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it for granted that some of the factors that increase fuel costs cannot easily be changed. Sixty per cent. of pensioners live in homes that have inadequate heating systems. That should be tackled under a five-year programme that would create worthwhile work for those who need it most--in the same way that we tackled roofing problems some time ago during an earlier period of high unemployment.

This coming week, we shall see the end of the coal obligation on generating companies--the requirement for them to pay an extra £1,000 million for the higher price of coal. The cost of burning coal to generate electricity and the extra profit margin involved probably have the same effect as VAT on domestic fuel. That obligation was accepted because it was felt that keeping more people under ground was a good thing, even though the cost must be met by electricity consumers. We have already heard that a higher proportion of that cost will be paid by those on low incomes, or the cost will account for a higher proportion of the incomes of those who are not earning. We should be realistic about both.

In the same way, I suspect that some hon. Members and people outside the House would have regarded it as better if the cost of domestic gas had remained as high as in 1986, when British Gas was privatised, to avoid the 17.5 per cent. VAT imposition over the next two years, even if that made people worse off. After privatisation and competition, the real price of gas has become 20 per cent. lower than it has been, so even a 17.5 per cent. increase on that reduced index would have left users better off. We must be rational. As to reducing unemployment levels, I have a horror of not just the way that the coal communities appeared to have been disregarded but of the way that the debate has developed. If last autumn's argument was for an extra £100 million of spending a month to maintain an extra 25,000 jobs in mining communities, that represents £4,000 per miner job per month, or £48,000 a year.

On the fringes of my constituency in south-east London, seven miles from this place, is the Woolwich Arsenal site. Over the past 70 years, it has lost 73,000 jobs--the equivalent of a colliery closing every single year for 70 years. The last 1,000 jobs go this year. Unemployment is running at 60 per cent. in the Arsenal ward of the hon. Member for Woolwich (Mr. Austin-Walker). That affects many of my constituents as well.

A city challenge application asked for £12 million a year over five years--a total of £60 million--to generate between 2,000 and 4,000 jobs, with much private sector money coming in as well. It would have involved a development on derelict land seven miles from Westminster.

We should ask whether the Government can rationally decide expenditure over and above the level of their taxation revenue, and whether the subsidy provided by the consumer or taxpayer to help transition in the mining industry could not be partly diverted to meet some of the city challenge applications that could not be approved by the Department of Environment. Both the economic and employment effects would be substantially better--in the same way that an extra £500 million of capital investment

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in British Rail and London Underground would have a better economic and employment effect than transition being delayed too long for too many pits.

Getting the framework of taxation right does not get proper attention. If I had longer to speak, I might question whether there should not be the same VAT arrangements in respect of greyhounds as those made for horses. Why should not the sport of kings' arrangement work for those of us who are going to the dogs?

I praise the Government for acknowledging that they have lost £500 million a year in revenue on whisky--with or without an "e". We find that, because of fashion, recession and strangling the golden goose, whisky sales have been declining. In leaving whisky out of the count, and reducing the duty on that and other spirits, there may be a rebalance and people will be able to make a choice--especially when they are not driving.

We should also examine the properness of tax expenditure. I have argued for most of my 17 years in the House that mortgage interest relief is counter- productive. I repeat also my comments on previous occasions about personal allowances. It is back to the Grey Book, which details the large sums of tax forgone by permitting personal allowances--and I refer not just to the married man's personal allowance. I welcome its reduction to 20 per cent. I would reduce the personal allowance to 20 per cent. and do the same in many other areas, so that help is concentrated where people need it. I remind of the House for the reason for the child benefit scheme, which was not mentioned in the Budget because it is dealt with relatively automatically. Child benefit is not a form of income support. I suspect that the Treasury would do better to wrap up the Department of Social Security and make its functions an adjunct to the Treasury, in the same way that the Inland Revenue and Customs and Excise are.

There are further important measures to be taken in respect of income support. Child benefit should not be part of that. What is the justification for a cash child allowance? Looking at the family life cycle in social and economic policies, when people have children their taxable capacity is reduced and their needs increase. That is the justification for the allowance. It should not be a tax allowance that gives most help to people in the 40 per cent. tax band, about the same help to those in the 20 per cent. or 25 per cent. band, and no help to those below the tax threshold. Would it be better to have a flat cash allowance? The answer is yes.

