Budget Resolutions and Economic Situation

HC Deb 10 April 2003 vol 403 cc452-98

3.9 pm

Mr. David Willetts (Havant)

I begin by declaring the interests that appear in my entry in the Register of Members' Interests.

Yesterday's Budget was overshadowed by events in Iraq, and I am sure that all hon. Members recognise that the drama of what happened in Baghdad rather overwhelmed whatever was happening in the Chamber. The collapse of an entire regime is inevitably more dramatic than what is simply the collapse of a set of economic forecasts. But even without those events thousands of miles away, yesterday's Budget statement was strangely lacking in vigour and anything that would have compelled our attention. The reason for the strange absence from the Budget statement of interest or drama was that the two crucial strategic decisions that will shape the remaining months or years of the Chancellor's occupancy of his office were both avoided in his statement yesterday, and neither of them can be delayed for much longer.

The first evasion, of course, was on the euro. The Chancellor is in a very odd position. His defence of the declining performance of the UK economy is that at least we are doing better than the continental economies. As always, things are relative; it is not really that we are doing well, but they are doing even worse. The right hon. Gentleman cannot deliver a Budget in April saying that we are doing so much better than they are, and then turn round a few minutes, days or weeks later and say that he wants to tie our monetary and fiscal policies inextricably to the very economies whose performance he has been denouncing. As a result of that central confusion between the alibi that he presented to the House yesterday and any argument for entering the euro in the future, he has carefully avoided saying anything about the biggest single decision facing him as Chancellor.

However, there was a second evasion in yesterday's Budget statement, concerning what will happen to the Chancellor's fiscal plans in the medium term. He has public spending as a proportion of national income throughout the whole period covered by the Budget, gradually growing from 36.5 to 38.5 per cent. of gross domestic product, reaching a higher level as a percentage of GDP than we have seen for more than 20 years. What we need to know is how the Chancellor will finance that steady increase in public expenditure not just in real terms, but as a proportion of our national output.

One option, of course, is more borrowing, and the Chancellor is going to borrow more. He shows his future borrowing running at more than £20 billion as far as the eye can see. As well as more borrowing, there is more taxation, and the table on page 260 of the Red Book is devastating because it shows tax revenues rising as a percentage of GDP from now until kingdom come, going upwards, well above 38 per cent. of GDP. So what the right hon. Gentleman's Budget shows is that he will have higher spending, higher borrowing and higher taxing. That is not the prospectus on which the Government were elected in 1997; it is not the prospectus on which they were elected in 2001; but it is the prospectus buried in the tables in the Red Book.

Kali Mountford (Colne Valley)

What is the hon. Gentleman most proud of from the Conservative party's period of tenure? Was it the high borrowing or the low spending that he was most proud of?

Mr. Willetts

I am proud of the fact that we left our economy in 1997 in infinitely better shape than we found it in 1979—that was our achievement, and all Conservative Members can still take great pride in it.

I want to press the Chancellor on the fact that more spending, more borrowing and more taxing are in his own forecasts buried at the back of the Red Book, and that is based on a quite exceptionally favourable set of economic assumptions. He is saying that the British economy will now grow by 2 to 2.5 per cent.—whereas the International Monetary Fund has said that it might perhaps grow at 2 per cent.—and next year it will miraculously bounce back to a growth rate of 3 to 3.5 per cent., when the IMF said only yesterday that it believed that the growth rate next year was most likely to be 2.5 per cent.

So having been caught out with his forecasts already and twice having to reduce his forecasts for this year, the Chancellor shows no compunction whatsoever in carrying on assuming that he will have high growth rates in future. He is like someone who has just lost a bet on the grand national and says that that is evidence that he is more likely to win his bet next year. He is no more likely to be proved correct in next year's forecasts than in those for previous years.

If the Chancellor's forecasts are not correct and the outside, independent forecasters and international organisations are, the scenarios will be even worse than those set out in the Red Book. Indeed, the Institute for Fiscal Studies has warned in the last hour at a seminar on the Budget that it believes that the Chancellor will face tax increases of between £4 billion and £11 billion simply to finance the public spending plans set out in the Budget if its economic forecasts, rather than the Treasury's, are correct.

The Budget has two crucial omissions—one in regard to the euro; the other the failure to set out what the Chancellor will do when he faces the fiscal crunch of being unable to finance the spending plans contained in the Budget. But the Chancellor tried to fill the gaps that should have contained his central Budget judgments with a large amount of detail on tax credits and benefits.

The Chancellor is one of those anoraks who is deeply interested in those things—and, I confess, so am I. I am rather intrigued by some of his proposals. I have previously debated with the Secretary of State for Work and Pensions the ideas, for example, about the reform of housing benefit, to which I give a cautious welcome. Some of the ideas in the Budget on such subjects are well worth exploring, but I have to tell the Chancellor that he will not compel the nation's attention if he makes those ideas the central point of a Budget judgment.

Housing benefit reform and a variety of other measures that would pad out a rather thin social security uprating statement really will not do as the centrepiece of a Budget statement during a debate on the future of the nation's economy. Given that the Chancellor has offered us that material, I should like to touch for a few minutes on four of the specific topics in the Budget: the child trust fund; the Chancellor's proposal on pensions and savings; his measures to try to improve employment; and, finally, his tax credits.

I have chosen to begin with the child trust fund, partly because there is a considerable degree of shared ground. I accept that one of the most interesting developments in the thinking about the reform of the welfare state in the past decade has been the recognition that we should think not just about the income of people who are in poverty, but about the importance of encouraging them to build up assets and pots of saving as well. Hon. Members on both sides of the House share that ground. It goes back to the Tory vision of property-owning democracy, and we wish to see more people in this country owning more assets.

We are happy to participate in the debate on assets and poverty, but I have to tell the Chancellor that, as always, what is basically a good idea is spoilt by an obsession with making everything so complicated. Instead of one scheme, there are two: a child trust fund and a savings gateway. Those two different proposals are easily confused. His child trust fund will involve not just putting in money when a child is born, but perhaps further payments—we do not know the detail—when the child is five, 11 or 16. There will be some sort of means test because there are two values of payment— £250 or £500—so there presumably has to be a means test at four different stages of each child's life to assess whether the higher or the lower payment will be made.

So, to choose an example at random, the Chancellor's neighbours in Downing street, with four children, would face 16 separate occasions of means-testing for their four children simply to participate in his child trust fund. It seems rather excessive to require the Prime Minister's family to submit information about their income to the Chancellor on 16 separate occasions to enable him to establish exactly the size of payment that he will make into their children's bank accounts. Why could he not do it a bit more simply?

The Chancellor's scheme stops at the age of 18, perhaps because that is when the money will be needed to pay the tuition fees that this Government have introduced. We want a scheme that carries on encouraging and rewarding saving throughout people's entire working lives. That is why our lifetime savings account not only carries forward into the future, but is far simpler and more flexible than what the Chancellor has proposed.

The second subject that I wish briefly to raise is the question of pensioners and the importance of saving for retirement. One of the other extraordinary omissions from yesterday's Budget statement was anything about the pensions crisis facing our country. We are seeing the collapse of the post-war settlement in British pensions and the collapse of occupational funded pensions, which have been such an important part of financing the retirement of millions of people. I am surprised that the Chancellor did not feel the urge to say anything whatever about that subject, especially given his own track record in that regard. We all remember what he said in his first Budget statement in July 1997: Many pension funds are in substantial surplus and at present many companies are enjoying pension holidays, so this is the right time to undertake a long-needed reform."—[Official Report, 2 July 1997; Vol. 297, c. 306.] That is what he said. Well, the substantial surpluses and contribution holidays are long since gone, but the £5 billion a year in tax remains. What we want to hear from him is some recognition of the effects.

I offer the Chancellor the following suggestion. The Opposition will accept that the problems facing our funded pensions are not wholly the result of the tax increase. I do not pretend that they are solely and exclusively the result of the £5 billion a year in tax. There are many factors behind the crisis; his tax is an important one, but not the only one. We will accept that the problem is not only the tax if he will come to the Dispatch Box in return and accept some responsibility in respect of the tax and if he is willing to show just the faintest hint of recognition that his £5 billion a year tax has something to do with what is happening to the savings of millions of workers. Instead of so busily engaging in conversation on the Front Bench, why does he not take this opportunity to accept at the Dispatch Box that that tax has had an effect on the funded savings of millions of people?

Mr. Adrian Bailey (West Bromwich, West)

Will the hon. Gentleman give way?

Mr. Willetts

We are being offered a rather poor substitute for the Chancellor, but if the right hon. Gentleman will not intervene, I shall of course accept another intervention.

Mr. Bailey

Will the hon. Gentleman give a commitment that he will reverse the decision made by the Chancellor?

Mr. Willetts

What I am trying to find out is what the Chancellor thinks has been the effect of his decision. I deeply dislike many of the 53 tax increases that this Chancellor has imposed. I would love to be able to reverse many of them. When we come to reach our financial judgment in the run-up to the next election, we will decide which ones we can afford to reverse. That is the responsible position to adopt.

Mr. Michael Jack (Fylde)

Does my hon. Friend recall that the justification given by the Chancellor for ending the payable tax credit was reducing the pressure on companies to pay dividends with a view to helping them increase their investment? Does he think that that squares up with the falling levels of private investment reflected in the economic data revealed yesterday?

Mr. Willetts

My right hon. Friend makes a very good point. He is right that one of the many forecasts that the Chancellor had to reduce yesterday in his Budget judgment was his estimate of the performance of business investment, which is not growing as he had hoped but declining.

The wider point made by my right hon. Friend the Member for Fylde (Mr. Jack) relates to the absurd economic theory that was advanced to defend the tax increase—I am afraid that I heard it from the Economic Secretary at one point—that we could somehow encourage investment by encouraging companies to hold on to more of their retained earnings. That theory represented a complete failure to understand the role of the capital markets in allocating capital in the most effective way. The distribution of a company's profits means not that they are lost to the economy, but that they go into the capital markets to be allocated to the firms that have the best use for them. It is a sort of constipation theory of investment to say that people have to hold on to something in order to maximise investment. Of course, that theory is now being comprehensively demolished by the evidence before us.

We are facing not only the attack on funded savings in our pensions, but the logical consequence—driving people into dependence on means-tested benefits instead. This year, 60 per cent. of pensioners will be dependent on means-tested benefits. That is not the sort of country that we want to live in and it is not what the pensioners of this country want. They want the dignity and independence of enjoying an income from their own savings, rather than to face more and more means testing.

I ask the Chancellor to consider an example that illustrates the ultimate absurdity of his system. I have identified the position of a 70-year-old man with a basic state pension and an income on top of that of £60.07 a week. That 70-year-old pensioner, with his £60.07 income on top of his basic state pension, has achieved the apotheosis of the Chancellor's vision of how his system should work. Every week, the pensioner is paying £1.04 to the Inland Revenue and receiving £1.04 of pension credit. The two transactions exactly balance out, as he is paying £1.04 to the Chancellor's Revenue department and receiving £1.04 from the Pension Service. I suppose that we should regard that as a triumph of the Chancellor's policies in rewarding saving, but I regard the whole game as absurd.

The situation is worse than that. Of course, I am assuming that that pensioner is at least collecting the benefit, but we know from the report published only yesterday by the Select Committee on Public Accounts that there is a very serious problem with the take-up of means-tested benefit. The Committee's 12th report states that between one-quarter and one-third of entitled pensioners do not claim Minimum Income Guarantee… one-third Council Tax Benefit and one-tenth Housing Benefit. The total amount unclaimed is in the range between £900 million and £1.8 billion. Thus, there is an enormous amount of unclaimed benefit, and as a result, all the models that the Chancellor offers to show how much better off everyone will be as a result of the benefits have the one slight problem that many people do not collect the money that he would like them to receive.

James Purnell (Stalybridge and Hyde)

Surely what matters to pensioners is whether or not they are better off, not whether or not they are means-tested. Does the hon. Gentleman accept that the number of pensioners in relative poverty after housing costs has fallen by 50 per cent. since 1997? That contrasts with the record of the Thatcher Government for whom he worked—a record of which he said he was proud. Under that Government, the income of the absolute number of people in poverty, or the bottom 10 per cent., fell by 20 per cent. in absolute terms. They were worse off by 20 per cent. Is he proud of that record, as he said earlier?

Mr. Willetts

The point that I was making is that a lot of the figures on poverty assume take-up that simply does not exist. Even according to the Chancellor's targets, 1 million pensioners will not be claiming the benefits in 2006.

I am also trying to address an issue that I believe the Secretary of State for Work and Pensions recognises, as he has referred to it in the past. I am trying to invite those on the Government Front Bench to consider not only the figures for today, but the impact on behaviour for the future. The question is what the scope of means-testing says to people who are considering whether to save. I do not claim that that is an original point or a distinctively Conservative one, but it seems a very powerful point that the sort of static model that we just heard advanced does not recognise.

For the benefit of Ministers, I should like to give a quote not from a Tory, but from Ernest Bevin. The Secretary of State has previously heard me cite the quotation. which appears in Alan Bullock's biography. The remarks were made when Ernest Bevin came to his executive council of the Transport and General Workers Union in 1937 after he had painstakingly worked to try to set up a funded pension scheme for the sheet metal workers of south Wales. Much to his disappointment, the members of his union voted against having an occupational pension. Bevin reported to his executive council: I think it is a tragedy for South Wales, but it appears that a large number of the men take the view that if they become party to a superannuation they are merely saving the Unemployment Assistance Board expenditure. When a large community develops a relief complex of this character it is not good for democracy. That is the point. Will the spread of such means-testing affect behaviour in a way that none of us support? The Chancellor and the Secretary of State for Work and Pensions need to tackle that question. I believe that they understand that; it is a pity that they will not acknowledge it.

