Budget Resolutions and Economic Situation

HC Deb 18 April 2002 vol 383 cc731-804 2.19 pm

Mr. David Willetts (Havant)

May I begin by declaring the interests that appear in the Register of Members' Interests?

Yesterday's Budget was the first since the Government's general election victory only 10 months ago. Pundits were critical of the quality of that campaign, but something clear and important was at the centre of the political debate. Time and again, Ministers and Labour politicians were asked what would happen when the end of their planning period for public expenditure, 2003–04, was reached. It was suggested that there would have to be either a reduction in the rate of growth of public spending, or a further round of tax increases if the Government carried on increasing public spending.

Time and again, the Chancellor and the Prime Minister went out of their way to deny that there would need to be further tax increases in the middle of the Government's second term to finance a further increase in public spending. For example, the Prime Minister was interviewed by Jeremy Paxman on "Newsnight" about the guarantee not to abolish the national insurance ceiling. Paxman said: I am merely asking why you could give this guarantee last time, but you can't give it this time, and whether any reasonable person wouldn't suppose that you therefore propose to increase national insurance contributions. The Prime Minister replied, "They shouldn't". That was on 22 May 2001, less than a year ago. In the same campaign, the Prime Minister wrote in the Daily Express: We are not going to clobber people on higher incomes…We have not the slightest intention of hammering people on £30,000 and £35,000 and the higher income brackets. Yesterday, however, in the first Budget since those election promises were made, the Chancellor came to the House and broke the assurances that he and other Labour party members gave during the election campaign. The Chancellor took the first opportunity that arose, in his first Budget after the election, to trample on the promises that he had made to help get himself elected.

There was no apology, nor any humility. In fact, Labour Back-Bench Members cheered the tax increases even more loudly than they had cheered the promises made to secure their election in the first place.

Even more shocking than the cynicism with which those pledges were broken is the scale of the increase in the tax take. In the final year of the Conservative Government, the tax take was approximately £270 billion. Next year, it will be £407 billion. At the end of the Chancellor's planning period, it will be £520 billion. That is an enormous increase in the total amount of tax taken over the lifetimes of the two Labour Governments since 1997. We are entitled to ask—as we will throughout the debate—how the taxes are being increased, who will bear the burden, and what will be given by the Government in return.

At the heart of the tax increases announced yesterday is the dramatic rise in national insurance contributions. For employees and employers, the combined rate will be a very heavy 23.8 per cent. However, the Chancellor was up to his old tricks yesterday. He referred to the national insurance increases, and to a set of measures designed to help the environment and provide specific assistance for business. We have examined the way in which he presented the changes.

I entirely support the Government's aim of helping the environment. The Chancellor yesterday produced a set of measures to that end, and chapter 7 of the Red Book is entitled "Protecting the Environment". The measures add up to slightly less than £100 million. Some of the measures in the table to which the Chancellor referred in his Budget are marked with an asterisk, showing that their cost is "negligible".

The Chancellor gave his attention to environmental measures with a combined impact of less than £100 million, and devoted fewer words to the proposed rise in national increase insurance contributions, worth £7.5 billion. Those proposals include the abolition, in practice, of the upper earnings limit. The Chancellor will now collect additional national insurance contributions at the rate of 1 per cent. from people's total income, including any income above the old upper earnings limit.

National insurance now has a very odd structure, and one that no rational person would be able to defend. There are personal allowances, and rates for employers of 12.8 per cent. and for employees of 11 per cent. The latter rate has now been raised by 1 per cent., but what is to stop the Chancellor raising that figure again, by 1.5 per cent. or 2 per cent., in the future? The right hon. Gentleman has created a new revenue raiser that he will be able to use whenever he wants to raise taxes still higher.

I hope that the Secretary of State for Work and Pensions or the Chancellor will assure the House that the extra 1 per cent. added to employees' national insurance contributions will not be raised again in the future. If no such assurance is given, we will know what the Chancellor's future stealth tax is going to be. Whatever promises he makes on value added tax or personal income tax, the Chancellor will be able to return to that extra 1 per cent. on employees' national insurance contributions. Gradually—and it may take a few years—he will achieve what John Smith tried to do 10 years ago. The upper earnings limit will be abolished. Over time, the full rate of national insurance contributions will apply to the total of employees' incomes. This is the start of the process.

James Purnell (Stalybridge and Hyde)

Will the hon. Gentleman give way?

Mr. Willetts

I should be happy to give way. I hope that the hon. Gentleman, who was a policy adviser before he became an MP, will say whether he thinks the Government should give the assurance that there will be no further increases in national insurance contributions.

James Purnell

As someone once said, we ask the questions in this matter.

The hon. Member for Havant (Mr. Willetts) wants to go back 10 years, but he advised the previous, Conservative Government between 1979 and 1992. In that period, the income of people in the lowest 10 per cent. fell in absolute terms by 17 per cent. He has said that he does not recognise those figures, as the Hansard record shows. However, the same figures were accepted by Nicholas Timmins, who I believe is a great friend of the hon. Gentleman's. The source of the figures is the Office for National Statistics, so they are official Government statistics. The hon. Gentleman claims to be on the side of the poor. Will he apologise—

Mr. Deputy Speaker (Sir Michael Lord)

Order. The hon. Gentleman must not begin to make a speech.

Mr. Willetts

I hope to turn to the Government's record on poverty later in my speech. I still do not recognise the figure to which the hon. Gentleman referred.

I want to know where the extra revenues indicated by the extraordinary figures for the increase in the tax take are being spent. The Chancellor's Budget statement focused on the national health service. This morning, I asked the House of Commons Library to supply the figures for spending on health and benefits in 1996–97, the final year in office of the previous Conservative Government. The Red Book shows that health spending will amount to £72.1 billion next year. I also asked the Library what the total of spending on benefits and tax credits will be next year. Many of those credits ought to be counted as benefits expenditure. A lot of them used to be so counted, but they have been miraculously redefined by this Government.

I see that the hon. Member for Stalybridge and Hyde (James Purnell), who asked about poverty, has left the Chamber. It is regrettable that he has not stayed to hear my answer.

Adding together the tax credits and the social security budget, one discovers that the total increase in spending on social security and tax credits between 1996–97 and 2003–04 is bigger than the increase in health spending.

The Secretary of State for Work and Pensions (Mr. Alistair Darling)

In cash terms.

Mr. Willetts

I am comparing cash spent on health in 1996–97 with that to be spent in 2003–04, and cash spent on benefits in 1996–97 with cash to be spent on benefits and tax credits in 2003–04. It is an entirely consistent comparison. What it shows is that the extra money—the biggest single increase—is not for health or education but for the Chancellor's personal preoccupation—tax credits—added back in to the social security budget. All those promises that we were going to save money on welfare to put the extra money into health and education have been broken, too. A big increase in welfare expenditure has been redefined and redescribed as tax credits.

Mr. Darling

I shall happily plead guilty to spending more on pensioners and more on children. Will the hon. Gentleman not accept that, as a result of getting more people into work, we are spending about £5 billion a year less on the dole than was spent when he was advising the Conservative Government?

Mr. Willetts

I am considering the total budget for social security and credits. I have observed that it is striking how, under this Government, the big increases in expenditure, for example, are in other areas of benefits. We welcome the fact that unemployment has fallen, but I am considering the total budget for expenditure on social security and credits. That is what has gone up—it has gone up by more than health and by more than education.

Mr. Darling

If the hon. Gentleman looks at the figures—I know that, in these debates, he cannot wait to bury his head in the figures, a fact about which I am happy in many ways—will he not accept that expenditure has gone up because we have deliberately increased expenditure on pensions and on support for families with children? If we had not done that, the rate of spending on social security would be falling compared with that under his Government. We are spending more because we have chosen to do so on children and pensions—spending which he and the Conservative party have vehemently opposed.

Mr. Willetts

All I can say is that the Government's original claim was that they would save money on social security to put more into health and education. We are now being told, "It's all right. Yes, we are spending a lot more on social security and credits but we've chosen to do it."

I now want to consider whether the extra increase in expenditure on social security and credits has been effective in terms of the objective that the Chancellor and the Secretary of State set themselves—the attack on child poverty. The Chancellor will recall not just the commitment that he gave to tackling child poverty—an entirely admirable objective—but his claim during the election campaign, repeated in the Labour manifesto, that the Government had reduced the number of children who were in poverty by 1 million. Let me quote the manifesto on which the Government were elected, which masqueraded as an accurate historical statement: over 1 million children have been taken out of poverty. That is what the electors were told at the last election. However, I am afraid that, even buried in the Chancellor's Red Book yesterday, there was evidence that they have simply failed to deliver what was presented in the manifesto as a matter of historical fact. I shall quote from the discussion of child poverty on page 90 of the Red Book: By 2000–01 the number of children in households below 60 per cent. of contemporary median income"— the measure of poverty that the Government used— had fallen by 0.3 million compared with 1998–99 and by 0.5 million compared with 1996–97". There was thus no 1 million reduction in the number of children in poverty on the Government's preferred measure. The Budget showed that the performance was half that, at best. The Chancellor has shown in his own Red Book that the assertions that he made during the election campaign on the Government's record on child poverty were simply not correct.

Mr. Michael Connarty (Falkirk, East)

Will the hon. Gentleman first accept that, as we have raised the level of incomes, the median income has also gone up? We have therefore set ourselves a higher target to jump over than was ever in existence under his Government. Will he return to the question that he did not answer previously: is it not true that, during the time he was giving advice to the Conservative Government, the bottom 10 per cent. of the population's incomes fell, in real terms, by 17 per cent.? Will he therefore apologise for the advice that he gave?

Mr. Willetts

As I said, I do not recognise the figure of 17 per cent. When I look at the Government's figures for households on below-average incomes, I see a pattern of the number of children in poverty, on various measures, rising in some periods and falling in others. In fact, if one compares the Government's record on child poverty not with 1996–97 but with a few years earlier, one finds that the Government have carefully chosen their base year—they chose a point when child poverty had gone up; child poverty was lower two years earlier. For all the huffing and puffing and extra expenditure, all they have done is to take the rate of child poverty back to what it was in 1994–95.

I therefore question whether the policy decisions that have been taken, supposedly with the justification of reducing child poverty, have achieved the results that were claimed for them on the Government's preferred indicator. The consultation document on poverty that the Government have just released—I have not yet had the opportunity to study it, and I am sure that the Secretary of State will want to discuss it further—is an attempt to redefine the target. When they fail to achieve the target, they redefine it. I want an assurance from the Secretary of State and the Chancellor that they will continue to be judged by the measure of child poverty that they used when they first set the target. That was 60 per cent. of median income, which was clearly the measure that they first used when they said that they were going to take I million children out of poverty during their first term, and that they were eventually going to eliminate child poverty. If, after four years, they have failed to achieve that target, it is not acceptable simply to announce that they are going to change the target. That is not good enough. I look forward to hearing an assurance from the Secretary of State that that is not the case.

Lynne Jones (Birmingham, Selly Oak)

The hon. Gentleman says that he does not recognise the figures for the increase in child poverty under his Government. What figures does he recognise?

Mr. Willetts

I recall, as I quoted them, the latest figures on the number of children in households on below-average incomes, on the measure of 60 per cent. below median income. I also recall a Social Security Committee report—I do not see the right hon. Member for Birkenhead (Mr. Field) in his place—that considered what had happened to the real value of benefits to people on the lowest incomes. That report showed that it had increased significantly during our period in office.

I would happily have a longer historical debate, but I want to challenge the Government on why they have not met the target that they thought they had met. It is not just that they have failed to meet it, full stop—I am genuinely sure that the Chancellor was not trying to mislead us when he said, during the election campaign, that 1 million children had been taken out of poverty. When he said that in the election campaign and put it in the manifesto, he thought that it was true. Why did he think it was true, then, when it is clearly not true, now, on his own figures? The explanation is very important. Instead of putting all this effort into redefining the target, he ought to be thinking about why what he thought had happened has not happened.

The reason for this failure is take-up. The modelling and the evidence that the Chancellor was using, to which he refers again in his Red Book, assumes that his benefits and his new tax credits were going to enjoy 100 per cent. take-up. We all see the marvellous captions and graphs that the Treasury puts into its Red Books—some of which appear in the newspapers and on the television—showing how much better off a family will be in various circumstances. Those illustrations assume that everybody receives those benefits and credits, but they do not. They do not do so because the Chancellor has made the system so complicated, and has changed it so frequently, that we face a catastrophically low level of take-up of his pet tax credits. That is why he thought that he had taken I million children out of poverty when, in fact, he had not; he had taken only half a million out of poverty.

I once asked the Paymaster General—I am sorry that she is not here—a simple question: To ask the Chancellor of the Exchequer how many families … are eligible for (i) the working families tax credit and (ii) the child care tax credit."—[Official Report, 15 November 2001; Vol. 374. c. 842W.] I did not get an answer about eligibility at all—I got an answer about the number of families in receipt of the working families tax credit. The Treasury will not answer questions about take-up or about the gap between the number of people who are eligible and the number who receive the benefit.

I am pleased to see that both the Chancellor and the Secretary of State are present, because I must tell the Chancellor that the Department for Work and Pensions provides much better information and explicitly investigates take-up of means-tested benefits in a way that the Treasury refuses to do. One of the problems is that, as the Chancellor gradually takes over these benefits, the level of public information, which enables us to assess take-up, declines. In fact, the only material that we have is a Department for Work and Pensions research report that suggested that take-up of the working families tax credit is running at an average of 62 per cent. among all eligible families. That is 10 per cent. lower than the take-up of the old family credit. It is running at an incredibly low 31 per cent. among eligible dual-earner couples, and at 49 per cent. among all eligible couples. In other words, fewer than half the couples eligible for the working families tax credit actually receive it. That is why the Chancellor thought that he had taken I million children out of poverty when he had not.

The gap in the Chancellor's strategy is that he has nothing to say about how he will increase take-up, apart from spending ever more money on the advertising budget. However, the real problem is not that the advertising budget is too low but the complexity and confusion for which he is responsible. He has imposed on families an incredibly complicated set of changes that go right back to 1999. That is when he proudly announced the working families tax credit—I now quote the normally sober pages of the Financial Times—assisted by Dennis the Menace, Postman Pat and a Womble. After he had launched the working families tax credit, he took them back to the Treasury and asked them to help him to design the next credit—and the next one.

Between 1999 and 2003, we will have had the following: the abolition of family credit, the introduction of the working families tax credit, the introduction of the child care tax credit, the abolition of the married couples allowance, the introduction of an employment credit, the introduction of the children's tax credit, the introduction of a baby tax credit, the abolition of the working families tax credit, the abolition of the children's tax credit, the abolition of the baby tax credit, the introduction of a child tax credit, the abolition of the employment credit and the introduction of a working tax credit. That is what the Chancellor will have done between 1999 and 2003. It averages out as a new tax credit for families every six months.

Helen Southworth (Warrington, South)

That is good, supporting families.

Mr. Willetts

The hon. Lady says that it is good, but how many of her constituents can find their way through the system that the Chancellor has created? That is why he has the problem of low take-up.

Further complexity was buried in the Red Book published yesterday. We thought that the changes would happen in April 2003, but that is no longer the case. Instead, the planned start is April 2003, and I hope that Treasury Ministers will give us a bit more detail about how the system is supposed to work. However, the child tax credit is no longer being introduced in one stage in 2003. Instead, we will have a process of migration whereby some people move on to the child tax credit in October 2003 and others do not move on to it until April 2004. The Chancellor will be running two systems in 2003–04.

At one point, the pension credit was supposed to be introduced in April 2003, but that will now happen in October 2003. The Child Support Agency was supposed to be introducing its reforms in April of this year—before that, it was supposed to be at the end of 2001—but those changes have been deferred with no new date given.

I do not know why the Government drove information technology experts abroad with IR35, because they will need them to introduce all the changes. The danger is that, between 2002 and 2004, we shall have nothing less than a total shambles as the Government try to introduce all the new schemes. The pension credit will be on the old computer and then it will be on a new one. We do not have a date for the Child Support Agency changes and the child tax credit will he phased in over three stages. Our constituents and poor people are expected to find their way through the system so that they can enjoy the increases in their incomes that Ministers have boasted about. The danger is that people will not be able to find their way through the maze that Ministers have created. That is the problem with their record.

Mr. Connarty

I can give the hon. Gentleman a figure. Some 1,881 families in my constituency will receive the increase in the working families tax credit that is coming in. He seemed to be suggesting—although he appeared to lose his way—that failures resulted from people's failure to take up the credit. However, he and his colleagues need to do what I am trying to do. Everyone who needs advice from me or from local authorities should be able to receive it so that they can fill in the forms correctly and take up the tax credits to which they are entitled. Will he assure me that he will campaign among his colleagues so that they will provide similar advice, thereby ensuring that their constituents receive the credits that the Chancellor is offering them? Or will the hon. Gentleman leave people in poverty because it suits his political ends?

Mr. Willetts

Of course I want people to receive the benefits to which they are legally entitled. I urge people to take up the working families tax credit. When that is abolished, as it will be in less than a year, and reappears in a different form, I will urge them to take that up as well. I will even put in a bit of effort to try to explain the Chancellor's changes. I ask the hon. Gentleman to do something in return, however. Will he table a parliamentary question that does not just ask how many of his constituents receive the working families tax credit but asks how many are eligible for it? Will he then come back and tell the House what he thinks about the take-up of that credit? We can then have a serious debate about the problem that I am trying to draw to the attention of the House.

The Chancellor has created a structure that is so complicated that we have a problem with take-up. If it were just a disaster for the welfare and social security system, we might be able to write it off as a tragic mistake. However, the same problem appears in a completely different area of policy that is the Chancellor's other great preoccupation. He is almost as interested in productivity as he is in creating new tax credits.

Lynne Jones

I do not know whether this will surprise the hon. Gentleman, but I agree with his concerns about the complexities of the tax credits. But he has not said what he would do to increase work incentives and to assist poor families. Does he agree that it would be better to put additional resources into substantially increasing child benefit and to claw the money back from better-off families through a progressive tax system?

Mr. Willetts

Perhaps I might take this opportunity to say what I think the Chancellor should have done. He missed an opportunity when he came to office. He could have achieved everything that he wanted to achieve with the family credit. He did not need to go through four years of structural turbulence and change. All that he needed to do was put more money into the family credit.

We argued all along that there was no evidence to support the view that it was important to deliver the in-work top-up through the payroll. We asked the Treasury about the mystical significance of paying benefits through the payroll, but it did not provide any empirical evidence to support its approach. No such evidence exists.

In this Budget, in one respect at least, the Chancellor is following the advice that we offered him. He is returning to paying most family payments to the caring parent. He has abandoned the belief that that money needs to go through the payroll, but he has unfortunately created a new payroll benefit instead. The working tax credit, which will largely go to a different group of people, has been carefully designed so that it does not go to the people who tend to be poor. He has excluded the under-25s and they tend to have particularly low incomes. He has created a new payroll benefit, but most family payments will go back to being the benefits that they should have been all along. It is a pity that we have had to have this elaborate detour in the course of which many hundreds of thousands of people who are entitled to the tax credits have not been able to receive them.

Lynne Jones

Although the hon. Gentleman is correct to say that the take-up of family credit was higher than for the working families tax credit, the evidence is that that occurred merely because the family credit was in existence for longer. His solution would still face the problem of inadequate take-up. For family credit, take-up was about 75 per cent.

Mr. Willetts

The take-up of family credit was, indeed, rising, and I hope that the take-up of the tax credits will rise. The increase in the take-up of the family credit is another reason why the Chancellor's policy in 1999 was a mistake. He had something that was becoming widely understood, and the take-up of family credit was up to 91 per cent. However, instead of sticking with the credit, he believed in a year-zero fallacy. Labour Members believed that nothing had happened before 1997 unless it was terrible.

The Chancellor could not bring himself to say that the incomes of people in low-paid jobs had already been boosted by family credit and that he wished to put more money into it. He had to pretend that there was no help for low-paid families before 1997, and that is why he had to have a new benefit with a new name so that he could write family credit out of history. That is part of what he did, and the losers are those who have suffered from the catastrophic fall in take-up. I hope that the take-up of the Chancellor's new tax credits will rise. However, the chances of the take-up of the new working tax credit becoming high are pretty slim. Let us hope that he achieves a high level of take-up.

I am trying to argue that the problem is not a one-off. I am arguing that exactly the same can be seen with productivity—the other thing with which the Chancellor is preoccupied. His record on productivity is exactly the same as with all his credits—endless initiatives, with the aim of improving the productivity of the British economy.

As with the attempt to reduce child poverty, it would also be a very good thing if our economy's productivity were to increase. We would like productivity to improve, and in every Budget—this one is no exception—we see a long list of specific measures that are supposed to improve the productivity of the British economy. Meanwhile, what happens to its productivity? The answer is that it is somewhere around average and, if anything, its performance is declining compared with our historical record of the past few years.

The Chancellor's measures to increase productivity are having no effect whatsoever on productivity. Given that we as a country spend rather more on information technology and have been at the head of its introduction—ahead of many countries in euroland—we would expect, other things being equal, our productivity performance to exceed theirs. In fact, our productivity performance is roughly similar to the European average, despite unusually high spending on IT, suggesting that we are significantly underperforming in all other respects. So we have exactly the same phenomenon—we have endless fiddling, tinkering interventions, with no impact on the thing that the Chancellor claims he is trying to address.

