House of Commons Hansard Debates for 13 Feb 1990

Mr. Norman Lamont : My hon. Friend is making an interesting speech. Does he agree that the answer to what he said was given by the hon. Member for Derby, South (Mrs. Beckett) when she told us that a future Labour Government would be committed only to two things--an increase in pensions and an increase in child benefit? Everything else might happen or might not happen, but would none the less be listed. Is not that a thoroughly dishonest approach?

Mr. Stewart : My right hon. Friend goes to the heart of the matter. The speech of the hon. Member for Derby, South will be read carefully by my hon. Friends and will, no doubt, often be quoted objectively in future.

The right hon. and learned Member for Monklands, East goes round like the famous Dutch boy with his finger in the dike. As the floods of promises and pledges increase, he rushes round saying, "Remember lads, say as resources allow'. Don't put any figures on it." He is not succeeding in that approach and he will not do so.

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I shall give two examples relating to education in different parts of the country. A document called "London Pride", published by the Labour party in January 1990, said :

"Labour will make repair and modernisation of school buildings a top priority."

How many top priorities are there? In Scotland, the approach has been rather different. Last week, the Labour party there announced its plans for Scotland to journalists. One of them asked mildly how much they would cost. He was told :

"We have had 10 years of not affording education and look what it has cost us."

That approach to public expenditure reminds me of a Scottish friend who, when he came to London, discovered a doubles bar with a happy hour. After about his fifth cheap double, my friend was generally admonished by others there about the merit of continued expenditure. He said, "Have another. Think of the money I'm saving." Such is the approach to much of public expenditure which is adopted by Opposition Members.

Mr. Burt : Does my hon. Friend agree that a fourth principle has been enunciated this evening? It was mentioned clearly by the hon. Member for Nottingham, North (Mr. Allen) and was not contradicted by his Front Bench. He said that the spending policies of the next Labour Government would be revealed the day after the election. There was no contradiction from his Front Bench. Is not that a further extraordinary example of how to lay policy honestly before the British electorate?

Mr. Stewart : My hon. Friend the Member for Bury, North (Mr. Burt) is right. All that that pledge to the British electorate means is that if there were, by any mischance, to be a Labour Government, they would issue a public expenditure White Paper at some point. The right hon. Member for Llanelli and my hon. Friend the Member for Clwyd, North-West (Sir A. Meyer) spoke about Wales. They would not expect me to talk about Wales, but it is interesting to examine identifiable general Government public expenditure per head in different parts of the United Kingdom. For 1988-89, the figure for England was £2,161. For Wales, the figure was higher at £2,489. The figure for Scotland was £2,805. It is interesting that no Scottish Labour Members are here now, although I do not criticise them for that.

Mr. Tony Favell (Stockport) : They are spending all the money.

Mr. Stewart : My hon. Friend says that he believes that they are out there spending all the money. It is impossible to argue that Scotland is somehow disadvantaged in public expenditure.

I want to refer to local authority expenditure and to table 21.4.11. Will my hon. Friend the Economic Secretary to the Treasury and the hon. Member for Newcastle upon Tyne, East say a word about the implications for those figures of the implementation of the local government finance policies currently being advocated by the Labour party? If one removes the index linking of non-domestic rate income--which is a Labour party pledge-- inevitably, that constraint on local authority expenditure is removed. My hon. Friend may, on this occasion or in the future, want to talk about the implications for public expenditure of the roof tax, which is clearly proposed by the hon. Member for Glasgow, Garscadden (Mr. Dewar) and his

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colleagues and far less clearly proposed by hon. Members south of the border. Perhaps the hon. Member for Newcastle upon Tyne, East will do the entire United Kingdom a service tonight and confirm that the Labour party generally agrees wholly with the concept of a roof tax as spelt out by its Scottish spokesman and that it will apply in precisely the same way north and south of the border. If the hon. Gentleman wants me to give way to him, I shall be happy to do so. Does the hon. Gentleman want to get the wording right for his winding-up speech?

The introduction of such a tax, among its many other disadvantages, would have major implications for public expenditure. The tax base would be so much smaller than either the base of community chargepayers or the old base of ratepayers. The burden would fall on a small, selected part of the electorate. There is a recipe for massive increases in local authority expenditure when local authorities can go ahead with such increases without any real political cost. Those may be questions for the future, but I hope that we shall be given some answers tonight by the hon. Member for Newcastle upon Tyne, East.

