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Mr. Oliver Heald (Hertfordshire, North) : Most commentators agree that one of the problems for the industrial base is that we need to have the best trained young people for technical jobs. Does the hon. Member for Coventry, South-East (Mr. Cunningham) agree that the initiative on apprenticeships that has been announced will provide a credit system through youth training to produce a new raft of apprenticeships ? That will be a big contribution to that area, and is something that the trade unions will welcome.
Mr. Cunningham : I do not think that the Chancellor spelt out the details of the apprentice training scheme. A wise man would ask to see the details, but it will still not produce the numbers of highly trained young people that the country needs to protect its industrial base. I am sure that the trade unions would agree with me because they have argued for many years about the need to provide the necessary number of quality apprenticeships. The Opposition will consider the scheme once we know about its exact details and the number of people involved.
The Chancellor of the Exchequer has announced that the social security budget will be reduced by £2.5 billion. That cut reveals the true nature of the Government's promise to assist old-age pensioners, who will be hurt by VAT increases and cuts in benefits in the next two years, the homeless and one-parent families.
I notice that the Government have not introduced any new initiative to pump more money into the ailing national health service. The Chancellor merely said that he hoped that the NHS would be more efficient. Depending on what definition of efficiency one chooses to take, however, that could mean that more jobs will be at risk and that redundancies will occur. It does not necessarily follow that that efficiency will increase in relation to patient care. We also learnt that public sector workers will be subject to a wage freeze, except when there is improvement in efficiency, but once again, that depends on what is meant by the Government's use of the word "efficiency". It may mean that they will receive a small wage increase if they are prepared to sacrifice some jobs. I am certain, however, that their wages will not be increased this year or next year.
The standard spending assessment for local authorities will increase by a marginal 2.3 per cent. We are aware, however, that many local authorities are already wrestling with the problem of providing care in the community out of their limited resources. Those authorities also need extra resources to provide new housing. The Chancellor also announced that the tax relief for home owners and first-time buyers will be frozen. I have no doubt that the relief offered will be reduced prior to the implementation of that announcement.
When one attempts to judge a Budget, one considers whether the sacrifices have been distributed fairly. Today's Budget has failed to do that. The onus has been placed, once again, on those who are caught in the poverty trap. The Government may say that they will assist one-parent families with childcare. They have failed to recognise that two-parent families also need assistance sometimes, because in our modern society those parents must, reluctantly, both work to make ends meet.
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This Budget should not be welcomed but greeted with great trepidation. It is difficult to analyse its full implications a mere one and a half hours after the Chancellor has delivered his speech, but I believe that my right hon. and learned Friend the Leader of the Opposition was right when he said that, in the coming months, the British people will become aware of the increased tax burden that has been placed on them. They will realise that it is due to the Government's mismanagement of the economy.6.3 pm
Mr. Richard Page (Hertfordshire, South-West) : I have always been told that, if one wants to take over a company, it should be one at the bottom rather than at the top, because it is a foil to show off one's abilities. If I were the Chancellor, however, I would not be too keen to take over a company with a public sector borrowing requirement deficit of £50 billion, a balance of trade deficit in excess of £12 billion, and 3 million people unemployed. My right hon. and learned Friend has also had to try to find some magic to keep the recovery rolling. The only bright spot on the horizon, as far as I can see, is low inflation.
In the political and media debate before the Budget, I was disappointed to note that the problem that my right hon. and learned Friend faced was treated as a linear equation based on either increasing taxes or cutting expenditure. The commentators ignored one dimension that is known in the commercial world as "growing the business". I shall talk later about the need to produce more in the United Kingdom. I was obviously delighted, however, by the moves announced by my right hon. and learned Friend to promote smaller businesses, because they are the seed corn from which growth and expansion can come.
In the past, in times of a little local difficulty in our economy, interest rates have gone up, unemployment has gone up, but, at a crucial moment it normally coincided with an election down came the interest rates. That meant that growth increased, orders went up and we then did rather well, thank you very much.
That often happened because we found that our major customers in the European Community or the United States had also enjoyed economic recovery. Their economic train began to chug uphill and we managed to hitch back on a few coaches further down. As a result, we were able to reduce our costs by between 10 and 15 per cent., and we did well. That gave a little boost to our economy and everything was all right until prices began to rise, inflation went up once again and we were forced, once again, on a down cycle.
