We all know the problems that the landfill tax has caused in some rural areas, with illegal dumping right, left and centre. I am not sure that it is the best way to raise revenue.

7.47 pm

Dr. Stephen Ladyman (South Thanet)

As I have only 10 minutes, I shall not deal in detail with the speech of the hon. Member for East Londonderry (Mr. Ross). However, he made a plea for the winter fuel allowance and the free television licence for the over-75s to be scrapped and the money added to the basic weekly state retirement pension. If we did that, poorer pensioners would lose the benefit of that money from their income support. We would have to change the rules for income support as well. In the mean time, at least the Government's proposals are a convenient and simple way of channelling resources to poorer pensioners and giving a boost to other pensioners.

We have heard a variety of pleas from the Conservatives. I have heard a plea to spend money on gold rather than schools. I have heard a plea to support oil companies rather than the British coal industry. I have heard a plea that we should give favourable treatment to the tobacco industry almost in preference to the health service. However, I have not heard a justification for the tax guarantee.

One or two Conservatives have touched on one of the major flaws in that policy by talking about the economic cycle. The Conservatives appear to have forgotten—or not to have worked out yet—that for every 1 per cent. below trend growth in the economy, £10 billion will be wiped out from receipts, which means that £10 billion of savings must be found. If the Conservatives believe that we have not got rid of boom and bust and that one day the economy will slow, they must also accept that they are going to go into an election promising that, even in those years, they will cut further the money available for public spending. A 1 per cent. cut in the tax burden means a further £10 billion of cuts.

Mr. William Ross

rose—

Mr. Hayes

rose—

Dr. Ladyman

I shall give way later. I should like to make some progress first. It would take £10 billion of cuts to make 1 per cent. of savings, and £10 billion to deal with the fact that the economy was growing at a 1 per cent. slower rate than expected. Suddenly, they would have to find £20 billion of cuts.

We have heard this week that the Conservatives now think that our spending on the health service is a good thing, and Conservative spokesmen outside this House have, I believe, said that they believe that our spending on education is a good thing. Their savings must therefore come from the social services budget, as it is the only significant pot of money left for public spending.

When the Secretary of State was speaking, Conservatives laughed at his comment that there was good spending in the social services budget and bad spending. Bad spending, he said, was money spent on keeping people out of work. Good spending was the money that we were spending to encourage people back into work and making work pay.

Mr. Paterson

Will the hon. Gentleman give way?

Dr. Ladyman

Later.

Mr. Paterson

Will he give way on that point?

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

Order. The hon. Gentleman is not giving way.

Dr. Ladyman

Bad spending is something over which the Government have no control. It is money that must go to those people who are out of work. At a time when the economy is slowing down, unemployment will either be steady or will rise, so that the spending of bad money will be increasing. Therefore, the savings that the Conservatives would have to find to honour their tax guarantee would be from the good spending in the social services budget, such as the working families tax credit and the child care benefit.

Mr. Paterson

The hon. Gentleman talks about good and bad spending. The Red Book shows that spending on social security benefits is increasing from £93.3 billion to £104.5 billion in 2001–02. Is that good or bad spending, according to his definition?

Dr. Ladyman

The position was set out clearly by the Secretary of State, who defined the measures that the Government have taken to make work pay as good spending. I believe that to be good spending. The Tories' tax guarantee would force them to cut that money at a time when the economy was slowing down—when that money could do the most good.

Mr. Nick St. Aubyn (Guildford)

Will the hon. Gentleman give way?

Dr. Ladyman

No, not with the 10-minutes rule.

Mr. St. Aubyn

On a point of order, Mr. Deputy Speaker.

Mr. Deputy Speaker

I hope that this will not be a point of order about interventions.

Mr. St. Aubyn

It is a serious point of order. The hon. Member for South Thanet (Dr. Ladyman) said that his time was limited. Would you confirm that time spent on interventions—

Mr. Deputy Speaker

Order. The hon. Gentleman knows the rules as well as I do. I am not here to run O-level classes in interventions.

Dr. Ladyman

I am grateful, Mr. Deputy Speaker. The time limit would allow the hon. Member for North Shropshire (Mr. Paterson) to intervene, but I would then have to answer him, and lose more time.

Another criticism of the Budget has concerned exchange rates. One of the easiest ways of dealing with the problem would be to join the euro—something that the Conservatives have made clear they do not want. I share their view that the time is not right to join the euro.

Those hon. Members who have made a plea to join the euro should answer this point. They come from regions of this country where manufacturing is being hardest hit. To convince me that the time is right to join the euro, they must show that they have a robust way of sharing out the public spending that must be provided within euroland in such a way that we in this country would not have to cut our public spending to control the inflation caused by increased public spending in some of the less-developed regions of Europe. Until they can answer that question, they cannot offer a convincing argument to their own constituents as to why joining the euro would benefit their regions.

I wish to refer to the effect of this and previous Budgets since we came to power. By April 2001, the average household will be £460 better off; on average, families with children will be £850 better off; a single-earner family with two children on £25,000 a year will see a 10 per cent. rise in living standards; a single-earner family with two children on £12,500 a year will see their real living standards increased by around 20 per cent; the poorest two-child families on income support will be £1,500 better off; 1.2 million children are to be lifted out of poverty; a 75-year-old on the minimum pensioner income guarantee will have an annual income that is £950 a year higher.

These are the achievements of this Budget, taken in the round with previous Budgets. Conservative Members can scoff as much as they like, but these are the facts. They can try to confuse the issue as much as they like, but my constituents are counting the extra money in their pockets, and they will take that into account at the next election.

I do not often use the words of Baroness Thatcher to support my case, but she once said that the Good Samaritan was able to help only because he had the money to do so. One thing that has annoyed me about the response to the Budget has been people saying that it is a redistributive Budget for the Labour heartlands. They forget that the previous two Budgets from the Government prepared the way for this Budget. In effect, they were equally redistributive, because they allowed us to earn the money that we are using in this Budget to make this a fairer and more prosperous country.

I congratulate the Chancellor on the cut in amusement machine licence duty. My hon. Friend the Member for Morecambe and Lunesdale (Miss Smith) referred to that earlier, and said that it would boost the seaside arcades in her constituency. It will be a boost to arcades in my constituency also, but, more importantly, the world's two leading companies manufacturing these machines are in my constituency. I can tell the House that there are several hundred workers in my constituency breathing a huge sigh of relief that, thanks to the Budget, they know that their jobs are safe.

I thank the Chancellor for the extra resources that he is giving to combating smuggling. We have a real problem in east Kent as a result of the build-up of smuggling and the fact that organised crime is becoming involved. I am delighted to see that the Government have started to address that.

This is a Budget for fairness and to increase prosperity. It is a Budget for the health service and for schools. It is a redistributive Budget that I am proud to support.

7.57 pm

Mr. Andrew Tyrie (Chichester)

I would like to say a few words about the Red Book, which very few people seem to talk about. That is not surprising, since it is virtually impossible to understand. I am not sure that anybody knows the relationship between all the numbers in the Red Book. Maybe some of my right hon. and hon. Friends will help me out. I wish to say a few words about the affordability of public spending in general, and health spending in particular.

Everybody welcomes increases in public spending, but they are only worth having provided that they are affordable over the cycle and that the higher spending in the long run does not end up lowering the long-run growth rate. That can happen either because of the disincentive effect of the taxation that has to be brought in to pay for the spending, or because that taxation is distortive, which itself will reduce the growth rate.

I see virtually no understanding of the possible relationship between higher spending and poorer long-run economic performance in the Red Book, and we heard virtually nothing from the Chancellor about that. It is back to the old days of taking growth for granted, and that is a dangerous road to go down. Control of public spending is very difficult to manage and easy to lose. It takes only a small flicker over the business cycle—a downturn in overall economic performance—and public spending becomes extremely difficult to control.

The problem is that Labour is in a state of complete denial about the existence of cycles. The Government say that they have put an end to boom and bust and that somehow they are not in a business cycle. The Red Book says that everything will return to trend; that could be above trend for a period and then suddenly get straight back to trend.

Hidden in the Red Book are some interesting spending figures. Over the next couple of years, spending will increase from 38 per cent. to 40 per cent. of gross domestic product, although the outer years are not given and there is no explanation of how that will be paid for, except perhaps if one looks closely at the borrowing line. There is a table showing an increase in borrowing in the outer years to £13 billion.

What will the Bank of England say when it has had a good go at trying to understand the Red Book? It will not just sit there and watch spending, taxation and borrowing rise. It will take these facts into account in taking its decisions. Overall, it is likely to conclude that the Budget will require interest rates to be raised, perhaps not immediately, but soon. That will mean a higher exchange rate, which will bring more problems for manufacturers.

Part of the price of higher spending—including health spending—will be an exacerbation of some of the problems that have already been caused by the strong pound. That will not be the only factor that the Monetary Policy Committee takes into account. It will ask why we should have above-trend growth for a while and never need to go below trend, and why the Government believe that they have abolished a swing around the average, when all other Governments and economies worldwide have always been vulnerable to it. That will make it cautious in its judgment on the Budget.

The MPC will also consider several of the accounting fiddles in the Red Book, the biggest of which is how the private finance initiative is treated. If PH did not exist, each year's capital spending implied by it would be added back in the first year to the budget lines of the individual spending Departments, and spending would look several billion pounds higher for each year in the Red Book. The MPC will do its internal accounting on that basis, not on the basis of PFI pushing liabilities back to future years.

Will we get anything for the extra spending? My hon. Friend the Member for Havant (Mr. Willetts) gave an excellent explanation of why it is unlikely that we will get much in social security. We will have a lot of extra spending without any clarity on how better to allocate it.

The massive announcement of 6 per cent. per annum growth in health spending for the next four years has been accompanied by the biggest load of waffle that I have ever heard from a Prime Minister to explain the reforms that are supposed to make effective use of the money. There is a great danger that a high proportion of it will be swallowed up in higher pay. I do not necessarily begrudge health workers higher pay, but there is no point in raising public spending if that is where it all ends up. I am very concerned that the increase in health spending may in any case prove undeliverable if there is a downturn in the cycle. We should have had greater clarity on what the spending was designed to achieve.