7.38 pm

Mr. Graham Allen (Nottingham, North) : In our previous economic debate, I began my remarks by quoting the line from "Jaws" : "Just when you thought it was safe to go back in the water" in respect of Ministers. I feel like quoting the same line tonight, given that my hon. Friend the Member for Dunfermline, East (Mr. Brown) has now moved on to greener pastures. His place has been taken by my hon. Friend the Member for Derby, South (Mrs. Beckett) who showed real merit and steel in her opening speech. Conservative Members may yet grow to wish that my hon. Friend the Member for Dunfermline, East was back in his place as shadow Chief Secretary to the Treasury, given the performance of his successor today. Before I speak about the public expenditure plans, I should say that I am grateful to the Government for the changes that they have made to the layout and format of the Government expenditure plans in the White Paper. I was sorry that the Chief Secretary did not pay tribute to the Chairman of the Public Accounts Committee along with his warm tribute to the Chairman of the Treasury Select Committee. The documents have advanced so far that they are almost comprehensible to an ordinary human being. That is quite some progress, given the way that the documents looked some years ago. I thank the Chief Secretary in particular for his efforts in moving the papers on a wee bit.

I hope that hon. Members will begin to look at these documents seriously. Each Select Committee has an opportunity to examine them, in conjunction, one hopes, with annual reports from Departments, and to give some teeth to the parliamentary financial accountability of the public expenditure plans that the Government lay before the House. It would be no bad thing if each Select Committee reviewed the relevant documents and brought before the House a report on Government expenditure.

All that was by way of an aside. It worries me that Conservative Members do not know which tag to adopt when defending Government expenditure plans. Sometimes they say that we must control public expenditure. That is a totem to show how fiercely they are prepared to guard the financial integrity of the

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Government. At other times they talk about how much more the Government are spending. There is always an irreconcilable contradiction in Conservative Members' remarks. They cannot reconcile the desire to promote the image of the Government as a high- spending authority at national level with the idea that the Government have a tight fiscal policy, as the Chief Secretary would have it called. That is called having your cake and eating it. I am sure that my hon. Friend the Member for Newcastle upon Tyne, East (Mr. Brown) will refer to that when he sums up, as my hon. Friend the Member for Derby, South did in her opening remarks.

There is a basic fallacy and misunderstanding in the remarks of Front-Bench Conservative Members, too. They equate on a one-to-one ratio the financial health of public sector spending with that of the economy as a whole. That is to mistake Great Britain Ltd.--the enterprise of the Government, who have balanced their books--for the health of the economy as a whole, which is in a deplorable state. The stewardship of the Government does not merely involve Government expenditure. It sounds fine to say that we are repaying a certain amount of our debt, but the responsibility and the role of Government in the financial sphere is not only to manage their finances properly. The essential priority is to use that finance to ensure that the wider economy works properly. To express joy merely because one part of the economy is under control--as the Government would have us believe--is not enough.

We see the poor condition of the wider economy in the various indicators of economic success. Our trade deficit is the highest percentage of GDP in any industrialised country in the West. Inflation is running at an average of 7.7 per cent. over the year. We have the highest inflation of the Group of Seven countries. Interest rates are going through the roof and one in 10 people who have a mortgage are falling behind with their repayments. Every hon. Member knows that industry is screaming out because it cannot obtain the finance that is essential for long-term investment. That is the measure of the Government's economic success. The Government may take pride-- perhaps misplaced pride--in the state of the minor section of the finance for which they are executively responsible, but the fact that they are repaying the public debt is not enough.

The Government have had tremendous advantages. It is commendable to repay the public sector debt, but, with North sea oil revenues over a 10-year period of some £87 billion and the massive consumer boom--with money sloshing around throughout the economy--the Government do not have a great deal to show for 10 years of tremendous advantages. Yet at the end of that period they talk so glibly and gladly about the one area in which the Government seem to have balanced their books. To make my point, I can do no better than to quote as a point of reference for the missed opportunities the following extract : "without higher investment--in skills, innovation and the infrastructure as well as new production capacity--we stand little chance of overcoming either our balance of payments deficit or inflationary pressures without a recession.

But I regret to report that we enter the new decade with an unfavourable economic background against which companies will be formulating their investment plans".

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That quotation is not from the shadow Chancellor or Financial Secretary but the Director General of the Confederation of British Industry, that renowned Socialist Labour supporter, John Banham. In this month's CBI News both Conservative and Opposition Members will read that the CBI will soon hold its annual dinner. It is on Thursday 17 May, in case Conservative Members have not put it in their diaries. It is to be

"a relaxed and cheerful gathering of members and their guests to enjoy a convivial evening of good food and conversation." It will be of interest to both Conservative and Opposition Members that the guest speaker will be none other than the Chancellor of the Exchequer. I hope that he will have on his left John Banham, who may even read him that quotation from his article in CBI News. On the Chancellor's right perhaps he will have Sir Trevor Holdsworth, the outgoing president of the CBI. He, too, has made several pungent comments on how the Government are failing to meet the needs of commercial and industrial development. He could do no better when the Government talk of their large public sector surplus than to quote from the CBI report to members. Under the heading "Economic Priorities for 1990" it urges that :

"The large public sector surplus be used for increases in public spending on the transport infrastructure and for cuts in business taxes :".

I hope that at that dinner the Chancellor of the Exchequer will be sandwiched between those two chairmen and that that sandwich will be the most savoury item on the menu. I hope that the Chancellor will listen, if not to the Opposition or rational economic argument, at least to the views of people who in the past were supportive of his party.