Funded pension saving has declined and dependence on means-tested benefits has increased. That is the Government's record on pensions. It is a disaster for our country.

Ms Karen Buck (Regent's Park and Kensington, North)

Is not it the case that before the proposal for the pension credit, there was no value in people saving if modest savings took them just above the level of income support? The pension credit will provide an incentive to save. That is its value.

Mr. Willetts

But there are other, better methods of alleviating poverty among pensioners that do not have the same effect on savings. When the pension credit was considered in the House, we tabled a reasoned amendment, which the right hon. Member for Birkenhead (Mr. Field) and the Liberal Democrats supported, that would have provided for the money to go towards a higher pension for older pensioners. It would have targeted poverty without the need for so much means-testing. It would not have had the same effect on incentives to save as the spread of means-testing.

Mr. Paul Goodman (Wycombe)

Would my hon. Friend like to comment on the following words: The pension credit unquestionably adds further complexity to an already Byzantine system of retirement provision, which is causing confusion for pensioners, pension providers and those saving for their old age."? That is a quote from the report of the Select Committee on Work and Pensions, of which the hon. Member for Regent's Park and Kensington, North (Ms Buck) is a member.

Mr. Willetts

I am grateful for that intervention. The report reflects a widespread anxiety that has been expressed by not only Conservative Members but the National Association of Pension Funds Ltd, the Institute for Public Policy Research—the Government's favourite left-wing think-tank—and Age Concern about the spread of means-testing. They demand that the Government at least consider reforming the benefits system as part of tackling the pension crisis.

James Purnell

Will the hon. Gentleman give way?

Mr. Willetts

I have given way to the hon. Gentleman once and I want to make progress.

Instead of considering reforming the benefits system, the Secretary of State for Work and Pensions produced a Green Paper that completely ignored the state's role in creating the mess in which people find themselves. It ignored the problem of absurdly complicated benefits. Someone said that the Green Paper was so green that cows could graze on it. It is therefore not too late for the Secretary of State to present proposals for a simpler, better benefit regime for pensioners.

Let us consider another old favourite about which we heard more yesterday: crackdowns on the unemployed. No Budget or autumn statement by the Chancellor is complete without a crackdown on the work shy. Every year since 1997, the right hon. Gentleman has gone for the headlines. In July 1997, a headline read, "Labour to be tough on workshy". After the March 1998 Budget, we read: "Puritan Brown goes to war on workshy". "Brown declares war on workshy" stated a newspaper after the 1999 autumn statement. In 2000, The Sun stated, "Blitz to hit workshy". The Chancellor is good at spin. In March 2001, he got "Workfare system facing the jobless" into The Daily Telegraph. Well done! In November 2002, after the autumn statement, The Times reported, "Brown gets tougher on hardcore unemployed".

I always watch with interest for the spin about how tough the Chancellor will be on the unemployed. Every year, a little like the man who clears up the mess after the procession has passed, I table a few parliamentary questions to ascertain what is actually happening. Of course, what happens is always different from the spin. Let me give three examples of the gap between the Chancellor's rhetoric and reality.

First, let us consider lone parents. I shall cite the latest figures on workless, lone-parent households. A welcome and steady welcome decline occurred for several years. It began when my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke) was Chancellor and continued after 1997. Workless, lone-parent households declined to a low point of 680,000 in autumn 2000. The Chancellor subsequently launched his new deal for lone parents. Since then, the trend has reversed and the figures are now increasing. According to the latest statistics, for autumn 2002, there are 707,000 workless, lone-parent households.

The Secretary of State for Work and Pensions (Mr. Andrew Smith)

What has happened to the proportion of lone parents in work since Labour has been in government?

Mr. Willetts

The total number of lone parents in work has increased. Since 1997, the percentage of lone parents in work has risen. However, the downward trend was reversed in 2000 and the position has subsequently deteriorated.

A similar analysis applies to disabled people. Labour has been talking tough but failing to deliver. Those on incapacity benefit decreased steadily since we introduced the benefit in 1995 until 2000. Since then, the figure has risen. Now, more people are on incapacity benefit than when Labour took office in May 1997. The number is increasing, partly because of so-called reforms that the Government introduced, claiming that they would reduce it. However, people are staying on incapacity benefit for longer because they believe that if they begin to work but subsequently have to go back on incapacity benefit, its terms would be different. They do not want to run that risk. That is a classic example of the perverse effects of ill-thought-out policies. More people are on incapacity benefit now than before the Government introduced their so-called reforms.

Mr. John Bercow (Buckingham)

My hon. Friend's comments reflect a pervasive cynicism about the chasm between the Government's words and their actions. Does he know that, only last month, I asked the Under-Secretary of State for Work and Pensions, the hon. Member for Croydon, North (Malcolm Wicks) on how many occasions jobseeker's allowance had been withdrawn from individuals who had thrice refused reasonable job offers? The Under-Secretary got into a frightful rage but was unable to give a figure.

Mr. Willetts

My hon. Friend is right. When one asks for the number of people who have been given a mobile phone to help them find a job, or have lost their driving licences because they have not complied with the Child Support Agency, or have been sent to prison or fined because they have refused two job offers, the Government either do not have the figures or they are pathetically small. The Government have large headlines and small results. That is the story of all their welfare-to-work policies.

Kali Mountford

Will the hon. Gentleman give way?

Mr. Willetts

I have given way to the hon. Lady once, and I would like to make progress.

I am sure that the Chancellor will want to touch on tax credits during the debate—I hope that he will—because he loves his tax credits. I shall begin with some common ground between us: it is important to boost the incomes of people with low-paid jobs. If we are to have a flexible labour market, people, and especially those with family responsibilities, might accept wages on which we could not expect a family to maintain itself in a decent society. In such circumstances, it is right to top up families' incomes so that they are higher than their earnings. That is a shared principle that goes back to the early 1970s when Keith Joseph introduced the family income supplement. The principle was reflected in our family credit and, most recently, in the working families tax credit. I disagreed with the Chancellor about aspects of the working families tax credit. For example, I regretted the way in which he changed the system of payment so that rather than delivering the payment as a benefit to the parent—possibly at home—it was delivered via the pay packet. That was completely unnecessary, and the Financial Secretary and the Paymaster General probably persuaded him to see sense and return to the pre-2000 regime of delivering it as a benefit, which I welcome.

I am rather sorry that the working families tax credit disappeared at the end of last week because the new system is even worse than the one that it replaced. The new system is far more complicated and it is causing considerable distress to people throughout the country. If the Secretary of State for Work and Pensions or the Chancellor wish to intervene on this point, I would appreciate it. I talked to people at a citizen's advice bureau only last week and they told me about problems encountered by people who received the working families tax credit until last week and who will now need the child tax credit to form a significant element of their income. However, unless they had submitted the claim form by 31 January—I think that that was the deadline—there was absolutely no guarantee that the Inland Revenue could deliver the child tax credit. That will affect low-paid Families. As the Chancellor has transferred responsibility from the Department for Work and Pensions—formerly the Department of Social Security—which had at least some understanding of the issues, to the Inland Revenue, he is running the significant risk of leaving hundreds of thousands of families in considerable financial distress.

Mr. Kenneth Clarke (Rushcliffe)

Is my hon. Friend aware that I asked my office to contact the Inland Revenue this morning on behalf of one of my constituents who applied in October to transfer her working families tax credit to child tax credit? She received no response to her application and was given an explanation that many applications had been lost in a warehouse. All inquiries to the Inland Revenue produced no indication of when child tax credit would be received by her or the many other poor families to whom the Chancellor boasts the credit will give such assistance.

Mr. Willetts

My right hon. and learned Friend is absolutely right. That is a serious problem that is arising throughout the country for a simple reason: the Inland Revenue uses annual returns of income—it works on an annual basis. People fill in tax returns, or are taxed using pay-as-you-earn, and necessary adjustments are made at the end of the year. The Department for Work and Pensions helps poor people who need money immediately—week in, week out. People on low pay need their income topped up and boosted this week. I do not believe that the Inland Revenue understood the need to get the money out promptly every week or that the child tax credit needed to be delivered to families with low earnings this week because they would otherwise have insufficient money to feed their children and heat their houses.

The Chancellor has decided—it is entirely his responsibility—that the Inland Revenue must operate as an alternative benefits agency. He might not believe in contestability of public services when it comes to health or education, but he certainly does when it comes to delivering benefits. The Inland Revenue now has responsibility to ensure that low-paid families receive a regular income. This is the first week in which it has had such responsibility and the indications are not good. They show that we will all have constituents whose families are not receiving the money that they expect and need. I know that the Secretary of State for Work and Pensions has shed responsibility for that, but if he can offer any comfort to the thousands of families who face such a considerable worry by tackling the problem, that would be welcomed by not only Conservative Members, but people struggling in citizen's advice bureaux throughout the country and hon. Members of all parties who have constituents with problems.

On tax credits, the Chancellor has been his own worst enemy. He has constructed a system that is so complicated and confusing that many people are unable to claim the benefits to which they are entitled. If everyone had claimed the means-tested benefits to which they were entitled, an extra £5 billion of benefits and tax credits would be paid each year to families and pensioners in the UK. Had that £5 billion a year been paid to them, it would have taken the Chancellor's public expenditure and borrowing limits above the 3 per cent. rule that he set himself. It is the final irony of this Chancellor's record that it is only the failure of his tax credits and means-tested benefits to reach the people who need them that has enabled him to keep his public expenditure plans within those rules. That is why we oppose the Budget and the judgments behind it.

3.44 pm

The Secretary of State for Work and Pensions (Mr. Andrew Smith)

This Budget is for a Britain in which flexibility and fairness, enterprise and full employment go hand in hand. It champions economic strength and social justice, building on all that we have done to ensure macro-economic stability and to deliver high and stable growth.

I want to focus on our aims of greater labour market flexibility, full employment in every region and making work pay, and on the extra measures that we are taking to help pensioners and to build a fairer society for all. First, however, let me acknowledge the albeit tepid welcome that the hon. Member for Havant (Mr. Willetts) managed to give to at least one or two of our measures. In so far as there is a shared aspiration on asset-based welfare or asset-based democracy, there is also a clear difference. He may talk about it and give a bit of a welcome for the child trust fund, but Labour is delivering asset-based democracy with 1.1 million more homeowners and net household wealth up 40 per cent. since we came into office. The difference is that he can talk, but we can deliver.

If we look at the Budget in the round, it is clear that because of the tough decisions that Labour has taken over the past six years—making the Bank of England independent, bringing public finances under control—Britain is better placed than other countries, and better placed than it was in the past, to withstand the global downturn and to benefit when world economic recovery begins. We have the lowest inflation for 30 years, the lowest interest rates for 40 years and the highest levels of employment in our history.

The hon. Member for Havant made light of welfare to work and matching rights and responsibilities, accusing us of big headlines and little delivery. When it comes to welfare to work and progress to full employment, surely there is no bigger headline than the 1.5 million extra people who are in jobs thanks to a Labour Government and our welfare-to-work initiatives. Those achievements did not happen by chance. They certainly did not happen because we followed the advice of those on the Conservative Front Bench. After all, the Conservatives opposed Bank of England independence, the fiscal rules, the new deal, public investment and even the working families tax credit, the loss of which the hon. Gentleman lamented. It was clear that they have learned nothing. He and his colleagues should ask themselves why, when they were in charge in the early 1980s and early 1990s, Britain was first into the downturn and suffered the most and longest. When we have produced growth in every quarter for six years, why did they twice have the British economy in recession for five quarters in a row?

Mr. Andrew Hunter (Basingstoke)

Some commentators said today that the greater part of job creation in the past 12 months has been in the public sector, not the wealth-creating private sector. The private sector continues to suffer from belt-tightening and that trend looks set to continue. Will the right hon. Gentleman comment on that?

Mr. Smith

If the hon. Gentleman is saying that we should not be employing more teachers, more police officers, more nurses or more doctors, then he is confirming the shadow Chief Secretary's agenda of 20 per cent. cuts in public spending. The detailed figures relating to the 1.5 million extra jobs now in the economy show that whereas about 400,000 are public sector jobs, more than 1 million of the extra jobs that we have generated are in the private sector. The difference between Labour in government and the Conservatives in government is that, thanks to their mismanagement of the economy and the depth of those recessions, they cut not only public sector employment so that hospitals, schools and policing suffered, but private sector employment, too, so that unemployment rose to more than 3 million, which was enormously wasteful to individuals and to our society. I make no apology for employing more public servants to deliver front-line public services, but the success of our economic policies has resulted in more employment in the private sector as well.

Conservative Members should ask themselves why their Government had interest rates at more than 15 per cent. for a year, whereas we have them at 3¾ per cent. Whereas we have inflation at 2.5 per cent., they had inflation at 20 per cent. in the 1980s and 10 per cent. in the 1990s. We have a cumulative current surplus over the cycle. Although, this year, net borrowing is projected to be £27 billion or 2.1 per cent. of GDP, borrowing under the Conservatives reached a high of 8 per cent. of GDP—in today's terms, £83 billion of borrowing—in just one year. The hon. Member for Havant talked about the legacy the Conservatives bequeathed to us, but they left us debt standing at 44 per cent. of GDP. Yesterday's Budget stabilises debt below 34 per cent. of GDP, as far as the forecasts go—

Mr. Kenneth Clarke

Will the Secretary of State give way?

Mr. Smith

Britain is not simply doing better compared with other industrialised countries, but doing very much better than in the past, including when the right hon. and learned Member for Rushcliffe (Mr. Clarke) was in charge.