It has often been said over the past few days that the increase in health spending is unprecedented, which is true over the four years, but the Conservative Government increased health spending by 6 per cent. for a run of two years, between 1991 and 1993, and that increase was a spectacular success because it was accompanied by the introduction of the internal market, which generated a huge increase in productivity.

Generally agreed tables have been published for productivity in the health service, derived from Department of Health statistics, and they show that increase very clearly. The figures have been published since about 1985. I predict that, when the figures are published for the outturn from the latest increases, we will find that productivity has fallen dramatically. I would not mind betting that productivity could be negative for a time.

Mr. St. Aubyn

I know from my constituents, as I am sure that my hon. Friend knows from his, that fundholding general practitioners are horrified at how money that they used to spend wisely and effectively in delivering good health care is being wasted in the system. I even know of patients who have had their lives put at risk—in one case, a life was lost—because the treatment that they would have had under the fundholding system was denied them under the more bureaucratic system that the Government introduced.

Mr. Tyrie

The evidence is overwhelming that primary care groups are less efficient in delivering health care than GP fundholding. I believe that evidence from King's Fund research shows fairly conclusively that the introduction of GP fundholding increased productivity and reduced waiting times. Indeed, one of the reasons for the increase in waiting times has been the Government's ideological decision to get rid of GP fundholding, which was a profound mistake.

The Government should have delayed the announcement of all their spending increases until they had worked out a package of reforms to accompany them. They should have awaited the July spending review, but they did not, because pressure from No. 10 Downing street to spend the money became overwhelming. We have heard that the Prime Minister was receiving an almost daily note on how big the fiscal adjustment would be, so that he could make up his mind how much of it to spend.

The plain fact—although these things are covered up—is that the Prime Minister won the battle with the Chancellor on making a huge political gesture. Partly as a result, we now have a Chancellor who has taken some risks with the public finances and is spending money without knowing exactly what he can buy with it. He is not being prudent and he does not have a clear purpose: exactly the opposite of "Prudent for a Purpose", as it says on the cover of the Red Book.

Why has the Chancellor done this? It is because of the coming general election. It is obvious to the public that that is what is going on. They will know that there will be a price to be paid, no matter who wins the election, in higher taxes or worse.

8.7 pm

Mr. Nigel Beard (Bexleyheath and Crayford)

If the new Labour Government had started spending in 1997 to remedy the state of decline and neglect of our public services, they would have compounded the huge deficit in public finances that they inherited. Today, the Government would not have been discussing the future of the International Monetary Fund: the IMF would have been discussing the future of the Government.

When the first Labour Government for 18 years took office, they faced a world of globalised financial markets that could pass judgment on them instantaneously at the flick of a switch. A financiers' veto would have been far from democratic, but it could, nevertheless, have negated the Government's authority for the rest of the Parliament. There would have been no glad, confident progress on education and health and all the other public services, and the air would have been filled with denunciation, recrimination and righteous anger. None of that would have done Britain any good at all.

The decisive way in which control of monetary policy was passed to the Bank of England signalled to the financial community that the Government would not play political games with economic policy. By creating confidence, the new Labour Government sustained the authority and opportunity that they had gained at the polls to deal with deep-seated and long-neglected problems of our society and our economy.

First and predominant among the problems was that of the economy itself, with poor productivity derived from a lack of investment and innovation. The previous Government thought that Britain should find its way in the world as a low-cost economy, not using the inherent skills of an ingenious people but vying with the cheap labour economies of Asia and becoming the below-stairs society of western Europe. Their conduct of economic policy amplified the trade cycle to create two of the most severe recessions of the century. A cocktail of divisive ideology and incompetence has for ever characterised the Conservative party as the party of boom and bust.

That strategic weakness of economic policy has been the origin of many of the difficulties facing businesses in Britain: they could not be sure of market demand even three or four years ahead, so they were reluctant to invest either in expansion or in new technology. The long-term pay-off of research and development was considered too risky, so our innovation record and international competitiveness weakened.

The first and greatest economic achievement of this Government, which is in danger of being taken for granted, has been to create a climate of economic stability and an expectation of that continuing. With that foundation much else becomes possible, for both businesses and Government.

Having achieved that foundation, the Government have made another profound break with the past. They have not said that economic strength must dominate and overshadow every other aspect of life, but neither have they said that social policy should predominate, whatever the state of the economy. The Government have recognised that economic strength depends on social justice and a fair society, and that those factors in turn depend on the creation of wealth. That is why the minimum wage, the working families tax credit and fairness at work, to name but a few policies, have had a high priority, alongside reducing corporation tax, encouraging investment, encouraging research and development, and helping small businesses.

Another break with the past is pursued further in this Budget. It is the knowledge-based economy—the determination to build this country's economic strength by cultivating and applying the talents and skills of our people. It is an economic policy that works with the grain of individual fulfilment and ambition. Gone is the hopelessness of the low-wage economy, with competitiveness based on low cost and minimal safeguards at work.

The Government's vision is of a British economy based on people as its most precious asset. That is the meaning of the new deal, now expanded to all the long-term unemployed, which trains them for work and brings them in from the wilderness of poverty and rejection. That is the meaning of the emphasis on education, from infant schools to universities, and the meaning of lifelong learning. It puts an end to the doors of educational opportunity being slammed shut too early in people's lives.

The economic power to which our policies have given rise must clearly be directed at one of the top priorities recognised by people of all incomes and all backgrounds—the national health service. It has been clear for at least 20 years that the health service has been underfunded. For many years we told ourselves that although many countries, such as America, spent more on health, their services were not as good. Our NHS was better value for money, we told ourselves. Up to a point that was true, but it lulled us into a complacency that lingered long after the alarm bells should have been ringing.

The Tory Government's response to gathering problems was to move as near to privatisation as they thought that they could get away with. Far from being regenerated, the national health service declined. The principles on which it was founded were eroded, and despite the dedicated selflessness of its staff, improvisation to maintain the service predominated over modernisation. In that barren period, the NHS put out few new growth shoots, despite immense advances in medical thinking and techniques.

Mr. Hayes

Will the hon. Gentleman give way?

Mr. Beard

No, as I have only a short time in which to speak.

The Government's strategy, in which increased resources are considered to be the key to modernising a public service, is the right one, and the vast majority of Britain knows that. That is why the Opposition, after denouncing previous plans for increased spending as reckless, have now endorsed plans for spending even more. It is a death-bed repentance, but they should remember that death-bed repentances never avoid death. The British public know that to trust the Tory party with the national health service would be like Red Riding Hood trusting the wolf.

This Budget's strength lies in it completing the foundations of a stable and expanding economy, and providing the resources and priorities for reform and modernisation of our public services. It has rightly been widely acclaimed, but there is a ghost at the feast—European economic and monetary union, and Britain's relationship with it.

The present strength of the pound against the euro is damaging the prospects for manufacturing industry and is indirectly opening up a gap between the economic prospects of south-east England and those of other regions.

Mr. Hayes

Will the hon. Gentleman give way?

Mr. Beard

No, I will not.

The pound's strength does not reflect the relative strength of the British and continental economies, even allowing for their being at different points in the trade cycle. There could, therefore, be a sudden fall in the value of the pound which, though desirable for several reasons, would have a shock inflationary effect that would need to be counteracted.

The value of the pound is therefore a rogue element in the Budget calculations. Short of the Government losing the confidence of the financial markets—which is not likely, given their splendid record of economic management—there is little that they can do to influence the rate of exchange. The only means of remedying that impotence is membership of EMU.

Whatever else may be said, if the United Kingdom had joined in the beginning, the pound would not have surged to its present height; manufacturing would have been protected; and interest rates would be half their current level. The arguments against our reaping those benefits by joining EMU, when the convergence criteria are met, have to be much stronger than a denunciation of Johnny Foreigner and his devious ways.

There is a danger in viewing the Budget piecemeal.

Mr. Paterson

Will the hon. Gentleman give way?

Mr. Beard

No.

If we consider the Budget on a piecemeal basis, there is a danger that we will miss the wood and only see the trees. Taken as a whole, this Budget gives concrete expression to Labour's vision of a modernised Britain of the 21st century. It moves the process of modernisation into a higher gear. Its appeal goes beyond the self-interested analysis of gainers and losers from individual tax changes. In giving practical force to a vision of Britain in the 21st century, its appeal is to the latent idealism of Britain today.

Mr. Deputy Speaker

Order. Time is up. I call Mr. Nigel Waterson.

8.18 pm

Mr. Nigel Waterson (Eastbourne)

I am very pleased indeed to have the opportunity to contribute to this Budget debate, even though time is limited.

A couple of days before the Budget, I was reading the obituary of Bombardier Ferrebee. Who was he, and why did he rate an obituary in The Times? He was, of course, the bomb aimer who dropped the bomb on Hiroshima.

As I sat listening to the Budget, the thought came into my head that it reminded me of that famous radio broadcast that Emperor Hirohito made after the bombs were dropped. That was the first time that the Japanese public had heard the voice of their emperor. The broadcast contained the immortal piece of understatement, "There has been a development in the war that is not necessarily to Japan's advantage."

I thought of that phrase when I listened to the Chancellor's speech. The spirit of that long-dead Japanese speech writer seems to live on in the modern Treasury. Whoever wrote the Chancellor's speech was a master of the same sort of understatement—the best recent example of which was the Chancellor's comment in his 1997 Budget speech. In effect, he was staging a raid worth £5 billion on pension funds, but he said he was making other tax changes to "encourage" companies to invest profits in the future—an example of the Hirohito school of speech writing, if ever I saw one.

As time is limited, I shall touch briefly on some of the ways in which my constituents are disadvantaged by the Budget; in particular, I shall show how the Budget speech differs from reality. The best example is the national health service. Naturally, the Opposition welcome the new money for investment in the NHS, but we are concerned whether it will be put to the best use.