Public expenditure as a percentage of GDP has fallen. That is clear from the documentation. That fall in public expenditure in real terms is evident in the lack of investment in industry and transport. The fall in expenditure simply represents cuts--good old-fashioned cuts. For example, there has been a massive reduction in the rate support grant to local authorities. The hon. Member for Clwyd, North-West (Sir A. Meyer) said that his local authority was suffering. It is no reduction in the tax burden or in requests for moneys from individuals if the Government say, "We are not giving you more or even the same rate support grant. That money will have to be found from other sources." Ultimately, the individual, the family, the taxpayer and the poll tax payer has to meet the bill.

It is a sleight of hand to imagine that local government expenditure can somehow magically be reduced merely because central Government reduce their contribution to local government. We all know--all hon Members know this from constituency experience--the pressure under which local government has been put by that sleight of hand. It does not reduce public expenditure ; it simply makes the national books look a little healthier.

There are also cuts right across the range of housing provision. I know that my hon. Friend the Member for Leeds, West (Mr. Battle) will refer later to council housing and to the allowances for home improvements and the reductions in the money for housing associations. The Chairman of the Public Accounts Committee, my right hon. Friend the Member for Ashton-under -Lyne (Mr. Sheldon), has eloquently outlined the cuts in maintenance. All those things come back to roost. If I can put it in

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Granthamite terms, if people do not put a lick of paint on their window sills or elsewhere on their house, they will soon have to buy new windows, guttering or whatever. The same Granthamite arguments apply to the national estate, to Government buildings, to roads, sewers and railways. The Government cannot cut maintenance by £1.8 billion on hospital maintenance, for example, as we heard recently in the Public Accounts Committee, without the ghost coming back to haunt us in a big way. Yet again it will be a Labour Government who will have to pick up the bill in the future.

Cuts in training and a reduced public sector obviously influence the way in which Government debts at national level are viewed. If the Goverment sell off the family silver, there is less of a public sector. Again, as we heard in the Public Accounts Committee, we have had a parade of privatisations, brought about by sweeteners, and by money spent on marketing, advertising and all sorts of devices, including bribes in one sense or another, extremely low sale prices or dowries. Whatever the term used, the Government have been selling Britain's assets short. That has been the way in which the major public assets--the family silver--have been disposed of, but it is a one-off and can never happen again. Once again, massive amounts of money have gone into subsidising the Government's obsession with balancing the Government's national books instead of being used to develop the wider economy, which is what I and many of my colleagues feel is the Government's real economic responsibility. According to my hon. Friend the Member for Derby, South, there has been a grand total of £50 billion- worth of wasted expenditure in that respect. Another thing that the Chancellor could have a chat about with Sir Trevor Holdsworth and John Banham at their lunch--that is assuming that the Chancellor is still in post--[H on. Members :-- "Dinner."] Well, it could be a long conversation that runs from lunch to dinner. I note the obvious experience of the hon. Member for Staffordshire, South-East (Mr. Lightbown), which appears to be far more profound than that of any other hon. Member.

I refer now to a concept that lost "fashionability" about 10 years ago but which is nonetheless paraded by Ministers occasionally--it is called "crowding out". Let us look again at that famous Labour party journal, CBI News. My hon. Friend the Member for Kingston upon Hull, North (Mr. McNamara) tried to draw the Prime Minister's attention to the front page of CBI News at Prime Minister's Question Time last week because it showed a tremendous drop in the investment intentions of CBI members. Unfortunately, the Prime Minister had a problem with her myopia and could not see the diagram. No doubt it can be sent to her if she has not yet got her own copy. It looks very much as though the intentions of CBI members to invest in plant and machinery over the next 12 months are themselves being crowded out. The concept has now lost all credibility.

The only crowding out that is taking place is in areas such as research and development. Once again, that is an area in which Sir Trevor Holdsworth has great expertise, especially in respect of the defence percentage of research and development. I believe that we have the highest percentage of R and D on defence--as opposed to civil R and D--of any country in western Europe, which will be made worse by the Government's expenditure plans in which we can see that the civil element in R and D is to be reduced by a further 2 per cent.

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Mr. Christopher Gill (Ludlow) : Is it part of Labour party policy to reduce corporation tax and to allow companies to retain more of their own profits so that they can invest in research and development and in training?

Mr. Allen : I hope that the hon. Gentleman will forgive me for not being able to speak on behalf of the party, but I shall, of course, give him my personal opinion. I believe that corporation taxes should be reviewed. They are too high and could be reduced. That is a possibility, along with an examination of depreciation allowances, all of which could be paid for in time by an increase in growth when the Government's own expenditure acts as the pump-priming mechanism for a growing industry. I do not know whether that is the view of my Front Bench.

Mr. Nicholas Brown (Newcastle upon Tyne, East) : Yes, absolutely.

