House of Commons Hansard Debates for 20 Mar 1991

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"One option for change from the existing reserve scheme would be to specify the scheme in legislation only for the first year of operation. After that there would still be a reserve scheme, but it could be deemed to be whatever scheme was in force the previous year, rather than automatically reverting to a free scheme, as now." The implication is clear : the free scheme could go in those circumstances.

In addition, the element of local discretion for boroughs under the National Assistance Act 1948 would go, and that could have repercussions for some, including the mentally ill. The reserve scheme would be more expensive. For example, airbus travel would have to be included and charged to London authorities. London Transport would decide the charges and impose them on the boroughs. My Bill seeks to ensure that if the scheme operated by the London boroughs fails, the reserve scheme, which is guaranteed in law, will give London pensioners the same concessions as they get now, which include BR travel and the earlier starting time to which I have referred.

I am also trying to improve the existing scheme by offering free travel instead of half fare on British Rail and on Green line buses within London. The whole scheme needs to be examined to counter the threat to pensioners' passes because of the Government's deregulation plans.

To summarise the aims of the Bill, the service to pensioners should be improved, the reserve scheme should be as good as the current scheme which is operated voluntarily by local authorities, the Secretary of State's power should be limited only to being able to improve the scheme for users and to help allay some of the costs, and LRT's responsibility for setting charges to local authorities should be limited to the equivalent of fare rises or the inflation rate, whichever is the lower. On top of that, the contribution which the local authorities have to pay for the pass should not be counted in any poll tax capping or other capping arrangements introduced in future.

The Bill deals specifically with London, but I am not concerned only about London. I am not parochial about these matters. I want free travel arrangements for

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pensioners to be extended to all local authority areas. There should be a statutory reserve scheme in those areas in case Tory local authorities start taking away the concessions which are already provided in those areas.

My Bill has the support of pensioners and travel organisations. For example, Age Concern said :

"an acceptable minimum level of service would be the currently voluntary scheme."

A representative of the London regional passengers committee is quoted as saying that a main concern was to ensure the continuation of concessions already achieved.

The pensioners' pass is safe for this year, because the general election is looming, but after that it will be at considerable risk. It comes up for review in December this year. As I said at the beginning of my speech, all Londoners want the problems to be sorted out early. That is what my Bill seeks to do. It would guarantee pensioners a free travel pass well into the 21st century, so that London pensioners--including you, Mr. Speaker--can enjoy it well into their dotage.

Question put and agreed to.

Mr. Speaker : Who will prepare and bring in this excellent Bill? Mr. Cohen rose --

Hon. Members : Mr. Speaker.

Mr. Cohen : Yes, perhaps Mr. Speaker.

Bill ordered to be brought in by Mr. Harry Cohen,

Ms. Diane Abbott, Mr. Tony Banks, Mr. Jeremy Corbyn, Mr. Tom Cox, Mr. John Fraser, Ms. Mildred Gordon, Miss Kate Hoey, Mr. Ron Leighton. Mr. Ken Livingstone, Mr. Peter Shore and Mr. Nigel Spearing.

Reserve Free Travel Scheme (London)

Mr. Cohen accordingly presented a Bill to amend the London Regional Transport Act 1984 and to make other provision in respect of the reserve free travel scheme for certain categories of London residents : And the same was read the First time ; and ordered to be read a Second time upon Friday 19 April and to be printed. [Bill 116.]

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Orders of the Day

WAYS AND MEANS

Order read for resuming adjourned debate on Question [19 March].

AMENDMENT OF THE LAW

Motion made, and Question proposed,

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

(a) for zero-rating or exempting any supply ;

(b) for refunding any amount of tax, otherwise than by virtue of goods or services supplied to one person being treated for the purposes of section 14(3) of the Value Added Tax Act 1983 as supplied to another person ;

(d) for relief other than relief applying to goods of whatever description or services of whatever description.-- [Mr. Norman Lamont.]

Question again proposed.

Budget Resolutions and Economic Situation

[Relevant document : European Community document No. 4433/91 on the Annual Economic Report 1990-91.]