It is clear that the Government have panicked. A winter of pressures—problems with waiting lists and so on—has caused them to throw money at the problem rather than to think rationally about it. However, as we approach the winding up of the Budget debate, it has emerged—only a few days after the Budget speech—that the boast of 10,000 new nurses was really a repackaging of a previous announcement. That figure had been included previously. Furthermore, the boast about the percentage of gross domestic product to be devoted to health included the figure spent on private health care. That is complete hypocrisy—not only are the Government against private health care on principle, but one of their first acts was to abolish tax relief for private medical insurance for people over retirement age.

Mr. Hayes

As my hon. Friend has thoroughly studied the Red Book, he will be aware that even that inflated figure does not take the proportion spent on health to the amount that would be necessary to bring it in line with European averages. At one time, the Prime Minister said that was a pledge; then he said it was an aspiration. The Budget total is about 6.1 per cent. of GDP; but we need to spend 7.5 per cent. of GDP in order to reach that aspiration.

Mr. Waterson

My hon. Friend makes an excellent point.

In my local hospital, Eastbourne district general, there have been many problems during recent months. We have seen the resignation of the chairman and the chief executive, and there is still a shortage of nurses. Recently, the new chief executive told me that it was not really a matter of money, but of finding nurses to recruit. About 15 Filipino nurses were due to arrive last week to try to help plug the gap.

When I visited the hospital recently, I saw the dedication and hard work of everyone there, but I also noticed that almost none of the wards had an unoccupied bed. That was after the flu epidemic that caused so many problems. I also understand that we are now about 1,000 behind the waiting list target for operations. Politicians should not make silly, simplistic election promises about waiting lists—those who do so should go down with the ship.

Another important matter is the effect on transport. We have standstill Britain; a pitiful amount of new money is to be spent on transport. In my area, there is the shambles of the Polegate bypass. That scheme was all set to go ahead when we left office in 1997; it was postponed, although it is likely to start later this year. In the meantime, the Government have paid £5 million on account to the contractors not to build the road that they were supposed to build.

Another road, the new A22, is known as the road to nowhere; although it is almost finished, it cannot be joined up because of the bypass problem. The sum of £100,000 is being spent simply to guard it from vandals and others. If that is how that relatively small amount of extra money is to be spent, we cannot expect any great changes in standstill Britain.

The Budget will have an effect on older people—especially pensioners—in my constituency and elsewhere. Of course, we welcome the increase in the savings and earnings limits and in the higher winter fuel allowance. However, why is there only to be consultation over the new credit for pensioners? Surely the Government realise that there is a growing feeling of unfairness among pensioners—those who have made the effort to provide for their retirement are seen as second-class citizens under the Government's policies. As co-chairman of the all-party group on older people, I am constantly made aware of that sense of unfairness on the part of many of our pensioners.

Pensioners have already seen the abolition of the married couples allowance, of the widows allowance, of tax relief on private health care insurance and of tax credits on dividends. They have experienced the £5 billion raid on pension funds. On top of all that, they have seen a plethora of stealth taxes, for example on petrol. Council tax is going up by 8 per cent. in my constituency—nobody's pension is increasing by 8 per cent. How are pensioners to pay that increased tax?

Furthermore, pensioners in my constituency are receiving less in services, largely because of a Liberal Democrat-controlled borough council and a Lib-Lab pact at county level. They will pay an 8 per cent. increase when inflation is about 2 per cent. That is a stealth tax. Some older people in my constituency and elsewhere may have to dip into their winter fuel allowance simply to be able to pay the extra council tax.

Some of the Budget's small print was about basic banking services; the Chancellor mentioned that about 1.5 million people do not have bank accounts. However, in my constituency, we have the absurd situation that the Meads branch of Barclays bank is to close on 7 April—with no consultation with local residents or customers—merely because of a contraction in the banking network. Our Order Papers are awash with early-day motions about similar closures; Barclays alone is closing about 170 branches throughout the country.

The Meads branch is used by older people; they will not be able easily to go to the town centre to the remaining Barclays branch. If elderly people do not have bank accounts, they are dependent on their local post office. At the same time as bank branches are closing, the Government are introducing policies that will close many local post office throughout the country.

In conclusion, this Budget—like all the Chancellor's previous Budgets—exists on two levels. On the surface, it is all spin and good news, but when we consider the detail—even only 24 hours after the speech—we see that it is full of hidden traps; there are stealth taxes and disadvantages for people in my constituency and elsewhere. I have described how it will affect the health service, transport and older people—especially pensioners—in my constituency and in other parts of the country. Those are the realities, which will become increasingly apparent as the months roll on, of yet another Budget from a Chancellor who taxes more but delivers less.

8.28 pm

Mr. John Home Robertson (East Lothian)

There is something wonderfully implausible about listening to Tory Members, such as the hon. Member for Eastbourne (Mr. Waterson), calling for more public expenditure after all their years of talking a completely different language. It is even more implausible when the hon. Gentleman does so during the Budget debate after my right hon. Friend the Chancellor's announcement of massive increases in public expenditure—on the national health service and on education, to name but two.

This year was the first time for many years that I was unable to be in the Chamber to hear the Budget speech. When my right hon. Friend made his statement last week, I was in Stornoway in connection with my new duties as a junior Minister in the Scottish Parliament. However, my right hon. Friend might be interested to know that people in Stornoway were happy to hear reports of the cut in air passenger tax for people living in the Scottish islands. That was well received.

I welcome this opportunity to commend the Chancellor's skilful management of the economy, and to assure the House that the overwhelming majority of Scots do not subscribe to the peculiar brand of Scottish nationalist economics that we heard again from the hon. Member for North Tayside (Mr. Swinney). He called for more public expenditure and less taxation. That defies logic and invites ridicule. I hope he is aware that we are keeping a careful tally of nationalist spending commitments as they add up over the years. The Scottish school of economics is rather more realistic and rather less reckless. Indeed, we have had the best of Scottish economics from a Scottish Chancellor. I can say with absolute confidence that the Budget will command great respect in Scotland, not least because it provides for such substantial investment in the national health service and in education.

Unemployment in my constituency is lower than it has ever been in my 22 years as a Member of this place. Living standards are improving as both public and private investment grows. My right hon. Friend's stewardship of the economy is succeeding spectacularly to the benefit of all our constituents. However, as a Back-Bench Member here, if not in the other Parliament north of the border, I hope that my right hon. and hon. Friends on the Government Front Bench will not mind if I express a couple of mild anxieties. After all, that is our job.

First, important primary and manufacturing industries are suffering to a degree from the weakness of other currencies in relation to sterling. Obviously, that is the consequence of the Government's good management of the economy. However, there is legitimate anxiety about advantages enjoyed by importers and the disadvantages endured by exporters from the United Kingdom.

Mr. Hayes

Will the hon. Gentleman give way?

Mr. Home Robertson

No. I hope that the hon. Gentleman will forgive me, but I do not have much time.

The present situation tends to confirm my strong personal belief that it will be in the best interests of the United Kingdom to join the single European currency as soon as circumstances permit. Clearly they do not permit at present, for the reasons that I have illustrated. It will be to the benefit of our exporters especially and our economy in general, especially the manufacturing economy and our primary industries, if we are linked with the European single currency. I hope that it will be possible to make rapid progress in that direction.

My second concern is about the rights—I think that we should talk about the rights as much as the needs—of pensioners and older people generally. We owe a great deal to those who endured the second world war and the hardships of the post-war years. The extra £50 winter payment in addition to the £200 that my right hon. Friend the Chancellor has already made to those people, together with other measures, is a huge help and an appropriate acknowledgement of our debt of gratitude to them. Unfortunately, the baseline increase of 73p appears inadequate when it is considered in isolation.

I know that my right hon. Friend the Member for Coatbridge and Chryston (Mr. Clarke) will understand my point, especially in relation to former miners who are suffering from respiratory diseases. I welcome the fact that the Government have been able to provide funds to compensate these people. I wish only that we could move rather more quickly to pay out the money that has been made available for that purpose.

Thirdly, I hope that the Under-Secretary of State for Social Security, my hon. Friend the Member for Wallasey (Angela Eagle), will forgive the Scottish Minister with responsibility for fisheries for taking the liberty as a Back-Bench Member in this place of saying something about the peculiar predicament of share fishermen that has arisen recently. Share fishermen have always been able to claim benefit when their boats have not been able to put to sea for a period of days. That can happen as a result of bad weather, mechanical breakdown, the skipper having a hangover or for a multitude of other reasons. It is not the fault of the crew if their boat cannot go to sea. Hitherto it has been possible for people to claim benefit in those circumstances. It is vital that they should be able to do so at such times to support their families

It appears that there has been a recent change in the paying of benefit to share fishermen in the form of the jobseeker's allowance. A number of my constituents have drawn this matter to my attention. The system has changed and it has become a great deal more difficult for such claims to be dealt with. I have written to my hon. Friend the Under-Secretary of State for Social Security and I am grateful to her for her reply, but I reiterate that share fishermen have paid a high rate of national insurance contributions over the years and that they have a unique form of employment. They are not jobseekers in the strict interpretation of the term. From time to time they are prevented, by a range of circumstances beyond their control, from going to work. Their families should have the benefit of the support that they have paid for through their contributions. I hope that we shall be able to overcome this local or national difficulty, which has recently come to light in my constituency.

I am delighted to congratulate my right hon. Friend the Chancellor on a characteristic display of prudence combined with generosity, those two best Scottish qualities. He has made massive investments in the NHS and in education. It is essential that these investments should be translated into real improvement in those services. That is the task facing Ministers, NHS trusts and local authorities. I am sure that it will be picked up with great enthusiasm south of the border, as it will by my ministerial colleagues, Susan Deacon and my hon. Friend the Member for Strathkelvin and Bearsden (Mr. Galbraith), north of the border. The Budget presents great opportunities for investment and for improving services in our country. It is exactly what the people voted for in 1997.