This time, it is different. The core financial position of our customers in the European Community is well known, and we no longer enjoy any advantage offered by a potential upturn in its economy. The United States, however, appears to be coming out of its economic depression or down cycle.
The current circumstances have kept prices down and that gives us, for the first time in many years, the chance to build a stable recovery. My right hon. and learned Friend has performed a superb balancing act between keeping the fragile recovery going it is fragile because no one should
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try to make out that things are booming in the marketplace and making careful decisions to reduce the PSBR and our indebtedness. The balance of trade deficit is another matter, and I do not believe that it has been given sufficient attention in the Budget. It is extremely worrying that the recovery has begun with such a large trade deficit, because that could make the recovery short-lived. The Institute of Fiscal Studies has pointed out in its "Green Budget" that benign neglect of the current account deficit could sow the seeds of the next recession. If that deficit continues unchecked, either the United Kingdom's competitiveness that means volume production must be boosted or growth cut. That would mean an increase in interest rates. The first option is surely more preferable to the second.There must be a marked shift towards investment that will result in exports and import substitution. My concern it is not the first time I have raised it in the House is that the financial institutions are biased against manufacturing investment. Short-termism seems to rule supreme. That has led to a reduction in the investment we need. Investment against the gross domestic product is at its lowest level for some 30 years. That investment is considerably lower than that made by some of our industrial competitors in the world marketplace. Within Government, an element of schizophrenia seems to be apparent. We laud the car industry because, at last, we have become a net exporter of vehicles. We no longer import more cars than we export. At the same time, however, we seem to have missed out on some of the opportunities offered by the huge investments that have been made by Toyota, Nissan, Honda and Peugeot, which have helped to produce that beneficial change in our exports.
In the short term rather than in the long term, we must focus our minds on providing more investment. I am talking not about blanket investment, but about specific focused investments. For example, we have fewer computerised machine tools per thousand head of population than any country in the industrialised world. In this country, the figure was around 0.9 per thousand. In western Germany before it was combined with East Germany the figure was 2.3. I learned a long time ago that I do not care how broad your back is or how big your shovel is, Mr. Deputy Speaker, but you will never beat a man who is driving a JCB if you want to dig a trench. We must compete in the modern world.
Mr. Iain Duncan Smith (Chingford) : One needs a big garden as well.
Mr. Page : I accept what my hon. Friend says.
Nevertheless, we must have investment in computerisation if we are to compete. I welcomed the increase in capital allowances in the last autumn statement, but I felt that the state of British business at that time was that companies had turned their attention away from investment towards short-term survival. After the restoration of corporate viability, companies are more capable of coming forward with investment plans than for some time. I could produce figure after figure to support that point.
I return to the announcements about small businesses, which are some of the more positive and welcome aspects of the Chancellor's speech. My right hon. and learned Friend correctly identified three areas of difficulty the
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burdens of regulation, external finance and cash flow. The measures which he announced went a long way to help in all three areas. Moving up the level for exemption against VAT to £45,000 will help many small businesses, and removing the cost of the audit has been asked for by small companies for years.The message I would send to small businesses is that that must not be used as an excuse not to have proper financial accounting. I have been talking to three of the major clearing banks in this country, and all three came up with the same figure. The banks said that, of small businesses with a turnover of between £250,000 and £1.5 million, only 8 to 10 per cent. carry out monthly profit and loss accounts. As someone with a little knowledge of business, I find it staggering that anybody can try to run a company without knowing every month how it is doing. That is absolutely beyond comprehension.
The Chancellor has moved to allow people to reinvest and put moneys into other companies when they have decided to sell up or move away from their original activity. The raising of that level to £750,000 shows a realistic recognition of the amounts of money needed to be put into industries and businesses today to make them survive. I will now mention the replacement of the business expansion scheme. The scheme was introduced to give finance to businesses, and, with the benefits to investors, went some way to compensate for the risks in small firm investment. However, as with most fiscal measures during that time, the scheme has lost much of that original aim. The extension of the BES to rented housing accommodation in 1988 provided a vehicle for relatively low-risk, high-return investment. That was well away from the original aim of the BES. Therefore, I welcome what my right hon. and learned Friend has done with the enterprise investment scheme, and particularly with the block on property.