The pattern with this Chancellor is that he is best at the things in which he is not interested. His biggest single triumph as Chancellor was to take his hands off monetary policy and give independence to the central bank. [Interruption.] Yes, we now recognise that that has been a great success. We support it and believe that it has significantly improved the conduct of British macroeconomic policy. The Chancellor's giving the conduct of monetary policy to an independent central bank has worked. Since then, however, he has put his restless intellectual energies and those of his Department into other objectives—productivity and the tax credits—and that is where he is failing to deliver. He is best at the things that he gives to others and worst at the things that he insists on fiddling with himself.

Mr. Steve Webb (Northavon)

For the record, will the hon. Gentleman remind the House of which of the three main parties included the independence of the central bank in its 1997 manifesto?

Mr. Willetts

I thought that there were only two main parties. I presume from the hon. Gentleman's leading question that perhaps the party that he represents advocated an independent central bank. My right hon. Friend the Member for Fylde (Mr. Jack) is in his place, and he will know that we had already made progress towards that policy before 1997. Nevertheless, it has been a great success, but if the Chancellor looks at his table on long-term interest rates, he will clearly see that those rates were already falling in the mid-1990s, as we gave greater operational independence to the Bank of England.

I will not cavil, however. We welcome the achievement of the independent central bank, but the Chancellor should not then have started to fiddle with other things instead. The more attention a policy gets, the less successful its delivery. That is the tragedy of his chancellorship. We would like the Chancellor or the Secretary of State to tell us about some of the other things about which they promised they would be radical, but on which the Budget was almost completely silent.

What has happened to the savings gateway and the child trust fund? We were told that that was the transforming idea for this Parliament and that it would change the nature of the welfare state. Needless to say—this is typical of the Government—there are three pilot projects in obscure parts of the country, with a report due in two or three years. The Government got their headlines during the last election campaign by promising radical delivery of that policy, but absolutely nothing has happened.

What about pensions? In the past few months, there has been a catastrophic decline in people's prospects of enjoying an income from their funded pensions when they retire, as one company scheme after another has closed to new members. That is a direct consequence of the decision that the Chancellor took in his 1997 Budget to impose a new tax on pension funds. What does he have to say about that in his Red Book? He says that the Government is concerned that a number of employers have taken the opportunity to reduce their pension contributions. He can say that again.

The prospect of millions more people being dependent on means-tested benefits in future as a result of the closure of their final salary pension schemes is the most important single change currently taking place that will affect the Department for Work and Pensions, so the Government's being concerned is really not good enough. I hope that the Secretary of State will attempt in his speech to say what the Government will do about that very serious problem.

The Conservative party has been open-minded about the reform of health care. The Chancellor's Budget statement, the Red Book and today's statement make it clear that the Government have a closed mind. They do not believe that we can learn from the continent of Europe how to organise health care in future. I think that we can learn from Europe. The Budget represents a missed opportunity, and the reason why the Opposition will not support the Budget tax increases in the Divisions on Tuesday is very simple.

The Chancellor looks to the continent of Europe when it comes to increasing the tax burden, regulating the labour market and imposing new burdens on business. In other words, he copies the worst aspects of the continental European model. However, when it comes to how health care systems are organised in continental Europe and how those systems ensure the mixed financing of health care, which clearly works and is a success story, he closes his mind and rules out options that can be developed by learning from how things are done on the continent. He has got things exactly the wrong way around. He should learn from the things on the continent that work, not from the things there that do not work. That is why we oppose the Budget.

2.56 pm

The Secretary of State for Work and Pensions (Mr. Alistair Darling)

Talking of continental Europe, I understand that the shadow Secretary of State for Work and Pensions is going to Germany tomorrow to address his sister party on the revival of conservatism. One cannot help but have a great deal of sympathy for the audience that he will address. I hope that what he has to say tomorrow will be rather more illuminating than what he had to say about the Budget this afternoon. I am sure that his audience will be absolutely fascinated by his critique of the wiring of the Child Support Agency computer system and by the fact that his mind has gone completely blank in relation to what happened to poverty 10 years ago, when he was advising the then Conservative Government.

Had the man from Mars arrived in the Chamber this afternoon, he would have been forgiven for not believing that this is the first day of four-day Budget debate, not least because the shadow Chancellor is not even in the Chamber—let alone opening the debate, as used to be the case on such occasions. The shadow Secretary of State certainly could not be accused of concentrating on the big picture. He had precious little to say about health. In particular, he could not tell us whether the Conservative party proposed to match the increased funding that we announced yesterday. He could not tell us whether he believed that we should spend more or less on the fight against poverty and helping families with children. He had absolutely nothing to say on the economy—which, after all, ought to be central to any Budget debate.

One of the key differences between this debate and the Budget debates that we used to have years ago is that my right hon. Friend the Chancellor set out his Budget proposals yesterday from a position of almost unprecedented strength and stability in the British economy. Five years ago and in successive Budgets, we set a course for stability in the economy not just for one or two years, but for the long term. We took the necessary tough decisions right at the start of that Parliament, and we took more necessary decisions yesterday.

It is interesting that the shadow Secretary of State gave us credit for one policy—giving independence to the Bank of England. As he rightly said, that has been one of the principal ingredients in building that long-term economic stability. The hon. Gentleman then had the gall to say that the Conservatives were secretly in favour of that policy and were working towards something that we always thought they opposed. That casts new light on what was going on in the Treasury when they were in government: they were making steady progress towards something that they said on every occasion they were against.

Indeed, the only time that I ever heard Conservative politicians say that they were in favour of an independent Bank of England was when a Chancellor left office. When they made their resignation speeches, they said that they were in favour of something that they had always said they opposed. Perhaps that explains why 10 years ago to this very year, the Conservative Government presided over a catastrophic mess in the economy, which largely contributed to their defeat four years later.

Sir Michael Spicer (West Worcestershire)

rose—

Mr. Darling

I shall now give way to somebody else to whom Labour Members owe a great deal, because he, too, contributed substantially to his party's defeat five years ago.

Sir Michael Spicer

On the Monetary Policy Committee and the independence of the central bank, is it not the case that, if that has been a success, one reason is that the Government have been protected from their own Back Benchers when they have pressed the Government to break the inflation target? When I was on the Treasury Committee, we were constantly faced with Labour Members trying to get the Government to break the inflation target. Is it not right that the reason why the Government have not is that they are hiding behind the Monetary Policy Committee?

Mr. Darling

The hon. Gentleman knows a thing or two about the trouble that Back Benchers can cause their Government. If the last Prime Minister were here, he would have something to say about the hon. Gentleman; indeed, my recollection is that he had a very unparliamentary term for the hon. Gentleman and some of his colleagues.

We gave the bank independence, which helped to produce stability, low interest rates and lower mortgage rates, but we have introduced other important policies. The latest figures show that 1.5 million more people are in employment, which is a significant achievement when the House remembers that in the mid-1980s more than 300,000 young people were on the dole for over a year; today's figure is about 4,500, which is a measure of how far we have travelled and the changes that we have made. It is not just about the monetary decisions we have made, but about the other decisions that the Chancellor has made.

Yesterday, building on that strength and stability, the Chancellor outlined the three challenges facing us: encouraging enterprise; taking the next steps to end child poverty and providing more support for families with children, as well as making work pay; and building on our investment in public services, especially the health service, to which I shall return shortly.

Mr. Michael Jack (Fylde)

Will the right hon. Gentleman give way?

Mr. Darling

I want to deal with the steps that we have taken over the past five years to achieve our goals, but before doing so, I shall give way to the right hon. Member for Fylde (Mr. Jack) who, I recall, spent many happy years in the Treasury secretly working towards the independence of the Bank of England.

Mr. Jack

May I refresh the right hon. Gentleman's memory? The British economy has been growing for the past 10 years—five years under the Labour Government, and five under the Conservative Government. Yesterday, the present Government reaffirmed the 2.5 inflation target which we set and worked towards. We strengthened public finances, admittedly after a period of economic difficulty resulting from a cyclical downturn. Will the Secretary of State at least acknowledge that under the chancellorship of my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke), the foundations for the strength of the British economy were put in place?

Mr. Darling

I know that the right hon. Gentleman is a great supporter and admirer of the right hon. and learned Member for Rushcliffe (Mr. Clarke), if not his predecessors. He referred to economic difficulties; they could also be characterised as two of the longest and deepest recessions of the last century. In the five years since we came to office there have been two economic downturns, the most recent caused by what happened in the United States last year. The key difference between Britain now and Britain in the past, not just under the right hon. Gentleman's Government, to be fair, but under Labour Governments as well, is that we could weather those downturns because we took steps to ensure that we have a fundamentally strong economy.

I dare say that, later in our debate, the good professor will bleat about what we ought to have been done in the first two years of the last Parliament. However, because we made a difficult and tough decision to stick to the spending totals that we inherited, we were able to repay huge amounts of debt to put the economy in a much stronger position. That is the key difference between what we have done in the past five years under the stewardship of my right hon. Friend the Chancellor and the miserable rollercoaster regime of the last Government, of whom the right hon. Member for Fylde was a member.

We established stability; building on it, we have been able to switch spending to our priorities. In addition, because we have cut debt and unemployment, we have been able to release resources to spend on public services and help families and pensioners, which simply did not happen in the past. It is worth remembering that as a result of the reduction in debt interest payments, we have released £8 billion and saved almost £5 billion in unemployment costs because we have been able to help more people into work. By cutting debt and unemployment, we have been able to tackle the backlog of under-investment that we inherited.

All that has been going on for the past five years. Yesterday, my right hon. Friend the Chancellor set out the way in which we can build on that work, setting out both the money that is now available for the next spending review period and, critically, plans to put more money into the health service, which everyone agrees is necessary.

Several hon. Members

rose—

Mr. Darling

Before I deal with what we are doing to get people into work, I happily give way to my hon. Friend the Member for Falkirk, East (Mr. Connarty).

Mr. Connarty

My right hon. Friend may cover the point I wish to make when he talks about work. The Opposition gave money away to their friends when they privatised the utilities, but we took it back to create the new deal and put people back into work. They looked after the few, but we looked after the many, which is why we have the reward of so much employment while they had so much unemployment.

Jonathan Shaw (Chatham and Aylesford)

But they were thinking about doing what we did.

Mr. Darling

My hon. Friend the Member for Falkirk, East is right, but my hon. Friend the Member for Chatham and Aylesford (Jonathan Shaw) is also right: we do not have the slightest doubt that the hon. Member for Havant will maintain that the Conservatives were secretly working towards a windfall tax on the utilities, but never got round to telling us that that was their policy.

It is worth reflecting that the figures from my right hon. Friend the Minister for Work show that the number of people in work has reached a new high of more than 28 million. Last month saw the third consecutive monthly fall in the number of people claiming unemployment benefit. I have never sought to make too much of one month or even a short run of favourable figures but, bearing in mind the dire predictions last autumn, particularly by the shadow Chancellor, whose judgment on this is as flawed as it is on other subjects, it is a significant achievement that, because of the strength of the economy, we have got more people into work.

Despite that, however, we must do much more; many people are still not in work, but ought to be. A key step in the Budget is to make sure that we break down the barriers that prevent people from getting work; in particular, we must make work pay. The Budget will be remembered for a significant and major change in tax and benefit policy. For years, people have argued and campaigned for the integration of the tax and benefit system; we are starting that process with the working tax credit and the child tax credit, which the Chancellor announced yesterday. The Budget builds on the measures that we have already taken to make work pay; it supports children, whether their parents are in or out of work; it tackles child poverty; and it ensures, critically, that the tax and benefit system helps people when they most need it—for example, when they first start work or are looking after young children.

It is important that the House realises the difference that the Budget makes; perhaps the few Opposition Members present can tell their colleagues about that difference, because it will be directly relevant when they come to knock on their constituents' doors in a few years' time. The working tax credit, which helps single earners with wages of up to £10,500 a year and couples with incomes of up to £14,000 a year, provides significant assistance in ensuring that people without children, as well as people with children, realise that getting into work will result in a big difference to the money in their pocket. As the Chancellor said yesterday, the child tax credit will help families with incomes of up to £58,000; it will make a real difference by reducing the amount that many individuals pay in tax and will help many people.

Our central economic objective is to get more people into work, as that is the best way of getting people out of poverty and opening doors for them that would otherwise remain closed. As a result of the new deal and other measures we made work possible, but we still had to do more to make sure that we tackled a problem in the welfare system that we inherited—making sure that it is worth while to take up a job. Over the past five years, we have introduced measures such as the minimum wage and the working families tax credit, all of which were opposed by the Conservatives. It is pretty clear from what the hon. Member for Havant said that they are still against those measures, and will remain so.

The Budget takes those measures a step further. It will make work pay significantly more than benefits and it extends the help already available to families with children to all single people and couples on low incomes. From next April the working tax credit will provide extra help for people over the age of 25. For example, for a couple with no children it will pay at least £183 a week—that is £53 more than at present. For a single disabled person, it will pay £22 more than now. A lone parent working full-time will be guaranteed £237 a week, as well as help with child care, making work pay £70 more than income support.

That will make a real difference—something that never happened in the 18 years during which the hon. Member for Havant supported the Government or advised them behind the scenes, no doubt working secretly towards a policy of giving more to people when they got into work. Perhaps I will go to Germany tomorrow to see what else he was working towards but not telling us.

It is critical, as we have always said, that new rights are matched by new responsibilities. We announced previously that as we extend the new Jobcentre Plus network across the country, we will require everybody of working age on benefit to come in for work-focused interviews. There will be more conditions attached to the receipt of benefit, because we believe that it is only right that if we offer more assistance to get into work, people ought at the very least to know about it, and an increasing number of people will be required to do something actively to help themselves become independent. Last autumn I announced the new StepUp programme, which will start later this month in six areas and will be extended to 20 areas by the end of this year.

We have found that where we require as a matter of course that people go on a two-week gateway in preparation for going on the new deal, there is a better chance of them getting into work, so we will extend that on a compulsory basis not just in central London, but to Manchester, Swansea and Dundee. It is extra help with more responsibility, and it works.

We are also tackling a problem with which all hon. Members are familiar: older people who are continually drifting in and out of work. Because people cannot join the current new deal if they have been out of work for 18 months, many people miss out. Now, if they have been unemployed in any 18 of the past 36 months, they can join the new deal for the over-25s. Again, that is valued help and the evidence is that it works.

Jim Knight (South Dorset)

Can my right hon. Friend confirm that the measure will also help seasonal workers? There are many in my constituency in the seaside towns of Swanage and Weymouth who go into employment during the summer when work is available in the tourism industry and then leave it in the winter. They fall out of many of the statistics and certainly out of eligibility for the new deal. Will the new measure make them eligible for such help?

Mr. Darling

Those are precisely the people about whom we are concerned. Until now, because they came in and out of work, there was never a long enough period for us to help them. I cannot tell my hon. Friend when the programme will be extended to his constituency, but the preliminary evidence is that it works and we want to extend it.

As the Chancellor said yesterday, I shall shortly announce a national campaign with employers and others to help get more lone parents into work. I am convinced that we can do far better to get more lone parents into work. For obvious reasons, they are often much more motivated than others to get into work, and we are offering them more help and support. It is worth bearing in mind the fact that because of the interventions that we introduced, there are well over 100,000 fewer lone parents on income support than there were when we came into office.

By building on stability, setting our priorities and cutting unemployment, we have been able to do more not just to make the country more economically efficient, but to make it a fairer country where more people can participate and get on. Sadly, the previous Government not only neglected that, but in many cases virulently opposed it.

Jonathan Shaw

Does my right hon. Friend agree that one aspect of people taking part and being treated fairly is that they have some protection in work? There have been 400 additional union agreements with employers this year, and we should be pleased about that. Working in partnership means that people have some sort of protection. I do not believe that the Opposition thought about that when they were in government.

Mr. Darling

The Opposition were never too hot on looking after people who worked. They were the party which said, for example, that the minimum wage would cost 1 million jobs. The shadow Chancellor said that, and he has a rocky record on reliability. He was wrong on that, and my hon. Friend's comments are right.

I turn to the measures that we announced yesterday to help families and children and the progress that we are making towards ending child poverty. It is an awful pity that although my hon. Friend the Member for Stalybridge and Hyde (James Purnell) asked the hon. Member for Havant a number of times—having given him notice of the question three weeks ago—the hon. Gentleman's mind was blank about what happened when he was the principal adviser to the Conservative party on these matters some 10 years ago.

It is worth reflecting that in total, following all the personal tax and benefit changes that we have introduced since 1997—

Mr. Deputy Speaker

Order. May I remind the right hon. Gentleman that he should address the Chair?

Mr. Darling

I shall address you with great pleasure, Mr. Deputy Speaker. I was about to tell you of the good things that we have done since 1997. Following the changes that we have made, families with children will be on average £1,200 a year better off after inflation, and the poorest 20 per cent. of families will be on average £2,400 a year better off after inflation. That is a measure of how much we have done in five years.

Mr. Ernie Ross (Dundee, West)

My right hon. Friend will recall that when he spoke to the all-party group on poverty at the end of February, he promised that a consultation document would be issued shortly on how the Government measure child poverty. Can he say more about that?

Mr. Darling

Yes, I can. The hon. Member for Havant mentioned the document that we published. He had the decency to say that he had not read it, before going on to denounce its conclusions.

For the past three years the Government have published in their "Opportunity for All" series three separate measures of poverty—absolute poverty, persistent levels of poverty and relative poverty. We also set out measures of deprivation in relation to education, health and so on. All of them are important.

Over the past year or so, academics and others have asked whether we would consider measuring poverty in different ways, as is the case in other countries. Indeed, the hon. Member for Havant said that we should go to other countries with open minds to see what is on offer. That is precisely what we are doing. When he is travelling round Europe looking at health systems, perhaps he should also look at the way in which poverty is measured there.

We are setting out in clear terms what we have done and possible alternative ways of measuring poverty, many of which owe much to Professor John Hills of the London School of Economics. The Government are neutral on whether or not we change the measures that we use. We have an open mind. We are consulting and we will hear what people have to say. One thing is important, however. On any measure whatsoever, child poverty in this country is coming down. The Conservatives could never say that.

It is obvious, especially in respect of relative poverty, that as a result of what we are doing, even at a time when the country's wealth is growing spectacularly, we are narrowing the gap between the richest and the poorest in the country. That is a measure of how much we are doing. The child tax credit which comes in next year will for the first time provide a single system of income-related support for families and children. That in itself will make a major contribution towards the eradication of child poverty.

Mr. Willetts

rose—

Mr. Darling

I dare say that all the time—and I did not know it!—the hon. Gentleman was working towards an anti-poverty strategy. Let us hear all about it.

Mr. Willetts

I have a simple question for the Secretary of State. I look forward to reading his paper. Of course there are many ways of measuring child poverty, but we need an assurance that the target which he, the Chancellor and the Prime Minister set of taking 1 million children out of poverty and eliminating child poverty using the measure of 60 per cent. of median income still stands. The right hon. Gentleman can measure poverty in many different ways, but his target was formulated in terms of 60 per cent. of median income. Does he stand by that target?

Mr. Darling

The target that we set was to eradicate child poverty within a generation, and by 2004 to be a quarter of the way towards that. The public service agreement target is in place and we will stick to it. I am happy to tell the hon. Gentleman that we are about a third of the way towards meeting it in time, and about a third of the way along in terms of the number of children removed from poverty. I thank him very much for raising that point; I much appreciate it.

Mr. Willetts

rose—

Mr. Darling

I have answered the hon. Gentleman. He asked me about the PSA target, and I said that we were sticking to it. [Interruption.] I shall give way to the hon. Gentleman shortly, but I want to make some progress. I am very conscious that he overstayed his welcome; I do not want to do the same.

Let me return to the child tax credit. One of the big differences that it makes is that, for the first time, the tax system will recognise parents' obligations towards their children and the new demands that they bring. It allows parents to get help when they need it most and to take a break from their work without the catastrophic drop in income that they might otherwise have suffered. It treats families equitably. Alongside child benefit, on which it builds, the child tax credit provides support to families with incomes of up to £58,000, paid to the main carer. Some 90 per cent. of families will benefit, and many Budget commentators have noted the great effect that the policy has on so many families. Despite yesterday's national insurance increase, many families will gain from substantial reductions in the amount that they pay because of its implementation.

To pave the way towards the more generous credit, we will increase the child allowances in income support and jobseeker's allowance by £3.50 a week from October this year. That will mean that the amount paid to parents on income support to help them support their children will have gone up by 85 per cent. since 1997. We are also introducing other measures such as the extension of support for child care costs to help with approved child care in people's homes. That will particularly help people on shift work, who have had difficulties in the past.

All in all, we are introducing measures that will make a great deal of difference to many people and families in this country. Every single measure is opposed by the Conservative party. I listened to what the hon. Member for Havant had to say about these measures, but it returned us to the same problem that the Conservatives have with health. What they are against is spending more money, whether on health, tackling poverty or supporting families. I have considered the hon. Gentleman's argument; indeed, he has produced the same one month after month, so I can assure hon. Members who do not usually attend such debates that they get no better. He has a familiar style and always returns to the same point: he is against complexity. However, he has had to admit, as even the professor who speaks for the Liberals admits, that no matter what happens, support must be provided for people on low incomes. Inevitably, that means making some sort of assessment of people's need and income, but when it comes down to it, the Conservatives are against the fact that we are spending more money. When they say that they want a simpler system, they really mean that they want a meaner one. The hon. Gentleman kept mentioning family credit, hut when we consider the family credit system to which he is so attached, we see that it is far from simple. Like the basic state pension, people think that it is simple, but it is complex when it is considered in detail.

When the Government came to office, lone parents were receiving an average of about £58 a week from family credit. By November last year, after the introduction of the working families tax credit, they were getting an average of more than £88 a week—£30 a week more. The amount will increase again as a result of the Budget. That is what upsets the Conservatives: the fact that we are spending more money.

