House of Commons Hansard Debates for 6 Dec 1993

Ms Hilary Armstrong (Durham, North-West) : Opposition support for much of what the hon. Member for Macclesfield (Mr. Winterton) said was such that I did not hear my name called. I agreed especially with the early part of the hon. Gentleman's speech in which he declared that the Budget had no overall strategy for dealing with the long-term problems of the economy or for investing in the future of industry and the industrial base. Such a strategy is desperately needed.

The Budget continued to perpetrate the Government fraud on the British people. Before the election, the Government decried taxation and said that any increase would fundamentally undermine the economy, but every year since the election taxes have been unfairly increased. The Chancellor did nothing to remove VAT on fuel, a regressive and punitive tax on those who have little opportunity to increase their income. They will be heavily punished by the tax.

The Budget ensured that ordinary families, many of them struggling to maintain the standard of living they

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began to expect during the 1980s, will be the people who will pay more tax and get less. They will pay the price for the mistakes and the fraud of the Government. Many of them are already paying that price. The middle income earners will be badly hit. As my hon. Friend the Member for Glasgow, Central (Mr. Watson) said, a typical family's tax bill will rise by £10 a week next year and by £16 a week in 1995.

Newspapers have become more aware of precisely what the Budget said, and are also recognising that there has been a bigger tax hike in this year's Budget than we have ever had, certainly since the second world war. The future for ordinary middle-income families is looking bleaker than they were ever led to expect by the Government--much worse than the Government, and the party that they represent, predicted when they were trying to scaremonger about Labour's plans. More than 500,000 extra people will be drawn into taxation and income tax because of the freezing of allowances. More than 300,000 of those people will be women. It is a Budget which, once again, makes things much more difficult for many women. The Government have tried to target one-parent families--many headed by women--and the financial opportunities for them are being constrained by the Government's behaviour.

Mr. Hendry : What about the child-care initiative?

Ms Armstrong : I will come to the child-care initiative. There were no initiatives in the Budget to secure long-lasting recovery. It will not create the new jobs in north-west Durham that the people there are desperate for. It will not bring the new industries that we have been finding it so hard to secure. It contained no new incentives for investment and expansion for the firms in my constituency.

At the same time, the Budget has put a squeeze on public spending, which means cuts in many of the services that ordinary families and the vulnerable in our society depend upon. In particular, local government spending has been very savagely hit. That will mean that the expansion that we require in nursery education will not happen. I am sad that Tory Members are still trying to obtain pleasure out of the figures that were exceptionally well presented, I have to say, by the Chancellor.

When we look at those figures in the Red Book, we can recognise that the gloss is just that--gloss. Underneath the gloss lies a story that is much more difficult for people in areas such as mine to come to terms with. We desperately want nursery education, smaller classes in our primary schools and leisure facilities to help to promote the health and well-being of the population. It will be much more difficult to provide all of those.

The points made about local government reorganisation by the right hon. Member for Horsham (Sir P. Hordern) will be met with a wry smile in Durham. We must pay for an additional review because the Government did not like what the commissioners said the first time round. We have to pay not only for an initial review but for a second one because the commissioners did not come up with what the Government wanted.

Unemployment benefit is being slashed and, conveniently, approximately 240,000 people will be removed from the register. More than 600 people in my constituency have been unemployed for between six and 12 months. In October 1993, out of nearly 4,000 claimants in my

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constituency, more than 2,000 had been unemployed for more than six months, and nearly 1,500 had been unemployed for more than a year. Long-term unemployment is a reality in my constituency. It is not an area where a person can lose a job and quickly get another. Conservative Members should consider more carefully the social consequences, the family consequences and the community consequences of unemployment. Unemployment is breaking up families, breaking up communities and bringing enormous distress to those communities. It was an insult for the Chancellor to imply that that is because people are not looking for work ; that was something that many found too hard to bear.

On top of that, invalidity benefit is to be taxed. In areas such as mine, more people tend to claim invalidity benefit. That may be because of the increased numbers on unemployment benefit. It may be because the type of industrial work that many of them have done in the past has made them less able to work. That is a part of the Government's great insult. People who have worked and made commitments are having everything withdrawn from them, and they are being blamed for the economic mess that the Government have created.