8.38 pm

Mrs. Eleanor Laing (Epping Forest)

It is truly a pleasure to be able to take up the remarks of the hon. Member for East Lothian (Mr. Home Robertson). I mean that, because it is good to see him in this place. It is encouraging to know that he, unlike many of his colleagues, still considers it worth attending the Chamber, despite his membership of the other place north of the border.

Having paid the hon. Gentleman a compliment which he probably does not welcome, I must immediately criticise one of the first things he mentioned, namely, his theory that the Chancellor is the best Scottish economist. I must disagree with him. The best Scottish economist by a long way was, and always will be, Adam Smith, whose belief was that the country would prosper by having peace and low taxes. How right he was, and how right he still is.

It is a great pity that the Chancellor of the Exchequer does not appreciate the value of low taxation. By his actions, and from examination of the detail of the Budget, it is obvious that he wants the British people to believe that he believes in low taxation when what he delivers to them is far from that.

It had not been my intention to speak in the debate. However, because I spent the weekend in my constituency listening to what people were saying about the Budget, I feel an obligation to express their annoyance and anger about how the Budget will affect them. I shall mention two particular matters. The first is the dishonesty of the Chancellor's stealth taxes, and the second is the Government's obvious and complete lack of understanding of small businesses and how they work.

The stealth tax on which I shall concentrate is stamp duty. Many Labour Members may honestly believe that it affects only a small proportion of the population. In my constituency, that is not the case. The Chancellor has introduced an enormous increase in stamp duty for properties worth more than £250,000. In my constituency—this may genuinely surprise some Labour Members—£250,000 buys a modest, three-bedroomed family house. It is easy to understand who is being victimised by the Chancellor and about whom he simply does not care. The first problem that my constituents have with the Budget, and especially with stamp duty as a stealth tax, is that it is vindictive towards ordinary families.

The second problem is that the increase in stamp duty will obviously fuel an increase in house prices in the south-east. Of course it will; that is so obvious it is hardly worth mentioning. However, it seems that the Government have not noticed that fact—or perhaps they do not care.

Like all taxes, stamp duty—which does so in such a sneaky way—takes spending power away from the individual and gives it to the Government. They have estimated that the increase in stamp duty will produce £365 million for the Exchequer by 2003. That is £365 million that people throughout the country will not be able to spend in the way that they would have wished.

I come now to the affect that stamp duty will have on small businesses. They need flexibility and confidence, not more red tape and extra burdens. However, they constantly receive the latter from this Government and this Chancellor. Stamp duty affects not only domestic but commercial properties. If a small business's ability to invest and expand is burdened by extra stamp duty, it is obvious that the business itself is also burdened.

Stamp duty has another effect on small businesses. People who buy houses would, in normal circumstances, employ people to work on those houses. However, those people will now be less able to employ others—they will have less money to spend because they will give so much to the Chancellor in stamp duty. That leads to one obvious conclusion: the Government simply do not understand and do not try to understand small businesses.

I appreciate that the Chancellor pays lip service to small business. However, neither he, nor members of his Treasury team, nor most Labour Members have ever worked as small business people. [HON. MEMBERS: "Not so.''] If Labour Members have done so, I am willing to take interventions from them. Can they tell me that they know from personal experience what it is like not to know how much money one will earn by the end of the month, whether one can attract sufficient orders and how the business will go over the next few months? Do they know about the stress involved? Have they faced the risk of the family home being mortgaged to raise money to expand the business and to employ people?

In this debate, Labour Members have said that small businesses fuel the economy. That is true. The hon. Member for Coventry, South (Mr. Cunningham) said that. His words were correct, but the arguments that he used to back his case were wrong. The Government clearly do not understand small business. If they did, they would surely not, for example, have increased stamp duty or be pursuing IR35, which entirely undermines small entrepreneurs who are doing their very best to work for themselves and their families and to use the skills that the education system has given them for the good of their communities, their businesses and the country as a whole. The Government pay lip service to those entrepreneurs—but they say one thing and do another.

Another aspect of the Budget and the Prime Minister's statement the following day angered the constituents to whom I spoke over the weekend. They listened to the Chancellor and read Wednesday's newspaper reports of what he said, but they know that they did not discover what he will do and what the Budget's real effect will be on them. Several of them told me, "Listening to the Budget statement might be entertaining, but it is what the Chancellor does not say that counts." Conservatives Members know that it is only a week or 10 days after the Budget that the people of Britain begin to understand what it will mean for them. They understand not because of what Treasury Ministers say, but because of the analysis carried out by Conservative Members.

What annoyed my constituents most of all was that the Prime Minister gave the wrong figures on how much the Government intend to spend on the health service in the coming years. The Prime Minister stood at the Dispatch Box and gave the wrong figures, and nobody on the Benches behind him helped or corrected him.

I would never suggest that the Prime Minister would deliberately mislead the House, but I suggest that it is even more worrying that he did not realise that he was misleading the House. He cannot have it both ways. I cannot suggest that he knowingly misled the House, so it is obvious that he unknowingly did so. That has considerably worried my constituents because although the vast majority of them disagree with the Chancellor and the Prime Minister, they should at least be confident that when the Prime Minister gives a figure, it is the truth. How sad that that is not the case.

8.46 pm

Mr. Tony Colman (Putney)

After the rather mealy-mouthed comments of the hon. Member for Epping Forest (Mrs. Laing), may I say that on the streets of Putney and Roehampton there was a great welcome for the Budget, particularly for the new money for education and the health service, and we are seen to be delivering on our election promises.

My constituents want us to be elected for a second term, and they want to ensure that, unlike the Tories, who appear to be committed to reducing spending on the NHS with their so-called guarantee of tax cuts, we are committed to increasing health service spending. Indeed, we are the only party with that commitment. Money for the health service is particularly important to my constituents, who want to ensure that the new community hospital at Queen Mary's university hospital in Roehampton is completed. That will happen only if there is a Labour Government.

I want to draw to the attention of the House the Budget's strengths in wealth creation. I support the measures that will encourage enterprise in the British economy; this is very much a Budget for enterprise. I state an interest in that I am chair of the Share Issues Group—I hasten to add that the position is unpaid—which has met the Financial Secretary to the Treasury several times to discuss issues concerning share options. I am particularly drawn to those matters because in my time as a managing director I took great advantage of the available share options schemes. It is important to reward people at all levels within a business, and the initiatives in the Budget are excellent ways to ensure that we will do so.

Mr. Hayes

Will the hon. Gentleman give way?

Mr. Colman

No, I am afraid that I do not have time.

I draw the attention of the House to the new enterprise management incentives scheme, and the increase from 10 to 15 in the number of employees in small companies who are eligible to join the scheme. That will help in the recruitment and retention of key employees by small higher risk companies.

Mr. Hayes

rose—

Mr. Colman

I shall not take interventions because we are very short of time.

The access to tax advantage share options of up to £100,000 is obviously important to ensure that those who take the risk of getting involved in start-ups are able to benefit.

Warming to my theme, I am particularly concerned about the all-employee share plan schemes, which the Budget has made attractive to companies of all sizes and much easier to operate. I was particularly pleased that the save-as-you-earn share save scheme remains in the armoury of available options. That has been the bedrock of saving by employees because it ensures that they are all able to save in a building society on a failsafe basis and purchase shares at a pre-agreed price. More than 1,200 companies currently have an SAYE share save scheme and 1.75 million employees are in those schemes. A second scheme that will continue under the Budget is the company share option scheme. Currently, 3,570 companies are part of the scheme, covering 450,000 employees.

Most important is the confirmation provided in the Budget that we are going ahead with the new all employee share plan, the details of which are set out in Inland Revenue REV3. I shall outline the advantages of the new scheme. Employers can give employees shares worth up to £3,000 each year, free of tax and national insurance. Out of their pre-tax salary, employees can buy partnership shares up to a maximum value of £1,500 a year, again free of tax and national insurance. Employers can match those partnership shares by giving employees up to two free shares for each partnership share that they buy. That is an extremely important means of encouraging share ownership.

Initial indications are that 350 employers in the United Kingdom are expected to set up such a scheme in the coming months, as it comes into operation. The result will be that an additional 500,000 employees in the UK will, for the first time, own shares in the company for which they work. That number is expected to grow to about 2.5 million over the next three years. I hope that hon. Members on both sides of the House applaud such an increase in employee share ownership—in fact, I see the Opposition spokesman, the hon. Member for Arundel and South Downs (Mr. Flight), nod in agreement. It is nice to see Opposition support for the Budget.

A cause of concern that has been the subject of a meeting I had with Treasury representatives is national insurance charges and unapproved share option gains. It should cause the whole House concern, as it does the Government. I remind the House that the concern centres on dot.com companies, which often encourage employees who have scarce skills to join them, not by paying high wages, which they cannot afford, but by offering large unapproved share option gains. I applaud such a means of tackling the scarcity of skilled individuals, for if we do not solve that problem, such companies will move abroad, especially to the United States.

The Government have proposed a consultation on three options to resolve the problems. The proposals would allow a voluntary agreement between employer and employee that: All the employer's NICs liability on unapproved share option gains will be met by the employee, or Part of the employer's liability on these gains, or the excess above a predetermined amount, will be met by the employee, or The employer's NICs liability is to be met by the employee but, by mutual agreement, the employer could take on the statutory liability at the time it is incurred. It is extremely important that we resolve that issue. My hon. Friend the Financial Secretary to the Treasury tells me that the timetable for the consultation is extremely limited and that he looks forward to introducing measures—perhaps in the other place—to deal with the problem.

Labour Members might be surprised by my paean of praise for share options, but it is important to realise that share options can spread wealth to everyone who works in industry and commerce. In California, even those who have played only a modest role in a dot.com start-up—perhaps as a cleaner or a secretary—can become dollar millionaires through the success of the company in which they have invested their time and effort. It is not enough to own shares in a pension fund, at arm's length; we need the hands-on experience of share ownership in the company for which we work, so that we get behind it.

One of the great problems of capitalism is that there are not enough capitalists. I was in Atlanta recently and picked up a book by one Jeff Gates, called "The Ownership Solution—Towards a Shared Capitalism for the Twenty-First Century". I recommend it to the House. The author argues that we need to ensure that there is more share ownership across the entire community.