My right hon. and noble Friend Lady Thatcher understood that, which is why in 1983 and after what I call the Lawson fallacy on child benefit, she made sure that the Chief Secretary to the Treasury and the Secretary of State for Social Security increased it. She understood, but we often forget. Every three or four years, it is worth making the argument again out in the open.

If I had time to make a longer speech, I would talk about the effects of the Budget on trade. It is right, too, to encourage small business.

We should ask when we will be willing to give up tax benefits at some stage or in some circumstances so that others--or people like ourselves in different circumstances--can gain more benefit either from tax expenditure, real benefits, or the chance of employment.

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It is not a question of from whom we will take and to whom we will give. It is in each person's life cycle. When will they be willing to give up what they have, so that they and others can gain it when they need it?

Matching needs and resources better requires a debate that goes beyond the scope of a Budget debate. I hope that is something that Labour's social justice commission will examine and that the Tory party will find a way of making that match. I hope that some of those issues will be considered across the Floor of the House, so that the Budget deficit will be reduced, people's well-being will be increased, and avoidable disadvantage, stress and handicap are minimised. 8.27 pm

Mr. Clive Betts (Sheffield, Attercliffe) : The Budget stands condemned on four grounds. It contains broken promises, offers no hope to the unemployed, is based on a Government act of faith that recovery will somehow occur, and provides no means of dealing with the British economy's long-term structural problems.

We are told that, at the time of the 1992 general election, the Government had no plans to increase the scope of value added tax. Those are weasel words. The majority of people who voted for a Conservative Government did so in the firm belief that VAT would not be levied on goods or services such as domestic fuel during the lifetime of this Parliament. For the Government to claim now that they had no such plans in 1992 but that they might at some time during the next five years is dishonest.

The Government claim that their promises were made sincerely in 1992. What of current Government commitments not to extend VAT to children's clothes, food or books? Are those commitments just as sincere as those made in 1992?

The impact of the Budget measures was mentioned by several of my hon. Friends. We have not yet been given a figure by the Government, but they could still cushion the impact of their actions on people receiving income support and pensions. They cannot, however, protect the low-paid who are just above income support levels and for whom fuel expenditure represents pay a higher than average percentage of their income. Those same people must, on average, pay out a higher percentage of their incomes because of the national insurance increases. They, not the higher-paid, will suffer. The Government have offered those in low-paid employment a real double whammy. I personally welcome the changes in mortgage tax relief. I do not consider the mortgage tax relief scheme defensible ; I have held that view for many years. But why did not the Government use the money to introduce a benefit scheme for low-income earners with

mortgages--people who are not only struggling to make their mortgage payments now, but, in many thousands of cases, facing the prospect of repossession? The Government could have used the savings resulting from the change in the mortgage tax relief system to introduce benefits to assist those whose earnings place them just above income support level.

What have the unemployed been offered? They have been offered no help and no hope. No help or hope has been offered to the 100-plus who are to lose their jobs at Whitbread in Sheffield, the 100-plus who will lose their

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jobs at Trebor Bassett and the 100-plus who will lose their jobs at Avesta Sheffield. All those job losses have been announced in the last few weeks.

What do we offer a 50-year-old ex-steel worker, made redundant up to 10 years ago, or a 25-year-old who has never had a job? Do we offer the possibility of one of 100,000 training places, when those people know, and we know, that there is no possibility of their getting a job at the end? That is not merely dishonest ; it is immoral.

The Government could have done so much. They could have released the capital receipts that are still locked up in local authority coffers ; they could have presented sensible proposals for the development of a proper transport infrastructure, rather than the shambles and the constant delays of the channel tunnel link and the fiasco of the Jubilee line extension.

When will the Government recognise that public investment must be in place before we can create a climate in which private investment can follow, instead of trying to cobble together deals that simply result in years of delay and no action on the ground? All that the Government appear to offer the unemployed is protection from the Labour party and the social chapter. That is a real bargain basement offer : "no pay or low pay" seems to be their policy.