So the argument is not about whether to help families on low and modest incomes, but about the level at which that help is set. There is nothing complex about that, as the hon. Member for Havant will find out when he knocks on doors at the next election. Even if he cannot do the maths, he will find that the voters can, just as he found when he proposed the abolition of the winter fuel payment, on which I seem to remember that the maths was also straightforward. Opposition Members need to focus on this point: for families with an income of less than £50,000 a year, the child tax credit will guarantee support for a first child of £26.50 a week, compared with only £11 in 1997. For families with an income of less than £13,000, it will guarantee an income of £54.25 a week, whether the parents are in or out of work. That is almost double the help that was available in 1997; it is about £28 a week more.

Even if the Conservatives cannot do the maths, families can. So too can pensioners, about whom the hon. Gentleman's argument is exactly the same. He is against the fact that the pension credit, which will take effect next year, will benefit about half of all pensioners. On average, it will give pensioner households about £400 a year. If the hon. Gentleman is against that, it is fine by me, but he will have some explaining to do. Not only are pensioners who pay tax not affected by the national insurance changes announced yesterday, but as their tax allowances are increasing above inflation next year, we will take a further 170,000 of them out of tax all together.

I find it very surprising that the hon. Gentleman had so little to say about health, especially as his party has had quite a lot to say—and very illuminating it has been, although unintentionally so.

The Chancellor of the Exchequer (Mr. Gordon Brown)

Perhaps he will be talking about it in Germany.

Mr. Darling

As my right hon. Friend says, that might be what the Germans are getting tomorrow.

We have heard the Conservatives set out exactly the same approach on health that the hon. Gentleman has set out on families and pensions. They use exactly the same strategy: they rubbish the extra investment, say that it is impossible to do anything and then argue for cutting the money. The Conservative health spokesman said at a private meeting—it is a shame that he did not make the remark at a public meeting, but fortunately, somebody has made it public for us—that the Conservatives' strategy is to persuade people that the health service will not and cannot work, and then to argue that people should pay for their own health care in what he calls "self-pay". We can be clear what "self-pay" is, as the BUPA price list is on the internet and bears close examination, especially for people who will not get health insurance easily and would have to pay through the nose. The good doctor also said that he wanted to reduce public spending and that the most difficult part was to argue the Conservative alternative. He is not the only one. When I appeared on last night's "Newsnight", I saw that the shadow Chancellor was in some difficulty when he was asked about the Conservative alternative. After 18 years in government and five in opposition, he still does not know what the Conservative policy on health is.

Surely the central point is that there is cross-party consensus about the fact that the health service needs more money. Yet the Opposition cannot say whether they would spend the same as us, or more or less than us. The question is fairly simple. We have said how much we think should be spent on the health service in the next five years, but the Conservatives cannot say whether they would match it.

Helen Jones (Warrington, North)

Does my right hon. Friend agree that the Conservatives' difficulty stems from their deep hostility to the provision of public services? Far from seeing public services as a way of liberating and supporting individuals, they have always seen them as a burden, which is why they are so reluctant to pay for them.

Mr. Darling

The shadow Chancellor may secretly be working towards the same policy as ours. Perhaps that will be revealed on some suitable occasion. Many Conservatives have had an ideological objection to the national health service since it got going.

Mr. John Bercow (Buckingham)

No.

Mr. Darling

Come on; not even the hon. Gentleman can persuade me of that.

Mr. Bercow

I have used it for more than 30 years.

Mr. Darling

The hon. Gentleman would probably have used anything that he could have got his hands on all his life, but that still does not tell me that he is philosophically attracted to it.

People's ability to use the health service freely and on the basis of need is not only a question of social justice. It also makes economic sense. I can understand the Conservatives' aversion to equality or some sorts of fairness, but it does not make economic sense to take the route that they now appear to be taking. There is a consensus that more money needs to be spent, and there are two sources from which it can be obtained.

Mr. Jack

Will the Secretary of State give way?

Mr. Darling

One moment; the right hon. Gentleman may wish to comment on this point, as he probably comes from the other wing of the Conservative party.

There are two sources of money, one of which is taxation. We have made it very clear that that is the best and fairest way of raising the money that our health service needs. The alternative is fees and charges. People can get insurance, but fees and charges would remain.

The Conservatives will have to face up to a problem as they travel around the world in search of a solution. They might want to fly to the United States to see what is on offer there. The Americans have a system of private insurance, and the average family insurance premium for the health service is about £100 a week. Problems would soon arise if we took that route. One does not have to go far in the United States before meeting people who say, "If you are very poor, you have Medicare; if you are fairly well off and in a company scheme, your company provides your health insurance"—that is a cost on the company, of course—"but if you lose your job you often lose your health insurance." Americans who are on the equivalent of our welfare-to-work programmes often say, "I'd love to go to work, but I'm terrified about health care for my children." Very many Americans are not covered, so they do not have health care. If that is what the Tories want, let them tell us, because that is the choice—taxation or the American style.

Despite everything that the Conservatives have led us to believe, they appear to have a new-found attraction to matters European, so why do not they take a day trip on the Eurostar to France? If they want social insurance, let them look at its cost. It costs French employers about £60 a week per employee. That is the reality of social insurance. Opting for what the shadow Health Secretary calls self-pay would mean that the sick pay for being sick.

There is a respectable argument to be had about this, so if the Conservatives want a debate, let them set out their policy. We believe that taxation is the fairest and the best way to fund the health service; they believe that it should be based on fees and charges. Whereas the shadow Chancellor says that he has not yet made up his mind and the hon. Member for Havant is vague, the shadow Health Secretary has made his view very clear: he has said in terms that he wants self-pay and that the great untapped market in Britain is health insurance.

If we are to have this great debate, I ask Conservative Members this. Under the Tory scheme, who pays, how much will they pay, and what will happen if they cannot? Until the Tories answer those questions, their credibility on this matter will be absolutely zero. In many people's eyes they have always been suspect on the health service, but if they cannot tell us who pays, how much they will pay and what happens if they cannot, people will have every right to believe, and to be fearful, that if the Conservatives got back into power the health service would be anything but safe in their hands.

Mr. Jack

May I take the Secretary of State back to the previous passage of his argument? Does he agree that the formulation of health policy is difficult? The Government's track record is as follows: first, accept Conservative plans; then, change through the 10-year NHS plan; and now, the Wanless plan. The Government have been in office for five years and have had three goes at trying to design a health care policy, and we still do not know whether it is correct. Is this not a complex and difficult matter?

Mr. Darling

Some aspects of health care are extremely complex and many decisions are difficult—I grant the right hon. Gentleman that—but the decision on whether to fund the health service from taxation or to make people pay through fees and charges is pretty simple: one has to choose between one or the other. No amount of travelling to Europe, the United States, or anywhere else in the world will solve the Conservatives' problem. They will have to answer the question. If they believe not in funding the health service through taxation, but in self-pay—as the shadow Health Secretary explicitly said—they must tell us who pays, how much, and what happens if they cannot. If they cannot do that, they are in real difficulty.

Mr. Michael Weir (Angus)

rose—

Mr. Edward Davey (Kingston and Surbiton)

Will the Secretary of State give way?

Mr. Darling

The idea that the Liberals have the answer is laughable.

I shall give way to both hon. Members, then move to a swift conclusion before I outstay my welcome.

Mr. Weir

The public funding of the health service is probably one of the few things about which I would agree with the Secretary of State. I want to add to the questions that he asked of Conservative Members. Under their proposed system, what would happen to those who are already long-term ill or disabled and cannot get health insurance at a reasonable cost?

Mr. Darling

The hon. Gentleman makes a good point. Anyone who examines the small print of a private health insurance document will note that it seems absolutely great until one becomes ill or old. Today I asked someone to look on the Internet at three of the main private health insurers' prospectuses. They all quote prices, but all have asterisks and footnotes saying, "If you are over the age of 60, you need to write separately and we will give you different rates."

The hon. Gentleman is probably right that this is the only thing that we agree about, but I am sure that he will acknowledge that one of the reasons why we have been able to increase health spending in Scotland by so much is that it is part of the United Kingdom, which has a Labour Government.

Mr. Davey

As the Secretary of State knows, the Liberal Democrats and the Labour party agree that the health service should be paid for primarily through taxation. Can he explain how years four and five of the health service spending increases announced by the Chancellor yesterday will be paid for? Will they require any extra taxation?

Mr. Darling

If the hon. Gentleman looks at table C5 in the Red Book, that will all be explained to him. When it comes to giving us lectures on public spending, I remind the hon. Gentleman of what the Prime Minister said to his leader yesterday. The Liberal Democrats have commitments that would fill this Chamber three times over, all to by financed by 1p on income tax.

The differences between the two major parties are very clear. We have set out a clear course for building economic stability and for increasing investment in our public services. We will ensure that we do more to fight poverty and to help families with children; pensioners; and, in particular, the health service. We have clear, published plans that work, compared with a Conservative party that is increasingly evasive about its real intentions. Frankly, until the Conservatives are prepared to be straight about how much more or less they would spend and what their charging policy on the health service would be, they will have very little credibility.

I believe that the people of this country will trust our judgment and our belief in fairness and enterprise far more than they are tempted by the Conservative alternative. I commend the Budget to the House.

3.36 pm

Mr. Steve Webb (Northavon)

When our constituents see Prime Minister's questions, they often ask us, "Why do you lot always shout at each other and why are you always disagreeing? When you agree with someone, why don't you say so?" I therefore want to begin my remarks on behalf of the Liberal Democrats by saying that there are significant elements of the Budget that we welcome and agree with.

We very much welcome, and indeed had called for, the increased spending on the health service—a key issue in the Budget that I shall return to later.

On the specific areas for which the Secretary of State for Work and Pensions is responsible, we welcome several of the changes to the children's tax credit arrangements which were announced yesterday. We welcome the fact that the difference between support for children whose parents are out of work and for those whose parents are in work has been levelled up. We particularly welcome the fact that that takes effect from October, as there was no requirement on the Government to do that—they could have started from April 2003, so it will be six months early.

I welcome the fact that the threshold at which support runs out altogether has risen from £42,000 to £58,000. Like several other hon. Members, I should perhaps declare an interest. So generous is the child tax credit that from April 2003 I will be entitled to it. It does make me start to wonder what is going on when even I start to be entitled to additional tapered support with the costs of my children. Nevertheless, raising that threshold has prevented some two-earner families from losing out.

I welcome the fact that the Government are addressing child care in one's own home, which will benefit people with irregular working patterns, among others.

Those are welcome, desirable changes, and it is important to put that on the record.

Lest my hon. Friends become too nervous and start drifting out of the Chamber more rapidly than they otherwise would, I should say that we have some important concerns to raise with the Secretary of State. On the child tax credit, it is not correct to say that the change that the Chancellor announced has avoided creating losers. I shall use the example of a professional couple who are both on £30,000 a year—say, senior public service workers such as a teacher and a nurse who have made some progress in their professions. At present, they get the full tax credit, which will be about £540 next year. From next year, when they have to add their incomes together, they will get nothing at all. In addition to the £300 or so each of additional national insurance, they will lose a £500 tax credit, so they will be £1,000 worse off overall.

If a scheme were defined from scratch, it is debatable whether it would provide for couples with a combined income of £60,000 to receive a means-tested version of support. That would be odd. However, they have been given the money. A few years ago, the married couples allowance was taken from them; a year later, they were given the children's tax credit to replace it. Two years later, in one fell swoop, they will lose £500 pounds on top of national insurance increases.

My colleagues and I sympathise with the view that direct taxation had to increase to pay for the health service. Although we would have used a different method, the national insurance rise is not an unreasonable way to finance the increases. However, removing a lump sum of £500 from hard-working families, some of whom work in the public services, is a swingeing loss on top of other tax rises.

Will the Secretary of State reflect on the fact that those families have got used to having the £500, which will be taken from them overnight next April, and consider a transitional arrangement whereby families who have already benefited from the tax credit can retain it? Obviously, new families will not be entitled to it, but should not existing families have some protection? A tax rise of £1,000 in one go is substantial, and the Treasury should think again.

The Secretary of State used the phrase "making work pay". The Government constantly suggest that work always pays, but there is an exception that they have failed to tackle. Owner-occupiers who do not work can get their mortgage paid through income support, or whatever it will be called, or private insurance. When they take a job—of 16 hours a week under income support rules—they lose every penny of mortgage assistance. Perhaps the Secretary of State or the Financial Secretary can tell us whether work pays for families in that position.

Mortgages are a substantial part of the household budget, and if people lose all support when they take a low-paid job they can be worse off. The Government fail to grasp the nettle of housing costs. They have postponed reform on housing benefit, but, if anything, they have allowed private insurance to play a bigger role in providing help for people with mortgages.

I stress to the Financial Secretary that successive Governments have imagined that pushing mortgage support into the private market relieves the state of a burden. However, it creates a deeper unemployment trap. I know of constituents who have private mortgage insurance and cannot touch work because private insurers are even fussier than the Department for Work and Pensions. When anyone takes a job, all support stops and it cannot be given again. I hope that the Treasury will consider that new unemployment trap, which will become worse if, for example, house prices start to fall from their peak and there is negative equity. If unemployment rises by even a little, people who are increasingly likely to have private insurance will find that working does not pay. They are an important and growing group, which are excepted from the Government's goals.

If the Government had come clean about child poverty, we might have supported them and said, "Well done." On any definition, taking 500,000 people out of poverty is an achievement of which to be proud. However, we are disappointed, to put it charitably, by the way in which the Government have handled the matter. Instead of admitting that they promised to take 1 million children out of poverty but that they have barely done half the job, they tried to fiddle the figures.

On "Newsnight" recently, the Secretary of State said that when the Government claimed they would take 1 million children out of poverty, they meant that some children might fall into poverty if they took no action; that had not happened, so that accounted for some of the children. Politicians are mocked enough for breaking promises. If the Secretary of State says that he will take 1 million children out of poverty, one imagines that he means 1 million children who are currently in poverty. That is not an unreasonable assumption.

The hon. Member for Havant (Mr. Willetts) tried to intervene when the Secretary of State made his confession. He said that the first goal was to take 1.1 million out of poverty by 2004 and that the Government were a third of the way there in time and in numbers. The same Secretary of State sat in the "Newsnight" studio and claimed that the Government had achieved their goal of getting 1 million children out of poverty. The Chancellor made the same claim during the general election campaign. The Secretary of State has now admitted on the record that the Government are a third of the way towards getting 1 million children out of poverty. Who was right—the Chancellor in the general election campaign or the Secretary of State today? I know of old that when the Secretary of State engages in fevered conversation with a ministerial neighbour, he is uncomfortable.

There is a serious debate to be held about child poverty. As the Secretary of State said, a report has been commissioned, inviting comments on how the Government should measure child poverty. It was published in good time for our debate this afternoon. It would be disrespectful to the hon. Member for Havant to suggest that I had leafed through it during his contribution. I therefore speculate on its contents. I shall be charitable, as is my wont, towards the Government, and assume that the wider debate about defining poverty is the sort of discussion that I called for when they published the figures last week, rather than an attempt to get off the hook about missing their original target. I shall assume that they will retain the target and be judged against it. In that context, I welcome the document.

If we are to have a popular front against child poverty, we must do it in a way that folk can grasp, not through percentages of medians below thresholds.

James Purnell

I confirm that the hon. Gentleman welcomed the figures because I heard him speak at the End Child Poverty Campaign meeting last week. He said he believed that different methods of examining figures should be used. However, I am not clear from that meeting or his comments today whether he supports the child tax credit or whether he is worried about the means-testing involved, as he said last week.

Mr. Webb

If the hon. Gentleman consults the record, he will discover that I led for the Liberal Democrat party in the debate on the children's tax credit and that we voted for it. There is no ambiguity about that.

Mr. Willetts

I think that the hon. Gentleman means the child tax credit.

Mr. Webb

I do. The hon. Gentleman is right; I got the name wrong, as did the Secretary of State on several occasions. That probably proves a point.

Perhaps the Secretary of State would be so kind as to record my comments as representation No. 1 in response to his consultation paper. I believe that we should have a measure of child poverty that permits headline figures, not 50 indicators. The "Opportunity for All" approach and the thick documents that the Government have produced are right to highlight the fact that poverty is multidimensional, but the political sting is taken out of it because they contain no summary of progress. Instead, we get, "This measure's gone up, that measure's gone down, this measure's unmeasurable." The latter is the most common problem with the Government's figures. We want a summary of progress on tackling poverty that catches the public's imagination and has relative as well as absolute dimensions.

The Government are right to have a poverty target that is about one's standard of living relative to society. We do not want to freeze the target in the Victorian or post-war eras. As we become more prosperous, our expectations for our children increase and any good poverty measure should provide for that. The Secretary of State will be familiar with the "Breadline Britain" studies of the 1980s and 1990s. They were not perfect, but they asked people what they needed to be a part of society.

People could grasp the basics—for example, that children should be able to have a family holiday once a year, and new, not second-hand clothes; that parents should be able to afford to send children on school trips rather than keeping them off sick because they could not afford it. The studies surveyed the number of children who could not get those items. If we track them over time, the list changes. Fifty years ago, having a television was not a necessity, but nowadays a child whose parents cannot afford a television is probably missing out at school. The list changes but a Government who ensure that no child has to live in a damp, draughty house or miss out on a school trip and who make progress on those matters are rewarded.

The Chancellor has been accused of doing good by stealth and putting money into tax credits but hoping that nobody will notice because there is no public support for tackling poverty. However, poverty is defined obscurely. If we defined it in a populist way, many people would say that they wanted their children to have a holiday or new shoes and that therefore they wanted that for other people's children. They would sign up to the expenditure.

I support the Government's relative measure. I should like them to set out a headline measure—of course, there will be reams of supporting statistics—for which the Government can be held to account. I hope that that is a constructive response to the consultation process.

At the risk of deviating from being constructive, I want to draw to the House's attention a line in yesterday's Budget speech relating to the treatment of teenage single parents. It has not attracted a great deal of attention, but it was a rather strange line. It stated that teenage single parents who are not living with their parents should not be allowed council houses. That rang bells, and I have done some research on the matter. In 1996, The Independent referred to a speech made by the right hon. Member for North-West Hampshire (Sir George Young) at the Conservative party conference as long ago as 1993. It states that the then housing Minister Sir George Young invoked an image of teenage girls leaping up the council house waiting lists with new babies". This is the origin of the present idea.

The concept was taken up with enthusiasm by the right hon. Member for Wokingham (Mr. Redwood) in 1996. This is rather intriguing. I am again quoting from The Independent: Mr. Redwood, whose Conservative 2000 Foundation will be launched on Wednesday, said young mothers should be housed in hostels rather than leapfrogging 'the couple in their twenties who decide to wait before having a child' in the queue for council housing. He deplored the assumption that 'the illegitimate child is the passport to a council flat and a benefit income'. The most intriguing aspect of all this is the Labour party's response as reported at the time: John Prescott, Labour's deputy leader, said: 'The Tories want to return to the 19th century and put mothers and babies in the workhouse.' The newspaper went on to describe the scheme proposed by the right hon. Member for Wokingham: Mr. Redwood's hostels would offer a mix of studying, working and childcare". If I understand the provision correctly, that is precisely what the Government are proposing. The idea resurfaced in the social exclusion unit's paper of 1999, which advocated something similar. There are two possible responses. One is to assume that new Labour has adopted a right-wing Conservative agenda. Far be it from me to suggest that. The alternative response is to suppose that this proposal is entirely benign and that the Government are saying that chucking teenage single mums into council flats and leaving them to rot is not a good idea. I am with them on that. I think we would get that far together.

The question is, what is going to happen instead? What will be the element of coercion in this proposal? Perhaps the Secretary of State, or whoever is going to wind up this debate, could respond to that question. How much coercion will there be? To what extent are existing teenage single mums in council flats going to be forced out against their will? To what extent are the incoming teenage lone parents going to be forced to live in hostel-type accommodation? Are we talking about a small number of units of good-quality, supportive accommodation that will provide a basis for work and child care, or are we talking about large institutions?

Miss Anne Begg (Aberdeen, South)

May I give the hon. Gentleman an example from Aberdeen? The Foyer organisation is a voluntary sector organisation working with the homeless. It takes lone parents and helps them, gives them support, and ensures that they will be able to sustain any kind of tenancy. It also assists them in the job market, helping them into work. It often has to help people to overcome a drug habit, and gives a high level of support to very disadvantaged youngsters in Aberdeen. My right hon. Friend the Secretary of State has visited it more than once; he complains that we keep taking him there. It is an excellent model of how we should be helping young people to come out of poverty and a dreadful lifestyle and into accommodation and work that they can sustain.

Mr. Webb

We would all agree that that is entirely desirable. Will the hon. Lady reflect, however, on whether that sort of project would work if the lone parents in question had been forced to go there? Presumably they go there of their own free will at present, because they are attracted by what is on offer. The key question is whether lone parents in this position will be enticed by what these schemes have to offer. If so, they will probably be queueing up.

If the schemes are as good as the hon. Lady suggests, if they are to be extended nationwide, and if the money is going to be put in to them, great. People will not need forcing, because the schemes will be an attractive alternative to being left to rot in a council flat. My suspicion, however, is that that is not exactly what is being proposed. The amount of detail is very scant. We have looked through the documents, and we have found scarcely an item about the provision.

Mr. Willetts

I might be able to help the hon. Gentleman with the history of this idea. He has referred to discussions that took place on it pre-1997. He omitted to say that the Prime Minister made great play of it in 1998 in one of the Labour Government's classic welfare crackdowns. We get those every few months. At that time, there was a welfare crackdown story on the front page of the Daily Mail, with a signed piece by the Prime Minister, which stated that teenage lone parents should not have houses of their own and that they should all go into hostels. He spun that idea for a week in 1998. Nothing happened then, and we have no reason to believe that anything will happen this time.