Mr. Clarke

Will the Secretary of State please stop making ridiculous claims about interest rates and inflation based on comparisons with the inflationary recessions in the 1970s and 1980s, which were quite different from the problems that are hitting this country now? Almost every country in the world can claim that it now has the lowest interest rates that it has had for about 30 years—indeed, fears of deflation are running through the developed world. In fact, the UK currently has the highest interest rates in the G7 and has done so for most of the time that the Labour Government have been in office.

Mr. Smith

I do not think that the right hon. and learned Gentleman was listening to me. I did not simply point to the '70s and the '80s; I pointed to the '90s as well—not that long ago—when, under the Conservatives, inflation was in excess of 10 per cent. The reason why there is now greater economic stability, 1.5 million more people in jobs and many more businesses thriving in our country is that we have been building an economy on a sound macro-economic foundation, following tough, firm and clear fiscal rules, assisted by the independence of the Bank of England. By contrast, he refused to put firm fiscal rules in place and opposed the independence of the Bank of England.

Mr. Clarke

The Secretary of State is going back to the '90s, but not to the time when the economy was handed over to the present Government. When I left office as Chancellor I was able to boast of the lowest mortgage rates and interest rates for many years. This country has had 10 years of growth with low inflation. Private sector jobs were created as a result of the ongoing benefits of that and the United States-led boom. Things have changed now: public sector employment has been rising by 70,000 a month—they are not all teachers or nurses—and private sector employment is falling quite rapidly. Once they get into difficulties, the Government will find that they have lost control.

Mr. Smith

I do not blame the right hon. and learned Gentleman for talking up his record and achievements, but he should compare current mortgage rates with what they were when he was in charge. As for his legacy, look at that debt of 44 per cent. of GDP and compare it with our achievement of getting debt below 34 per cent.

If the right hon. and learned Gentleman is comparing different downturns in the world economy and their domestic effect, he must ask himself why it was that in the world downturn of the 1980s, employment went down by 1.3 million. In the downturn of the 1990s, employment went down by 1.6 million. Contrast that with the position in this world downturn, where employment has increased by half a million. That is the result of the macro-economic stability and the policies of economic success that we have put in place.

Mr. Parmjit Dhanda (Gloucester)

If the right hon. and learned Member for Rushcliffe (Mr. Clarke) is not content with main comparisons of mortgage interest rates, perhaps he should consider the growth in living standards under the present Government compared with that under the Government of whom he was a member.

Mr. Smith

Absolutely. Living standards have been rising. Net household wealth is 40 per cent. stronger than it was when we came into office. That is a consequence of the stability that I have been talking about and the tough fiscal decisions that we have taken. That has meant more people in jobs, people being better off and successful businesses. It has meant also that we are able to invest more money where it is needed. The Conservatives ran down public services, investment and infrastructure, with unemployment of more than 3 million and millions in poverty. We are tackling poverty and, at the same time, targeting public spending on front-line services—for example, health, education, transport and crime fighting.

This year's Budget implements our spending review commitments with real rises in education spending, for example, of about 6 per cent. a year. As my right hon. Friend the Prime Minister highlighted yesterday, an international report finds that English primary school readers are now among the best in the world. We have the highest ever number of police officers—there are more than 130,000 officers, more than ever there were under the Conservatives. According to the British crime survey, crime is down by more than 25 per cent. Through the increase in national insurance that was announced in last year's Budget, spending on health in the United Kingdom will rise by 7.2 per cent. a year in real terms right through to 2008. That will secure the national health service as a quality service, with 25,000 more doctors, 80,000 more nurses and more than 100 new hospitals, all free at the point of need. It is because we took tough decisions, stuck to the fiscal rules and built a strong economy that we can now go further.

Yesterday, my right hon. Friend the Chancellor of the Exchequer set out a range of measures that build on a stable foundation to promote enterprise, to tackle poverty, to protect the environment and to ensure a better quality of life for current and future generations. During the debate today and in the days that follow, Opposition Members will have to tell us whether they support our drive to improve the supply of housing and the streamlining and simplifying of planning decisions. They need to say whether they back our measures to help break down the barriers to business success by reducing red tape and simplifying tax for small businesses. These measures will bring greater flexibility to capital markets, to product markets, to housing and planning and labour markets.

Mr. Jack

Will the Minister give way?

Mr. Smith

On flexibility, I am happy to give way to the right hon. Gentleman.

Mr. Jack

I wonder whether in that litany of gains that he has put before the House he can refresh my memory as to how much the loss has been in the value of pension funds, endowment policies and other similar investments since 1997.

Mr. Smith

We should consider what is happening to pensioner incomes rather than the allegations and the figures that are thrown around by Opposition Members. It is possible to hypothesise all sorts of things about funds. What matters to pensioners is the money that they are getting. We must have regard to surveys of household income. The right hon. Gentleman and those on the Opposition Front Bench will find that pensioner incomes are up by 20 per cent. in real terms since Labour came into office.

Mr. John Bercow (Buckingham)

The right hon. Gentleman is focusing excessively on inputs to the detriment and perhaps even the exclusion of outputs. Given that the trumpeted public service agreement targets on literacy and numeracy were both missed in 2002, and that the target on truancy was missed, then scrapped, can he not see that although it would be disappointing if the Government missed targets set by independent experts, for them to fail to meet the targets that they have set themselves requires incompetence on a truly spectacular scale?

Mr. Smith

I heard the hon. Gentleman use precisely the same language yesterday to make precisely the same point, which was rather more effective in the original than in the repeat. He is talking about outputs, and so am I. Crime surveys show that crime is down by more than 25 per cent. If the hon. Gentleman wants to talk about outputs in the health service, he should take a look at the fact that 130,000 fewer people are waiting a long time for operations, or that, unlike the past, 98 per cent. of people suffering from cancer now get to see a consultant specialist within two weeks. Literacy and numeracy have both improved significantly since the Opposition were in office to the point where, as I said earlier, the Prime Minister could highlight international reports commending English standards in our primary schools. We are therefore doing better—[Interruption.]

Madam Deputy Speaker (Sylvia Heal)

The hon. Member for Buckingham (Mr. Bercow) asked the Minister a question and he has replied, so perhaps he would listen.

Mr. Smith

I shall take your advice, Madam Deputy Speaker. I think that I have answered that one.

On employment, since 1997, we have transformed our employment programmes and approach. On input, we are investing £2.2 billion in transforming Jobcentre Plus to make it the best welfare-to-work service in the world. On output, every year we are helping over a million people into jobs through Jobcentre Plus. Investment is matched by reform, for example, the introduction of the work-focused interview and an approach that matches rights and responsibilities, and makes work pay. The Budget carries reform further forward. With some parts of our country still having twice the unemployment of others, we want to get more people into work and offer a better service still to employers through local initiatives and innovation, harnessing the talents of our local managers and staff to meet the labour market needs of their communities.

Mr. Bailey

Given the way in which the hon. Member for Havant (Mr. Willetts) rubbished the Government's rights and responsibilities agenda, perhaps the Minister would like to comment on the situation in my own local jobcentre? It offers a step up scheme, for which 102 customers have been identified as eligible, and 49 of the long-term unemployed, the most problematic people on the register, are now in employment under it.

Mr. Smith

That is indeed a success to be proud of, and I join my hon. Friend in commending not only the programme but our front-line staff in Jobcentre Plus, who work with partners in the private and voluntary sectors and make such a success of those initiatives.

From April next year, we will be able to take the devolution of power and responsibility to front-line staff further by giving managers powers to adapt new deals to local needs and introduce a new discretionary fund to give local managers new, enhanced flexibility to direct resources to tackle local barriers to the labour market. With local discretion will go a new performance regime, with better rewards for the best performing managers and staff and a tougher approach to the worst performing, including replacing the management where that is what it takes. In every area, Jobcentre Plus specialist managers will match employers who need staff with unemployed people who need jobs. We are helping more people into work and ensuring British businesses, big and small, improve competitiveness by having access to the right employees at the right time.

We will also target resources on areas of high need to provide a particularly responsive job placement service to employers. As nearly half of all vacancies are generated by small and medium-sized enterprises, a new team will work at the regional level across Jobcentre Plus to produce a step change in service to the small business sector, building on the success of Employer Direct, which is already taking 13,000 job vacancies a day.

We shall also take further action to address the needs of those facing additional and particular barriers to work. From April next year, specialist account managers will work with employers in areas of particularly high ethnic minority unemployment, and a new £8 million fund will be established for local initiatives to help people to find work in those areas. To ensure that people at risk of drifting into longer-term unemployment take every chance of a job, we shall bring in weekly signing for those on jobseeker's allowance between 13 and 19 weeks of unemployment. We shall also increase the area over which new JSA claimants will be expected to travel to find work.

In terms of making work pay, since 1997 we have reformed the system so that it pays to move from welfare into work. Too often, however, unemployed men and women say that losing their housing benefit means that it is not worth their while to work. So from next April, people on housing benefit who move into work will no longer be required to submit a new claim for housing benefit. They will simply inform the local authority and continue to be paid the out-of-work rate until their benefits are recalculated.

Ms Buck

I welcome the proposals to offset housing benefit against income to help to make work pay in high-value areas. May I, however, flag up one worry? There are people in my constituency who have been waiting for some time for their housing benefit calculations to come through, because companies such as Capita are taking some time to do the work, and this might also happen under my right hon. Friend's new system. Those people can build up massive overpayments, the repayment of which can lead to rent arrears and, in some cases, to the issuing of eviction notices. Will my right hon. Friend do what he can to work with local authorities to ensure that tenants do not unwittingly end up with serious rent problems because of housing benefit overpayments?

Mr. Smith

My hon. Friend makes a telling point. I acknowledge her experience and expertise in this area, and I always listen carefully to what she has to say. We are in fact already acting on these issues. We have made £200 million available to local authorities, for example, to improve their administration, which in many cases involves updating outdated information technology systems. We also have a help team out there working with the worst-performing local authorities, and it is succeeding in helping to transform their performance.

Like my hon. Friend, however, I suspect that there was something fundamentally flawed in the system of housing benefit that we inherited. That is why we are piloting the new approach—which was welcomed, at least in spirit, by the hon. Member for Havant—in which there will be a standard allowance that will depend on a person's family circumstances and income, rather than on the rent that they pay. That will be much more simple and straightforward to administer, because it will avoid having to poke around and assess every individual letting that is taking place within the housing benefit system. I know, because my hon. Friend the Member for Regent's Park and Kensington, North (Ms Buck) has talked to me about this as well, that there are particular challenges involved in bringing the standard housing allowance system into areas of great rent variability, such as the constituency that she represents. We shall learn from the pilots how best to deal with that.

There are now 200,000 more lone parents in work than there were in 1997, and, as the hon. Member for Havant had to acknowledge, their employment rate is now 54 per cent., compared with 46 per cent. when we came into office. That is good progress, but we need to do more. The Budget brings forward a package of measures to break down barriers to work. For many lone parents, the costs involved in looking for work are a disincentive. So, in a groundbreaking pilot, lone parents who voluntarily attend regular work-focused interviews and undertake job search will be offered an extra £20 a week to cover job search costs, rising to £40 extra a week—and topping up wages for a year—when they move into work.

While the minimum wage today is £147 for a 35-hour week, tax credits—much derided by the Conservatives—raise the minimum family income for a lone parent with two children to £276, even after tax, which is almost twice as much. We shall want to do more for lone parents who want to work part-time, as for many that is an important stepping stone into work in general. The housing benefit disregard announced yesterday, which will help 90,000 people, means that for lone parents paying £50 a week part-time work will pay £213 a week. That is what we are talking about when we say we must make work pay, and help people to move from welfare to work.

Mr. Wayne David (Caerphilly)

I acknowledge and welcome what my right hon. Friend has said, but does he recognise that much more should be done about crèche facilities?

Mr. Smith

Child care provision of all kinds is extremely important. We have a child care strategy, and the substantial extra resources we are providing will provide hundreds of thousands of places in addition to the hundreds of thousands that have already been added to the existing number. Moreover, Jobcentre Plus means that in every area a child care partnership manager will ensure that local child care provision, including advice given in jobcentres and support for employers, is properly co-ordinated.

Mr. Bercow

Will the right hon. Gentleman give way?

Mr. Smith

I should like to make a little more progress.

A flexible, dynamic economy must go hand in hand with a fairer society so that everyone has an opportunity to fulfil his or her potential. Since 1997 we have reversed the long-term trend of rising child poverty and reduced the number of families living on less than £10,000 a year by a third, and the Budget allows us to go further. We will tackle the cycle of low expectation—a cycle that can take people from low income in childhood, through low pay in adult life, to low income in retirement. The Budget allows us to give all children opportunities that have hitherto been confined to the few, by giving everyone a chance to build up some savings. The new child trust fund will give every newborn child £250, with double that amount going to the poorest.

The Budget confirms that pensioners with modest savings and occupational pensions will gain from pension credit, which will provide, on average, an extra £7 a week for half the pensioner households in the country. Here is a challenge for the Conservatives, who love to deride pension credit—along with all the other credits—and talk of people being sucked into means-testing. Half our pensioner households will be, on average, nearly £400 a year better off. Is the Conservative party going to take that money away from them? That is the question that it must answer between now and the next general election.

Taken together, our reforms will make pensioner households more than £1,150 a year better off in real terms, with the poorest third gaining over £1,600. Most pensioners have no income tax to pay, but those who do will benefit. Age-related personal allowances for the forthcoming year will rise to £6,610 for those between 65 and 74, and to £6,720 for those aged 75 and over. No pensioner will pay tax on an income of less than £127 a week.