The whole Budget seems to have been motivated by faith--the belief that the recession will end, some time, somehow. In imposing VAT on fuel, the Government have admitted that they got it wrong : they thought that recovery was coming 12 months ago, but it did not materialise ; hence the increase in the public sector borrowing requirement. Their economic approach is almost equivalent to the national health service abandoning medical science in favour of faith healing. Behind the facade of the "seven wise men" arguing away, we can almost see Treasury Ministers and their civil servants in a room in No. 11 Downing street--on their knees, eyes closed, holding their hands in front of them, willing the green shoots to appear. There seems to be no more substance than that to Government medium- term strategy.

Every so often, a cry of joy will be heard as unemployment falls for a month--although every serious commentator recognises that that is merely a blip. Cries of delight will be heard when industrial production goes up in one month, but the fact that the far more important three-month average has not shifted will not be recognised. Retail sales have risen since Christmas, but, year on year, they are still down in real terms. Housing activity is increasing slightly, but the scale of the depression has been so great that that increase will not feed into the construction industry for a long time, and the Government are offering the industry no real assistance.

The Government are willing recovery to occur, but what will happen if it does not? What will happen if it is delayed for another year--delayed until the tax increases begin to bite? Where in the Budget is the recognition that recovery is not certain, and that the timing is problematic? Where do we read of the consequences of the Government's getting it wrong, and--as they did 12 months ago--predicting a recovery that does not happen?

Let us turn to the long-term problems. Where is Government policy in that regard? Since 1979, unemployment, manufacturing investment and the balance of payments have worsened. The Government's problem with the economy is not cyclical ; it is a fundamental,

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structural problem. The 1980s were a decade of private consumption and borrowing, which created personal debt. The Government should be turning the 1990s into a decade of investment in manufacturing and infrastructure, but there are no signs that they are doing so. The Government's dilemma--the PSBR is rising to record levels, while unemployment is doing the same--is a product of the real weakness of the British economy : the inherent failure of our manufacturing industry, its collapse in the 1980s, the loss of a third of manufacturing jobs and the dereliction and destruction of areas such as the lower Don valley in Sheffield, where 50,000 jobs were lost during that decade. The same fundamental problems have brought about our balance of payments crisis at the depth of the longest recession that the country has experienced since the war.

The one thing for which the Government can claim some credit, in their terms, is getting inflation down ; but we must ask whether they have solved even that problem. They have brought inflation down to below 4 per cent., but that was at the depth of a recession ; they have never managed to achieve the same result at any of the peaks of economic activity since 1979, although each of those peaks has coincided with a higher level of unemployment than the previous one. That is the scale of the problem that the Government not only face--as we do--but have created, and for which they will not accept responsibility.

The Budget does not recognise the existence of such problems. It does not attempt to solve the long-term difficulties of financing British industry, and the relationship between banks and manufacturing industry, which clearly is not working ; it makes no attempt to deal with the long-term problems of financing and offering equity capital to small firms, and the skills gap that affects the whole of industry ; and it does not try to stimulate research and development to secure long-term recovery. None of those issues is mentioned.

On all counts, the Budget has failed. It has failed the whole nation with its broken promises. It has failed the unemployed by offering them nothing ; it has failed to give a clear direction on medium-term strategy, offering faith and hope as a substitute ; and it has failed to recognise the inherent structural failings of the economy, or to provide any policies to deal with those failings. It is a failed Budget from a failed Government.

8.36 pm

Mr. Anthony Steen (South Hams) : That was a merry speech. I do not know whether the 10-minute rule will apply to me, as I am the last Conservative Back Bencher who will speak this evening ; hon. Members on both sides of the House may wish to hear a little more from the Conservative party, and I am happy to speak for a little longer. The 10- minute rule means that hon. Members cannot mention all the speeches that they have heard, although I know that they will be mentioned in the winding -up speeches. Some interesting speeches have been made--for instance, the speech of my hon. Friend the Member for Eltham (Mr. Bottomley), who always speaks so brilliantly that his tour de force must be read very carefully if the reader is to understand all the finer points. I am sure that the House will wish to return to that subject.