I initially welcomed the announcement about the child-care allowance. I have argued for something like that and for the Government to introduce a national child-care strategy for a long time. Such a strategy would enable us to do our best for our youngest children and give women the opportunity to go back to work. I hope that the Chief Secretary will tell me that I am wrong, but my understanding is that the total amount available for family credit will not be raised. I have discussed this with the Library, and it seems that if people are drawing the full amount they will not be entitled to any extra for child care. Two thirds of families are on the lowest salaries and are entitled to the maximum family credit, and they will not gain a penny. Some 90 per cent. of single parents with one child, who are entitled to family credit, will not gain a penny from this initiative. It is a fraud.

Mr. Deputy Speaker (Mr. Geoffrey Lofthouse) : Order.

7.37 pm

Mr. Richard Ottaway (Croydon, South) : As someone who introduced two private Member's Bills, in 1986 and 1987, about the late payment of debt, I give a very warm welcome to the consultation that has been announced on the statutory right to interest.

I disagree with my right hon. Friend the Member for Horsham (Sir. P. Hordern). I believe that the March Budget was right to delay the impact of the tax increases to allow the economy time and room to recover. That is now clearly happening. It is also clear that, although we have a debt problem, it is not a debt crisis. Against that background, the Budget had to do two things : first, it had to prove that the deficit would be substantially reduced ; secondly, it had to support the economic upturn without causing inflation. The judgment of both of those issues has to be considered in global, national and local terms--in my case, in Croydon. Globally, it is clear that the markets have given the Budget the thumbs-up. The pound has strengthened since last Tuesday--up one cent against the dollar and three pfennigs against the deutschmark. That is because of the

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Chancellor's determination to control the deficit. The market looked at the overall picture and liked what it saw. It saw inflation coming down, output going up, unit costs coming down and productivity going up. It saw unemployment falling--and, having reached a verdict, it raised its stocks. In short, everything that ought to be going up is doing so, and everything that ought to be coming down is doing so.

Let us compare that with the picture in the rest of Europe. Spain has a 24 per cent. unemployment rate ; Belgium has had a general strike ; in France, every £100 ticket issued by Air France is subsidised by the taxpayer to the tune of £10.

Nationally, the situation looks a little different. This was a tough and pragmatic Budget, showing a sense of realism. Most important, it addressed the deficit ; however, it also contained welcome increases in health and education expenditure. Those increases can be achieved by means of reductions in expenditure on defence, local government and transport, all of which I believe can be justified.

A certain amount of pain is bound to ae. The local government reduction can be managed : we need only look at a good Conservative council like Croydon to see how reductions in grant can be absorbed. Croydon council is sub- contracting out no fewer than six departments, which will result in huge improvements in efficiency and much less dependence on central Government funding. As for transport, road costs are now falling dramatically ; given the current lower interest rates, I sincerely hope that the cuts will have little impact. The most interesting aspect of the Budget is the fact that the deficit is being reduced not through a widening of the VAT base--which many expected--but through greater control of spending. How is that done ? First, I belive that the unified Budget has given us a greater focus on the need to balance expenditure with taxation ; I think that this vindicates the decision to present such a Budget. Secondly, there are the accounting reforms to be imposed on Departments, which will adopt private acounting practices. I understand that they will follow the New Zealand model, which has resulted in better management of public finances and resources. That is a critical aspect of the Budget. It will work only if spending control is effective. Critics have said that huge tax rises will kill off the recovery. I think that that ignores two important points. Last week, Goldman Sachs commented that the tax rises would knock 1.5 per cent. off the growth in gross domestic product. But that is offset by the 0.5 per cent. cut in interest rates announced two weeks ago, and by cuts made over the past two years which have yet to work their way through the system. Those cuts have, in effect, produced a subsidy to industry of some £12 billion, which is bound to be of huge benefit to British industry as a whole. It cannot be disputed, however, that large tax rises are in the pipeline. If the recovery stumbles, the Chancellor should not hesitate to cut interest rates again.

Thirdly, what does Croydon man think of the Budget? The small business man will certainly have a smile on his face, as will the lone mother--or father, for that matter--who wants to return to work ; she, or he, will welcome the new child-care allowance. Croydon's success, however, really depends on the prosperity of London.