James Wolfensohn, the president of the World bank, has said: Ownership is the sine qua non of sustainable development.

Bob Swann, who is president of the Schumacher Society, has stated: The community we all long for can't be realised with only 6 per cent. of the population owning shares. This has to change. The Budget is a first move to ensure that we are re-engineering capitalism for inclusion. I recommend it to the House.

8.55 pm

Mr. Tim Collins (Westmorland and Lonsdale)

The hon. Member for Putney (Mr. Colman) will forgive me if I do not follow his interesting remarks on share ownership, given the lack of time available. I entirely agree with him as to objective, although there will inevitably be some differences between us about the method of achieving that objective.

I shall make some general observations about the Budget, before turning to specific constituency points. The hon. Member for Bexleyheath and Crayford (Mr. Beard) said earlier that he would speak about a ghost at the feast. There seem to me to be three or four ghosts at this feast, of which the first and perhaps most worrying is the collapse in the savings ratio.

The Chancellor and the Prime Minister are fond of speaking about the fact that the Budget and their economic management have laid the ground for strength and economic stability in the future, but nothing could more clearly indicate the way in which they are storing up trouble for the future than the fact that the savings ration has halved since 1997.

That was in direct response to the outright declaration of war against the pension funds, which the Government launched in their first Budget, with the £5 billion a year raid on pension funds; the abolition of PEPs and TESSAs—working systems—and their replacement with what can generously be described as an imperfect and untried ISA system, which is much less generous in its tax treatment; and a reform of the social security system, if it can be graced with that noun, which has resulted in a situation in which, I am told, unless one can be sure to retire with a pension fund worth £100,000, it is not worth saving at all through one's working life. That is the situation that the Government have produced.

The second ghost at the feast is the issue of economic growth. Why is it that as far ahead as the Red Book can project, economic growth under the Blair-Brown economic miracle is not expected to return to the level at which it was in the last year of the previous Conservative Government? Not for as far ahead as the Government can foresee do they foresee economic growth getting up to the level at which it was when there was a Conservative Administration in charge.

The third ghost at the feast is the Government's projection of a doubling of the balance of payments deficit—hardly an indication of a strong economy, soundly based for the future. In that context, I refer to the remarks that a Downing street spokesman—no doubt Mr. Alastair Campbell—is supposed to have made today about Sellafield in Cumbria. Whatever one's views about nuclear processing, that happens to be the single greatest generator of foreign exchange, bar none, in this country.

The spokesman said that it was now up to Sellafield to make its own case. That was an abdication of responsibility, an insult to more than 10,000 extremely skilled workers in Cumbria and an indication of a somewhat flippant attitude towards a very important generator of foreign exchange.

A filling station owner in my constituency told me recently that he takes in £1.8 million a year at his filling station, of which £1.7 million a year goes straight off to the tax man. He says that he might as well take down the BP sign and put up a sign reading "HM Inland Revenue".

The Budget contained yet another increase in petrol prices. We see an urban-based Government who have no recognition of the impact on my constituents and those of some of my hon. Friends, for whom the car is not a luxury or an option, but a necessity. In my constituency, some of the poorest people are two-car families. Both cars may be ramshackle, but that is the only way in which those families can access even the modicum of public services available in rural areas. In that respect, the Budget was extremely disappointing for people in south Cumbria.

Before I deal with other constituency points, I shall take up the charge that has been made by several Labour Members, that Conservatives can never advocate greater spending in their own constituencies because there is no such thing as waste under the Government. It is impossible to reallocate priorities and inconceivable that one could identify savings. Perhaps I can give the odd example of possibly being able to find a penny or two to spend more wisely elsewhere.

Let us consider the £1 billion a year extra that is being spent simply on administering government. The Chief Secretary, who is present, is the guardian of the public purse. Why not establish a rule that if three Cabinet Ministers travel from this country to the same meeting, they must travel on the same aeroplane rather than having one aeroplane each? That might save some money for more worthy causes.

What about the hundreds of millions of pounds that are wasted through the Government's mismanagement of asylum seekers? Huge amounts of public money are spent unnecessarily because the Home Secretary has lost his grip on his Department.

Police officers in my constituency, to whom I spoke on Friday, are greatly worried about the reports that the cost of the inquiry into the events on Bloody Sunday 28 years ago could escalate to £100 million. For 2 per cent. of that sum, Cumbria constabulary could be removed from its current predicament of having to sack police officers, shut police stations and withdraw services from people across that rural county. I do not believe that a historical inquiry needs to spend 50 times more than the amount of money that would relieve the policing problems of my constituents and the county of Cumbria.

It is a question of priorities. My hon. Friend the Member for Eastbourne (Mr. Waterson) referred to the saga of a bypass in his constituency. It was postponed by the Government, although it was ready to roll when they came to office. He said that £5 million had been paid to a contractor so that he would not build the bypass. The bypass will fortunately be built.

However, in my constituency, we still await the completion of the A590 High Newton and Low Newton bypass. Sadly, that bypass, which is the Barrow-in-Furness industrial area's only link to the rest of the country and passes through two stone farm buildings, despite being a dual carriageway for the remainder of its length, is needed to avoid a death trap. Only 10 days ago, someone was again killed on that stretch of road because the Government postponed the construction of a bypass that is desperately needed. Yet again, the Government make false economies, and believe that they save money while they rack up costs in lives and public expenditure by not spending wisely.

Let us consider the national health service. The tentacles of the Inland Revenue reach Cumbria, and plenty of money is siphoned out of south Cumbria. Sadly, less of it is recycled. The Westmorland Gazette has run an excellent campaign called Heart Line, which draws attention to the fact that the number of people who wait for more than a year for heart bypass operations has more than doubled in south Cumbria since the Government were elected. One gentleman, Mr. Gordon Graham, who fortunately had his operation last week, had to wait almost 18 months for a life-saving operation, yet the Government boast about the billions of pounds that they announced last week for the NHS.

Six months ago, £50 million was announced for heart care, but none has yet been allocated to the north-west, even though the region has the worst heart problems in the country. We do not want announcements; we want to know that the money will be transferred from the sticky fingers of the Whitehall bureaucrats to the people who need to spend it.

I want to quote from a copy of a constituent's letter to the Prime Minister. The Chancellor is present, and he ought to hear it. My constituent lives in Grange over Sands. Her letter to me states: Find enclosed photocopies of my tax forms and pay slips. The most recent tax forms show that I will be thousands of pounds down in the taxable allowances I would normally get, starting in the tax year April 2000. This is … a result of decisions made by your government. She explains that she is a teacher at a comprehensive school, where she works five days a week. She is a care worker on Friday evenings, Saturdays and Sundays. How on earth, she asks, can she be expected to manage on a cut of £70 a month?

The Chancellor should note these words: I voted for a Labour Government for all the years the Conservatives were in power and so far I have never been poorer … I will never vote Labour again. You are simply a bunch of liars. Millions of others will never vote Labour again.

9.5 pm

Mr. Ivan Henderson (Harwich)

I can tell Ministers that the head teacher of Clacton County high school, whom I met today, was very pleased with the £50,000 that the Budget has given his school.

My constituency contains a mixture of leisure industries, small businesses, large businesses and resorts. It also contains all the problems that resorts bring with them—for instance, areas of severe deprivation. The fact that the Government are working with a task force to examine some of the problems of seaside resorts has been welcomed by those living in what could be described as pockets of deprivation.

The Chief Secretary to the Treasury, my right hon. Friend the Member for Oxford, East (Mr. Smith), will know of the problems in my area. We launched the new deal there because unemployment was so high—owing, I might add, to the shipping policy of the Conservative party. It decimated the British shipping industry. The Government have introduced a tonnage tax in an attempt to repair the damage.

Let me return to the subject of education, and point out that the £50,000 provided for the head teacher in Clacton was in addition to the provision of an education action zone covering 23 schools in my area, £3 million for the next three years and the promise of a language status college for the Harwich school. Pupils there are looking forward to working with those in other countries, learning Dutch, Chinese languages and Spanish.

Mr. Hayes

Will the hon. Gentleman give way?

Mr. Henderson

No, because I do not have much time.

Seaside resorts contain many retired people. More than 30,000 pensioners in my constituency welcome the minimum income guarantee, and 12,300 welcome the Government's introduction of free television licences. Those pensioners also welcome the winter payment of not £20, not £50, not £100 but £150 that they will receive. The other day, a pensioner in my constituency reminded me that pensioners had to wait for seven days and freeze before they got £10 out of the last Government. Now they have £150 automatically, irrespective of weather conditions.

Pensioners in my constituency also welcome the additional funds for rural transport. The links between Harwich and Clacton were withdrawn under the Conservative Government because of their deregulation of bus services. Now pensioners can benefit from bus services in seven villages, following their previous isolation; moreover, from next April they can benefit from bus services with no charge for bus passes and half-price bus fares. More than 30,000 pensioners will benefit.

Mr. Russell Brown (Dumfries)

Free bus passes for pensioners are a godsend. Does this not open up avenues to which pensioners have never had access before? Pensioners who have felt trapped in the past will now be able to travel thousands of miles.

Mr. Henderson

My hon. Friend is dead right. Pensioners in my constituency lost that choice under the last Government. Indeed, pensioners in the constituency of the hon. Member for North Essex (Mr. Jenkin) have gained from the establishment of transport links in several villages, from Manningtree to Clacton. They have written to me to congratulate the Government on restoring those rural transport links.

My pensioners know that the previous Government, not this Government, withdrew the wages link with pensions. My pensioners know who abolished free eye tests—not this Government, who restored them. My pensioners know which party put value added tax on fuel—not the Labour Government, who made it as low as they possibly could. The Conservative party deregulated bus services and left my pensioners without services, but this Government have put more money into rural transport to make it much easier for them to get to towns around my constituency.