4.22 pm

Mr. John Smith (Monklands, East) : A Budget is not just about revenues and fiscal policy. It provides an opportunity for the Chancellor of the Exchequer to make an important statement about the management of the economy and to assess the prospects for the future. It has been noticeable that this Government have used forecasts about our economy ruthlessly and irresponsibly to conceal the real trends in economic performance by always painting a reassuring picture about future prospects. However depressing is the reality of today, happy days are promised for just round the corner. Hence, in this Budget statement we are told that recovery from deep recession is imminent and, indeed, is assured to happen as soon as next year.

The Government's technique has become familiar because this is not the first assurance that we have had about prospective economic improvement. After all, we were told not so long ago that, as part of the miraculous economic achievement, the scourge of inflation had been eradicated. In his 1988 Budget statement, the right hon. Member for Blaby (Mr. Lawson), whom the Chancellor apparently regards as his mentor, told us :

"It is a testimony to the soundness of our policies that the present strong and sustained upswing, unlike almost all its predecessors, has not led to any resurgence of inflation."--[ Official Report, 15 March 1988 ; Vol. 129, c. 994.]

The right hon. Gentleman was not alone. The then Chief Secretary--the present Prime Minister--told us in the autumn statement debate of that year :

"Inflation is low and will remain so".--[ Official Report, 14 January 1988 ; Vol. 125, c. 549.]

We know now, of course, that they were both completely wrong. Inflation doubled, rising to more than 10 per cent.

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last year. So much for Conservative assurances about the prospects for inflation. Even as it rose relentlessly, it was described as a "temporary blip".

Similarly, we had expansive assurances that recession would not occur, that any pause in the economy would be to quote the present Chancellor--"shallow and short-lived". Of course, good news is always predicted. Any disturbing tendency is minimised, or concealed by a fresh declaration of confidence, hard on the heels of the last disappointment. A classic of this genre appeared in last year's Budget statement, when the then Chancellor told us that, whatever had been the problems of 1990, we could be confident about good times in 1991. He said :

"Growth should return in 1991 towards its sustainable rate of around 2 per cent. I am confident that the period of low growth will be short lived."-- [ Official Report, 20 March 1990, Vol. 169, c. 1011.]

That statement is characteristic of the present Prime Minister. In the Red Book he published a growth figure of 1.5 per cent., but he could not restrain himself from hinting that it might be 2.75 per cent. It would take a Chicago lawyer to get at the real meaning of this remark :

"Growth should return in 1991 towards its sustainable rate of 2 per cent."

What on earth does that mean? However, it is typical of the Prime Minister that he should publish one figure in the Red Book and, in his statement to the House of Commons, hint that the situation might be much better. But it does not really matter what he intended to say. He was right about at least one thing : growth was short-lived. There was none at all. Far from growing at anything like 2 per cent., the economy slid into recession.

But exactly the same rose-tinted forecast was made by the then Chief Secretary, who is now the Chancellor. Concluding his speech in last year's Budget debate, he made this ringing declaration : "Pain there may be, but gain there will also be. By this time next year, the prospects will be distinctly brighter. [ Official Report, 21 March 1990 ; Vol. 169, c. 1142.]

Here we are, one year later--[ An hon. Member :-- "The prospects have been brighter for him."] They have been a little bit brighter for him. There were some ups and downs on the way, and I gather that there is a continuing argument between the right hon. Gentleman and his predecessor as Prime Minister as to what precisely was his role in these events. However, perhaps I should not inquire too closely into matters of private grief-- [Interruption.]

The hon. Gentleman may get more attention for that sedentary intervention than he planned. I can tell him that the right hon. Member for Finchley (Mrs. Thatcher) keeps a careful eye on all that is happening. I think that the hon. Gentleman is trying to take some of the heat off the Chancellor of the Exchequer. Come to think of it, he looks a bit like a lightning conductor.

As one reads earlier debates, one finds that some feelings that have obviously been kept under tight control for a very long time are beginning to peep out. [Interruption.] Someone says that Conservative Members are glad that the right hon. Member for Finchley has gone. Unfortunately, he did not get as good a reward as did the right hon. Member for Kingston upon Thames (Mr. Lamont), who, as Chancellor of the Exchequer, now holds one of the senior positions in the Government. I must not be diverted by the seated interjections of members of the Government Front Bench, however entertaining they may be.

