§ The Secretary of State for Education and Employment (Mr. David Blunkett)
In opening this third day of the Budget debate, I make no apology for repeating the accolades that are due to the Chancellor for the way in which he has ensured that our economy is offering prosperity, stability and success for the future. By choice, not by accident, and by conscious and deliberate action, the Government have taken the necessary steps to ensure that the fruits of stability and competence can be reinvested to bring greater prosperity in the years to come.
In lifting debt from the shoulders of the British people and in enabling us to pay our contribution in lifting debt from the developing world, we can ensure that we apply the people's money to the people's priorities. Those priorities, in health, education, regeneration and employment, are critical to a decent quality of life and to a future to be proud of.
In ensuring that we can invest in improved services, and in avoiding the failures of the past, we are turning the fruits of employment and the reductions in benefit payments into an ability to re-apply them for further employment and for reducing the need for those benefits. We have already spelled out the reduction, from 42p in the pound to 16p, of tax revenue spent on debt and on the payment of unnecessary benefits. That is a foundation on which we can build by reinvesting in social cohesion, and today I shall spell out some of the measures that we are taking to underpin that investment to ensure that quality teaching is in place and that we can recruit and retain the teachers that we need.
Having ameliorated the worst evidence of poverty through the measures that the Chancellor has taken since the election in 1997, and through the future measures spelled out in last Wednesday's Budget, we can now begin to concentrate on investment to overcome the need for ameliorative measures by tackling the causes as well as the symptoms. By investing in education and skills, self-reliance and independence, by liberating the talents of all our people so that they can contribute to their own well-being and reach out and contribute to the wider community, by investing in future success and, in particular, by investing in jobs and community regeneration, we can make it possible for those who follow us to continue an upward spiral of investment in key services, rather than the stop-go policies of the past.
Tackling the legacy of neglect has been the major task of the Government; avoiding its recurrence will be the task of the next Parliament. That is why the extra investment of a third of a billion pounds each year in education and extra investment in skills is so important. It is linked with further cash for employment and for our wider welfare-to-work measures. The Opposition would cut, whereas we are reconstructing. The Opposition were prepared to sacrifice services, whereas we are using them not only to ensure the liberation of the talents of the individual but to contribute to economic well-being, because economic prosperity and social well-being go hand in hand.
In the Chamber a few weeks ago, the hon. Member for Maidenhead (Mrs. May), the shadow Secretary of State, painted a picture—a distorted portrait—of my leadership 636 and that of my colleagues, describing it as centralist. She evoked the image of "Thunderbirds". I reminded Lady Penelope that her party introduced the national curriculum, centrally directed tests, the Office for Standards in Education, the predecessors to the Qualifications and Curriculum Authority and the Funding Agency for Schools. [Interruption.] Yes, I did pick up the issue of grant-maintained schools and, yes, Conservative Members introduced the Teacher Training Agency. Lord Dearing, to whom I pay tribute once again, managed to dig them out of a hole by slimming down some measures.
This Government Lave taken further steps to lighten the national curriculum, slim down the TT'A, amalgamate the two predecessor bodies into the QCA, lighten the inspection regime and ensure that it falls less frequently on schools that are doing well and provide through the literacy and numeracy strategies the relevant support to make the tests attainable.
§ Mr. Michael Fabricant (Lichfield)
The Secretary of State talks about lightening the administrative burden, but is he aware that teachers in Staffordshire, whether they work in a comprehensive school or not, say that they are bogged down by the administrative burden? Does he not understand the betray 11 that teachers feel, especially given the promise that he and his team made in 1997, when they said that they would produce a new funding system, which was not delivered, whereby Staffordshire would not remain second from bottom in funding per pupil? The combination of burden, red tape and low funding in Staffordshire remains.
§ Mr. Blunkett
I am pleased that the legacy of low funding is nowhere near what it was when we took office in 1997. Direct funding to head teachers, which we enhanced last week to an average of £70,000 for a secondary school and an average of £24,000 for a primary school for running costs, will have helped schools in Staffordshire as it has helped schools across the country. The two-thirds reduction in paperwork over the past six months—the figure for primary schools is 40 per cent.—will have helped to raduce the time taken to access that paperwork.
Paperwork for literacy and numeracy—for example, the grammar guide, which was sent out last term—is not bureaucracy or administration, but direct support. I again make the point to the House that those who want to direct teachers to teach in a particular way and who want to toughen up on phonics should not also claim that teachers should not be directed on how to teach. Those who are prepared to abandon phonics, decent spelling and grammar and the literacy hour should stand up and be counted.
I have made the point before, but it is worth making again, that Conservative Members can hardly claim that they introduced the literacy hour, given that the hon. Member for Maidenhead famously said that 60 minutes is too long for the literacy hour, thus redefining a metric hour, which no doubt will be an interesting feature of any debate on Europe.
§ Mr. John Bercow (Buckingham)
The Secretary of State referred to the Teacher Training Agency, and he always tries to convey the impression that he is a sound traditionalist, although it is obvious that Mr. Chris Woodhead, among others, is not so persuaded. Is the right 637 hon. Gentleman aware of the abominable observations of those three supposed specialists in the teaching of reading, Kimberley, Meek and Miller, who are on record as saying:Within the psycho-semiotic framework, the shared reading lesson is viewed as an ideological construct where events are played out and children must therefore learn to position themselves in three interlocking contexts.What assurance can the right hon. Gentleman give that such drivel, which has done so much damage to the life chances of a generation of children in our state schools, is not continuing to spread like a disease?
§ Mr. Blunkett
From memory! That is a remarkable achievement. I reinforce my congratulations. What a smart and able Member the hon. Member for Buckingham is, and what a smart Alec, too. As far as I am aware, the three authors to whom he referred had nothing to do with the literacy hour. Fortunately, the phrase that he memorised and quoted has not passed over my desk.
§ Mr. Blunkett
I am grateful for the accolade from the hon. Gentleman, and I am glad to hear it, too.
Having disposed of that matter, we can get back to reality, which is the £200 million allocated last Wednesday—£100 million of revenue for running costs, and £100 million of devolved capital for heads and governors to use. Incidentally, that brings the amount of devolved capital available for investment in repair and renewal during the spending period 2003–04 to £600 million a year. That compares with £683 million, which was the total for capital investment in repair, renewal and new build for the whole of England in 1996–97. It clearly shows the transformation that has taken place as we move to an £8.5 billion investment in repair and renewal of our schools, which will help teachers to do the job better, will make the teaching profession more attractive and will ensure that youngsters get the environment they deserve.
Today, we are introducing new measures. Conservative Members raised the issue of administration and bureaucracy. I can announce a £35 million investment from the capital modernisation fund, which is entirely new money that was not announced last Wednesday. I am grateful to my Treasury colleagues for releasing £35 million for us to invest in a new management information system. It will enable us to ensure that we can collect, collate and transfer data, and thus avoid the statistical nightmare of constant data collection for different purposes. It will be possible to transfer data between schools and age groups, so that the unique pupil number and added value measures can be introduced more effectively; so that collated information on children in the primary sector can be transferred easily and quickly to secondary schools; and so that we can reduce the volume of form filling to about one working week per head per year, which will make a substantial contribution to reducing pressure on heads and teachers. I am pleased that we have been able to make a start on that.
638 I am also able to give details of the additional £200 million programme over three years, which was mooted in the Chancellor's Budget statement, for recruitment and retention measures for teachers.
§ Mr. Phil Willis (Harrogate and Knaresborough)
My party strongly supports the introduction of a bureaucracy-buster and the passing on of records, which is an excellent initiative, but how does the Secretary of State intend to commission the work? One of the great problems in the past has been that schools and education authorities have all gone their own way. Unless the software is consistent, the system will fall down when children transfer from one authority or school to another.
§ Mr. Blunkett
I entirely agree that there has been a problem, although, in the context of Government as a whole, my Department's record on implementing new technology—in the Student Loans Company or in the development of the national grid for learning—is not bad. In the latter context, we shall want to move quickly, in consultation with representatives of heads and with the e-envoy, to ensure that we get it right. Compatibility is an important factor.
The retention and recruitment package will build on steps that we have already taken. Whatever people may feel about the immediate problem of recruitment, there has been a remarkable turnaround in the attitude to teaching, especially among young people. I would not go so far as to say that teaching has become fashionable again, but a 19 per cent. uplift in applications for the next academic year and a remarkable increase in the number of inquiries constitute symbols of hope.
This time last year, there were 51,000 inquiries; this year, there have been 141,000. The 19 per cent. uplift in applications for September—which, of course, will not feed through in terms of teachers in the classroom for another 18 months—includes a 14 per cent. increase in maths applications, a 27 per cent. increase in science applications and a 7 per cent. increase in modern languages applications. That is a substantial and welcome improvement, which we must build on as quickly and effectively as possible; but we must also keep teachers in the classroom, which is why our measures are about retention as well as recruitment.
It will certainly not help if teachers walk away from children, leaving others to cover classes, denying the children an education and reducing their chances of future success. It will not help those children to do well in tests, GCSEs and A-levels. No one will gain unless those in classrooms act as professionals and ensure that cover is provided while we take the measures that have been demanded to lighten the pressure and ensure that enough teachers are in the classrooms. I thank all the professionals who have been doing that job—under considerable strain in some schools—and appeal to others not to make matters worse by walking away from children who need teachers to cover their classes.
This is a real problem, which arises from decades of under-recruitment and loss to the profession. Together, we need to do something substantial to ensure that, while we await the outcome of new applicants' training, a return to teaching is an attractive option.
Two years ago we introduced "golden hellos", and enhanced them for shortage subjects. We introduced training bursaries to give postgraduates an incentive 639 to train. We introduced the graduate teacher programme, which has been such a success in the development of in-school training, and the new training schools: it is working extremely well, as I saw for myself this morning when I visited Southfields community school. This time last year, on the back of the Budget of 2000, we put a further £180 million into the programme. I believe that we are beginning to turn the corner and that the success of our measures is shining through, but the time scales are agin us.
§ Mrs. Theresa May (Maidenhead)
Along with others, I raised a number of problems relating to the graduate teacher programme during a recent Opposition day debate on the teaching profession. We mentioned the calculation of subjects that would qualify for the programme, and various other issues to do with the qualifications of those entering it. The Secretary of State undertook to tackle those problems; what has he done?
§ Mr. Blunkett
I was planning to deal with that matter later, but I shall do so now. The hon. Lady proposed to slim down the administration and application of school-based graduate teacher programmes. I am pleased to tell her that we will take the action that she advocated. I said that we would examine her proposals, and I meant it. We have accepted them and shall implement them. They are part of the programme that we are announcing today.
As we are on the subject, I can also announce that we shall substantially increase the graduate teacher programme by adding another 570 places, bringing the total number to 2,250. That will make a substantial contribution to enabling people with experience to receive a salary while training and to encouraging them. The increase will commence at Easter.
I am seeking to ensure that we do not treat the issue as a football to be kicked around. I am prepared to listen and to learn. I shall continue to offer everyone—Members and members of the public—the opportunity to offer ideas on how to deal with teacher shortages in some of our schools and some of our regions. I assure the House that we will work with people and take those ideas on board.
§ Mr. Willis
In our previous debate on the subject, the issue of the degree requirements for those who wish specifically to access key stage 3 teacher training was raised. Graduates who had not trained in a national curriculum subject were being denied access to training. The Secretary of State said that he would investigate the issue and report back. Has there been any progress on it?
§ Mr. Blunkett
Although I shall try to avoid reporting back on everything today, I shall do my best, so that hon. Members can tick off the boxes. I acknowledged that there was an issue, and we have investigated it. We have also agreed with the Teacher Training Agency and institutions that if the course content of a degree is sufficient to provide assurances that an individual has the necessary background and foundation to take on a specialism, that individual may access training for the specialism. In our previous debate, a psychology degree was cited as an example. If graduates are able to show that their psychology degree involved sufficient statistics content to enable them to undertake maths training, they should be able to participate in such training.
640 I hope that that assures the hon. Member for Harrogate and Knaresborough (Mr. Willis) that we are trying to balance the desire to ensure quality with the relevance of an individual's background. We are trying also to offer upgrade courses in specialised subjects, so that there is not an automatic cut-off for applicants. Those who are particularly committed and interested should be able to take in-service courses, making it possible for them to transfer to those specialisms.
In some schools and some parts of the country, non-specialists have had to take on specialist teaching to ensure that cover is provided. The hon. Member for Harrogate and Knaresborough, as an ex-teacher, will be aware that that has happened for many years. As someone who taught in a college of technology, I was aware that it was happening around me. I shall never forget being asked to teach law. I said that although I had A-level law, I was not intent on teaching it. I think that many teachers have found themselves in a similar position.
§ Mr. Geraint Davies (Croydon, Central)
Does my right hon. Friend agree that we are victims of our own success? The simple fact that an extra 1.1 million people are in jobs, that wages are increasing and that there are pressures on housing markets in the south-east perhaps helps to explain why, although we are investing enormous sums in teacher supply, it is still difficult to square the circle. Although standards axe rising, there are still many options for good teachers.
§ Mr. Blunkett
There are indeed. By trying to recruit more teachers, rather than fewer; by recruiting an extra 7,000 teachers in the past two years while seeking to reduce class sizes and ensure not only in-service training for mainstream teachers but training for supply teachers; by putting in place booster classes that are attractive to supply teachers; and by offering professional development courses that teachers find attractive, but which require cover, we are perhaps making a rod for our own back in trying to match supply and demand. That is particularly true in high-cost area; in which attractive salaries can be paid and there are additional costs. That is why the review body report recommended substantial uplifts of 30 per cent. in London weighting and outer-London weighting and retention bonuses of £5,000 a year to be rolled into a £15,000 package of retention over three years. That is why performance-related pay, which we introduced, is so critical. It offers not simply an uplift of £2,000 for good teachers but access to new pay scales of an additional £4,000. That will make a difference to retaining as well as attracting teachers.
This afternoon's package will deal with the problem of how we get people back into the profession now. The immediate £2,000 incentive—£4,000 for shortage subjects, which matches the bonus that is already in place for new recruits to the profession—will, I hope, be an attractive proposition, but it needs to be matched by other measures. Those measures will include an acceleration of the graduate teacher programme and a £35 million programme of funded measures this year, to be matched by at least £35 million in the next financial year. The money will go directly to head teachers and governors, without bureaucracy and administrative difficulty. There has to be co-ordination. We want a light-touch approach at local authority or area level, using the recruitment managers who are already paid for by the Department and are in place.
641 The money will enable head teachers to pay for additional housing costs and for care components, if needed, to help returners with the costs of child care and of caring for older relatives. It will enable travel costs to be met and changes to incremental scales to be offered. The scale on which a post is offered can be changed to meet the needs of a returner, whether that person has just had a family or took early retirement.
I was tickled to hear that one of the agencies had written to the hon. Member for Harrogate and Knaresborough, an ex-head teacher, to ask whether he would like to come back to the profession. I gather that he has reserved his position until after the election—a wise man. I have been out of the profession for so long that no one has sent me anything, but one never knows.
The new funding will be made available immediately, but through the review body we will simultaneously consult to avoid any misunderstandings or allegations that we did not consult. We will ensure that the money is made available as speedily as possible to those who return to the profession.
I hope that the measures will enable us to say to people on the edge of returning to the profession that this is an appropriate moment to do so. We will offer free update courses of six weeks and child care provision. We will also pay a bursary during those six weeks so that there is no disadvantage to the family.
§ Mr. Andrew Mackinlay (Thurrock)
I congratulate the Secretary of State on what he and his colleagues have been doing to improve standards, particularly with regard to the recent intervention on behalf of schools in Thurrock. That was timely and much appreciated by parents and me.
Will my right hon. Friend undertake to revisit a problem with the allocation of scan e resources from the Department? I understand that the indices include the number of children who have free school meals and levels of employment. In my area, although unemployment levels are not high, a lack of wealth and opportunity is disguised by the large retail sector, which pays relatively low salaries. The numbers of the many children who are greatly deprived are not reflected in the indices of free school meals and unemployment. The allocation of funds needs fine tuning to reflect tradition ally poor areas.
§ Mr. Blunkett
There is always a problem with crude measures versus complexity—between trying to set up simple measures of deprivation and the complicated evaluations that inevitably have to be dealt with through greater central administration. There is a dichotomy between what is fair and what is simple, as I can well understand, for example, in relation to the pupil learning credits that we announced in the Green Paper.
This afternoon's package will be aimed at areas where vacancies exist; it will be tailored both to particular geographical areas and to schools with the biggest problems. The money will follow the problem and will thus be related not to prosperity or bidden deprivation but to the specific problem that we want to overcome. As with other measures in the Green Paper, we shall apply some of the resources proposed in last week's Budget, together with the spending review allocations, to ensure that we can be flexible on other measures hat will be attractive and fair to people coming into the profession.
642 As I said, some hon. Members are concerned about undergraduates taking BEd and BA courses. We want to use some of the Budget resources for experiments in the fourth year of such undergraduate courses to enable students to achieve qualified teacher status early and move into the classroom as appropriate, and to help them financially. I look forward to being able to move on that matter, on which there will be further consultation.
I hope that this afternoon's package will enable us, once again, to appeal to people to work together, rather than against each other, to solve a genuine difficulty. Success breeds success, as schools show through their higher standards and achievement; and, with the additional support and resources that have been made available, they will be able to tell others that teaching is an excellent profession to be in. We can see from the increased number of applications that young people believe that. We can reach out to former teachers and draw them back into the profession.
We cannot solve all the problems that arise from the success of the economy in parts of the country where prosperity puts enormous pressure on housing costs and offers alternative employment. However, we can take steps to match that. We are putting in place the precise measures that most people wanted, ensuring that recruitment, retention and reward go hand in hand. In a spirit of collaboration, we are challenging the main Opposition party to say whether it will match the funding that we are putting in place. The commitment of the Leader of the Opposition and the shadow Chancellor applies only to money allocated to schools. However, there will be allocations from the DFEE budget for many of the measures that we are taking, including the information technology package to reduce administration. Given the extra resources that we are putting in, in the event of the Opposition miraculously finding themselves on the Government Benches, it would be interesting to hear where the cuts of £8 billion and tax cuts of £8 billion would be imposed. I doubt that Conservative Members will answer the question because no one in Conservative central office has worked it out yet. Everyone outside knows perfectly well that the sums do not add up.
The foundations that we are laying today will carry forward opportunity for all our children, investment in schools across the country, greater delegation of budgets and the freedom of heads to use them. We are introducing measures that directly address the problem of recruitment. We are overcoming the legacy of years of neglect that we inherited. We are very pleased indeed to have been able to do that. I am grateful to the Chancellor for enabling me to announce these measures this afternoon.
§ Mrs. Theresa May (Maidenhead)
Four years ago, this Labour Government were elected with the priority, "education, education, education." Four wasted years later, they have manifestly failed to deliver on that promise. That is clear to anyone who visits schools and listens to teachers complaining about the burden of bureaucracy; to head teachers complaining about Government interference; to governors complaining about the overload of red tape; to pupils complaining about disruptive children being kept in class, damaging their education and that of others; or to parents worried about teacher shortages that are creating difficulties in their local schools.
643 Jenny Short, the head teacher of Loddon junior school in Earley, wrote in her open letter to the Prime Minister,As a head teacher of a junior school, I am at a complete loss as to how to cope with the staffing problems I now face.She set out those staffing problems and continued:Whilst I shall continue to make every effort to cover absence in the event of illness, if this proves to be impossible, children will be sent home.She has subsequently been in touch with me and said:I leave my school after five years and two successful OFSTEDs exhausted and disillusioned. Once we could choose our teachers carefully with due regard for the balance of age and experience, ability and expertise, personality and potential to fit in with our high standards and ethos. We could build on our successes, make real improvements …Now …the daily staffing crises reduce us all to firefighters where strategic planning and real improvements are impossible".On a doorstep in Hurst during the weekend, a parent told me, "The Government promised education would be their priority. I haven't seen any evidence of it."
So as we consider the Budget's impact on education, what is the end-of-term report on the Government and the Secretary of State? "More red tape—done. Increased interference from Whitehall—done. Teachers leaving in droves—done. Larger secondary classes—done. More disruptive pupils in class—done. Grammar schools under threat—done. Abolition of grant-maintained status—done. Fiddled figures—done."
The legacy of the Government's four wasted years is a national crisis of teacher shortages, a demoralised teaching profession, schools threatened with four-day weeks, standards damaged and children's education suffering—for the Government, who came in promising so much, have delivered little, not just in education. The Secretary of State did not refer to any of the comments on the new deal that the Chancellor made in his Budget speech, because the Government have spent hundreds of millions of pounds on the new deal—a scheme that the National Institute of Economic and Social Research has shown has directly resulted in only 13,000 jobs.
The evidence shows that the new deal works when the private sector is involved, using its expertise and flexibility in the interests of unemployed people—for example, Reed Executive in Hackney and Pertemps in Birmingham. We have seen what the private sector can deliver. That is why we will replace the new deal with "Britain works", which will involve private sector expertise and will focus on getting people into jobs as soon as possible and helping them to stay in them. "Britain works" will be a better deal for unemployed people, for employers and for taxpayers. The new deal is a broken pledge.
§ Mr. Geraint Davies
Does the hon. Lady agree that the shadow Chancellor's policy of keeping inflation below 2 per cent. would inevitably drive up interest rates, thus increasing unemployment and resulting in less money for education?
§ Mrs. May
I suggest that the hon. Gentleman consider the inflation rate at the moment. I understand that it is less than 2 per cent., so perhaps he should reconsider his intervention. He should look at the new deal figures, 644 which show that the programme has failed to provide jobs for young long-term unemployed people; that the rate of decline in long-term youth unemployment has slowed under this Government in comparison with what was happening during the last years of the Conservative Government; and that where the new deal works, it does so because the private sector is involved. With "Britain works", we shall ensure that the private sector is involved, to get people into jobs.
§ Mr. Blunkett
Why has long-term youth unemployment fallen by 75 per cent" Why did the report of the National Institute of Economic and Social Research say that the new deal has added £500 million steady state a year to GDP? Why did it acknowledge that more than 200,000 youngsters have got into jobs faster? Why are 274,000 youngsters who had been unemployed for more than six months now in work when they were not when we came into office? And why are employment zones working so well that even the Conservative party cannot think of abolishing them?
§ Mrs. May
The figure from the National Institute of Economic and Social Research is 13,000 new jobs from the new deal. The report showed that hundreds and millions of pounds hive been spent to find 13,000 jobs. Unemployed people deserve a better deal. They do not want to be put on training programmes only to find that they come off them when they go back on to benefit because there is no job for them. The new deal has become a revolving door for too many of the long-term unemployed, and that is why it needs replacing with a better scheme. "Britain works" will be that better scheme. The new deal is a broken pledge.
Let us consider the Government's education promises and look back on their early claims about extra education spending. Three years ago, in the first comprehensive spending review, the Government announced an extra £19 billion for education. We soon saw how wrong that figure was. As The Guardian said:Mr. Blunkett's claim to be spending an extra £19 billion has collapsed in empty rhetoric".The Times reported:Mr. Brown added together increases over three years to produce his global figures of ti billion more for education … This is misleading since it represents triple counting".[Interruption.] The Secretary of State seems to be commenting on the author of The Guardian report, but perhaps he would like to comment on the rebuke that he received from the Select Committee on Education and Employment, which said that there wasno cash bonanza of the type which newspaper headlines might suggest".True to form, the Government have been up to their old tricks. They are perhaps getting a little better at hiding them—as they do in table C13, on page 202 of the Red Book. The Chancellor announced an extra £1 billion of spending on education, but a comparison of the figures on page 202 of the Red Book with the latest comprehensive spending review show s that, as a result of the Budget, the increase in education spending over the next three years is actually £200 million—not £1 billion. The answer is that one simply cannot believe a word that the Government say about their spending.
That is not the only' way in which the Government are fiddling the figures. Ministers welcomed the School Teachers' Pay Review Body recent pay award for 645 teachers, but they did not tell anyone that they were not going to fund the increases fully. Local education authorities will have to find the extra money, and schools will see their budgets being cut to provide the pay for teachers.
Ministers claimed to put £65 million into school budgets this year for the new AS-levels, but how many schools have seen a penny of that money? Their teaching costs have gone up, their resources costs have gone up and their examination costs have gone up, but the Government have not provided them with the extra funding to pay for that.
§ Mr. Jim Cunningham (Coventry, South)
May I remind the hon. Lady that I spent some years in local government? In every one of the 18 years of the Conservative Government, my local authority had to find a proportion of teachers' salaries—and she can check that point out. She should not complain about this Government when they are trying to do something to right that wrong.
§ Mrs. May
The Government are not doing that; that is the whole point. Local authorities today have to scrape around for the extra cash because the Government are not providing it. The Government hide and fiddle the figures so that schools do not know exactly what they will get, and fail to provide the funding that they promise for schools. The expectations of teachers and parents have been raised, but that is why they are now becoming totally disillusioned and fed up with the Government, They have heard so many promises on which the Government have completely failed to deliver.
We should not be surprised by that, given that, when the Government claimed to be introducing fairer funding, they said that more money would go direct to schools. while at the same time specifying 89 categories of spending that local authorities could hold back from schools. The Government promised that they would change the standard spending assessment within a year of coming to office but they have done nothing about it. Few schools in the numerous authorities—such as Wiltshire, Worcestershire, Dorset, Leicestershire and indeed Staffordshire, to which my hon. Friend the Member for Lichfield (Mr. Fabricant) referred—that have been disadvantaged by that calculation think that funding today is fairer. That is certainly not what I heard last week from heads in Wiltshire who face problems and budget deficits because of the difficulties caused by the Government's lack of funding. In any case, how much of the money announced in the Budget will be top-sliced from local authorities and redistributed to them as new money?
What about the way in which the Government tell schools how to spend their money? During a visit to a secondary school in Formby last week, I was told by the head, "I've got four pages of A4 which describe all the different funding streams that come into this school. One page covers the funding streams over which we have discretion; three pages cover the funding streams over which we have no discretion." The Secretary of State referred to the Chancellor's Budget announcement of an extra sum that will go directly to schools, but that is only true of about 1 per cent. of the money. Money should go directly to schools so that heads have the freedom to spend it in the best interests of children in their classrooms: they should receive 100 per cent. of it 646 directly. Heads should have the freedom to spend the money on what they know is needed in their schools in the interests of their pupils.
The Secretary of State mentioned devolved capital. At a primary school in Woodley this morning, the head told me, "It's all very well talking about this devolved capital, but the problem is that I am only allowed to spend it in chunks of £10,000 and then only on certain priority areas. I can think of a lot of things I want to spend the money on, but I am not allowed to." We are far from the Secretary of State's claim that the people's money is being spent on the people's priority. Instead of the people's money being spent on schools' priorities, it is being spent on Labour's priorities.
It would be unfair to suggest that the Government have not increased spending on education, however. They have increased the amount that is spent on advertising in the Department for Education and Employment and the money that is wasted on bureaucracy. During the past four years, the Government have introduced 530 regulations. In the past year, they have sent out a directive a day to teachers. They have published well over 2,000 press releases and goodness knows how many of the Secretary of State's speeches have been published in glossy booklets. Increased spin—done.