Mr. Webb

I am not sure whether I welcome the idea that nothing will happen this time. We have been reflecting on what the Conservatives might have done, had they been allowed to continue. Perhaps they would have taken action on this front; perhaps that is where they were heading. They have not needed to do anything, however, because the present Government have taken up that agenda.

Miss Begg

The hon. Gentleman has still not given us any evidence as to why he thinks that this Government are proposing what he seems to think is a worst-case scenario. Where is the evidence for that?

Mr. Webb

The hon. Lady is well versed in the language of new Labour, and the rights and responsibilities agenda. What will be proposed here, as in so many elements of the welfare reform package, is compulsion. In this Budget, lone parents with children under five are going to be compelled to have interviews on pain of loss of benefit. The partners of the unemployed and of the disabled are also going to be compelled to go in for interviews.

Rosemary McKenna (Cumbernauld and Kilsyth)

Will the hon. Gentleman give way?

Mr. Webb

In a moment. Compulsion is central to the new Labour agenda. That is why I suspect—more than that; I am almost certain—that coercion will be central to this proposal. If the hon. Member for Cumbernauld and Kilsyth (Rosemary McKenna) wants to tell me that there will not be any compulsion, I shall be delighted to hear it.

Rosemary McKenna

Will the hon. Gentleman tell me what is so wrong with ensuring that young, vulnerable people come for an interview to see how they can be assisted into work and into a better lifestyle?

Mr. Webb

If all these things are so good for people, why do we have to force them to do them? That is the key question. If the provision is self-evidently good for people—if they are being offered support, not threats—why do they need forcing?

The Financial Secretary will have the chance to respond to the debate and to put on record today whether there will be compulsion in these schemes. I will happily take an intervention from him now if he would like to tell us the answer. This is a simple yes or no question. He does not want to intervene on me because he cannot say whether there will be compulsion. This is why we want to put this on record.

Mr. Darling

I am aware that I spoke for a long time earlier, but I can answer that point. For the avoidance of doubt, it is a condition of receiving benefit that anyone of working age comes in for an interview to find out what help is available. Will the hon. Gentleman tell me what is wrong with that? If it is obligatory to send our children to school, surely it cannot be too great an obligation to say to someone, "You have got to find out what help is on offer." Even for the hon. Gentleman, that was a daft point.

Mr. Webb

The House will have noticed that the Secretary of State did not answer the question. The question was: will teenage single mothers be forced out of council flats into hostels, or some sort of supportive accommodation?

The Financial Secretary to the Treasury (Mr. Paul Boateng)

That was not the question.

Mr. Webb

The Financial Secretary says that that was not the question. It may not he the question that he wants to answer, but it is the question that I am asking. We have not had an answer. The House has not been told whether teenage single mums will be forced into hostel-type accommodation. We do not know how big the accommodation will be, or what level of support it will provide. We do not know what the penalty for saying no will be.

If these projects are to be paragons of virtue, like the Foyer project that the hon. Member for Aberdeen, South described, they will be wonderful. People will queue up to get into them, and we will not need to use force. If they are not, there might be some resistance, which is where the Secretary of State's penchant for using force will come in. The House will notice that that possibility has not been denied.

Mr. Connarty

I am amazed. I now know why my colleagues in England dislike the Liberals so much. The hon. Gentleman's use of this scenario is a scare tactic. Does he not think that there is something wrong with saying that we will leave people socially alienated and excluded? That is what happens to people who are slapped into council flats with no support and no compulsion to go and see an expert who has strategies to get them out of their social exclusion and alienation. The hon. Gentleman wants to leave those people to languish, and he should take responsibility for that. That is what he is advocating at the moment.

Mr. Webb

The hon. Gentleman is entirely wrong. The only distinction between my approach and his is that I want to offer teenage single mums the chance to have such attractive accommodation and he wants to force them into it. He obviously thinks that they may not find it attractive. We have had no denial of that. If that accommodation is attractive, why are the Government so afraid that teenage single mums will not take it up that they are forcing them to do so?

Mr. Connarty

Will the hon. Gentleman give way?

Mr. Webb

No. We have pursued that issue sufficiently.

Mr. Menzies Campbell (North-East Fife)

Will my hon. Friend give way?

Mr. Webb

I suppose I should give way to both my right hon. and learned Friend and the hon. Gentleman.

Mr. Campbell

Does my hon. Friend remember the terms of the speech that the Chancellor of the Exchequer made to the House of Commons yesterday? He said: Where there are lone parents under 18 who cannot live with their family, the policy is that, instead of independent tenancies, they will have supported housing that combines accommodation with counselling and help with child care."—[Official Report, 17 April 2002; Vol. 383, c. 587.] Is not the ambiguity that my hon. Friend is highlighting a direct result of the ambiguity of the Chancellor's speech?

Mr. Webb

My right hon. and learned Friend is exactly right. We have looked through the documents and we cannot find any clarification on this issue. I invited the right hon. Members on the Treasury Bench to intervene, but no one has explained the position, which means that it must be compulsory. We can come to no conclusion other than that teenage single mums will be coerced into taking up this accommodation. If that is in their interests, why do they need to be forced to take it up?

Mr. Connarty

It was interesting that the right hon. and learned Member for North-East Fife (Mr. Campbell) used the correct term "supported housing", not "hostels" or "institutions". Even Women's Aid in Scotland has supported housing for women who are alienated and excluded from society. The hon. Member for Northavon (Mr. Webb) does not seem to accept that single parents who are out of a family situation become broken away and hide from society. There needs to be some way of compelling them to go for an interview with someone who can help. There is nothing wrong with compelling people to go for interview with someone who will help them, if the alternative is social unrest, which is what the hon. Gentleman seems to be arguing, because he thinks that it is good for Liberal Democrat votes.

Mr. Webb

There was a slightly bizarre conclusion to the hon. Gentleman's intervention. At least he is honest about being comfortable with compulsion and coercion, but it is not clear whether the Secretary of State is because he will not tell us. The part of the Chancellor's speech that my right hon. and learned Friend referred to said that lone parents under 18 will not have an independent tenancy. If it is not an independent tenancy, what is the difference between supported housing and a hostel? I do not know what this accommodation will be like.

The other substantial area of the Budget that we should touch on is the plans for health spending. My hon. Friend the Member for Kingston and Surbiton (Mr. Davey) asked the Secretary of State to clarify the Government's plans and to say whether there is a hole in them. The Government have set out detailed spending plans for the national health service for five years, but detailed tax and revenue plans for only three years.

The Secretary of State referred my hon. Friend to table C5, which contains the grand totals and which I have read, but Budgets do not spell out which taxes that percentage of gross domestic product will come from. They do not give that detail several years ahead. In response to my hon. Friend, the Secretary of State failed to put on the record whether more discretionary tax increases will be required to fund the planned health service spending. If the Secretary of State or the Financial Secretary think that there is a danger of the wrong impression being given on the record, I am happy to give way so that they can clarify whether any further discretionary tax rises will be needed, over and above those that have already been announced, to meet the spending plans for the health service that were given yesterday. They do not want to intervene, because they do not want to answer that question. The chances are that there will need to be more discretionary tax rises, and they should come clean about it.

That brings me to the central point of the Budget. A year ago the Labour party wrote its manifesto. There are two possibilities. One is that it knew it would have to raise direct taxes to pay for improved public service, and it failed to disclose that fact, which would be dishonest. The other is that it did not know it would have to raise taxes to improve public services, which would be incompetent. I shall not judge whether the Government are dishonest or incompetent, but they must be one or the other.

Yesterday's tax rise was predicted by us during the election campaign, by the Institute for Fiscal Studies and by all independent commentators. It was predicted that the Government would have to raise direct taxation to pay for their public spending plans. They declined to tell the electorate that. It would have been better to come clean, because they would then have had a stronger mandate for the tax rises that they announced yesterday.

The Chancellor rejected the notion of hypothecation, so yesterday's national insurance rise was just a general tax rise; it would go into the pot with other tax rises, which would pay for public spending. There was no link, not even between the 1 per cent. on national insurance and the health service, because most of that 1 per cent. will not be spent on health but on pensions and other services, or it will go into the national insurance fund surplus.

The Chancellor rejected hypothecation for one reason: he did not want the cyclical effect of the economy to undermine the funding of the health service. I gave him, in my usual generous way, an offprint of an article that I wrote for New Economy, the journal of the Institute for Public Policy Research. [Interruption.] Indeed, it made his day. He promised to take it to bed with him, but he obviously did not read carefully the section about how we should deal with the ups and downs of tax revenues. The Chancellor does that all the time. He sets fiscal targets that work over the economic cycle.

Mr. Edward Davey

Cyclically adjusted.

Mr. Webb

Cyclically adjusted, as my hon. Friend says. The Chancellor of the Exchequer does not expect every year to meet all the rules: he says that we will meet them over the cycle. The health service could be funded in precisely the same way. National insurance rates, if that were the hypothecated tax, could be set so that over the cycle the health service was funded in a predictable and stable way. In the good years it would raise more than was needed, in the bad years it would raise less, and when those figures were cyclically adjusted, as the Chancellor is so fond of doing, there would be no problem. That is not a fundamental objection to linking tax and spending.

The electorate do not trust the Government on tax because they failed to tell them at the election that they would need to raise taxes, and then went and did so yesterday. We need a method whereby the electorate know that they can trust politicians on tax. Politicians could bind themselves to spending every penny of a particular tax on a particular service and not siphon that money off. If the public were asked to pay more, they would know where the money was going. It would not need an Audit Commission report or anything else: they would know by statute.

The Chancellor said that he wanted a debate on how public services should be funded.

Mr. Adrian Bailey (West Bromwich, West)

Will the hon. Gentleman give way?

Mr. Webb

No, because I am about to finish.

These ideas will be a way of reconnecting the public with taxation. The Government and the Liberal Democrats both want good tax-funded public services. We are united on that against the Conservative vision. The danger is that, if the Government blow it by raising taxes that they did not tell people about and do not spend them entirely on the things that people want, the public will not give a second chance to parties that believe in tax-funded public services and they may be seduced by the Conservative dogma.

In a spirit of constructive friendship, I say to the right hon. Gentlemen on the Government Front Bench that the Government should come clean on tax and link what they are spending with what they are raising, and then the public may trust them. By not telling people during the election what they intended to do and then putting taxes up yesterday, they betrayed the public.

4.8 pm

Mr. Eric Illsley (Barnsley, Central)

I do not intend to follow the same route as the hon. Member for Northavon (Mr. Webb), except to say that I do not believe that the Government are dishonest or incompetent. We can debate hypothecated taxation, but the hon. Gentleman said himself that if we had hypothecated taxation, money could be spent year on year in a certain area to the detriment of other areas. As for whether the public knew that we were going to raise taxes to fund the national health service, up until yesterday the world and his dog knew that we would do that.

The hon. Member for Havant (Mr. Willetts) said that Labour is comfortable only when it raises taxes to spend money. That is not the case at all. Labour Members do not welcome tax increases. Like anyone else, we would rather the health service were funded, as it has been funded in the past five years of the Labour Government, through the good stewardship of the economy. The money has been available because of increased employment—1 million people are back in work—and increased tax revenues. It would be much better to fund the health service in that way, but if it needs extra funding I am not afraid to say to my constituents, "Yes, taxes must increase to provide you with the national health service that you want." Over the past year or so, the public have made it clear exactly how they want their national health service to operate. They want more money put into the service. I am comfortable with the increase in taxes to fund the national health service.

As I have said, it is Labour's prudent management of the economy that has allowed considerable investment in our public services over the past few years without those tax increases. I shall not repeat the list that was given yesterday, but it included low interest rates, low inflation—the lowest for many years—and higher employment. I believe that only this week unemployment fell again.

I welcome the extra money for working families: increases in the working families tax credit, working tax credit and child tax credit. Those moves will greatly assist my constituents. The extension of the new deal is also welcome. Over the last few years my constituency has experienced high unemployment, but, although the level is still slightly higher than the national average, it has fallen recently as a direct consequence of the Government's policies.

I look forward to the pension credit that will be introduced next year. That too will help many of my constituents, especially those who qualify for pensions under the mineworkers pension scheme or who qualified for it prior to 1975, before it was index linked. A very small occupational pension has prevented such people from obtaining other benefits.

I welcome the tax concessions for small businesses. Because of our attempts to regenerate the Barnsley area over the past two years, we have had to seek assistance for such businesses—surprisingly enough. I am happy to say that my constituency contains some world-leading small businesses. I also welcome the reductions in beer duty for micro-brewers and local brewers. I should declare an interest as honorary adviser to the northern branch of the Licensed Victuallers Association. The move will help breweries in rural areas and rural pubs; one of the issues in such areas is the decline of the traditional country pub.

I am pleased to see that my right hon. Friend the Financial Secretary to the Treasury is present, as he is responsible for the climate change levy. I am glad that electricity produced from coal mine methane will be exempted from the levy. Only a few days ago, my right hon. Friend opened a plant in my constituency that converts methane leaking from old coal mines to electricity in order to power a local glass factory. I understand that next year such methane will be exploited on some 80 sites.

While I am on the subject of glass, let me say—I know my right hon. Friend will expect me to make this point—that the glass industry has been hit hard by the climate change levy, especially as a result of the exemption and rebate system that revolves around the integrated pollution prevention and control regulations. A company registered under the regulations will receive an 80 per cent. rebate.

I understand that, to qualify, a company must melt glass. Some companies use a lot of electricity, but do not melt products in order to make glass. They may bend substances, for instance to make motor-car windscreens; some, such as Potters Ballotini in my constituency, use 100 per cent. recycled glass—coloured glass. That is an environmentally friendly operation in itself. Such companies, however, are subject to the full rate of the climate change levy.

Potters Ballotini must pay £160,000 per annum, in return for which it receives only £2,000 in national insurance rebate. It points out that because it uses 100 per cent. recycled materials, it should not be subject to a levy that is intended to make companies focus on being environmentally friendly and on emissions targets. I hope my right hon. Friend will look again at the way in which the IPPC regulations affect such companies. I have heard it said many times that the climate change levy is revenue-neutral, but it is not revenue-neutral for the companies paying £160,000 in order to receive £2,000.

As I have said, I welcome the extra funds for the NHS and the five-year stabilisation plan. As I said after the statement by the Secretary of State for Health, however, my constituency and others are in a bizarre position: NHS funding appears to be decreasing when examined against target funding for the health authorities involved. It is a question of distribution.

Last year my authority received 98.5 per cent. of the funding target; at the end of the current year, it will have received 97 per cent. of that target. Although more money is going into my health authority and the NHS in general, the amount provided for its core functions appears to be falling. That 3 per cent. shortfall equates to some £6 million, which the health authority simply could not find. In fact, its budget was rejected by Trent regional health authority on two occasions because it simply could not find a way of disguising a £6 million shortfall, or making any further efficiencies to reduce the amount. It had already taken £1.5 million out of the budget through efficiencies.

Mr. Peter Viggers (Gosport)

The hon. Gentleman has put his finger on an important point. Ministers consistently tell us that NHS spending is increasing. In my area, the Portsmouth and South East Hampshire trust has been called on to make 2 per cent. efficiency savings in consecutive years. It says that its budget is way below what it needs. I am talking about the sixth largest hospital trust in the country, which received no stars in a recent survey. The hon. Gentleman has identified the difference between the Government's claims and reality.

Mr. Illsley

I entirely understand the hon. Gentleman's point. Similar points were made following the statement by my right hon. Friend the Secretary of State for Health.

I readily admit that the amount being spent on the health service is increasing, but the manner of its distribution, and the fact that it is sometimes attached to initiatives, tends to move it away from the core. That is one of the main problems in my area. Initiatives have been imposed on the health authority—the other day the pro-chancellor of Hull university described the syndrome as "initiative-itis"—to which the money is tied. It is tied to an initiative and to a target. That tends to move the money away, because part of the health service concentrates on achieving the target. Meanwhile, another part of the service may receive less money and experience neglect.

My area is desperately short of general practitioners. Apart from, I think, Sunderland, it has the fewest in the country. We had a training surgery providing initiatives with the aim of recruiting and training more GPs, but the funds had to be withdrawn because the health authority had to concentrate on other initiatives and targets imposed by the Department of Health.

We have experienced shortfalls year on year. It is not just under the present Government that my health authority has been underfunded. More than a year ago, inappropriate prescribing by GPs led to a shortfall of about £1 million. Perversely, this year—because we have addressed the issue—we have more problems because prescribing is very good. GPs are now prescribing according to the Department's instructions in terms of best practice. That has increased the cost of prescribing and left us with a £2 million shortfall, as part of the overall £6 million.

We would appreciate some targeting of funding for the health service. The new independent audit and review must assess each health authority to determine which are providing value for money, but doing so on a shoestring because they are underfunded, and which are being wasteful. We must ensure that there is a balance of the scarce resources.

My local health authority has the worst rates of lung cancer, heart attack and stroke in the Trent region, which covers most of south Yorkshire and north Derbyshire, and probably among the worst in the whole country. We have among the lowest rates of heart attack survival and the highest of morbidity. A recent Commission for Health Improvement survey of Barnsley district general hospital came out with the bald statement that anyone aged between 35 and 75 admitted to that hospital suffering from a heart attack had a 50 per cent. higher chance of dying than in any other hospital in the country. That alone tells me that our funding problems must be tackled.

We hope that the NHS audit will solve the problem. I have yet to get an answer to a question that I have been asking for many years. We are 3 per cent. short of our target, but no one can tell me why my local health authority, which probably has among the highest need in the country, continues to be underfunded. When they consider the whole idea of the distribution of funds for the national health service, I hope that the Government will revisit the targets and sort out those problems.

I am also concerned about other public services, and especially those delivered through local government. A few years ago, we were promised a review of standard spending assessments, but that appears unlikely to occur according to the time scale set out last year. We were looking for a vast improvement in the mechanisms for local government funding, reflecting need rather than proceeding on the current formulaic basis.

My local authority has been underfunded ever since 1990, when poll tax capping was introduced. This is the area in which the public come face to face with the delivery of services, and they often find that the service that they expect cannot be provided because of lack of funding.

Our education funding has improved dramatically, with grants now given directly to schools to improve facilities, and I very much welcome the new school building programme. I am happy to say that the rate of staying on at school post 16 has improved in my constituency, as has our performance at GCSE, which has traditionally been poor. However, the services known as the "other services block", such as street cleaning and environmental services, have suffered over the past few years as the Government have, quite rightly, targeted education. I hope that they will look again at the funding of local government.

Housing, and the lack of money being made available to local authorities to meet the demands of repairs and other services, continues to be a problem. The Government have set out their policies on council housing clearly: sell it off to other landlords, form aim's-length management companies or simply maintain the status quo. Tenants in my area voted against sell-offs and the Government will not allow the local authority to construct an arm's-length company, because its rating in housing management is only two stars rather than three, so we are left with the status quo and council tenants cannot get repairs or improvements to their properties because the funding is not available. I hope that the Government will do something about that in the near future.

This is the point at which I usually say something about excise duties, but as none of them was increased yesterday there is very little to say. Let me repeat yet again, however, that cigarette smuggling remains a problem. It is a huge industry—a black economy—in my constituency. I agree that cigarette prices need to be increased for health and social policy reasons, but that tends to increase smuggling in areas such as mine.

I warmly welcome the Budget and the fact that the Chancellor has grasped the nettle and taken the right decision on the future funding of the national health service. I fully support him on that and look forward to a much improved NHS in my constituency.

4.26 pm

Sir Michael Spicer (West Worcestershire)

The hon. Member for Barnsley, Central (Mr. Illsley) said that raising taxes is not enough. I agree.

I declare my interests as set out in the register.

It is highly appropriate that we should be debating today the work and pensions implications of a Budget that has produced the highest tax rise on jobs since Labour introduced the selective employment tax in 1966—and this on top of a substantial tax on pensions in a previous Budget.

The proclaimed essence of the Budget is a massive £8.5 billion tax increase on jobs to pay for more health spending. If we are to go down the crude tax-and-spend route, the first question to ask is, will it do the trick? Are taxes set to go even higher? What about other expenditure requirements, such as defence, education, transport and indeed pensions?

Liberal spokesmen have popped up throughout the afternoon demanding more discretionary tax increases. One of them asked for more to be spent on education, and another wanted more money for social services, and now the hon. Member for Northavon (Mr. Webb), in his line of questioning to the Minister, seemed to be asking for yet more discretionary taxation.

The Wanless report, published yesterday, argues that if all the extra funding for the NHS is to be found through taxation, tax may have to rise by an average of £5 billion every year for the next 22 years. To put that in perspective, if the whole amount of the extra revenue were placed on income tax, it would rise by 2p in the pound each year, reaching a maximum of 66p in the pound, just to cover health funding alone, never mind extra spending on pensions, education and the rest—the mind boggles.

The Chancellor seems to be contenting himself with a massive one-off tax rise of almost £9 billion next year, and an implicit claim that the Government will match future expenditure to economic growth. A critical issue, therefore, is whether the target for economic growth—2.5 per cent. in this Budget—is likely to be met. So far, the Government have had luck on their side. In part because of the strong economy inherited from the Conservatives, and in part because of a massive expansion of imports into our economy, we have had reasonable economic growth over the past few years.

That is unlikely to continue in future. On the contrary, genuine investment-led growth is grinding to a halt.