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We must examine the brighter prospects that we are enjoying this year compared with last year's Budget forecasts. In last year's Red Book, it was predicted that in the first half of 1991 there would be growth of 1.5 per cent. Yesterday, the Chancellor of the Exchequer told us that it would fall by 2 per cent. We were told last year in the Red Book that manufacturing output in 1991 would increase by 0.75 per cent. Yesterday, that estimate was revised to minus 5 per cent. Last year, fixed investment in 1991 was expected to decline slightly, by 0.75 per cent. Yesterday, it was reduced massively to the almost unprecedented level of nearly 10 per cent.--9.75 per cent. to be precise.

Do the new and grim forecasts for 1991 reveal the distinctly brighter prospects that were promised 12 months ago by the then Chief Secretary, who is now the Chancellor of the Exchequer? Since that Budget, unemployment has increased by almost 400,000. Is that another feature of the brighter prospects that were promised last year for the year that lay ahead?

We see from the repeated contradictions between promise and performance how thin is the credibility to be attached to any forecast about anything in the economy that comes from Ministers of this Government. Let us keep at the forefront of our minds when considering their blithe asssertions the fact that, after heading sharply downwards, the economy will suddenly recover to growth of 2 per cent. in time for the last available date for the next general election. What a happy statistical coincidence. What a wonderful world we live in when we can create on the basis of bogus predictions and misdeclarations about the economy.

It was surely significant that the Chancellor of the Exchequer drew our attention to the severe penalties that were attached last year by the Government to incorrect declarations in the value added tax system. The present Chancellor of the Exchequer reminded us yesterday that especially severe penalties had been introduced for those who persistently made inaccurate financial returns. The right hon. Gentleman referred specifically to the serious misdeclaration penalty which was introduced in April 1990. His experience since then appears to have given him a special sympathy for the miscreants to whom the penalty was directed. He told us that there had been widespread protest that the penalty was too severe. I give the Chancellor of the Exchequer credit for realising that it was wholly inappropriate to impose such a penalty on those whose misdeclarations were minor matters compared with the gross misdeclarations about the economy that Ministers have made year after year.

Whatever the Government try to do, the facts eventually catch up with them. Yesterday, the Chancellor of the Exchequer was noticeably reticent about some key economic indicators. Not a word did he say to the House about the estimate for fixed investment for 1991. The right hon. Gentleman's predecessor told us last year that fixed investment would decline by slightly less than 1 per cent. The forecast that the present Chancellor of the Exchequer has been obliged to print in the Red Book reveals, as I have already said, that the forecast for 1991 is a precipitate fall of almost 10 per cent. Why, we wonder, was that omitted from the Chancellor's Budget presentation yesterday and, indeed, from his television broadcast last night? Come to that, the right hon. Gentleman made no reference to the projected fall in manufacturing output. It was forecast a year ago that it would increase by almost 1 per cent., yet it is now expected to drop by as much as 5 per cent.

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These are, for the Government, embarrassing indicators of what is happening in the real economy and of the depth and seriousness of the economic recession that afflicts our nation. At least it seems to be accepted that there is a recession. I have no doubt that that is only because it can no longer plausibly be denied--not that the Government did not try to do that as well. In December 1989, the present Prime Minister scoffed at the notion that there would be a recession at all. He said in a speech to the Association of British Chambers of Commerce :

"I do not believe myself that a recession is either likely or necessary."

Not to be outdone, the present Chancellor of the Exchequer, after being cornered by the Select Committee on Treasury and Civil Service, and having to accept that there was indeed a recession, told us that it would be "shallow and short-lived".