At the top of the Government's list of achievements, however, is the increase in bureaucracy, red tape and paperwork that they have imposed on teachers. The Secretary of State mentioned reducing bureaucracy. In the Green Paper that was published a few weeks ago, the Government claim that they have reduced the number of pages of material sent to primary schools by 1,170 pages to just 490, but it was their fault in the first place that those schools were receiving nearly 2,000 pages of circulars telling them what to do.
What about the time that that bureaucracy, which keeps teachers away from the core job of teaching children, takes up? The Government say in the Green Paper that the standards fund will be changed and not all the money will go directly to schools. Some categories will remain as they are, but the system is apparently being changed to save time in schools. However, according to the Government, schools have spent three months filling in forms for the standards fund. That is hardly a reduction in bureaucracy.
§ Mr. Bercow
My hon. Friend's concerns reflect those that hundreds of teachers throughout my constituency—from north to south and from west to east—have put to me over the past four years. Is she aware of a written answer given by the Minister of State, Home Office, the hon. Member for Norwich, South (Mr. Clarke) that said:The number of people leaving a profession may be taken as an indicator of morale."—[Official Report, 11 December 2000; Vol. 359, c. 65W.]Given that the vacancy situation is three times worse in the capital than at national level and that one fifth of people who leave their posts are leaving the profession altogether, is that not the most damning indictment of the continuing failure of this Administration?
§ Mrs. May
As ever, my hon. Friend makes a telling intervention. It seems that the Minister of State, Home Office knows a great deal more than the Secretary of State for Education and Employment about what is happening 647 in the education system today. The problem is that people are leaving the profession because of bureaucracy and red tape.
One has only to look at the 2 March edition of The Times Educational Supplement, which has a front-page heading, "Crisis? What crisis?" What annoys teachers, head teachers, governors and parents is that unlike the Minister of State, Home Office, the Secretary of State fails to recognise the impact of his policies on the morale of the profession and the crisis that his actions have generated in our schools. The headlines inside the TES say, "Morale plummets as shortages rise" and "Official denials only add insult to injury". The head teacher of New college, Leicester says:We'll reach meltdown unless a miracle happens by September.The head teacher of the Malling school in Maidstone says:Don't even let me hear Estelle Morris say again 'there's not a crisis'. Come and spend a week in Kent.That is what is happening in our schools under the Labour Government.
The Secretary of State tells us that everything is all right because the number of applications at the graduate teacher training registry has gone up. If we look back over the four years of this Government, we see that there are fewer applications than in 1997. Applications to teach maths have fallen by 21 per cent. since that year: applications to teach modern languages have fallen by 26 per cent. and applications to teach English have gone down by 19 per cent.
Despite all the cash incentives and all the money that the Government claim to be spending on the problem, teachers are still not coming forward. Teacher applications have fallen and teachers are leaving the profession because they are demoralised by the red tape and paperwork that the Government have imposed and because the Government's interference means that they can no longer get on with the job that they want to do, which is teaching children.
§ Mr. Patrick McLoughlin (West Derbyshire)
Will my hon. Friend also comment on the management of the Department? I have just received two written answers to a parliamentary question. I asked the Secretary of State when he would reply to my letters dated 8 November and 21 September 2000 concerning the exclusion from holiday play schemes of children with medical conditions. I wonder if my hon. Friend can help me, because I have had two replies to the same question. The first says:I replied to the hon. Member on Friday 9 March".The second says:I will reply to the hon. Member as soon as possible.Both those answers have just arrived on my desk. Can my hon. Friend tell me which is correct? Do I have a reply or not?
§ Mrs. May
I am sorry to say to my hon. Friend that I know the Secretary of State's mind no better than it seems he or his Ministers do. My hon. Friend makes a telling point about the bureaucracy in the Department—the very bureaucracy that causes problems for our schools and teachers. I can only suggest to him that perhaps the people 648 who were supposed to be responding properly to his question were too busy drafting yet another circular to send to teachers.
We know that because of the shortage of teachers many schools have been able to operate without sending children home only because of the large number of supply teachers from Australia, New Zealand, South Africa and other countries. Unfortunately, those schools may soon find that they face another problem. An article in Sydney's The Sun-Herald yesterday said:Australian teachers recruited to work in British schools are quitting in increasing numbers because of poor behaviour by students and alien working conditions.The headmaster of Chalvedon school and sixth form college in Essex, who recruited nine Australians, finds five months on that four of them have left. As another teacher said:Staff shortages are so severe that we are getting Australian teachers who get off the plane one day and are literally standing in front of a class the next".That is the state to which the Secretary of State has brought our education system in his four wasted years in office.
Let us look at funding for schools and bureaucracy. We know that the Government will never give schools all the money or stop the bureaucracy, because they simply do not trust teachers or parents. The Secretary of State referred in his speech to liberating the talents of individuals. I hardly think that his proposals for advanced specialist schools in the Green Paper represent "liberating the talents of individuals". Advanced specialist schools will be able tovolunteer to take on a number of innovative ideas".Good—I am in favour of innovative ideas in education. However, as we read on, we learn that they can only do sofrom a menu developed centrally".Yet again, the Goverrment are obsessed with centralising and interfering, rather than letting schools get on with doing what they know is right for children in their classrooms.
As the former chief inspector of schools said:David Blunkett has presided over a set of initiatives that has wasted taxpayers' mom .y, distracted teachers from their real responsibilities and encapsulated the worst of the discredited ideology that has done so much damage since the 1960s".That is what this Government have done instead of delivering on education.
§ Mr. Blunkett
I should be ever so grateful if the hon. Lady would tell me whether she agrees with one or two of the initiatives to which she is referring, such as the excellence in cities programme, the new deal for schools, the national grid for learning and the reduction in class size—all of which were listed as initiatives over and above the two with which the former chief inspector of schools agreed. Does she think that all or any of those should have been initiated, or would she abolish them?
§ Mrs. May
The Secretary of State still does not get the point. The point is that schools should be given all of their budget and allowed to spend it on what they think is right for children—not on what the Government think is right. Head teachers constantly tell me that they want the ability 649 to spend the money that is due to their school in the way that they think fit—in the interests not of the Government but of children.
§ Mr. Willis
Will the hon. Lady clear up a misunderstanding, probably on my part? Will central funds be the same for each child in a primary school and for each child in a secondary school, wherever in the United Kingdom that school may be?
§ Mrs. May
No, the national funding formula will take account of some differential needs. I am happy to clear that up for the hon. Gentleman.
The next Conservative Government will get rid of the endless bureaucracy that takes teachers' time and resources and means that money is not spent in the best interests of children. We are absolutely clear that we will match the money that the Government are spending, and are proposing to spend, on schools. That will include the increases to which the Secretary of State referred in his speech today, which were announced in the Budget. Perhaps more important, we will tackle serious reform of education by devolving all budgets to schools and by ensuring that money which is currently held back by local education authorities and central Government goes to schools. That will mean hundreds of extra pounds per pupil for schools.
We are not just about devolving money. Head teachers should be given the freedom to do the job for which they were trained. A head teacher from Essex wrote to me recently:We as head teachers need more finance into the school with the freedom to be creative with it to suit our needs. We need less paperwork and more encouragement as a profession".The Secretary of State seems not to understand when teachers' representatives tell him that the introduction of the various initiatives that he has described will not bring teachers back into the profession or help to recruit more of them. Potential teachers do not want to join a profession in which they will be the mouthpieces of bureaucrats in the town hall and at Whitehall.
As the staff at Willowbank junior school said to me this morning, they long to bring creativity and spontaneity, which are now being pushed out because of the imposition of targets by the Government, back into the classroom. The Government are imposing pressure on schools to do things in the way they want. Teachers and young people going into teaching want the freedom to use the skills that they have developed to inspire young people. The Government have yet to learn that inspiration does not come from a Whitehall circular.
§ Mrs. May
No. I have given way on several occasions and I shall not do so again.
We shall set schools free. Unfortunately, the Government and the Secretary of State cannot and will not see the need to do that. That is why they have failed to deliver. It is why we have teacher shortages, why children are being sent home early and why children are being taught by non-specialist and unqualified staff. It is why the Government will continue to fail.
650 We need a vision for education, and a Government with that vision. As long as we have a Labour Government who think that education is merely a tool for achieving politically set numerical targets or for meeting politically correct slogans, and as long as the Secretary of State agrees that teachers are learning managers, equipping children with "learnacy" skills, children's education will suffer.
Parents, children and teachers need a Government who value education in its own right, recognise the importance of instilling knowledge and encouraging creativity as well as teaching skills, and above all recognise the importance of inspiring children and young people to achieve. We will be that Government. We will set schools free, let heads manage and let teachers teach. We will raise standards in the classroom. Our children cannot afford another four years of Labour.
§ Ms Bridget Prentice (Lewisham, East)
After that strange rant about what goes on in our schools, I want to move on, but I have a comment about the speech of the hon. Member for Maidenhead (Mrs. May). When I visit schools in my constituency, I find that teachers and head teachers do not want every penny of spending devolved to them. They appreciate much of what the local education authority does for them and want it to continue to have a role.
I welcome yet another triumph of economic mastery by my right hon. Friend the Chancellor of the Exchequer. I welcome also the money that will be given directly to schools. The move has been welcomed by schools in Lewisham in the past, and it will be welcomed again. However, I hope that the money will be used not only for the bread-and-butter issues of the day but more imaginatively to expand pupils' aspirations through creative projects that will further develop and enhance their future life styles beyond the classroom and after their lives in school.
I welcome my right hon. Friend the Secretary of State's announcement about funding to increase the number of teachers. As he knows, teacher numbers have been a problem in Lewisham, and continue to be. We have a peculiar problem that stems from the inadequacies of the Conservative Government, both in 1989 and 1993, when they did not deal properly with the recruitment and retention of staff in schools.
I shall take an overall view of the Budget. Anthony Crosland, writing in the 1950s at a time of growing prosperity, talked aboutthe declining importance of economic problemsand the need for a greater emphasis on personal freedom, choice, happiness and culture in future. Commenting on the values of those pioneers of the Labour movement, the Webbs, he wrote:Total abstinence and a good filing system are not now the right signposts to a socialist Utopia; or at least, if they are, some of us will fall by the wayside.Almost half a century later, we are again living through a period of growing prosperity. I hope that Tony—Crosland, that is—may yet be proved right. We have in our Chancellor of the Exchequer a true stakhanovite—a man who wears more hair shirts than anyone since Thomas More. We have a Chancellor who has given us economic stability and whose values are work and thrift. 651 In the Budget, he is continuing to make work pay and to make savings pay out more. People will benefit from the Budget if they contribute to the economic prosperity through work.
I do not deny that there are traditional battles that still need to be fought and won. It is an indictment of 18 years of Conservative rule that when we came to power, one in three children were living in poverty. There was hopelessness and despair in some of our inner-city housing estates, including those in my Lewisham constituency. We inherited a Britain in which our NHS, schools and other public services had been run down to the brink of disaster. That is changing, sometimes frustratingly slowly, but the comprehensive spending review and the Budget measures are together building us a better Britain.
We must aspire to do more. Although we are acting to end child poverty—more than 1 million children will be taken out of poverty thanks to the Labour Government's policies—to eliminate sink estates and to provide an education system and an NHS that are second to none, we should not lose sight of the fact that, for many people, the important issues of the future are more leisure time, happiness, the arts, architecture and the environment.
Of course Budgets are important. They can have a real impact on the economy. Over the years, Budgets have become major spectator events, closely watched and extensively commented on by the media. However, for those doing nicely or who are quite well-off—in other words, large swathes of middle England—the Budget is only a sideshow. More important to them are the preservation of the green belt, the quality of local restaurants and the performance of their favourite football team, and rightly so.
Budgets need to strike a balance between helping those in need and rewarding those who contribute to making society a better place. They should expand people's aspirations and creativity and, as my right hon. Friend the Secretary of State said in his opening remarks, liberate the talents of individuals. That is why the changes in funding for churches and renovation have been particularly welcome in my constituency. Only yesterday, I visited St. Margaret's church in Lee to celebrate in choral evensong the magnificent renovations there. During the evening, many of my constituents commented on and welcomed that aspect of the Budget.
Budgets should expand horizons. People in Lewisham, like those elsewhere, want to be able to use their leisure time purposefully. They want their environment to be both preserved and protected. They are concerned about the built environment. They want to ensure that proper respect is given to our heritage, preserving all that is good from the past while also being interested in developing new ideas and constructs for the future. Budgets should aim to create an environment that allows for creative expression in the arts or sport. That is why the changes for museums in the Budget are so important.
The Government are committed to social inclusion. That involves not only work to alleviate poverty, raise standards in schools and reduce crime, all of which collectively improve the well-being of our citizens, but giving them the opportunity to enjoy the arts as both spectators and producers. As we create more wealth, we 652 need to create an environment where more people can enjoy that wealth. Thanks to the Chancellor's successful economic management over the past four years, we can do that. As a modern democratic socialist, I believe that economic policy must be about helping those at the bottom of the pile and creating a good-time society. For that reason, I very much welcome the Budget.
§ 5.5 pm
§ Mr. John Major (Huntingdon)
"Education, education, education" was originally a cry from Lenin, who did not mean it. I suspect that the Secretary of State, who has just left, does mean it. He is sincere and, in his unavoidable absence, I should like to congratulate him on graciously adopting some of the: proposals of my hon. Friend the Member for Maidenhead (Mrs. May), who is shadow Secretary of State. That behaviour is as welcome as it is unusual, and I hole that future Governments of both complexions will be inclined to follow that particularly good example.
Turning to the Budget as a whole, I am pleased that the Chancellor has cut taxes and given back to taxpayers a small proportion of the money that he has extracted from them in the past four years. His generosity is not surprising: notwithstanding the problems of foot and mouth, a general election is pending and the public accounts show ample scope for tax reductions and, perhaps, modest expenditure increases. Yet, only a few weeks ago, when the Opposition said that, they were condemned as "irresponsible" by spokesmen from the Treasury and elsewhere. We now see how shallow those attacks were, for if the Opposition were irresponsible, why has the most prudent of Chancellors done what they recommended? In truth, my right hon. and hon. Friends were right to identify the scope for tax reduction. Not only were they right but, if the economy stays on course, there may be scope for even more tax cuts in future.
A principal reason for that remarkable leeway is the sheer size of tax increases over the past four years. We must disentangle fact from fiction. Prior to the Budget, there had been 26 increases in personal taxation and 19 increases in taxes on business in this Parliament. That number has risen slightly although, given the Chancellor's remarkable gift for sleight of hand, one must study the small print carefully to find out precisely how many tax increases there are. However, their sum total is enormous. The abolition of tax credits on dividends alone will cost shareholders about £6 billion in the current tax year. The reorganisation of advance corporation tax at the beginning of this Parliament has affected the quality of pension funds for millions of elderly people and cost those funds more than £5 billion during the course of this Parliament; it will do continuing damage until it is changed.
Even after offsetting tax reductions—of which there have been some, mostly minor, examples—the Inland Revenue's overall tax yield has risen by an astonishing one third during this Parliament. No wonder the savings ratio has fallen so badly. That is not a wicked Tory calculation; an independent survey shows the average family to be worse off than it was in 1996. The old tax-until-the pips-squeak bruiser Lord Healey must be salivating enviously at the extent of the tax rises forced through by the Chancellor.
653 More people have been dragged into tax. An extra 2 million now pay tax; 28 million pay it, compared with 26 million three years ago.
§ Mr. Major
If it is nonsense, it is Red Book nonsense. Those figures come from the Red Book. Before the hon. Gentleman mutters into his non-existent beard, he should read the Red Book and check. It is possible that the Chancellor has given us more duff facts; we are used to that. However, if they are duff, that is his responsibility, not mine.
There are 2 million more taxpayers and 700,000 more higher-rate taxpayers than there were four years ago. In addition, mortgage interest relief at source has been scrapped, although I do not object to that particularly. However, not only has MIRAS been scrapped, but stamp duty on home purchase has been increased and national insurance contributions for middle-income earners have risen sharply. So much—on the eve of the next general election—for the promises that the Labour party made to middle England and middle-income groups throughout the United Kingdom on the eve of the last one. Those groups may also care to note that the yield from inheritance tax has soared 50 per cent. during this Parliament. The Chancellor still has no concept—I genuinely believe that he does not understand its value--of letting more of the fruits of a lifetime of work filter down to the people whom the earner most cares about: his own family and the next generation.
It is no wonder, with such tax increases, that the ratio of tax to gross domestic product has risen 2.5 per cent. to 37.7 per cent. The Chancellor, despite all his promises, has not so much wooed middle England as assaulted it.
§ Mr. Geraint Davies
Does the right hon. Gentleman know that, taking tax and borrowing together as a share of GDP—given that borrowing is deferred taxation—the figure went down two points from 38.2 per cent. in 1996–97 to 36.2 per cent. in 1999–2000, and down to 34.1 per cent. in the current year? The current figure is due to the spectrum auction of mobile phone wavelengths, but for the previous period, those two points represent the equivalent of an increase of 7.3p in income tax. In other words, the right hon. Gentleman simply borrowed instead of taxing, and tried to fiddle the figures.
§ Mr. Major
The hon. Gentleman ought to know that his Chancellor changed the way in which the figures are quoted in the Red Book, and the actual equivalent of what he has done is an extra 10p on tax The hon. Gentleman may care to examine that matter. [Interruption.] If it is nonsense, it is the Government's nonsense in the Government's own figures. Those are the figures that I am using. I am glad to hear from Labour Members that they do not believe them.
It is ironic that the Government and the Chancellor have increased taxes so much. During the last Parliament, I remember vividly the present Chancellor and his colleagues, ever ready to find a catchy slogan, repeating the slander of 22 Tory tax rises, with no acknowledgment whatever of any offsetting tax reductions. To call their attacks disingenuous would be kind. They were patently 654 untrue, and a forerunner of the manipulation of facts that has characterised so much—not all, but so much—of what the Government have said and done in the past four years.
The Government cannot deny that, because the figures for tax increases are now clear. The statistics cast light where the slogans cast deception. Before this Budget, the real increase in taxes over this Parliament was about 4.5 per cent. a year. Obviously, that figure is now a tiny bit lower, but not all that much. That compares with 1.8 per cent. between 1979 and 1997. I am indebted to the Institute for Fiscal Studies for pointing out that there were tax rises of 2 per cent. a year between 1979 and 1990, and of 1.3 per cent. between 1990 and 1997.
So much for the 22 Tory tax rises, or, indeed, the unsustainable proposition—unsustainable except by malice—that the previous Government wrecked the Tory tradition of low taxation. Some of my right hon. and hon. Friends who rather timidly accepted that fiction in the early part of this Parliament can now feel comforted that it was not true and refute it. They need not concede, but may safely move on and reassert our traditional tax credentials. Taxes were not unduly increased, despite the pressures of a recession that began in the 1980s and cast its shadow into the 1990s—although not, from the point of view of the health of the economy, much beyond 1992.
The Chancellor is ever ready to gloss over the excellent parts of his inheritance. He cherry-picks the bits on which he can make party political capital, and I do not blame him for that: most politicians do. However, he misses other bits. He is, after all, a very political Chancellor who wishes to be Prime Minister, and he is doing a bit of image building.
We need more facts and less of the fiction that we so often hear. The economy has been growing steadily since 1992, before—some hon. Members may not wish to hear this next point—sterling left the exchange rate mechanism. Unemployment has also been falling since that economic recovery began, and the very welcome job growth across the country—in both the number and the variety of jobs—has been consistent throughout the previous Parliament and this one.
Inflation, too, began to decline in the early 1990s and has remained low. It looks set to fluctuate only within historically narrow parameters.
§ Mr. Mackinlay
The Chancellor has been skilled, but I put that in perspective. Other factors have contributed, such as the ebb and flow of the economy, and I accept, to an extent, that employment growth was under way during the right hon. Gentleman's stewardship. I have intervened only because of his breathtaking assertion that people are somehow worse off than in 1996, which defies both belief and the litmus test of what one sees and feels. There was extensive unemployment, particularly among poor and unskilled people, during the period to which he refers, and although I do not apportion credit or blame in respect of employment, people are now in jobs. Demonstrably, they are better off.
§ Mr. Major
Demonstrably, the people in jobs are better off. That is undeniably so, but I was referring to the scale of tax increases. If the hon. Gentleman reads some of the independent research, he will see precisely why I made that comment.
655 As it happens, I was about to give credit to the Chancellor. The economy is in good shape and he can take a great deal of satisfaction from that. I shall not be mealy-mouthed: he can take a good bit of credit for it as well. Were he to be similarly candid, he too would offer credit to his predecessors, because he has built on what they did and on a trend that was established five years before he went to the Exchequer.
For example, some hon. Members, but perhaps not all, believe that an economic miracle began on 2 May 1997. Let us take a date at random—1 May 1997. Growth was set to be 3.5 per cent. for the next year. Inflation was 2.6 per cent. and stable. Unemployment was falling rapidly and, although still high, was down to just over 1.5 million. The fiscal deficit was falling sharply—a point that the Chancellor invariably overlooks because it embarrasses his campaign to discredit his predecessors. The trend of a falling fiscal deficit was clear, and it was falling sharply. The right hon. Gentleman can take credit for not wrecking the trend, but he cannot take credit for beginning it, for it preceded him by four years.
I thoroughly welcome the fact that economic management has reached a maturity whereby the two major parties do not feel it necessary to reverse all the actions of their predecessor. That is beneficial to the British economy, and it will remain so for as long as that is the case. I may be wrong, but I think that the Chancellor took that too far in his first two years by adopting the previous Government's expenditure plans in toto. I can tell the House, and I hope that it is not a great shock, that we certainly would not have done that. We would have increased them in the two public expenditure rounds that followed, as we had in every public expenditure round since 1979.
Stakhanovite is one word; masochistic is another, which might perhaps describe more plainly the Chancellor's disposition. He has been an economic masochist over public spending. We hear a huge amount about public spending, and the Secretary of State for Education and Employment was at it as well this afternoon, but despite the hype about the unprecedented sums for health and education, the fact is that the Chancellor has raised taxes by far more than he has increased expenditure. The public have not noticed because one skill that the right hon. Gentleman has perfected is that of counting, and that includes the capacity to double count, overcount and miscount, which he has done repeatedly.
Again, I am indebted to the Institute for Fiscal Studies: total Government spending in this Parliament has risen at 1.2 per cent. a year in real terms. That is not only less than tax increases, but less than economic growth. It compares with public spending of 2.6 per cent. in the previous Parliament, which is a point that Liberal spokesmen have often made, although they are not often nice about the Conservative party. I am glad to see a nod of agreement, rather than a shake of the head, from the hon. Member for Sheffield, Hallam (Mr. Allan), because that is undoubtedly the case.
I concede that much of that expenditure was not discretionary: it resulted from the unavoidable impact of the recession. However, it puts in a better context that hoary old myth about Tory cuts, which the Prime Minister 656 is trying to recycle with his current spate of posters about potential future Tory cuts. Either he is ill-informed or scaremongering—probthly the latter.
The Government's publicity on cuts is familiar: it is an echo from the past. It was an odd experience in the last Parliament to be taunted by the Labour party over so-called cuts while hostile monetarists attacked us for spending far too much money.
§ Mr. Major
The lion. Gentleman may be right.
The health of the economy in 1997 and subsequently suggests that we may have got that balance about right.
During this Parliament, the Chancellor has benefited from the supply side reforms of the 1980s and the disinflation brought about by the policies of the 1990s. When he chants his mantra of boom and bust—I lost count of the number of times that he and the Prime Minister uttered such drivel last week—he should remember that the last unsustainable boom was well over a decade ago. That h is not stopped the Prime Minister depicting my right hon. Friend the Leader of the Opposition and my right hon. Friend the shadow Chancellor as Mr. Boom and Mr. Bust. [Interruption.] The Financial Secretary to the Treasury sniggers, but that is the politics of sneer and jeer. Neither of my right hon. Friends were policy makers at the time of the last boom, and one of them had barely been in the House of Commons.
There is a boom and bust today: a boom in tax raising and a bust in the competitiveness of manufacturing industry. Perhaps the Chancellor and the Prime Minister should concentrate on that boom and bust.
§ Mr. Major
I shall make a little progress, if the hon. Gentleman does not mind.
The Chancellor of the Exchequer is a redistributive Chancellor. He tries to hide that fact, but it is evident, and from his perspective he should not hide it. He aims to redistribute to the less well-off, but in general he redistributes to the Inland Revenue. Even his well-intentioned schemes are not wholly successful. I do not disagree with all of them. Bits of what the Chancellor has done have been good social justice, and if I had been in government with the economy that he now has, I would certainly have taken some of the measures that he has taken, and I am not remotely shy about saying so. However, some of those schemes have not been successful.
The Chancellor abolished the married couples allowance last year, and this year—after a helpful 12-month gap for the Treasury and the Inland Revenue—he has introduced a children's tax credit to replace it. However, many people will not receive that credit, because it is means-tested and millions will lose either some or all of it on the means-tested taper.
The organisation of that tax credit is a shambles. As it is based on the highest-earning member of the household, it throws up huge and unacceptable anomalies. If one parent works and earns £42,000 a year, no payment of the 657 child tax credit is made, whereas if both parents are at work, with no one at home with the child, and earn £35,000 each, the full credit is payable. As a means of social justice, attacking poverty and helping low-income families with children, this scheme is nonsense on stilts. If the Chancellor were serious, he would have examined those problems and sought to correct them before introducing the tax credit in its present form.
The minimum income guarantee is the Chancellor's safety net against poverty, but it is so complex that more than one third of eligible pensioner s do not claim it. The form is so complex and absurd that a large percentage of graduates might not claim it.
The 10p band extension is right in principle. I do not disapprove of minimising tax on lower income groups. However, the proposal is so niggardly and mean as to be almost pointless. The maximum gain from the Chancellor's measures in the Budget is 75p a week—that figure should strike a chord with Labour Members. Given pensioners' response to that amount previously, surely he should have done it differently.
Many of the main effects of all economic management, by every Chancellor of the Exchequer, become apparent some years after the announcement of the original tax and spending decisions. This Chancellor was lucky. He was lucky in his predecessors—lucky, notably, that my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke) and my right hon. and noble Friend Lord Lamont made the painful and unpopular decisions that contributed so much to the subsequent benign situation of which the present Chancellor has made such use in this Parliament. And—unless my memory is failing—I seem to recall that they made those decisions in the teeth of unrelenting opposition, not least from the present Chancellor and the Prime Minister.
I will not be in the House to see the Chancellor's legacy at first hand, but much of it is now predetermined. He inherited an economy of falling unemployment and low inflation, and he has maintained it. That was well done; but under his stewardship also, taxes have risen too much. The tax system has become far more complex. Manufacturing industry has declined further. Regulations have soared. Increases in business taxes are undermining competitiveness, and so in due course will the social charter, whose economic folly is not yet fully apparent but will become so.
It is, in truth, a mixed record—some good, some bad—for this luckiest and most fortunate of modern Chancellors of the Exchequer.
I cannot be certain, but this may well be the last occasion on which I shall speak in the House. Let me say that it has been a privilege beyond measure to be here, in this mother of Parliaments. I hope that the next generation of hon. Members, whichever of our peat parties they may represent, will feel as I did when I first came to the House; I hope that they will feel that way in future, and I hope that we shall be able to end the miserable political climate of spin and counterspin that has grown up in recent years.