Mr. Allen : Well, I should be happy to talk to my right hon. and hon. Friends about it. We should not forget which party is in government, but it is unfortunate that the Government are not taking any notice of the CBI's request for that sort of review and examination. I believe that it bears examination and I very much hope that when the time is right we can look at bringing this country's corporation tax levels more into line with the levels on the continent.

The continent does not have the theory of crowding out. If we consider the expenditure of the Governments of France, West Germany and elsewhere, especially on transport and on infrastructure developments, we see that they take no notice of the ancient Bacon and Eltis nostrum of crowding out. That is old hat. They realise that where there is a good transport infrastructure and investment, there are benefits for the private sector and the public sector equally and for those who work in them.

To me, that is common sense and it is common sense to the French, the Italians, the West Germans and to everyone else in Europe. However, once again our isolationist Prime Minister has failed to catch up, which has meant that we are falling further and further behind. That is why our trade deficit is getting higher and higher and why our imports are increasing. As my right hon. Friend the Member for Llanelli (Mr. Davies) so eloquently said, we may be a nation of shopkeepers, but the stuff that we are now selling in our shops comes from Japan and Europe and less and less of it is being made in this country.

As hon. Members are looking for suggestions for future policies under a new Government, I put forward my suggestion on the exchange rate mechanism. While all parties appear to have a host of pre-conditions for joining the ERM, my only pre-condition would be that in a new climate, with a new Government, it would be quite easy to negotiate the condition early on that our levels of public expenditure investment in industry and commerce should match those of our continental competitors. That could be achieved and there would be the will to achieve it under a Labour Government which, sadly, there is not under this Government.

If we look through the public expenditure documentation we do not see the rhetoric that we have heard tonight from Government Back Benchers who seem confused about whether the Government are holding down public expenditure or are the greatest thing since sliced bread for a host of sectors in which there is public expenditure. We see cuts in real terms in the provision for industry, the

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regions, research and development, housing, education and training. There is a desperate need for expenditure on education and training, but spending has been cut back by £85 million this year, despite the fact that the city technology colleges, a pet project, have a provision of £135 million. Ironically, some of the few increases in the public expenditure White Paper are to pay the extra high interest rate repayments generated by the Government's incompetence in other sectors. They have to set aside greater provision to pay back interest rate charges than they did a year ago.

I am not in a position to give Labour's priorities. I am certainly one of those referred to earlier as the Monklands, East tendency who believe in the philosophy, "We shall let you know in good time." I know that my hon. Friends on the Front Bench are more liberal and want to talk about matters more freely. If there is a kitty of £190 billion there is immense scope for reordering public expenditure provision on the lines of the social priorities that we would seek. My hon. Friend the Member for Derby, South has already outlined what she would like in terms of pensions and child benefit. There is great scope for reorienting current programmes, even without growth. Once growth provides additional expenditure for other programmes, be assured that Conservative Members will be the second to know the sectors of greatest expansion and the matters of first priority. I have one final worry about what we shall face as a party coming into government. It has always been our lot to inherit what has been left after the locust years of a Tory regime, be it the years after 1964 or the boom and bust of Barber in 1974. No doubt, when the Thatcher era ends, be it in 1991 or 1992, we shall inherit that position again. Massive investment will be necessary throughout industry, commerce, the transport infrastructure, sewers, water and electricity industries, right across the board to education and training. It will take a new Labour Government to make that investment. The Government have steadfastly refused to put aside the amount of money made available through North sea oil and the credit boom of the 1980s. Once again it will fall on the Labour Government to dig the country out of the hole in which the locusts have placed us. I regret that that should be so. I particularly regret that it takes a number of years before the fruits of investment are seen. I remember having a conversation with a senior member of British Rail management who said that the organisation could not use money if it was given it on a plate within a matter of months or even one or two years. Gearing up was necessary to ensure that plans were ready and schemes were put into operation. It may well fall to a Labour Government to put those schemes into operation. I hope that the electorate will have patience with an incoming Labour Government and realise that it will be a long time before those investments bear fruit. Be that as it may, it will be the duty of the next Labour Government to undertake that task.

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8.4 pm

Mr. Roger Knapman (Stroud) : Thank you, Mr. Deputy Speaker, for calling me to speak.

Like the hon. Member for Nottingham, North (Mr. Allen), I followed the speech of the hon. Member for Derby, South (Mrs. Beckett) with considerable interest, particularly towards the end when she said that the Opposition knew the scale of the problems and the scale of the needs. Unfortunately, that did not enable her to state the scale of the costs. Finally, she said in grand Churchillian crescendo, "Give us the tools and we will finish the job." Some of us feel that Labour nearly finished the job in 1979, but not in the way that the hon. Lady meant.

I congratulate my right hon. and hon. Friends in the Treasury on the presentation of the estimates. I was particularly pleased that there will be a 9 per cent. increase in Overseas Development Administration spending in the next few years. Surely it is right that, as our economy becomes strong and the country wealthier, we should spend more on Third-world countries.