We must put money into ideas which will produce things for this country, and not just into the bricks and mortar. We must have the basis for growth and development. While the building is a part of that, if we do not put money into machinery and ideas we will fail against our foreign competitors. The idea of the creation of a venture capital trust is bold and imaginative. I would love to see the details before I make any final judgment, but the idea behind it is superb, and if it will encourage investment in smaller businesses, it is to be welcomed.
The payment of debt has been mentioned time and time again. Small companies are worried that their major customer is not paying them on time, and the major customer can use that situation cynically to its advantage. The small company can do nothing about it. If it criticises its main customer or takes action against it, the small company loses, possibly for ever. My right hon. and learned Friend's remarks about the charging of interest and other measures is to be welcomed.
When Ministers assess how to bring that into law, they must ensure that there is as little possible activity as is required by the small business. Otherwise, the business would have to initiate the action, and could lose that customer the very reason why small businesses do not take action under the existing legislation. The proposal is marvellous, but it must protect the small business man who may be ripped off by a larger company.
With the exception that I have mentioned of the moves to tackle the balance of trade, I think that my right hon. and
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learned Friend the Chancellor has succeeded magnificently in the difficult balancing act of reducing the PSBR and keeping the recovery rolling. On that, he is to be congratulated.6.17 pm
Ms Diane Abbott (Hackney, North and Stoke Newington) : It is with some diffidence that I rise to speak so soon after the Chancellor has sat down. Clearly, I have not had an opportunity to read the lorry-loads of paper which go along with a Budget. I do not have the advantage, as did the Chancellor, of having a glass of amber-coloured liquid in front of me to refresh myself. No doubt the Chancellor was just enjoying a quiet celebration of St. Andrew's day.
After the media flurry about the cost of cigarettes and wine has subsided, the question which people in Scotland, in Wales, in London and particularly in my constituency will ask is, "What will this Budget do about mass unemployment ?"
After one has stripped away the gimmicks and the flourishes, we have been presented with yet another Conservative Budget which fails to make bringing down unemployment a priority. Instead of making that the centrepiece of their strategy, we have boasts. One of the Treasury handouts which I have had time to read claims immodestly, I believe that the Budget completes the job of sorting out public finances.
The Chancellor himself said again immodestly, with echoes of Mr. Toad that the Budget would "sort out" the public sector borrowing requirement "once and for all". I put it to those on the Treasury Bench that those boasts will come back to haunt them. It is not clear from the Chancellor's speech that there are enough concrete measures in the Budget which will deal with the burden of the PSBR. Unemployment is an issue which haunts every family in the land. Every estimate suggests that this country will still have 2.5 million people unemployed at the end of the century. Who could forget those posters at the time of the 1979 general election featuring the long queues of unemployed people ? The posters said that Labour was not working. Who could forget the Tories wringing their hands about unemployment figures of 1 million at the end of the 1970s ? Yet we will see out the century with levels of unemployment more than double those which the Government inherited, thanks to more than 14 years of Tory economic mismanagement.
Sadly, my constituency has the sixth highest level of unemployment in the country, with the present rate being 23.2 per cent. More sadly, that is an under-estimate. I know for a fact that women workers and young workers have opted out of the job market altogether, and that they do not register.
The figures for Hackney, North, in common with the figures from all over the country, have undoubtedly been presentationally massaged by more than 30 changes over the lifetime of the Government in the statistical methods of collecting the unemployment figures. If I were a Minister, I should not be so quick to rush on to television to talk about unemployment figures coming down. Any set of figures can come down if they are tinkered with 30 times in 10 years. Hackney, like many other parts of the country, is not following the overall trend and, sadly, unemployment continues to rise.
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Even when, by jiggery-pokery, the Government fiddle the figures to bring the overall number down, the national picture shows that more than one third of the unemployed people whom even the Government are prepared to admit exist that is, more than a million people are long-term unemployed. It also shows that there are 750,000 unemployed young people.It is worth reminding the Government of the real cost of unemployment, because they seem to forget it. There is a financial cost, in that we spend £350 million on benefits. When the Government talk about public spending, and about taking money away from the disabled to deal with the public sector borrowing requirement, do they understand what the real basis of our spiralling PSBR is ? It is the cost of maintaining the unemployed.
The Government sometimes seem to get the argument back to front. They seem to think that the way to cut the PSBR is to cut the money we give the unemployed, whereas the only long-term decent method of cutting the PSBR is to cut the number of people who are unemployed. For as long as I have been in Parliament, the Government have refused to face that issue.