Let us ponder for a moment the now admitted fact that investment will fall by 10 per cent.--as far as I can discover, an

unprecedentedly bad prediction. Investment is the seed corn of economic progress, yet here in Conservative Britain it is falling through the floor. Ominously for us, that is not happening elsewhere. The latest figures of the Organisation for Economic Co-operation and Development show that all the other members of the Group of Seven are maintaining positive and superior levels of growth in investment. Investment is vital for economic recovery, particularly in the context of the single market after 1992. It does not seem to worry the Government that in other European countries 1991 is a year of preparation and investment. In Tory Britain it is a year of cuts and decline. That is why we in the Labour party called for a Budget for investment and for recovery. That is why we proposed lower interest rates and a package of investment incentives for manufacturing industry. The Government felt obliged to make reductions in corporation tax--no doubt because of the parlous condition of so many smaller companies as a result of the recession and the years of high interest rates. We should have preferred the fiscal relaxation to have been targeted on the stimulation of investment in the manufacturing sector which, after all, is the crucial wealth creator and the most internationally tradeable part of the economy. We also proposed a major investment in training, another area of policy which, like manufacturing, seems not to concern the Chancellor of the Exchequer very much. We proposed that the foolish cuts in the training budget of £245 million should be reversed. How can the Government justify those cuts when we have skill shortages in the midst of sharply rising unemployment and when we are now in the most absurd of all situations, putting trainers on to the dole ? We also recognised the human problem as well as the economic waste of rising unemployment, up by 85,000 last month alone or more than 4, 000 lost jobs for every working day of the month. We proposed to tackle that by a temporary employment scheme to provide both work opportunity and training for the growing number of our citizens without work. Our proposals in this regard would have cost £340 million, and we would have invested £300 million in a new skills fund to provide much-needed extra resources for the training and enterprise councils and non-statutory training organisations. The only acknowledgement of any training need in this Budget was the tax allowance for individual training costs at an estimated cost to the Treasury during 1992-93 of £20

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million. Such a sum shows how totally inadequate is the Government's appreciation of the scale of the training disaster that our country has suffered in the Conservative years.

Mr. Nigel Forman (Carshalton and Wallington) : I have been trying to follow closely the argument of the right hon. and learned Member for Monklands, East (Mr. Smith). Is it implicit in what he has just said that the previous undertaking given, I think, by him and the shadow Chief Secretary, the hon. Member for Derby, South (Mrs. Beckett)--that the only areas of public expenditure which would be expanded under a future Labour Government were child benefit and pensions--will be extended to cover increased expenditure on these other worthy purposes to do with training? If so, what items of public expenditure does he intend to reduce to make room for those increases?

Mr. Smith : The hon. Member for Carshalton and Wallington (Mr. Forman) should have read some of the proposals that we published last week. First, he misrepresents what my hon. Friend the Member for Derby, South (Mrs. Beckett) said. We indicated the priority that we attach to certain items of expenditure, but we did not exclude the possibility that we would enter into proposals for other areas of expenditure.

That was why I drew the hon. Gentleman's attention--I could not have done so more specifically--to the precise sums in our proposal. I hope that he does not think that I did that just for fun. I did so to show the House that we were entering into a commitment to achieve precisely that end. He should consider why on earth the Government whom he supports do not enter into a similar commitment to tackle our training problems. Surely a man of his perception, knowledge and experience of such matters knows that we have a training disaster in this country. What does he do about it--does he merely wring his hands and say that there is nothing that he can do about it?

Mr. Forman : The answer to the nation's training needs is to be found in the TECs, which are going ahead very satisfactorily-- [Interruption] --and the sensible tax relief proposed for individual training.

Mr. Smith : I do not wish to be disrespectful to the hon. Gentleman, who tries to make a helpful contribution to our debates, but he should have listened to what I was saying. I drew attention to the Budget proposals for tax relief for people on individual training programmes, but I said that £20 million--not this year, but the year after next--is hardly an adequate response to the scale of Britain's training problems.

The hon. Gentleman referred to TECs. Does not he know that almost all the TEC chairmen protest loudly that they have been given responsibilities by the Government without being given the resources to carry them out, and have recruited various people from the private sector to contribute to the TECs, who discover on arrival that there is no money for them to carry forward the programme? My constituency is suffering from that very problem. The Government amalgamated the Scottish Development Agency and the Training Agency into a new organisation, Scottish Enterprise, and set up many local enterprise companies. The one that affects my constituency,

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Lanarkshire Development Agency, has had to cut the training programme that had already been promised. Its first job is to deliver the bad news that the Secretary of State for Employment lost the argument with the Chancellor on the previous autumn statement figures. That is why, unhappily, money is being cut from training. I hope that, when he reflects on it, the hon. Gentleman will see that there is a great deal of wisdom in what we are saying.