Increasing spending is one thing, but actually getting it to the sharp end- -the patient or pupil--can be quite another. Over the past few weeks, it struck me that one or two of the schools that are opting out are absolutely delighted with Government funding because they have suddenly found that the local education authorities were keeping up to 40 per cent. of the money. If that is so, there is no doubt that they are much better off. If that happens between local education authorities and schools, I wonder whether it also happens between regional and district health authorities. I wonder how much the regions are keeping back from the district health authorities. It would interest some of us to know.

I intend to speak about small businesses. The growth of the economy over the past few years has enabled increased public expenditure and, over the decade, a reduced proportion of GDP to be used. It is that ratio that is vital because Government income depends on the health of, and growth in, the economy. In particular, we must continue with a business environment in which small businesses can thrive. We have done a great deal towards that during the past decade, but there is one aspect where we can do a little more.

It is wonderful that such a large proportion of people have taken the plunge over the past decade, risked all and started their own businesses. The vast majority of people with energy would sooner put up with a few blips in capitalism than have the dull, drab certainties of Socialism. Labour could never even afford to acknowledge the value of small businesses or their contribution to the economy because that is absolutely incompatible with state planning. If some people prove that they can manage without such benefits, it may be catching.

The nadir of state planning for many of us with longer memories was the Meriden motor cycle co-operative. That was on the shortlist without doubt. But for me the nadir of state planning was the sale of the 24 ships to Poland. That business was conducted to prop up the shipbuilding industry-- or did we think that we needed zlotys at the time? The effect was that in a short time the sale undermined the Merchant Navy.

In 1979, British industry and small businesses were hopelessly uncompetitive, overmanned and dictated to by

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the trade unions. That was not entirely surprising because, at that time, the right hon. Member for Islwyn (Mr. Kinnock) said : "It is inconceivable that we could transform this society without a major extension of public ownership and control."

The hon. Member for Nottingham, North was not saying anything very different. By 1988, the same right hon. Member for Islwyn said : "faced with a market economy we have got to run it better than the Tories."

I do not know what to make of a right hon. Gentleman who makes such a sharp U-turn, except that it is possible that he does not believe in very much.

Of course, in 1979 it was obvious that new large-scale, labour-intensive undertakings were not forthcoming to replace those that were closing, and, even if they had been, it was unlikely at that time that they would have chosen to set up in this country. So we had to rely on new small industries and businesses. At that time it was absolutely essential to release the energies of business men, and we did so. It cannot be stated too often that in 1978 the number of business closures exceeded the number of start-ups by 100 every week, whereas now the number of start-ups exceeds the number of stops by 1,200 every week. No wonder the number of people in

self-employment has risen from under 2 million to over 3 million in the course of just over a decade. That is an increase of about 60 per cent.

Mr. Gill : Does my hon. Friend agree that it is remarkable that, although, during the past decade, literally hundreds of thousands of men lost their jobs in the old-fashioned heavy industries, there are now more people in employment than ever before?

Mr. Knapman : My hon. Friend is absolutely right, and it is only capitalism that could have brought that change at a reasonable social cost. That contrasts with the results of the planned Socialist economies of eastern Europe that we have seen over the past few months.

I hope, in due course, to draw the attention of my hon. Friend and other hon. Members to the situation in my constituency, which is a striking example of the change that has taken place. Not only was there an increase in self-employment, but the right climate for small businesses was created by the promotion of investment, enterprise and, indeed, competition. We have reduced the levels of inflation and of taxation, although inflation is still far too high, at least by the standards of a Conservative Government. I am sure that we shall all put up with the short-term pain of high interest rates for a while, to cure inflation once and for all. Not least, the Government have reformed employment law and are continuing to do so. In fact, a member of the Committee on the Employment Bill told me that he and his colleagues started off thinking that reform of the closed shop would be a very contentious issue. Now some Labour members of the Committee are actually supporting the proposed change.

I have said that my constituency of Stroud is a perfect example of this business transition. My constituency was early into the first industrial revolution, essentially with textiles--the mills in the valleys and the sheep on the hills--but also with engineering, which usually needed to be located by streams or rivers. For many decades, the valley industries prospered, particularly in what is known as the Golden valley. Many firms ended up with 200 to 1,000 employees, and one engineering firm at Dursley employed

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4,000 people. On top of the hills, overlooking the valleys, there were the large and imposing employers' houses, and woe betide any mill foreman who sounded the "leave work" hooter a minute early. The local economy there shadowed the national economy. The engineering and textile industries are still important--in the case of textiles, billiard cloths, tunics and suit materials in particular--but not as important as they used to be.

Indeed, both locally and nationally, most labour-intensive firms had to shed labour to stay competitive, both nationally and internationally. The firm that employed 4,000 people now employs 1, 200, and high rates demands have not been helpful. But, with 1,200 employees, it is more competitive and has a better product range than for many years. Fortunately, unlike parts of the north or, perhaps, Corby, Stroud did not have lay-offs all in one go. They were gradual. Then the transition occurred--hundreds of new small businesses springing up, often on the sites of former textile mills and outbuildings. Business parks with planning permission for five, 10 or 20 units were soon fully let, and sometimes had a waiting list. Of course, some of those businesses will grow, and some will perish, but the capitalist cycle will go on.