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In the nine minutes available to me, I want to speak about the Budget's interesting proposals for small businesses. Unlike its predecessors, which have tended to introduce fiscal measures of one kind or another, this Budget recognises that the administrative arrangements for small businesses are often equally important. It is no good giving companies tax breaks if there are so many rules and regulations that they are prevented from being profitable. I welcome the introduction of self-assessment for income tax purposes, the fact that self-employed people will pay tax based on current and not preceding year' estimates, and the fact that companies that are not incorporated will not be required to have a statutory audit. The Budget, however, must be seen in the context of other initiatives to help small firms. The Government have abolished 5,000 business forms and 10,000 others. What did those forms do? How can the Government simply get rid of 5,000 forms? What were they all produced for, and what is the result of losing them? Why were they put there in the first place? What have we lost by taking them away? Will the number of civil servants and bureaucrats be reduced? Does bureacracy in this country increase in direct proportion to the number of rules and regulations that are abolished? Is there a new Parkinson's law whereby the more things we get rid of, the more staff employed increase? The Palace of Westminster is a good example. I have my office in one of the outbuildings, where a very expensive security system has been installed. The door opens only after a card has been inserted. Before this high security system was installed, there were no security guards. Now, with the system, there are two full- time security officers as well as a very expensive security system. There seem to be more and more opportunities to duplicate our staff as well as our technology.

Mr. Patrick Cormack (Staffordshire, South) : And the doors often do not work.

Mr. Steen : That is perfectly true, but that is another matter. Since 1957, the rate of introduction of Government rules and regulations has increased steadily. The trend has accelerated during the past six years. This most recent trend has been caused by the Government's practice of introducing new rules and

regulations--statutory instruments--under ministerial powers, following primary enabling legislation. In 1992, the Government introduced 2, 439 statutory instruments. It is not surprising that, in the same year, 24,424 companies became insolvent. It was not just the recession ; it was the impact of the plethora of rules and regulations on enterprise. Many of the rules and regulations emanate from this place, as well as Europe.

Each set of regulations develops a life force of its own. As it spins into orbit, it attracts lots of people around it. It is self-generating ; it attracts more and more officials as it spins off into space. Officials will fight to the death to keep each regulation in place. Every time we introduce a regulation, either in this House or in Europe, we also introduce a new bureaucracy to service that regulation. Far too much stick and not enough carrot is given to companies to implement the rules and regulations.

The Prime Minister has already said that he intends to do something about reversing that trend, but the buck starts and stops in Westminster. Just as central Government are trying to make local government more

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cost effective, so we need to apply the same rules to ourselves. I wonder whether machinery exists in the House to deal with central Government Departments that are churning out rules and regulations. Some hon. Members may say that the advantage of the Mastricht debate is that it is preventing the Government from introducing more and more rules and regulations.

I welcome both the Prime Minister's and the Government's intention, but we have to translate their belief into freeing up enterprise and reducing the amount of bureaucracy and the number of rules and regulations imposed on small businesses.

What is the problem? By privatising companies, we have produced two organisations : first, the provider of the service ; secondly, the regulator. That has led to a new scenario. Water authorities used to provide both water and water services. They also used to be the gamekeeper. Today, the job of water authorities is to provide clean water and to free the sea from pollution. The job of the National Rivers Authority--the gamekeeper--is to scrutinise the work of the water authorities and to prosecute them if they do not comply. It is rather like a man with the stick chasing a dog.

The reason for the introduction of more and more rules and regulations and for their application with such ferocity and enthusiasm is because those two functions have been separated. We have not dealt with the effect of the introduction of the regulator. The Audit Commission is breathing down the necks of local authorities. It spends most of its time pressing local authorities to increase their standards of performance. Some standards incur the more rigorous application of statutory duties and regulatory enforcement. Consequently, enforcement officers are more zealous when faced with target enforcement standards. It is the classic mistake of using input rather than output measurement--an increase in efficiency but not effectiveness. In general, the Audit Commission adopts a regulatory approach. That is a fundamental error, as there are other ways of encouraging British management and industry to comply. The problem with negative enforcement is that it has resulted in a new approach that accepts accountability for compliance, with health, hygiene and safety standards, but oblivious to the current economic position. Rules and regulations shall be brought into force only when the nation can afford to do so.

How are we now to proceed? First, there are 70,000 rules and regulations on the books. We cannot repeal many of them. Furthermore, all these officials are implementing the rules and regulations. They would not give up their jobs lightly.

Secondly, we could starve the enforcement agencies, such as the National Rivers Authority or the local authorities so that they no longer had the money or the bureaucracy to enforce the regulations. The Chancellor of the Exchequer might find that approach attractive. He could save a lot of money by not providing resources to the enforcement agencies.