Mr. Goodman

The right hon. Gentleman mentioned means-testing. According to the most recent take-up figures, did take-up of income support, jobseeker's allowance, council tax benefit and housing benefit go up or down?

Mr. Smith

We need to do more about take-up of those benefits. I acknowledged that when the figures were published. What neither the hon. Gentleman nor the hon. Member for Havant has mentioned is the acknowledgement in that and other reports of the considerable impact that our take-up campaigns have already had. For example, 150,000 more pensioners have benefited from the minimum income guarantee by an average of £20 a week. As we roll out the new pension credit, we will contact every pensioner in the country with unprecedented energy and attention to ensure that every pensioner gets the entitlements that should be their right, and which they deserve.

James Purnell

Does my right hon. Friend recall that the hon. Member for Wycombe (Mr. Goodman) is a member of the Work and Pensions Select Committee, and that it unanimously welcomed the pension credit? It said that the pension credit will ensure that most pensioners will be better off as a result of having saved for their retirement, compared to those who have not.

Mr. Smith

I am sure that the hon. Member for Wycombe (Mr. Goodman) drafted that text, and I am grateful to my hon. Friend the Member for Stalybridge and Hyde (James Purnell) for drawing it to my attention. [Interruption.] Apparently, the hon. Member for Wycombe did not draft it.

Mr. Goodman

I am certainly happy to acknowledge that I signed up to the report on the pension credit—if the hon. Member for Stalybridge and Hyde (James Purnell) will also acknowledge that he signed up to its concluding paragraph, which states: However, the Pension Credit unquestionably adds further complexity to an already byzantine system of retirement provision, which is causing confusion for pensioners, pension providers and those saving for their old age. Perhaps the hon. Gentleman might also like to confirm that, although the Committee welcomed the money, it never accepted the principle of the pension credit.

Mr. Smith

We have had an illustration of the fine tradition of compromise that underpins the standing and integrity of our Select Committee reports. However, I cannot but draw the House's attention to the fact that the hon. Gentleman supports the pension credit, whereas the hon. Member for Havant opposes it. Their position is going to come apart between now and the next general election.

To provide greater financial security and to reduce anxiety for those who stay longer in hospital, we will ensure that, where pensioners and those receiving income-related benefits currently lose about 40 per cent. of their pension after six weeks in hospital, everybody admitted to hospital from yesterday onward will be able to keep their benefits in full for stays of up to 52 weeks.

Mr. Andrew Miller (Ellesmere Port and Neston)

My right hon. Friend has sneaked in a little word—as did the Chancellor—that nobody has properly picked up. The hon. Member for Havant (Mr. Willetts) often accuses the Department of keeping things to itself. However, am I right in saying that this provision will apply to everybody who is on income support, and will that not constitute a huge benefit to the mentally ill in particular, who have complained for years that when a schizophrenic, for example, is sectioned under mental health legislation, they lose their housing benefit after a few weeks, which makes it even more difficult to get back into the community? Is this not a fantastic gain for people such as the mentally ill?

Mr. Smith

It is a very important gain, and I am grateful to my hon. Friend for reminding the House that the provision applies to all income replacement and benefits for up to 52 weeks. For the avoidance of doubt, it will not apply to attendance allowance and disability living allowance, because those are living cost and care cost benefits that are met while people are in hospital.

For pensioners aged 80 or over, the Budget also introduces, from yesterday onwards, an extra payment of £100, over and above the £200 winter fuel payment, for the remainder of this Parliament. Almost 2 million people aged 80 or over will benefit.

We have just reached the end of the largest ever consultation on occupational pensions. We shall shortly produce plans to open avenues to flexible retirement and to increase saving through proposals to make informed choice a reality, to improve the information and advice available for people planning their retirement, to simplify radically pensions legislation and red tape to make it easier for employers to provide good pensions. and to improve protection for scheme members and restore confidence in pensions. Anxiety over scheme closures undoubtedly undermines such confidence.

Kali Mountford

rose—

Mr. Willetts

I want to take the right hon. Gentleman back to higher winter fuel payments, which he touched on briefly. He used a phrase from the Red Book, which states that the additional £100 is for the lifetime of this Parliament". Do the Government intend, if re-elected, that the extra £100 would apply in the next Parliament?

Mr. Smith

The hon. Gentleman can look forward to that being in our election manifesto.

Kali Mountford

rose—

Mr. Smith

I well recall, however, how Opposition Front-Bench Members—I think including the hon. Member for Havant—were foolish enough to deride the winter payment as a gimmick when it was first introduced. At first, the Opposition were going to abolish it. Then, if I remember correctly, they were going to consolidate it in the pension. Then, in abject confusion as the election came upon them and they saw how popular the measure was, they were going to give pensioners a choice as to whether it was consolidated or paid separately. In his own interests, I urge the hon. Gentleman to think carefully and not to repeat the same mistake. [HON. MEMBERS: "We want him to repeat the mistake."] Labour Members want the hon. Gentleman to make the same mistake again, so perhaps he will.

Kali Mountford

rose—

Mr. Smith

This year's Budget builds on our achievement since 1997. We are giving children the best start in life. We are making work pay. We are making sure that pensioners share in the country's rising prosperity.

Kali Mountford

Will my right hon. Friend give way?

Mr. Smith

I must draw my remarks to a close, but I cannot resist giving way to my hon. Friend.

Kali Mountford

I am very grateful to my right hon. Friend for giving way. Does he agree that trust in pensions, especially in private and occupational pensions, is extremely important? Will he build on the work of my right hon. Friend the Member for Makerfield (Mr. McCartney)? Before he left his post as Minister for Pensions, he was dealing with pension liberation schemes. People who had put money into pension schemes honestly had it virtually stolen from them in scams. Several companies were brought to book by my right hon. Friend the Member for Makerfield. I believe that the cases have gone through the courts and that the companies have been punished for their dreadful acts. Will my right hon. Friend ensure that the regulations will look at pension schemes, and protect pensioners from that sort of vile activity?

Mr. Smith

Absolutely. My hon. Friend draws attention to a very important matter. She is right to commend the work of my right hon. Friend the Member for Makerfield (Mr. McCartney) in this area. I assure her that the fine tradition that he established will be carried forward. We will prosecute anyone who tries to defraud pensioners in this country.

In conclusion, I believe that we have set out our vision for a fairer, more flexible and more enterprising Britain. We have rejected the Tory failings of the past—the economic instability, the high unemployment, and the under-investment in our schools and hospitals—which denied people opportunity and quality public services.

This Budget, as with all the others over the past six years, is about building a Britain of full employment. It is about maintaining a course of prudence and stability. It is about investing in our public services.

We reject—as I believe that the British people reject—the 20 per cent. cuts proposed by the Opposition, and the shadow Chancellor's doctrine of shackling public spending to short-term shifts in gross domestic product. That would damage public services and investment, destabilise the economy, and take us back to boom and bust. That is where the Opposition are headed with the Howard doctrine.

The truth is that the Opposition have learned nothing, but Britain has learned that, with Labour's prudent course of economic stability and enterprise, flexibility and fairness, we can achieve full employment and quality public services, and give everyone the chance to make the most of their potential.

This Budget carries forward the Government's work of building a strong economy and a strong society, where enterprise and social justice go together. I commend it to the House.

4.23 pm

Mr. Paul Burstow (Sutton and Cheam)

I rise to address the issues to do with health and welfare, which are the principal subjects for debate today. I want especially to deal with matters connected with benefits and pensions, because yesterday's Budget statement omitted any reference to the growing pensions crisis. It did little, if anything, to reverse the Chancellor's love of complexity in our tax and benefits system. It leaves real questions about how we as a country will be able to resource, in the medium to long term, the Government's commitments—which Liberal Democrats support—to invest in our public services, most particularly in education and health. The Budget also raises questions to do with the resourcing of social care, and I shall return to that matter in a moment.

We have a pensions crisis in this country, but we do not have a pensions Minister at the moment. It is a particularly bad time to have a vacuum in such a key ministerial post within the Department for Work and Pensions—not least as the Green Paper consultation process comes to a close. It has been useful to hear the Secretary of State talk about his expectations for occupational pensions, but what we really need is a Minister for Pensions working now to give the public confidence that the Government are not in denial of the pensions crisis, but are taking action to deal with it.

Why does the Prime Minister believe that managing the Labour party and appointing a party chairman is more important than tackling the pensions crisis? We have had six Pensions Ministers in six years of Labour government, so what does that say about their approach to pensions? Does it mean that every one of those Ministers was not up to the job? What does it demonstrate to the public? What confidence can people have that the Government are on top of the pensions difficulties faced by so many of our constituents? Undoubtedly, the current vacuum in respect of a Pensions Minister is sending out the wrong signal.

More and more of our fellow citizens coming up to retirement and, indeed, many who are currently retired, face the prospect of a period of poverty. The latest Government figures show that more than one in five pensioners—2.2 million of our senior citizens—live in poverty today. As we have already heard, the Government's approach is to provide more and more means-testing. However, when he was the shadow Chancellor, the Chancellor was not in favour of means-testing. Indeed, in 1993, he said: I want the next Labour Government to achieve what in fifty years of the welfare state has never been achieved—the end of the means test for our elderly people.

So what happened? Was there a Damascene conversion on the road to government that led the Chancellor to conclude that that was no longer the way forward? We reject that view and believe that excessive reliance on means-testing is increasingly denying the poorest in our land access to the resources that they need. The Chancellor has increased means-testing and the complexity of our system. As a result, we have seen a reduction in take-up.

The Department published figures a week ago—the Secretary of State acknowledged that they were not good enough—that bear repetition. Pensioners are currently missing out on up to £1.8 billion of benefits and up to 270,000 pensioners are missing out on housing benefit. Some 670,000 are missing out on the minimum income guarantee and up to 1.43 million on council tax benefit. As council tax bills land with a loud and disappointing thud on people's doormats, we should reflect on the failure to increase take-up of council tax benefits. In fact, we have seen a reduction in the number of people taking up such benefits to the extent that people are losing, on average, £7.60 per week.

What additional steps are being taken to learn the lessons from the failures of the take-up campaign for the minimum income guarantee and ensure that more people take up council tax benefit? Is it not a pity that the Chancellor did not take the opportunity yesterday to announce his acceptance of our policy of cutting council tax bills by £100 across the country? Given the regressive nature of council tax, that would have helped the poorest people in our country and the poorest pensioners among them.

If take-up is already a problem, it will be even greater in respect of pension credit. The Government estimate that 3.8 million households will be eligible—half the pensioner population, the Secretary of State tells us—but that only 2.8 million will receive the benefit by October 2004. By 2006, an extra 200,000 are expected to claim it, taking the total to 3 million people. The Public Accounts Committee rightly described the Department's target as entirely unambitious in respect of driving up pension credit take-up. That is why we reject the reliance on means-testing and argue for the boosting of the basic state pension. We propose a £5 across-the-board increase, plus extra help that is targeted on the basis of age additions£10 at the age of 75, and £15 at the age of 80.

Yesterday, the Chancellor made a welcome announcement on age addition at the age of 80. The figure of 25p has not been increased since it was introduced more than 30 years ago. However, rather than increasing the age addition, he chose to go down the route of paying it through the winter fuel allowance—the extra £100. It would be churlish not to welcome that extra money, but it is worth pointing out that, if we consider what the 25p would be worth today if it had been indexed to prices over the past 30 years, we find that it would stand at the princely sum of £2.19 a week. That is based on figures that were published by the Department for Work and Pensions in July last year. Obviously, they have to be updated slightly, but they give a good indication. The £100 equates to £1.92 a week. All that has been achieved by the Chancellor's largesse yesterday is a catch-up on the past 30 years of failing to index the age addition. That is hardly generous, despite the way in which it was presented. Liberal Democrats believe that the targeting of extra help to the over-80s requires a substantial extra investment. That is why we propose an extra £15 a week, or £780 a year, to the over-80s.

Yesterday, the Chancellor made much about flexibility in the labour market. He talked about additional support and assistance to schemes to promote employment among the over-50s. However, if we are serious about addressing labour market inflexibility, we have to tackle deep-seated ageism in the labour market. Ageism denies access to employment for many thousands of our fellow citizens and it denies people their dignity and liberty. It makes no economic sense. The cost of ageism to our economy—as estimated by the Employers Forum on Age—is £31 billion a year in lost production, lost taxes and lost opportunities. What a waste of money.

Today, one in three people who are over the age of 50 but below the age of the state pension are out of work. Some of those people have made a deliberate choice to retire, to take up voluntary work, or whatever. However, far too many of them have been tossed on the scrap heap by employers who have adopted ageist assumptions about their capacity to do the job. Age should not be seen as a proxy for a person's capability or competence to do anything; and yet, still today, surveys shows that employers use age as a criterion when deciding whether to employ a person. We need age-discrimination legislation. The Government must signal that they will not wait until the last minute of the last hour of 2006 to introduce legislation under the European Union directive on equal treatment. The Government must not simply legislate for employment but legislate to deal with age discrimination across the whole economy—in terms of goods and services, whether publicly or privately provided, as well.

I want to touch on a couple of other issues, the first of which is the child and working tax credits and the £9 million advertising campaign that we have all seen on our televisions over the past few weeks and months. From answers that the DWP has given, 2 million of the 5 million families who are entitled to this tax credit are not claiming it. Again, complexity is denying access, denying benefits and denying extra income. At the same time, the old tax credit system is winding down. A constituent came to see me last weekend and said that they had applied for the old tax credit and been told that they would have to wait because the staff who would process it were now processing all the claims for the new system. My constituent may also lose out on a maternity grant because time scales mean that they will be timed out. I hope that that will not be the case and that, when I write to the Department, Ministers will confirm that my constituent will get the tax credit and will not be penalised because of processing delays in the system.