There are some proposals in the Budget--

The Secretary of State for Social Security (Mr. Tony Newton) : I wonder whether, before the right hon. and learned Gentleman hastily moves on from Labour's shadow Budget-- [Interruption.] He would have been wise to move hastily because he will know that I have been asking the hon. Member for Oldham, West (Mr. Meacher) to explain the major balancing item in the shadow Budget, an alleged saving of £619 million by withdrawing the personal pensions incentive. That could be done only by taking back money to which people already have a legal entitlement and wrecking 4 million personal pensions. Is that the Opposition's policy?

Mr. Smith : The right hon. Gentleman knows perfectly well that that was one of the changes that we proposed. Our proposals clearly suggested that the bribe for people to enter personal pension schemes should not be continued. The precise figure--which I understand the right hon. Gentleman also contests--was supplied by his Department in a parliamentary answer. On the whole, we should be entitled to rely on that. That is the answer.

Mr. Newton rose--

Mr. Smith : The right hon. Gentleman might ask me whether I am prepared to give way. I have not assented to give way and it is slightly arrogant to wander up to the Dispatch Box without asking the speaker if he will give way.

Mr. Newton : The £619 million included in the shadow Budget is money to which people already have a legal entitlement and most of which has probably been paid in respect of contributions that they have already made. Is that or is that not to be withdrawn?

Mr. Smith : The right hon. Gentleman should know perfectly well that, since that proposal was introduced by the present Government, the Labour party has said that it would be one of our ambitions to withdraw it. We are merely proposing once again that that bribe should not be continued.

The right hon. Gentleman's other shot at this subject was to try to say that we had dropped our commitment to uprate old-age pensions according to prices or earnings, whichever was the higher. We do not have to repeat that commitment on every occasion because it is so clearly understood by the public and the House as one of the Labour party's major commitments.

The right hon. Gentleman asked why we included proposals for child benefit. That was because they are highly relevant to Budgets in which child tax allowance used to be a feature. It looks as though we did some good by putting it into the shadow Budget because the Chancellor appeared to listen to what we said in our proposals. I must move on to the other proposals--

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Mr. Newton : Will the right hon. and learned Gentleman give way?

Mr. Smith : The right hon. Gentleman cannot complain because I have given way to him twice. He asked two absurd questions to which he has received adequate answers.

There are other items in the Budget, some of which my right hon. and hon. Friends will be disposed to welcome as the Labour party has, for many years, campaigned for them. I shall draw the right hon. Gentleman's attention to one. It seems at last to be recognised, at least for future conduct--I hope that the right hon. Gentleman will pay attention to this because it affects his Department--that a potential Conservative Government would uprate child benefit according to the inflation rate.

It is hard to believe that the Government are seeking congratulation on the abandonment of a posture of unfairness and obduracy that no Government should ever have contemplated, let alone pursued. They know full well that they broke an all-party understanding that child benefit--the product of the amalgamation of family allowance and child tax allowance--would be regularly updated in the same way as a normal tax allowance. In addition, they were perfidiously misleading in their shameful manifesto reference to the subject at the last election. Even now, when a sense of penitence on their part should have led them to make good the entire shortfall of the freeze, we have a proposal merely to increase the first child's benefit by £1, while the increase for other children is limited to a miserly 25p- -all of which will not be paid, as I understand it, until October of this year. The Labour party proposed that the increase should take child benefit up to £9.55 for all children. Clearly, it will be left to the next Labour Government to put right an injustice which has been only partially, if revealingly, acknowledged in this year's Budget.

There are other items, such as the changes in mortgage tax relief--

Mr. Newton rose --

Mr. Smith : The right hon. Gentleman should ask me whether I am prepared to give way. I think that he is clearly ambitious to join Treasury Ministers. I shall give way to him for one last time, but he must understand that I am being generous in giving way to him so frequently.