There is also a social cost to unemployment. Nobody believes that one can entirely dissociate the issue of rising crime from that of mass unemployment. No one suggests for a second that, simply because someone has no job, he will go out and commit a crime, but the correlation between areas of high unemployment and areas of rising crime are too obvious to miss.
It is odious to use one of the Prime Minister's new words to see the Home Secretary strutting around talking about how he will build more prisons, put more young people in jail for longer and make prison conditions tougher. It is odious to see him playing the law and order card ruthlessly, when he knows that, if one group of people bears the responsibility for rising crime and the mass unemployment that underpins it, it is the Government.
Unemployment also has a cost in terms of the quality of people's lives. Fear of unemployment affects every community in the country. Perhaps during the 1980s people in London and the south-east said, "Unemployment may be affecting coal mining areas, Scotland, Wales and the north-east, but at least we are experiencing a boom." But in the past 18 months, the chickens of Tory policy have come home to roost in the Tory heartland of the commuter belt, of London and of the south-east.
In the London borough elections next spring, the Government will pay a price for the extent to which unemployment has affected London, the south- east and the rest of the commuter belt, as it did not in the roaring Thatcher years during the 1980s.
I believe that no single factor acts to depress the housing market and growth more than the fear of unemployment, yet in the Budget, as in a whole series of Budgets, the Government refuse to make fighting unemployment a priority. Instead, we get gimcrack, gimmicky schemes that take up much time and space in press releases and give the Government something to say, but which do little about unemployment. Let those of us who were in the Chamber in March cast our minds back to the schemes announced by the dear departed right hon. Member for Kingston upon Thames
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(Mr. Lamont), which were supposed to reduce unemployment. The right hon. Gentleman was so desperate to have something in his Budget that seemed as if it referred to the unemployed that he dragged in schemes that were really matters for the Department of Employment. The educational allowance scheme was trumpeted in March. What has happened to the 60,000 places that were promised ? Ministers tell me that, so far, only 5,000 people are participating. In the March Budget, we also heard about the new community action programme, and were told that 20,000 places would be handed out. What has happened so far ? Only 1,200 people are participating. What has happened to the pilot schemes for the long-term unemployed, about which we heard so much in March ? They are only just up and running.The presentation of those schemes and their value was limited. Shoehorning them into the Budget statement was extremely cynical. The seriousness of the Government's commitment to the unemployed is restricted entirely to window dressing schemes which, six months after the dear departed former Chancellor announced them, are hardly up and running.
This year we have been told about more schemes and more window dressing. There is to be a two-week restart course, and even "extended" community action although even the places promised in March have not been filled. There are to be higher levels of skills training, career development loans, the job finders grant, and job finders workshops. There is to be caseloading whatever that means. Those schemes, like the schemes announced in March, like last year's schemes and the schemes before that, are mere window dressing. They achieve little in terms of affecting long-term unemployment ; they are simply a public relations device so that the Government can be seen to be doing something for the unemployed, whereas the reality is that the long-term trend, especially for people who have been unemployed for more than a year, and in relation to the structural unemployment in communities such as mine, the long-term trend continues to rise.
Let us not waste any more time on the schemes that have been exposed as the merest cynical window dressing. What is the Government's real answer to unemployment ? They must have given it some thought ; I do not want to suggest that they have given the matter no thought. To find the Government's real answer to the problem of unemployment that is haunting every family in the country, we must pluck out a phrase from the Chancellor's speech. The right hon. and learned Gentleman talked about the importance of a flexible and deregulated labour market.
What does that phrase mean ? The Economic Secretary to the Treasury and the Government Whip are laughing ; they know what it means, and they are fortunate indeed that it does not apply to them. It means a low-skill, low- wage labour market with no security and no job protection. In recent weeks, we have seen the Secretary of State for Employment, that well-known Christian Democrat, fighting off the other 11 European states' modest efforts to offer a level of protection to low-paid workers.
As we approach the year 2000, the Government present the British people with the notion of the British economy competing with Japan, Germany and the economies of the Pacific rim on the basis not of training or skill but of a low-skill, low-wage, insecure, unprotected labour market.