The Liberal Democrats welcome increased investment in the national health service. Last year, we voted for the national insurance increase because we believed passionately that extra investment was needed. However, the Labour Government spent too much time during their first term inflating figures to create the impression that substantial investment was being made. They raised expectations that were not met, thus allowing the Conservatives to peddle their current line that extra investment will not make a shred of difference to our national health service. That is a false argument, but the Government have brought it on themselves by the false figures and accounting of their first term.

Where is the money going? Waste is a serious problem in the NHS. I offer the House some examples. Agency nurse costs have risen threefold since Labour came to power and are currently £529 million a year, half of which is spent in Greater London alone. NHS resources of £500 million are going into agency costs rather than into the provision and retention of directly recruited staff.

Mr. Kelvin Hopkins (Luton, North)

Would it not be sensible to bring such agencies into public ownership, as public services, so that they are non-profit making?

Mr. Burstow

In a way, the Government tried that with the establishment of NHS Professionals—their answer to the cost of agency nurses. That body was set up to manage bank nurses and other agency nurses to provide a service to the NHS. However, that form of nationalisation produced a poorer service, which was rejected by many trusts.

We need sensible strategic planning for the use of agency staff rather than the panic measures currently being adopted. Only 18 months ago, an Audit Commission report concluded that there was not enough planning in the use of agency staff; they were merely being used as a firefighting measure to plug gaps as and when. The lesson to be drawn is that, if we want family friendly practices throughout the economy, we should be seen to have adopted them in the NHS. People are voting with their feet and leaving the NHS to work for agencies, where they find the flexibility that they are not given when they work directly for the NHS.

There are questions about the pressure on the NHS to hit Whitehall targets that often relate not to genuine clinical needs but to other Government ambitions. For example, the Government set a target of four hours for waiting in accident and emergency departments. In March, they carried out a snapshot survey to find out how things were going. The problem with taking a snapshot is that everyone lines up for the photograph to make it look as though they are doing a good job. During the week of the Government's snapshot survey, extra agency staff were brought in, overtime was increased, and training courses and scheduled operations were cancelled so that the right figures were achieved.

Maintenance in the health service is also a problem. When the Government took office, the cost of the maintenance backlog to deal with the peeling paint in the crumbling buildings of our health service was £2.8 billion. The Labour Government were going to save the NHS in 24 hours. What is the situation six years later? The figure for the maintenance backlog is £3.4 billion and rising. PPP has not solved that problem. What are the Government doing to deal with that long-term maintenance backlog?

The Chancellor rightly talks of the need for long-term investment in the health service. He commissioned the Wanless inquiry, which we welcomed. We subscribe to many of its findings. However, we were puzzled by the fact that Wanless said time and again that health and social care were sides of the same coin and that they needed to be seen as part of a whole system, yet Wanless was denied the possibility of inquiring into the adequacy of social services resources. Surely it is time to hold such an inquiry, not least given the integral relationship between the two parts of the system. The NHS can begin to deliver many of the Government's targets only when its social care partners are properly resourced. That is why it is disturbing to learn that in the past six years 124,000 fewer households received home care—a 25 per cent. reduction in the number of people receiving care in their own homes. Is it any wonder that there are still problems with delayed discharge? Instead of tackling the underlying causes, a system of fines has been passed into law that will damage working relationships on the ground, but will not solve the problems. Is it not time to have a Wanless on social services funding?

My final point on the national health service concerns prescription charges for the chronically ill. Wanless described that situation as not logical, nor rooted in the principles of the NHS". Under rules written in 1968—an entirely different time when medical science was not as good as it is today, and when people with acute short-term medical conditions tended to live less long than they do today—thousands of our fellow citizens with chronic long-term medical conditions do not gain access to exemptions to prescription charges, but have to pay. They may be exempted if they are very poor and on income support, but those on the margins pay through the nose. For example, those on incapacity benefit find themselves in a serious situation whereby, because they have just 7p more a week than someone on income support, they do not qualify for the exemptions and end up having to pay their prescription bills. It is therefore not surprising that 750,000 prescriptions issued to people with long-term medical conditions—prescriptions that could change the quality of their lives—are not being taken up. What a waste of those people's quality of life. I hear about people saying to their GP or pharmacist, "Which of these prescriptions will make the most difference to me?" Some of the people who are paying, but should not have to, are those with asthma, cystic fibrosis or Parkinson's disease. The Budget should have addressed that long-term anomaly, which Wanless identified and on which the Government should act.

The Budget is built on a number of assumptions by the Chancellor—untested favourable assumptions about growth and investment by the business sector. It is time that the Chancellor subjected his whole Budget to an independent audit by the National Audit Office. It should not be for the Chancellor to choose the assumptions that he submits—the NAO should be able to look at the whole Budget so that we know whether we are basing our debates on firm assumptions rather than on woolly, ungrounded and unfounded assumptions.

The Chancellor has spent six years producing Budgets that make our tax and benefits system more complicated. He has been slow to invest in our public services and he has remained in denial about the crisis in our pensions system. The problem that results is an imbalance in the economy as a whole. Manufacturing is in recession and there are serious problems of investment in the business economy. Unless the Government begin to tackle that imbalance and ensure that the long-term growth forecasts are not just Mickey Mouse figures but a reality, we will not be able to pay for the increased borrowing—which we support—to provide improvements to public services. As a consequence, the Government's whole strategy will start to unravel, allowing the case of of others who wish to make cuts in public services to be heard more effectively. That is the danger of the strategy that the Chancellor outlined. It is a high-risk strategy, and I hope that his luck holds; otherwise public services will suffer. For our constituents, that will be the biggest concern of all.

Mr. Deputy Speaker (Sir Michael Lord)

Order. Before I call the next hon. Member, I remind the House that the debate must conclude at 6 o'clock. There were three statements, so time is very limited. I ask Members to exercise a reasonable amount of discipline in making their contributions so that a maximum number of Members can be called.

4.44 pm

Mr. Parmjit Dhanda (Gloucester)

Conservative Members' comments, not only today but yesterday, have focused on waste and bureaucracy. I suppose that that is what I would have expected. Yesterday, however, I went to the Library and dug out an interesting document—a research paper on parliamentary questions, debates and contributions, which was released last week. I discovered in it that between 13 June 2001 and 7 November, one Member of the House, who shall remain nameless—at least for the time being—managed to ask 3,036 questions more than his nearest rival: 18 oral parliamentary questions, at the cost of, I think, £299 each, plus a staggering 4,206 written parliamentary questions at £129 a pop. Most of them were about waste and bureaucracy, at a cost to the taxpayer of more than half a million pounds. Not only do Tory policies cost us more, but Tory politicians cost us a lot more. That is an example of bureaucracy and waste if ever there was one.

Once the dust has settled on the Budget and we look back at headline figures, four key areas will come to mind with regard to their impact on my constituency. On employment, health, education and pensions, the national figures grab attention. We are down to under 1 million unemployed, and we have the highest ever employment level. On health, by 2008, we will have some 80,000 more nurses and 25,000 more doctors. On education, we have a settlement by which we are moving towards spending 6 per cent. of GDP on our children's education. A range of measures has been introduced for pensioners over the years, but those announced yesterday will be particularly welcome to campaigning groups in my constituency.

Sometimes, however, those measures can seem a long way away from the working man and woman on the streets of Gloucester, and the statistics do not seem to relate to them in their day-to-day lives. I can understand that. As a constituency MP, I relate most to measures such as the new deal, which has reduced youth unemployment in my constituency by 75 per cent. When Labour came to power in 1997, 347 young people under the age of 25 in my constituency were out of work. Remarkably, that figure has been cut to 71. As a result of other measures introduced by the Chancellor in the past six years, a staggering 1,297 Gloucester people have been taken off benefits during that period. I remember working as a cleaner during my holidays for just £2.30 an hour. I am proud to say that, under this Government, in October this year, the national minimum wage will be £4.50, and we are looking at implementing a minimum wage for younger groups, too.

When we talk in statistical terms about growth, productivity and how we compare with the rest of the G7, it can be boring for the man in the street. The single most important factor, which I mentioned in my intervention on my right hon. Friend the Secretary of State for Work and Pensions, is the improvement in living standards. If we look back over the past 50 years, this country has experienced the greatest improvement in living standards since post-war times. That is hugely significant.

I mentioned the minimum wage and the difference that it is making. Clearly, the Tories were against when it was introduced, although I think that they are in favour of it now. I do not know exactly what the Liberal Democrat policy is on the minimum wage: it is Thursday, so I think that they are against it at the moment. I gather that instead of the council tax, they propose a local income tax, although we do not know at what level that would be set. A figure of 3p in the pound has been mooted, but in an internal document leaked last week, they said that they did not want to be drawn extensively on the level of that income tax.

Mr. Andrew Love (Edmonton)

That was on Wednesday.

Mr. Dhanda

And on Monday.

The Liberal Democrats fought a rather tenacious campaign in last year's local elections. At national level, they are talking about removing 1,000 jobs at British Energy by doing away with a Government loan to my constituency. It is interesting that Liberal Democrat councillors should be elected in the very ward in which they would axe those jobs, yet they tell us in their national campaigns what they would do for our local economies.

I mentioned the headline figures for health—the 80,000 nurses and 25,000 extra doctors we propose to have by 2008. They are big ballpark figures, but I have only to look out of my office window to see a £30 million new hospital taking shape—one of scores of such developments throughout the country. We have had scores of extra nurses, dozens of extra doctors and more hospitals, and I have become the first Member of Parliament in a generation who has opened hospital wards in my constituency, rather than presiding over their closure. Of course the hospitals in Gloucestershire hope to be in the first stream of foundation hospitals. I am sure that we will return to that discussion and that it will be a very strong bid indeed.

As well as being involved with the £30 million brand new hospital, I am the first Member of Parliament for Gloucester to preside over the opening of a huge educational establishment—a new university campus—worth £19 million. We heard about the 6 per cent. of GDP and the ballpark figures nationally. For my locality, that translates to a 7.2 per cent. increase, given the new funding formulae that have been interpreted, but there is still more work to be done.

The formulae are tied to the tax credit system, so in local education authorities, such as Gloucestershire, that are in part leafy—it has affluent areas and impoverished urban areas, such as parts of my constituency—it is important to target the increases in education funding that have come about because of the number of people who receive working families tax credit in those areas.

Head teachers from my constituency have come to the House to make their case directly to Ministers. As consequence and as a direct consequence of our economic position and the measures that the Chancellor has taken during the past six years, we have been able to achieve increases in our education funding formulae and, as I said, a 6 per cent. increase across the country.

All that contrasts remarkably with what Conservative Front-Bench Members propose. Early this week, the shadow Chancellor wrote a pre-Budget piece in The Guardian in which he talked about the failure, as he put it, of primary schools under a Labour Government. He said that 25 per cent. of primary school students were failing to learn to read, write and count properly. Well, that compares with 40 per cent. of children failing to reach level 4, and 20 per cent. cuts throughout the health and education systems, when he was in government. Those cuts would translate into about 678 teachers being lost in Folkestone in his constituency.

The other headline figure that I mentioned related to pensions. There has been an awful lot of campaigning on pensions, particularly by pensioners groups, such as the T and G pensioners forum in my constituency, which has been very keen for some time to ensure that pensioners who end up being hospitalised still have dignity and can claim their pensions despite the fact that they may be in hospital for more than six or 13 weeks. Such groups will be more delighted than any others with the changes that the Chancellor has announced this week. I for one am also very grateful for some of the other changes, such as the pensioner credit, which will affect more than 8,000 pensioners in my constituency. Typically, they will be £7 a week better off, or £9 a week better off if they happen to be in a pensioner couple.

It is important to mention a group of my constituents who have come to Westminster and campaigned on finance and Treasury issues—those involved in trade justice campaigns. Trade justice campaigners throughout the country can rightly be proud of the fact that we have made a commitment to ensure that 115 million children around the world go to primary school and get the education that they deserve. Hon. Members on both sides of the House can be very proud of that.

4.55 pm

Mr. Kenneth Clarke (Rushcliffe)

I refer the House to my business interests in the Register of Members' Interests. After yesterday's Budget, I look forward to the day when the present Chancellor rises to make the same declaration, as I fear that we are nearing the stage when he should move on to the private sector phase of his career. I think that he is now getting into very worrying difficulties, which he still denies in the House that he faces.

The prudent Chancellor is long gone and well behind us. Indeed, he was an iron Chancellor for the first two years to an excessive extent. He is now a classic tax-and-spend Chancellor of the Exchequer of the sort that we have seen in the past. He spends first and taxes later, he is getting into all the difficulties that such Chancellors have faced in the past, and he continues to be in denial and will not share with the House exactly what he will do to get us out of the consequences of his policies of recent years.

In yesterday's Budget, the Chancellor gave us a pause from tax and spend. Indeed, he gave us a pause from Budget measures. It was very lucky for him that a war was raging—obviously, that is uppermost in all our minds at the moment—as it deflected attention from the paucity of his speech and the lack of any ordinary Budget judgment, comments on the economy or measures of any significance. He was almost saying "Steady as she goes", although I think that he was doing so not because he does not feel the tremors in the deck, but because he does not quite know what to do next to avoid the consequences—unless, Micawber-like, he is lucky enough to see something turn up to save him from the next stages.