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I agree with my right hon. Friend the Member for Brent, North (Sir R. Boyson) : London must remain the commercial centre of the world. If it is to achieve that, four essential ingredients are necessary. The first of those ingredients was introduced back in the mists of time, in 1980 : it was the abolition of exchange-control regulations and the introduction of the free flow of capital--a measure opposed by the Labour party. Secondly, London must have the best

telecommunications in the world, which it now has--Britain's telecommunications companies now lead the world. The Government's privatisation of those companies was also opposed by Labour. Thirdly, my constituents want to be able to commute from Croydon to their work in London. Services from Croydon to London are much better than many people would give them credit for being : there are no fewer than 10 trains per hour from East Croydon to the centre of London. I also welcome the announcements about the infrastructure and the extension of the light railway ; slowly but surely, too, the Jubilee line is making progress.

None the less, I must utter a murmur of dissent. We need better trunk roads to south London. For instance, it is imperative that the Coulsdon bypass, which is planned to go through the middle of my constituency, remains part of the Department of Transport's road programme. Hon. Members who get off the plane at Gatwick will know exactly what I mean : the traffic goes straight up the M23 into my constituency and is then funnelled into a single lane, causing intense traffic congestion.

It is said that we must get more people off the roads and on to the trains, but that will never happen unless we can correct the price imbalance. In that context, I warmly welcome the motorway pricing measures announced in the Budget, and the consultation that is to take place. I also welcome Labour's support for that policy. London also needs the best leisure facilities in the world. Over the weekend, the news dribbled out that the two London orchestras which were under threat have now been saved. Indeed, a decision to shut them down would have been astonishing.

There is no doubt that there are hefty tax rises to come, but they are comfortably controlled. The two tests that I set have both been achieved. The deficit will soon show signs of coming under control, and this is not an inflationary Budget--how could it be, with some £12 billion coming out of the economy? The Chancellor has achieved both those aims, and I give him my full support.

7.46 pm

Mr. Dafydd Wigley (Caernarfon) : I should like to say a few nice things about the Chancellor's first Budget, but I find it rather difficult. I certainly agree that we need a new apprenticeship scheme, although I think that the provisions should go much further than has been suggested. I also welcome the proposal to offset the cost of child minding, and the moves to charge interest on the late payment of commercial debt--along with certain other provisions for small companies. I regret very much that the retirement age for women is moving up to 65 rather than men's retirement age moving down to 60 ; much-needed jobs could have been created. I also fear that the changes in sick pay may result in the moving of state

responsibilities to the private

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sector, and I greatly regret the erosion of student grants. Many low-income families have an understandable fear of loans, and will not accept a loan-based regime for university education.

My main worry, however, concerns the total lack of basic strategy in the Budget. I fear that taking £11 billion out of the economy will undermine any possible upturn. It was interesting to note that those points were picked up by the more serious newspapers over the weekend. An editorial in The Observer commented :

"behind Mr. Clarke's glib manner and slick presentation lies the most deflationary Budget in recent history. The Budget is a serious gamble with the current economic recovery Far from being designed to reduce unemployment, this Budget is likely to increase it". Another editorial, in The Sunday Times, observes :

"Next year alone more than £11 billion will be taken out of the economy in extra taxes and reduced public spending. That might not be enough to abort the recovery but it hardly helps promote vigorous growth after the longest recession since the 1930s The government's position would be more comfortable if the Treasury understood the nature of this recovery."

I believe that those comments underline the fear that the unemployment crisis which still faces so many of our communities will not be overcome.

The Government seem to have given up the fight against unemployment : the costs of unemployment built into the long-term expenditure programme seem to be on an even keel, which implies that the current unacceptable level will continue.

The Chancellor should have retained the present level of PSBR at least, if not slightly increased it to try to stimulate the economy. If we can sustain the low inflation rate that we have at present, with the current PSBR, it ought to be possible to live with it for a little longer. That situation should be facilitating capital expenditure in areas that include schools, universities and hospitals, yet the plans announced are to reduce capital expenditure from £29 billion to £20 billion by 1997. I would like to see capital expenditure programmes increased to encourage the construction industry, especially. It is ridiculous that we are willing to live with such levels of unemployment when those unemployed people could be used to build the capital assets that are greatly needed in so many parts of our communities.