The one word that the Budget dare not speak is productivity. Even the Government's recent White Paper did not include a table showing productivity rates over the past 10 years. That is strange and does not follow precedent. Table 1.1 on page 3 of the White Paper "Productivity in the UK" published in November 2000 shows that the average productivity rate was 2.1 per cent. between 1990 and 1997, declined to 1.6 per cent. between 1997 and 1999 and has been 1.9 per cent. thereafter. Since its publication in that report, table 1.1 has never been seen again. It has been airbrushed from all subsequent publications on productivity.

Despite this censorship, the secular decline in the rate of productivity ever since the Government took office remains a fact of life. We know this to be true because the Chancellor of the Exchequer admitted as much in a recent interview on the "Today" programme. The issue is not whether productivity rates have fallen, but why. That question is absolutely critical to a proper assessment of the Budget.

The rate of productivity is the performance measure of the structural changes occurring in the economy. The figures tell us that the rate at which the competitiveness and efficiency of the British economy was catching up and even overtaking other countries under the Conservative Government has now slowed down and gone into reverse under Labour. This is why, from being the sixth most competitive country in the world in 1997, we have crashed to 14th place and the plummet shows no signs of slowing down. The rate of investment has crashed from a peak of 13 per cent. in 1998 to 2 per cent. in 2001. Last week's figures show that inward investment fell by more than one third last year and that our European Union share fell from 26 per cent. to 19 per cent.

Not surprisingly, as a result, old ailments are beginning to recur. Since 1998 there has been a dramatically steep rise in our balance of payments deficit from an annual average of around £5 billion in the first half of the 1990s to nearly £20 billion in the second half. If that reversal of the fundamentals of our economic fortunes had been unavoidable it might at least have been forgivable. It might also have been insolvable. It was avoidable, is unforgivable and remains unsolvable. It requires, above all, a change of Government.

There are at least four reasons why the necessary investment to improve productivity and competitiveness will never be forthcoming under a Labour Government. Special circumstances apply to the present Labour Government, but the general rule persists: in the end a free-enterprise economy always comes unstuck under a Labour Government, even one as fortunate as the present Government in their inheritance from the Conservatives.

Mr. Mark Hendrick (Preston)

I thank the hon. Gentleman for giving way. Does he accept that the reduction in inward investment is to some extent due to the fact that Britain remains undecided on the euro and many inward investors would like us to take a decision on that? Does he also accept that his party's position, which is for Britain never to join the euro, would lead to an even bigger drying up of inward investment?

Sir Michael Spicer

I shall turn to the euro in a moment. However, in the past the rate of inward investment has been high and it is still higher than that in most euro countries. So that argument does not wash. Indeed, in a moment I shall argue that the Government's commitment to enter the euro is one of the problems currently affecting confidence.

The first reason why the Government's economic policy will end in tears is that Labour does not understand capitalism and free enterprise. Many Labour Members do not even try to understand capitalism because the basis of their ideology and motivation into politics is antithetical to it.

One might say that the dividing line between old and new Labour is between those who try to comprehend the ways of competition and free enterprise and those who contemptuously do not. In practice, the distinction does not matter very much because it all comes down to the same thing in the end: free enterprise never works very well under Labour. The reason is that free enterprise, especially the incentive to invest, requires confidence, particularly confidence that the rules of enterprise will not be changed meretriciously as they were twice for Railtrack investors and as they were for investors in power stations faced with a sudden moratorium on gas.

Helen Jones

I am grateful to the hon. Gentleman for giving way. If free enterprise worked so well under the Conservative Government and people were so motivated to invest, can he explain why nearly 20 per cent. of the manufacturing industry in my constituency was destroyed?

Sir Michael Spicer

I cannot speak for the companies in the hon. Lady's constituency; perhaps they were not very efficient. I have no idea. However, I can refer to the massive growth in the late 1980s and early 1990s which the Government inherited. They had managed to keep the momentum going, but it is now on the brink of slowing down. The hon. Lady must accept that productivity and investment rates are so low compared to what they were five or six years ago that Britain is on the brink of a severe economic problem which is reflected in the volume of imports and other factors that I have mentioned. I certainly cannot speak for the hon. Lady's constituency as I do not know the circumstances there, but there is a dramatic change in the structure and the fortunes of the British economy.

Mr. Connarty

As we are talking about capitalism which I studied long and hard when I took my degree in economics, is it not the case that the great capitalist economy of the USA has a much larger balance of payments problem than the UK yet, despite the events of 11 September, it has strong growth and is fundamentally a thriving capitalist economy apart from the fact that it imports more than it exports?

Sir Michael Spicer

In recent years, because of the strength of the dollar and the fact that US companies would pay in US paper—a commodity which reflects the strong internal economy—the US has imported more than it has exported. That is a matter for the US economy to put right. I accept entirely what the hon. Gentleman says. The US cannot continue using paper to pay its way in the world, at least without depreciating that commodity. The hon. Gentleman makes a good point but I am talking about the UK economy, which in many respects is unlike that of the US. The Americans make almost a conscious decision to use their paper to buy in goods. Our economy is increasingly being forced to buy goods because it is not sufficiently competitive to pay its way. There is a fundamental difference between the American economy, which is highly competitive in most sectors, and the British economy.

The fundamental point is that Labour does not really understand how capitalism and free enterprise works. This is illustrated by its chopping and changing on Railtrack, the sudden moratoriums on power stations and financiers being faced with dramatically changing rules for the funding of London Underground.

At best, new Labour sees the private sector as providing a reserve of funds to be turned on and off at the will of the Government. Capital markets simply do not work in that way. Investors cannot be ordered around, otherwise they take their capital away, and there are signs that they are beginning to do precisely that.

The second reason for falling confidence under Labour is regulation, which has been mentioned today. It is partly a matter of the sheer quantity and the burden of the new rules, but it is more significantly a matter of their quality and direction. Together, the new regulatory regimes add up to socialism by stealth, and investors do not like it.

The Labour Government have contorted and perverted a regulatory structure laid out by the Conservatives to ensure maximum competition when they privatise utilities and certain state monopolies. The Utilities Act 2000 gives powers and roles to the regulatory bodies that have nothing to do with improving economic performance, let alone competition, and everything to do with socialist ideology, specifically the redistribution of income.

The gas and electricity regulator is empowered to relieve fuel poverty. The telecommunications regulator sets out to ensure universal coverage, the Financial Services Authority must achieve social banking as a priority, the water regulator must ensure fair investment, and the rail regulator must provide a total transport strategy. Ofgem has even been used to try to protect jobs in the mining industry through its implementation of the gas moratorium. It would seem that the prospect even exists of regulators coming together to agree a total strategy for governing the commanding heights of the economy. As I say, this is socialism by stealth and investors do not like it.

As the hon. Member for Preston (Mr. Hendrick) said, the question also exists of the Government's commitment to entering the single European currency. Investors know that we would either enter at a rate that would be a permanent and artificial handicap for British sales to the continent of Europe, or that the Government would be forced to take action through interest rates to lower the value of the pound, which would prove inflationary and further undermine British competitiveness. Indeed, if they were carrying out the rules of the Monetary Policy Committee—assuming, as we were discussing earlier, that it were still an independent body—they would have to raise interest rates at that point, which would itself prove counter-productive. Contrary to the hon. Gentleman's suggestion, the whole process of commitment to entry is a destabilising factor.

Mr. Hendrick

The Monetary Policy Committee would not raise interest rates, because if were joining the euro, the interest rate would, by definition, have to be the same as that of the European Central Bank.

Sir Michael Spicer

There is considerable argument as to whether we would have to be within an equivalent of the exchange rate mechanism, but I am talking about the process of entry into the euro. The Government would be faced either with an artificially permanently uncompetitive rate at which to enter—that would certainly scare off industry from investing in this country—or they would try to talk down or work down the rate of the pound. As a result, inflationary pressure would come into play and the MPC would have to put up interest rates.

Mr. Hendrick

If we entered the euro as a result of a referendum, the Government would not try to manage the exchange rate; the markets would take care of it.

Sir Michael Spicer

I should be delighted if that were so, and that is exactly how exchange rates should operate. They should be market-led, and should reflect the economies of the countries in question. However, that principle is denied under the permanent and indefinitely fixed exchange rate that entry into the euro requires. It is exactly because we do not want fixed rates that some of us are dead against the euro. Whether one is against it or not, my point is that the very commitment to enter the euro is itself a destabilising factor in British economic policy.

The final element of destabilisation is taxation. Despite the denials and obscurantism of the Chancellor and the Prime Minister, taxes have gone up continuously under Labour. In 1994, they constituted 34 per cent. of gross domestic product. They rose to 36 per cent. in 1997, to 37 per cent. in 1999, and to 38 per cent. in 2001. According to the Red Book, yesterday's Budget will push that figure above 40 per cent. in a year's time. Of course, this Budget is the one in which Labour has broken its cover; it has been outed as a high spend, high tax party.

It is not just investors who will be put off. At a level of more than 40 per cent., taxes are bound to be regressive, and will hit the standard of living of people on lower incomes. What does all that add up to? Britain's economy, which was one of the most dynamic in the world, is moving back to being one of the more sluggish. Once that happens, the spiral will be downwards. More public spending will mean even higher taxes. That will mean lower growth, which will lead to yet higher taxes, and so on. That downward spiral is implicit in this Budget.

The challenge for a future Conservative Government is to reverse the spiral, as past Conservative Governments have done, by removing the shackles from businesses and by releasing the energy not only of the private sector but of the so-called public services. However the Government caricature such matters, new ways will have to be found of running and funding public services. In particular, we must break up the monopolistic position of the providers, and return powers—especially purchasing powers—to the customer. Achieving that—particularly improving the effectiveness of health care provision expenditure—by adopting one of the many funding models that operate throughout the world is the debate that the Government should have launched today, and in which they seemed to want to engage as recently as last year. At some point during this winter, they seemed suddenly to change their mind, and retreated into old-fashioned socialist dogma. That has pleased their own Back Benchers and got them cheers, but we shall have to see what the result of that shift will be.

Mr. Connarty

The hon. Gentleman should consider what happened when we introduced the market into other utilities. The trend has been towards monopoly, not competition. As an expert told many of us in the parliamentary group for energy studies in some detail last night, that is particularly true in the energy field. There are three major energy suppliers in Europe. What we have is not a free market, with lots of competing small suppliers that help the consumer, but large monopolies that, without regulation, would force prices up. It is the regulator that keeps prices down for the consumer. Free market capitalism always leads to monopoly, because monopoly leads to super-normal profit, which is the whole purpose of capitalism.

Sir Michael Spicer

I shall not only defend my position; I shall tell the hon. Gentleman how wrong he is. Contrary to what he has just said, one massive effect of the electricity legislation that as the Minister I piloted through the Commons was the complete break-up of monopoly power. We had a monopolist—the Central Electricity Generating Board—but now we have a multitude of companies, only one of which has more than 9 or 10 per cent. of the British generating market. That is absolutely contrary to the hon. Gentleman's argument. The same applies to the distribution side of the industry—an outcome that we did not fully expect. The hon. Gentleman is factually 100 per cent. wrong. Given that he obviously knows something about this field, and that he attended last night's lecture—I was not there myself—I am very surprised that he takes the view that he does.

Mr. Connarty

As has been pointed out, 10 Downing street's electricity is supplied by a French company that bought London Electric. Such developments are happening throughout Europe. No. 10 would be paying much higher prices if were not for the fact that a regulator controls domestic prices.

Sir Michael Spicer

I do not know the hon. Gentleman's views about the future of Europe. If he wants a united Europe, he should be pleased about the free flow of capital. Personally, I am very relaxed about the free flow of capital around Europe; I simply object to the fact that the rules are such that our capital does not flow into continental Europe as easily its capital is allowed to flow into Britain. The hon. Gentleman's basic point that free enterprise leads to monopoly—a good socialist thing to say—is the exact opposite of what has happened. In fact, we broke up a thoroughly inefficient state monopoly—the CEGB—that was running massive overcapacity. Now, prices have come down and there is tremendous competition. We have a thriving industry, into which people want to buy because it is thriving. That is the exact opposite of the hon. Gentleman's argument, and I am very grateful to him for making it.

The sadness for the country of the Labour party's change of heart on a more radical approach to funding for public services, especially the health service, is that it will further delay the time that our people will benefit from the quality of service to which other countries have become accustomed. We discussed health yesterday and today, but Labour Members have not once accepted that other comparable countries with different funding systems have much better health systems. We are looking at those systems because they are better. It is no good shutting our eyes and denying that there is a better way. The result has been that the British taxpayer is paying for our people to receive treatment on the continent of Europe that they cannot get here. Sadly, that will continue to happen for longer because of the Government's refusal to consider alternatives ways to give consumers the purchasing power that they have in other countries.

Those methods do not necessarily require lower funding by the state. For example, France does not spend much less than we do, but it gives the consumer more power, so monopolies are broken up and the health service is provided far more effectively. Because the Labour party has balked on that issue, the electorate will turn against it. This is a turning point in the electoral fortunes of the Labour party and it will be left to the Conservatives to pick up the challenge and put things right in the future.

Mr. Deputy Speaker (Sir Alan Haselhurst)

It probably has not escaped the attention of hon. Members that the average length of speeches by Back Benchers so far has been 21 minutes. If that continues, we shall hear from few other hon. Members this afternoon.

4.52 pm

Miss Anne Begg (Aberdeen, South)

Before I commend the aspects of the Budget that will encourage people into work, make work pay and bring more children out of poverty, I must tell the hon. Member for Northavon (Mr. Webb), who unfortunately is no longer in his place, that it will come as a big surprise to my constituents with severe disabilities who have moved from hospital wards to supported accommodation, run by such worthy organisations as Cornerstone, Archway and the Richmond Fellowship—I am sorry if I have missed any Aberdeen organisations out—that they are regarded by him as living in an institution. Other disabled constituents have moved out of the family home into supported accommodation to gain more independence, but—according to the hon. Gentleman—they are now living in an institution. The biggest surprise of all will be felt by the hundreds of pensioners who live in sheltered housing complexes, if the Liberal Democrats now believe that that means living in an institution too. Many of our constituents already live in supported housing—that is the exact phrase that the Chancellor used yesterday—for very good reasons. I do not understand why the Liberal Democrats have taken against such accommodation for lone parents under 18, as the Chancellor mentioned yesterday.

Mrs. Annette L. Brooke (Mid-Dorset and North Poole)

My hon. Friend the Member for Northavon (Mr. Webb) was making a point about choice. He expressed the strong concern that people might be coerced into certain actions and wished to be assured that they would be able to choose. In fact, Liberal Democrats welcome many schemes around the country in which young people are supported.

Miss Begg

We take a slightly different view of the case. If people are vulnerable and in need, we should not leave them to their own devices. This case concerns lone parents under 18, which in England and Wales means that they are under the legal age at which they can get married. In Scotland, young people can marry at 16 without their parents' consent. However, we could be talking about children as young as 14 or even younger. The earliest age at which young girls get pregnant is about 14, and some are no longer able to live in the family home—as the Chancellor said yesterday. We do not think that such vulnerable young people—some of them are still children—should be left alone in a council house. They should be in supported accommodation. It is not a matter of choice—children should not live alone.

Mr. Connarty

I remind my hon. Friend of the landmark case in my home town of Monklands. A 16-year-old obtained a legal judgment to the effect that she should be allocated housing on her own. She was allocated housing in a flatted block, but she was violently and sexually assaulted in her flat within a few months. It was an unprotected and unsupported environment, and we think that we should do better for those young people.

Miss Begg

I agree absolutely with my hon. Friend. I detected nothing in what the Chancellor or the Secretary of State for Work and Pensions have said that would suggest that any coercion will be used to make lone parents under 18 live in accommodation that is not suitable for the purpose.

I commend what the Budget will do to encourage people into work, to make work pay and to bring children out of poverty, and I shall concentrate my remarks on those aspects. Not long after the introduction of the working families tax credit and the minimum wage, I received an irate letter from a constituent who complained that everything was being done for children but nothing was being done for those of working age who were in work but on low incomes. He claimed that he would be better off on benefit than he was in work. I asked the Library to do some calculations, and he was right. Because of the way in which housing benefit, jobseeker's allowance and other benefits worked, some people in full-time work would have been better off not working, so they had no incentive to work. Those people felt left out and unable to share in the growing prosperity.

One answer to the problem is to raise the minimum wage and I am glad to see that it is increasing, albeit not as fast as I would like. I accept the arguments about the need not to destabilise the economy and we do not want unemployment to start increasing, as the Opposition claimed would happen when the minimum wage was introduced. Unemployment did not increase, and I still think that the minimum wage should be increased further.

I welcome the new employment tax credit introduced in the Budget. It will ensure that people such as my constituent, who are just above any kind of minimum income but paying high housing costs—as often happens in Aberdeen—will have an incentive to work. The figures for the employment tax credit cited by the Chancellor yesterday show that a single-earner couple will have a guaranteed income of £183 a week, while a family with one child will have an income of £237 a week.

The integration of the employment credit and the working families tax credit to form the new working tax credit will make it absolutely certain that in all cases work pays. I know many hon. Members find it difficult to persuade constituents who are looking for work in the low-wage end of the economy to take such work unless in every circumstance their constituents will be better off. The working tax credit will ensure that.

I also welcome the extension of the new deal. I remember many people in Aberdeen asking why we needed the new deal—unemployment in Aberdeen is extremely low: 1.5 or 1.8 per cent.—when anybody who was any good would get a job anyway. Therefore, it was argued, the only people who were not in jobs, particularly young people, were those whom nobody would employ. In fact, the opposite proved the case. Youth unemployment in my constituency has dropped by about 80 per cent. because there are jobs if people of working age are ready for them.

It is interesting that a fairly affluent constituency such as mine has benefited from many of the Government's policies, such as the minimum wage and the working families tax credit, and that is because most of my constituents are in work but often in low-paid jobs. There are many highly paid jobs in Aberdeen—we have a fairly buoyant economy—and because of the oil industry, there are also many service industry jobs. There is a need for cleaners and there is a lot of bar work available in the local hostelries. Very often, those involved are paid low wages, so they obviously benefit from the minimum wage and the working families tax credit. Well over 1,000 families-2,000 in the case of the minimum wage—have benefited from the working families tax credit in my constituency alone.

Any extension of the new deal to those over the age of 25 who have gone in and out of work—a pattern we see in Aberdeen—is welcome. I have seen constituents who have been out of work for just over six months but do not yet fit into any of the new deal categories. They have felt left out—that somehow, Government policies have not catered for them—so I am glad that they no longer do.

I undoubtedly welcome the increases in the working families tax credit and the disabled persons tax credit. It is very important that disabled people share this country's increasing prosperity, and one of the best ways of doing so is by entering the labour market. In Aberdeen, there are jobs available if such people are given support to get them.

Perhaps the biggest barrier to getting back to work, particularly for lone parents and other working parents, is the issue of child care. The problem is not just affording child care—the Government have gone some way to solving that problem by introducing the child tax credit—but finding appropriate child care. That problem is faced by those who work shifts. There is much shift work in Aberdeen, and there is a lack of child care. Any help that the Government can give to encourage more people into the child care business would be welcome. If people are going back to work, why should they not become child minders? That would certainly ease difficulties in Aberdeen. There is certainly a need for high-quality child care.

I particularly welcome the move toward integrating the tax and benefit systems. Until those systems come together, there will always be poverty traps and always some who lose out. I hope that there will be a seamless system. If everybody has to declare their income, eventually those who do not receive enough will get money back, and those who receive too much will pay tax. We will therefore remove the stigma of means testing and ensure that any help is well targeted.

I also commend the Government's work on bringing children out of poverty. I know that there was huge controversy last week over the Government's figures, but by any measure, 500,000 children is a lot. That was not an accident; it did not happen because the economy improved or it just so happened that parents went back to work. It was specifically because this Government were the first in history to introduce measures aimed directly at tackling child poverty. As a result, 1.4 million children have been lifted out of absolute poverty, and 500,000 out of any relative poverty.

I have not had tune to read it, but I welcome the Government's consultation document on measuring child poverty because it is time we had a proper measure that everybody can trust and understand. There is more to poverty than just income.

By any measure, the Government have done well in reducing childhood poverty. I was surprised at the amnesia displayed by the hon. Member for Havant (Mr. Willetts). The reason so many children were living in poverty when we were elected was that when the previous Government were in office, from 1979 to 1997, the number had multiplied by a factor of three. If the then Government had made a promise to take 1 million children out of poverty in 1979 and had done it, there would be no children in poverty now. It is important to have a clear definition of poverty and that the Government continue to pursue these measures.

With those comments, I commend the Budget to the House. There is no doubt that its proposals mean that more and more families will move up the income scale and be able to share in the country's prosperity.

5.5 pm

Mr. Michael Jack (Fylde)

I am grateful to be called to speak in the debate. I remind the House of the declarations of my business interests that are properly put into the Register of Members' Interests.

I congratulate the hon. Member for Aberdeen, South (Miss Begg) on a characteristically good speech about her constituency. I sympathise with some of her observations about the child tax credit and child care. I congratulate the Government on responding to representations that I and many others have made on helping parents who work irregular hours to have child care provided in their own home. That will be of particular benefit to those working in the care and nursing home business. They have to work antisocial hours, and this will mean a great deal for them.

Mr. Connarty

Will the right hon. Gentleman give way?

Mr. Jack

Perhaps the hon. Gentleman would be so kind as to let me make a little progress, in the light of your comments, Mr. Deputy Speaker.

I also welcome the fact that venture capital trusts will be used in inner cities. I still feel that it is an indictment on us all, in the 21st century, that we have some really bad spots of urban dereliction. We struggle to get to grips with them but they are often the centre of so many social and crime problems.