We need to separate fact from fiction, substance from soundbite, information from innuendo. The public—the electorate—the people who sent us here—deserve more than to be spoon-fed a cocktail of headline-grabbing feel-good stories. They deserve the truth, unvarnished sometimes, but the truth, and every Member of this House, whether Minister or Back Bencher, has the obligation—the duty—to provide it.
§ Mr. Jim Cunningham (Coventry, South)
I hope that that was not the last speech that the right hon. Member for Huntingdon (Mr. Major) will make in the Chamber. We can agree with some of what he says from time to time and disagree with other things he says, but we must all recognise that he has made interesting contributions to the House over the years—and, indeed, ended up being Prime Minister as a result. I hope that we shall hear from him one last time: he may say things that Labour Members do not like sometimes, but that is the nature of politics and the nature of debate.
I welcome some of the initiatives announced by my right hon. Friend the Secretary of State. I appreciate the £8.5 billion capital investment in education, as I am sure will many local authorities, and the capital investment in the new transfer of information scheme from primary to secondary schools. If that will reduce the amount of paperwork, it must be worth while. As I said earlier, some of us—sadly—remember the years when the present Opposition were in government. They may talk of red tape, but I remember teachers showing me cupboards full of paperwork that they were expected to go through. It is not all Labour's fault; there is much for which to blame the other side. The Opposition talk of freedom, and money going directly to schools. Who introduced local management of schools—again, the forerunner of bureaucracy?
Opposition Members talk about teachers being demoralised, but who was it who took away teachers' bargaining rights? I seem to remember that it was Conservative Members—although they seem to have changed coats now. I also remember, some years ago, a Conservative Secretary of State receiving a very rough ride at a teachers' conference. Although I agree with Opposition Members that there are some cases of low teacher morale—no one would deny that—the Government are making various attempts to raise it.
I welcome some of today's announcements by my right hon. Friend the Secretary of State for Education and Employment, as they should help to lift teachers' morale. Training bursaries must be welcomed, because anything that encourages more people to enter the teaching profession must be good. I also welcome the increase in teacher training places to 2,250 as part of the direct funding package for education, which should commence in June. It is a good development which should also help to lift teachers' morale.
In many ways, the teaching profession was devalued by some of the measures implemented by the previous Administration in their 18 years in office. It is therefore perhaps not difficult to see why it is so difficult to persuade the profession to trust the current Government's efforts to help it.
Opposition Members have mentioned the Government's schemes to retrain young people and to get them into work. I remember three or four of the previous Government's youth schemes, some of which only served to disillusion young people. Indeed, those schemes may be part of the reason why we have a lost generation of young people. Regardless of what caused that disillusionment, it is indisputable that, because of this Government's action, 270,000 young people now have prospects that they never had before and 1.1 million adults have been able to take up full-time employment.
659 Such progress was never made under the previous Government. I remember when, under that Administration, there were between 3 million and 4 million unemployed. That is quite a contrast with the current situation. Conservative Members accuse others of cherry-picking issues, but they, too, address them selectively. They take credit for the improvements, but blame everything else on the Government.
A few weeks ago, I raised the general issue of education standard spending assessments. Often when Governments of whatever complexion say that they are providing money in the SSA, it turns out that that money is not available. I am not accusing my colleagues of doing that, but simply telling them that that means of funding is well worth examining. The sooner we do that, the better.
Reorganisations—school amalgamations and closures—are under way both in my constituency and in other parts of Coventry. I am not so sure that the way in which we are dealing with those reorganisations is always right. A consultation exercise is being conducted and the public are essentially being told that alternative proposals will be considered. However, it is not always appreciated that the public may need assistance in developing and proposing such alternatives. Some members of the public have never before dealt with public authorities such as big education departments, which have great resources, or tried to persuade them to change policy. Although drastically declining school rolls sometimes require the amalgamation or closure of schools, I believe that that policy, and SSA funding, should be revisited.
Other matters, such as further education, were not dealt with in the Budget, but we cannot have an education debate without considering them. The Government have made some progress on further education, but it is still sometimes treated like a Cinderella eduction sector, squeezed between secondary and higher education. I ask my hon. Friends on the Front Bench to think about that. Very often, people who have not had the benefit of a university education find their niche in further education. I see the Under-Secretary of State, my hon. Friend the Member for Croydon, North (Mr. Wicks), nodding his head.
I hope that in the next Parliament the Government will not be in favour of top-up fees. Universities are looking for a variety of means by which to raise resources. Only a couple of weeks ago, one of the universities in my constituency tried to introduce a system whereby students who did not have laptop computers would find it difficult to get into that university. I hope that the Secretary of State is looking out for such schemes and gimmicks.
We cannot have disparity between north and south of the border, and it is about time that we looked at the Cubie report.
The long-term care of elderly people will not go away and I hope that Ministers will consider it after the election, if not before.
It has been said that our manufacturing base has been threatened. We have a well-known problem with Rolls-Royce in Coventry. People have heard me ask my right hon. Friend the Prime Minister to look at that, and my right hon. Friend the Secretary of State for Trade and Industry has agreed to do so. An important lesson has come out of discussions with Rolls-Royce.
660 The decisions that resulted in the lack of money invested in research and development were made in about 1992, and earlier. I remember saying on many occasions that the money saved by people losing their jobs should be used for research and development. A colleague of mine, a prominent shop steward, once told a Minister, "You're going to have some expensive shelf-stackers at Sainsbury's." That gives an idea of what people feel about a lack of research and development and the consequences that that can have in Coventry, particularly for companies like Rolls-Royce.
We welcome the increases for pensioners. Whatever the merits or demerits of the link to earnings, we have to convince pensioners about our policy. I readily acknowledge that Ministers have some valid reasons for not going down the road to re-establish the earnings link. For example, the £200 winter fuel allowance would be taxed. Nevertheless, at many of the meetings that I attend, pensioner constituents voice a lot of concerns about their incomes and it would be remiss of me not to repeat them. I hope that the Government will take note of that.
Low interest rates mean that the economy expands, and that assists manufacturing industry, certainly in the midlands. That has to be welcomed. Interest rates are probably the lowest they have been for about 35 years, and low inflation—the lowest for about 30 years—plays a significant part in the economy. Short-term interest rates from 1997 have averaged about 6 per cent., while longer term interest rates should average about 5 per cent.
People will remember the problems of negative equity. Mortgage interest rates have dropped—they have stabilised, from an average of 11 per cent. between 1979 to 1997 to about 6 per cent. at present. That gives comfort to small businesses, and to anyone buying a house, particularly young people. Low mortgage interest rates allow young people to plan ahead, which most of them want to do.
Manufacturing has started to rise—to about 1.6 per cent. That must be vitally important to the economy—especially in the west midlands. Productivity has been a subject for debate for 35 years or longer—certainly, during all my time in public life and in industry. It has grown by 4.4 per cent. That has got to be good, when we consider the years when it did not grow. I am sure that most people welcome that growth. We can all remember the days of boom and bust when exports were down and imports were up, creating balance of payments problems. Exports have risen by about 7.4 per cent. That has to be welcome—as is this year's surplus of £23 billion.
One of the things that the Conservatives lectured previous Labour Governments about was borrowing. The debt repayment is about £34 billion, so that is surely welcome.
§ Mr. Bercow
The hon. Gentleman talks of the importance of debt reduction, although he does so very much at national rather than local level. If the issue is of importance to him—it is right that it should be—will he tell the House what assessment he has made of the impact on the size of interest repayments on local authority debt of the change in the rules on the use of capital receipts from the sale of council houses?
§ Mr. Cunningham
The hon. Gentleman should not throw that red herring into the debate. The issue of capital 661 receipts was always mixed, depending on which local authority one spoke to. It was a Conservative Government who told local authorities that they could keep all their capital receipts only to start to plunder them. The hon. Gentleman should do his homework.
Lower unemployment means lower social security costs. In the past, the Opposition have criticised social security; they talk about cutting the budget and introducing swingeing measures that would make it almost impossible for people to claim social security. In fact, the cost of social security under my right hon. Friends, is down by about £4 billion—that must be welcome. In effect, it means that in order to achieve our other targets we do not have to make it more and more difficult for people who need social security to claim it.
During the period from 1979 to 1997, 42p in every pound was being used to pay off debt. That is down to about 16p at present. All in all, we must congratulate my right hon. Friends—especially on the reductions in corporation tax and capital gains tax and, more important, the assistance to be given, through reduced VAT, to small businesses with turnover of up to £54,000, and £100,000 for larger businesses. Those reductions should certainly be helpful.
Inner-city regeneration has caused much consternation and debate over the years. Under previous Governments, improvement grants were available, but people in inner-cities would now find it extremely difficult to obtain them because the Conservative Government cut them. I welcome the new initiatives to reduce VAT, to encourage inner-city regeneration—whether of property or by setting up small businesses.
Once again, I congratulate my right hon. and hon. Friends on an imaginative Budget, which gives something to everybody. I hope that they have noted the concerns that I highlighted and that, at some point in the future, they will revisit them.
§ Mr. Phil Willis (Harrogate and Knaresborough)
It was a pleasure to be in the House to listen to the speech of the right hon. Member for Huntingdon (Mr. Major). It was a pleasure to listen to a speech that was part of the debate, that entered into it and offered information and informed opinion. The right hon. Gentleman's speech was in stark contrast to the comments of the Leader of the Opposition—especially the speech about "a foreign land" that he made in Harrogate two weeks ago. The right hon. Member for Huntingdon did not give the House that impression today. It was delightful to hear the right hon. Gentleman forgive his former friend, Lord Lamont—although I suspect that Lord Lamont has never forgiven me for defeating him at the general election.
I want to quote a wonderful remark made by the right hon. Member for Huntingdon—he may intervene if I do not get it right. In 1997, when the right hon. Gentleman was asked to comment on the Labour Government's policy of "education, education, education", he replied that he thought it was a good policy but that he would have put it in a different order. That brings me to a critical comment on the right hon. Gentleman's Government.
Although I would not challenge the right hon. Gentleman's knowledge and understanding of economics, I would certainly challenge the fact that successive 662 Conservative Governments, one of which he presided over as Prime Minister, left 7 million adults functionally illiterate and only one in four adults functionally numerate. That legacy was unacceptable, and it behoves all of us, irrespective of political party, to address that huge deficit and to ensure that future generations do not face the world without the basic skills that they need to operate successfully.
I, too, welcome this debate and echo the comments made at the beginning of the Budget debate by my right hon. Friend the Member for Ross, Skye and Inverness, West (Mr. Kennedy), who said:the mark of a society is what sense of opportunity it gives its youngsters and how much security it offers the most elderly and vulnerable."—[0fficial Report, 7 March 2001; Vol. 364, c. 318.]The hon. Member for Lewisham, East (Ms Prentice), who is no longer in her place, hit the nail on the head. The one thing that I took from the Budget, and the one thing that the House should praise, was the concentration on removing child poverty. Without ending child poverty and ensuring that fewer of our young people begin life and spend their early years in poverty, much of the rest of what we do is reactive rather than proactive; it is a sticking plaster.
In terms of my right hon. Friend's comments on 7 March, two main issues were not dealt with in the Budget, and they have been addressed by Labour Members during the debate. First, there was nothing in the Budget on the care of the elderly. That was a huge omission; it is one of the most pressing issues that we face. It is not simply a pensions issue—clearly, we have had many debates about pensions—but one of how we care for our elderly. The way in which the long-term residential care needs of our population are looked after distinguishes a caring from an uncaring Government, an idea to which the hon. Member for Coventry, South (Mr. Cunningham) alluded in his speech.
There was nothing in the Budget to support local authority social service departments, which are desperately struggling with the costs of residential and nursing-care placements. It was rather sad that there was nothing to support the cross-over between health authorities, health care trusts and social services in trying to meet those needs. The Chancellor, who had the resources available, could more wisely have used his money in that way.
§ Mr. John Hayes (South Holland and The Deepings)
The hon. Gentleman may want to consider the fact that Library figures show that, in the first two years of this Government, the Chancellor reduced personal social services expenditure to the detriment of the very vulnerable groups that he describes.
§ Mr. Willis
I accept the hon. Gentleman's comments, but he must accept that, certainly in each of the five years before the new Labour Government's election on 1 May 1997, the resources given to local authorities for social care use were reduced, year on year; and that, more perversely, capping arrangements meant that council tax rises could not compensate for those reductions, so I would say, "A plague on both your houses!"
This debate is primarily on education, so I shall return to education as soon as possible. It was rather sad that the hon. Member for Maidenhead (Mrs. May) spent virtually 663 all her contribution offering a diatribe without ideas, regurgitating the same old accusations, mostly on behalf of The Guardian and Nick Davies, about the Government's spending plans.
The hon. Lady and the Tory party offer one specific response to our schools' needs—free schools. The response that she gave to my question about funding was appropriate, because it goes to the heart of the debate on the Tories' proposals for free schools. They seem to be suggesting that every school will be funded centrally, so I asked whether every child would receive the same level of funding. Interestingly, the answer was no. There would have to be a formula to distribute resources and that is one of the issues that has bedevilled Governments in their attempts to provide equitable resources to individual schools.
I have often discussed the issue with the hon. Member for South Holland and The Deepings (Mr. Hayes). The tragedy of the Tories' proposal becomes clear when one considers which of the services that are currently offered by local authorities to schools would have to be offered by the schools themselves as part of the package. The costs for special educational needs for schools in an inclusive education system can be horrendous if they are not largely picked up by the central administration. The idea that each school would have to meet the requirement does not bear the critical examination that such a policy should receive. The idea that head teachers want to be responsible for school transport and want to organise buses and taxis is beyond belief. Again, the suggestion that the service could be provided more cheaply if it were run by each individual school rather than by a local authority does not bear critical examination.
One of the key suggestions that the hon. Member for Maidenhead constantly makes to head teachers relates to disruptive pupils. Under a Tory Government—God forbid—schools would be able to kick such pupils out, but where would they go and how much would it cost to look after them? All the evidence shows that it costs at least five times more to educate a pupil in a pupil exclusion unit than it does in school. Where would that money come from, and what would happen if the number of units were expanded? My authority does not have such a unit. It would have to build one, and that would have to be resourced centrally.
In my role as education spokesman for the Liberal Democrats, for the past two years I have had spats with the Secretary of State and accused him of all sorts of things. However, I would never accuse him of not being interested in, or committed to, education. From the age of four, I have spent my whole life involved with various Secretaries of State in one guise or another. In 1944, my father was presumed killed in the war and that was the year I attended my first nursery school. Since then, I have been involved, in one way or another, with every Secretary of State. Perhaps Butler to Blunkett does not sound as good as Huxley's cradle to the grave, but the Secretary of State will be right to be proud of many achievements if he leaves the Department for Education and Employment and goes to the Home Office.
Sadly, however, the Secretary of State's legacy will not be as good as it should have been. In 1997, the whole education world welcomed a change and expected that things would be different. I was a head teacher in 1997 664 and I know that schools were demoralised then. The whole education system was demoralised and underfunded and there was a 20-year backlog of repairs to school buildings. The situation was dire. So it is rather sad that the Government have abandoned the proud ambitions with which they came into office. They have squandered them on spin, triple accounting and knee-jerk reactions. Above all, the Government have put their faith in the likes of the former chief inspector of schools, Chris Woodhead, who betrayed not only the Secretary of State, but the education system.
The Budget was announced as we look forward to a general election and I support much of what the Chancellor said last week. I welcome the fact that much additional money will go to head teachers to spend on books and equipment. When I was a head teacher, I would have welcomed greater flexibility in the spending of part of my resources, and I am sure that most heads welcome the proposal.
However, the Government should not be able to claim that a huge sum of extra money was announced in last week's Budget. The £1 billion was an underspend from previous years. It was not new money, but money that had been regurgitated. If we take account of the Barnett formula and subtract the money for Scotland, we are talking about £800 million over three years, of which £200 million will go towards earmarked recruitment and retention packages. The money for each school will thus be about £10,000 to £11,000 a year, and a school's future cannot be planned on the basis of such funding. That is the huge mistake that the Government continually make. Year after year, they drip-feed money into our schools and they attract major headlines, but they do not attack the root cause of the major underfunding in the resource budgets of all our schools.
Let me give some examples. A head teacher in the royal borough of Kingston upon Thames has written to the chairman of the Conservative-led council. Kingston is reducing school budgets, because it is anticipating the money that the Chancellor will give directly to schools. Exactly the same thing, is happening in North Yorkshire—again a Conservative-controlled authority—which is top-slicing its school budgets by £2 million. Although Harrogate grammar school—which, by the way, is a top-class comprehensive school—will receive an extra £12,000 from the Budget settlement, it will lose £40,000 because of the reduction in funding from the county council. I recall what the hon. Member for Coventry, South said, and point to the nonsense of the current funding arrangements and to their lack of transparency.
§ Mr. Hayes
I know that the hon. Gentleman shares my concern that the problem with the drip-feed approach that he describes is that, although it may attract headlines, it is unrelated to need. It is a crude instrument. He criticised my hon. Friend the Member for Maidenhead (Mrs. May) because she said that the formula would have to take account of need, but surely he would acknowledge that the Government's approach of handing out money in lump sums does not address the core issue of need.
§ Mr. Willis
I think that I have already said that. I have never met an hon. Member who supports the current system. I asked for an explanation of the current standard spending assessment system and, because I knew that it would be a leisurely debate, I have the answer with me. 665 I shall describe to the House how primary schools get their money. Under the fairer funding scheme, the Government's SSA for primary pupils for 1999–2000 contains the following formula:(a) Pupils aged 5-10 multiplied by the result of: £1,722.06; plus £206.93 multiplied by Additional Needs index; plus £94.75 multiplied by Ward sparsity index; plus £200.94 multiplied by free school meals;(b) The result of (a) is multiplied by the Area Cost Adjustment for education;(c) The result of (b) is then multiplied by a scaling factor (1.00000461765064).It is plainly nonsense to have such a lack of transparency in our funding system, and the Government promised to change it.
§ Mr. Jim Cunningham
First, it ill behoves the Opposition's Front-Bench spokesman to talk about SSAs when no one manipulated them more than the Conservative Government. Secondly, every year they were in government we had the hardy annual of finding out whether an area would retain its cost adjustment. We cannot know where we stand when we relate cost adjustments to SSAs.
§ Mr. Willis
Again, I agree with the hon. Gentleman. However, while the Labour party was still in opposition, it promised that the system would be made fair and transparent. The Secretary of State should give a commitment to that effect.
Another myth needs to be exposed. It was mentioned by the right hon. Member for Huntingdon and relates to the amount that the Government are spending on education services. It is thought that such spending is increasing dramatically. However, according to Library figures, the proportion of gross domestic product that is spent on education during this Parliament will be 4.6 per cent., compared with 4.9 per cent. under the Government of the right hon. Member for Huntingdon. We can argue about GDP until the cows come home, but the Government said that they would spend a greater percentage of the country's wealth on education. That is clearly not happening.
Liberal Democrats welcome the £200 million for recruitment and retention which the Secretary of State announced. We also welcome the fact that the Government have understood that there is a problem. However, we want to dissociate ourselves from the right hon. Gentleman's disgraceful attack on dedicated professionals which appeared in the Daily Mail today. When we are in the middle of a sensitive dispute, it does no good whatever to launch a wholesale attack on the teaching unions. The Under-Secretary of State for Education and Employment, the hon. Member for Croydon, North (Mr. Wicks), is in the Chamber and I have a challenge for the Government: rather than bandy words with trade unions about teacher shortages and, in particular, the strike action, they should immediately organise an emergency summit with trade union leaders, local authorities and the Department to set a timetable and resolve the crisis.
Last year, we established the General Teaching Council, one of whose key tasks should be to operate as a standing committee on teacher supply. I hope that I 666 receive a response to that idea. We have all continually warned the Government about the problem of teacher recruitment. In last year's debate on the Budget, I said:It is surprising … that there is nothing in the Budget to assist with teacher recruitment … despite the worrying trend."—[Official Report, 23 March 2000; Vol. 346, c. 1150.]This year, we have received £200 million over three years. That is an improvement, but it is clearly not enough.
According to last week's survey by The Times Educational Supplement and the Secondary Heads Association, there are 10,000 vacancies in our secondary schools, and some 10,000 vacancies in our teacher training colleges have gone unfilled since 1997. That cannot go unchallenged. Indeed, Ministers have acted. They have introduced "golden hellos" and have tried to introduce a grant, which has become a training salary. Baroness Blackstone has said:The Government have introduced training salaries".—[Official Report, House of Lords, 21 February 2001; Vol. 622, c. 861.]Hon. Members should note the term "training salaries". Paragraph 5.17 on page 68 of the Green Paper, which was published two weeks ago, said:We have introduced a new £6,000 training salary".However, it is not a training salary and, if it is, it breaks all the Government's rules on salaries. A £6,000 salary works out at £3.95 an hour, based on a 40-hour week, but last week they told the House that we must have a £4.10 minimum wage from October. There is a real conflict here. Perhaps the Government will admit that the new training salary—if it is to be a salary—will have pension rights attached to it and that national insurance contributions will be paid on it. Without those, people will be disadvantaged.
The hon. Member for Maidenhead said that there was a problem with the Government's figures on applications for teacher training. I do not want to repeat those. Last week, we had a major spat with the Graduate Teacher Training Registry because it published figures a day early for the Government. It said that the Government asked for their early release so that they would not conflict with the good news in the Budget. It cannot be right that an independent organisation should leak information to the Government ahead of time, but not give it to Conservative Front Benchers, Liberal Democrat Front Benchers or anyone else. The Government so often get it wrong by attempting to manipulate information rather than giving everyone access to it.
There has been a 13 per cent. drop in secondary course applications, despite all the Government's belated actions since 1997. That is having an effect on our schools because of the related shortages. Rather than criticising the teaching unions, we should work with them to redress that balance.
Higher education was—conveniently—almost totally absent from the Budget statement and the Secretary of State's statement today. The Chancellor recognised that we need 2.5 million more employees who are educated to degree level. However, he offered nothing to ease the growing burden of student debt. There is an aversion to mentioning that problem. Indeed, the Select Committee on Education and Employment avoids recognising that debt aversion is relevant. It puts people off going into, and staying in, higher education. The Liberal Democrats are the only party to guarantee students reduced debt and the abolition of tuition fees. I was delighted to hear the hon. 667 Member for Coventry, South mention the Cubie report. Ultimately, we will return to that and have similar arrangements for students in this country.
Last Friday's editorial in The Times Educational Supplement said:The Liberal Democrats' proposals to restore means-tested grants are the most coherent solution to student poverty and are a prerequisite to expansion. Labour should steal them.That is a good message for the Minister.
§ Mr. Richard Allan (Sheffield, Hallam)
My hon. Friend will know that many of my constituents are academics who work in Sheffield's two universities—the university of Sheffield, and Sheffield Hallam university. He should also be aware that many of them are writing to me to tell me how poor morale is within the higher education sector. Does he share my concern that the Government's policy is about cramming more bodies into the higher education institutions without dealing with the fundamental pay problems in higher education? The product that they provide will inevitably suffer as more industrial disputes take place and other problems of morale arise.
§ Mr. Willis
My hon. Friend makes two excellent points. Expansion is pointless without sufficient investment to ensure quality. After the Robbins report in 1963, the sector expanded year after year, but in the 1990s, under the previous Government, there was a year-on-year reduction in real terms in the amount available for each student in higher education. The sad fact is that every year since 1997 there has been a reduction per student in the amount of money for their education.
The Prime Minister recently announced that his ambition was to have 50 per cent. of young people going into higher education. That is meaningless unless we are told where all those people are to come from. At the moment, the demand simply does not exist. Last year, 53 higher education institutions were unable to fill their student places. There were 40,000 unfilled places in our universities. The Government are planning unbridled expansion simply to grab headlines.
I agree with the earlier comments about further education. There was not a word about that sector in the Chancellor's statement. It is as if the Learning and Skills Council has wiped away all further education worries and resolved all the problems. There is a massive problem of recruitment and retention in FE, just as there is in our schools. There is a huge issue surrounding pay, just as there is in higher education, as the Bett committee reported. An even bigger issue in FE is the professionalisation of lecturers. If we do not grapple with those problems, we will see the same sordid results as have occurred in many of our schools, such as young people being sent away and teachers being pulled in from wherever possible to fill staff places.
The Government's policy on lifelong learning began with a huge agenda and was going to revolutionise the world. Under the policy, "learning works", no child, young person or adult who was failing would be allowed to continue to do so. Sadly, the joined-up thinking has not taken place. The schools taskforce said that we 668 desperately needed people to have access to level 2 and 3 qualifications throughout their lives. The Chancellor says that he wants to underpin level 2 training, but that is all. There will be access to training at level 2, but not beyond, even though, apart from Mexico and Greece, we have the lowest number of people in level 3 training anywhere in the developed world. That is the challenge that the Government have not met. Hopefully, a Liberal Democrat Government will meet it in the next Parliament.
§ Mr. Ivan Lewis (Bury, South)
We have heard perhaps the final contribution of the former Prime Minister, the right hon. Member for Huntingdon (Mr. Major), so it is appropriate for me to say a few words in response. If we put politics to one side, most of us would accept that he is basically a decent man, but he found himself leading a political party that was unleadable. Indeed, much of his time was spent standing up to the right-wing, extreme elements that now control the modern Conservative party, so it must be difficult for him to make speeches from the Opposition Benches these days.
It was, however, curious to listen to the right hon. Gentleman's analysis of the economic situation in Britain. He was clearly anxious to rewrite the legacy of his stewardship of the economy. Listening to him, one would have thought that his Governrnent had a reputation for economic competence and that he had led them to a barnstorming victory on 1 May 1997, but history records something very different. It shows that Black Wednesday was the beginning of the end of the Tories' claim to be the party of competent management, economically and more generally. That Government left the country with national debt that had doubled. They left the country extremely insecure, socially divided and very unhappy, and that is why the right hon. Gentleman led his party to the worst election defeat in living memory. That is no reflection on him as an individual or on his decency; it is a reflection on the record of the Government whom he led, and more specifically on their economic incompetence and the social division that they created.
The right hon. Gentleman made one useful contribution to the debate of which the Government should take note. In his condemnation of the use of the terms "Mr. Boom" and "Mr. Bust" to describe the Leader of the Opposition and the shadow Chancellor, he spoke of "sneer and jeer" politics. I am sure that Labour Members would regard "Mr. Sneer" and "Mr. Jeer" as equally appropriate descriptions of the Leader of the Opposition and the shadow Chancellor, so I thank the right hon. Gentleman for that idea.
Labour Members would agree with much of what the hon. Member for Harrogate and Knaresborough (Mr. Willis) said, although, like every Liberal Democrat Member, he asked for more and more public spending. There is never any reckoning of how that is to be paid for, and account is never taken of the need for a stable economy and for economic prudence as the foundation of public spending.
I shall give an example of Liberal Democrat contradiction from my area. The right hon. Member for Ross, Skye and Inverness, West (Mr. Kennedy) recently said that we cannot have high levels of public spending and low levels of taxation, and that it is important that politicians are honest about the fact that they must put up 669 taxes if they want to increase spending. Last week, the Liberal Democrat group on Bury council proposed an amendment to the Labour-controlled council's budget to reduce council tax. They displayed none of the honesty recommended by their national leader; they did not say that reasonable, fair taxation is necessary to pay for decent services. They made a nakedly political move to pander to an audience.