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That is how they want to get people or, at least, some people back to work, at the very bottom of the employment pyramid.Mr. Duncan Smith : If what the hon. Lady says is true, why does 40 per cent. of the inward investment in the ECGentleman for his intervention ; it is precisely because what I am saying is true that we get the inward investment.
Labour costs in Britain are lower. Car workers in Britain cost 40 per cent. of what car workers in west Germany cost. I have never spoken to the hon. Gentleman before, and I do not know his background, but does he really believe that this country has any long-term prospect of competing with Germany, Japan and the Pacific rim on the basis of low wages and low skills ? That idea does not present any long-term prospects for this country. The hon. Gentleman should go back to his constituents and tell them, "I have seen the future, and it is a future of low wages, short contracts and unprotected employment." They will thank the hon. Gentleman for that by lowering his majority.
I do not want to be entirely unfair to the Chancellor. There is one thing in the Budget for which I would like to give one cheer the announcement of the child care allowance although I have yet to see the details of it. I am a cynic. I dare say that, when those who will benefit from the allowance cut it up, they will have lost money in all sorts of other ways in terms of the value added tax on fuel and so on.
However, the principle of the allowance it is an important one, and I welcome it is that the way to get single parents off benefits and into the job market is to offer them some help with child care. But the way in which the allowance is worked out in practice is an entirely different matter.
The Chancellor began his statement by boasting about how he had solved the public sector borrowing requirement once and for all. That cannot be true. That claim places far too much weight on spending cuts which have yet to be specified. The proof of the pudding of the Budget statement will be in the eating. The balance of getting public spending under control relies too heavily on public spending cuts. We will have to see those spending cuts, and we will have to see whether the Government can get them through the House.
High unemployment is a tragedy not simply for those who are unemployed but for the young people leaving school with no prospect of ever getting a job, and skilled men in their 40s and 50s who are being made redundant and know that they will never work again. Unemployment is not simply a tragedy for those who are enduring it. It is also a tragedy and a serious matter for the economy of this country, because growth and a sustained upturn will never be achieved unless the human capital of this country is maximised. However, that human capital is not maximised by condemning millions of people to long-term unemployment. For many years to come, we will pay the price economically and socially for the mass unemployment of the Thatcher years.
I listened with great interest to the Chancellor's presentation. He must be congratulated on the bravura and flourish with which he made his speech. Nonetheless, when all the fanfares have died down, I am waiting, the
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people of Hackney are waiting and the people of Britain are waiting for a Government who will finally, after 14 long years, put a return to full employment on the top of the political agenda.6.32 pm
Mr. William Powell (Corby) : One of the problems that Tory Members always face in dealing with Labour Members' speeches is that, when we ask them how on earth they would get from here to Edinburgh, they always say, "If I were going to Edinburgh, I would not start from here". The difficulty is that Labour Members are genuinely reluctant to face the main strategic problems of the Chancellor and his predecessors. Indeed, if Labour Members had been lucky enough to win the general election, they would have faced the same problems. My right hon. and learned Friend the Chancellor presented a Budget which is not the Budget that he would have chosen to present in a perfect world. However, he has to deal with the real world and real circumstances and, as one would expect, he has done so with characteristic courage and integrity. We are fortunate that the Chancellor and, indeed, the Cabinet I am proud to include Cabinet members and their collective responsibility faced up to many of the problems which they immediately faced and introduced a package which is creative and is genuinely designed to address many of the short-term difficulties. But it also lays the basis for the longer term and for much more sustainable achievements in our economic fortunes.
I look forward to the day one year hence when my right hon. and learned Friend, as a result of what he has been able to do this afternoon, will be able to present a second Budget which builds on today's Budget and which is more in keeping with the sort of Budget that it would have been his ambition to deliver in a more perfect world. The hon. Member for Hackney, North and Stoke Newington (Ms Abbott) laid down the yardstick by which she would judge the Budget what it does for unemployment in this country. I respect the impulses that led her to argue and analyse exactly as she has done. When I came to the House more than a decade ago, I had the highest level of constituency unemployment. That is no longer the case, or anything like the case. At that time, we had structural unemployment in Corby and east Northamptonshire which meant that, whatever the national unemployment level, unemployment in that area was always significantly higher than the national average. Today, we have reached the point at which unemployment in the area is fairly consistent at 1 per cent. to 1.5 per cent. below the national average. Of course, it is still too high, but I draw comfort from the fact that unemployment has fallen by 6 per cent. in the past year. The way in which I judge the Budget is that more of my constituents are likely to find work next year than has been the case in the past year.