Mr. Newton : I acknowledge that, but the right hon. and learned Gentleman might acknowledge that the biggest single proposed item of expenditure in the shadow Budget was social security expenditure, to which I am about to come, and that the biggest single item of saving was the personal pensions incentive, to which I have referred. The right hon. and learned Gentleman made a number of points on child benefit. I should like his comments on a point that I have put to him and his right hon. Friends-- [Interruption.] The proposal that the right hon. and learned Gentleman put in his shadow Budget is costed in such a way that 1 million families on income support, and with more than 2 million children, would have gained no benefit. The proposals that my right hon. Friend announced yesterday give full benefit to all parts of the population, including the poorest. The document that he published--

Hon. Members : Come on.

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Mr. Frank Haynes (Ashfield) : On a point of order, Mr. Deputy Speaker-- [Interruption.]

Mr. Deputy Speaker (Mr. Harold Walker) : Order.

Mr. Haynes : This is disgraceful, Mr. Deputy Speaker. You should have stopped the Secretary of State for Social Security. He is abusing the procedures of the House of Commons. He will have an opportunity to speak in a day or two's time.

Mr. Newton : My question is simply this : is it or is it not Labour party policy, as costed in the shadow Budget, to spend £750 million on child benefit while giving no help to the poorest families on income support?

Mr. Smith : I fear that I cannot congratulate the right hon. Gentleman on a capacity for brevity. Having patiently listened for quite a long time to his third intervention, I believe that it is an abuse of the generosity that I have extended to him--

Mr. Michael Brown (Brigg and Cleethorpes) : How about answering the question?

Mr. Smith : I will answer the question in my own way and in my own time. The Opposition are well used to abuse from Conservative Back- Benchers, but I see that it has moved forward.

I give a straight answer. The difference between the Opposition and the Government is that we would have increased child benefit properly and they did not. That is what it is all about. Had there been a Labour Government, child benefit would be £9.55 per week for each child. That is not the case under the Government. If the right hon. Gentleman wanted to show support for the poorest people in our society, he has had plenty of opportunity to do so during his period in office.

As I was endeavouring to say, there are other items, such as the change in mortgage tax relief, which the Opposition support and which have long been resisted by the Government. Imitation is, in many ways, the sincerest form of flattery and I suggest that for guidance and enlightenment the Conservative party would be well advised to read the Labour party's policy statements with care and attention. [ Hon. Members-- : "We have."] I am glad to hear it. If they read them with a more open mind than heretofore, they will find some extremely attractive, eminently sensible and much-needed proposals to create the strong economy and the fair society to which an increasing number of our people aspire.

The Government are no doubt inhibited by a feeling that cheap imitation is no substitute for having policies carried out by those who believe in them and are committed to them for their worth--a view which I think will prevail in the coming decisions of the electorate.

But what caused many of the headlines following the Budget was the humiliating U-turn executed by the Government on the poll tax which was presaged by the increase in VAT of 2 percentage points--a percentage increase of more than 16 per cent. in the tax.

Mr. James Arbuthnot (Wanstead and Woodford) rose

Mr. Smith : I have hardly said a word on this, but I will take a risk, as I did on a previous occasion, and give way to the hon. Gentleman.

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Mr. Arbuthnot : Would a Labour Government reverse the transfer of local government taxation to VAT?

Mr. Smith : On the radio this morning the Chief Secretary said--

The Chief Secretary to the Treasury (Mr. David Mellor) : I was asleep.

Mr. Smith : Well, the right hon. and learned Gentleman's voice was on the radio. He probably was asleep, but I certainly heard it. He said that it would be wise for us to suspend judgment on the question of local government taxation until the Government's full proposals had been revealed.

I gather that there is some irritation among members of the Government that one of their colleagues regularly leaks information in Central Lobby. Anyone who took a wander out there a day or two ago could have seen his minions in the act. It is well known that the Secretary of State for the Environment has been leaking like a sieve the proposals that are before the Government. He does not seem to have suffered much, so no doubt he will continue to do so. Since the Government do not tell us very much, we should be grateful for the odd crumb that we get from the right hon. Gentleman.

We will consider carefully what the Government put forward and when we see the Bill--we do not even know its title--we will be able to give a considered reaction.

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