Throughout the country, Liberal Democrats at a local level are inconsistent with their national leadership. They do not merely have different policies in different towns—sometimes they have different policies in different streets. Is it not about time that they were honest with the British people about how they would pay for the increased public expenditure for which they continually ask?
§ Mr. Allan
Before the hon. Gentleman awards us the monopoly on complaints about local taxation, I hope that he will refer to Labour opposition groups, such as the one in Sheffield, who attack Liberal Democrat-controlled councils for their council tax rises. Does he not accept that it seems to be a traditional role of the opposition in local government, whatever party they represent, to attack the ruling group for its council tax rise? Will he pay attention to the proposals published in the Liberal Democrats' alternative Budget, which clearly point out where additional funding at a national level would come from?
§ Mr. Lewis
The hon. Gentleman's party says that it is different; that is the whole point of the remarks of the right hon. Member for Ross, Skye and Inverness, West. He tries to pretend that the Liberal Democrats are somehow separate from politicians in other parties, and that they are more honest, straighter and tell the truth. Yet in Bury, the Liberal Democrats did exactly what their national leader tells us is unacceptable and misleading—they called for a council tax reduction purely to pander to local opinion at the time and without any regard for the consequences for local services. The Liberal Democrats cannot continue to have it all ways.
The Budget has been warmly welcomed by my constituents. It demonstrates that the Government have honoured their pre-election promises to the British people. To be specific about the fundamental pre-election promise, the Budget continued the rebuilding of the country on the foundations of economic stability and social justice. The Government have always aimed to combine encouragement of individual ambition and aspiration for families who want a decent life and to do well for themselves with a commitment to community solidarity, to public services and to the idea that we achieve far more together than we ever do alone. The Budget is responsible and it ensures that we are able significantly to invest in the people's priorities. It would never have been possible without the tough choices made by this Government early on in our Administration.
The Conservative party seeks to pretend that we have continued its economic policies and that, had it continued in government in 1997, the economy would have been as strong as it is now and the fundamentals would have been in place. I shall give three specific examples of why that is arrant nonsense and of where this Government had to make distinctive and difficult choices.
The first decision was to give responsibility for the setting of interest rates to the Bank of England's Monetary Policy Committee. That option was available to Tory 670 Chancellors for many years, but they declined to take it. This Government took the decision to prioritise paying off the national debt. That is a distinctive choice, which Governments do not have to make. In fact, the Conservative party doubled national debt while in office.
§ Mr. Lewis
I shall give way in a minute.
This Government chose to make the payment of national debt central to their economic strategy. Yes, we chose to stay within tight spending limits, but that did not mean that we did not spend considerably more in the first two years of the Parliament on health and education—we did. [HON. MEMBERS: "No you did not."] Yes we did. However, the overall Government spend stayed within previous limits. It is interesting that the Conservative party says that that is the best example of our continuing its economic policies, yet the right hon. Member for Huntingdon said that the Conservatives would not have done so had they been in government post 1997.
§ Mr. Brooke
I feared that the hon. Gentleman would get to a point where my intervention would be irrelevant. As he has said that the previous Government doubled the national debt, will he remind the House of the national debt in 1979 and of that in 1997? I think that he will find that it did not double during that period.
§ Mr. Lewis
I thank the right hon. Gentleman for his intervention. I was referring specifically to the period between 1992 and 1997, when he was a leading and respected member of the Government. It is important that people who served in that Government take responsibility for their record and legacy, and do not seem to have a collective fit of amnesia.
This Government made distinctive and difficult decisions in their early days that led to today's economic stability. It is wrong to pretend that the economic strength of our country, which the right hon. Member for Huntingdon was honourable enough to acknowledge, was created by accident or chance. We, as a Government, recognise that it is also due to the enterprise of the British people and their contribution to that economic growth and success. If this Government had not laid such foundations, we would not now be able to use that economic stability to invest in our country's future.
Let us consider the outcome of those policies of economic stability and competence. One difficulty for Conservatives is that they cannot cope with the fact that the British people now see the Labour party as the party of economic competence. The Conservative party finds it difficult to stomach the fact that the British people recognise that the Labour party has travelled a tremendous distance and demonstrated—not just promised—in four years that it can be trusted to manage the economy. The outcome of the policies is clear. We have the lowest inflation for 30 years and we have low interest rates. The average family now pays £1,200 per household a year less for their mortgage than they did in 1997. That is a significant contribution to household income. The Government have created 1 million new jobs, and we have the lowest unemployment for 26 years.
We should remember that it was not so long ago that we were being told that mass unemployment was a price worth paying for low inflation. For a long period during 671 the reign of the Conservative party, the British people were told that they could not have low unemployment and low inflation at the same time because it was managerially impossible. In fact, I think that it was Lord Lamont who said that unemployment was a price worth paying. That was an insensitive and disgraceful comment, and this Government have demonstrated that unemployment is not a necessary price to pay for the creation of a low-inflation Britain. It is a Labour Government who have delivered low interest rates, low inflation and low unemployment.
All that does not mean that there are not job losses—of course there continue to be people who lose their jobs. In recent weeks in my constituency, I have seen the sad loss of the East Lancs paper mill, which had offered a number of very important jobs and played an integral part in the community of Radcliffe, which is an important part of my constituency. What is important now to those who have lost their jobs is an opportunity to get another one, and that there will be investment in their area and community to give them hope, so that they are not consigned to long-term unemployment.
In the 1980s and 1990s, far too many people were consigned to the scrap heap of unemployment. In some families, three generations of people were never given the opportunity of a job and of engaging positively in society and in the community in which they lived. There continue to be job losses in certain sectors, but if one maps what happens one sees that the majority of people who find themselves out of work are very quickly able to reskill, retrain and find alternative employment opportunities.
Indeed, one of this Government's great successes has been the incentivisation of work through the new deal, which gets young and long-term unemployed people off benefit and into work. There has been a cultural shift in the social security system and economic strategy. Many people used to be better off not working. Low-paid jobs were available, but people were not able to secure work that provided a decent income for themselves and their families. This Government have created an environment that incentivises work and makes it pay. That in itself constructively engages many people in the community, so that they can make a positive contribution to the economy.
It is essential that our economic and social policy is relevant to all parts of the country. That is why the establishment of the regional development agencies was so important. They look at the strengths and needs of each region and ensure that we invest according to their sensitivity, history and future needs. Of course, the Conservative party is committed to abolishing RDAs, which would be disastrous in areas such as the north-west, where we are beginning to see the coming together of a local strategy between the public and private sectors, working with central Government to lay the foundations for continued economic growth and prosperity while at the same time tackling the fundamental social exclusion that has built up over many years. To ditch regional policy and, more specifically, to abolish RDAs, as the Conservatives would if they had their way, would be a lost opportunity.
One of the most incredible facts revealed in the Budget is the statistic on national debt: in one year, this Government have paid off more debt than was paid off in the preceding 50 years added together. That is a major achievement. I say that not because it is a good soundbite 672 or because it sounds good politically but because I believe that we should analyse the way in which the state spends its money and how it prioritises that spend.
Under the Conservative Government, in 1997, 42p in every pound of taxpayers' money was spent on paying either unemployment benefit or debt interest repayments. Only 58p in every pound remained to be spent on front-line services such as education, health and the fight against crime. Now, only 16p in every pound is spent on debt repayment and unemployment benefit and 84p in every pound of taxpayers' money is available to be spent on services that matter to people. There has been a massive change and a fundamental shift in the management of the economy since the 1997 election.
§ Mr. Willis
Why have the Government not considered local authority debt, especially that of hospitals and health care trusts? The local health care trust in my constituency spends about £900,000 a year on servicing debt. Why is it only Government debt that is written down? Why is there not support for local authorities and health authorities?
§ Mr. Lewis
The Government's responsibility is to lay foundations at a national level and to set parameters for the way in which local agencies work and for the choices that they make. The Liberal Democrats would be the first to criticise us for over-centralisation if we decided to dictate priorities for health care trusts and other local agencies in terms of the balance between debt repayment and investment in services. We have set parameters and taken a lead but, ultimately, given the massive extra moneys that are being made available by the Government to local health care trusts and LEAs, it is for those organisations to make choices and judgments on priorities locally.
We in Bury were pleased to receive my right hon. Friend the Secretary of State to open the Third Millennium building at the college of further education last week. It was a successfull visit, and my right hon. Friend was warmly received by all those who were fortunate enough to attend the opening. We are generally proud of our education system in Bury. We have excellent levels of performance. We have a family of schools working together in partnership with the LEA, which is recognised nationally; Ofsted acknowledges that it is one of the best in the country.
All those educational achievements—among the best performances in the country—must be set in the context of our having probably one of the worst levels of funding per pupil in England. That is why the public, and especially head teachers, teachers and governors, welcome the fact that the Government have produced a Green Paper on the reform of local government finance which for the first time identifies the distribution of education standard spending assessments as a difficulty and commits the Government to taking action to ensure that there is a far fairer distribution of education resources. I am told that a White Paper will follow after the election.
It is important that we tackle the issue of SSAs and have a more equitable system. Wherever a child is educated, a minimum sum should be agreed. No education authority should be expected to receive less than that sum.
§ Mr. Geraint Davies
I agree with what my hon. Friend says, but does he agree with me that we also need to 673 take into account issues such as ethnicity, multicultural education, mobility and other costs that certain urban centres face and certain rural areas do not?
§ Mr. Lewis
Of course I agree that those factors must be taken into account in creating a new and fairer system. The Government are not seeking to justify the funding gap that exists as between some LEAs. Indeed, they are seeking in their Green Paper to redress the balance. The factors to which my hon. Friend has referred matter, but they do not in themselves explain the gap between funding per pupil that exists as between some areas. That is why we welcome the Green Paper.
There are some political parties who say that the Government should have revamped local government finance in their first three or four years—that we should have got to grips with extremely complex and difficult problems that the Conservative Government did not tackle in 18 years. The Liberal Democrats know that, realistically, they will not have the opportunity to tackle them in the near future. We all know that local government finance is amazingly complex and that it is not easy to reform. However, the Government are committed to reform. In the Green Paper, they have specifically acknowledged the inequity of education SSAs as one of the issues that must be put right. Bury regards that as an extremely important commitment.
Those who imply that, because the SSA system has not been radically reformed, massive amounts of money have not gone into schools in places such as Bury and the other LEAs, are deceiving and misleading the public. Investment in the standards fund in Bury has risen from £27 per pupil in 1997–98 to £151 in 1999–00. We have seen £240,000 allocated to school security. Access initiatives have received £133,000. To recruit additional teachers to reduce class sizes, there has been funding of £2,082,000. Various capital projects have been allocated £1,448,000. There has been spending of £1.5 million on new classrooms to reduce class sizes, and £1.9 million has been made available for the new deal for schools. Given what was happening in the education system in the lead-up to the 1997 election, there has been a massive shift.
The right hon. Member for Huntingdon accuses us of scaremongering about the threat posed to communities by Tory cuts. Our argument is based on real experience. Anyone who served on a local authority during the Tory years knew what the annual cycle meant: it meant managing cuts exercises year after year to ensure that cuts did the least damage to the most vulnerable people in our communities.
The extra money that is going into schools and other local services throughout the country is making a real difference to the quality of those services and to the quality of education available in schools. It is a pretence that there has been no difference. We remember annual cuts exercises. We remember when there was inadequate money for books and equipment. We remember when class sizes in primary schools were far too large. We remember that era.
Anyone working in education at any level would acknowledge the significant amount of extra investment that is going into schools, which is making a difference to standards, to the quality of education and the physical environment and to opportunities to learn. The assertion 674 that the Government are not making a difference to education is false and mislading and is not borne out by the evidence that exists in every community.
The Budget will also make a difference to schools through the teacher recruitment strategy announced today, which is backed up with resources. One subject that has not been discussed so far is the reason for the crisis that we face in recruiting people to work in the public services, part of which is the way in which the public services and public servants were devalued and run down during 18 years of Tory government. Public services were portrayed as a leech on the public purse. Young people were not encouraged to go into public services if they wanted a decent standard of living or quality of life.
The status of public services and those who worked in them was undermined and demeaned over an 18-year period, yet in four years the Government are supposed miraculously to turn that culture around. Labour is responsible, allegedly, for the fact that we have thousands too few nurses, doctors, teachers and other public service professionals. In the words of a famous tennis player, "You cannot be serious." Most of the British public accept that, it takes time to make a fundamental shift in such a complex situation.
If we have thousands too few teachers, doctors, nurses and hospital beds, what was going on during the 20 years of unbroken Conservative rule, when there were periods of great prosperity and economic opportunity for the Government of the day? Where did that dividend go? Where did our money go? It went on tax cuts for a very few at the top, and the rest of it went down black holes on Black Wednesday and on debt repayment and paying the costs of mass unemployment.
It is a bit rich for the Opposition to attack the Government for the difficulties arising from the shortage of certain public sector workers. No one out there believes that. I suspect that many Opposition Members do not believe that that is a credible position. Everyone accepts that public services had to be rebuilt from the lowest level at which they have been since the war as a result of the damage that the Conservatives did to them. That will not happen overnight. Most of the British people acknowledge that, and are fair enough to accept it and to congratulate the Government on the achievement so far, even though they want more.
It is important to mention the Government's attack on child poverty, which has a direct correlation with educational performance. It is not good enough to look in isolation at test results, exam results and the resources going into schools. It is essential that we also consider the resources going to ordinary, hard-working families to tackle the problem of poverty and people living on unacceptably low incomes. The Budget introduces the children's tax credit, which will be £520 a year for ordinary families, and £1,040 in the first year after a child's birth, in recognition of the fact that that is a particularly expensive time for families bringing up children.
There will be enhanced child care allowances, which contribute towards a stable home environment, allowing children to learn and do better educationally. There will also be long-overdue improvements to maternity pay and leave, which again contribute towards stable foundations for the average family. The increase of £5 a week in the working families tax credit will incentivise work, making it worthwhile for people to make the choice to have a job.
675 The Government were the first Labour Government, after many promised it, to introduce the national minimum wage. That is to be increased from £3.70 an hour to £4.10 an hour—another policy of which the Government are proud, and which the Opposition said would cost millions or hundreds of thousands of jobs. Not a bit of it. The shadow Chancellor has accepted that if the Conservative party ever returned to power, the minimum wage would have to remain. Of course, that party would allow it to wither on the vine. That is the difference in approach between the Opposition and the Government. We will ensure that it increases according to the economic conditions that prevail, so that people on low pay benefit when the economy is doing well. Although the Opposition say that they would not eliminate the national minimum wage if they ever returned to government, they would certainly have a strategy of allowing it to wither on the vine.
All the Government's support for families, for children and for people who are working hard will make a substantial difference to those people's quality of life and standard of living, and ultimately to the quality of our education system. The Conservatives' comments about the Government's spending plans as set out in the Budget imply that they would make significant cuts in public expenditure. They have accused the Chancellor of having irresponsible spending plans, and they have identified the areas in which they believe those spending plans are irresponsible. If the Tories were ever re-elected, every community throughout the country would face tangible and massive cuts to local services that matter to local people.
It is about time that the Tories were honest and told us where the cuts in local public services would fall. How many teachers, doctors, nurses, police officers and transport schemes would be lost? How many essential services would be cut, and how quickly would we return to the culture of public service cuts? The Opposition also say that they would reduce taxes. We all know who would be the beneficiaries of that policy. The Conservatives would reduce taxes for the few at the top in our society, whereas our tax proposals are directed at reducing taxes in a targeted way for those who most need it.
Opposition Members look horrified at that proposition, but it has always been the way of the Tories, throughout history, to cut the taxes of the very people who least need it, and to do nothing about the hard-working majority of people, especially those on low incomes. It is not new and should not come as a shock to the Opposition that such accusations are levelled against them. It is entirely consistent with what they are promising in their election manifesto, and even more consistent with what they did when they were in government for all those years. It is often best to judge politicians by what they did when they had power, rather than by what they say they will do.
§ Mr. Richard Ottaway (Croydon, South)
I am grateful to the hon. Gentleman for giving way. Having listened to him drone on for 40 minutes because his Whips cannot get enough speakers to fill the time allocated for the debate, we are at least entitled to an accurate representation of the Conservative party's policies. There is no question of cutting health, education, transport or police spending. We would make a darn sight better job 676 of running those services than his party has done. Likewise, the tax cuts that we announced would be far more effectively targeted on those who genuinely need the help—the elderly and savers, in particular.
§ Mr. Lewis
I thank the hon. Gentleman for yet another example of the Opposition denying reality. Whatever the debates and disputes about the state of the economy, when the Government came to power in 1997, we inherited hospitals in crisis, schools that were crumbling, public services that were in a dreadful state, and a transport infrastructure that was a disgrace to a modern economy. That was the legacy not of four, eight or 12 years of the Conservatives, but of 18 years of unbroken government, when they had the opportunity to run the country in whichever way they saw fit. That is the situation that people faced in their daily lives on 1 May 1997, which may provide a miraculous explanation of why the Conservative party had the worst election result ever in the history of a major British political party.
§ Mr. Lewis
I thank the hon. Gentleman for his confident prediction.
It is important to remember that, in four years, it is impossible to put right 18 years of under-investment, social division and the running-down of public services. That view prevails among Labour Members and others and explains why we were elected in such large numbers. Many people who had previously voted Conservative transferred their loyalties to the Labour party because they saw destruction on the ground and society crumbling in their communities.
The Budget redresses the belief that there is no such thing as society and that we are simply a collection of individuals. That was not just Conservative rhetoric; the previous Government tried to run this country on the basis of that belief. They divided the country from top to bottom and, having failed to deliver high-quality public services and a cohesive society, added to that between 1992 and 1997 by messing up the economy. They were deemed to be economically incompetent and unfit to govern.
Nobody believes that the Opposition have any new solutions to the country's fundamental problem. Everybody knows that, if they came back into power, it would be more of the same—cuts in public services and tax cuts for the few at the top of society at the expense of the mainstream majority. There is nothing new about that; it has been Tory philosophy throughout the ages and from one generation to the next.
I am proud to support the Budget. Having spoken to my constituents at the weekend and read newspapers that I am not normally inclined to read, I genuinely believe that it is a Budget for hard-working families and high-quality public services. It is a good Budget for pensioners and small businesses; it is a Budget of which the Government can be genuinely proud.
§ Mr. John MacGregor (South Norfolk)
The hon. Member for Bury, South (Mr. Lewis) droned on for so long, with so many travesties of the truth and the facts, making so much irrelevant comment about history— 677 rewriting it and spinning—that he will forgive me if I do not follow his example. Indeed, the longer he went on, the more I realised that it was not worth following him and responding to his comments.
I have spoken in many Budget and Finance Bill debates, both as a Minister and a Back Bencher, during my years in the House. There was a pause only when I was a Minister in a certain Department. This may well be my last opportunity to speak in a Budget debate before retiring from the House, so I am glad to have had the opportunity of catching your eye, Mr. Deputy Speaker. I do not intend to cover the entire ground, only some key points, as I very much agree with my right hon. Friend the Member for Huntingdon (Mr. Major), not least about our strong economic legacy. I shall come back to that.
My overwhelming impression, as I listened to the Chancellor and looked at the Budget over the weekend, is that this is an itsy-bitsy Budget which, as in previous years, used the smoke and mirrors of the conjuror's art—I know something of that art—to deflect attention from what was really happening. There were little bits for everyone, but they did not add up to much. Nevertheless, the Chancellor got what he wanted: media coverage that made it look like goodies all round. I shall refer to smoke and mirrors later.
It has been widely recognised—and much commented on—that the Chancellor is apparently giving away, or, more accurately, giving back, only a small proportion of what he has accumulated during the past four years. That cannot be said too often because the Chancellor, the Prime Minister and others on the Government Front Bench tried to deny for some considerable time that there had been an increase in the overall tax burden—until, of course, the facts became irrefutable. Many studies by the House of Commons Library, accountants and others demonstrated that what the Government said was untrue. Now, the Red Book demonstrates that there has been a considerable increase in the tax burden, which, as a proportion of gross domestic product, has increased from 35.3 per cent. when the Government took office to 38 per cent. in the coming year. That is a measure of the increase in the tax burden, of which a significant proportion comes from fiscal drag.
My right hon. Friend the Member for Huntingdon was right to talk about the legacy of a strong economy. When history is written, that will be seen as one of the great benefits that the Chancellor inherited. To be fair, by and large he has not gone back to the policies of past Labour Governments, which would have dissipated all the benefits of the strong legacy that came about partly through the supply side reforms undertaken by my noble Friend Baroness Thatcher in the 1980s and the many other economic reforms during that period.
§ Mr. MacGregor
No, I have listened to the debate for a long time and I know that many of my hon. Friends wish to contribute.
During that period, there were strong economic policies, low inflation, and falling unemployment. As those of us who have worked at the Treasury know, those trends continue and others benefit from them—which is what has happened to the Chancellor. As I said, to be fair, he has not returned to the policies of the last Labour Government.
678 One reason for the fiscal drag is that the Chancellor has indexed all the thresholds on direct tax, including inheritance tax and capital gains tax, and has not compensated for the substantial earnings increases and capital cumulation during those years. When I listened to the Chancellor, I was struck by an illustration of that. The starting point for the tax threshold for the 40 per cent. higher rate, taking into account the personal allowance, is about £34,000, which is only about £9,000 higher than average earnings. Someone earning £34,000 goes straight into the highest tax band, which is a big tax jump and particularly unfair for households with a single earner in the family. They start to pay higher rate tax at the comparatively low level of £34,000 and are particularly disadvantaged compared with two earners in the same family each earning £25,000. That is a similar point to that made by my right hon. Friend the Member for Huntingdon about the children's tax credit. That issue must be addressed. However, fiscal drag is not permanent and can soon wither—I shall return to that later.
The other reason for the big fiscal surplus is the collective stealth taxes, the bulk of which have been levied on companies and their pension funds, and also involve indirect taxes. Starting with the burden on companies and pension funds, the Chancellor has been able to give the impression that he has not increased the tax rate because the burden has been put on those who, if I may put it this way, are not ordinary voters, and on bodies where the effect of the tax increase will come much later. Some people therefore feel that because the Chancellor has not increased direct taxation, he has not increased taxes overall.
However, the disadvantageous effects of increases in stealth taxes are bound to come through, especially in relation to pension funds. In the past four years, £17 billion has been taken from pension funds and added to the Chancellor's revenue, giving him the opportunity for fiscal surplus. That £17 billion, which will continue to accumulate in coming years, will have severe effects on companies and pensioners. Speaking as the chairman of the House of Commons pension fund, I suspect that, before long, it will feel the impact; the surplus will disappear partly because of the change in advance corporation tax. There is already a severe impact on a lot of companies, which now find that they have to cut benefits, move to direct benefit pensions—rather than direct contribution pensions—and considerably increase their own contributions to pension funds. Damage is already becoming apparent, but we shall see much more.
As for indirect taxes, the one that really affected individuals was the constant increase in fuel duties. Looking at the Chancellor's environmental measures, on which I shall comment in a moment, he has now recognised that technological improvements have made a bigger contribution to our climate change targets and so on than any increase in fuel duty. In fact, the Chancellor's continued increase in the fuel duty escalator was simply for revenue-gathering purposes, not for any environmental reason. It was only because of the outcry last autumn that the Chancellor called a halt to that. The impact of indirect taxes such as those has been very severe indeed, particularly on rural areas.
It is because the collected stealth taxes do not make a direct impact on individuals that the Chancellor's figures suggesting that various households are better off are so misleading. His calculations in the Budget documents 679 about people being better off refer only to direct tax. The situation looks very different if we take into account all the indirect taxes.
The Chancellor is at it again with the stealth taxes that were not announced in the Budget, but which leaked out later. The 7.5 per cent. increase in the upper earnings limit for national insurance contributions announced this week is an increase of three times the rate of inflation. Many individuals earning about £30,000 will be worse off as a result of the Chancellor's measures because that stealth tax was not announced in the Budget. We did not hear anything about it in the Budget for the simple reason that the Chancellor wanted to introduce it stealthily.
Another reason for the fiscal surplus has been the restraint on public expenditure in the Chancellor's first two years, to which my right hon. Friend the Member for Huntingdon correctly referred. That restraint was spun out by the treble counting that we kept hearing, year after year. Figures were repeated constantly by the spin doctors and by the Prime Minister, accumulating three years' increases in expenditure and giving the impression that they were being introduced all at once. That is one of the reasons why the public were unaware that many of the increases were nothing like as large as the Prime Minister and the Chancellor tried to pretend.
There has also been an underspend in the departmental expenditure limits, by £2 billion last year and £1 billion this year. That could be one of the reasons why a reluctant Chancellor managed eventually to allow the Minister of Agriculture, Fisheries and Food to announce changes to the amounts of agrimonetary compensation last week. The underspend no doubt made that very easy for the Chancellor. It is a pity that the announcement was linked to foot and mouth disease, because it has nothing to do with it and should have been introduced much earlier.
I also suspect that the underspend made it possible for the Chancellor to announce what I thought was going to be another smoke and mirrors announcement: the £1 billion increase in health and education. I was watching for an element of retreading or reannouncing of an announcement that had already been made. I grant that that did not happen on this occasion, but the three years' increases were rolled into one and made to look very much larger than they are. The increase in education, for example, is £290 million next year, a far cry from the impression of £1 billion that was given. I take the point made by the hon. Member for Harrogate and Knaresborough (Mr. Willis), who has just left the Chamber, that education spending as a proportion of GDP under the previous Government was higher than it has been under the Labour Government over the past four years.
I shall make one comment on part of the educational spend—the new £290 million—which is that I welcome the conversion to the way in which we approach education spending in terms of the direct payments to schools announced as part of the package. I notice that the Secretary of State for Education and Employment spoke today about greater delegation of budgets and giving more freedom to head teachers. Well, what a conversion. One of the most damaging things that he did was to abolish the grant-maintained schools approach, in which a large 680 proportion of the spend was directly delegated to head teachers, who were given the freedom to spend it as they wished.
I agree with the comments by my hon. Friend the Member for Maidenhead (Mrs. May) about the way in which so many of the education initiatives have been ring-fenced and small, giving the impression of great initiatives and great activity, when they would have been much better directed if they had been given directly to the schools in lump sums.
On health, the reality on the ground and the spin relating to the amount of money are poles apart. A general practitioner in a small village called Brooke in my constituency is retiring. It is proving very difficult—indeed. I think that it will be almost impossible—to replace that GP. One reason is the shortage of money. When I tried to discover whether the relevant funds could be rolled forward into the next three years, I was told that the Norfolk area health authority and the primary care groups were under huge pressure in relation to their budgets. That is the reality on the ground, and the announcement made last week will not make a great deal of difference.
More smoke and mirrors, now. I noticed, when I started to read through the press releases, that many of the tax reductions and grants are, as in the previous Budget, in years two and three. The impression is given that all those goodies will be immediately available, but we shall have to wait for two or three years for them to come through.
Furthermore, press release No. 1 from the Inland Revenue is absolutely littered with proposals which, when we examine them, turn out to be proposals to consult on this, that and the next thing. They give the impression of substantial giveaways to companies—many of the proposals affect the corporate sector—while doing almost nothing at all. As a former Minister with responsibility for small businesses, I can say that the changes proposed for small and medium-sized enterprises are absolutely minimal. The spin is much greater than the reality.