I agreed with my hon. Friend the Member for Worcestershire, South (Mr Spicer) when he emphasised the question whether the Budget would assist in delivering higher sustainable growth in the future than has been the case recently. I think that it will do so. More of my constituents will get jobs as a result of that sustainable growth, and they will benefit correspondingly from it.
Matters that are important to my constituents and those of all hon. Members lie substantially beyond my right hon. and learned Friend's power. Above all else, it is absolutely
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essential for the sustained revival of economic activity in this country that we have sustained growth in world trade. In the past 250 years of British economic history, there has been no period when the British economy has prospered against a background of decline in world trade. If we are to prosper, it is absolutely essential that there is a robust recovery in world trade because so much of our economic activity is involved in international trade. However, one cannot be too sanguine that that is about to happen.Resolution of the problem of the general agreement on tariffs and trade is of considerable importance to this country and should never be overlooked. I welcome the measures introduced by my right hon. and learned Friend which will encourage trade with countries in the Pacific rim and with Asia. Of course, European markets are likely to remain the most important markets in the foreseeable future, but there is no doubt whatever that the expanding markets in the world which offer opportunities for our business men, merchants and entrepreneurs are in Asia as well as in Europe. The message needs to go out loudly and clearly that, if businesses wish to prosper, they must prosper not only here but abroad. By "abroad", I mean not only western Europe but the burgeoning dynamic markets in the east. I welcome many of the measures announced by my right hon. and learned Friend. I strongly support his announcements on local authority expenditure for next year. Even a 2.3 per cent. increase in the money that local authorities can spend next year on this year's planned target not their actual expenditure is still on the generous side. Since May last year, a number of large spending authorities have been on a financial binge, and wish to continue that binge. That has been happening in Northamptonshire, and it simply must stop.
I welcome the fact that my right hon. and learned Friend underlined the Government's willingness to use their capping powers to ensure that spending targets for local authorities are not undermined by local authorities that feel that they are entitled to go on a spending binge, spending not only council taxpayers' money but Government taxpayers' money.
The controls exercised by the House of Commons over how centrally collected taxes are spent by local authorities are hopelessly inadequate. A much closer interest needs to be taken in how local authorities spend their money, 50 per cent. of which often comes not from what they raise locally but from what the Treasury gives them. That Cinderella area of public expenditure has been overlooked for far too long.
A scandalous report has been issued in Birmingham saying that taxpayers' money allocated for education through Treasury payments to the city of Birmingham has not been spent on education as most parents, governors and teachers in Birmingham schools would have wished, but has been used to develop exhibition facilities and goodness knows what else. As a result, we now learn that Birmingham has some of the worst academic results of any education authority in the country.
It is wrong that a large authority like Birmingham can receive money from my constituents who believe that it will be spent on education and then discover that it is being spent on something else. That is happening in countless local authorities, including some in Northamptonshire. I
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hope that the Government will be firm in making it plain to all local authorities that the 2.3 per cent. allowance on this year's planned spending rise is the limit and that capping powers will be used to ensure that it is held.I welcome the increased contribution to the national health service. All our constituents not only want that but need it. The increased expenditure on education will also be important. I was astonished at what the right hon. Member for Berwick-upon-Tweed (Mr. Beith) said about grant-maintained schools. It is right and appropriate that the Government should seek to make available more and more money to the grant-maintained sector, knowing that it is usually better spent than any money given to local education authorities.
I have many grant-maintained schools in my constituency, most of which have become grant maintained not least because of decades of neglect by the local education authority in Northamptonshire, whether it has been under Labour or Conservative control. They welcome their increased freedom to manage their schools and assets in a much more sensible and practical way. I hope that when the allocation of money to the grant-maintained sector is broken up, the Secretary of State will not overlook the important claims of many junior and infant schools that are now becoming grant maintained for capital allocations over and above those given to the secondary school sector. I hope that successive Budgets will ensure a progressive flow of funds into that sector and that the Opposition will get the message that grant-maintained schools are popular. Not a single grant-maintained school has had reason to regret going grant maintained. I have considerable experience of that sector and know that most of them richly welcome the opportunities given to them. I very much welcome the schemes for expanding the unquoted companies sector. It is an important measure. Small businesses have taken a serious beating during the past four or five years and everything that can be done to encourage the revival of small businesses should be welcomed, and I welcome the raft of measures put forward by my right hon. and learned Friend. What he said about the late payment of debt is also important, but I wish to underline a good point made by the right hon. Member for Berwick-upon-Tweed. Some of the worst payers in this country are Government Departments. Some of my constituents who work for Government Departments complain week after week about every imaginable excuse made by Government Departments about why they should not pay their bills. The matter will not be taken seriously unless and until the Government are prepared greatly to improve the financial discipline that they exercise and ensure that small businesses in particular receive priority payment rather than endless excuses about why money cannot be paid.