Finally, I welcome the Government's acknowledgement that some more money will have to be found in the Budget for social care. I hope that some effort will be made to ensure that some of that resource goes into child care, in the sense of being responsible for children. Like every other right hon. and hon. Member, I was shocked by the information that came out of the Victoria Climbie inquiry. We hope that this will never happen again but, to a certain extent, that is possible only if child safety is given the resource that it needs.

Mr. Connarty

I do not know the right hon. Gentleman's interests. It is possible that I may be called to speak next, but I would lose that opportunity if I left the Chamber and would then be debarred from speaking. The right hon. Gentleman has not declared his interests, so if he speaks in favour of or against something and has an interest to declare about a particular organisation, I would be grateful if he named it as he speaks.

Mr. Jack

If I had felt that there was anything so specific, I would have done, but I followed the precedent that has been followed throughout the debate of making it clear that I have business interests as a non-executive company director and as chairman of an agricultural consultancy company. I do not propose to say anything about that, or the business that the company trades in. Those declarations are properly and publicly made and we have all followed that precedent. I have made it clear to the House that I have business interests and am grateful to the hon. Member for Falkirk, East (Mr. Connarty) for allowing me to tell him a little more about some of the things that help to inform me about the real world in which I live. It illustrates the fact that many on the Labour Benches have little understanding of the world of business, because they have not been directly involved in it.

One of the areas that I hoped the Budget might touch on was Britain's responsibility in the world to deal with the sources of discontent that have given rise to some of the terrorist outbreaks that we have seen. Perhaps the Financial Secretary could consider giving some form of credit or tax allowance to encourage British companies to invest in those parts of the less developed world where the growth of good markets and good business may help to be an antidote to the discontent that manifested itself in the terrorist events of 11 September. Our private companies have a tremendous record of involvement in the less developed world. We can be proud of that role, but we should give them some encouragement, especially in those hot-spot areas identified by the Foreign and Commonwealth Office. That would be of particular value.

The detail of the Budget can be interesting. One note—Rev Bn 20—is entitled "Denying tax relief to bribes". Even when I was in the Treasury, I was not aware that we gave tax relief for bribes. In the fevered discussion about donations, the note may offer some interesting further reading.

Our debate has already touched on the tax burden borne by our citizens, and on the tax increases in this and previous Budgets under this Government. The Centre for Economics and Business Research has produced some figures that paint a rather different picture of the tax burden in this country. The centre found that, after deductions, British families have only 68 per cent. of their total gross annual income left to spend. That is less than France, where the level is 75 per cent.; in Spain and Italy it is 61 per cent. The level in Germany is 66 per cent. The finding is interesting, because the figures will worsen as a result of the changes in national insurance announced yesterday.

I want to bring another matter to the Financial Secretary's attention. In 1981, as a Back Bencher, the present Secretary of State for Foreign and Commonwealth Affairs initiated an attempt to assess the impact of the Budget on the direct and indirect tax paid by individuals. The present Labour Government found the results deeply embarrassing when they came to power, and concocted a set of words to explain why they would not provide that information. They said that the request was unrealistic and that they could not meet it.

With respect to the Government, they must realise that it is legitimate for Members of the House of Commons to seek that information, and that the Labour party in opposition requested it first. Will the Financial Secretary say whether the Treasury will reconsider its position? The previous, Conservative Government provided the information, even though it was embarrassing to them. It would be useful if the Government continued to provide the figures.

It is all a matter of openness. In that connection, does not the Financial Secretary also think that more information should be regularly released about what is happening to the UK economy in cash flow terms? I keep tabling questions asking for projections of tax revenues, but am always told that the matter is too difficult. However, I am also told that 18 people in the Treasury are busy working on projecting tax revenue. If they are employed to make such projections, why cannot we—the representatives of the people and the taxpayers of this country—know what is happening to the cash flow of the economy? That information would give us more sense of the dynamics involved.

The question of what comes next has already been raised in the debate. Anatole Kaletsky's perceptive column in The Times this morning draws attention to the work being done by the Institute for Fiscal Studies. The institute has calculated that sustaining the real annual spending growth of 4 per cent. projected in the Red Book would require that an additional increase in taxation amounting to some £6 billion would have to be announced in each Budget of the next Parliament. That is the institute's opinion, and I appreciate that much can change. However, the point is that more tax is in prospect, unless other factors—as yet unknown to us—change.

The article, like others, points out that the rather subtle change in national insurance has allowed the Chancellor to get around his promise not to raise the higher rate of tax by sneaking in an additional 1 per cent. tax on all higher-rate taxpayers.

The Chancellor has done something else that is significant: he has ended the contributory principle of the national insurance fund. Most people pay national insurance contributions because they think it a good thing to do so. The most recent report from the Government Actuary found that 0.9 per cent. of the national insurance fund goes to the national health service. That proportion will now be much larger.

We have witnessed the true birth of hypothecation under this Government, but at the same time the end of the contributory principle. Other hon. Members have noted in this debate that the Government from now on will use the national insurance fund as some sort of cash milch cow.

The Red Book contains a whole list of the Government's tax measures. One of the items that I was interested to note was the amount of money that will be paid for the research and development tax credit. It will rise from £200 million in the current financial year to plateau out at £400 million for the next two financial years. What is the reason for that plateauing? Do the Government not think that the measure will suck in more and more investment to be relieved? In business terms, the changes in employers' national insurance are comparable with putting another 3p back on corporation tax.

There are also some other interesting things. I am delighted that the Government have come to their senses and ended their love-in with the film industry in their changes to film tax relief. That, at least, is a note of realism that I applaud. The Government will get some flack from the City, however, in response to some of the changes, particularly in terms of foreign companies. The Government were right to consider that question, but they will find some difficulties there.

The other mysterious thing is the oil fraud strategy. We all know that there may be some funny goings-on in relation to red diesel, but the build-up in the countering of fraud seems to be incredibly slow, given that, in year three, according to the Red Book, a projected £550 million will be put in as a result of this exercise. It will be very interesting to learn more about that matter.

I am surprised, too, that we have not heard anything from Ministers about the National Audit Office's observation that VAT fraud amounts to some £6.4 billion to £7.3 billion of lost revenue. If that nut could have been cracked, the Government would not have had to raise the national insurance contribution by anything like the amount by which it has been increased. I admit that exercises are under way in relation to fraud, but if £6.4 billion to £7.3 billion is going missing and there is no discussion on the Treasury Bench about additional resources to go into that area, that says something about where the Government's priorities lie.

I shall comment briefly on expenditure on health. I was interested in the observations of Patience Wheatcroft, whose column in The Times I have grown to enjoy. She contrasts Mr. Fred Goodwin with Mr. Wanless, from whom he took over as chief executive of NatWest bank, and writes that Mr. Goodwin would have been harder than Mr. Wanless—rather than giving the money away first, he would have got the reforms. I want to share with the House the thought that, in delivering this health care package, one of the problems that the Government will face will be actually getting people in for treatment.

The Wanless report gives us some counsel. First, it points out that it is difficult, in various scenarios, for spending growth of between 7.1 per cent. and 7.3 per cent. to be spent wisely on the health service; that is pushing it. It is not surprising that paragraph 5.54 of the report refers to the problem of the shortage of doctors, which it predicts for after 2005: If 20 per cent. of GP and junior doctors' work were shifted to Nurse Practitioners, this would eliminate any potential capacity constraints in doctor numbers. That is worth considering. However, it continues: On this basis, the demand for nurses would increase by around a further 10 per cent. This could be filled if 12.5 per cent. of nurse workload could shift to health care assistants (HCAs). But on the basis of a transformation rate of 1.5, this would require additional recruitment of almost 70,000 HCAs in addition to the projected increase in demand of 74,000. Although there is scope to increase the number of HCAs, it may be difficult to recruit this many HCAs on top of the current workforce of around 350,000. The whole report is littered with ifs, buts and assumptions. If the Government's policy on health care is founded on solving such problems, that illustrates the difficulty of spending the money quickly to deliver front-line services.

I hope that some of the money will contribute to relieve the wait to see consultants. Under the current arrangements in my area, as far as the Blackpool Victoria hospital is concerned, since January 2000, large numbers of specialties have vastly increased waiting times, which are well above the Secretary of State's current target of 15 weeks—soon to be 13 weeks for the first consultant appointment, I think. In only those disciplines in which clinical priority was changed by the waiting lists initiative has there been any decline in waiting times. The worst-case scenario is neurosurgery; someone with a brain problem has to wait 72 weeks to have it sorted. That is unacceptable, but I hope that the problem will be solved. I also hope that the policy will mean that the Blackpool Victoria hospital will get an additional CT scanner. I say that because I fight for the health care interests of my constituents and because I am personally dependent on the national health service. We want rapid progress.

I draw attention to another contrast. I talked to the new chairman of our primary health care trust who was involved with the primary care group until this month. He told me that it had taken him nine months of battling to try to get more chiropody services into the local health authority. No one could understand why what he described as "foot care maintenance" mattered. Now that he is the chairman of the primary health care trust, he says that he will change that. However, people have had to wait nine months to receive chiropody services, and we have all received letters from elderly people who desperately need help. This issue illustrates the problem and the complexity of the task of trying to put the health service right.

My right hon. and hon. Friends are right to examine alternatives. We should not be criticised because we have the courage to consider different approaches. We share the common agenda of wanting better health care in this country. I am glad that we at least share such common ground, and I am grateful to have had the opportunity to contribute to the debate on the Budget.

5.21 pm

Rosemary McKenna (Cumbernauld and Kilsyth)

I am grateful to be able to take part in this important debate. We should welcome the gracious comments of the right hon. Member for Fylde (Mr. Jack) at the beginning of his speech. It was nice to hear such words from a Conservative Member.

I congratulate my right hon. Friend the Chancellor on a superb Budget that will be of major benefit to all the people of the United Kingdom. It is worth noting the impact that it will have on Scotland, where it is good news as it will provide an extra £2.7 billion for public services over the next three years. That is equivalent to £528 per man, woman and child in Scotland. A further £5.5 billion will be provided in years four and five.

The 2002 Budget will go down in history as the one in which the Labour Government began to reverse decades of under-investment in the national health service and returned it to the type of health service that people want and deserve. The development of modern techniques and the fact that people are living much longer create an even greater burden. I believe that the vast majority of people understand that massive investment is required to make the health service, in the words of my right hon. Friend the Chancellor, the best insurance policy in the world."—[Official Report, 17 April 2002; Vol. 383. c. 592.] I refer those Members who argue that the public will not understand our policy and will not continue to support the Labour party to the words of the taxi driver who brought me to Westminster this morning. His comments will certainly reassure Labour Members as we all know that London taxi drivers are a great barometer of public opinion. He said, "We want a good health service and we know we have to pay for it." His views reflect what the vast majority of people think. They want an NHS that is free at the point of need and that is not based on anyone's ability to pay.

The reforms demanded are crucial. We need an audit commission, and I welcome the creation of such an independent body. My right hon. Friend the Secretary of State for Health made it clear just how independent the process will be. There must be an explanation for why some areas of the country are so much better served than others. I hope that the commission will provide such an explanation, as well as the accountability that has been sadly lacking in the health service for a long time.

I also welcome the improvements in the help given to working families through tax credits, which will further help people into work. I wholeheartedly support the efforts to get people into jobs because that is the only way to begin to lead people out of poverty. That is the principal way in which we can achieve our target of eradicating the scourge of child poverty. I agree with my hon. Friend the Member for Aberdeen, South (Miss Begg)—she put it so well—that helping even one child out of poverty is worth celebrating. It is appalling that, in 2002, so many children are denied the prosperity of the majority.

I will continue to work with others in my constituency to improve take-up. I assure the hon. Member for Havant (Mr. Willetts) that Labour Members continue to remind the Secretary of State about that very important issue.

I was appalled at the attitude of the hon. Member for Northavon (Mr. Webb) and the scare tactics that he used. I was a housing convenor in the mid-80s and one of the things that worried me most was having to give young, pregnant, vulnerable girls the keys to flats because we were putting them into such a dangerous position. To have to look after a young baby in isolation and without support is probably one of the most frightening experiences in the world. As a mother of four, I completely understand what that is like. Fortunately, I was never left alone, but it must be absolutely terrifying. That is why we should welcome the proposals in the Budget statement.

Supported living accommodation is needed. In my constituency, we have the first foyer project in Scotland, and it grew from a council initiative. Way back in the late 1980s, together with the YMCA, we set up supported accommodation not just for girls, but for young vulnerable people, and that has grown.

Mr. David Rendel (Newbury)

We welcome that initiative only if it is voluntary.

Rosemary McKenna

Believe you me, those young people welcome it, and it is not appropriate in this day and age to put young pregnant girls—some are 14 years of age and all are under 18—who cannot be supported by their parents into a situation that would make their lives worse. They are vulnerable financially and sexually. What happens to some of those young girls is just unbelievable, and we want to ensure that they become responsible citizens and better parents. Surely that is the aim of all hon. Members.

My constituency has benefited greatly from the Budget and certainly since the Labour Government were elected in 1997. We have an unemployment statistic of 3.5 per cent.—a reduction of 43.3 per cent. since 1997. That is an amazing figure in anyone's book. I also congratulate our local jobcentres on developing their own initiatives. They have not waited for instructions to be handed down from on high. They have encouraged people into work, and they have done some superb work.

The people of Cumbernauld and Kilsyth will benefit hugely from the child tax credit, and even more families are benefiting from the working families tax credit—more than my hon. Friend the Member for Falkirk, East (Mr. Connarty) says benefit from it in his constituency. More than 1,700 families benefit from it in my constituency.

Mr. Connarty

May I correct my hon. Friend? In fact, I said that it was 1,881.

Rosemary McKenna

I am sorry: I misheard. The number in my hon. Friend's constituency just beats mine. My aim is to get even more people to benefit from that credit and to continue the work on its take-up. Helping people to stay in work is very important. That is why we have to make work pay.

The additional assistance for child care is also greatly welcomed. In my constituency, that is particularly welcome for those who need to have their children looked after at home. A great many of those in the work force in my constituency work shift patterns. Many of the jobs are in distribution, with a 24-hour working day. Having child care in the home will make a huge difference to those people; indeed, it will be a good reason for more individuals to get into work. At the moment, a lot of women are prevented from working and cannot take up much-needed jobs.

I welcome the guarantees for pensioners, especially those on state pensions or small occupational pensions. People who were able to provide for their retirement often found themselves in a poverty trap; the Budget will make a tremendous difference to them. Many pensioners in my constituency have asked me to thank the Chancellor because they are better off than they have been for many years: we should not be afraid to express such sentiments. Eight hundred and fifty businesses in Cumbernauld and Kilsyth will benefit from the cuts in the starting rate for corporation tax and the small business rate, as well as other measures to encourage enterprise and new business. New businesses are crucial to future employment prospects, and the Chancellor has provided genuine incentives to improve the business rate.

I am delighted that the Budget will benefit everyone, but I have one concern. How are areas like Cumbernauld and Kilsyth, where people are not highly paid but where there is low unemployment, to help adjoining communities with unacceptably high unemployment? Areas of deep deprivation and poverty, which often adjoin successful constituencies are one of the biggest challenges facing the Government. A significant target for us is to find a way to help them out of poverty.

Cumbernauld and Kilsyth give a sincere welcome to the Budget. We are a hard-working community; most people are in employment, but are not on high incomes. We hoped that the average income would rise in the near future; a well-known Scottish footballer, Henrik Larson, suggested that he would move to the constituency but, sadly, he has changed his mind, disappointing 50 per cent. of my constituency; I do not know what the other 50 per cent. are saying.

It is a great honour to be a member of a Government who have made a commitment to improving our public services. The Budget will ensure that resources will be available to both the Government and the Scottish Executive to deliver improved public services. I believe in our public services, and I want them to be the best in the world.

5.32 pm

Mr. Andrew Hunter (Basingstoke)

I draw attention to a registered interest: I am non-executive director of a hotel or catering conference company that is relatively labour-intensive, so I anticipate that it will be adversely affected by some of the provisions in the Budget.

I originally intended to make just two points. Bearing in mind the edict of the Chairman of Ways and Means, I shall restrict myself to one point which, however, I shall extend a little by regretting the fact that the hon. Member for Barnsley, Central (Mr. Illsley) is no longer in the Chamber. I appreciate that he has legitimate business elsewhere, but I was genuinely interested in his contribution to our debate. There appear to be affinities between Barnsley and Basingstoke. My constituency is situated in a relatively affluent part of the country, but has pockets of deprivation. I therefore identified with the hon. Gentleman's observations about Barnsley. In particular, our health authority has incurred a recurring deficit. Both today and yesterday, I listened carefully to all the Government's statements and observations; I have yet to hear, but look forward to doing so, clarification of the way in which the Government's increased expenditure plans will bear on health authorities with a historic recurring deficit.

I shall confine my further comments to just one point: the impact of the Budget on industry and commerce. Earlier in the debate the Secretary of State referred to the unprecedented strength and stability of the economy—I believe that I quote him accurately. It would be churlish to deny that that is the case in many respects, and I give credit to the Government for that. However, it is not the whole story.

During the previous Parliament, according to the Confederation of British Industry, business was burdened with an extra £6 billion a year in tax and some £5 billion in the estimated cost of red tape. Even before yesterday's Budget, those burdens have been impeding companies' ability to win orders and create jobs.

There is a further down side to the current generally healthy situation. The Government have so far only paid lip service to another important matter—the burden of bureaucracy on UK businesses, which increases remorselessly. Opposition Members have grown accustomed to pointing out that there has been the equivalent of one new regulation every 26 minutes of every working day during the lifetime of the Government. Whether or not that figure is disputed, it is irrefutable that UK businesses are spending more and more time filling in forms and less time chasing orders and creating jobs. Consequently, the UK is becoming a less attractive place to do business.

That is potentially very serious for a constituency such as Basingstoke—there are many similar constituencies, especially in the south-east of England—where a great deal of the locally based economic activity flows from inward investment. Over the past five years the UK has fallen from ninth to 19th in the league of world competitiveness, according to my figures. My hon. Friend the Member for West Worcestershire (Sir Michael Spicer) had slightly different figures, but we are making essentially the same point.

The Government inherited a legacy of low taxation, a mobile work force and low non-wage costs for employers, but that legacy has largely been eroded. We have lost and are losing much of our advantage. That is important to towns with a high-tech industry component, such as Basingstoke. The Minister may recall the table that appeared earlier this week or perhaps last week in The Times, which showed that in towns such as Newbury, Basingstoke, Woking and Bracknell, the rate of unemployment has increased relatively dramatically over the past year or so, admittedly from a very low base. Our productivity growth used to be faster than that of the United States, but under the present Government productivity growth is slowing.

Mr. Hendrick

Does the hon. Gentleman accept that the gradual increase in the rate of unemployment in the towns that he mentioned is due to the nature of the industries in those towns—high-tech industries, which have been greatly affected by the downturn in the high-tech sector in America?

Mr. Hunter

Of course that is right. I briefly pointed out that the downturn in the American economy is a significant contributing factor, but there are also other factors. My general point is that the UK is becoming a less attractive place for inward investment, which has consequences for employment in areas such as those that I have mentioned.

On trade, we keep reminding the Government that the UK's share of world exports has fallen and continues to fall. Our balance of trade has been in deficit every month for the past four years. I make those points simply to counter the Government's assertions about the strength and stability of our economy. Although I do not substantially disagree, I am saying that those factors are not the only picture, because there are other growing areas of concern that are relevant to the Budget, as I shall explain. The experience of my constituents is that, over the past five years, taxes have increased; public services have generally become worse; and business has borne the brunt of increased taxation. The essential point that I want to make is that from the point of view of business, the tragedy of the Budget is that some of its positive features are wholly negated by the increases in national insurance contributions.

The positive features are commendable. One of them relates to payroll burdens and the Government's response to the findings of the Carter report. They have responded, albeit modestly, and acknowledged that businesses have been hit severely by payroll burdens in the past four years. Nowadays, businesses are acting as unpaid tax collectors and administrators for the Treasury with regard to the working families tax credit, stakeholder pensions and student loan repayments, and no doubt in other respects. The Budget's payroll burden measure goes some way towards addressing the issue.

On the extension to large companies of the research and development tax credit scheme, I think that we are entitled to remain agnostic until we know the precise details and have seen the measure in practice. It is right that the Government should encourage companies to invest in research and development, but as a general rule, they can best do so by creating a climate that is favourable to the growth of business. That climate will consist to a significant degree of low taxes and fewer regulations, rather than a tax credit scheme that is burdensome to operate.

Mr. Hendrick

Will the hon. Gentleman give way?

Mr. Hunter

I hope that the hon. Gentleman will forgive me, but I wish to accelerate my remarks so that other hon. Members may contribute.

We know about the measures that the Chancellor has announced with regard to corporation tax and capital gains tax, but they are all very small fry. They account for virtually nothing and fade into insignificance in comparison with the increases in national insurance contributions, which represent a £4 billion-a-year tax on jobs starting next year—the equivalent of an increase of almost 3.5 per cent. in corporation tax. The impact will vary from company to company, but every company, and also the self-employed, will be hit. As has been pointed out in this debate and earlier during questions on the statement, the largest employer in this country is the national health service.

So it is happening again: for virtually every business, the overall tax burden will increase. Digby Jones, director general of the CBI, said yesterday that the Budget brings a net increase of £2.5 billion in the cost of doing business in the United Kingdom.

Most commentators are saying today that the Government have taken an enormous gamble, and I am sure that that is an accurate assessment. There was media speculation, not supported by my own observations, that some Labour Members had the jitters earlier this week when a national opinion poll stated that 70 per. cent of the population remain unconvinced by the argument that higher taxation is the way forward for public services. Irrespective of whether that is so, I am certain that we will see jitters in the years to come.