I said that the Chancellor gave us a pause from tax and spend. He certainly did so in comparison with last year's Budget and public spending statement, but he had cleverly left in the pipeline tax increases which he announced last year, but which come into effect only now. Unfortunately, from the point of view of the real economy, they do so at a disastrous time of slowdown in economic activity. We all know that £7 billion-worth of national insurance increases are now coming into effect and that they will be a severe blow to business and commerce in this country. That tax on jobs comes at a time when the job market, certainly in the private sector, is already looking in a perilous state.

Everybody has just received their council tax increases, which are miles above inflation. I shall say only en passant that I am one of the few no doubt maverick Members of the House who still think that we will never solve that problem without returning to some modernised version of rate capping, as I do not believe that local government is capable of showing restraint to the required level when the economy slows down—but that is not currently a fashionable view.

The Chancellor of the Exchequer, who has also frozen personal allowances—another subtle and slightly stealthy way of raising personal taxation—has paused. Nothing more of any significance was added yesterday. He slightly tightened policy, but mainly by closing loopholes. My first serious point is that I think that that is ducking the problem. We now face a situation in which we are talking about when he next has to raise taxation and not whether he has to do so, and about exactly what damage he will do to the real economy, and eventually public services, when he does so.

Yesterday's Budget included a few themes on which I shall briefly dwell. It appears that the main theme was "Building a Britain of economic strength and social justice". I know no Conservative—certainly no one-nation Conservative—who would not have subscribed to that at any time in the past 20 years. We shall hold the Chancellor to account for his delivery, but it was very near motherhood.

The Chancellor made great play of welfare to work. There is no difference between the Government and the Opposition on the desirability of helping to move people from welfare to work. Indeed, it was the theme of the second Budget that I presented as Chancellor, but its origins go back to the time I worked with my right hon. and noble Friend Lord Young when he was at the Department of Trade and Industry on his Action for Jobs programme, which drew heavily on workfare in the United States. I marvel that the entire Labour movement, which then attacked it vigorously and intensely, now tries to prove that it can do the same and gets headlines in The Sun about tackling the work shy. As my hon. Friend the Member for Havant (Mr. Willetts) made clear in his excellent speech, we do not disagree with the Chancellor's motives—welfare to work is a desirable public policy aim. We have won the argument. However, we criticise the Byzantine complexity of the Government's methods.

The Chancellor usually steals phrases from us, but I noticed that he did not utter the phrase that the Secretary of State for Work and Pensions recklessly used a moment ago: "No return to boom and bust." For the first time, the Chancellor did not say that. Like me, he is not sure whether a bust will occur. I do not predict a bust, but the danger exists if things go wrong and his luck does not hold. He therefore no longer repeats the phrase.

Everything for which the Chancellor claims credit and all the benefits that the hon. Member for Gloucester (Mr. Dhanda) mentioned derive from the good news in the economy in the past few years. We have had more than 10 years of growth with low inflation. I do not want to argue about the past, except to point out that the Chancellor had an excellent inheritance in 1997. We had growth and low inflation, and the public finances were returning to balance. We had fiscal rules. I aimed to achieve a balanced Budget over the economic cycle. It is a tighter rule than the Chancellor's. The International Monetary Fund agrees that it is a better rule than the golden rule, with which I once flirted. Two years into my period of office, I issued a Red Book that contained both, but I was persuaded that it was too flexible. If one achieves the golden rule, it also means that the Government are probably not contributing to savings as they should, but we were well on course.

The Chancellor then had the good luck of a period of unprecedented global boom. We now know that it was largely led by a boom in the United States that collapsed when an asset bubble burst. He is now in trouble, to which he is not reacting because he does not know what to do.

The Budget speech was remarkable. The Chancellor has abandoned every rule that used to apply. I acknowledge that some of them were tedious and old-fashioned, and led to lengthy speeches about monetary aggregates and every tiny tax change. That has long gone. Indeed, the Chancellor hardly delivered a Budget speech at all. He went into long, tedious details of changes in various departmental policies. As my hon. Friend the Member for Havant said, they could have been given in speeches or written answers by the Under-Secretaries of State for Work and Pensions, for Trade and Industry or for any other relevant Department.

Like most people who are interested in economic policy, I was waiting for the description of public debt and some sort of forecast. The comparatively slow exposition of detail suddenly ended. I could not keep up with my notes as figures streamed out. After much slow delivery of fiddling nonsense about other Departments, which the Chancellor likes to command, he raced through gabbled figures. That was the only time when he addressed the so-called "hole" in his Budget. It is a good description of the problem over which he was skipping. He did not deal with the hole in the Budget at all.

The convention is to welcome the odd measure, which I shall do briefly. I welcome what has been done for pensioners and benefit recipients who go into hospital. I have looked at the cost of that and congratulate the Chancellor on his decision. I cannot understand why none of us did that a few years ago. It is a wholly welcome measure.

I was also going to welcome the end of national pay bargaining. I was riveted by that passage of the right hon. Gentleman's speech. I have always thought that one of the best ways to remedy deficiencies in an economy is to end national pay bargaining, which our private sector achieved many years ago. In fact, that is the advice that I give to Germans now, and we should replicate the policy in our public services. The right hon. Gentleman talked about pay review bodies and setting the pay for public servants in general with regard to regional price indices. When we are trying to recruit nurses, teachers, firemen and others in high-cost parts of the country, I have always thought it absurd that we can only recruit them by setting the same basic pay rise for every nurse from Land's End to John o' Groats. But by this morning on the "Today" programme, the Chancellor had chickened out, so we may not hear much more about that. He reversed rapidly at the first threat of a national strike and I am not sure how many of us will have the courage to keep on supporting him on that. We backed away from ending pay bargaining in the public sector, but at least it got a welcome mention.

I shall now gabble through what I regard as the real Budget, which can only be abstracted if one reads the Red Book because that shows what the Chancellor has done and what he thought he was going to do. Hon. Members only have to look at 2002 to see what is going wrong with the economy. Government consumption in that year was very heavy. It rose by 3.75 per cent., the highest rate of growth for 25 years. Government capital spending rose by 9 per cent., but business investment declined and ended the year 5.5 per cent. below what it was at the end of 2001.

Business fixed capital investment was down 9 per cent. in 2002, the fastest decline in business investment since the 1960s. Manufacturing output fell by 4 per cent. between 2001 and 2002. That must be noticeable even in Gloucester, where it seems that good things have been happening. Manufacturing is back in recession, with more than 600,000 manufacturing jobs lost since 1997. I refer the House to a good article in the Financial Times this morning debunking the Chancellor's misleading figures about our productivity record and the competitiveness of our industry. He made totally misleading use of figures based on a slight change to the statistical base since November last year. Under the Government, productivity in the private sector has been rising at half the rate that it was under the Conservatives when Labour took over.

On the short-term forecasts, I am, of course, going to make the same point as everyone else about the scandalous optimism of the second and third-year forecasts, but, first, what will happen this year? We are supposed to be examining that closely. The Government forecast GDP growth for 2003–04 of 2.25 per cent., which is above all the independent assessments, and they are generous at 2 per cent. That figure is based mainly on private consumption and private spending, which in turn are based on a housing boom and public sector pay rises.

The Government are still saying that GDP growth will increase by more than 2 per cent. Presumably, they believe that the housing boom will continue to help to finance that. Government consumption is forecast to increase by 1.5 per cent. But even in the financial year on which we have just embarked, the Government are forecasting a further decline in business investment of minus 0.25 per cent. and net trade in goods and services of minus 1.25 per cent. That is how they get the 2.25 per cent. growth.

I have given enough figures to illustrate the key point: we have reached a stage at which the wealth consuming and spending part of our economy is still growing heartily. So public spending and wealth consuming is the main sustaining force behind our growth. The wealth-creating private sector—business—is declining. If business investment and productivity are so weak, the long-term expectation is that the outlook for the economy is not healthy.

In my opinion, it is not true that that the UK is better placed than any other country in the world to withstand the forthcoming problems. To be fair to other hon. Members who wish to speak, I have no time to go into the detail of the fiscal problem that that poses for the Chancellor, which he has not addressed. His problem is not only that Government Departments are now getting better at spending the enormous sums of money that are in the books, but that the huge fall in tax revenues has made all his forecasts wrong. The big falls are in income tax and corporation tax. They are the reason why he has had to adjust his borrowing figures so much already.

The Chancellor forecasts that his tax revenues will bound back when this country returns to big growth in two years' time. He expects his tax revenues, including from corporation tax and income tax, to start to grow again as though we had returned to the 1990s boom conditions that he enjoyed so much. I believe that that will not happen. The Treasury has returned to underestimating the likely growth in revenue, which will continue to disappoint Treasury expectations. To use the jargon, structural changes have taken place and structural problems have arisen in the Chancellor's ability to get revenue. For the reason why, return to the point I made a moment ago: it is because the tax-paying, wealth-creating part of the economy is being shrunk, whereas the tax-consuming spending part of the economy is growing. That is why all the forecasts of revenue bounding back are, in my opinion, wrong, even assuming that the growth forecasts are even remotely credible.

The Chancellor cannot stop making the books look more attractive by promising a fantastic rebound in years 2 and 3 of his Red Book, whatever they may be. I know scarcely anyone who believes that the economy will grow by more than 3 per cent. in the year after this one and the year after that, but the right hon. Gentleman keeps pushing rosy forecasts as an excuse not to do anything. He will not get away with it. He is already taxing business, jobs and pensions in a damaging way; the only question is when and where he will have to raise taxes again. He is desperately hoping to be able to put that off until after the next election, or on to some other Chancellor of the Exchequer.

I very much do not wish to be the Chancellor of the Exchequer who takes over from the present incumbent—a gambler who has taken a bet that probably will not come off. His successor will have a great deal of work to do to sort out the problems that he leaves behind.

5.12 pm

Mr. Tom Clarke (Coatbridge and Chryston)

Perhaps because he is my namesake, I have a regard for the right hon. and learned Member for Rushcliffe (Mr. Clarke), but he will not be disappointed to hear that I will not take any of the advice that he has offered the House in the past few minutes. In terms of job rotation, perhaps, given his own career, he should not look in his local employment office for the post of employment adviser. I reflect with great joy on the advice that he freely dispenses and the advice that he gave to Mrs. Thatcher in 1990, but I conclude that the quality of his advice appears to have deteriorated since then.

I think my right hon. Friend the Chancellor has delivered a particularly good Budget. The politics of envy have been somewhat evident in the past few minutes, and for good reason. Let me briefly recall what my right hon. Friend inherited in 1997 from the previous Government, before referring to my constituency, where the backdrop is now very different. The former Chancellor and those who occupied that office in the Conservative Government gave us unemployment of about 3 million and the highest mortgage rates that any of us can remember; we know that neither will return, certainly not under the present Government. I do not remember inflation under the right hon. and learned Gentleman being anything like 2 per cent.

The Budget, including the inevitable contribution to the war and reconstruction and confirmation of the public spending programme commitments, is extremely welcome. So are the main objectives of my right hon. Friend the Chancellor in my constituency. I welcome the fact that we are talking about full employment, as I did during the excellent speech of my right hon. Friend the Secretary of State for Work and Pensions. The eradication of poverty is extremely important in my constituency and elsewhere. There have been real achievements to back it up. Everything that has been said today about security for pensioners is most welcome and meaningful, and applies to virtually every part of my constituency. I welcome too what my right hon. Friend the Chancellor had to say about international development. He has attacked poverty at home and he has applied those principles abroad.

Full employment—employment opportunities for all—is a noble idea. In addition, it is something that is practical and can well be achieved. We are clearly in pursuit of that goal, given the Government's record.

The Government started with a number of disadvantages. For example, when the right hon. and learned Member for Rushcliffe was in government, he did not—nor did Conservative Chancellors before him—make the most of the benefits of oil revenues. If only the present Government, in addition to the growth that they have introduced, had had the benefit of those oil revenues. Under a Labour Government, many of my constituents would not have suffered as they did.

I welcome the fact that my right hon. Friend the Chancellor has invited right hon. and hon. Members to apply the objectives of his Budgets locally. [Interruption.] If the hon. Member for Havant (Mr. Willetts) wants to intervene, I shall give way. It seems that he does not wish to do so. Earlier, he was making ridiculous noises about incapacity benefit. I hoped that when he was referring to that he would not include in that area the 20 per cent. reduction in public expenditure to which his party is committed.

I welcome the Chancellor's view—

Mr. Willetts

Will the hon. Gentleman give way?

Mr. Clarke

No, I am not giving way. My time is limited. The hon. Gentleman went on for about 25 minutes, and he knows that I have only 10 minutes. I would relish dealing with him, but I intend to deal with more important matters.

The Budget has delivered, as have the Government, for small businesses. Local accountability is welcomed. Reforms to housing benefit, which are important to my constituents, are to be welcomed. Such reforms are long overdue. Budgets of all sorts, delivered by whatever party, can only help to create the atmosphere in which jobs are provided and produced. That is why I want to take the opportunity to welcome the challenge that the Budget presents to Scottish Enterprise, for example. I think that it should be making more of the opportunities that the Government's economic successes provide.

Some infrastructure has been provided in Scotland, but I shall deal with my constituency in terms of the challenge to Scottish Enterprise. If ever there was evidence of the decimation of manufacturing bases in Scotland, there is the former Gartcosh site. We have an industrial development park, but I would welcome inward investment and jobs. Scottish Enterprise has the opportunities. Unemployment in my constituency has fallen considerably, but there is still scope to reduce it further. That will remain the position for as long as the industrial park is not developed fully. That leads me to the conclusion that Scottish Enterprise can do more for my constituents, for Lanarkshire and for the people of Scotland.