Thirdly, we could slow down the enforcement of the rules and regulations. We ought not to be the first of all the European Community countries to enforce the regulations. We should not necessarily be among the slowest, such as Greece and Portugal, but we should slow down the pace of enforcement. That would be extremely helpful.

Lastly, a new civil service culture is needed. That may be the result of the scrutiny team's recommendations. An

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announcement was made earlier this month that a team would be set up, and 500 small firms would be asked to tell the Government what should be done about the regulations from which they suffer. Last year, red tape killed nearly 25,000 companies. Although I welcome the Prime Minister's initiative, I am concerned about how it will be translated into action. We shall be unable to compete with the rest of Europe so long as we smother business with rules and regulations which

Mr. Deputy Speaker : Order. The hon. Gentleman's time is up. 8.46 pm

Mr. Bill Etherington (Sunderland, North) : I appreciate being called to speak in the debate, Mr. Deputy Speaker, having been absent for so much of it. However, I heard the President of the Board of Trade's speech this afternoon, and it was like a trip down memory lane. He referred to the dissatisfaction of the Conservatives with what they inherited when they took office in 1979. I am surprised that he did not go back to 1924 and castigate Ramsay Macdonald, or to 1945 and castigate Clement Attlee. What has to be realised, above all, is that the Government have been in power for so long that they cannot castigate anybody else for what has happened. They have been in power for over half a generation.

My constituency is very depressed. The Budget has given no encouragement to many of my constituents. Nevertheless, I welcome three things. I welcome the fact that mortgage interest relief is to be reduced. I have long believed that property prices have been kept artificially high for many years because of mortgage interest relief. It would be a good thing if it were abolished altogether, although I realise that that will take time. I am also very pleased about the abolition of stamp duty on premises that are sold for less than £60, 000. That will be very good for first-time buyers who are short of money.

Most important of all, I am pleased not so much by what is in the Budget as by what was left out of it, although the Chancellor of the Exchequer made a playful reference to it. He told us that there is to be no imposition of VAT at this time on reading material. I very much welcome that announcement.

We must view the Budget in the context of what has been happening in the past 14 years. It is an ironic coincidence that the Library issued a very good publication earlier this month. It could not have come at a better time. Research paper 92/93, entitled "The Burden of Taxation", points out that, since 1979, those who have been on above-average earnings have gained at the expense of those on below-average earnings. I recommend that Conservative Members read the document instead of trying to mislead the public by telling them otherwise. It is now possible for a person earning 150 per cent. of average earnings to pay a smaller proportion of his earnings in direct taxation than a person on average earnings.

Every hon. Member is well aware that indirect taxation, such as VAT, bears more heavily on the poor. I wish to comment especially on the proposed imposition of VAT on domestic fuel at 8 per cent. next year and at 17.5 per cent. in 1995. Hon. Members, and especially Ministers, probably will not notice the increase in their fuel bills. It is fine for them to say that it is a good system, but they have clearly not considered the low-paid. I am not talking only

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about poor pensioners. Many pensioners have small pensions in addition to their state pensions, which takes them above the income support level. They will be hit especially hard, but 12 million people live below the European decency threshold, and they will be hit even harder.

It does not take much understanding to realise that many people whose incomes are not very high--perhaps both partners are having to work to give their children a reasonable standard of living--often live in premises that are not very well insulated. They do not always have a choice of fuel, and matters have not been helped by the fact that many councils have not been able to bring properties up to the required standard, because of a lack of cash. It is an indictment of the Government that they should consider a fuel tax when there is already so much fuel poverty. It is no exaggeration to say that, every year, people perish from hypothermia, largely because of the cost of fuel but also because many premises are not up to standard. I always remember a good comrade of mine saying many years ago that one can always judge a society by the way it treats its very old and very young. Just as many pensioners will suffer from this pernicious taxation, so many young people will also suffer. It does not bear thinking about.

One of the most annoying aspects about the proposal is that, during the so- called boom years, many of those on above-average incomes did very well, and it seems only right and proper that, when the country runs into more stormy times, they should be expected to pay a little more, not less. Once again, the Government have shown just what sort of Government they are, how unfair and unjust, and how little respect they have for those who create the wealth, who are not necessarily those on high pay--indeed, I suggest, just the opposite.