In one of the valleys there is a modern factory employing 400 to 500 people, producing all sorts of high-tech materials for the North sea oil industry. A very prosperous factory it is. Adjoining it is a five-storey, Cotswold stone, mullion-windowed mill with all its windows broken. In my eyes the transition has been from one to the other. Only capitalism could have brought about that transition at an acceptable social cost. The constituency of Stroud, and for that matter the nation as a whole, owes its prosperity solely to capitalism, and not in any way to Socialism.

I am grateful for all that the Government have done over the past decade to improve the situation of small firms. I want, however, to end with a small criticism. We have promised to reduce bureaucracy, to reduce red tape. Indeed, we have done so, but not to a great enough extent. We must reduce the burden on small businesses, of their unpaid tax-gathering functions. I want to quote from "Your Guide to Government Help for Small Firms". Under the heading, "Cutting Red Tape", it says :

"Most Government departments now have Deregulation Units whose job is to cut red tape wherever possible, see whether existing laws can be simplified and assess proposed new laws for their impact on business, especially costs."

I believe that if some civil servants were to spend time with the average small business, they would find a fairly consistent and common complaint. It would be about the red tape that those businesses still have to suffer, in the payment of wages and the collection of taxes.

It happens that my background is in small business, so I hope that I understand that one has to be a man or woman of many parts. One arrives on Monday morning somewhat ahead of the staff, to make widgets or whatever. Before long, one gets production going, but suddenly the first customer comes along and one has to sell something. The business has to be kept going. One is dealing with the sale when a lorry arrives and has to be unloaded. Otherwise production would stop. No sooner has one started doing that than a machine break down, and one has to become chief engineer. In small businesses, any time that is taken away from the essential processes of buying, selling or manufacturing is, relatively speaking, wasted. Yet we expect the owners of small businesses to be unpaid

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tax gatherers. They have to collect national insurance and VAT. That process takes up a lot of time for a person running a small business that employs up to 10 people. Above all--hideously complicated for small business--is the system of pay-as-you-earn. Here I am not criticising. I realise that much has been done to simplify the tax system. We now have one higher rate of tax, rather than four or five, as previously. However, we can do more, and I think that we should.

I should like to suggest a further move from taxes on income to taxes on expenditure, which would benefit most the small business man. It would do more for him than all the other advice put together. When I became parliamentary candidate for the constituency of Stroud about four years ago, the main problem in that area was unemployment. It is most certainly not the area's main problem now. I am pleased that the United Kingdom has an unemployment rate of 5 per cent. to 6 per cent., compared to a rate of about 9 per cent. in the rest of Europe. That is an immense achievement. For several years we have created more new jobs than the rest of Europe put together. If we encourage small firms, particularly by further simplification of the tax-gathering system, they will give more money, through taxes, to the Government, and we shall be able to continue to spend more on the Health Service and on education. We have a record of which we should be proud.

8.18 pm

Mr. Ron Leighton (Newham, North-East) : Like perhaps other hon. Members, I scanned the Government's new public expenditure plans to see what the Department of Employment was proposing to spend on training. Everybody now surely knows how abysmally we lag behind our competitors in vocational training. Unfortunately, we have the worst trained work force in the industrialised world, falling behind not only Europe and north America, but now also many Asian countries. Only last month yet another paper, this time from the National Institute of Economic and Social Research, reported that in the West German kitchen furniture industry nine tenths of all German employees had vocational qualifications based on a three-year, externally examined apprenticeship-type course. In Britain only one tenth came anywhere near to being in that category. Is it any wonder that the German industry has a huge productivity advantage and dominates the high value added sector of the market? In clothing manufacture, the institute found that 80 per cent. of German machinists had completed the relevant two or three-year examined course, whereas in British plants it did not come across one machinist with such a qualification. So the comparison goes on for industry after industry.

Recently, the previous Secretary of State for Employment, the right hon. Member for Sutton Coldfield (Sir N. Fowler), described a study by the Department into training as mind boggling--mind bogglingly bad, not mind bogglingly good. As countries can buy in state-of-the-art technology, it is by the skills of their work forces that they compete. Training our people is the vital strategic investment. This matter has been analysed to death. Everybody knows the facts. The question is : what are we going to do?

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After 10 years of a Conservative Government we are falling further behind. We are getting into a sort of low skills equilibrium with poor management and badly trained workers producing low- quality, low value added goods, and the orders for sophisticated goods are going overseas. As a result, our trade deficit now threatens to overwhelm us.