5.45 pm

Gillian Merron (Lincoln)

I very much welcome the Budget, not least because of the greater security that it gives to jobs in the city of Lincoln, where unemployment is just two fifths of what it was in 1997. In an already increasingly vibrant economy, the reduction in red tape for small businesses will be greatly welcomed by the local branch of the Federation of Small Businesses. The tax cuts for more than 1,600 businesses in Lincoln will also help to continue the positive local developments.

Engineering has received a great boost from the exemption from the climate change levy that has been given to the combined heat and power industry. I have worked for some time on behalf of Alstom, the largest private employer in my constituency, which makes gas turbines. Following its representations, I led an all-party group of MPs to meet my right hon. Friend the Financial Secretary to press for an exemption from the climate change levy. In an attempt to hold him to ransom, I reminded him that the heat and light that was being provided to Whitehall through a combined heat and power system was driven by a Lincoln-made gas turbine. Clearly my attempts were successful, and there was no need to get Lincoln to pull the plug on Whitehall.

There have been two years of unrelenting damage to the combined heat and power industry, and I hope that the exemption will be part of a mix of measures that are needed to deliver the Government's target of doubling combined heat and power output by 2010. I urge the Government to continue to take action and give support. Nevertheless, this step is extremely welcome and greatly increases job security at Alstom.

I turn now to the health service. Over the next five years, the Government will spend nearly half as much again as they are spending now. I know how warmly that is welcomed in Lincoln, where people have demanded—and, indeed, deserve—a better health service. The extra money that my right hon. Friend announced yesterday is extremely welcome. It gives the health service a financial footing that mirrors its place in people's lives and affections.

However, as has been acknowledged, extra money is just part of the solution. I want to press for a shift in approach, because we have the opportunity to do that. Disease prevention must be much higher up the agenda than it is currently. The funding for the NHS is long term and. as I am sure hon. Members agree, prevention is better than cure. Not only will prevention save the NHS billions of pounds in the long term, but it will improve the quality of life that people can enjoy.

In 1996, coronary heart disease—the single leading cause of death in this country—cost the health service £1.6 billion, yet only 1 per cent. of that money was spent on prevention. Diabetes and its associated complications account for just under one tenth of the whole NHS budget. The incidence of adult obesity has tripled in the past 20 years, so that one in five adults is dangerously overweight, as is one in 10 children under the age of four—twice as many as 20 years ago. Obesity carries a tremendous cost—£500 million per annum for the health service, but also a personal cost in sickness, and, sadly, premature death for many thousands each year. This is a serious matter that needs serious and dedicated action.

The Budget is about much more than extra money for the health service. It also covers reform and independent inspection of standards. However, we must plan carefully to ensure that we move from having a national poor health service to a national good health service. Sport and exercise is proven to improve mental and physical health and to tackle many life-threatening conditions; I have mentioned some of them.

The Government should take positive action to encourage people of all ages and backgrounds to take part in more sport and exercise. I am sure that the film "Bend It Like Beckham" will do a tremendous amount for women's football—that is not lost on Lincoln City Ladies—and especially for Asian women's football. However, we need a plan to improve the uptake of exercise and sport as part of a national health service strategy. I shall make some specific suggestions.

First, the Government should ensure that primary care trusts and groups, doctors and nurses better understand the role that sport and exercise can play in promoting healthy living. We should set national physical activity targets, as already happens in Scotland. We should ensure that health improvement modernisation plans include specific guidance on physical activity. General practitioner exercise referral schemes need long-term funding. They currently receive only short-term funding, the provision is patchy, and the Department of Health does not keep statistics on them. We must move beyond that.

Secondly, the Government could consider amending planning law to ensure that private developers pay a business contribution towards improving sport and recreation facilities. In Lincoln, the Ruston Marconi sports ground was recently acquired by Ashtenne Holdings for development. I share and have expressed the tremendous local anxiety about the provision for sport and recreation in that part of the city. We need better, not worse facilities. A change in the law would assist the local community in bringing pressure to bear to ensure that we have better facilities.

Thirdly, we should promote and quantify local authorities' role in sport and recreation. We expect local councils to provide facilities and a number, including Lincoln, find that such provision is under extreme financial pressure. It is difficult for councils to make the provision that they would like. I urge the Government to ensure that the review of local government finance takes account of our expectations and funds them accordingly. We must make a decision about the role of local authorities. I believe that they play a strong role in making local provision as part of a national health strategy.

As sponsor of a ten-minute Bill that advocated tax relief to community amateur sports clubs, I welcome that move in the Budget. I know that the Lincoln canoe club and Lincoln Wellington athletics club, which has offered to help me train for next year's London marathon after my first appearance in the Lincoln 10 km run this year, will welcome that support as well as the £20 million to renovate and improve community sports facilities.

I would like to finish by referring to the Wanless report, and to its conclusions and recommendations, which state: The Review has concluded that the UK must expect to devote a significantly larger share of its national income to health care over the next 20 years. The report goes on to say that there are five factors which would result in the health service needing fewer resources. One of those factors is more success in public health". It is clear to me that, in addition to the extra funding and monitoring, we must have a greater emphasis on prevention, not just on cure.

There is something for everyone in this Budget—we have the framework and the resources; I hope that we can make it work for the benefit of people in this country.

5.55 pm

Mr. David Rendel (Newbury)

I am delighted to have the chance to participate in this debate. I want to speak mainly about education and students in particular. It is interesting that those two subjects were scarcely mentioned in the Budget speech yesterday. It is also interesting that the Government have chosen not to allocate a particular day to the subject of education during the Budget debate. After all, it is the subject that they originally based their whole government on, saying that it was the most important aspect of public spending. Now it seems to have dropped way down the list of priorities, and I deeply regret that.

I want to make two other quick points before I move on to education, the first of which concerns the question which was, in a sense, at the heart of the Budget—that of the 1p extra tax on incomes for health. This is an interesting concept because it is neither a direct income tax nor a direct national insurance tax. Under this new tax, 1 p is being levied on everybody's income above a certain basic allowance, which is very similar to how an income tax works. Indeed, if one were beginning to introduce an income tax with no suggestion of its being progressive, that is exactly what it would be: 1 p tax on income above a certain allowance.

On the other hand, national insurance for employees is at present levied above a certain allowance, as is income tax, but it also has a top-level cut-off. In that sense, it is very different from this new tax, which goes right the way through the income scale up to the top. Although, sadly, this new tax is not as progressive as the present income tax system, it is nevertheless closer to an income tax than to a national insurance tax. It is interesting, by the way, that people talk about a I p levy, because, of course, 2p will be levied on income: 1 p from the employee and 1p from the employer.

If anyone doubts that there is a close connection between the new tax and income tax, it is worth thinking about what would have happened at the last general election if the Labour party had pledged in its manifesto not to raise national insurance contributions, but had made no such pledge about income tax. If it had done that, it could have done precisely what it did yesterday. It could have said, "All right, we will introduce a new 1 p levy on income tax—because we did not promise not to raise income tax—but you can be sure that we won't touch national insurance. That is not changing at all." It could then have done precisely what it did yesterday, and said, "We are keeping to our pledge, because we are only raising income tax." That demonstrates clearly that the Government are simply playing with words when they claim that they have kept to their pledge not to raise income tax, by raising only national insurance.

Mr. Connarty

rose—

Mr. Rendel

I shall give way, but I will take only one intervention.

Mr. Connarty

The Chancellor said that everyone, businesses as well as individuals, will benefit from a better health service. It is correct to levy the business community as well as the working population.

Mr. Rendel

I did not say that it was not right to levy the employers. That was not the point I was making. I was saying that the employees' side of the provision is much more like an income tax than a national insurance contribution. The Chancellor's and the Labour party's pretence that they have carefully kept to their pledge because they have raised only national insurance and not income tax is, frankly, an attempt to fool the populace at large, but I do not think that they will be fooled.

I also want to make a brief point about social services. We were promised today that there would be a 6 per cent. increase in the amount allocated for social services. That is desperately needed, as everyone in the country knows that social services are particularly underfunded at present. What horrified me in the Secretary of State's statement this afternoon was that he seemed to think that 6 per cent. was going to be enough. He seemed to suggest that, with that increase, it would to be easy for local authorities to end the problem of bed blocking, and to take everyone out of hospital who was ready to come out. Indeed, he threatened that he would fine local authorities if they did not do that.

In West Berkshire, we have had cuts worth much more than 6 per cent. Our social services funding has been cut by about 30 per cent. in the past few years. In spite of that, West Berkshire is still spending 50 per cent. more than its standard spending assessment—more than the Government say it should be spending now, let alone when it has taken on the extra people who are blocking the beds in our hospitals. If my local authority is fined in future for failing to take people out of hospital when it has been given this pitiful amount compared to what is needed, it will feel very hard done by, and I would not blame it.

I shall now deal with the problems of students and education as a whole. It is a glaring omission that students were not mentioned in the Chancellor's speech. There was little about education, and almost nothing about higher education. The only time he mentioned higher education was when he said that education will receive the priority to deliver further substantial improvements, not just in our schools but also in"— here it comes at last— our universities and colleges."—[Official Report, 17 April 2002; Vol. 383, c. 588] That was the only mention of higher education, and there was no mention at all of students.

Liberal Democrats welcome the extra money for universities and colleges. Although the figures came out in a parliamentary answer to a question that I tabled, the Government have not yet fully admitted that funding per student from the public sector has fallen by 6.7 per cent. since Labour came to power in 1997. It would therefore take more than 7 per cent. to put that back up even to the figure the Government inherited from their predecessors. It is welcome that we are at last getting some of that money from the public sector.

That money may be going to universities and colleges, but nothing is going into the student finance package. That is a criminal failure by the Government to finance a sector of the public service that desperately needs more funding. It is in line with what we are told the Chancellor keeps saying to the Prime Minister and to the Secretary of State, which is that whatever happens in the student finance review, there will be no more money overall. Most of us had hoped that that was the Chancellor's position, and that the Prime Minister and the Secretary of State would have the strength to overrule him and to insist that more money should be available as a result of the student financial review to be published in the summer. It looks as though that will not be the case.

That is odd, because the Labour party is well aware of how many votes it lost in the general election on this issue. At the end of last year, the Chairman of the Select Committee on Education and Skills said that the Government had got the collywobbles…after a successful campaign by the Liberal Democrats during the election."—[Official Report, 6 November 2001; Vol. 374, c. 144.] He said that that was why they had set up their student financial review.

The Secretary of State has explicitly recognised that debt is a great barrier to access, which the Government are rightly determined to improve. She said: I recognise that for many low income families fear of debt is a real worry and could act as a barrier to higher education. I want to make sure that our future reform tackles this problem. How can it tackle the problem when no more money will be made available?

It is also odd because of the effect on students. Students now leave university with an average debt of £10,000 and rising. The National Audit Office has confirmed the danger to the student population that that lack of finance is causing. It reported on student participation, and confirmed that people from poorer backgrounds are significantly less likely to participate in higher education following the Government's changes. It said: Since 1998–99…final removal of the means tested grant is likely to have widened the gap between social classes. Is that what the Government were elected to do?

The NAO has reported that 47 per cent. of students have to take on work to fund their educational experience. According to the National Union of Students, full-time students work on average II hours a week—what does that do to their educational experience? Research at Newcastle university suggests that 35 per cent. of students with a job would get a higher-class degree, and a better grade for every year they spent at university, if they were not in employment.

For all those reasons it is odd that the Government have failed to put more into student finance this year, but one thing is even odder. At the heart of this Government and this Budget has been the theme of the NHS and what should be done to improve it. This afternoon's statement made it clear that the Secretary of State for Health expects to employ some 15,000 more doctors as a result of these changes. Doctors have to undertake not just a three-year but a five-year course, at least, before even qualifying—and they must undertake much more training after that. The five-year course must often take place in London, which is one of the most expensive areas for students.

For doctors, it is not just a question of a 10,000 debt when they leave university. Even now the amount averages £13,350, and 40 per cent. of those qualifying end up with a debt of at least £15,000. The sum is increasing constantly as the new system becomes fully operational.

My early-day motion 875 was tabled some time ago. It refers to the problems of students who undertake long courses. It has attracted signatures from Irish Members and nationalist Members, and I am pleased to say that there are signatures from Labour Members as well as members of my party. Sadly, however, there has not yet been a single signature from a Conservative Member. The Conservatives are simply not interested in the problems of students undertaking long courses.

In case anyone has any doubts about the disincentive caused to those considering taking up medical careers, let me point out that the intake of one London medical school this year consists of some foreign students—that is good news, of course, because it means more money—and some students who have been educated at independent schools. Not one of those students was educated in the public secondary school sector—there is a disincentive for you.

If we really want to encourage those from poorer backgrounds to enter the medical service, we must do something about the funding of medical students. It is idiotic to aim for an increase of 15,000 in the number of doctors in this country unless we are prepared to ensure that there is a much smaller financial disincentive for those who want to take medical courses at medical schools. We need a bit of joined-up government, between the health and the education services.

Many students and their parents had assumed that the current review would lead to a better, more generous financial package. The Chancellor has now made it clear that students can expect nothing overall. The Government admitted that they were shocked by the effect of this issue on their vote at the general election. Well, students and their parents will have one last chance, before the spending review is out, to send the Government the message that we need more money for student finance. That chance will come on 2 May, and I hope that the voters will take it.

6.8 pm

Helen Jones (Warrington, North)

It is a pleasure for me to speak in this debate, especially on a day when we have heard a statement describing how the increase that the Chancellor announced for the health service yesterday—the largest-ever sustained increase in health service resources—will be implemented.

This is a good Budget for my constituents. The child tax credit will provide a tremendous boost for many of my constituents on very modest incomes. The same applies to other measures announced by the Chancellor, such as the raising of pensioners' income threshold, which will take many pensioners out of the tax system altogether. That will be a marvellous boost for many of my constituents who have very small occupational pensions to top up their state pensions.

What I expect my constituents to welcome most of all, however, is what the Chancellor has announced for public services. They will welcome not only the health announcement, which builds on the £43 billion that we have already committed to the public services up to 2004, but our plans for education. Contrary to what the hon. Member for Newbury (Mr. Rendel) said, the Chancellor made it clear yesterday that education spending would continue to rise as a proportion of national income and that there would be an immediate £100 million extra for school improvements.

Those announcements are both economically and morally right. They are economically right because a sound economy can afford to invest in its public services, and if we are to create a society in which people are prepared to take risks, be enterprising and start new businesses, we need the underpinning of public services that makes them feel secure in doing that. The announcements are morally right because they show clearly that we have an obligation to one another in society and that we can achieve more by acting together to provide communal services than by acting alone.

I support the arguments for extra investment in public services that the Chancellor advanced yesterday. The Conservatives continually denigrate those services and have set out on a sustained mission to try to convince the public that public provision cannot and will not work, as a prelude to further privatisation. That is the same argument that we heard from the last Tory Government, but simply packaged more prettily. It is based on the fundamentally flawed belief that public services, far from being a help to individual effort, are a hindrance to it, and that libertarianism produces a better society.

That idea is based on a fundamental misunderstanding of the history of this country. All the great advances for individuals have been achieved through public provision at a very basic level: the provision of clean water, sewerage and mass vaccination did more for people's health than any individual effort could achieve. Public housing took people out of slums, and the creation of a public education system allowed individuals to achieve their potential in a way that was unknown several generations ago.

I always cite my own family as an example, not because we are in any way exceptional but because we are so typical. My grandparents brought up their children in the direst poverty. My older relatives still remember what it was like to have to struggle to pay the doctor if a child was ill or a new baby was born. There was no hope of staying on in education past 14. Yet my grandmother lived to see her grandchildren born in national health service hospitals, living in decent public housing and going to university. That was achieved not because we were clever or because we worked hard—I do not believe that my generation ever worked harder than my grandparents did—but because the public provision was in place to make it possible.

We have to achieve that again for a new generation. Quite rightly, the public services that we put in place have raised expectations. People demand more of the services that we provide now. That is why what my right hon. Friend the Health Secretary said about a clear and proper audit of the extra provision for the health service is so important. Governments have a duty to tax fairly and spend wisely, but our individual citizens also have the right to expect that we will make it clear that the extra spending is truly improving provision.

Hon. Members' readiness to support that will speak volumes about their beliefs about the future direction of this country. The Conservatives' position is clear, however much they may try to obfuscate it: it is Thatcherism with a smile. They talk about better provision of public services and about the disadvantaged, while at the same time they are committed to cutting public spending to 35 per cent. of gross domestic product. That would have a profoundly regressive effect, giving tax cuts to people on higher incomes. The poorest and those on modest incomes will have to pay for it.

The hon. Member for Woodspring (Dr. Fox) kindly told us exactly how the Conservatives plan to pay for health care. They want more people to take out private medical insurance. The trouble with that is that schemes do not take on people who are sick, have a long-term chronic condition or are elderly. The Conservatives want more of what they call "self-pay". Do they mean hip operations that cost between £5,000 and £8,000, cataract operations that cost between £1,500 and £2,500 or people having to pay to see the doctor? They have not explained exactly what is involved, but it is clear that their plans would put an end to medical care free at the point of need, which has always been the key to health provision in this country.

In my view, it is much fairer and more equitable to fund health care through direct taxation, as the Government have decided to do. We must also be honest enough to tell people that we expect to see changes in the service for the money that we put in. There is no longer a something-for-nothing deal. Public services must be much more responsive, because what was appropriate for people's needs in the 1950s is not appropriate in the 21st century.

We have already seen that the public sector can deliver more responsive services if it is given the opportunity to do so. Examples are NHS Direct, walk-in centres and the personal medical service pilots. The one in my constituency has been able to tailor its services to the needs of the population and train its front-line staff to do much more.

The money will provide an opportunity to look carefully at the services that are currently provided and ask some fundamental questions about them. For understandable reasons, health care has been focused on acute services. I trust that now, with the extra money going in and the primary care trusts coming on-stream, we will be able to spend much more on community services.

The right hon. Member for Fylde (Mr. Jack) rightly mentioned the need for more chiropody and podiatry services. They are not glamorous services that attract a great deal of publicity, but they do more to keep elderly people mobile, prevent them from developing other diseases and keep them out of hospital than other services in the acute sector. Similarly, we need to make sure that therapy services are properly delivered and that we integrate hospital and community provision so that people have a proper package of care when they come out of hospital. That will end the revolving-door syndrome whereby patients leaving hospital do not get proper therapy and therefore have to be re-admitted.

The health service can be flexible and respond to changing needs only if we invest in front-line staff and allow them to take the lead in developing services. They are often fizzing with ideas. We have to accept that some of those ideas will not work, but we cannot make progress without drawing on the experience of the staff, not simply the extra doctors and nurses whom the Wanless report makes it clear are required, but other health service staff. Many are on low grades, but they have a great deal of experience to offer the health service. We should design a proper career path that rewards their commitment to public service with the ability to progress. The Government have made a start by allowing health care assistants to train as nurses and I hope that there will be more progress in future.

I conclude with a few words about education, which I hope to expand on at some future date. The Government have improved standards in primary education beyond recognition through use of the literacy hour and the numeracy hour, which, it is fair to say, were viewed with great suspicion at the beginning. We now need to focus on how we deal with secondary education, and to ask some fundamental questions about the values that we want to pass on to our children, and what they ought to be learning to equip themselves for a vastly more complex world than we ever had to face. We must address not just the teaching of basic subjects, but how we teach our young people to deal with the vast amount of information that they receive through various media. We must teach them how to discriminate between, and value, types of information.

We must look carefully at the practical skills that children need, and we need seriously to consider when we should begin language teaching in our schools, because we in this country have not been good at that. We must also look at how to develop scientific literacy—not just the teaching of science, but an appreciation of how science has changed our world and how people can learn to assess scientific risk—because recent examples have shown that our society is very poor in that regard.

We can consider many things, but the key is that this Budget has given us secure funding for public services, which will allow us to ask those questions and to build up our services for the future. That will enable us not merely to firefight in the public sector, but to develop the best possible provision for the people of this country. That is why it is a good Budget. It enables our people to look forward to the future with confidence, and I hope that the House will support it.

6.21 pm

Mr. Peter Viggers (Gosport)

I am fortunate to be called late in this debate, because it gives me a chance to follow the hon. Member for Warrington, North (Helen Jones), who, in a thoughtful and obviously sincere speech, expressed a point of view with which I fundamentally disagree. This Budget is one of the worst that I can recall. Why, oh why, do Chancellors not follow the example of Mr. Derick Heathcoat-Amory, who, in a lengthy Budget speech some years ago, changed the excise duty on chicory—and nothing else? More Chancellors should realise that, as they tinker, they do damage.

When I was a Parliamentary Private Secretary to the Treasury, I discussed with others the fact that any measure taken by a Chancellor of the Exchequer inevitably damages somebody. The then Chancellor was quite proud of his measure to reduce the duty on environmentally friendly, "green" petrol. He said, "There is a change that won't damage anybody at all", but it virtually drove out of business the main manufacturer of anti-knock additive to lead petrol. I gather that that manufacturer was a strong supporter of the Conservative party. Every change damages somebody.

Although they are probably not directly relevant to my remarks, I should declare my interests, which are properly recorded in the register.

This Budget is extremely damaging: it is damaging to employment, through the 2 per cent. increase in national insurance, and to investment. Anyone listening to yesterday's statement would have thought that the Chancellor was actually helping oil companies in the North sea; in fact, he was adding a 10 per cent. duty on profits. The Budget was far too complicated, consisting as it did of various children's benefits and working families tax credits. I gather that the take-up rate for the working families tax credit is about 31 per cent. This Chancellor simply cannot resist tinkering. We would be better off without this Budget and, in my view, without this Chancellor.