It must also be said that the fuel tax will affect charities. It is worth bearing in mind that, because of the failure of so many of the Government's social policies, more pressure is being put on charities. Charities will not be able to claim back the extra VAT that they will have to pay on fuel, and they will also suffer a loss of income tax relief on their investments.

I may not know as much about finances as most Conservative Members, but I have been involved with charities. I know how they work, and I know that there often is a very thin line between them continuing to exist and having to wind up. I am very much afraid that the imposition of VAT will cause charities to suffer badly, especially those charities looking after old people, which will have to bear a disproportionate burden because of heating costs.

There has been a tremendous amount of hypocrisy about the green effect of the proposal, and about our having to meet emission standards. If this country were sincere about meeting those standards, we would be spending money to ensure that all properties were properly insulated ; we would be doing something about transferring freight and passengers from road to rail ; and we would be investing in tram systems to take buses off the road. We would also be interested in combined heat and power schemes as an alternative to the seedy system of so-called competition in the electricity generation and

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distribution industries, which, in addition to being monopolistic, have a vested interest against the efficient use of energy. Only when such measures are contemplated will I begin to believe that the Government are sincere in trying to meet their obligation to do something about emissions.

8.55 pm

Mr. Patrick Cormack (Staffordshire, South) : I did not expect to have the pleasure of participating in this debate, but I am glad to do so, if only briefly.

I congratulate my right hon. Friend the Chancellor on an extremely innovative and thoughtful Budget. I am especially glad to be able to do that, as he is a very old friend of mine, and it is good to see him produce a Budget which will be something of a landmark Budget. He has been especially helpful to small businesses and, in spite of what the hon. Member for Sunderland, North (Mr. Etherington) said, he has done a great deal for charities, not only in this Budget but in a series of Budgets.

I am delighted that my right hon. Friend has come into the Chamber. I wish to appeal to him on the subject that has occupied many of the headlines in the past few days--his understandable but controversial decision to impose value added tax on domestic fuel. I understand what prompted him to do it, and I appreciate that there must have been a great deal of mental wrestling in deciding where revenue was to be raised. Of course, many of us would have been up in arms had he put VAT on books and newspapers. Whatever he had decided to do, he would undoubtedly have been the target for some criticism. However, I ask my right hon. Friend to think very carefully in the year ahead. We have a year before any VAT is imposed on domestic fuel. It will first be imposed at 8 per cent., and will not reach its 17.5 per cent. level for two years. My right hon. Friend is well aware, as we all are, of the particular plight of the elderly. I worry very much about how many of them will be able to cope with a rate of 17.5 per cent. We have had assurances from the Prime Minister and others, for which we are grateful, that something will be done to compensate, but it has not been spelt out carefully or clearly enough. We want to know the full details as soon as possible. I am confident that something will be done adequately to compensate those who are on benefit, but I point out that many elderly people do not qualify for benefit--through their thrift and frugality they have been able to look after themselves, and they take great pride in that. It is on them that the burden will fall with especial and peculiar severity.

I suggest to my right hon. Friend that there is a good solution. I have felt for a long time that there is a case for two-tier VAT. If my right hon. Friend puts 8 per cent. on domestic fuel next year, he should leave it at that. He should not raise the figure to 17.5 per cent. in the subsequent year. If the rate remains at 8 per cent., it will be far easier to cope with in terms of the increase in benefits. It will also be easier for those who do not have recourse to benefits to budget for the increase.

My right hon. Friend could also set a useful precedent. I fully agree with him that it is a fundamental belief of our party that we should increase indirect rather than direct taxation. However, many people feel that 17.5 per cent., on whatever it is levied, is a high level of VAT. It is certainly a high level on fuel, one of the basic necessities of

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life. I completely comprehend the green argument, and I was interested to receive from Friends of the Earth a paean of praise for the courage of my right hon. Friend

Mr. Patrick Nicholls (Teignbridge) : Surely not.

Mr. Cormack : One can echo that to a degreee. Friends of the Earth are not always right.

In congratulating my right hon. Friend on what he has done and in thanking him for producing a far-reaching and innovative Budget, I say to him as a very old friend, "Please think again about VAT at 17.5 per cent. on domestic fuel, especially as it affects our elderly citizens."