I welcome the schemes to give people an incentive to get back to work. What is needed is a much greater emphasis to encourage people to work. This afternoon some useful steps were taken, most of which have been called for by the Opposition, although the specific detail may not have been what the Opposition Whip, the hon. Member for Wolverhampton, South-East (Mr. Turner), wanted.
The House knows that I am among those who are totally opposed to the extension of the VAT base. I am as angry today as I have been at any stage in the past six or seven months that my right hon. Friend the Member for Kingston upon Thames (Mr. Lamont) should have made such a
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proposal. I welcome the fact that the Chancellor has decided not to go further in extending the VAT base. Any idea that the VAT base can now be extended at the standard rate of 17.5 per cent. is utterly impossible. During the past few months there has been much agitation in the country and the House among my right. hon. and hon. FriendsMr. Walter Sweeney (Vale of Glamorgan) : Will my hon. Friend give way ?
Mr. Powell : Will my hon. Friend allow me to persist in what I have to say before he intervenes ?
There has been much agitation about the amount of compensation that will be allowed. I pay tribute to my right hon. and learned Friend the Chancellor for introducing a package of proposals for compensation which is much more generous than anybody in the House expected and certainly more generous than I expected. At no stage during the past few months have I advocated a compensatory package because I should have preferred VAT not to be levied on heating and cooking. However, I pay tribute to all my right. hon. and hon. Friends who have persistently and vigilantly brought home to my right hon. and learned Friend and other members of the Government the fact that the proposal was not sustainable without handsome and generous compensation.
It is usually estimated that VAT at 8 per cent. would cost an average household 85p a week and, at 17.5 per cent., approximately £2. Although it must be said that, on those figures for an average household many households are not average there is not total compensation, there is all but total compensation for those who receive it.
I welcome the fact that compensation has been extended to all pensioners. One of the matters that made me so angry about what was done in the Budget in March was that my right hon. Friend the Member for Kingston upon Thames did not seem to appreciate that those just above the benefit level, many of whom had seen a decline in the income from their investments because of the decline in interest rates, would be the worst affected by the introduction of VAT in that way.
My right hon. and learned Friend has gone almost as far as anybody could ask to compensate pensioners, including those above the social security thresholds, for the introduction of the tax. That is not to say that all those who deserve it will receive compensation. Of course, there will be individuals who will fall outside the package that is one reason why I have never regarded a compensation package as the best answer to the problem.
There will also be deserving organisations, frequently charities, that will be hard hit by the introduction of the tax. As the House has heard me say on many occasions, organisationswhich raise money in modest circumstances will find the extra tax a heavy burden to bear on top of the many other fiscal burdens of recent years.
It would be wrong of me, in again registering my hostility and anger at the extension of VAT to heating and cooking, not to recognise that my right hon. and learned Friend the Chancellor has introduced a remarkable package that will go a long way towards dealing with immediate difficulties. I hope that my right hon. Friend the Secretary of State for the Environment will ensure that the extra energy conservation measures that have been announced will be directed to houses inhabited by local authority tenants and old houses in the private sector, in which heating costs are above average.
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We have talked throughout about average heating costs. We should recognise that, although there may be one or two that meet the average, homes will digress substantially from the average. I have seen Graham Gooch score many runs as a batsman at the crease, and he has an average of 44.61, but I have never seen him score that number of runs and I doubt whether anybody else has.The announcement will go a long way towards meeting the legitimate complaints about the matter of so many people. Although I am unable to award my right hon. and learned Friend the Chancellor the highest accolade, as I would have wished, I am prepared to pay handsome tribute to his Budget. It will be recognised throughout the country as a great help.