I am not the only one to think so. The "Lex column" in today's Financial Times, which refers to "Tax tinkering", deserves extensive quotation: If you want to raise the rate of income tax, the simplest thing to do is raise the rate of income tax. That, however, would be too straightforward for Gordon Brown. Hemmed in by an election promise to raise neither the basic rate nor the higher rate of personal income tax, he has furtively accomplished the same thing by introducing an additional I per cent national insurance contribution on all earnings…This is evasion, not avoidance, of the election promise. If this were the first time that Mr Brown had introduced needless complexity in pursuit of some private whim, it would he bad enough. The Chancellor is, however, a serial offender. He has turned the British tax system into a monstrous thing, riddled with complexities and inconsistencies. We have a bad tax system that is far too complicated. If the Chancellor were a company director he would be banned, and if he were a bookie he would probably be warned off the course.

The Labour view, well expressed by the hon. Member for Warrington, North in her thoughtful speech, is that the Government know best and that any problem can be resolved by Government. That is why the top rate of tax is now effectively 41 per cent., but for those earning between £28,000 and £30,000 it is effectively 51 per cent. because of the total of the national insurance payments.

My right hon. Friend the Member for Fylde (Mr. Jack), who is of course a former Financial Secretary and knows what he is talking about, made a very good point when he said that we should look globally at taxation. That is true. If someone works overtime and earns £50, half of it will go in tax and national insurance. If he then spends £25 on petrol for his car and a packet of cigarettes, more than 90 per cent. of those overtime earnings will go to the Government in revenues of one kind or another. Perhaps it is time for a study that shows the inter-relationship between direct taxation and indirect taxation. We are being very heavily taxed and little money is left with which individuals can make their own choices.

We forget also that universal benefits cost around I per cent. to 1.5 per cent to administer, but means-tested benefits cost some 10 or 11 per cent. on average. The increase in means-tested benefits under this Government is costing a great deal in administration. For example, in the past four years, the Government have introduced five new tax credits for families, scrapped four of them and introduced two more. That level of complexity is confusing and expensive. Occasionally I meet constituents who really know their way around the tax and benefit system and they are usually doing well. However, for most of us it is far too complex. The present tax system is beyond many people's comprehension, take-up rates are poor, it is unfair and expensive, it encourages dependency and it discourages independence.

The main theme of today is work and pensions and I wish to return to a point that I put to the Secretary of State on Monday during questions. I am glad to see that he is in his place today and I congratulate him on that. Unlike many of his Front-Bench colleagues, he is a good attender in the House and we appreciate that. My point was that the Government and the Chancellor, in his single biggest act of taxation, changed the rates of advance corporation tax on pension funds, thereby damaging them—perhaps irreparably.

I made the point that millions of people in their 30s and 40s now find that pension funds are phasing out final-salary schemes. Those people will no longer be able to make provision for their retirement. The Secretary of State responded by saying that, not for the first time, I had misled the House. He pointed out that reductions in value on the stock exchange and longevity were more responsible for changes in pensions funds and the phasing out of final-salary schemes than was advance corporation tax. That is not true, because pension fund trustees can take account of long-term variations in stock exchange values. They know that values on the stock exchange go down as well as up, and they can plan for the long term with the advice of their actuaries. They can take a view on long-dated bonds and AAA-rated bonds and invest for the long term so as to allow the pension fund to reflect the requirement for pensions to be drawn from it. Longevity is also taken into account by actuaries when they advise the trustees on the proposed benefit schemes.

Final-salary schemes are being phased out because the Chancellor, in his biggest single stealth tax, which he introduced in his first Budget in 1997, has placed a massive burden of £5 billion a year on pension funds. The cumulative effect is that many pension funds are phasing out their generous final-salary schemes and introducing instead money-purchase schemes. I repeat the point that I made on Monday: millions of people in their 30s and 40s will be deprived of the independence in retirement for which they were hoping. They will be forced into dependency. One is forced to believe that this Government do not want to encourage independence.

Mr. Hendrick

Will the hon. Gentleman give way?

Mr. Viggers

I am sorry, but I shall not give way to the hon. Gentleman, who has intervened frequently this afternoon.

I think that the Government like to have people on means-tested benefits. They estimate that between 56 and 59 per cent. of pensioners and 40 per cent. of people generally are on means-tested benefits. According to departmental estimates, 65 per cent. of pensioners will be on means-tested benefits by 2050. We on the Conservative Benches deplore that and believe that independence is the single most important thing that people seek. This Government have done a massive amount to destroy that.

6.31 pm

Mr. John Bercow (Buckingham)

This has been a good, stimulating and robust debate, to which so far no fewer than 13 right hon. and hon. Members have contributed. It was opened with his usual style and incisiveness by my hon. Friend the Member for Havant (Mr. Willetts), the shadow Secretary of State for Work and Pensions, who offered the House a forensic dissection of the complexities and minutiae of the Government's tax credits policy. The Secretary of State followed, with what I must confess, by his standards, was a highly humorous and witty speech—though I am sorry to say that, in my mind at any rate, that did not compensate in any way for its relative lack of intellectual substance.

The Secretary of State was followed by the hon. Member for Northavon (Mr. Webb), who gave us a scholarly disposition on a range of Government policies. When I observe the hon. Gentleman, I am always rather worried on his account. He has so many brains that I am always a little apprehensive that at any moment one or other of them might spew forth from his head and on to the Floor of the Chamber. He made a good speech and I enjoyed listening to it, as I did to that of the hon. Member for Barnsley, Central (Mr. Illsley), who offered a penetrating critique of the Government's climate change policy based on his experience in his constituency. I am sure that it was greeted with respect and understanding on both sides of the House.

My hon. Friend the Member for West Worcestershire (Sir Michael Spicer) commented with authority and expertise on the Government's tax policies, the declining competitiveness of UK plc and the alarming problems of the productivity gap. There was a potent contribution from my right hon. Friend the Member for Fylde (Mr. Jack), who is a distinguished former Financial Secretary to the Treasury. He focused among other topics on venture capital and the burden of corporation tax. My hon. Friend the Member for Basingstoke (Mr. Hunter) offered a general critique of the Government across the field of public policy, including their failures in respect of economic performance and the delivery of public services.

The hon. Member for Lincoln (Gillian Merron) talked about energy, the health service and her particular pleasure in respect of Government policy in the Budget on community amateur sports clubs. The hon. Member for Newbury (Mr. Rendel) lamented the Government's position on student finance. We had a powerful contribution just a few moments ago from my hon. Friend the Member for Gosport (Mr. Viggers), one of the merits of which from my selfish point of view was to remind me of how moderate in my criticisms of the Government I am progressively becoming. I am grateful to him for providing a yardstick against which I must measure my efforts in future.

I hope that I have not missed out too many hon. Members. The hon. Member for Aberdeen, South (Miss Begg) made a powerful speech, but I shall not be hypocritical about it. Sadly, I was not present for most of it, but I am well aware that that was my loss and not hers.

The hon. Member for Warrington, North (Helen Jones) made a brilliant, skilful, eloquent, passionate and sincere contribution to the debate. I recall, as she will with some pain and anguish, that I lavishly complimented her in a newspaper interview about a year ago. Whether there is any causal relationship between that compliment and the inexplicable fact that she continues to languish on the Government Back Benches, I know not, but I do not wish to embarrass her any further.

Mr. Simon Burns (West Chelmsford)

Why not?

Mr. Bercow

Because I am a naturally generous-spirited fellow, and I do not wish to damage the hon. Lady's prospects in any way.

In the short time available to me, I wish to focus on a number of aspects relating to business, the children's tax credit, national insurance and the health service. On business policy and the contents of the Budget impacting on companies, we will certainly look dispassionately and constructively at the research and development tax credit, the Government's proposals for VAT reform, the pilot schemes to encourage the provision of training and the attempted reduction in the payroll burdens on business following the Carter report—burdens that have been substantially imposed by the very Government who are now pledging to review them.

Similarly, we will look critically but with interest at the Government's policy on gains from substantial shareholdings, on tax relief for intellectual property and other features of the Budget that have been highlighted in contributions this afternoon. However, I have to say to the Financial Secretary to the Treasury, who is winding up for the Government, that any progress in relation to enterprise, any assistance to companies that has been provided and any betterment of the business climate that might result from particular measures in this Budget must be viewed in the context and against the background of two important facts. First, the consequence of the changes—let us be explicit and say the huge increases—in national insurance contributions will be extremely damaging to large numbers of companies the length and breadth of the United Kingdom, as the authentic representatives of British business, whose word I trust on these matters, have eloquently testified over the past 26 hours.

These measures must be viewed in the light of the damaging regulatory imposts that have spewed forth from Whitehall since May 1997. The Government said just before they were elected that they would not impose burdensome regulations upon business because they understood that successful businesses must keep costs down. Since then, they have progressively increased regulatory burdens so that the sea of regulation with which businesses have to contend is deeper and more hazardous than at any time in the history of the United Kingdom.

As my hon. Friend the Member for Basingstoke said, the Government have imposed one regulation every 26 minutes of the working day. In 2001, from the Treasury alone, we had no fewer than 188 regulations in the form of statutory instruments, running to 1,352 pages—a veritable cure for insomnia—and weighing 4.074 kg. That is the record of a Government who do not understand business, have not worked in business, have never run a business and have certainly never owned one. That is the context in which we must view what they say now.

The Government have talked with enthusiasm and no little pride about their child tax credit and the measures that they are taking, the better to assist families. As a number of my right hon. and hon. Friends have pointed out over the past 24 hours, that must be considered in the light of the fact that between October 1999 and April 2003 the Government will have introduced five new such credits, withdrawn four of them and then added another two on top. Many of those measures require substantial swathes of regulation if they are to become effective in practice, and that means regulation on businesses. When we talk about regulation on businesses, we do not mean businesses including small businesses, we mean predominantly small businesses. Some 99.6 per cent. of companies in Britain employ fewer than 100 people; at my last examination of the matter, they accounted for approximately 57 per cent. of the private sector work force and they now generate about half our national output. Those companies are being belaboured by the regulatory leviathan so favoured by this Administration.

We know that the increase in national insurance contributions will hurt some people badly. It has been imposed even though, on 29 May last year, in a debate on the "Powerhouse" programme towards the end of the election campaign, the present Secretary of State for Trade and Industry said that there was no question that national insurance contributions would be increased. She said that the Government had no such plans, and she added that it simply would not happen.

In defiance of those apparent commitments, the increase has happened. The Forum of Private Business said yesterday that the additional bill would be £2,361 a year for companies with 10 employees. For any firm daring to grow and become more prosperous, to generate greater wealth and employ up to 100 people, the additional national insurance burden as a result of yesterday's Budget will be £23,606.

The change also has a relevance for public services. My hon. Friend the Member for Brentwood and Ongar (Mr. Pickles) pointed out to me today that each of the six secondary schools in his constituency will each face an extra bill of £40,000 a year as a result of the 1 per cent. increase in employer national insurance contributions. I think that even the Financial Secretary will be able to do the arithmetic readily enough. The extra bill will amount to almost a quarter of a million pounds a year for those schools.

In the education service, for 361,200 teachers, the extra bill will be £79 million a year. The police service has 124,970 officers, and the additional bill there comes to £32 million a year. The NHS is now the largest employer in western Europe, following the collapse of the Red Army. The extra national insurance bill for the NHS as a consequence of yesterday afternoon's deliberate and calculated imposition by the Chancellor is £336 million a year.

That is the reality of what is about to be implemented by the Government. They say that the purpose is to finance improvements in health, and that those improvements will be accompanied by reform. However, before the Budget, I made a cursory examination of speeches by the Prime Minister, the Chancellor, the Chief Secretary to the Treasury and the Secretary of State for Work and Pensions. Since 1998 there have been no fewer than 23 references to the matter but, although we have had the extra £100 billion in taxation and some of the promised increases in expenditure, we have not had the reform.

The Secretary of State for Health made a statement today, but on reform he gave us only woolliness and gimmickry on a grand scale. Problems of bed blocking and cancelled operations—77,818 of the latter last year—persist. The problem that there are more people waiting to see a consultant remains—there are 113,000 more of them since the Government came to office. The problem that our NHS has more administrators than beds persists and is exacerbated almost every day. To be precise, there are 12,290 more administrators than there are beds.

All those problems persist because we have a monolithic, bureaucratic, over-centralised, inflexible and unresponsive system. About £10 billion a year is wasted in the NHS in various ways.

A little while ago, I praised the hon. Member for Warrington, North generously and perhaps extravagantly. She spoke about the danger that more people will have to pay for operations. She is a keen student of the facts of political debate, and she must know that, last year alone, an extra 250,000 people in this country did just that, even though they had no insurance.

The two-tier system already exists under this Government. Many Conservative Members, including those who have used the NHS for decades of our lives, do not think it right that people should have to use their life savings to save their lives. That is what is happening under this new Labour Administration.

I shall take no lectures from the Financial Secretary, and certainly none from the Secretary of State for Work and Pensions. I hail from the wing of the Conservative party whose members pay mortgages and buy their own furniture. I have used the NHS for 35 years of my life. I did not go to a Scottish public school called Loretto, and I will not take lectures from the Secretary of State about the importance of standing up for and tailoring policies that are in the interest of people who do not have money. I believe in treating people on the basis of their need. We have an open mind about how to improve health care, and the Labour party has a closed mind. It has learned nothing over the past five years, and it is arrogant and stupid enough to think that it has nothing to learn in the course of this Parliament either.

This Government have failed on their public service agreement targets. They have failed on truancy, they have failed on numeracy levels for 11-year-olds, and are failing now in terms of the growth of passengers on the railway system. They are failing in terms of the reduction of congestion on our roads, which increased in 2001 by 3 per cent. They are failing in relation to their criminal justice targets, too. They say that they want to cut robbery; they are failing to do so.

The Government know how to tax and they know how to spend, and, as my right hon. and hon. Friends and millions of people the length and breadth of the country are increasingly aware, they also know how to waste money on a monumental scale. They have failed, and they are failing. With their approach, they will continue to fail.

The Government have been sussed. That is why they are becoming rattled—they have no new ideas. They have lived by spin, and they will die by spin. They are a useless shower.

6.46 pm

The Financial Secretary to the Treasury (Mr. Paul Boateng)

This has been a good debate. I fear that its tone and content plummeted with the contribution of the hon. Member for Buckingham (Mr. Bercow). I would not dream of lecturing him; it is not in my nature. I feel called on, however, to counsel him slightly, which is in my nature. The last person whom I witnessed using visual aids at the Dispatch Box, as he has just done, was one Neil Hamilton. We all know what happened to him. I would hate the hon. Member for Buckingham to end up in freak show television. He is due for another destination entirely—languishing on the Opposition Benches for many years to come.

In this Budget, we are building on the prudence of our first five years in office the principles for the next 50 years. I say that in the light of two contributions that I have heard from Opposition Members. If I may, I should like to compare and contrast them, as one was invited to do in response to exam questions of the sort set by the professor—the hon. Member for Northavon (Mr. Webb), who speaks for the Liberal Democrats on this issue—and even, I suspect, from time to time, by the hon. Member for Havant (Mr. Willetts), in his own mind at any rate.

The two contributions in question came from the right hon. Member for Fylde (Mr. Jack) and the hon. Member for West Worcestershire (Sir Michael Spicer). They were interesting and contrasting contributions. That of the right hon. Member for Fylde was reflective and considered. It bore all the hallmarks of someone who has been responsible for the publication of the Red Book, and it raised a number of important issues, not least about oil fraud. I am bound to say that, just as Calais was found to have been carved on the heart of Mary Tudor, so oil fraud will be found—when that unhappy day comes—to have been carved on mine. I will therefore write to the right hon. Gentleman about his detailed points in relation to oil fraud.

A contrasting speech was made by the hon. Member for West Worcestershire. His contribution was that of an energetic Europhobe and a fanatical free marketeer, who characterised the Government's economic policy in the most grotesque way. For him to suggest, having heard yesterday's Budget speech by my right hon. Friend the Chancellor of the Exchequer, that the Government had a downer on competition and did not recognise the benefits of the market parodies beyond belief what the Government have stood for over the past five years.

The hon. Member for Buckingham invited the House to consider what has been said about the Budget by those responsible for industry, business and the creation of wealth in our society. I am happy to do that. I refer him to the comments of Mr. Digby Jones of the CBI, who said that the Chancellor had left businesses in no doubt that he was committed to encouraging enterprise. The tax improvements, he said, including those relating to the red tape burden, were welcome. He especially welcomed the financial help for small businesses gaining accreditation as Investors in People. Although the two sides of the House disagree about the issues and about the balance of the Budget, to characterise the Budget, as the hon. Member for West Worcestershire sought to do, as anti-competitive and anti-market does not do justice to my right hon. Friend the Chancellor's statement.

Sir Michael Spicer

Will the Minister at least accept that the Government have fundamentally changed their minds about tax and spend in the past six months? Is that why the Prime Minister has been going around looking so washed out over the past few days?

Mr. Boateng

I do not accept that, or the hon. Gentleman's description of the Prime Minister, any more than I recognise his description of the state of the British economy today. We must not forget what we inherited from the Conservative party.

Mr. Oliver Heald (North-East Hertfordshire)

Will the Financial Secretary give way?

Mr. Boateng

No, not at the moment. Conservative Members do not like being reminded of their past, but they will have to hear about it for a bit.

We inherited from the Conservatives in 1996–97 a debt that was 44 per cent. of national income. Three years ago, we brought it down to 36 per cent. and, last year, it was 31 per cent. That is in stark contrast to the United States, which has a debt of 41 per cent., the euro area as a whole—this will be music to the ears of the hon. Member for West Worcestershire—which has a debt of 53 per cent., and Japan, which has a debt of 59 per cent.

The difference between us and Conservative Members is that we have the prudence and capacity to manage the economy, whereas they are incompetent and have a wanton disregard for sound public finances. That was the Conservative party's legacy. The Labour party is now the party of government—that rankles with all too many Conservative Members—and we have cut interest debt payments by £8 billion and saved almost £5 billion more on the cost of unemployment.

The hon. Member for Buckingham is concerned about waste. What about the waste of idleness and the obscene waste of unemployment? That is what Conservative Members were responsible for when they had stewardship of our economy. We have made the Bank of England independent, a step that the shadow Chancellor described at the time as damaging to the future of this country. Conservative Members have changed their minds. I listened to the right hon. Member for Fylde, and I could actually believe—this may stretch the imagination of some of my hon. Friends—that, somewhere deep in the bowels in the office of the Financial Secretary to the Treasury, he was secretly working away at just such a plan. However he did not have the guts to implement it. It took a Labour Government and a Labour Chancellor to do that, and the economy has benefited ever since.

We have freed up the resources for public services in a sustainable and responsible way. We are delivering on our commitment to improve the public services in the Budget. That was recognised by my hon. Friends the Members for Barnsley, Central (Mr. Illsley), for Aberdeen, South (Miss Begg), for Cumbernauld and Kilsyth (Rosemary McKenna), for Lincoln (Gillian Merron), for Warrington, North (Helen Jones), for Falkirk, East (Mr. Connarty), for Preston (Mr. Hendrick) and for Stalybridge and Hyde (James Purnell). All of them recognised in their contributions what the Government have done for the public services.

This Budget rightly places an emphasis on health—I want to deal with that in detail in a moment—but my hon. Friends have also recognised what we have done for education and law and order in their constituencies. Importantly, my hon. Friend the Member for Lincoln also emphasised in referring to community sports clubs what we have done for social cohesion—what we have done about the business of bringing together people and communities.

Yes, we are desperately concerned as a Government about the importance of social inclusion. Yes, we are concerned to take the practical measures necessary to bring together sections of our community, one of which has been mentioned in the debate: teenage mums—girls under the age of 18 who find themselves with child. Yes, we are determined to do all we can to bring them back into the mainstream of society, to give them the opportunities to gain an education and to make work pay for them. Yes, we are absolutely determined to use all the resources and measures at our disposal to ensure that they do not just allow themselves, or that they are not allowed, to languish alone, unsupported and isolated, in council estates or in unfurnished or furnished bedsits throughout the country.

Yes, there is another way: it is right to make available the resources by which those young girls can be helped in supported accommodation. For those who speak for the Liberal Democrats to characterise that as a form of compulsion is a travesty of what we seek to do. This is a matter not of compulsion, but of support and encouragement.

Mr. Willetts

Is the Financial Secretary aware that in an article headed "Why we should stop giving lone teenage mothers council homes" that appeared in the Daily Mail on 14 June 1999, the Prime Minister announced that that was the Government's policy, and that nothing has been done in the three years since then?

Mr. Boateng

My right hon. Friend the Chancellor has taken forward that cause in the Budget, as he has a range of other issues.

The Budget sets out our response to three key challenges. The challenge of enterprise involves a low-taxation environment, incentives for investment and innovation and support for small businesses. There is the challenge of child poverty and family prosperity. We are helping families to help themselves with a radical reform of the tax and benefits system. All families with an income of up to £58.000 a year will be better off. There is also the challenge of the public services, which were starved of investment under two decades of Conservative rule.

We are seeking to address decades of underinvestment in the NHS. The Opposition have failed to explain in all their wanderings, like flying Dutchmen going from place to place, how they will deliver the resources necessary for the NHS. Above all, they have failed to say how they would pay for the NHS and who would do the paying. We know who would pay—the public, through charges and private insurance. The Budget defends the NHS and takes forward our economy. I commend it to the House.

Debate adjourned.—[Mr. Caplin]

Debate to be resumed on Monday next.