Like my right hon. Friend the Member for Huntingdon, I want to give credit to the Chancellor on two counts. First, on the macro-economic front he has not, by and large, pursued old Labour policies. He has avoided the ludicrously high rates of tax and the reckless spending that we saw under previous Labour Governments. I freely acknowledge that, because of that and the continuation of many of the policies that we were pursuing, he has been able to make a significant repayment of debt. Any Chief Secretary to the Treasury—especially one of my political composition—would always wish to be in that position. In fact, I was close to getting to it myself when I was Chief Secretary, and my point about inheritance was that it was my right hon. Friend the Member for Huntingdon who inherited the opportunity to repay debt.
I acknowledge that the Chancellor has been able to repay that debt, very much for the other reasons that I have given. However, he is in serious danger of throwing away his advantage. I sometimes wonder why there are so many rumours about an imminent election. I suspect that it is because the Prime Minister and the Chancellor do not want to wait until the autumn because they are aware that, given the slowdown in the American economy, the difficulties in Japan and the possible repercussions of globalisation that we experience from 681 time to time, the fiscal drag and the opportunity to repay debt might quickly start to move away. I suspect that that is one reason for having an early election.
However, we must also take into account the threat to the Chancellor's position on the repayment of debt. According to the Red Book—this point has now been well documented and commented on—in the next three years, the increases in public expenditure are planned at between 6 and 7 per cent. a year, with the three years growth estimated at very much less than that. Anyone who has been involved with the Treasury will know that, in terms of the surplus or the deficit—because we are talking about a small residual figure in relation to the expenditure numbers and the revenue numbers—if the economy moves into a slowdown, or if we spend much more than the growth in the economy, we can quickly experience a reverse in that repayment of debt and in the improvement that the Chancellor has been able to achieve on that front. That is the danger.
I also want to give credit to the Chancellor on the environmental front. I strongly welcome the reductions in fuel duty on ultra-low sulphur petrol, and a number of the other proposals in the Budget designed to improve the environmental aspects of transport generally. I remember clearly that I was Chief Secretary when my noble Friend Lord Lawson was Chancellor and we introduced the first reduction in duty on unleaded petrol. Although we were all in favour of that measure, we greatly underestimated the impact that that reduction would have on quickly moving everyone over to the use of unleaded petrol.
I generally welcome the Chancellor's proposals on environmental issues, but he is persisting with the climate change levy, with all the damage that it will do to the many businesses that will not be compensated by the national insurance reductions. He promises an aggregates levy next year, but that will be equally damaging to certain parts of our industry, and the threat of the pesticides tax to agriculture has still not gone away. If we read the small print, we discover that there is still the threat of a pesticides tax being introduced next year. I can think of nothing more harmful to our beleaguered agriculture industry at the present time than the continuation of that threat.
I have further detailed points to make. I believe that the climate change levy should not have been proceeded with and that the pesticides tax and the aggregates levy should not be introduced. I am sad that the Chancellor did not reverse IR35. When I was in California last September, I talked to a lot of Brits who work in the high-tech and biotech industries. Although California was the magnet that attracted British expertise from these shores, the spike of IR35 has greatly accelerated the trend and the visit to India made by the Minister for Small Business and E-Commerce provided one of the more ludicrous examples of its impact.
The Minister tried to recruit skilled consultants in the high-tech industries, for whom an accelerated immigration procedure was to be introduced, because we were losing our people. We have had to turn to others because IR35 has forced home-grown consultants from our shores.
§ Mr. Brooke
Is my right hon. Friend aware that the fastest-growing sport in the state of California is cricket, which is played in silicon valley?
§ Mr. MacGregor
As always, my right hon. Friend, through an illustration or an anecdote, makes the point extremely well.
I understand that the Chancellor has a passion for and obsession with detail, and that certainly shows in the complexity of so many of the new measures. As with education and getting budgets into schools, I believe that it is much more sensible to reduce taxation on families generally than to introduce a series of directed schemes that appear to be favourable and attractive to families. It is much better to leave families to make their own choices.
The complexity that we are beginning to detect on the tax credit front is frightening. Following the working families tax credit, a series of extremely complicated tax credits has been introduced. I must tell the Chief Secretary that I hope that that is not another way to fiddle the figures by reducing the public expenditure totals, as was done by the working families tax credit. The first of the two more serious consequences of such an approach is complexity for the recipients, and I am not surprised that there is not a big take-up.
Coming to the House in the car the day after the Budget, I listened to "Money Box Live". All the questions were about tax credits and the experts had great difficulty in explaining them. A lot of people outside the House simply will not comprehend them and I understand that the form is 40 pages long. That is not the way to set about establishing new systems, nor is it the way to encourage take-up.
Anyone who has tried to complete a self-assessment tax form this year, as I have, will have discovered that, because of a number of minor changes that the Chancellor has introduced to the tax system, that form is also 40 pages long and extremely complex. 1 happened to fill in my own, but it represents a bonanza for accountants, who will have to spend much longer on it. Introducing schemes of such complexity is not the right way to proceed and, of course, the burden on employers will be substantial too.
In the light of what is undoubtedly a Budget that will greatly exacerbate the complexity of our systems, I await the Chancellor's proposals on simplifying tax. It is perhaps significant that the press release on that subject comes last of all the Budget press releases. What is being simplified this year? The measures, which are the most minor that one could imagine, conclude withincreasing to £50 the de minimis limits within corporation tax, self-employed income tax and VAT for business expenditure on gifts, so that fewer minor items need to be reported and tracked by business.Big deal, when so many complexities are being introduced.
On savings, I have to declare an interest. As stated in the Register of Members' Interests, I am a non-executive director of a life assurance company. However, my remarks are geared not to that, but to pensioners. The hon. Member for Lewisham, East (Ms Prentice) said that the Chancellor wears a hair shirt and is greatly interested in thrift. She might be right about the hair shirt, but he shows his interest in thrift in funny ways. We know how much the savings ratio has dropped—it has more than halved and is down to 3.75 per cent. this year from about 11 per cent. when the Government took office.
I regard that as serious, but I am not at all surprised when I consider ISAs—which replaced PEPs and TESSAs and are nothing like as good by any measure—and the 683 changes to pension fund income in relation to advance corporation tax. I predict that the stakeholder pension scheme will not do for the Government what they hope it will. It certainly will not achieve substantial take-up among the targeted income group—those who earn between £9,000 and £18,000. Indeed, the scheme is likely to proceed in such a way that there will probably be many fewer providers and much larger ones than in the past. That, too, will not produce the results that the Government seek, although I am certainly with them in wishing to encourage much more take-up of pension contributions at a much earlier age from all employees.
§ Mr. Geraint Davies
Does the right hon. Gentleman accept that savings ratios tend to go down at a time of consumer confidence and economic stability? The majority of people's savings these days is in their houses, not in conventional savings accounts, and the savings ratio does not take on board wealth accumulated in housing.
§ Mr. MacGregor
When providing for old age or saving for other reasons, it is not helpful to put all one's money into a house.
§ Mr. MacGregor
Let me finish. I was a great supporter of the original Conservative concept of the property-owning democracy and supported all the way through every measure that we took to achieve it, but it has been achieved. The next stage is the share-owning democracy and the vast majority of the population providing for their own pensions. We all know, and the public widely recognise, that the state system will not do that, which is why I want to encourage those other measures and why it is worrying that the savings ratio has gone down.
There was speculation before the Budget that the Chancellor would introduce a measure to deal with the fact that people with personal pensions have to purchase an annuity by the age of 75. The concerns about the current system have been well documented, not least in a report by a retirement income working party headed by Oonagh McDonald, a former colleague in the House who participated in debates on the Finance Bill. I shall not go into those concerns because of the shortage of time, but they are well understood.
My hon. Friend the Member for Bournemouth, West (Mr. Butterfill) has introduced a private Member's Bill to address the matter, but as far as I can see the Government took every step to talk it out last Friday. Why is not such a measure in the Budget? Why are not the Government removing the deadline age limit of 75, by which one must have turned to a retirement annuity? If we are in a low-inflation environment, annuities will pay much less so it would be much better for individuals—certainly with their personal pensions—to subscribe enough to what the McDonald working party report describes as an index-linked annuity to meet a minimum retirement income. That would cover the possibility that individuals may squander their money. not have enough and, in due course, rely on a minimum income guarantee from the state.
I agree that it is right to protect that, and people have been working out ways to do so, but, beyond it, there is no reason why people who have been encouraged to build 684 up personal or money-purchase pensions should be encumbered with such a restrictive regime, which, in my view, is out of date, not least because they would have nothing to pass on to their families. Therefore, it is sensible to introduce a measure to remove the deadline age limit, and the absence of that represents a great gap in the Budget. I hope that it will be addressed and I am interested to know why the Government have set their face against such a measure.
This may be the last time that I speak in the Chamber and I echo all the comments made by my right hon. Friend the Member for Huntingdon. Participating in so many Budget and Finance Bill debates has been a tremendous experience, but, above all, it has been a privilege and a thrill to be a Member of the House.
§ Mr. Colin Burgon (Elmet)
As a relatively humble Back-Bencher, I am proud to take part in a debate with the former Prime Minister, the right hon. Member for Huntingdon (Mr. Major), and the right hon. Member for South Norfolk (Mr. MacGregor). I hope that they will still have further contributions to make. The right hon. Member for Huntingdon is a straight man whom I respect. I also respect his experience, but I think that it was Frederick the Great who said:Experience is useless unless the correct conclusions are drawn.Perhaps we will have to debate these issues further.
After the Budget, like all good constituency MPs, I went out and about trying to judge people's mood and find out what they thought about the proposals. I should like to cover three subjects that have been drawn to my attention: education, the environment and pensioners.
On education, I did not recognise the picture painted by the hon. Member for Maidenhead (Mrs. May). On Thursday, I went to West Garforth primary school to meet the head teacher, Ann Oxley, and open a computer suite, thanks to Government funding. The head was pleasantly surprised to hear that the amount of money she was expecting to receive for her small primary school had leapt from £10,000 to £13,000. Similarly, down the road in Allerton Bywater primary school, a larger school in my home village, Gill Weatherhead, the head teacher was delighted to hear that her expected sum of £50,000 had leapt to £63,000. Likewise, the amount for the two large comprehensives in my constituency, at Boston Spa and Garforth, leapt from £92,000 to £115,000. That is money well spent and well received.
We must be honest. I wish that the hon. Member for Harrogate and Knaresborough (Mr. Willis) was still present. I used to be a neighbour of his in more ways than one: I am a neighbour as an MP and he taught just up the road from where I taught. He got a lot more money than I did, and I was in a tougher school—but then again, he was a head teacher, so he can speak with authority. Any MP who goes round schools and talks to teachers must accept that they recognise that more money is coming in, but that is not the full picture.
We must address two problems. First, I hope that when we are re-elected at the general election, whenever that may be, we will do something about teachers' pay structure. Secondly, we must deal with an area that will otherwise give us problems by supporting teachers in the most difficult aspect of their job, which is maintaining discipline. There is no doubt that it is impossible to 685 contain some pupils in an ordinary school setting, so we must consider pupil referral units. Such units are costly, but they are productive. If the element that is difficult to control were removed, teachers could get on with the job of teaching.
I do not think that I am so aggressive or imposing that head teachers cannot speak to me frankly, and not one of them has ever told me that they want a full, 100 per cent. devolved budget. If the argument is that head teachers are already disappearing under a sea of bureaucracy and paperwork, such a move would involve them in even more bureaucracy, whether it be on school dinners, school transport or special needs. I did not recognise the picture painted by the hon. Member for Maidenhead.
I listened carefully to my right hon. Friend the Secretary of State's comments on the big issue of recruitment and retention. It is no good trying to shy away from this problem. I welcome the £35 million to be invested in the new management information system. It is our job as MPs—certainly on the Labour Benches—to ensure that the claim that the new system will lighten the load of data collection is delivered. Teachers tell me that the amount of paperwork they receive is extremely time consuming. I regularly receive a lecture from my brother, who is a head teacher and who tells me how much time he has to spend dealing with forms.
In the discussions I have with teachers, I encourage them to speak their minds, and in response I am allowed to speak mine. After having a face-to-face, full and frank discussion with staff of a large comprehensive in my constituency, I asked the head teacher—I shall not say who—"Don't they realise the amount of money that is going in? I can't believe their reaction." He said that, at the end of the day, they will vote Labour, because they know that a Labour Government will deliver the resources they need. We may have an argument with teachers, but it is within the family, and I feel confident that they will support us.
We need to get a grip on the lack of cover in schools. In my city of Leeds, several schools are balloting on strike action. If a pool of people is not available now—to be blunt, supply teachers are of variable quality—I am not sure what strike action will achieve.
I am also interested in the Chancellor's proposals on the environment and how they affect my city of Leeds. Leeds takes a dual approach to many matters. It has an affluent outer core, and an inner-city core where the business sector has developed. It also has areas of devastating poverty. The steps that the Chancellor has taken to regenerate Britain's towns and cities, such as Leeds, are excellent. I want to highlight three or four key proposals.
The stamp duty exemption for property transactions in the most disadvantaged areas is an excellent measure. My right hon. Friend has cut VAT to 5 per cent. to encourage renovation and conversion of existing property, and he has proposed 100 per cent. capital allowances for creating flats over shops. I hope that people will support all those ideas.
I am particularly interested in the 150 per cent. accelerated tax credits to help to clean up contaminated land. That is good news for the industrial and old mining areas of Leeds that I represent. The only bad news is that that was not done a few years ago. In my home village of 686 Allerton Bywater, the colliery site has just been reclaimed. I wish that the tax incentives had been available at that time.
Those measures taken in conjunction with the various planning legislation that the Government have introduced—I am thinking principally of planning policy guidance note 3—provide a package of measures that show the interrelation between the inner city and the suburbs, whose fates are inextricably linked. In Leeds, we are developing housing in the city centre. We must ensure that it is not only flats for wealthy people. If we use our derelict land effectively, it will help us to protect our greenfield sites. I hope that Conservative Members agree with us on that issue.
The proposals in the Budget that have preoccupied me most are those relating to pensioners. Like all MPs, if I had a pound for every time a pensioner chewed my ear, I would not be here—I would be sunning myself somewhere. Pensioners are great people, because they speak their minds. As long as I can speak my mind back to them, I welcome that. I welcome the priorities in the Budget that will improve pensioners' incomes. It is important to consider the strategy that the Labour Government have developed over the years. It represents a giant step forward, but we have a few more to take.
In an overall strategy of ending pensioner poverty by 2010, the Government have taken the initial steps of increasing the basic state pension by more than the rate of inflation to £72.50 for a single pensioner and to £115.90 for a pensioner couple; increasing the amount of income that is taxed at the low rate of 10 per cent., which will help an estimated 3 million pensioners; and increasing the minimum income guarantee to £92.15 for a single person and £140.55 for a pensioner couple.
When the MIG was introduced, like most other MPs, I ran campaigns up and down my constituency to raise awareness of the guarantee and to encourage people to take it up. In such wonderful-sounding places as Swillington, Allerton Bywater and Swarcliffe, we engaged in vigorous discussions about the Government's policy on pensioners and the minimum income guarantee.
An important aspect of the Budget for pensioners, and for me—after all, I may well be a pensioner soon—is the announcement of the start in 2003 of the pension credit scheme, which will reward the 5.5 million pensioners who have made the sacrifice of contributing to modest works pensions, and/or saving for their later years. I encountered many households with very small tailors' or miners' pensions, for instance—they were usually the husbands' pensions; for some strange reason women tend to outlive men, and research will doubtless explain why—which prevented them from claiming other benefits. That rankled with them. I wrote to the Prime Minister and the Chancellor of the Exchequer, and I should like to claim that they have listened to me, although greater forces were probably at work. In any event, the proof of the pudding is in the eating.
During that first half of 2000, I went out of my way to meet as many of my pensioner constituents as possible to promote the minimum income guarantee. They raised a question which I hope the pension credit scheme has at last begun to answer. Under the scheme the sacrifices that they made while in work will be recognised, and credit will be given for modest pensions and savings. I am gratified to note that pension credit will be linked 687 to earnings, thus giving pensioners more than they would have received through the restoration of the link between the basic state pension and earnings.
§ Mr. Bercow
The hon. Gentleman is making a thoughtful speech, and I am enjoying listening to it. However, given his interest in thrift and prudence, and the inevitable and perhaps desirable fact that people will themselves always have to contribute to the pot from which they draw on retirement, would he in principle endorse the notion that we should abolish tax on savings for basic rate taxpayers?
§ Mr. Burgon
Not at this stage. I think it would be financially irresponsible to do so.
Let us consider what the Labour Government have already done. I said that we should see everything in context, and there are things that I never forget—and never forget to remind pensioners about when they speak to me in the street, whether in a friendly or in an abrasive manner. We have provided winter fuel payments of £200 in every household containing someone over 60; we have provided free television licences for those over 75; and we have given pensioners the right to free eye tests. In June, we will introduce a national bus scheme for pensioners guaranteeing at least half-price fares. The fares will be 20 per cent. of the full amount in Leeds, so we are not doing badly. We have reduced value-added tax on fuel to 5 per cent. We have introduced the home energy efficiency scheme, which gives pensioners grants of up to £2,000 to install central heating and insulation. We estimate that that scheme will benefit some 400,000 pensioners over the next three years, and we hope to hit our target of ending pensioner fuel poverty by 2010.
In our dialogue with our constituents, we must also present the alternative, because a choice may have to be made in a year or less. When considering the Conservative party's approach to pensioners, we must take account of three or four key facts. Under the Conservatives, the gap between the poorest and the richest pensioners grew to its widest since 1960. They allowed the value of the basic state pension to decline throughout their years in office: by 1997, one in three pensioners lived in poverty. They scrapped free eye tests, and cut free travel passes. They condemned more than 4 million pensioner households to fuel poverty.
I can offer the Conservative party a way out. [Interruption.] It is not suicide, as someone has just suggested from a sedentary position. On Saturday, I was in Kippax, Garforth and Wetherby. An old couple came up to me in Wetherby—traditionally, a rock-solid Conservative bastion—pushing a trolley, and nearly knocking me down with it. In the course of our subsequent conversation, they told me that they had never been so well off: they were doing really well under this Government. I replied that it was brilliant to hear that, because quite often a certain group of pensioners did nothing but give me a hard time. They said "Mr. Burgon, they will only be happy if you give them a gold pig." I offer this advice to the Conservative party: the only way back to power lies in offering every pensioner a gold pig.
There is no doubt that the buzz on the ground is that Labour has delivered a very positive Budget. I know that the Chancellor did not have one eye on the election, 688 because he is not like that: his strategy is quite different. However, I am delighted that a by-product of the great effort that he has put in is the laying of the groundwork for a Labour victory.
§ Sir David Madel (South-West Bedfordshire)
In his Budget speech, the Chancellor made a glancing reference to farming industry. He referred tofarming—an industry essential to Britain, which today faces immediate and long-standing difficulties".Since he made that reference, things have got much worse, and they are getting much worse for the tourist industry as well. A real crisis is brewing up. I know that a number of electioneering speeches have been made over the past few days, but the Government need to consider the implications of what is happening in farming and tourism if they decide to plump for 3 May.
The hon. Member for Elmet (Mr. Burgon) said that he had offered advice to the Conservative party. In return, I offer the Labour party some advice: if it has a big domestic crisis on its hands, the public expect Labour to solve it rather than running to the polls. We went through all this in February 1974. I vividly remember the reaction on the doorstep, and believe you me, if an election is called a year before it is necessary during a full-scale crisis in farming and the tourist industry, the party concerned will receive a pretty hostile response on the doorstep.
My advice to the Labour party is that of Mr. Harold Macmillan, who used to say that the time to call an election was in the autumn, when the charabancs had rolled back from Seville. I must update that now, and say that the time to call an election is when the airlines have safely delivered all their passengers to Luton airport after the summer peak time. Hon. Members will know why I make that particular point. I have no shares or other interest in easyJet, Britannia, Monarch or any of the others, so the sleaze-buster will not be upset by my reference to them.
Budgets always involve grand ideas and lots of detail. I agree with my right hon. Friend the Member for South Norfolk (Mr. MacGregor) that this Chancellor hugely prefers detail. To me, the test of the Budget is whether unemployment will fall further and whether it will stay down, whether the 2.5 per cent. economic growth target will be met, what the effect of the United States slowdown will be on this country as Americans start to save rather than spend, and what will happen—the Chancellor mentioned this—if oil prices suddenly become volatile.
There are two grand schemes mentioned by the Chancellor to which I want to refer. In relation to unemployment, he said:For the hard to employ, those still left behind, we are proposing from 1 April, at a cost of £200 million a year, a new regime built around more intensive coaching and stronger sanctions for the over-25s.If that means—as I suspect it does—that local authorities will be involved in such essential work, they will inevitably have to take on more staff. I hope that the revenue support grant will be adjusted accordingly to take account of the additional staff who will be needed if they are to contribute to the employment of those who, in the Chancellor's words, have hitherto been hard to employ.
689 The second "grandish" scheme features in another part of the Budget statement. The Chancellor said:Today we issue proposals and will consult on the best way to extend a research and development tax credit to the larger companies.All I can say is that I hope the scheme will help research graduates just coming into work pay off their student debts and loans. I also hope that there will be comparable arrangements for medium-sized companies, which also go in for research and development.
I mentioned the Chancellor's devotion to detail. My right hon. Friend the Member for South Norfolk mentioned the problems over 1R35. Let me give a particularly muddled example. I have been in contact with the managing director of a company in my constituency, who said:I have at long last managed to get a credible answer from the Inland Revenue to the question which I raised in November … whether an employee who has acquired a more-than-5 per cent. interest in my company through membership of an employee share scheme is subject to tax on her entire fees if she works on a time-and-materials contract which falls within the scope of clause 1(1)(c) of Schedule 12 to the Finance Act 2000.The first reply that the managing director received from the Inland Revenue declared:if the person alluded to in your letter is as you have stated an employee of your business being paid through the payroll the provisions of IR35 will not apply.The managing director went on to say that that reply wasremarkably similar to Dawn Primarolo's response to you"—"you" being me, as I had taken up the issue with the Government. That response stated:If the person … is … an employee of'that company,then that person should already be onthe company'spayroll and the company should already he deducting PAYE and National Insurance Contributions from money earned. If that is the case, then the 'ir35' legislation will not apply.The managing director's letter goes on to say:Yet now, after repeated prodding, I have the following statement from the same Inspector who sent me the first reply:I can confirm that if the work that your employee undertakes under any given contract were to fall within the scope of clause 1(1)(c) of the Finance Act 2000 then by virtue of the fact that a more-than-5 per cent. interest in the Company share capital has been acquired, as per clause 3(1)(a) and clause 3(4)(a), a liability would arise under IR35.'It is a first-class muddle and an example of a business having to spend a lot of time worrying about the Inland Revenue and IR35 when it should be concentrating on the needs of its customers. We cannot say that we have not been warned. The February brief from the Association of Chartered Certified Accountants warns that it is very concerned about the impact of IR35 on income and corporation tax self-assessment. The brief states:IR35 mistakes made under the self-assessment arrangements could prove to be a ticking time bomb. If errors are made, they could lie undetected for years only to detonate in the future at huge expense to the individual or company concerned.I should like to deal with another, albeit slightly different ticking time bomb. My right hon. Friend the Member for 690 Huntingdon (Mr. Major) mentioned inheritance tax levels. The Chancellor said this of his inheritance tax proposals:I propose to raise the allowance, so that no tax will be charged on estates up to almost £1/4 million—a threshold of £242,000. Ninety-six per cent. of estates will pay no tax."—[Official Report, 7 March 2001; Vol. 364, c. 298-304.]With house prices surging ahead in the south-east, how can he be so sure?
I also do not understand the reasoning behind some aspects of our tax system. When someone dies and something has to be done about the house, payment of tax is the first thing that must be done. The house cannot be sold until probate has been granted, but probate will not be granted until the tax has been paid. Surely we can change the system so that, when someone dies and leaves a house, the first charge on the money that is raised is for the taxman—who will be the first in the queue. I certainly do not believe that people should have to borrow to pay the notional tax on a house that has not been sold because probate has not been granted. I should think that that tax reform would appeal to the Chancellor's sense of detail, and that it should be introduced very quickly indeed.
The Government have another looming, detailed problem. Ministers have made much of help for the family and child minders and help with child care. I have a constituent who is a single mother with three children, aged six, three and one. She must pay £100 per week to the child minder and £12 per week to the play scheme which the middle child attends. My constituent gets back 70 per cent. of the £12 that she pays to the play scheme, but gets back nothing for the £100 per week that she pays to the child minder, because the child minder looks after the children not in her own house, but in the mother's house and is therefore classed as a nanny and not as a child minder. That particular child minder—just to make the situation more interesting—works in the play scheme looking after the middle child at certain times of day. The only reason why she is able to do that is that she has the necessary qualifications.
It is a detailed muddle. I do not understand why my constituent cannot claim back money because the child minder looks after her children in her own home. If I have encountered that problem, other hon. Members will have done so too. The National Association of Citizens Advice Bureaux and those who advise on tax credits advised that constituent to see me, which she did on Saturday morning.
Like my right hon. Friends the Members for Huntingdon and for South Norfolk, I found some good things in the Budget. In South-West Bedfordshire, we have had the tremendous shock of Vauxhall's decision to stop building cars at Luton next year. I was heartened when a statement from management this week stated:Vauxhall management will continue to take all reasonable steps to avoid any compulsory redundancies as a result of the restructuring".The management is hopeful that it will achieve that aim. It also goes on to say—this is music in my ears—that it has reaffirmed itsundertaking to pursue new business opportunities in the UK.I hope that those opportunities will come in the Dunstable and Houghton Regis area. The Chancellor's comments in the Budget statement were very relevant for my area because he said that there would be six targeted tax cuts to speed up regeneration, at a cost of more than £1 billion over the next five years. He also said that he 691 will do more to clean up contaminated land and help to revitalise high streets, with 100 per cent. first-year capital allowances to bring empty flats over shops back into the residential market. He also said that there will be more help for the Small Business Service. However, he made not one mention or glancing reference to the need to improve the infrastructure in my constituency to make those changes happen. They will not happen until we get new roads such as the Dunstable bypass and other improvements.
This speech—like those of my right hon. Friends the Members for Huntingdon and for South Norfolk—will pretty definitely be my last in this Chamber. I echo everything that they have said. However, the greatest privilege for me has been to represent my constituents in this place for almost 31 years. Above all, I want the employment base to become strong again in South-West Bedfordshire, after some horrific shocks over the years. I want us to remain an industrial area. We want a hand up from the Government, not a handout, and that entails immediate improvements to our infrastructure. When I leave the House of Commons, I want above all to be able to say to my constituents that action has been taken to reduce unemployment and to retain my constituency as a powerful industrial base.
§ Mr. Geraint Davies (Croydon, Central)
Listening to some of the speeches by Opposition Members, I was a little bemused by their recollection of the state of play in 1997. They have described a golden legacy. My memory is of debt doubling and of interest rates being much higher than they are now. I also remember talking to the chief economist of the NatWest bank, who pointed out that the interest rate cycle varies from 7 to 15 per cent. We are now enjoying the low part of that cycle and a stable economy.
Before the Government were elected, unemployment was 1.1 million higher, and inflation was much higher. There were also much higher levels of bankruptcy and repossession. The picture being painted by Opposition Members is a figment of their imagination. Since 1997, the themes in the Chancellor's Budgets—promoting stability, prosperity and fairness, and the focus on benefits to families and businesses—have been remarkably consistent. It is those themes that have regenerated Britain and will serve us in good stead for the future.