9.11 pm

Mr. Matthew Taylor (Truro and St. Austell)

Over four days of debate the parties have set out their election platforms, and none more clearly than the Conservatives, who have responded to the Budget and will seek to fight the election with claims of a tax-cutting agenda. However, those claims have been revealed to be entirely incredible on four grounds. First, when presented with health and education increases, for which they did not ask, they merely rolled over and accepted. There is no argument that health and education need that money, but equally no Conservative Members argued for those increases before the Budget—they argued for tax cuts. There is no credibility there. Their credibility falls further away if we read their policy documents, which argue for extra money for roads, police, prisons and the Army. The list goes on.

The Conservatives also have no credibility because we are about to hear from a shadow Chancellor who argues against the very tax increases that he started to implement when he was a Treasury Minister—cutting mortgage interest relief at source and the married couples allowance and introducing the fuel tax escalator. There is no credibility there.

The fourth reason why the Conservatives have no credibility is also the very reason why the British public have remained mystified for three years about why they have not seen the improvements in public sector services such as health and education that they might have expected. In fact, the Government have got rid of the Tory deficit—£28 billion in one year—which they inherited. It was a record deficit when the shadow Chancellor was at the Treasury.

The tax increases which have been imposed—the Government made a nonsense of themselves by pretending they had not happened—have closed the deficit gap—as, indeed, the Conservative Government planned to close it through tax rises as well. It has been closed, but as a result the extra money has not gone into public services in substantial amounts. The tax increases have paid for the deferred taxation to which the previous Conservative Chancellor frequently refers, the deficit run up by the shadow Chancellor and his hon. Friends.

Only now, with the deficit closed, are the Government starting to put serious money into some public services. However, the problem is that they have deceived the public by claiming increased funding that did not really take place. That is Labour's credibility problem. If there is any startling element in the Budget, it must be the fact that Ministers keep a straight face when they talk about "massive improvements" and increases of £2 billion for health and £1 billion for education, when only a week ago they were telling us that they had put £21 billion into health and £19 billion into education. One or the other is not true, and we all know that those earlier huge increases were not true. They never existed—they were funny money, which is why the public services did not receive them. If they were true, Labour Members could not boast of the £2 billion for health today.

Having said that, at last we are talking real money. Now the health money is real, not funny money. It happens to be the money that we advocated for the Budget—what we proposed, to the penny. We shall not criticise that proposal. During debates in the past few weeks some Labour Members have said that our comments on health were carping, but I do not know what more we can say. We acknowledge that the Government are right, it is the right amount, it is being put in now and it will make a difference. We think that the money should have been provided earlier, but when we argued for that we were told that we were being unrealistic. What was unrealistic one week is prudent this week, but we welcome it none the less.

Labour Members must understand that sticking to Conservative Budget proposals in the early years of this Parliament for longer than was needed, stacking up an election war chest, has resulted in the problems in health of which we are all too well aware. People have not had treatment when they needed it, and some people have lost their lives as a result. It has been bust and boom in the public services, even if the Chancellor can rightly say that he has avoided that in the economy.

We are also starting to see real money for education, but it is not sufficient for the changes that Liberal Democrats would like. It will not guarantee average class sizes of no more than 25 in primary schools. It is certainly not sufficient to abolish tuition fees in England and Wales, as they will be in Scotland thanks to the Liberal Democrat influence in government there. It will not be sufficient to increase higher education funding as a proportion of national wealth, which has been slashed since Labour came to office.

Most significantly, the money will not be sufficient to reach the proportion of our national wealth spent on education under the Tories. That is the extraordinary thing about the Labour record on education. Labour pledged to raise the proportion of wealth spent on education, but in fact it has been cut.

In the Budget debate last week, the Secretary of State for Education and Employment claimed that next year the proportion of national wealth spent on education would reach 5 per cent. compared with the 4.9 per cent. inherited from the Conservatives. That sounds rather good, but when we look at the figures it turns out not to be true. We asked the House of Commons Library if it could come up with that figure, but the answer was no. We phoned the Department for Education and Employment and asked it how it had come up with that figure, but it did not know. It suggested various possibilities, but when we said that none of them seemed to work, it said that we were right. We asked the Library to ask the Department for Education and Employment, and it could not come up with a figure either. It seems that an apology is due to the House.

The Secretary of State for Education and Employment has given a figure that not one official or the House of Commons Library can substantiate. The Government will not meet the 5 per cent. figure next year. Indeed, they will be at least a couple of points short. Over the Parliament, on average they will be short of what the Conservatives spent. Not one single year so far have the Labour Government given an increase of the size provided each year under the previous Prime Minister.

Education has certainly not been the Government's priority. Why is that, and why have pensioners been short-changed? The Government talk about an increase in pensioners thresholds, but that will not come in for a year. They talk about a review of the amount of savings that pensioners are allowed, but any proposals will not come in for several years. If pensioners are lucky enough they will get 75p on their basic pension, but a woman with a low record of payments will get less than that.

The Chancellor likes to include the £50 extra winter fuel payment, but we should not forget that it is not on the terms suggested in the briefings: it is a household payment, not an individual payment, so it does not add anything like £1 a week on top of the 75p. Why have the Government done that? There are two possible answers. First, they did not mean it when they said in their manifesto that they wanted pensioners to share in the growing wealth of the economy. Even allowing for the heating allowance—the one payment that pensioners will get in the coming year as well as the 75p—pensioners will share in only half the growth in the economy and a third of the growth in average earnings. That is not pensioners sharing in the growing wealth of the economy.

Secondly, the Chancellor has attempted to put money into health at the same time as making a 1p cut in tax. Therefore, he could not give the amount that is actually needed in education and, even more important, had to raid the social security surplus, giving £2 billion to health, which meant that it was not available for pensioners, who lose out. Labour Members know that that is true and how angry pensioners are. I hope that they are making that message clear to the Chancellor. They have time to try to retrieve the situation and to show that the Government believe in the state pension.

A great unspoken element of the Budget is the high pound. There are the problems at Rover. There were 120,000 job losses last year. Exports are down 9 per cent. Imports are up 10 per cent. From November to now, the predicted trade deficit has doubled from £10 billion to £20 billion—a record. The Chancellor had nothing to say about any of that. He is willing to let jobs go in farming and manufacturing. He has forgotten that he has a task beyond tax and spend: to look after those in real jobs in those areas.

9.20 pm

Mr. Michael Portillo (Kensington and Chelsea)

I begin by welcoming the right hon. Member for Ashton-under-Lyne (Mr. Sheldon) back to the House.

I congratulate the Chancellor of the Exchequer. There is no denying that he is a clever fellow, but I congratulate him in particular on his luck: he is a lucky Chancellor. He did not invent the British recovery. The economy has been growing since 1992. Unemployment has been falling since 1993. He did not invent either the fantastic performance of the American economy. Nor did he invent the recovery in Europe.

When we listen to the Chancellor deliver any Budget, we see that he is well aware that he is clever, but it is not apparent that he is aware that he is lucky. He repeats the phrase "boom and bust" so often that I am afraid that he believes that he has abolished the economic cycle. Hubris comes before nemesis. Pride comes before a fall. Any Chancellor who thinks that he has abolished economic cycles has lost touch with the real world. That is when Chancellors make mistakes. No Labour Chancellor's career has ended in success. I do not suppose that his will end in success, either. Perhaps the Budget is the beginning of the end for the reasons that my right hon. Friend the Member for Haltemprice and Howden (Mr. Davis) and my hon. Friend the Member for Bury St. Edmunds (Mr. Ruffley) gave.

The Chancellor is never too old to perform new tricks. This year, he raised tax allowances and duties by the rate of inflation. That sounded even-handed, but it turns out that tax allowances that reduce the tax that we pay rose by a measure of inflation that was calculated as 1.1 per cent. The duty on petrol was raised by a different measure of inflation that came out at 3.2 per cent. The difference between the two raised £500 million in extra taxes for the Chancellor. Anyone watching, or any taxpayer who used such a trick when filling out a tax return, would receive a visit from the Inland Revenue before he could say, "Geoffrey Robinson."

When the Chancellor describes the Budget as "Prudent for a Purpose", people will have every right to ask what he means by that: how prudent is it and what is the purpose? This is the Chancellor who has attacked prudence whenever the British people have shown prudence. He attacks people who save. He has scrapped the married couples allowance and so attacked people who marry. Starting next month, couples will lose £200 a year. By scrapping mortgage interest relief, he has attacked those people who wanted to own their own homes and is costing them £225 a year.

Then the Chancellor attacked people who wanted to make provision for themselves in pensions. The average 30-year-old will have to invest £200 extra a year to make up just for the tax that the Chancellor has taken out of people's pension funds.

The Chancellor said that this would be a Budget for hard-working families. However, new figures—independent figures—from the Library released today show that a typical working family is already paying £670 extra a year under Labour. As the hon. Member for North Tayside (Mr. Swinney) said, that includes the punitive tax on petrol. Yet, Labour Members still have the gall to pretend that working families are paying less tax than at any time since the Government of my right hon. Friend the Member for Old Bexley and Sidcup (Sir E. Heath), who is in the Chamber.

The Chancellor repeated that ludicrous claim on Sunday, on the "Breakfast with Frost" programme. The only family that is like that—the mythical Brown family—is a family that does not smoke, does not drink, is not married, does not drive a car and does not even have a local council. The Chancellor's claim to be cutting tax on families is pathetic. No one believes it, and he should at least come clean and admit that it is absolutely bogus.

If the Chancellor is out of touch with families, he is out of touch with the new economy, too. In the global economy, highly mobile individuals and highly skilled people will seek out the low-tax environment and the low-tax Finance Ministers wherever they can find them on the face of this globe.

Mr. Derek Twigg (Halton)

Will the right hon. Gentleman give way?

Mr. Portillo

Not on this point; sit down.

The Chancellor has become wholly insular.

Mr. Twigg

Will the right hon. Gentleman give way?

Mr. Deputy Speaker

Order. The right hon. Gentleman has stated that he is not giving way, and that should be enough.