9 pm

Ms Harriet Harman (Peckham) : I welcome the comments of the hon. Member for Staffordshire, South (Mr. Cormack). The way in which he, on behalf of his constituents, can get the Chancellor to think again about imposing VAT at 17.5 per cent. on gas and on electricity is to join us in the Lobby tonight and to vote against that proposal. This is a Budget of betrayal and of failure. It betrays the hope of the unemployed and it fails to set the economy on course for growth and investment. It puts up everyone's taxes to pay for the Tories' economic mistakes and it is unfair. Those who will pay most are those who can least afford it.

The Tories' election promises on public services are now also threatened by spending cuts. The Tory manifesto promised that health spending would be increased year on year, that there would be more police on the beat, that there would be more nurseries and more help for students, and that pensions and child benefit levels would be protected. Yet it is to consider precisely those areas that the Chief Secretary is now to preside over a review of the Department of Health, of the Department for Education, of the Department of Social Security and of the Home Office. If the Tories can break their promises on taxation, how much easier they will find it to break their promises to defend a welfare state which few of their families use and which many of them despise.

The Budget not only threatens vital services and fails to set the economy on course for jobs, for investment and for growth--it breaks the Tories' central election pledge to reduce taxes. The economy needed a Budget for jobs and for economic recovery. We should have had a Budget to break out of the vicious circle of unemployment, of waste and of decline. We should have had a Budget which forged a new cycle of skills, of productivity and of growth.

In the past 14 years, manufacturing has grown by 50 per cent. in Japan and by 25 per cent. in America, but in Britain it has barely grown at all. We are falling behind on investment. The German industrial worker is backed by an average of £4,000 capital investment. The Japanese worker is backed by an average of £6,000. The British worker has only £2,500 capital investment behind him. We are also behind on skills. West Germany, Japan, Hong Kong, Singapore, Taiwan and South Korea have more of their young people at college and in further education than is the case in Britain. The competitive edge of an economy will be the skills of its people, so falling behind on skills and leaving people unemployed is not only a waste of people's individual talent and potential--it means that we shall fall further behind as economies compete in future.

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We are also behind on research and development. Japan sees eight times as much of its profits ploughed back into research and development as we do. The fragile state of our manufacturing industry was revealed in the Sunday Times leak of the Department of Trade and Industry report, which the Government still refuse to publish--indeed, they still deny the facts that were clearly set out in it.

Mr. Geoffrey Hoon (Ashfield) : Does my hon. Friend agree that we get a lot of lectures from Conservative Members about the success of Japanese companies investing in the United Kingdom but that they rarely mention the fact that, threatened by recession, the Japanese Government have invested £40 billion to try to ensure that Japan remains competitive? Why are the British Government not trying to do the same?

Ms Harman : I agree with my hon. Friend. Japan and the United States are investing and the EC wants to invest ; the British Government alone, it seems, are blind to the lack of investment in our economy and try to tell us that everything is perfectly fine.

Mr. Nicholls : As the hon. Lady applauds a Government investment of £40 billion, will she now tell us what she thinks the public sector borrowing requirement should be?

Ms Harman : The high level of the PSBR is the result of high unemployment and a failure in our economy. What we would do is to bring down unemployment, introduce a proper strategy for industry and growth and bring down the PSBR. The PSBR is too high as a result of the failure of this Government's economic policy and particularly as a result of their allowing unemployment simply to grow.

Mr. Peter Thurnham (Bolton, North-East) : The hon. Lady blames the Government for unemployment. Is it not a fact that every Labour Government who have ever been in power have left unemployment higher than when they came to power?

Ms Harman : Unemployment has more than doubled since 1979. It increased by 61 per cent. between December 1990 and December 1992. We have the highest rate of increase in unemployment in the European Community.

The Tories' economic judgment has been wrong throughout. They have been wrong about the fact of the economy going into recession. They have been wrong about the impact of the recession--particularly on our beleaguered manufacturing industry. They have been wrong about the length of the recession and they have been wrong about the depth of the recession. In 1989, the Prime Minister--then the Chancellor--said :

"I do not believe that a recession is likely".

In September 1990, in true King Canute style, he said : "We are not in recession".

As soon as the Tories acknowledged that Britain was in recession, they began predicting the end of the recession. In December 1990, the Chancellor told the Select Committee on the Treasury and Civil Service that the recession would be

"relatively short-lived and relatively shallow."