Hon. Members will remember that, in the first couple of years of this Government, the overall economic picture was a bit precarious. Hon. Members will recall the so-called south-east Asian financial crisis—when a quarter of the world economy was in recession, world growth targets were halved and Opposition Members were predicting an awful recession and saying that the Government's expenditure plans were grossly irresponsible. They have obviously forgotten all that, and we have moved forward. We still face global threats—the United States economy is slowing down and the Japanese economy is barely growing. Yet there is a robust certainty in the way in which we are moving forward, having prudently paid off debt and repositioned ourselves in the global marketplace for the good of Britain.
We have put an extra 1.1 million people in the workplace; they are making a contribution, rather than taking enormous amounts of money in unemployment 692 benefit and lost tax. The average cost of an unemployed person is some £12,000 a year. In my borough of Croydon, where I was leader of the council, the unemployment figure has been reduced by 4,877, translating into a saving of £58 million every year that can be invested in more services or tax reductions. Indeed, they are being invested in both, for the good of my constituents and the wider economy.
Getting 1.1 million people back into work is the key to the Government's success in being able credibly to say that they will invest more in public services and reduce taxes. The other side of the coin is that people know that Conservative economic policy means lower employment, hence higher taxes and cuts in public services—the worst of both worlds. It is very important, as we approach another time for public decision, that people realise that fundamental difference.
It is not by choice or by legacy that we are enjoying the current economic environment, but by decision and difficult choice. The Bank of England's independence was one of the Chancellor's first master strokes. It immediately took the risk premium out of interest rates. Long-term interest rates dipped and are at a 30-year low. Independence encouraged more investment in jobs, enabled consumers to enjoy lower mortgage payments and allowed stability to reign in the economy and the housing market. In addition, the new deal meant that people who had been taken out of the labour market and had disengaged from the habit of work could get back into work and make their contribution. The Chancellor's overall fiscal management was excellent.
I intervened on the former Prime Minister, the right hon. Member for Huntingdon (Mr. Major), when he was describing how he saw his past. The hard facts show that, in 1996–97, the previous Government's total managed public expenditure was 41.2 per cent. of gross domestic product and 6 per cont. of that went on borrowing. The previous Government did not take tough decisions—although they imposed 22 tax increases—but decided to borrow and borrow, thereby doubling debt. We are all familiar with the statistic that for every pound spent since 1979, 42p went on borrowing, debt and dole. Now that figure has been reduced to 16 per cent.
If we compare the percentage of GDP that was tax plus borrowing in 1996–07—38.2 per cent.—with the figure for 1999–00 of 36.2 per cent., which is 2 percentage points lower, that represents £19 billion more that would have been taxed or borrowed under the Tories. That is an equivalent of 7.3p on income tax. If we were doing what the Tories did with the economy, which we have enlarged through economic prosperity, the punter would be paying 7 per cent. more tax.
People need to realise that, under the Tories, taxes would be higher and cuts deeper because of economic incompetence. They have already announced £16 billion worth of cuts in planned expenditure, but that is a massive underestimate. We must add to it the cost of higher unemployment. For example, the borough of Croydon would be looking at cuts of £72 million a year against planned investment, plus the £58 million saving resulting from people who are back in work. That is a total of £130 million a year—an enormous amount for a borough such as Croydon. It does not bear thinking about.
693 There have been references to the savings ratio. People are saving less because of economic confidence and because the primary method of saving in the modem economy is through housing, and house prices have been going up.
I realise why the right hon. Member for Huntingdon painted the picture that he did, but I did not recognise it. The Conservatives were responsible for unsustainable borrowing and debt which would inevitably have meant the road to ruin for any business. Thank goodness the Chancellor arrived; he has balanced the books by making tough decisions about containing cost, focusing on job creation and repaying debt. In addition, the cost of that debt has come down because marker confidence has led to lower Bank of England interest rates. All those factors have combined to provide a more benign economic picture.
Let us compare that with the shadow Chancellor's proposition to ask the Monetary Policy Committee to reduce target inflation from 2.5 per cent. to 2 per cent. We should remember that the Conservatives did not want a Monetary Policy Committee; they did not want independence for the Bank of England. Now they have come round to the idea—in fact, they have gone a step further. They know that the public have no confidence in their capabilities, so they want an independent commission to look at fiscal policy as well. Their attitude is, "Don't worry, vote Conservative and we will not actually manage the economy at all. We will ask Evan Davies of 'Newsnight' to do it."
The Conservatives want a 2 per cent. inflation target. I realise that, given the good management of the economy, that would be achievable in terms of the current inflation rate. However, that is not a desirable constraint because it would inevitably mean that, other things being equal, interest rates would have to be higher than they would otherwise be. That would reduce investment and increase the cost of mortgages, thereby increasing unemployment, debt costs, and the cost of unemployment, and reducing the tax take.
Even if the right thing to do were handed to the Conservatives on a plate, they would go back to the bad old days of boom and bust. That is why their claims to match our expenditure and our action on taxes are completely unbelievable.
§ Mr. Willis
To give the hon. Gentleman a break, does he think that that is why, in last Friday's Yorkshire Post, Mr. Paul Sykes, the multimillionaire who has rejoined the Conservative party, said:I don't want anything to do with the Conservative Party. They are a disaster."?
§ Mr. Davies
I do not have time to list all the possible reasons for Mr. Sykes to come to that conclusion. Many people come to that conclusion for a variety of reasons. Obviously, Mr. Sykes is particularly interested in not joining the single currency, for reasons best known to himself. He does not want to attach his campaign to the Conservatives' failed campaign. He does not want to attach himself to a bunch of losers, so he is keeping his money in the bank, keeping his powder dry, and he will fight his own campaign on the single currency.
We are all concerned about sovereignty, as opposed to the single currency. Sovereignty is, by definition, about having maximum control over the choices that dictate our 694 destiny. Are we around the table, leading the debate, or are we on the sidelines, being led by the "Nos"? I have nothing against people who live in the rest of Europe, but some of the speeches made in Harrogate suggested that much of the policy is led by a loathing of foreigners as opposed to a rational analysis of the pros and cons of the single currency and of integration.
Turning back to the good fortune that I see personally in Croydon as a result of the masterly management of the economy, the NHS locally has received an extra £18 million. There is a linkage between good health, a strong economy and good education. People who are able to work more regularly are healthier and happier. Their morale is higher—that is good for the economy. We can see that in the police force in London, where the reduction of absenteeism has added the equivalent of 500 police officers to the force.
The Mayday hospital in Croydon does not have the best reputation in the world, but there have been an extra 2,000 operations; there are 90 more nurses, a new kidney unit and a new maternity unit, and the accident and emergency department has been refurbished. Things are getting better; people realise that. They want more and that is what they are getting.
I know that hon. Members are interested in the education situation in Croydon. There is an extra £370 per pupil. Standards are rising—an improvement of 13 per cent. in mathematics since 1997. Primary class sizes are smaller. There are difficulties in teacher recruitment, but that is part of the wider economic success that the country is enjoying. If 1.1 million more people have jobs, if after-tax income has gone up by 10 per cent.—as it has—and if the labour market is tight, graduates or trained teachers enjoy more choice. We must work harder to get those people into the classroom. We are working harder and they are coming into the profession. The other day, a chap who had just left college told me that, because of the "golden hello", he was becoming a mathematics teacher—good luck to him.
We are investing in areas that faced economic and poverty challenges. Often, because of economic circumstances and educational background—in respect of the availability of books in the family home—people from those areas have not succeeded as much as they might have done. That is why we have an education action zone in Croydon, where the business community has come to the table—I helped in that process. Companies such as Sainsbury and Mondial Assistance see that initiative as a one-way street to success.
Individual self-esteem is being raised. Often children are held back in school because perhaps their parents or parent say, "I didn't do very well in school son, and you're not very bright. School's not a very good thing." That holds people back. Education action zones break down those difficulties with more investment and more new ideas. That brings new success by raising standards that will shape the life choices of our children so that they can contribute to the new economy that is growing for the future.
Education is the key to the new economy and the family is the key to education. The big challenge faced by the Government, in a tight labour market, is how to add to productivity and skills. Yes, we can do so through technology, but also by enabling parents—especially women with young children—to engage flexibly with the 695 labour market in a way that does not ruin their family life. With a family of small children, it is extremely difficult to engage meaningfully with the labour market. That is why we have introduced all the extra benefits—the working families tax credit, the children's tax credit and help with child care. There is universal provision of nursery schooling at four—now at three. There is extra provision before and after school. Those measures are of enormous importance to providing flexibility.
People with very young children also have the choice to stay at home to look after them. As a parent of very young children, aged six, three and three months, I believe it important to invest enough time with them—reading to them, and so on. We must create a flexible environment whereby people can engage in the labour market and have a meaningful family life. That is why we have invested more in maternity and paternity benefits. I very much welcome that. With working families tax credit and children's tax credit, working families are better off than ever.
Employment is growing and productivity is rising. There are some interesting misconceptions about productivity growth; some criticisms have been made. Last Friday, at a dinner of the Chartered Institute of Bankers, there was a question about relative productivity rates and the slow-down in productivity growth, and I pointed out the simple fact that if employment is quickly increased by 1.1 million, it is obvious that the extra people will be less productive on average than the existing stock of workers. One would expect current average productivity to go down, because marginal productivity is less than the existing average. After any rapid increase in employment, productivity will slow down in the short term, but will then quickly speed up. That is the Chancellor's ambition and I am sure that with the investment in education, skills and information technology, our economy will go from strength to strength.
Business is, of course, the basis of the prosperity that we enjoy and that we invest in the social products which we all consume—through education and health. Businesses are succeeding. As someone who has run his own business and worked in multinationals, I believe it right to hold robust discussions on red tape, discrimination and the relative focus on administration versus entrepreneurial activity. However, it is also right to remember that some of the key costs identified by the British Chambers of Commerce—the minimum wage and the working time directive—themselves make contributions towards more profitable and productive business. When those costs are taken out, the BCC's somewhat exaggerated claims become massively deflated.
Enabling people to join the labour market effectively and profitably is part of the process of business success. People who run small businesses say that there is too much red tape, but when one asks them whether they are making more money and employing more people, the answer is, "Yes, yes, business is good." If we had listened to the Opposition, we would be back in the world of small business bankruptcy that we all vividly remember.
The right hon. Member for South Norfolk (Mr. MacGregor) mentioned that he would have liked to reduce debt. Sadly, his Government increased debt. He said that he would have liked to give more help to small 696 and medium enterprises. Sadly, bankruptcies ran at a record high. We have delivered his aspirations; I am glad about that.
On the environment, people have mentioned the fuel tax problems. We all know that fuel taxes in Britain are higher than they are on the continent. However, income and other taxes are higher on the continent, so on average, taxes are much lower in this country. That is a clear choice. When people tell me, "I have paid too much for my petrol," I say that, yes, it is right that the Chancellor has taken away the escalator because world oil prices have risen.
People have a choice. Do they want income tax or fuel tax? I do not have a queue of people asking for more income tax. If I did, we could discuss the matter. However, I do have a queue of people worried about asthma in children and about the environment they live in. The people wit complain about greenfield site developments need to understand that we have to create a good environment in our towns and cities in respect of air quality, education and security. Those are key drivers that make towns nicer places to live in. That is what I am pressing for in Croydon as a local MP. People understand that there are better alternatives in transport. I very much back the extra investment in public transport to be made over the next 10 years.
Through the combined effort delivered in the Budget, we have a situation in which education standards are being driven forward to help the economy, but where the economy also helps education. Health is improving; that is helping the economy. Institutionalised poverty tends to cluster—in bad housing, bad health, bad education and poor pay. Those problems, which were endemic under Conservative Governments, are being targeted directly and broken down. We are taking an enormous step forward.
Only a few years ago, those of us who talked about full employment were told that it could not happen again. We were asked how we could compete with the developing world, but we are doing just that by empowering people with skills and by providing the infrastructure and the human-based services that people desperately need, whether in care homes, public services or, indeed, in restaurants and all the other services that we enjoy because of our higher disposable incomes. All those things are moving forward; we are living in a better Britain. There are difficulties and there is a long way to go, however.
Crime is an issue, but it is down by 10 per cent. Many people are misled about crime. As hon. Members may know, the British crime survey is the only reliable indicator of all actual crime. It records all crime in a sample of about 20,000 people and shows that crime is down by 10 per cent., as crime recorded by the police represents only between a quarter and a fifth of total crime. A bit more crime is being recorded, so people believe that there is a real problem.
We need to invest in more Bobbies and Beatrices on the beat; we need to make progress on crime. As a London Member, I am glad that an extra 2,044 police will be provided and that, because of previous Budgets, almost an extra £3,500 has been added to the pay of new police recruits. I am also glad about the extra investment in closed circuit television and in partnerships with councils.
697 In my own area, the police budget is about £30 million; the local authority budget is, of course, 10 times that amount, so much of the incremental, unseen investment in combating crime takes place through local authority partnerships. It is not surprising that crime is down when we have more people in work and more people are being educated. The difficulties with mobile phone thefts and one-on-one assaults are being confronted, but they are non-financial issues.
Overall, in relation to business success, our fundamental services, stability, mortgage payers and the wider community, we have much to be proud of in the Budget; it is a stepping stone to the future. We do not want to be complacent, but actions such as paying off an enormous amount of debt strengthen us for the inevitable buffeting of the world economy, in which the future is unpredictable. We are stronger and better prepared than any of our European partners, and I commend the Budget to Parliament.
§ Mr. David Davis (Haltemprice and Howden)
I feel privileged to speak, bracketed between the valedictory speeches of several hon. Members who are among the most admired—certainly by me—in the House. It is also a pleasure to follow the hon. Member for Croydon, Central (Mr. Davies), a colleague of mine on the Public Accounts Committee, although he will understand if I disagree with almost everything that he said, as will become apparent in a moment.
I should like to address the Budget in the context of the Government's overall economic strategy—especially that on taxation, spending and borrowing—of the past four years and its long-term implications. The one point on which I agree with the hon. Member for Croydon, Central is that the Budget has had a good press. The public sector financial figures look healthy at first sight. My right hon. Friend the Member for South Norfolk (Mr. MacGregor) mentioned the smoke and mirrors that are involved in that, and it is true that financial and economic commentators like a surplus.
There are two sets of reasons for the surpluses—one good, and one bad. The good reasons reflect the healthy economy, delivered by nearly 20 years of Conservative economic reforms. Cutting tax rates and tax complexity and limiting regulation have been vital to the healthy and dynamic economy that underpins the Budget. In more fundamental terms, however, which the Government will not like, without the great trade union reforms, the great financial market liberalisations, the great privatisations and the dramatic reductions in tax rates under Conservative Governments, the Budget would not have been possible.
The bad reasons for the surpluses reflect the fact that we are simply being charged too much tax. Even the Government now admit that the burden of taxation has increased. We now pay between £25 billion and £35 billion in extra taxes. We must also take into account another £10 million—the cost of extra regulations—not to mention the ferocious complexity of the modern tax and benefits systems. The irony—the paradox—of the Budget is that it is slowly destroying the very things that made it possible.
Despite continually repeating economic platitudes about caution and prudence, the Chancellor and the Government have not learned the key concept of Conservative economic 698 arithmetic, which is straightforward enough: lower tax rates lead to higher growth rates; higher growth rates lead to higher tax takes; and higher tax takes allow tax cuts and spending increases—the story of 18 years of Conservative government. That virtuous cycle is the key concept behind Conservative economic policy.
The Government are gradually breaking that virtuous cycle for three reasons: first, their attitude to spending and their inability to manage it; secondly, their obsessive attitude to debt, which we have heard about today and with which I shall deal in a moment; and, thirdly, the high level of waste in government and the associated poor delivery of services.
I shall deal first with spending. Old Labour was characterised by feast, famine and overspending, followed by cuts when the Government ran out of money. The Chancellor knew that the financial markets would punish him for such behaviour. Indeed, his approach to the first few years has been dominated by the overwhelming desire to build up his reputation, at all costs, as cautions, careful and even prudent. He first ran up his war chest by overtaxing, and when he had a surplus he set out his pre-election bonanza. Old Labour represented feast then famine; new Labour represents famine then glut. That may have created the Chancellor's current reputation, but it is the worst possible way to manage public expenditure.
Starving the public sector of cash, followed by throwing money at it in panic will lead to waste and to the public sector failing to reach its targets. Runaway spending will fail to deliver the proper level of improved services. It will destabilise the public finances and, in the longer run, it will be unsustainable.
One of the Chancellor's strangest characteristics in his obsessive pursuit of prudence has been his obsession with public debt. Some of that obsession has been reflected in today's debate. The national debt in Britain is about a third of national income—half the European average—so it is not unmanageable; it is not even high by international standards. It is about half the level that is judged to be sustainable. We are not facing the situation that existed after the Napoleonic wars, when debt was three times as high as national income. We are not even facing the situation when debt was in the high 50s as a percentage of national income, which happened to be when the previous Labour Government were in power. The Chancellor, however, is saddled with Labour's history and reputation for economic incompetence, so, like a reformed alcoholic, he has to be a debt teetotaller and purchase Labour's economic credentials with taxpayers' money.
It is important to understand the purpose of national debt, which acts as a flywheel for the economy. When the economy slows, debt increases to allow the budget to meet increasing welfare payments without increasing taxes. When the economy is going well, debt should grow at a below-average level or a modest proportion should be paid down. Over the whole economic cycle, debt should stay roughly constant as a proportion of national income. The problem of paying down too much debt is that one has to raise too much tax to do it. The Government paid down £34 billion this year. In my judgment, it would have been smarter to have paid off about half that.
The Government's strategy is paradoxical. In the pursuit of their own reputation for financial prudence, they are damaging the financial standing of their citizens. The greatest single immediate effect of the last few years 699 of taxation and economic policy has been to drive the savings ratio down from 10 per cent. in 1997 to about 3 or 4 per cent. The hon. Member for Croydon, Central said that that was all the result of changes in economic confidence, but the numbers do not reflect that. There have been changes in economic confidence—up and down—in the past few years, but they have not been reflected in the rate of change in debt.
§ Mr. Geraint Davies
Does the right hon. Gentleman accept that debt and borrowing are, in fact, deferred taxation? The money has to be paid in any case, so in paying off a huge chunk of debt—for example, by the spectrum sale—we can save £2 billion of tax or avoid £2 billion of cuts in a given year without breaching the rules of the International Monetary Fund and the European Union. Those rules would be breached under his prescription.
§ Mr. Davis
I would not breach any of those rules, but I shall deal with the hon. Gentleman's point shortly.
By 1999, the reduction in personal savings was about £25 million and, by 2000, about £35 million. The increase in taxes is also about £25 million to £35 million, depending on when one measures it. Therefore, for every £1 increase in our tax burden at least £1 has come out of savings. The overall aggregate effect of the Chancellor's four-year strategy has been to transfer money from personal savings to the Treasury.
Instead of considering the issue in terms of billions of pounds, which is incomprehensible for most people, let us think of it in terms of the effect on the ordinary family. The level of national debt is about £15,000 per household. The Chancellor is expropriating more than a £1,000 a year from every household—money that would otherwise have gone into savings—and is using it to pay down Government debt, which is subject to the lowest possible rate in comparison with the return that a normal saver would get.
Before I come to the point made by the hon. Member for Croydon, Central, I wish to deal with a technical issue. The reduction in public debt might have a perverse effect that could lead to a shortage of gilts. The Chancellor might think—he almost said so in his speech last week—that the Myers report and the relaxation of the rules on investment solve the problem that that creates. Ironically, the reduced availability of very low-risk investments might, through the management of average risk, lead the financial institutions to cut their exposure to high-risk investments—precisely the opposite of the Chancellor's wishes. I have told the Financial Secretary that I shall write to him about that point, because the issue is too technical for this debate.
Debt reduction is being represented to the public as a virtue. The hon. Member for Croydon, Central, among others, has made that point. I can summarise his argument, because a Treasury press release does just that. It states:We are now building a virtuous circle of falling debt, lower interest rates, lower debt repayments and a stronger economy, releasing more resources for public services.That is the thrust of the argument, but it completely ignores the fact that the tax raised to pay down the debt has the effect of depressing the growth of the whole economy.
700 The destructive effect of high taxation on overall economic performance is now well understood, but appears to have been ignored by the Government. Studies based on Warwick university's economic model, by Robert Barro of Harvard university and by David B. Smith of Williams de Broe, whose work has recently been published by Politeia, show that a stark reduction in economic performance is related to increased spending and taxation.
The simplest way to understand that is to consider another model and another country. Through the late 1970s, 1980s and early 1990s, the social democrat model in Sweden went along the route of increasing public expenditure faster than the economy's growth rate. In the 1960s and 1970s, Sweden was the third or fourth richest country in the world. Today, it is the 19th richest, and that is the direct consequence of higher taxation. The studies that I mentioned argue that, if it had maintained a sensible and Conservative policy, its private sector would be three times as large as it is today. Had Sweden gone the low-tax, high-growth route, not only would individuals have been richer, but its expenditure on public services would be much higher than it can conceivably afford today.
Politicians' classic error is that they love to be the distributors of largesse—the apparent benefactors of their fellow citizens. In the Chancellor, that vice has become an addiction. Social engineering is so detailed and complex that it is now social micro-engineering. He and other politicians ignore the fact that their complex and burdensome taxes and regulations destroy initiative; that their largesse brings millions more into dependency—2 million in the past three years—and that the destruction of savings and the savings culture undermines the primary instrument of self-help and independence, which is people's investment in their own family's future.
The greatest help if that we can give the poor is to provide better jobs and better choices and give them the right to keep more of their money. Those would all be better than the Chancellor's cold charity and would all be delivered by a vibrant low-tax economy. The Government's strategy is tax a lot, spend more than we can afford, pretend prudence by the unnecessary payment of debt and ignore the long-term consequences for growth.
The approach of Conservative Front Benchers is to promise £8 billion of tax cuts, based essentially on the reduction of waste and bureaucracy in government. They rightly intend to focus much of that benefit on cutting taxes on savings. The Government have rubbished that strategy, but I am not too worried by attacks from Treasury Ministers who cannot manage their own spending to within £5 billion and cannot forecast their surpluses to within £20 billion. Indeed, Treasury forecasting is so far off that I am beginning to believe that it is a deliberate attempt to persuade the world that tax cuts are not possible.
In reviewing Conservative policy, I considered the possibility of cutting waste and bureaucracy. The best study that I could find was by Mr. Tim Ambler, a senior research fellow at the London business school. It is due to be published later this year and draws on experience in Britain, New Zealand and elsewhere. It estimates that £30 billion a year could be saved. Although I do not accept all Mr. Ambler s arguments, I certainly believe that it is possible to achieve savings of £20 billion with no 701 adverse effects on public services and front-line spending. Indeed, it is possible to achieve that while improving public services.
§ Mr. Geraint Davies
I am grateful to the right hon. Gentleman for giving way twice. He has painted a picture of a Labour strategy of excessive spending and taxation, but the statistics show that although we are spending more on health, education, crime prevention and so on, we are spending less on failure—on unemployment and debt. As a share of total GDP, total Government spend is marginally down because we do not have to service the same debt as the Conservatives. Tax, and borrowing as a share of GDP is also down. All aspects of policy are good, even according to the right hon. Gentleman's terms.
§ Mr. Davis
The hon. Gentleman assumes that the effects of the upturn of the economic cycle will always be available to the Government. Incidentally, he assumes that the effects of 20 years of Conservative reforms will always be available to a Government who follow a social democratic programme. That is not plausible. We are not just interested in the waste—as he rightly calls it—of people on unemployment benefit; w e are also concerned about the waste in government.
I did not intend to mention this, but as the hon. Gentleman has raised it and as he is a member of the Public Accounts Committee, I should explain that the Treasury assesses that the PAC has saved £1.5 billion a year so far. Is he really saying that that cannot be multiplied 10 times over by a Government who are determined to do their job properly, because it certainly can? He should accept that before he makes any more fatuous comments.
In conclusion, there is great scope for increasing savings beyond the £8 billion proposed by Conservative Front Benchers. It might be possible to double that in the following year. In addition, the Government's shortfall in spending appears to be systemic at about £5 billion a year—sometimes a little more, sometimes a little less. The result is that we are systematically paying £5 billion a year too much tax. In addition, we have the obsession with debt that I described earlier. It is not at all implausible that an incoming Conservative Government could, in their third year, consider tax cuts of some £20 billion, which would go some way to restoring the situation that existed when this Government came to power.
The simple fact is that the strategy that the Government have followed will not, in the long term, deliver economic success for this country. The Prime Minister likes to talk about preferring "what works". What works is freedom, as Conservative Governments have demonstrated over the years. We need freedom from excessive regulation, excessive taxation and excessive Government meddling. It is clear that the Government have not understood that message. I trust that the next Conservative Government will understand it and apply it with vigour.
§ Dr. Ian Gibson (Norwich, North)
I apologise for being absent for a couple of hours of the debate while I attended a Select Committee meeting and polished off a couple of related reports.
I pay my respects to the right hon. Member for South Norfolk (Mr. MacGregor), who has just left his place. He and I come from the same part of Scotland. He became a 702 magician and I kicked a football about. I have retained my accent, but he has slightly lost his—I do not know why. Our politics diverged very early in life and are very different now, but I pay credit to his hard work for his constituents, the county, his party and, indeed, his country. I look forward to working with his successor, who will undoubtedly—and, I hope, soon—be a Labour MP. The right hon. Gentleman and I will no doubt meet again on the A 1 1 dual carriageway, which the Government have now allowed to be developed. He will be glad that we finished the work that he started, although I note that it took a Labour Government to finish it off.
I am pleased to speak in the debate, and I want to concentrate on the growing confidence in Norfolk, especially in education, although it is reflected in other sectors. Norfolk county council is taking up Government initiatives. I pay tribute to the Labour party and the Liberal Democrats, who have worked hard together to implement those initiatives, shown great entrepreneurial spirit and kept in touch with reality. I pay tribute also to Norfolk's outstanding director of education, Dr. Bryan Slater.
Norfolk local education authority is responding to the Government's agenda of high standards for all and dealing with the legacy of the laissez-faire, market forces approach of the Conservatives nationally and locally, which has directly led to under-performance in far too many schools and low standards for far too many children. Norfolk now has a rapidly improving standard across the board, and at key stage 2 the improvement in our pupils' performance over the past three years has been the highest of any of the shire counties.
Norfolk is achieving that by challenging and supporting its schools in the way expected by the Secretary of State, and by making the best possible use of increased Government funding and education initiatives. The extra funding for schools announced in the Budget will therefore be put to good use in Norfolk. It will add to the pump-priming money that Norfolk will receive as part of its capital service agreement with the Government, which it signed recently. Norfolk will deliver even better performances in its schools in return for up to £4 billion of extra funding, and will do so by using the new flexibilities provided by the Department for Education and Employment.
Norwich, part of which I represent, is the heart of the county. Over the years, it has had education problems, but six schools, including two high schools that were in special measures, have been restored to health in the past three years. Norwich still has problems with fast economic growth and with the increase in the number of pupils. That has created a difficulty for the LEA in finding school places.