Mr. Portillo

The Chancellor has become a Canute-type figure, wishing away the tide of global competition and closing his eyes to the threat to the London stock exchange that is posed by the lower rates of stamp duty in other markets. He ignored the threat to gambling revenue from internet gaming. He failed to see that higher tobacco might reduce revenue and boost smuggling, but he has pressed on regardless.

Now we come to the infamous IR35. In this Budget, the Chancellor doubled his estimate of how much that tax would raise—and so we must now double our estimate of how bad will be the brain drain and how bad will be the damage to Britain. IR35 is one of the taxes that this Chancellor of the Exchequer never even announced in the House of Commons. This year, he showed at least some consistency by not announcing another stealth tax that also is aimed at the new economy and that also sounds like a character from "Star Wars". This year's IR35 is called BN2J. BN2J is the Chancellor's stealth tax on British world-beating companies and an attack on double taxation relief.

The world's largest accountancy firm said that BN2J will make the United Kingdom one of the least attractive locations for international companies. [Interruption.] All that Labour Members can do is to jeer at the world's largest accountancy firm. They jeer because the Government do not realise that, in the new economy, the choice will not be between lower taxes and better public services. In the long run, taxes must be low enough to attract investment from all around the world, so that we can fund better public services. The Government are taxing more and regulating more, and Britain is headed in the wrong direction.

As for the Budget speech, I say, as my hon. Friend the Member for Louth and Horncastle (Sir P. Tapsell) said: the Chancellor devoted so much work to the things that did not appear in his speech. If he had announced the taxes clearly in his Budget speech, he would have been forced to admit that taxes have increased by a net 8p under this Government—a 9p up, 1p down Budget. We know that this is a Chancellor who dispenses with tradition. However, now he has dispensed with the ultimate tradition of announcing Budget tax rises in his Budget speech. Moreover, all those tax rises have been introduced by a party whose Prime Minister promised not to increase taxes "at all".

Mr. Barry Gardiner (Brent, North)

I am grateful to the right hon. Gentleman for giving way, particularly on that point about not increasing taxes. He and his leader have guaranteed that they would give away £15 billion in tax cuts to the richest members of society. What effect would that have on public services?

Mr. Portillo

We have made no such pledge. I do not know what the hon. Gentleman is talking about.

The tax rises were introduced despite the fact that we had been promised no tax rises. Labour Members now like to claim that the Prime Minister never said that, but they should reflect on the fact that they would not even be in the House today if he had not told the British people that. He has not fulfilled his promise.

There are many other prime ministerial promises that he has not fulfilled either. He said that class sizes would be smaller, but they are larger today. He said that waiting lists would fall, but the waiting list to get on the waiting list is double today. He said that he would be tough on crime but, for the first time in six years, crime is rising again in this country. [Interruption.]

Mr. Deputy Speaker

Order. I must plead with the House to come to order. The right hon. Gentleman is addressing the House and there should be no private conversations. [Interruption.] Order. That goes for Mr. Bercow as well.

Mr. Portillo

We have heard promises, promises, promises from the Government. For three years they have been a promising Government, but those promises look pretty pale and washed out today.

It turns out that the Chancellor is not so much clever as too clever by half. The press and the public now do not believe a word of his Budget. Even the BBC chose to advertise their Budget coverage by saying that it would be an analysis of everything the Chancellor won't be saying.

The Sun newspaper said that it was a Budget that would need the seven-day test before judgment could be passed. It has indeed been a seven-day wonder. Today, on the seventh day, let us review where we have got to: day 1, the CBI said that this was not the Budget that they had been hoping for; day 2, a double taxation measure in the Budget's small print was exposed as costing British business billions of pounds; day 3, more small print was exposed, with a massive hike in company car tax; day 4, contrary to what the Chancellor said in his Budget speech, figures showed that the net increase in the Budget was £1.4 billion of extra taxation; day 5, we had the revelation that different rates of inflation had been used for computing allowances that benefit people from those used for duties that people have to pay; day 6, the Health Secretary admitted that the 10,000 new nurses announced by the Chancellor were not 10,000 new nurses at all, but a reannouncement; day 7, which is today, new figures have shown that the average burden of taxation on a typical family is £670 extra a year under Labour. The Budget has unravelled. It is not so much a seven-day wonder as another demonstration that a week is a long time in politics.

Mr. Beard

When my right hon. Friend the Chancellor has proposed increases in spending on the health service in previous Budgets, the Conservatives have denounced it as reckless. Now the Government propose to spend even more, the Conservatives endorse that spending.

Mr. Portillo

Another Member who cannot get his facts right. We never denounced the increases in health spending.

I am coming to the issue of health. The Prime Minister came here on Wednesday and delivered a mass of gobbledegook about the health service. It was the most embarrassing performance from a Prime Minister in the House of Commons in living memory. It was extraordinary. The Prime Minister who had announced enormous increases in health service spending gave us a demonstration of how to snatch defeat from the jaws of victory.

Mr. Ivan Henderson

rose—

Mr. Portillo

The hon. Gentleman might learn something if he keeps his seat for a moment.

We welcome the extra money for health and education and we are committed to good public services, but we want good value for money.

We have been promised so much by the Government. We were promised huge results from the first comprehensive spending review, and it turned out to be a comprehensive spending failure. Now, at least if the national health service turns out not to improve at all, we will know who is to blame. The Prime Minister has taken responsibility personally for this. The Prime Minister is running things—just as he did with welfare reform, and he ran that straight into the sands.

I re-emphasise that we support the extra money on health and education. [HON. MEMBERS: "Oh!"] Oh yes. However, we do not support all the Government's record on public spending. We do not support the tens of millions of pounds that the Government are spending on scrapping the pound sterling when the moderate majority of people in this country want to keep the pound. We do not support the hundreds of millions of pounds incurred by the Government by making Britain into a soft touch for asylum seekers. We do not support the £1,000 million pounds extra that the Government are spending on running Whitehall Departments.

We do not support a £32 billion increase in social security spending, which comes from a party which said that it would not have to increase taxes because it would take all the money from reducing welfare bills.

Several hon. Members

rose—

Mr. Deputy Speaker

Order. The right hon. Gentleman does not want to give way. A lot of noise is coming from those on the Government Benches. I do not want to hear them again.

Mr. Portillo

This was the Chancellor's fourth Budget. Over the previous three Budgets, the Chancellor has built for himself a reputation for slipperiness and for obfuscation. [Interruption.]

Mr. Deputy Speaker

Order.

Mr. Portillo

The Chancellor has become famous for his fine delivery on the day and his non-delivery after that.

For those who were on the look-out in the Budget for more tricks than treats, it entirely lives up to those perverted expectations. The Chancellor talked of prudence, but he has flouted his own rules for developing responsible public spending plans. He has committed Britain to returning to borrowing even if the economy continues to grow without interruption. He has talked of helping pensioners, but he has abolished their married couple's allowance and the additional age allowance that applied to older people.

The Chancellor claimed to be helping single parents, but he abolished the personal allowance on which single parents rely. He boasted of helping families, but he has swept away their tax allowances and he has loaded duties on to families' essential weekly spending. He posed as the friend of business while managing to increase problems for the old economy, and he has piled on extra taxes to make sure that we keep the new economy at bay. His slogan was "Prudent for a Purpose", but he has cut the ground from all those people who have been prudent with the purpose of providing for their future.

After so much twisting and spinning, the public are awake to the Chancellor's tricks. After so many launches and relaunches for the NHS, nobody expects anything now beyond political grandstanding and jobs for the boys. This is indeed a Chancellor who taxes more and delivers less.

9.39 pm

The Chief Secretary to the Treasury (Mr. Andrew Smith)

Before I start, Mr. Deputy Speaker, I have to draw the attention of the House to the fact that there have been two minor amendments to the original Budget resolutions as they now appear on the Order Paper. These are to take account of representations to widen the scope of the provisions affected.

First, on resolution 28—concerning the gift of shares to charities—the original proposal, announced in the pre-Budget report, was to allow only gifts of listed shares to charities. Following representations on the proposal, an extension to a wider range of shares and securities was announced in the Budget, and that is what is in the Order Paper.

The provision on the tax treatment of acquisition, disposal or revaluation of certain rights in resolution 41 has been widened to allow tax relief for all indefeasible rights to use a telecommunications cable system and not only the international submarine ones mentioned in the original wording. Both changes are designed to widen the scope of the new tax reliefs, and should be welcomed by all hon. Members.

Unlike the shadow Chancellor, it will not take me 13 minutes to get to the health service. Nothing could have been clearer from the right hon. Gentleman's speech than that the Tories are the party of privatisation of the health service.

What is the Tory reaction to the Budget? For most of the week, the Tories put their faith in Mr. Wyman of PricewaterhouseCoopers. Mr. Wyman claims that billions of pounds—£8 billion to £10 billion, even—will be lost if we impose measures to tackle tax avoidance. The Opposition jumped on the tax avoidance bandwagon, claiming that Mr. Wyman right, yet when he came to the Treasury, he could not produce the name of one company, one piece of analysis or one figure to make his claims stand up. He promised to bring us the name of a company affected, but could not. Then we find that Mr. Wyman is no ordinary adviser: he was the former tax adviser to Neil Hamilton when he was the Minister for Corporate Affairs. That is the shadow Chancellor and the Conservative party: the tax avoider's friend.

In opening the debate, my right hon. Friend the Secretary of State for Social Security set out eloquently how we are building on the platform of stability that we have been creating over the past three years. We are able to meet our rules of fiscal prudence while at the same time releasing significant new resources for the nation's priorities: tackling child poverty, providing extra support for pensioners and encouraging work and enterprise. That was all widely welcomed by my hon. Friends.

We had an extraordinary reply from the hon. Member for Havant (Mr. Willetts), who said that he could understand a totally means-tested system or a totally universal system; what he plainly could not understand was a pragmatic mix of universal entitlement and targeted help to ensure that we help all pensioners while getting the most help to the poorest. Let us remember that by 2001 we will be spending an extra £6.5 billion on pensioners, and as a direct result the average pensioner household will get an extra £400 a year and the 1 million poorest pensioners will be £1,000 a year better off.