The Budget is one of the meatiest that has been presented to the House. It may turn out to be one of the most important Budgets that has been introduced at this stage in our national and economic history. My right hon. and learned Friend the Chancellor deserves the congratulations of the House for his courage and integrity in introducing the proposals. I look forward to supporting him and his Budget proposals in the Division Lobby.
6.55 pm
Mr. Robert Ainsworth (Coventry, North-East) : When the Government drew up the slogan "back to basics", they gave us a couple of opportunities. The Opposition can use it to judge the Government's lack of aspiration for the country. It also gives us a good handle and measure by which to judge the policies that they introduce in the House, including the Budget. When we use the slogan "back to basics" to judge the Budget and the tax system that is to be introduced, we should ask two questions. First, are they fair and is the overall system in which they will operate fair ? Secondly, do they tackle the real issues that face the country ?
I was astonished that Conservative Members cheered the Chancellor of the Exchequer when he sat down. There will be a £6 billion increase in the tax burden, to be slid in over a three-year period. If one takes out the concessions to business in the personal sector, there will be a £7 billion increase in the tax burden. It will be slid in over a three-year period, but nonetheless there will be a £7 billion tax hike. That increase follows the increases in VAT and in national insurance contributions that were announced in the spring Budget. Those are the policies of a Government who at the last election promised decreases in tax year on year.
A lot has been said about the compensation that will be applied to the introduction of VAT on fuel. I was confused by what the Chancellor of the Exchequer said on the matter, and I am not still clear about it. He announced some figures that would apply to individuals, and I did not think that those figures were generous or would cover the total cost
Mr. Ainsworth : The hon. Gentleman is a clever chap he can read the bundle of papers before other hon. Members make a speech. I have not read the whole bundle. The figures are hidden somewhere in the papers, but I have not read them yet, because I have been listening to the debate.
The Chancellor gave us some figures that I did not think amounted to full compensation. He then gave an overall
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figure for the cost of the measure £1.25 billion. If that figure is correct, he has almost fully compensated some groups of people for the VAT.I am still confused about that, and perhaps when he sums up the Minister will clear up the issue. If the second figure is correct, it sends a clear message : that, having heard about the threatened imposition of VAT on fuel, pensioners organised themselves and "frit" the daylights out of some Conservative Members. If they are to be almost fully compensated, as the second figure would suggest, that is the reason. If that is so, perhaps the pensioners have something to teach other people who will suffer as a result of VAT. Families will be on the receiving end of that appalling increase, even if the pensioners will not.
Mr. Sweeney : Is it not right that my right hon. Friend the Member for Kingston upon Thames (Mr. Lamont) stated as long ago as the spring Budget that help would be given to those in need ? Has not the Labour party used its fertile imagination to whip up fears among pensioners, the poor and the weak in society over the past six months ?
Mr. Ainsworth : I seem to recall that, week on week, Conservative Members were reluctant to respond to questions asked, particularly by the Labour Front-Bench team, about whether or not people would be fully compensated. Conservative Members were not prepared to answer that question during the two by-elections at which the subject was an important issue.
If the Government have now decided to give compensation, and the hon. Member for Vale of Glamorgan (Mr. Sweeney) wants to suggest that they made that decision a long time ago and the fears were all a figment of people's imagination, one wonders why the Conservatives suffered such pains during the two by-elections, and have continued to do so during the past few months.
People should recognise that, if the Government have been obliged fully to compensate one group of people, they have done so as a result of the pressure brought to bear. Even if that is so, the compensation will not solve the problems for many other people. As the hon. Member for Corby (Mr. Powell) said, there is no such thing as the average household. There will be no such thing as the average fuel bill.
People with decent houses and decent insulation, with double glazing and good heating systems in short, the better heeled will do all right. But people living in poorer accommodation, with less efficient heating systems, in no fines council houses and the like, will find, even if in general there has been full compensation, that they are pounds out of pocket.
Another worrying issue is that the fuel bill money has now been included in pensions, so it will be steadily eroded as time goes by. The Government have been adept at cutting by stealth. Since they came to power, the basic state pension has become worth less compared with average earnings. I have no doubt that the Government will try to claw back the compensation package as soon as they can.
Mr. Heald : Is not the hon. Gentleman's point about energy efficiency dealt with by the expansion of the home energy efficiency scheme, which already helps 200,000 poorer households and which in future will be doubled ? I
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