The problem stems from planning consents given by Conservative-controlled district councils that do not require developers to contribute to what can often be small towns on the edge of conurbations. In my constituency there are two growth areas with many new houses, but no schools were built, which has created problems. It would make sense if, in the next Parliament, regulations were introduced to make developers' contributions to infrastructure a mandatory element of planning consent. I believe that the Secretary of State has some sympathy with that view.
703 It is opportune to congratulate the Prime Minister and the Secretary of State on the forward-looking initiatives announced in the recent Green Paper on education, "Schools: Building on Success". Much of the media attention has focused on the proposal significantly to increase the number of specialist schools. Norfolk has already embraced the idea of specialist schools and 10 have been set up in the past two years. Ten more are in the pipeline, and expansion of the specialist schools programme will be music to their ears.
The specialist schools in Norfolk's network are working together to improve standards for all children in all schools. I hope that the Secretary of State will accept the ultimate logic that all secondary schools should develop a specialism, that those that might find it difficult to raise sponsorship funding should be given the financial help that they need, and that particular attention should be paid to the difficulties of schools in less-advantaged areas as well as those in sparsely populated rural areas where there is no large employer to call on as a sponsor. It would be a tragedy if a two-tier secondary school system were to result from the specialist schools programme. Experience in Norfolk to date shows that there is no reason why that should happen. I shall return to that point in a few minutes.
There are a number of other positive features to the Green Paper proposals. This country has lagged disastrously behind other developed countries for many years in its failure to develop a system of secondary schooling in which academic and vocational education are of equal worth. Of critical importance to providing appropriate provision for all individual learners is the development of a system in which individualised pathways, involving a mixture of academic, vocational and work-related activities, can be provided. The Green Paper proposals offer the first real hope for the development and implementation of such an approach in our schools since the abandonment of the technical and vocational education initiative in the early 1990s.
Equally, if used sensitively and in the interests of the individual learner, proposals to enable individual young people to progress at different rates will provide a further means of ensuring that not only the content but the pace of learning is more likely to be appropriate and therefore to continue to engage the individual learner in learning. Those two developments underline the importance of developing through the new Connexions service, comprehensive and effective guidance for young people as they progress through the secondary education system.
Equally welcome are the clear statements about the role of local education authorities—reformed education authorities, in the language of the Green Paper—in future. All the signs are that local authorities have recognised and acted on their duties to raise standards.
The Green Paper also makes strong statements about the need to ensure collaboration and mutual development across schools. The stated intention of the welcome proposal for expansion of the specialist schools programme—both in the number of schools and the range of specialism—is to drive collaboration and not competition. That feature of the Green Paper has attracted the most comment and criticism since its publication.
704 Many have argued that the need for schools to attract external sponsorship in order to make a bid for specialist status will result in a two-tier system of secondary schooling, in which schools in more affluent areas are able to achieve specialist status, while others are not. That point is worthy of some examination in the Norfolk context.
Norfolk has rapidly developed a network of specialist schools: six technology schools, two sports colleges, one arts school and one language school. It has done so exactly in the spirit of the Green Paper, by developing a geographical spread and a range of specialism with the explicit expectation that schools will share the developing expertise across the secondary sector. That approach has been adopted as an intentional counter to the clearly emerging two-tier perception of secondary schooling in parts of the county—most notably the urban areas. The accumulated effect over a number of years of previous legislation and its interaction with local circumstances has come dangerously close to producing sink schools in some areas. Happily, things have moved on, and none of the worst-affected schools are any longer subject to special measures.
That pattern can be properly reversed only over a period of time, with schools and the LEA working together in the shared belief that all schools can be good schools. We must remember that it is the education of every child that counts. I passionately hold to the view that it is not necessary to have endemically weak schools in order that the majority of children can receive a good education.
The opportunity further to expand the specialist school system in Norfolk in a collaborative framework is therefore welcome news. However, it is slightly galling that it comes only weeks after the Department for Education and Employment wrote to tell Norfolk that it was nearing its ceiling for the number of specialist schools that it could have. That position has been reversed, and that will come as great encouragement to the 10 schools that are bidding to join the existing 10 specialist schools, and to the entire secondary sector.
§ Mr. Willis
How does the hon. Gentleman square what he has just said with that fact—it is also in the Green Paper—that only four out of 10 schools in Norfolk will be allowed to be specialist schools under the new framework? All those schools can opt to select 10 per cent. of their students. Surely the art of selection will undermine the sentiments that the hon. Gentleman is so admirably presenting to the House.
§ Dr. Gibson
The way round the problem, as Norfolk education authority sees it, is to take forward the spirit that head teachers throughout the county have adopted for years. They have not split away and formed grant-maintained schools. Instead, they have worked together. They are determined to show that a specialism in one school does not mean that it is higher up a hierarchy than another school. That is the spirit of partnership that drives education forward. It is all right having a valuable sector in a school, but that does not reflect on the other sectors. Instead, it encourages them. I have worked in education establishments where there has been one really classy department. That stimulates other departments to think that they, too, can be classy. If we create that spirit, it will drive education forward. It is a scene that we have not experienced for many years.
705 It would have been even more welcome if the Green Paper had fully grasped the nettle and had given the green light for all secondary schools, over a period, to develop their own specialism within a collaborative network. Perhaps Norfolk should itself work towards such a position in partnership with secondary schools in the county. I know that the people that I have mentioned—the head of the education committee and the director—have that in mind and will be reflecting; that position over the years, given the increased money that the Government have given them.
It is important to recognise that Norfolk will need to continue to ensure that an appropriate balance is maintained between so-called competition and collaborative approaches as the specialist school programme develops. There is no magic blueprint. I think that a spirit of co-operation and a determination to drive standards forward will overcome many of the problems that we could perceive in perhaps a more intellectual environment.
A further tension lies within the Green Paper. Teachers will find it difficult to reconcile statements about greater freedom for schools with highly prescriptive statements about the organisation of schools and curriculum delivery elsewhere in the Green Paper. Were local education authorities to adopt some of the stances set out in the Green Paper, such as those in relation to the use of setting or curriculum delivery, it would he regarded by schools and Government alike as old-fashioned interventionism. The Green Paper therefore offers an insight into the Department for Education and Employment mindset. Much room remains for development of the trust that could enable the appropriate exercise of professional judgment at all levels within the education system, based on commonly held principles that are developed in partnership with Government, local government and schools. That should be not only allowed but encouraged.
Without doubt, the Green Paper envisages a period of rapid development in coming years in the secondary sector. It proposes a significant expansion of the specialist schools programme. It welcomes more faith-based schools and the continuing establishment of city academies, and proposes changing the law to allow external sponsors to take responsibility for under-performing schools against fixed-term contracts of five to seven years, with renewal subject to performance.
The drivers for change in the secondary sector have been apparent for some time. Put simply, changes are encroaching on secondary schools from both directions. Sustained and significant improvement in attainment at the end of primary schooling means that secondary schools must be much more able to provide continuity of experience for all children, as well as meeting the higher potential that is now being demonstrated for many.
A separate paper on the agenda considers the Government's proposals for reform of key stage 3 of the national curriculum. At the same time, key stage 4 is facing massive change. The Government's post-16 reforms are designed to ensure that in future the vast majority of young people, if not all, stay in some form of education after the age of 16. In order to achieve that, changes and reforms in key stage 4 will be vital to provide a wider variety of experience than at present. The long-overdue establishment of vocational GCSEs and workplace learning in key stage 4 will need to become realities within a short time.
706 There is much more in the Green Paper, but the vision set out in it will bring about improved performance, which is already being seen in secondary schools in Norfolk and across the country, and even higher standards and greater equality of opportunity. The Budget initiatives and investments being made in schools will add to that vision, and send our people on to higher education and a more fulfilling life.
§ Mr. Peter Brooke (Cities of London and Westminster)
It is a pleasure to follow the hon. Member for Norwich, North (Dr. Gibson). He has added to the scientific understanding of the House since he entered it, and I shall follow him primarily in speaking about an educational subject, though I hope that I shall be closer to the Budget and perhaps less close to the Green Paper. A year or so ago in the Chamber, I declared interests in higher education. I apologised for their egocentricity. They are in the Register of Members' Interests, and I do not propose to be egocentric again.
The febrile attitude in the popular prints suggests that an election is on the way. In that context, I take the liberty of quoting a famous passage from the Venerable Bede:Such, O King, seems to me the present life of men on earth, in comparison with that time which to us is uncertain, as if when a winter's night you sit feasting with your ealdormen and thegns—I am addressing you, Mr. Deputy Speaker—a single sparrow should fly swiftly into the hall, and coming in at one door, instantly fly out through another. In that time in which it is indoors it is indeed not touched by the fury of the winter, but yet this smallest space of calmness being passed almost in a flash, from winter going into winter again, it is lost to your eyes. Somewhat like this appears the life of man".In that quotation, Mr. Deputy Speaker, you, of course, are the king, the Clerks at the Table are the ealdormen, and the Serjeant at Arms and his staff are the thegns. We, the Members of Parliament, are simply the sparrows who fly through the Chamber from one door to the other.
I made my maiden speech on the Monday night of the Budget debate in 1977 and, like various of my right hon. Friends and my hon. Friend the Member for South-West Bedfordshire (Sir D. Madel), I am making what may be my final speech in the Chamber on the Monday night of the Budget debate in 2001. Those 24 years are exactly what the Venerable Bede had in mind in the quotation that I have just given.
As the poet said,The Ancient of Days is an hour or two old".Twenty-four years is a bagatelle in a rural seat. My right hon. Friend the Member for East Devon (Sir P. Emery), who is also leaving the House, says that there have been five Members in East Devon in the past 130 years. Inner-city seats are a little different. Because of that, 24 years gives me the bronze medal in the City of London, which for most of the period since 1283 has had six Members of Parliament, and it gives me fourth place in Westminster, which has had two Members of Parliament since 1544 and Members of Parliament representing the same area since 1295. As fourth place gets one money in the grand national, I think that those are two reasonable places in the two seats.
I do not propose to spend what may be my final speech in the Chamber wandering down memory lane, save to make one confession and, from it, a single point. A year 707 or so ago, as I mentioned earlier, I indicated the intention to pursue in the House the issue of higher education in the latter part of this Parliament. That that was a reasonable intention is evidenced by the fact that in the Palace this very evening a meeting has been debating the future of higher education. That I have been prevented from doing so over the past months has been because my constituency office has become an outstation for the Home Office, to compensate for the latter's taciturnity and reticence towards my asylum-seeker constituents. Every Monday morning, I tidy up the asylum-seeker backlog from the previous week and, by Monday afternoon, the asylum-seeker constituency mail for Monday and the previous weekend has refilled the tray that I emptied in the morning. Although the correspondents have no votes, I do not begrudge the time I spend repairing the country's honour towards asylum seekers. Like all Tories, I recognise that, sadly, we live in an imperfect world.
My confession, as my prolegomenon may have made clear, relates to our universities, which have been a continuing interest of mine throughout my 24 years in the House. I spoke sympathetically about university pay in the Chamber in 1978 and thought it careless of the Association of University Teachers never to quote it against me when I was the higher education Minister five years later. My confession relates to that period. My Secretary of State was the late great Sir Keith Joseph, who was as sceptical about public expenditure—I use the old-fashioned term—as he was enthusiastic about freedom. My noble Friend Lord Lawson of Blaby, under whom I later served at the Treasury, was awash with oil revenues in the same way as the Chancellor is with mobile phone licence revenues. The universities, on the other hand, were imprisoned in a straitjacket of state planning. That meant that, in 1983, if a university sold an asset, it had to return the proceeds to the Treasury—a spectacular disincentive to entrepreneurialism, which we happily soon corrected, even if in two stages. It also meant that, even when we framed the rules on overseas student fees in sufficiently flexible language to encourage entrepreneurialism at all academic levels, universities tempted to try it feared that the University Grants Committee would penalise them. Thus Gulliver was held down by tiny but restrictive ropes.
My regret is that I did not even attempt to persuade the late great Sir Keith—who played a large and honourable part in changing the intellectual playing fields of British politics, on to which new Labour was finally obliged to follow us—to seek to persuade Lord Lawson to set free what were our then 45 universities with the encouragement of endowment if they were ready to be cast loose. Of course, I would not have insisted on their being cast loose. In the words of C.S. Lewis, if one hears of someone going round doing good to others,you can always tell the others by their hunted look.However, for those to whom freedom is important, there is no substitute for it. I seek to make amends for my juvenile silence in the mid-1980s by nailing my colours to the mast of freedom now that I have entered the final third of my first century, and as I leave this place.
The Chancellor has chosen to put the proceeds of the mobile phone licences towards repaying the national debt. I am aware of the attraction of that repayment for the Chancellor's place in history. Because I go back to 708 prehistory—that heady mixture of Rider Haggard's "She" and Sir Leonard Woolley's "Ur of the Chaldees"—I recall the level of the national debt in 1979. I did so during the lengthy speech of the hon. Member for Bury, South (Mr. Lewis), who made me recall an observation about Margot Asquith in the first world war. After she had visited the wounded in hospital, someone said of her:Margot is so marvellous … She can make the deaf hear and the blind to see, and she would cause the dumb to speak if they could only get a word in edgeways.I recall the level of the national debt in 1979, so I recognise why Government's base date for the national debt in this Parliament has always been 1990, rather than 1979, especially as international commentators warmly commended the previous Government's handling of the national debt during our full 18 years in government. Of course, the fact that the Chancellor has used the proceeds of licence fees for debt repayment, rather than true investment in our higher education by endowment, does not prevent the next Conservative Government from borrowing to set our universities free, without offending against the Chancellor's golden rule.
I pay the Chancellor tribute for championing genuine investment for 15 years, as against new Labour speak for revenue expenditure, unknown in the late Sir John Hicks's classic book on the national accounts. The Chancellor has championed genuine investment in training and higher education, for which I admire him all the more. Endowing universities would provide real investment, under whichever Government, and would set universities and the Chancellor free from the Laura Spence syndrome.
Under a planned system, an Oxford college—I declare an interest as a former undergraduate—is free to allocate places only in limited numbers and in particular subjects, determined by the system. Under a free system, Harvard—I declare an interest as a former postgraduate student there—is free to offer Laura Spence a scholarship, albeit in a different subject to the one that she sought to study at Oxford, because of the endowment funds that it has accumulated for that purpose.
I acknowledge the amount that the Government have put into higher education in the current year, and I do so unreservedly. I am happy that they have done so, but theirs is not the same aim as the one that I am espousing. When I was in the private sector, I gave up a day a year to sit at the feet of the futurologist Herman Kahn. One year, in the mid-1970s, he said that the United Kingdom's opportunities in post-industrial society would be in its three special centres of excellence: medicine, higher education and government. My ambition potentially embraces not just one of those centres of excellence, but even one and a hall.
When I was at the Treasury, we held the view that anything that could not be measured did not exist. That view was put to the test some years ago by the Foreign Office, which we all know and love. There was concern in the British embassy in Brussels that the doorway between the main spare bathroom and the main spare bedroom in the embassy would be insufficiently large to encompass the then Foreign Secretary, Mr. Ernest Bevin, who was, I acknowledge, a large man. A telegram was sent from Brussels to London, which stated:Please verify diameter of Secretary of State.709 A telegram came back from London, which demonstrated that those in the Foreign Office—for those of us who know and love it—are possibly more literate than numerate. It stated:Unable verify diameter, but circumference is 60 inches.Beyond measurement—and, therefore, infinite—is the potential of our universities, which respond to the spirit of the British genius. I hope that, as I leave this place, in this new century, our 90 British universities will blossom in the way they truly deserve to do.
§ Mrs. Betty Williams (Conwy)
Like those of several other Labour Members, my constituency has many attractions and advantages, but wealth is not one of them. The Budget is welcome news to my constituents. Also like many other Labour Members, I am looking forward to the results of the Chancellor's sound management of the economy further benefiting the economic and social fabric of our nation. The Chancellor's prudent management has placed the Exchequer in a position to respond to unexpected problems in ways that are not possible when a Government spend, day by day, to the limit of their resources.
The foot and mouth epidemic is such an unexpected problem, and is having a serious effect on the economy in my constituency. The news last week that it may continue for a long time was a blow to the many who, although affected by the epidemic, can do little or nothing to bring it to an end. I pay tribute to the work of my right hon. Friend the Minister of Agriculture, Fisheries and Food for acting so incisively and for reporting to the House so well. I also pay tribute to the National Assembly for Wales, not only for the personal commitment of its Minister for Rural Affairs, Mr. Carwyn Jones, but for the excellent foot and mouth disease information service that it has provided on the website, at www.wales.gov.uk. The Assembly has gathered information from several sources and the website is a great help in the Principality.
Compensation is available to farmers whose livestock is slaughtered, and I understand that other assistance may be available through the European Union under the EU agrimonetary compensation scheme. I am sure that that will be well received. However, the foot and mouth epidemic is having a much wider effect in my constituency. In Conwy, the landscape and the seashore are our livelihood in many ways, and the epidemic is having serious repercussions. Incomes are suffering and jobs are threatened in tourism, hotels, catering, countryside pursuits—including those of climbing instructors and mountain guides—shops and the haulage industry, to name but a few examples.
To seek some measure of the likely extent of the problem, I briefly examined "Digest of Welsh Local Area Statistics 2001". For an accurate assossment, I would need the services of a statistician, which most certainly I am not. My constituency contains parts of Conwy and Gwynedd and it is probable that the agriculture and tourism-related industries provide respectively 2,500 and 10,500 jobs in those counties. A substantial proportion of those 10,500 jobs may be under threat at present and the incomes of some of my constituents who are not involved in agriculture have already been reduced to nothing by the epidemic.
I know that my right hon. Friend the Minister of Agriculture and my hon. Friend the Under-Secretary of State for Wales are aware of my concerns. That, and the 710 fact that they and their colleagues are examining the consequences of the outbreak, was made clear in their answers to my questions on 8 March at columns 426 and 427, and on 7 March at column 277. I am grateful for that and for the agreement of my hon. Friend the Under-Secretary to meet my constituents on Wednesday.
The policy of slaughtering all affected animals is of long standing and I accept that it may be one of economic necessity. If so, we must give more serious and detailed consideration to the wider economic effects on constituencies such as Conwy. My right hon. Friend the Chancellor's stewardship has brought our economy to a state of unprecedented security, so I hope that a way may be found to assist my constituency and others where the epidemic is having a disproportionate effect on the local economy.
The Labour Government have brought many benefits to my constituents and to the nation, but they have done much more. International development and the relief of world poverty are examples. Last week, my right hon. Friend the Secretary of State for International Development visited my constituency and that of my hon. Friend the Member for Clwyd, West (Mr. Thomas). During her hectic day, I was delighted to introduce her to the university of Wales, Bangor. In particular, the work of the school of agricultural and forest sciences and the centre for arid zone studies was demonstrated and explained by staff, including the work being carried out under the Department for International Development plant science programme. My right hon. Friend's work on tackling world poverty, in which she co-operates with the Chancellor, is much appreciated by my constituents and I am proud that the university of Wales, Bangor, is playing its part in that mammoth task.
Sadly, towards the end of my right hon. Friend's visit, she was attacked by persons who are neither students of our university nor residents of my constituency. I feel that the House would wish to know that I have been sent many messages from my constituents expressing outrage at the treatment that my right hon. Friend received. I quote from a letter from Penrallt Baptist church, Bangor:Our own Baptist forefathers fought hard and with great sacrifice on the side of free speech and democracy and we share the dismay you must feel. Although our church hosts a variety of different political viewpoints we are all united in our support for you in this matter and assure you of our prayers on your behalf.To add to that moving message and the others that I have received, I wish to extend to the House my own sincere regrets and apologies.
§ 9.4 pm
§ Mr. Michael Fallon (Sevenoaks)
I declare the interests recorded in the Register of Members' Interests.
First, I shall discuss the Budget framework. The Chancellor appears to have delivered a healthy Budget surplus, but we need to look behind that. Yet again, he has substantially undershot on the revenue side. Yet again, he has substantially undershot on departmental spending. He goes on about long-term stability and consistency, but he is consistent about one thing: he keeps undershooting his own underestimates.
Secondly, it is by now obvious to almost everyone that the golden rules that the Chancellor claims to have met so comfortably are not quite as golden as all that. This is fool's gold, or at the very least gold plate. One must ask 711 oneself, certainly after this year's outcome, whether these golden rules mean anything and whether they are any guide to the Chancellor's performance, so easily does he skip past them. Thirdly, as previous speakers have emphasised, the Chancellor has enjoyed the one-off proceeds of the mobile phone auction—some £22 billion to add to the revenue side.
The plain fact is that behind this year's healthy Government surplus, as defined by the Chancellor, spending goes on rising faster than the economy is growing. Even on his own forecast, he plans to borrow again in just two years' time. In the financial year beginning April 2003 he will borrow £10 billion, then £11 billion and £12 billion. That assumes continuous growth. If growth should slow or stop, all those figures will look suspect.
That must be why the Commission, in its assessment for the Council of Ministers, and the International Monetary Fund have warned of the consequences of the Chancellor's future tax and spending plans. The IMF warned ofnegative consequences for investment and growth.When I asked the Chancellor about that last Thursday, one of his junior Ministers said that I was misrepresenting the report. The IMF and the Commission warned that the Chancellor's tax and spending plans over the next three years may not be sustainable if growth turns down. If growth does turn down and he wants to go on increasing spending at the rate that he has been doing, we can be sure that taxes will rise again.
My right hon. Friend the Member for Huntingdon (Mr. Major) told us graphically how taxes have already risen. In the last year of the Conservative Government, income tax receipts were some £69 billion, and this year they are £99 billion. I make that an increase of well over 40 per cent. Pension funds are paying £5 billion more in tax on dividends. Capital gains tax receipts have doubled from £1.2 billion to £3 billion. Inheritance tax is up from £1.5 billion to £2.3 billion. As my right hon. Friend said, 2.2 million more people currently pay tax than paid tax three years ago, and there has been a 30 per cent. increase in the number of people paying the higher tax rate. It would have been inconceivable before the war and in the period just after the war for so many people doing straightforward jobs to be classified as higher-rate taxpayers. Police sergeants in London, heads of department in schools and senior nursing officers are now classed as higher-rate taxpayers.
The result of all that is that total revenues—income tax, VAT, capital gains tax, inheritance tax and excise duties—are up by a third in three years to more than £250 billion. The tables in the Red Book finally and clearly reveal what the Chancellor has consistently tried to avoid disclosing in the past few years, which is that the tax burden is up from 35.2 per cent. of gross domestic product to 38.2 per cent.
§ Mr. David Ruffley (Bury St. Edmunds)
Is my hon. Friend aware that Credit Suisse First Boston has calculated that, after tax and inflation, average household disposable income under the Government has risen by 712 1.6 per cent. compared with 2.5 per cent. under the previous Conservative Administration, and 2.9 per cent. between 1979 and 1990?
§ Mr. Fallon
The House will be grateful to my hon. Friend for putting that point on the record so clearly. We hope to hear more from him later this evening, or in tomorrow's debate if he catches your eye, Mr. Deputy Speaker.
The facts on tax are now coming out. For so long the Chancellor and his colleagues first tried to deny that the tax burden was rising at all, then they claimed that it had risen but was planned to fall. Now, on the record in their own tables in the Red Book, we see that the tax burden has risen for the first three years. Whatever their plans are, we can be clear about what has actually happened: the tax burden has gone up. We are therefore entitled to ask where the money has gone and why it is not getting through.
It is interesting that today's debate, inaugurated by the Secretary of State for Education and Employment, has concentrated on teacher shortages and the difficulty of recruiting teachers. Given the billions of extra revenue and the billions that the Government have boasted of giving to the education service, why have they failed to get enough teachers into our schools?
When I visited Swanley school in my constituency on Thursday morning, the head teacher had to excuse herself from our discussion. She had to go and teach English—not a shortage subject—because the school was unable to recruit enough English teachers. Why is there a shortage of hospital staff, despite all the tax revenue and all the billions that have been allocated? Why is the money not getting through to front-line services?
The money is clearly not getting through. As is plain from last year's Budget, the pre-Budget report and the Budget last week, the Chancellor keeps topping up a settlement that he said was comprehensive and fixed for three years. Departments, he said in 1998, should not come back for more: the settlement would allow them to plan for the next three years. But in each successive year—in each successive mini-Budget and Budget—the Chancellor has to top it up to try to ensure that the money gets through. Now he is saying that he will give money directly to schools each year—money that is clearly not getting through under the existing system.
§ Mr. Ruffley
I wonder whether my hon. Friend's experience in his Sevenoaks constituency is similar to mine in Bury St. Edmunds, where police numbers have fallen, there are waiting lists for the waiting lists at local hospitals—longer than they were in 1997—and secondary-school class sizes are larger as a result of the gerrymandering at the bottom end in primary-school class sizes.
§ Mr. Fallon
That is an excellent example of the way in which Government targets, schemes and policies have distorted allocations. Two things are happening. First, money is not getting through to the front line—to the area police commanders, the NHS trust chief executives and the head teachers. Secondly, when it does get through it is distorted by centrally fixed priorities that dictate to the people running local services how those services should be run from the point of view of Whitehall. Our hospitals 713 and schools are ending up as branch offices of the great Departments of State in Whitehall, doing the Secretary of State's bidding.
Something is wrong with the way in which the Government have been allocating their spending. That is proved by the fact that they keep coming back to announce further allocations in some desperate bid to get the money through before people notice at the general election.
So much for the framework; let me now turn to some of the specific decisions in the Budget. Of course, I welcome some of the Chancellor's measures for entrepreneurship. It is certainly refreshing to have a Chancellor who claims to believe in entrepreneurship: that is not something to which we have been accustomed in the case of previous Labour Chancellors. I welcome, for instance, the extension of the enterprise management incentive scheme, the changes in capital gains tax and the help for small businesses. As I hope the Financial Secretary agrees, however, it is important for those moves to be followed up.
On the one hand, the Treasury accepts the case for share ownership in binding employees more closely to their companies and encouraging company loyalty; on the other, it is not prepared to go further and cut the costs of share dealing in this country. If the Government firmly believe in share ownership, they should ask themselves why it is so much more expensive to deal in shares in the United Kingdom than it is elsewhere in Europe or in America.
The Chancellor's proposals on capital gains tax and small businesses raise similar issues. It is no use the Government exempting more small businesses further up the turnover scale from VAT when they are simultaneously piling on to those businesses more of the social red tape and other regulation to which we are becoming accustomed. If Ministers believe in exempting those businesses from VAT, why ate they also piling on extra regulation? The Government's entrepreneurship proposals need to be followed through much more consistently if we are to believe that there really has been a conversion in the Treasury to the cause of entrepreneurship.
The Chancellor's decisions can be characterised under four headings. First, there is far too much fiddling about with the provision of small tax credits here and there. The credits are all intended to deal with ostensibly worthwhile causes such as community investment, research and development and persuading people to build flats over shops. However, I warn the Treasury that there are always deadweight costs in introducing such incentives for people who may well have made those decisions regardless. There are certainly bureaucratic costs in processing all those applications and ensuring that they are dealt with. I also doubt whether, ultimately, such incentives change behaviour in the way that the Treasury hopes they will.
My favourite line in the Budget is the announcement that the Government willremove VAT on the purchase of adult cycle helmets … to encourage people to cycle more".All I can say to Treasury Ministers is that I doubt that people will suddenly abandon their motor cars—or that the commuters of Sevenoaks will suddenly leave their 714 Mercedes or Volvos at home and cycle down to Sevenoaks station—simply because VAT has been abolished on cycle helmets. That is not how people behave in the real world.