I welcome the new flexibility at jobcentres for those who are seeking work. I welcome the fact that we are monitoring local labour markets. Further, I welcome the investment that has been mentioned. We had a little debate about investment in the private sector as against the public sector. However, we will not get improvements in the health service, education, transport and law and order services unless we provide jobs, training and careers, which are essential and which my constituents would welcome. That applies very much to the caring services. The decision that pensioners should receive a full pension while in hospital is excellent. Part of the Government's community care policy is about recognising people's needs in such a situation.

Mr. Michael Connarty (Falkirk, East)

rose—

Mr. Clarke

I am particularly sorry not to give way to my hon. Friend and former Parliamentary Private Secretary, but I said that I would speak for only 10 minutes.

Michael Fabricant (Lichfield)

Good for you.

Mr. Clarke

I am glad that my speech is pleasing the hon. Gentleman. I would like to say the same about his, but that would be less than honest.

The right hon. and learned Member for Rushcliffe, the former Chancellor, took a swipe at local government, but when he reads Hansard I believe he will reflect that he was being a bit unfair. We rightly pay tribute to nurses, teachers and the police, but social services in my constituency would be very much the poorer were it not for the influence of local government. Without that influence, voluntary organisations, which make a tremendous contribution to the lifestyle of our people, would be lesser bodies. I also welcome the fact that in 2003, the European year of disabled people, various Government initiatives have been introduced to try to improve job opportunities for people with disabilities and their advocates. My right hon. Friend the Secretary of State for Work and Pensions has given a particularly inspiring lead. Like the Disability Rights Commission, I would like even more opportunities for people with disabilities because they can contribute so much at every level in society, and that contribution is welcome.

In conclusion, we heard earlier today from my right hon. Friend the Secretary of State for International Development about the G7 summit which will take place in Washington at the weekend, and which she and the Chancellor will attend. I welcome the fact that she said that apart from the inevitable discussions on Iraq there will be further discussions about Africa, Asia, poverty-focused programmes in the third world and fair trade. The essential message of the Budget on fairness and justice applies just as much internationally, and I welcome the recognition that developing countries and developed nations can make a contribution to one another. I believe that together we can improve the world and indeed improve our own constituencies for the benefit of all whom we seek to represent.

5.23 pm

Mr. Michael Jack (Fylde)

It is a pleasure to follow the right hon. Member for Coatbridge and Chryston (Mr. Clarke), whose record in the House on campaigning for people who are disabled and in need of help is exemplary, and his speech today reflected that.

I am sorry that the Secretary of State for Work and Pensions has escaped from the Chamber. We had the usual frothy performance from him in which he attempted to paint the last Conservative Government all in black and the present Labour Government all in white, when what we are dealing with is a fundamentally different situation. As my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke) said in his excellent speech, world economic circumstances are different now, and for different circumstances there are different solutions. The present Chancellor was dealt an extremely good hand, but listening to his Budget yesterday, I detected signs that he is beginning to squander the legacy that he was left. I shall focus on that in a moment.

Underlying the Budget is the growth in public consumption, the decline in private investment and, in particular, the further decline of manufacturing industry. May I say that members of the Government have distorted the position of my party on the provision of public services? I would like to put on record the fact that I detest the Government's continued distortion in representing as fact the idea that we would make 20 per cent. cuts in public spending. That is not the position of our Front Bench. It relates to a remark relating to the administrative costs of government and, as my right hon. and learned Friend the Member for Rushcliffe pointed out, the growth in the rise of employment in the public sector illustrates precisely the point that my hon. Friend the Member for Arundel and South Downs (Mr. Flight) was getting at in his remarks. I just wish that, in the interests of balance and proper debate, the Government would not continue to distort that position.

Mr. Bailey

Will the right hon. Gentleman give way?

Mr. Jack

I would like to make progress because I am conscious that if I, too, take only 10 minutes, others may yet be able to speak.

I welcome the proposals for pensioners. I was also most interested in the idea that some local authorities could share in gains if they were able to bring new companies and businesses into their area, and I look forward to seeing more details of that proposal. I am sorry that, as we are thinking of Iraq, the Chancellor did not take up an idea about which I have written to the Treasury, which is to give some form of encouragement—perhaps through a mechanism similar to the research and development tax credit—to those in the private sector who seek to invest in the really difficult places such as Iraq. I would ask the Paymaster General, even at this late stage, to give some thought to mobilising private investment in places such as Iraq, where the expertise of such businesses will be much needed, when some encouragement through the tax system might be an advantage.

Listening to the Chancellor yesterday was a bit like having a large Chinese meal. I felt full at the time but woke up hungry the next day. It is always dangerous to judge a Budget on the day, so I judged it today. It was no better today than it was yesterday, and yesterday was pretty boring and meaningless. The Budget had the flavour of Micawber hoping that something somewhere would turn up.

The comments of those experts who gave their immediate reaction were quite interesting. I was particularly attracted to the words of DeAnne Julius, the former Bank of England Monetary Policy Unit member, who had an enviable record as a private economist before going on to the committee. She said of the Chancellor: He is placing big hopes on a quick recovery this year and next but if that does not happen, we will see a ballooning deficit and not a shrinking one. Mark Cliffe, global head of economics at ING Financial Markets, said: It's still not clear where the Treasury's projected revival in investment is going to come from. George Buckley, of Deutsche Bank, said: I very much doubt that we are going to see that growth materialise. If it does not, all the Chancellor's hopes and assumptions will crumble to dust.

It is interesting to note, when we look at the accuracy of Treasury forecasting—which underpins the philosophy of this Chancellor's approach—how we all ignored one very important point. In recent years, when the economy has been doing well, the Chancellor has come to the Dispatch Box and said, "The extra money that I have to repay debt is greater than I ever thought." And we all thought that that was rather good, but we did not reflect on the fact that, in its own way, it represented a considerable inaccuracy in the forecasting model that the Treasury was using. I should have thought that the penny would have begun to drop in the Treasury by now, and that it would have realised that what goes up rather more quickly than the model predicts could come down with equal rapidity. I am therefore very surprised that there appears to have been no adjustment in the Treasury's economic modelling.

If we look at the predictions that have been made over time for the borrowing requirements, we can come to some very interesting conclusions. The prediction made in 2000 for the year 2003–04, which we are now in, was for a £3 billion borrowing requirement. By 2001, that had been reduced to £1 billion. Then panic set in, and, by 2002, the Treasury was predicting borrowing of £11 billion. Last November, the prediction was for £20.1 billion, and by yesterday it was up to £24 billion. So in the space of three forecasting years, the Treasury has gone from £3 billion to £24 billion—a factor of eight. No private company could run its business on the basis of being eight times out with such a fundamental piece of analysis.

We all listened with sublime interest to the recital of growth rates of 2.25 and 3.5 per cent.—in what? Well, we are talking about a very large figure, namely our gross domestic product. The predicted GDP figure for 2004 is £911 billion. On the basis of the Chancellor's prediction, a fall in that amount—the sum total of activity in the economy—by just one third of 1 per cent. is the equivalent of a downward adjustment of the growth forecast in the Red Book from 3.25 per cent. to 2.9 per cent.

I estimate—using the Chancellor's methodology—that such a fall could add a further £10 billion to Government borrowing for that year. The Chancellor's method of calculation shows that a 0.75 per cent. change in the economy's predicted growth rate between 2000 and 2003 resulted in a 21 per cent. increase in borrowings. That is why it is so important for us to spend some time examining the figures underpinning the Chancellor's position—and what we see is that a minor change in a very big number can have a dramatic effect on the bottom line of Government borrowing.

I am disappointed by the Treasury's unwillingness, despite my efforts through parliamentary questions, to reveal in public its model demonstrating the way in which it predicts tax receipts. Sadly, although the Treasury model as such is available for scrutiny, the tax receipts model is not; and unless we know exactly what is going on, no one can accurately predict the course of the economy.

The Secretary of State talked briefly about boom and bust. That was an interesting aspect of the Chancellor's speech. The boom and bust under Labour has been the bust of personal pensions, the bust of endowment policies, and the bust of private investment. The Budget contains nothing of any note to deal with people's current worries about the future of their pension funds and, indeed, their personal savings.

All we were given in regard to personal savings was the so-called children's trust fund. The provision of £300 million a year to help a group of non-taxpayers to save strikes me as bizarre. In fact, taxpayers—parents—will park a lot of taxable money in this great trust, and when their children are 18 they will suddenly help themselves to a nice little earner when their ISA allowances, for instance, have run out. I see it as the "save for university" fund. Meanwhile, the Government are talking about encouraging talented people from overseas to come to this country, and using public money to do it. The two proposals do not add up, and I think the children's trust fund is a waste of time.

I am very sad that inheritance tax relief was not raised by more than £20,000. It is all very well for the Chancellor to say that 95 per cent. of estates can escape. Look at the labyrinthine process in which people have to become involved to escape inheritance tax when, through no fault of their own, the value of their major asset—their house—has increased. That is the ultimate form of double taxation.

The Budget statement contained the usual list of reviews and studies. I sometimes wonder how the great captains of industry who are involved in such projects have enough time to steer their company ships as well.

Let me end by saying something about the tax burden. As my hon. Friend the Member for Havant (Mr. Willetts) pointed out, the tax burden will rise—but let us not forget that between 2002–03 and 2005–06, £47 billion of extra tax will be taken out of this country: £10.2 billion a year. That is indeed a heavy burden to be borne for the sake of public service improvement that is yet to be delivered.

5.34 pm

Kali Mountford (Colne Valley)

May I say with all possible gentleness to the right hon. and learned Member for Rushcliffe (Mr. Clarke) that it is highly unlikely that he will be faced with the problem of taking over the current Chancellor's job, however much he may wish to do so? I should also say to the right hon. Member for Fylde (Mr. Jack) that I could not disagree more with his analysis of enabling children to save. He seems to have a rather cynical view of what parents might wish to gain on behalf of their children, whereby they will want to purloin such money as a personal, tax-relieved benefit. I do not see that happening.

In communities in my area, working-class people who are brought up on council estates want to save for their children so that they can get on better in life. Everybody aspires to the next generation's doing better than themselves. Some families have achieved that for many years, but others have found, after years of unemployment, that their ability to save for their children has been greatly reduced; indeed, in many cases it has been totally eradicated. Some families are now out of the habit of saving, so it is a very good thing for parents to have this opportunity to save on their children's behalf, with some help from the Government. That money is not there to help in a cynical way with top-up fees, for example; it will enable those aged 18—that vital time in a person's life when they reach maturity—to take decisions that they would be unable to take if they had no assets at all. It is a shame when those from an asset-based background try to deny such assets to others.

I am somewhat confused by the argument of the hon. Member for Sutton and Cheam (Mr. Burstow). I cannot see how some form of local taxation would help the poorest pensioners; in what way would that be better than the council tax, for example? He has completely overlooked the fact that any form of local tax would, in itself, be means-tested; that is the nature of taxation. [Interruption.] The hon. Member for Orkney and Shetland (Mr. Carmichael) laughs, but if he does not know how taxation works—

Mr. Alistair Carmichael (Orkney and Shetland)

I think that that is your problem.

Kali Mountford

The hon. Gentleman has entirely missed the point.

Mr. Carmichael

Tell us what the point is, then.

Kali Mountford

The hon. Gentleman is behaving in a rather silly fashion—he ought to grow up. What is important is that the people who need the most money get it. What has been suggested would be a rather bizarre way of getting around the problem. What will best help pensioners is not giving more flat-rate money to those who can already afford everything; it is targeting money from scarce resources—

Mr. Burstow

Will the hon. Lady give way?

Kali Mountford

No, I shall finish this point, which I have made many times, although it obviously has not sunk in to the heads of certain feeble-brained people. The best way to help the poorest people is to make money available to them. The only point on which I agree with the hon. Member for Sutton and Cheam is that the way to tackle the problem of getting money to the families who are not claiming it is to address the question of take-up. We must establish take-up campaigns.

Mr. Burstow

Will the hon. Lady give way?

Kali Mountford

Yes, but I should point out that we are short of time.

Mr. Burstow

I am grateful to the hon. Lady for giving way. Will she therefore be voting against the extra £100 flat-rate winter fuel payment for the over-80s?

Kali Mountford

The hon. Gentleman makes what he thinks is a very clever point, but his own party and mine—

Mr. Burstow

Will the hon. Lady answer—yes or no?

Kali Mountford

The hon. Gentleman likes hectoring and heckling, but he does not like listening. The point is that there is a particular problem with the over-80s that needs to be addressed because they constitute the poorest group of pensioners, and unlike other pensioner groups, they never had the chance to gain from occupational pensions and private pensions. There has been a huge rise in the number of personal pension plans, but there are problems with that industry, and we may need to regulate it to ensure that pensioners and savers trust such schemes, so that they continue to invest. However, the hon. Gentleman has completely missed the point that the over-80s have had the least opportunity to save for themselves. His argument simply does not work. [Interruption.] He can continue to laugh if he wants to, but he will not learn much that way, will he?

I want to draw the House's attention to what I consider to be a very important matter in connection with work and pensions. That is the proposition that we should look more flexibly at what we can do for people who are unemployed and in receipt of benefit. In my constituency, there are 8,186 people on income support or pensions who will gain from the help that will be available to them if they should ever be unfortunate enough to be in hospital.

However, one ward in my constituency has the highest number of people unemployed and on benefits, and the lowest income. In other wards, people have a great deal more income and a great deal more to gain. We must look at how I and my local jobcentre can tackle the community in the ward to which I referred, analyse what is going on there, and make sure that people get the help that they need—training, support and help back into work. That has to be provided on a case-by-case basis, and not according to the simple across-the-board approach that we have had to date.