Of course there is more to do, as we have said, but there could not be a clearer contrast between Labour in government, tackling pensioner poverty, and the Tories in government, who allowed pensioner poverty to grow to obscene levels.

Now the shadow Social Security Secretary threatens to take away the winter fuel payment. When directly challenged by my right hon. Friend, he refused to say that the Tories would keep it. There could be no clearer illustration of the fact that the Tories cannot square their so-called tax guarantee with civilised levels of public provision. We heard nothing whatever from the shadow Social Security Secretary or from other Conservative Members about what the Tories would do—two brains, no policy seemed to be the message.

My hon. Friend the Member for Stalybridge and Hyde (Mr. Pendry) welcomed the Budget's health and education commitments in particular, and asked a specific question about the transfer of land for social housing that his local authority, Tameside, was completing ahead of Royal Assent to the Finance Bill. He sought the opportunity to present Tameside's case for exemption from stamp duty. I assure my hon. Friend that I shall look into the matter, and I will be pleased to give the council the opportunity to make that case.

The hon. Member for Northavon (Mr. Webb) asked why we had not put the extra money for the winter fuel allowance on the basic pension. The answer is very simple, and it was given by my hon. Friend the Member for South Thanet (Dr. Ladyman). It is that to do so would have no benefits whatever for the poorest pensioners. What is more, the course suggested by the hon. Member for Northavon would be subject to tax. It seems that the Liberal Democrats are as usual engaged in striking postures way beyond anything that they promised in their election manifesto. In reality, they do nothing to help those in greatest need.

I welcome the positive things about the Budget that my hon. Friend the Member for Liverpool, Walton (Mr. Kilfoyle) said. I thank him for his recognition of the good things that we are doing to improve the health service and schools in his constituency. This was a Budget for the whole country, and it is right for the Government to take positive action to ensure that the benefits are shared across all regions and nations of the United Kingdom.

In my hon. Friend's region alone, the new regional venture capital funds will help create £210 million in funding for investment. The north-west employment zone will provide tailored help for 6,500 long-term unemployed people. The three action teams for the region, each receiving funding of £1.5 million, will help match the unemployed to vacancies in a further three areas in the north-west.

The new deal has already helped 57,000 young people in the region where the constituency of my hon. Friend the Member for Walton lies. Moreover, 170,000 families in the region will benefit from the working families tax credit, and 200,000 families benefit from the minimum wage. I hope that the whole House will welcome the actions taken in a Budget that is a Budget for the whole country.

My hon. Friend the Member for Walton also asked about the structural funds and match funding. The right hon. Member for Caernarfon (Mr. Wigley) made the same inquiries in relation to objective 1 funding. I assure the House that those matters are being considered as part of the spending review. We fully appreciate their importance for regional regeneration, and we are committed to making them a success. However, we must not forget that we only got objective 1 status—for west Wales, the valleys and all the other regions—because people elected a Labour Government.

The hon. Member for Louth and Horncastle (Sir P. Tapsell) questioned the overall fiscal stance of the Budget. Not only does the Budget represent fiscal tightening as compared to the plans announced last year—to the tune of 0.3 per cent. of gross domestic product next year, and 0.2 per cent. of GDP the year after—but it keeps the public finances sound. This year's projected current surplus is £17 billion, while the projected figures for subsequent years are £14 billion, £16 billion, £13 billion, £8 billion, and £8 billion.

Sir Peter Tapsell

How is it possible to argue that this Budget is tightening the fiscal position and, simultaneously, to announce huge extra expenditure?

Mr. Smith

The answer is that we cut the debt interest payments that were costing this country £4 billion a year under the Conservative Government' s incompetent and profligate management. Conservative Members might like to contrast what we are doing with the public finances in surplus, with the debt of £50 billion that the previous Conservative Government ran up. That allowed debt as a share of national income to rise to 44 per cent. of GDP. We have cut it to 37 per cent., and the Red Book shows that it will fall further, to one third.

I turn to the contribution from my right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon), whom I too am very pleased to see back in the Chamber in such good health. My right hon. Friend praised the Budget's provisions for the national health service, as did all Labour Members and a number of Opposition Members.

My right hon. Friend also raised the needs of manufacturing, as did several other hon. Members. Our measures on capital allowances, on capital gains tax and on research and development credit; the £1 billion venture capital fund; and the small business and clusters measures that were welcomed by my hon. Friend the Member for Coventry, South (Mr. Cunningham) will all help manufacturing. However, the most important thing that we can do is to continue to deliver the essential foundation for lasting success and macro-economic stability so that manufacturers—like other businesses—can plan ahead against a backdrop of low and stable inflation, sound public finances and steady growth. That is the way to continue prosperity in this country.

I now turn to the comments of the shadow Chancellor. One might have thought that, in his first speech to the House as shadow Chancellor, we would have heard from him a vision of how the economy, or Britain, would have fared under a Conservative Government—perhaps that is optimistic, but some people would have expected it. Instead, we heard the usual mix of contradiction, confusion and extremism that is the current Tory party.

We heard a lecture on honesty from the man who drove through the 22 Tory tax increases that broke all their promises. We heard demands for a recognition of marriage in the tax system from the man who, when in office, made the deepest cuts in the married couples allowance. We heard a homily on low taxation from the man who, as Chief Secretary, increased the tax burden by the largest amount in history.

The truth is that the right hon. Gentleman and his hon. Friends would return us to the dismal days of the previous Tory Government, in which he played a part. All would be driven by their only economic policy: the irresponsible, incredible, uncosted and unfair tax cuts for the few to which they are committed through their so-called tax guarantee.

By contrast, we are building economic stability, with 800,000 more people in work, and take-home pay up by 10 per cent. during this Parliament. Their irresponsible guarantee to cut taxes irrespective of economic circumstances would, as the shadow Chancellor must know, risk driving up the deficit and returning us to the Tory boom and bust of the Major years. That was when 1 million businesses went under and tens of thousands of families were in negative equity, or losing their homes. By contrast, we are cutting taxes for hard-working families; we are introducing the 10p rate; the 22p basic rate; the working families tax credit, which the Tories would scrap; and the children's tax credit.

The Tories' tax guarantee would mean tax cuts only for the privileged few. We know that from the shadow Chancellor's own words in his list of commitments. This month, he confirmed the Tory policy of transferable tax allowances. That would cost about—[Interruption.] Does the right hon. Gentleman deny that is his policy? It seems that he does. I shall go on to the next commitment.

The right hon. Gentleman said that he wants tax relief for private medical insurance at a cost of at least—[Interruption.] Does he deny that that is his policy? I am tempted to ask him which of our policies he disagrees with, but I shall carry on with my list.

The right hon. Gentleman also said that he supported the abolition of capital gains tax. Does he still do so? [Interruption.] The Tory document of last October offers top tax rate cuts—[Interruption.]

Mr. Portillo

As the Chief Secretary has made three outrageous claims, will he please produce the sources for all of them?

Mr. Smith

If the right hon. Gentleman is now saying that he does not believe what he was previously on record as saying, we accept that he has done a U-turn and has changed his mind.

Mr. Portillo

Why will the right hon. Gentleman not give us the sources?

Mr. Smith

I cited the Tory document of October 1999 offering top tax rate cuts—£600 million for every 1p off.

Mr. Portillo

No, that will not do. The right hon. Gentleman quoted me. Give me the sources.

Mr. Smith

They are the 1997 manifesto, the right hon. Gentleman's personal manifesto the year before last and the Tory document of last October. I shall send him chapter and verse on every one of these claims. He cannot seek so easily to resile from the pledges that he has made.

The right hon. Gentleman and the Conservative party are committed to the few and not the many in this country. The Opposition's tax commitments would deprive the national health service of the resources that the Government have committed over the next four years. The Tory commitments mean that they cannot match the four years of funding that we have announced. The right hon. Gentleman—I suppose that he will challenge this—said: Gordon Brown can either reduce taxes or he can increase public spending. What I would recommend is that he use that money to reduce taxes. He is not challenging that one. He is making it crystal clear that he cannot fund the spending increases in health, education and other public services that the Government are bringing forward.

It is clear what the Opposition's policies would mean for the NHS. In place of a publicly funded NHS, they would have a privatised system where the care received would depend on the amount of money that the individual pays. Whereas Labour is investing to build a modern NHS, the Tories would reduce the NHS to a second-rate safety net.

Only last week the shadow Chancellor said: I do believe that in the long term you've got to create some new sources of finance, you know, may be companies can help with insurance schemes.

Mr. Portillo

What is the source?

Mr. Smith

The right hon. Gentleman asks for the source, and it is his interview on 19 March during GMTV's "The Sunday Programme".

It is as a result of our sound stewardship of the economy and public finances that we are securing rising living standards, reduced borrowing, lower taxes for hard-working families, extra support for pensioners and substantial investment in health, education and other public services. The increasingly clear choice before the British people is between a Government who are delivering a strong economy and a strong society and an Opposition who are wedded to irresponsible pledges and plans which simply do not add up. In contrast, our priority has been to cut taxes for hard-working families and ensure strong public services for the many, whereas Conservative Members peddle reckless tax cuts for the few.

It is a choice between a Government who keep our promises and an Opposition who could not keep theirs. In this debate Conservative Members have confirmed themselves as the incoherent in pursuit of the undeliverable. Our Budget is indeed prudence for a purpose. It is a Budget for the whole country. It is the Budget that people voted for when they voted Labour and a Budget of which we can all be proud. I commend it to the House.

Question put and agreed to.

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

1. (a) for zero-rating or exempting a supply, acquisition or importation;
2. (b) for refunding an amount of tax;
3. (c) for varying any rate at which that tax is at any time chargeable; or
4. (d) for any relief, other than a relief which—

1. (i) so far as it is applicable to goods, applies to goods of every description, and
2. (ii) so far as it is applicable to services, applies to services of every description.

MADAM SPEAKER then, pursuant to paragraph (3) of Standing Order No. 51 (Ways and Means Motions), put forthwith the Questions necessary to dispose of the further motions.