But what do we get from Ministers at the Department of Employment? We get lots of speeches and empty, windy rhetoric, lots of continuous chatter and lip service about training. But where is the action? Where are the resources? We have to turn to chapter 6 of the Government's expenditure plans. What are they going to do? They are going to make cuts. Are they going to put their money where their mouths are? No, they will do the opposite.

In the Government's expenditure plans 1990-91 to 1992-93, the training programmes are grouped under the heading "Skill and competence for work", and the figures are given in table 6.3, "Expenditure on training". If we take an index figure of 100 for the estimated outturn for this year, 1989- 90, in real terms 1987-88 was 122. Two years ago we were spending 22 per cent. more. In 1992-93 it is planned to be only 73. The cash for training has been falling and it is planned to fall further. In real terms, expenditure this year is almost one fifth lower than it was two years ago, and in three years' time it is planned to be only three quarters of what it is now.

Since last year's White Paper the cash for 1990-91 and for 1991-92 has been cut in real terms by 18 per cent. and 21 per cent. That is the measure of the cuts in planned expenditure on training which the Treasury has obtained from Ministers in the autumn public spending round--a major victory for the Treasury, but a defeat for the nation's training needs.

Nor can it be claimed that the fall in numbers justifies the fall in expenditure. During the next three years, funds for YTS are to be cut in real terms by nearly a half, but the numbers are planned to fall by only one quarter. Real expenditure per trainee will fall by one third. It is right that employers should contribute more, but it is wrong for the Government to spend less and thereby send the wrong signals.

It looks as though the Treasury is saying that while there was mass youth unemployment it was willing to spend money as a cosmetic, to massage the unemployment figures, but now that there is to be a demographic change, the pretence of training can go hang while the Treasury saves money. We now have fewer young people, so more will go into jobs, but we must see that they are trained. The Government should look carefully at the plans being recommended by the CBI and the TUC to give substantial training credits to every young person. Now let us look at the other major programme-- employment training. The Government made a big splash about that when it was launched, but we do not seem to hear so much about it now. A fall in numbers cannot be argued here. The employment training programme is not hitting its numbers target, and, even it it did, it would reach only a fraction of what the Training Agency calls the client group. Despite that, there have been two cuts so far of £200 million in that programme and the cash stays the same this year while its real value is planned to fall by about one tenth. That is the opposite of what we should be doing.

Employment training, which has the germ of a good idea, is badly flawed. It is grossly underfunded and because

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of that it is often inadequate and unattractive. As a result, it reaches ony two thirds of the Government's published target for which it allocated the money. In those terms, it is not a success. The participants who were expected partly to work receive just £10 above the level of benefit. That is not very much of an incentive. Many are financially worse off.

The training agents receive £38 in London and £31.50 outside London to work out a personalised action plan for each participant, and £15 for each placement with a training manager. Those are shoestring budgets. Training managers receive £15 for each person who starts training and £18 a week basic grant for each person in training. In some cases there can be supplementary grants averaging perhaps another £20. That makes perhaps £38 a week to pay for training. What quality training can be obtained for that? What private training organisation would offer training for such derisory sums? The CBI refused to become involved in the scheme on those derisory figures. Hardly any large firms have lent themselves to the scheme and the construction industry refused to be involved with the scheme. It has a different and much better one where the courses cost between £150 and £180 a week.

Because of the underfunded, unsatisfactory, inadequate and unattractive nature of the programme most people drop out. When the Select Committee on Employment went to Dundee in March last year to inspect the programme we found that 33 per cent. of those referred by the employment service dropped out before reaching the training agent. We found that a further 47 per cent. dropped out before reaching the training manager, leaving only 20 per cent. who stayed with the training manager for at least one week.

Mr. Roger Dawe of the Training Agency gave evidence to the Select Committee in December 1989 when he said that, nationally, 45 per cent. drop out before reaching the training agent and then there is a further drop out before reaching the training manager. So it seems that there is a drop-out rate of about 80 per cent. Of the 20 per cent. or so who enter training, 70 per cent. leave before completing their original action plan and 42 per cent. of those who complete their training do not get jobs at the end. The House might well conclude that the employment training programme is completely shambolic. No one can pretend that it matches up to Britain's training needs or that it matches the efforts of our competitors. So unattractive is the programme and such is the number of the drop outs, it does not even spend the money that has been allocated to it. There are continual underspends. There was an underspend this year, last year and the year before that.

The last time I spoke on employment training I said it was half a loaf ; now I do not think it is even that. These cheapskate schemes fail the unemployed and betray the needs of the country. Rather than making these cuts, the Government should make the essential investment that is needed in training. If they do not, it will be for a new Government to do so.

8.30 pm

Mr. James Hill (Southampton, Test) : I have had a rather chequered evening. I had a meeting in the House with some of the officers of Hampshire county council at which one of the items that we discussed was, of course, the community charge. Hampshire county council is about to submit a budget for ratification of £770,510,000. That is

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an increase in one year of £140 million. In cash terms, it is 22 per cent. and in real terms 12 per cent. It would seem that local government expenditure is beginning to roar ahead. According to the people I have been talking to this evening, there seems to be no way of dampening it down. If these are the sort of figures that we will be confronted with, obviously the Government must examine some of the services for which local government has to pay.