§ Mr. Ruffley
Does my hon. Friend agree that that is the unacceptable face of the new Labour nanny state?
§ Mr. Fallon
That is an uncharitable view.
More fully, the sentence states that the Government willremove VAT on the purchase of adult cycle helmets … to encourage people to cycle more and improve road safety".The Government are therefore reducing VAT on cycle helmets to improve road safety. I do not quite follow that. Nevertheless, that sentence demonstrates all the overweening ambition and the futility of fiddling about with the tax system and thinking that, on 1 April, because a couple of pounds have come off the price of cycle helmets all the cars will be left at home and millions of people will be happily cycling to work. It really doesn't work like that.
The Chancellor's decisions can be criticised as quite clever packaging—like the "new and improved" formula that one sees in the shops. Not only has the decision on VAT on church repairs already been announced, it has already been blocked. Now, Ministers are trying to find a different way of producing the same money.
We have also already heard about the children's tax credit being increased to £10. The Government were consulting on that proposal and—surprise, surprise—people said that they were in favour of it. That change was reannounced again in the Budget statement. In his clever packaging, there were some measures that the Chancellor did not include. He did not remind us of the increase in national insurance contributions. Although that had been announced before, he did not trouble us by reannouncing it.
On Thursday, the Paymaster General was rather caught out and with some embarrassment had to explain to the House that Ministers had not provided hon. Members with the press notices with which we are usually provided and which explain some of the changes, including the one on the application of VAT to spectacles. Some of the notices were not even included in the Budget bundle. I think that the hon. Lady tried to convince the House that that was standard practice. It certainly has not been standard practice. In the old days, the Budget bundle included all the press notices and hon. Members did not have to ring up the Treasury or plug into the website to try to obtain more information.
My third criticism of the detail of the Budget is that there are, again, costs to business. Right hon. and hon. Members may be surprised to hear that, because the Budget was in general presented as one that cut taxes. However, maternity leave has been increased and paternity pay has been introduced. Even if the cost of those changes does not fall directly on business, it will do so indirectly. Business ultimately funds the changes through increased costs or it has to accommodate itself to the changes. That is particularly true of very small businesses which may have only three or four key people. Nevertheless, the Government tell them that they must provide so many weeks maternity leave and paternity leave. All those changes pile extra costs on business.
My fourth and final criticism is that the Budget perfectly demonstrates just how far the Chancellor has strayed from Treasury matters into all kinds of areas. I do not know whether the Financial Secretary has had time 715 yet to read the Treasury Committee's report on the role of the Treasury, which clearly shows that the Chancellor is involved in almost everything. He is involved in welfare policy—he is running the welfare system. He is involved in family policy. As we have just heard with regard to road safety, he is involved in transport policy. He is involved in education policy, in getting the money directly to the schools, helping to bypass the local education authorities. He is also involved in many other policies. Indeed, the Chief Secretary has become involved in something quite different. According to a Treasury press release, the right hon. Gentleman has announced an award for the most outstanding public building. So the Chancellor is also into architectural policy and has announced a new design award scheme. What does architecture have to do with the Treasury? The Chancellor simply cannot resist meddling in anything and everything—welfare, families, cycling and transport education and now public architecture.
The bigger issues are neglected. The Treasury has issued another consultative document to puzzle out why our productivity is still slipping behind that of our major competitors and why it seems that the gap between us and the United States cannot be bridged. There are issues at which the Treasury should be looking. For example, why do the Americans pay less tax but seem to work harder, for longer hours, and take fewer holidays? Why do our medium-sized companies find it so difficult to train and retain their work force?
After productivity comes the tax code. It is quite striking that commentator after commentator has gone on about the complexity of the tax code and the need for simplification. It is bad for individuals and complicated for business. Of course, I welcome the rewrite project and the work of those who are attempting tax simplification, but the structure is far too complex. It is time that the Treasury addressed these criticisms and came up with at least a commitment to taking an interest in simplifying the tax code.
In conclusion, this is not a very successful Budget. Taking the past four years as a whole, the Chancellor put up taxes quite massively for two years 'and then, in the past two years, reduced them slightly. As a result, taxes are much higher, but spending, as I have demonstrated, is no better. It is said that the Budget will benefit those with babies. It will certainly not take in those who were not born yesterday.
§ Mr. Richard Ottaway (Croydon, South)
This has been an interesting and quite prolonged debate. The opening speeches highlighted the contrast between the parties. My hon. Friend the Member for Maidenhead (Mrs. May) made an incisive, constructive speech which showed her free thinking, in complete contrast with the wooden, inflexible speech of the Secretary of State for Education and Employment, who has done so much to induce initiative fatigue in those of us who have to listen to him.
This was a unique day. We heard no fewer than four valedictory speeches from colleagues on the Opposition Benches—unfortunately only one of them is still in the Chamber. The first was made by my right hon. Friend the 716 Member for Huntingdon (Mr. Major), who drew attention to the Government' s and the Chancellor's assault on middle England. He drew attention to the boom in tax raising and the bust in manufacturing.
In truth, the Chancellor has much for which to thank my right hon. Friend, who laid the foundations for the Budget. The tough decisions on which the Chancellor has based his Budget were taken in the Budgets of Lord Lamont and of my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke). As my right hon. Friend the Member for Huntingdon looks back at his career, I pay him the compliment of summing it up in this phrase: he made a difference and I pay tribute to him.
The second valedictory speech came from my right hon. Friend the Member for South Norfolk (Mr. MacGregor), who, as a former Chief Secretary to the Treasury, had his finger on the button. He rightly said that the Budget was patchy, with little bits for everybody, and that the increase in the tax burden was caused by fiscal drag. With his unique knowledge of the pensions industry, he drew attention to the problems with annuities.
The third valedictory speech was made by my hon. Friend the Member for South-West Bedfordshire (Sir D. Madel), who incisively exposed the flaws in the Budget. He drew particular attention to the mess caused by IR35, giving an example that highlighted that problem.
My right hon. Friend the Member for Haltemprice and Bowden (Mr. Davis) pointed out most effectively and clinically how the Budget and its predecessors were eroding Britain's competitive position.
The fourth valedictory speech was made by my right hon. Friend the Member for Cities of London and Westminster (Mr. Brooke), who really is my friend. He and I soldiered through the proceedings of the Greater London Authority Act 1999 together, so I know what a support he can be for those less experienced than him.
My right hon. Friend pointed out that as the Member for the City of London, he would have won a bronze medal and as Member for Westminster he would have taken fourth place. In the affection of Members on the Conservative Benches today, he certainly takes first place. His speeches never fail to illuminate and lift whatever forum he chooses to speak in. To include the Venerable Bede, Margot Asquith and C.S. Lewis in one speech is unique and is unlikely to be heard again.
My hon. Friend the Member for Sevenoaks (Mr. Fallon) also made an incisive speech. He pointed out that in two years, the Government will be borrowing and that the IMF has noted the negative consequences of the Government's present monetary and fiscal stance.
What is most remarkable, however, is that although the Government have 417 seats in the House—a majority greater than the total number of Conservative seats—there were fewer Members on their Benches throughout the day than on the Opposition Benches. That shows how little interest Labour Members have in the serious consequences of the Budget that we are debating.
I shall deal with some of the wilder misrepresentations of Conservative tax and spending policies on education. The Chancellor announced an extra £1 billion for education over the next three years. He has used that technique before. Every year, he seems to produce a new three-year plan of some sort. A future Conservative Government will match that extra expenditure. However, somehow the inference has been made that that affects our projected tax and spend policies.
717 Before the Budget, the Chancellor had projected that public expenditure would be £442 billion in 2003–04, and we had set out how we intended to spend £8 billion less than that. After the Budget, the Chancellor still proposes to spend £442 billion in 2003–04, which includes the extra funding for education. We still intend to reduce that figure by £8 billion, but as none of that sum touches the education budget, we can match the Government's education proposals without affecting our overall policy.
The mystery, if there is one, is how the Government can spend an extra £1 billion In without increasing the spending total. In an excellent speech, my hon. Friend the Member for Maidenhead showed the manipulation in the figures and seriously brought into question whether an extra £1 billion existed at all. In fact, it looks more like an extra £200 million by 2003–04.
Our education policy would have fundamentally differed from that in the Budget in one way—our plan to endow the universities, to which my right hon. Friend the Member for Cities of London and Westminster referred. Before the Budget we had already announced that we would use the surpluses from future privatisations and spectrum sales to endow universities for the future. The universities will then invest the money and fund themselves through the income raised.
In the Budget, the Government propose to repay £32 billion of the national debt from the surpluses that they have accumulated during the past four years. In our judgment, much of that money could be better used to endow the universities, allowing them to receive substantial sums, which they could invest to fund themselves through the income. We will put our great universities on a standing with Stanford, Yale and Harvard, which revel in their independence.
Our policies will free the universities from excessive control and interference, allowing them to forge links with business and harness funding from the private sector without affecting their grant. They will decide the salary structures and how many students to take. That policy will remove the uncertainty about university funding, and it will be fiscally neutral.
That imaginative proposal stands in stark contrast to the Labour party's manifesto commitment in 1997, when it undertook to raise the proportion of national income spent on education. Under the previous Government, the average figure was 5 per cent.; under this Government it is 4.7 per cent.—another broken pledge.
§ Dr. Gibson
Does the hon. Gentleman understand the difference between a permanent endowment fund and an endowment fund? Could he explain which fund would operate under the Conservative party's policy?
§ Mr. Ottaway
The fund will be perfectly straightforward; the money will he given as a grant to the universities, thus removing the need for the Government to give them their grant, which is why the policy will be fiscally neutral.
We acknowledge that the Budget's foundations were laid in the 1990s. We acknowledge the current stable, monetary position, the reasonable growth in the economy, low inflation and falling unemployment, but, as many hon. Members have said today, the growth in the economy started in 1993, when unemployment started to fall, as did inflation shortly thereafter. Yet despite the Chancellor's 718 achievement in not messing up the golden legacy that we handed him, the fall in unemployment is slowing down under this Labour Government. Between 1994 and 1997, unemployment fell by 27 per cent.; since 1997, it has fallen by only 24 per cent.
The Labour party said in its 1997 election manifesto that it would get 250,000 under-25-year-olds off benefit and into work, but according to the National Institute of Economic and Social Research, youth employment has risen by only 13,000 in the past two years. So it is clear that the new deal has been an expensive failure and one of the least effective job creation schemes in history. The next Conservative Government will replace the new deal with "Britain works", a scheme modelled on the highly successful "America works". It will save about £400 million of public expenditure and it has a greater likelihood of success.
Despite the relative stability of the economy, what the Chancellor is doing with it is alarming people across the length and breadth of the country. Whatever the Government's protestations and whatever phrase or spin they choose to put on the situation, there is absolutely no argument that the tax burden has risen under this Government. They may talk about a couple of pence off petrol or an increase in the children's tax credit, but the remorseless, indisputable truth is that, in 1997, the tax burden was 35.3 per cent. of gross domestic product and, today, it is 37.7 per cent. Britain is paying more; Labour has taxed by stealth.
§ Mr. Geoffrey Clifton-Brown (Cotswold)
Does my hon. Friend agree that not only did the Government inherit a benign set of circumstances from the previous Government, but they inherited a benign set of world economic circumstances, particularly in north America? North America still has a very much lower tax burden as a percentage of GDP than the Government are currently imposing. Does my hon. Friend agree that, to become competitive in world terms, we still need to have a lower tax burden?
§ Mr. Ottaway
My hon. Friend is absolutely right. I intend to deal with the position of the United States shortly.
§ Mr. Ottaway
No, I am sorry, but time is against me.
The Government have invented 45 stealth taxes on everything from holidays to pensions. If people are married, smoke, drink or drive a car, they feel it in their pockets. The irony is that those taxes are being introduced by, of all things, a Labour Government. They are regressive taxes, hitting those on the lowest incomes and hitting worst of all in the Labour party's heartlands.
With the election imminent, those of us who have been on doorstep know what the public are saying. There is a sense of unease about what the Government have done. Labour voters from 1997 have their doubts and Millbank spin doctors warn us of apathy among the voters. It is not apathy; it is dissatisfaction among the very people whom Labour were voted in to look after.
The Government's tax increases since 1997 add up to £25 billion a year, equal to lop on income tax. A typical working family is £670 a year worse off under Labour. 719 However, as my right hon. Friend the Member for South Norfolk pointed out, the cruellest tax of all is the stealth tax on our pension funds. We all know that the price of cigarettes has gone up, but millions are unaware of how their pension fund has been eroded. Unless, one puts in hundreds of pounds extra a year into a pension, one will be much poorer in retirement than planned.
In a cynical step, with the election weeks away, the Chancellor has started to give a fraction of that money back. He has widened the lop tax band; he is going to give people an extra 69p a week. That, on top of last year's 75p increase to pensioners, illustrates that the Government have lost all sense of relativities. All that they are doing is earning the anger of the British people.
However, while the Chancellor is trumpeting his tax cuts, as in most of his Budgets, reading the small print reveals much more. The rises in national insurance contributions mean that 2.5 million taxpayers will be worse off; the climate change levy will start to clobber business; the increase in company car tax continues the right hon. Gentleman's relentless assault on the motorist; and the aggregates tax will hit the cost of construction.
However, it gets worse. Deep in the small print of the Red Book, it is revealed that the increase in corporation tax this year will be more than £5 billion. The Chancellor may have trumpeted a modest reduction in the headline rate of corporation tax but, since he came into office in 1997, he has not adjusted the threshold at all. Furthermore, he has left IR35 untouched. No wonder business feels unfairly treated.
However, most contemptible is the imposition of VAT on spectacles. It will particularly hit the poor and the elderly. Just what do the Government think they are doing? The elderly in our society are the most vulnerable. That is why we will cut taxes for the over-65s, eliminate tax on savings and substantially increase the age-related allowance, which will take 1 million pensioners out of the tax system altogether.
What a contrast with the fiddly changes to the rules on individual savings accounts and personal equity plans. As my hon. Friend the Member for Sevenoaks (Mr. Fallon) said, those changes illustrate the central features of any of the Chancellor's Budgets—the complexity and dramatic extension of means-testing and the use of tax credits reflect his tinkering, meddling, fiddling, interfering, intruding, prying, snooping and tampering. All that from a Chancellor who, in 1994, told the Labour party conference that he would eliminate means-testing from the benefits system.
To qualify for the tax credits, people must fill in extensive forms, so they do not bother. It comes as no surprise that millions of people who are entitled to receive the children's tax credit probably do not know about that. The Inland Revenue does not know where the children are—it does not keep such records. The anomaly of the children's tax credit remains. As my right hon. Friend the Member for Huntingdon said, why should two earners who are both on £35,000 a year—a household total of £70,000 a year—receive the children's tax credit when a single earner on £45,000 does not. In last year's Finance Bill, the Minister said that he was looking into the matter. I suggest that he gets another pair of spectacles—if he can afford the VAT.
720 We recognise the need to maintain spending on schools, but that does not me in that savings cannot be made. A future Conservative Government will take the growth in the economy and increase expenditure on public services while letting people benefit from the reduction in taxes. We are proud to campaign for tax cuts of £8 billion, which the nation can afford and which it wants. That highlights the philosophical divide between the parties. Conservatives believe that people who work hard and make an honest living should be entitled to keep as much of their money as they can and spend it in the way that they wish. We will cat taxes because we believe that people know better how to spend their own money. The Budget fails to recognise that fundamental truism.
The Budget is complacent. Although the Government predict a deficit in two years' time, they plan to increase public spending at an unsustainable level. The world outlook is not that rosy. Japan's economy has stalled and the alarm bells are ringing in the United States of America, but the Chancellor claims to have eliminated boom and bust, as if it were in his gift to do so. If the American economy turns down, the surpluses of which he is so proud will disappear in the mist. The Government will face the stark and unenviable choice of cutting expenditure or increasing taxes. That sounds like boom and bust to me, and they know it.
§ The Financial Secretary to the Treasury (Mr. Stephen Timms)
The fundamentals of our economy are stronger today than they have been for a generation. The centrepiece of our economic strategy—the establishment of a new stability in the economy—was set out before the last election, as my hon. Friend the Member for Bury, South (Mr. Lewis) reminded the House. The new macro-economic policy framework, with interest rates decided independently by the Monetary Policy Committee of the Bank of England and the rules of fiscal prudence, was needed to establish a new stability in the economy after decades of instability, compared with the record of our competitors. Having achieved that, we see it as a precious prize indeed. So maintaining it and locking it in for the long term was at the heart of my right hon. Friend the Chancellor's objectives last week.
We are enjoying clear benefits from that approach. More people are in work than ever before. The unemployment rate is at its lowest for 25 years. Of particular importance is the dramatic fall in youth unemployment. The number of young people aged 18 to 24 who are unemployed for six months or more—the group targeted by the extremely successful new deal for young people—has fallen by more than 75 per cent. since 1997. Everyone can appreciate the huge benefit to us all of so many young people becoming familiar with the habits and disciplines of having a job, especially when such a large number of them grew up in households in which no one regularly went to work. Opposition Members referred to the evaluation carried out by the Institute for Social and Economic Research. Its conclusion is that the new deal for young people will have cost £150 million a year over this Parliament and will have increased national income by £500 million a year, such is the scale of its success.
Interest rates are low and stable. We have the lowest long-term interest rates for 35 years, and unprecedentedly high rates of business investment—over 14 per cent. 721 of GDP. Inflation is on target, and has been lower for longer than at any time in the past 30 years. It is the lowest in the European Union. National debt has sharply decreased. The fall in debt charges, which some Conservative Members have questioned in the debate, has alone freed up £7 billion for next year, compared with four years ago. The fall in spending on unemployment benefit has freed up about £4 billion. That is why we can now plan with confidence for substantial increases in investment over the next three years in education, science, transport and health—the priorities on which our future prosperity will depend.
I shall respond to points made in the debate and set out the approach on productivity that we have taken in the Budget. There is still a substantial productivity gap between the UK and our leading competitors. The most recent data suggest that there has recently been significant improvement, with manufacturing productivity up by 4.4 per cent. in the past year, but we still have a long way to go to catch up on past failure, and we are determined that we should do so.
There are five key drivers of productivity growth on which we need to make progress: investment, skills, innovation, enterprise and competition. I shall outline how the Budget addressed each of those. On investment, we want to maximise the contribution of institutional investors to boost productivity. Following an investigation by Paul Myners of Gartmore Investment Managers, my right hon. Friend the Chancellor List week accepted his recommendations, which included making it easier for institutions to participate in venture capital investment. We want it to be worth people's while to move from a secure job in a large firm to a fast-growing start-up, so we are extending the enterprise management incentive, which has been welcomed in the debate. In future, tax-advantaged share options in small firms can be extended to as many employees as the company chooses, up to £3 million in total for all the options. We want a new regional dynamism to boost the economy, so we are introducing new flexibility to how the regional development agencies can use their budgets.
On skills, my right hon. Friend the Secretary of State for Education and Employment announced earlier in the debate our measures to improve recruitment and retention of teachers. We also want higher investment in work force training throughout the economy, and we are prepared to consider a tax credit for it. We need businesses and others to take complementary steps in response. Sir Gareth Roberts, the former vice-chancellor at Sheffield university who has just moved to Wolfson college, Oxford, will conduct a study of the supply of highly skilled scientists and engineers, focusing on those skills areas where shortages are most acute.
There is a great interest in sectors facing shortages in recruiting people who are currently out of the work force altogether: young people, lone parents, returners and early retirers. We will develop intensive. sector-based welfareto-work strategies in skill shortage areas such as retail, construction, financial services and information technology.
§ Mr. Bercow
The Minister of State, Home Office, the hon. Member for Norwich, South (Mr. Clarke), is on the record as saying in a written answer on 11 December:The number of people leaving a profession may be taken as an indicator of morale."—[Official Repot, 11 December 2000; Vol. 359, c. 65W.]722 Is not the Financial Secretary therefore able to recognise that there is an obvious link between the massive explosion of circulars, glossy publications and consultation documents that have spewed forth from the DFEE over the past four years on the one hand, and the number of people leaving the teaching profession on the other?
§ Mr. Timms
The hon. Gentleman, who I know has been present for most of the debate, will have heard several hon. Members recording their constituency experiences of the very high morale in schools throughout the country, which reflects the huge improvement in investment in our schools in recent years. He will have heard also about the substantial increase in the number of people applying for teacher training and about the measures that we will take over the next 18 months before those people go into employment in schools.
As the hon. Member for Croydon, South (Mr. Ottaway) said in his winding-up speech, the debate has been marked by—possibly—the last speeches of three distinguished former Conservative Cabinet Ministers, all of them, as it happens, former Treasury Ministers, and by that of a very distinguished Conservative Back Bencher as well. I want to run through the points made by all who spoke and say something about their remarks.
In a thoughtful and commendably succinct speech, my hon. Friend the Member for Lewisham, East (Ms Prentice) drew attention to and welcomed in particular, among other features of the Budget, the special grant for museums, to repay their VAT and to help them offer free admission, which we very much welcome.
The right hon. Member for Huntingdon (Mr. Major), in a dignified speech which he said might well be his last in the House of Commons, spoke with great feeling of the privilege of being a Member of the mother of Parliaments. He described my right hon. Friend as "this most prudent of Chancellors", paying him a number of compliments as well as levelling some criticism. The right hon. Gentleman commented on tax as a proportion of gross domestic product. It is worth making the point that it is less than it would have been on the previous Government's projections when the right hon. Gentleman was Prime Minister.
As the hon. Member for Harrogate and Knaresborough (Mr. Willis) rightly said, the right hon. Member for Huntingdon struck a very different tone from the current leader of the Conservative party in Harrogate. The right hon. Gentleman explained that he would be unable to be present for the close of the debate, but he will take with him when he leaves the House the good wishes of all hon. Members.
My hon. Friend the Member for Coventry, South (Mr. Cunningham) raised his interest in further education. The Minister responsible, the Under-Secretary of State for Education and Employment, my hon. Friend the Member for Croydon, North (Mr. Wicks), was on the Government Front Bench when he spoke and heard his remarks with particular interest. My hon. Friend also welcomed the support for research and development announced in the Budget, and the consultation on the new tax credit for large firms. That will be of particular interest to firms such as Rolls-Royce in his area.
The hon. Member for Harrogate and Knaresborough supported moves in the Budget to reduce child poverty and made a number of points about education. My hon. 723 Friend the Member for Bury, South was right to point out, however, that representatives of the Liberal Democrat party have a tendency to make endless demands without ever telling us how they would pay for them. My hon. Friend also made an important point supporting the new partnerships encouraged and gathered by regional development agencies.
The right hon. Member for South Norfolk (Mr. MacGregor), another former Conservative Chief Secretary to the Treasury, in what he said would be his last speech in a Budget debate, paid some slightly back-handed compliments to my right hon. Friend the Chancellor's stewardship of the economy. He said that the fuel escalator was abolished in response to the fuel protests in September. Of course, that was not so. The abolition of the fuel escalator was announced in the pre-Budget report in 1999, well before those protests.
My hon. Friend the Member for Elmet (Mr. Burgon) was one of those who passed on to the House the welcome of head teachers in his constituency for the additional sums that are being provided directly to their schools following the announcements last week. That is one of the factors that has improved morale in schools up and down the country.
The hon. Member for South-West Bedfordshire (Sir D. Madel), in what I think he said would be his last speech after 31 years in the House—he is the longest-serving of those who spoke in this debate before retirement—said that, although he welcomed the research and development tax credit for large firms, he was concerned about small and medium-sized enterprises. I can tell him that we introduced in last year's Budget precisely what he wanted—a tax credit for small and medium-sized enterprises which has been widely welcomed and in place for the past year. He also asked about support for the cost of child care at home. I refer him to paragraph 4.17 in the Red Book, where that point is directly picked up.
My hon. Friend the Member for Croydon, Central (Mr. Davies), in a highly economical, perceptive and well-informed speech, said that the key to the Government's success was the 1.1 million extra jobs that have been created. He made the telling point that the proportion of tax as a percentage of gross domestic product needs to be considered alongside the unsustainable borrowing that was taking place in 1997.
My hon. Friend the Member for Norwich, North (Dr. Gibson) showed his strong commitment to improving education in Norfolk. He welcomed the impact of the Green Paper. My hon. Friend the Member for Conwy (Mrs. Williams) spoke effectively of the repercussions of foot and mouth disease through the local economy in the area she represents, and welcomed the work of my right hon. Friend the Secretary of State for International Development.
I regret that I do not have time to comment on some other interesting speeches, including that made by the right hon. Member for Haltemprice and Howden (Mr. Davis). There was also the—possibly—retirement speech of the right hon. Member for Cities of London and Westminster (Mr. Brooke), another former distinguished Treasury Minister.
The greater prosperity that we are working for and taking forward in the Budget depends on public investment. We could not seriously aim for greater 724 prosperity if we continued in the old way of under-investing in our schools. We could not seriously aim for greater prosperity if we carried on in the old way and failed to invest in science. We could not do so if we carried on in the old way and failed to invest in transport. Investment, and public investment, are the essential prerequisites for prosperity in a modern economy.
What do the Tories offer us? They long to make cuts, but they know that the country has had enough of under-investment and crumbling services. They long to wield the axe, but they know that only a minority would support them. Instead of a frank commitment to cuts in services, we have an extraordinary list of fudges, exaggerations and naiveties, to which the hon. Member for Croydon, South referred, and which they claim would amount to £8 billion in savings.
Let us be charitable and pretend that £8 billion in two years would be enough to make the Conservatives' Budget arithmetic add up. It would not, of course, but let that pass. Let us consider the list on its own terms. Even on the most charitable interpretation, the list crumbles into dust when it is exposed even to cursory examination. It simply does not stack up.
It is well known, tot example, that there are no regional assemblies in England, yet the Tory list claims that £205 million will be saved by abolishing them. They are not there to abolish. We have been told this evening that the Conservatives would use the £34 billion debt repayment this year—it has already been made, but presumably they would borrow it again—to establish an endowment for universities. That opens up an additional hole of £2 billion that needs to be plugged by other measures that have not been specified. At point after point, the entries on the list cannot sustain even more than the most cursory scrutiny.
I am particularly interested by the claim that housing benefit reorganisation would yield nearly £450 million in savings. The Conservative party has experience of housing benefit reorganisation. The Conservative Government reorganised it twice in the 1980s, and made a hash of it on both occasions. The figure that the Conservatives have come up with is completely fictitious. They count savings from taking away housing benefit from some local authorities, but forget to add in the extra costs that the Benefits Agency would incur in taking on the additional work. It is all like that.
It is a curious fact that in the 1985 public spending White Paper, the Tories spelled out how much they thought they would save by housing benefit reorganisation. Yes, the sum was £450 million, but the saving never materialised. It was groundless then, and it is completely bogus now. As I have said, the numbers do not stack up.
Our numbers do stack up. We said before the election that stability was the key to success in managing the economy, and stability is what we have delivered. It presents us with our best economic opportunity in a generation, and all of us should wish to seize it.
It is being recognised increasingly that the United Kingdom is an attractive place for setting up a business. A few weeks ago, Arthur Andersen and Growthplus released their first annual pan-European benchmarking study on—
§ It being Ten o'clock, the debate stood adjourned.
§ Debate to be resumed tomorrow.