I see that time is running very short. I shall sit down now, in the interests of allowing further debate. However, I hope that the House will see the need for targeting help on those who need it most.

5.41 pm

Dr. Liam Fox (Woodspring)

Someone asked me last week whether it was nerve wracking to stand up and speak in front of a packed House. I guess that we will have to wait until another day for the answer to that question, but if the debate was sparsely attended, that was counterbalanced by the quality of the speeches.

My right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke) talked about the disastrous effect of introducing tax rises, and especially a tax on jobs, at a time when the economy is slowing. He reminded us that the Chancellor, in his role as domestic Prime Minister and great keeper of the real Labour truth and vision, had offered us enterprise, a family-friendly Budget, social justice—pretty much everything but places in heaven. I suppose that that was just in case there might be a place next door.

My right hon. Friend the Member for Fylde (Mr. Jack) again made a very informed speech, in which he talked about the need for clarity in the model used to predict tax receipts. He also mentioned the Government's shameless distortion of the supposed 20 per cent. cuts planned by the Opposition. The Government know that that is not our policy. It makes me wonder sometimes what moralising politicians, who for political advantage are willing to say things that they know are blatantly untrue, tell their children about the need to tell the truth.

It is a shame that we have not had a health debate in this debate on the Budget. Health is the Government's flagship policy. They have raised national insurance to fund rises in health service spending, but the Government are too afraid to allow the Secretary of State for Health to be paraded in front of his own Back Benchers. The Opposition would love to discuss the real health reforms that the Government might introduce in the future. In fact, we would have welcomed the chance to support the Secretary of State in his policy, and to congratulate him on the forthcoming Bill for opt-out foundation hospitals. We should also like to congratulate him on persuading the Treasury to move towards local pay and the abandonment of national collective pay bargaining. My right hon. Friend the Member for Fylde can be reassured that we certainly will have the courage to stick with that policy. I hope that the Government will. I am sure that the Royal College of Nursing, the British Medical Association and Unison would have loved to have heard the Secretary of State give the House details of how local pay would be implemented in the NHS. However, we wait for another day for that.

We have been promised much in terms of reform. In his famous interview with The Sun, the Chancellor said that there would not be one penny more until the changes necessary to carrying out the modernisation that the health service needed were secured. However, what real reform have the Government introduced? We have had some reorganisation, and the pieces have certainly been moved around. We have lots of spin to go with that, but the basic problems remain. The system is still too centralised, politicised, wasteful and bureaucratic. Its targets are entirely wrong, and drive activity in the wrong direction.

I entirely agree with the Paymaster General, who will wind up the debate for the Government and who told the House: Waiting lists, perversely, allow people to be treated not according to clinical need but on the period of time and political priorities of the Government."—[Official Report, 26 January 1993; Vol. 217, c. 962.] Yet that is exactly the perverse policy that the Government are following. It is a system that allows far too little choice.

I wonder what people would make of the concept of choice expressed in a written answer from the Minister of State, Department of Health, the right hon. Member for Barrow and Furness (Mr. Hutton). Of part of the Government's choice programme, he said:

The trust on whose waiting list the patient is held before the start of the choice process, checks whether the patient falls within the eligibility criteria for choice."—[Official Report, 26 February 2003; Vol. 400, c. 644W.] What sort of concept of choice is that? The only real reform that the Government are proposing is foundation hospitals but, because of the Government's internal sensitivities, we are not allowed to debate that in the House.

The Government's basic programme of reform on health has utterly faltered. What have we had? The consultant contract is a disaster. The GP contract is currently a disaster. Agenda for Change is not yet supported and is likely to fall into the category of disasters. Community health councils were abolished in order to provide better patient representation, but what did we get? We were told that the new supervision powers in place of those councils would guarantee that communities had a say about what happened in their area, but we are now told that they are not mandatory. The powers are there, but they do not have to be exercised.

We have had changes to care home regulations, resulting in the loss of 60,000 care home beds. We had a GP recruitment scheme, which was to provide 2,000 extra GPs between 2000 and 2004. With just a few months left, we have had only a little more than 400. Another plan was to send patients abroad. The cost of setting up, researching and administering the pilot scheme, which sent a total of 234 NHS patients to France and Germany, was a staggering £468,000. That is probably the greatest reform so far.

The funding of specific services will also be reformed. Under the NHS cancer plan—one of many—the Government pledged that an extra £570 million would be directly allocated to cancer services. We were later told by the cancer tsar that directly allocated does not mean ring-fenced: it is only an aspiration. The audit carried out by Cancer BACUP found that 50 per cent. of cancer networks had not received their expected allocation of funds, as 43 per cent. reported a shortfall in promised funds of between 20 and 25 per cent. More than 80 per cent. did not expect to receive the funds in 2003–04 and 70 per cent. of strategic health authorities pointed out a huge difference between the resource requirements to meet the needs of cancer services and the resources available to primary care trusts.

That is a pretty sorry tale and the same is true for hospices and mental health services. Everyone is asking where the money has gone. Faced with the failure to reform, new Labour resorts to type with spin, half-truths and downright lies. We are told that the Conservatives do not believe in the NHS and run it down at every opportunity. That presumably means not telling the truth because, under new Labour, telling the truth about the health service will lead to one of three consequences. People will be intimidated, like Mrs. Rose Addis; browbeaten, like NHS managers; or abolished, like CHCs.

My area, and that represented by the Paymaster General, has three trusts, none of which has any stars. The in-patient waiting list has increased from 10,000 at the end of December 2000 to 12,894 now. Are we supposed to say nothing about that because that is a criticism of the services to patients and undermines the basis of the entire system? Of course not. It is the duty of MPs to stand up and tell the truth.

I should like to tell the Government about privatisation. The involvement of the private sector is important. We must set the parameters for future partnerships we will need between tax-funding and personal contributions … We should be opening up health care … to a mixed economy … and be willing to experiment with new forms of co-payment in the public sector.

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

That sounds like charges.

Dr. Fox

Those are not my words, but those of the Prime Minister in one of his recent lectures. The Chief Secretary says that it sounds like charges; yes, it sounds very much like that to me, and all those who listened to the Prime Minister's speech would have been thinking exactly the same. The Chief Secretary is famous for scoring own goals in his television performances and he has managed one in the House, too.

The private agenda is often mentioned. It is not the Conservative Government but the current Secretary of State who has signed a new concordat with the private sector. Diagnostic and treatment centres are run by the private sector; there is private management for failing trusts; and the private finance initiative has been exalted to a near religious status. Labour Back Benchers might like to know that, last year, income from private patients in the NHS rose by 7.9 per cent., despite all the Government's rhetoric.

We are now seeing a decline in the number of beds and an increase in the number of bureaucrats. The number of beds in 1996–97 was 198,000, but is now 184,000—a reduction of 14,000. Yet the administration and estate staff have increased from 196,000 to 224,000. A Labour document states: Those who parade such figures do not realise that it is made up of people like painters and gardeners". I suppose that the primary care trusts and the strategic health authorities have been advertising for people to do a bit of dabbing of paint on the windows and to cut the grass, and have not been advertising for financial flow managers or public health staff. That is an absolute nonsense, and this is a Government in love with bureaucracy. However, consultant vacancies have risen from 2.3 per cent. to 3.8 per cent. in the past two years; the bill for agency nurses is now contributing hugely to hospital deficits; the number of cancelled operations has gone up from 52,000 to 81,000 since Labour came to office—and the figure worsened in each quarter of the past year; delayed discharges are a major problem and yet, rather than tackling the underlying problem, Labour has an absurd system of fines for local authorities; emergency re-admissions are up; clinical distortions have increased; and hospital-acquired infections have now reached the point where 5,000 patients a year die from them.

The situation has become absurd. We have looked at data from the Audit Commission and others, and we have looked at the Government's figures on how clean the hospitals are. The House will be pleased to know that more and more hospitals are hitting the Government's top target for cleanliness. However, in the 20 trusts with the highest rates of hospital-acquired infection—where people are most likely to die of it—13 get the Government's top rating for cleanliness and others get the second-top rating. That will be of huge reassurance to patients. The system suffers from endemic fiddling of the figures—both by the Government and encouraged by the Government.

The Government have thrown money at the system. Funding has increased by 21.5 per cent. in real terms; yet, by the classic measure of finished consultant episodes, activity is up by 1.5 per cent. The number of patients who were admitted to hospital last year actually fell by 0.5 per cent. It really takes talent to spend so much money and get so little back for it. We have to take the politicians out of the running of the service. That will mean abolishing the Government's central targets, giving power back to the professionals and giving real choice to the patients. The Government cannot succeed in running the health service by the present model. The Government believe that the patients are there to service the NHS, when it should be that the NHS is there to service the patients. That is the real difference.

5.52 pm

The Paymaster General (Dawn Primarolo)

I want to return to the Budget debate and to the discussions of the past two days, but in my concluding remarks I will turn to the points that the hon. Member for Woodspring (Dr. Fox) has made on the health service. I thank hon. Members on both sides of the Chamber for their contributions over the two days of the Budget debate. They will forgive me if I am unable to reply to every point in this short wind-up speech. Many thoughtful views have been expressed—by hon. Members on both sides of the Chamber, surprisingly—on a number of important challenges that face this country.

Britain has sustained the longest period of economic growth and the longest period of growth in living standards for half a century. Unlike the American, German and Japanese economies, the British economy has had uninterrupted growth in every quarter over the past six years. We have the lowest inflation for 30 years, the lowest interest rates for 40 years and the highest levels of employment in our history. Despite difficult world economic conditions, we are able, because of decisions that we have made, to meet our military and security costs abroad and at home and to pay for the costs of building the peace. We are able to maintain, in full, our record of investment in schools, hospitals, transport and policing. We are able to provide help for British business, industry and commerce.

This Budget marks a new stage for the Government. Having made reforms since 1997, we are now seeking to achieve a more flexible and more enterprising full-employment Britain—a Britain of economic strength and social justice. We have set out our detailed economic reforms, which are aimed at achieving, for each region and nation, the greater flexibility that we need to develop and maintain the global competitiveness that is necessary for us to secure our goal of full employment.

We should be clear. The flexibility that we seek in employment and pay, and in the liberalisation of capital markets and product markets generally, is not secured at the expense of fairness to families and members of our community—quite the opposite. It is underwritten by policies to promote fairness through full employment, tackling poverty through tax credits and better public services. In his opening speech, my right hon. Friend the Secretary of State for Work and Pensions, outlined our undertakings to assist lone parents, to improve employment rates and to develop skills. All are central to our strategy.

In an intervention, the right hon. and learned Member for Rushcliffe (Mr. Clarke) referred to a reply that had been given to his office about tax credits. He should not have been given such a reply. That should never have happened and I apologise to him. I shall be more than happy to take up personally the specific inquiry to which he referred. It is unacceptable that a Member of Parliament should have been given such information.

Mr. Kenneth Clarke

My constituent told my office that that was the explanation that she had received locally. My office was not given that explanation, but it was given information that implied that serious delays would take place so I welcome the right hon. Lady's indication that she will look into the matter.

Dawn Primarolo

None the less, my offer to the right hon. and learned Gentleman stands. It is unacceptable that delays should have occurred and that Members of Parliament should be advised incorrectly. That needs to be dealt with swiftly.

About 3.9 million claims for payment of tax credit have been received against an eligible population of 5.7 million. That does not include up to 1.3 million people in receipt of income support or jobseeker's allowance who will automatically receive the increase this year in their child premiums. The volume of claims is enormous and, unfortunately, errors are inevitable in some cases, but it is not correct to give the impression that there is excessive delay or that people have not been paid on time the money that was due to them.

Mr. Willetts

Will the right hon. Lady give way?

Dawn Primarolo

I will, but I hope that hon. Members will then allow me to reply to the debate.

Mr. Willetts

Will the Minister assure all the people throughout the country who, until last week, were receiving working families tax credit that they will all receive this week the child credit to which they are entitled? That is the problem.

Dawn Primarolo

The problem is whether people have applied for the credit and when. The hon. Gentleman is knowledgeable about such systems, especially the vastness of the tax credit system, to which more than 5 million people have access, so he will realise that if somebody applied late for their tax credit, it may not be possible—even with all the will in the world—to get their payment to them in time for it to be continuous. They will get the money and we are prioritising to ensure that they do. However, it would be to make a false promise to the House to give the undertaking that the hon. Gentleman requests. For example, where people have sent in wrong information, late information, incomplete information or information that we have been unable to verify, I could not make such an undertaking to the House.

In his speech, the right hon. and learned Member for Rushcliffe talked about unbalanced growth. In particular, he suggested that the wealth-creating sectors of the economy were being neglected. The Government recognise that manufacturing is disproportionately affected by the slowdown, but the same is true across the globe, as he knows. That is why the Government have implemented a proactive enterprise agenda, which has been welcomed by the CBI in its response to the Budget, as a way of continuing to develop and enhance enterprise and entrepreneurship, and to ensure growth in the sector.

The right hon. and learned Gentleman also suggested that the growth forecasts were optimistic. We do not agree, and nor do three quarters of the independent forecasts which, for 2003, are within or above the Government's forecast range. Since 1997, the Government have, if anything, tended to underestimate growth forecasts.

I entirely agree with the right hon. and learned Gentleman's point about the importance of understanding the trends in the global economy, but it simply is not true, as he said, that business investment is suffering unduly in the United Kingdom. British investment has weakened across the world—in the United States, by 12 per cent. We have also experienced that pressure in Britain. However, total real business investment for 2002 remains at 14.5 per cent., which is higher than in 1997.

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

Debate to be resumed tomorrow.