I have said for some years that the police, the fire brigade and perhaps even education should be the responsibility of central Government. I am not sure that all local authorities are as ham-fisted as some, but nevertheless they do not seem to be able to keep a check on their expenditure. I am particularly concerned because only this evening the figure for Portsmouth was announced at £308. I have a nasty feeling that the Southampton community charge may be in that region. This was not the intent of the community charge ; the purpose was to keep down local government expenditure. It does not seem in this first year to be able to do it. I am only saying this for the benefit of the Treasury Bench because it may be necessary in future to review some parts of local government expenditure and perhaps add a tranche to the community charge.

Mrs. Edwina Currie (Derbyshire, South) : Is my hon. Friend aware that there are in other parts of the country many people who think his constituency jolly lucky? My constituents in Derbyshire are facing community charges likely to be well over £400 and at least £100 more than neighbouring county councils with similar geography and social needs patterns.

Mr. Hill : I am sure that that is true. There is always someone who can leap-frog a little higher, but the position of my constituents is my first priority, and Derbyshire is not on the same plane. One good happening of the last few months has been the abolition of the dock labour scheme. The Department of Transport says that over 40 per cent. of dock workers were made redundant. I point out to everyone, including the Transport and General Workers Union, that the cost to the Government of the abolition of the scheme was £90 million, and the cost to the port employers was some £60 million. Already there are signs of rejuvenation in the port of Southampton, which may even challenge Felixstowe. I congratulate not only the Department of Transport but the Treasury on making the money available. Law and order is, naturally, the mainstay of Conservative policy. We are indeed the party of law and order. The Opposition would take a different view, but real spending--this may quieten some Opposition Members--on law and order will rise to £422 million in 1990-91. Spending to keep the bobby on the beat is said to have increased by 70 per cent. since 1978-79. As a result of these increases, for which we are all grateful, whether we are Socialist, Liberal or Conservative, there are 14,500 more police, and over 8,500 more civilians working in the police service, which naturally releases trained policemen for duty in the street. These figures are to be commended. Once in a while it would be nice if the Opposition were to compliment the Treasury team on making the money available. We have heard a lot about housing. In fact, a long time ago I was chairman of the housing committee. It was always a battle to meet one's targets. There was always an

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incredibly long waiting list. I remember Enoch Powell saying in a housing debate that he likened it to two stalls in the market selling tomatoes ; on one stall they were 3p a pound and on the other they were 6p a pound. We do not need any imagination to know which stall will have the longest queue.

Under the Government, as a result of pressure from the Treasury, rents are becoming more realistic. Over the years they have helped owner-occupation. Whatever one says about Europe, we have the highest percentage--68 per cent.--of home owners in the whole of Europe. No one else can touch us. We have built 1.4 million public sector houses since 1979. This is a tremendous achievement.

Mr. Kenneth Hind (Lancashire, West) : My hon. Friend will also be aware that because of the changes in the local government legislation last year Labour-controlled councils have now got their housing account ring- fixed so no longer can they, through the use of the public purse, supported by rate support grants, subsidise housing tenants who should be paying a market rate, with all due respect to the Treasury and the rest of the ratepayers.

Mr. Hill : I should like now to speak about transportation. The great problem is that, no matter how much money we put up front, as the expression goes, we will always have the long delay caused by public consultation. This has happened in southern Hampshire. We have now got the M27 finished, but the M3 is still not finished. I agree completely that in the development of a motorway adequate compensation must be offered to those who are threatened by plans for the motorway. This is an old Mussolini idea. The autostradas would not have been built had it not been for the fact that he provided for the most generous compensation. But unfortunately here we are only just beginning to get round to dealing with the problem of Socialism perhaps devaluing people's property that they had fought for and paid for and is then offered to them on a take-it or-leave it basis by the Inland Revenue valuation officer or, indeed, in conjunction with the valuation officer of the local council. I am extremely pleased that that item has been approved.

I am astounded at the amount that can be devoted to central Government expenditure. This must be a very prosperous country. The business man must be paying his taxes, and VAT must be an extremely good revenue provider. In 1992-93, £234 billion is to be spent in cash terms.

The Opposition, of course, want to return to power, and they imagine that once they have done so it will be easy enough to pull the levers one after another to achieve the desired results. They think that everything will run like clockwork. But, as they know, they have not the necessary expertise on their Front Bench, and they have not enough entrepreneurs at their disposal to show them the way when they go wrong. They denigrate the CBI and the Institute of Directors ; they will clearly drive every entrepreneur out of the country and then say, "We cannot understand it : we have not the money to pay for all our grandiose schemes."

Once in a while Labour policy comes out, usually in remarks shouted across the Chamber. Earlier we heard that corporation tax would be reviewed-- probably abolished altogether, indeed : after all, what does a promise

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