Now, as unemployment remains at more than 3 million, with predictions in the Budget statement that 200,000 more people will lose their jobs by the end of this year, and when the prospect ahead is a yawning trade gap, we are told that we have had a five-star week for the economy.

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The Government have repeatedly had to revise their figures on the economy as, time and again, predictions of growth have been too high and predictions of national debt too low. While the Chancellor has become famous as the star of the movie, "Honey, I Shrunk the Economy", the Chief Secretary to the Treasury is now breaking box office records with the sequel, "Honey, I Blew Up the PSBR".

The human cost of unemployment is painfully high, with families and communities around the country blighted, but unemployment is also taking its toll on the public purse. It costs the taxpayer £9,000 per unemployed person per year in benefits paid out and lost tax revenue. The annual bill for keeping 3 million people who want to work unemployed is £270 billion a year. No wonder public finances are in a mess.

While unemployment has risen, training programmes have been cut and the Budget offers extra help to only half the people who are expected to lose their jobs by the end of this year. The net new money that the Government have agreed for schemes to help the unemployed--schemes which were trumpeted before the Budget--simply has not materialised. The figure is only £125 million. Since 1987, the Government have cut £1.5 billion in real terms from spending on training and help for the unemployed. As unemployment has increased, the Government are hardly creeping back to the situation which existed before the cuts. Businesses have gone to the wall. There were 63,000 insolvencies this year, an increase of 31 per cent. since 1991. Against that background, the Department of Trade and Industry has suffered cuts. As my right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) and my hon. Friend the Member for Wolverhampton, North-East (Mr. Purchase) explained, the Budget does nothing for business. In fact, it anticipates a fall in business investment this year. It anticipates that there will be £400 million less invested in business this year than was invested last year.

The President of the Board of Trade referred to a survey by the Institute of Directors as optimistic ; yet that survey shows that half its members plan no investment this year. We would not be in this situation if the Government had taken the action that Labour has urged. Unless there is increased investment in capacity, skills and technology, British industry simply cannot recapture the markets that have been lost at home and abroad.

Mr. Nicholls : The hon. Lady talks about our losing markets at home. Will she bear in mind the fact that, as a result of the social chapter, we are actually gaining markets from overseas countries?

Ms Harman : Countries in the rest of the European Community which believe that it is important to have high-skill, high-wage, high-tech economies are going ahead of us. There is no future for our economy if it is a low-wage, low-skill economy competing with underdeveloped countries.

Unless British industry is competitive, the trade deficit will grow and there will be no hope of a sustainable reduction in the PSBR. Raising taxes without tackling

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unemployment and industrial decline merely deals with the consequences of the economic problems we face. It does not deal with the causes.

The Government have not suffered from a shortage of public money. They received £115 billion in revenue from North sea oil and £62 billion in privatisation receipts, but that has all been frittered away. If the Government are hemmed in now--as they are--it is not as a result of lack of public money in the past. Rather, it is the result of a complete absence of ideas for the future. While our competitors invested, the Tories gave tax handouts to the rich. They were also content to see more and more millions paid out in benefits for the growing dole queue which they believed was a price worth paying. They have broken their promises, increased taxes and failed on the economy.

In this Budget, the Government have sought to remedy the soaring public debt by raising taxes. Public debt is soaring as a result of the Government's mismanagement of the economy. The high level of public borrowing is a consequence of their economic failure, not a cause of it. This is a Budget in which everyone else has to pay for the Tories' mistakes. However, they still have not learnt from those mistakes.

As my hon. Friend the Member for Sheffield, Attercliffe (Mr. Betts) said, this is a Budget of yet more broken promises. Before the election, the Chancellor said :

"We will not have to increase taxes."

He went further and said :

"I cannot see any circumstances in which that will be necessary." Before the election, the Prime Minister said :

"We have no plans to increase value added tax."

Indeed, he went further than that and said :

"There will be no VAT increase."--[ Official Report, 28 January 1992 ; Vol. 202, c. 808.]

and he repeated :

"We have no need and no plans to extend the scope of VAT."

Dr. Liam Fox (Woodspring) : As the hon. Lady finds it so unpleasant to raise taxes, will Labour now give a definite pledge to revoke the VAT-- [Interruption.]

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