I am concerned that there is not more money being invested in energy efficiency and conservation. I acknowledge that steps have been taken along that route, but a comprehensive programme is neeeded which will help all low-income households, pensioners, and disabled people to cut household bills, to reduce energy consumption, to protect the environment and to create jobs. That would have been a beneficial step involving an expenditure programme of between £1.5 billion and £2.5 billion.

Infrastructure work to the railway network in Wales is needed. The electrification of the north and south Wales line is needed as much as the announced expenditure on the west-coast line.

I am concerned at the effects of cuts on local government services. We know the effects of those cuts in England and I am worried that the same may happen in Wales. Page 118 of the Red Book shows that the level of public expenditure in Wales will remain static at £6.2 billion in real terms from 1994 to 1997. Given the demographic increases, which will lead to an increased demand for health services, I suspect that there will be an inevitable erosion of community care services. That is

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worrying. In addition, local government reorganisation will cost at least £150 million, which means that other services will suffer. People may ask where the money would come from to pay for what I would like to see happen. The level of expenditure on weapons of war in the post cold war era is unsustainable. Spending £23,000 million on armaments is well over the top. The United Kingdom spends more than 4 per cent. of GDP on defence, compared with 1.6 per cent. in Spain, 2 per cent. in Italy, and 2 per cent. in Canada. Of our European Union partners, only Greece spends more on armaments. Surely it is now time to look for cuts in that area.

As I represent a rural constituency, I have obvious foreboding about the effect of increases in the cost of petrol. Between now and the general election, I can envisage petrol at £3 a gallon, which would be devastating for rural areas, not only directly hitting people on low incomes who have no alternative transport, but pushing up other costs. The issue of urban traffic pollution should have been more comprehensively addressed by road taxation rather than hitting those who have no alternative, such as those in rural areas. At my constituency surgery this weekend, a pensioner told me that, living by herself, she spends between £15 to £20 a week on warming her house. VAT at 17.5 per cent. will result in an increase of between £2.60 and £3.50 in her fuel bills. She will receive £1 extra from the Exchequer, which means she is between £1.50 and £2.50 worse off. That extra cost will hit many disabled and elderly people hard and the Government will pay a price for that.

The changes to unemployment benefit are also worrying to me, especially as I represent an area that has a seasonal economy. Awarding unemployment benefit to seasonal workers recently was seen as a step forward, but some of those claimants will now lose their benefit. I suspect that we shall see the Government tinkering with the unemployment statistics to play down the level of unemployment if we are to define them not only as people who are out of work, but those who draw unemployment benefit.

As for the vicious ending of invalidity benefit and what that may mean, the citizens advice bureaux have drawn our attention to the many severely disabled people having their invalidity benefit withdrawn because they are classified as being capable of holding jobs such as being an artist's model. A person may be able to sit reasonably still in a chair to perform that function, but how many jobs are there in any community for artists' models? Defining a severely disabled person as employable on the basis of being an artist's model is an ominous portent of what we shall face with the new system. Disabled persons' organisations will need to fight that issue forcefully.

The non-indexation of taxation could be insidious over the years. It will draw people on low incomes into the tax net. A single person earning £66 a week may not pay tax this year but may have a wage increase of £2 a week and suddenly have to do so--perhaps only at a rate of 40p per week, but nevertheless that person would be drawn into the tax net and all its accompanying bureaucracy. The Government are stupid not to index the threshold levels for income tax and they should reconsider that.

The Budget is strategically misguided and is especially hard on vulnerable people--disabled people, pensioners, unemployed people, students, low income families and the rural poor. I remember an old trade union friend telling me

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once that what is morally right can never be politically wrong. I believe that the Budget is morally and socially wrong. It can never be politically right. It is cynical in the extreme and the Government will pay the price.

7.56 pm

Mrs. Cheryl Gillan (Chesham and Amersham) : I totally disagree with the closing remarks of the hon. Member for Caernarfon (Mr. Wigley). On the contrary, I congratulate my right hon. and learned Friend on a Budget that has restored confidence in the City, in world markets, and certainly among my constituents.

At the weekend, I took soundings of opinion in my constituency, and I am pleased to report that they feel that the Government are in charge of events, rather than events overtaking us. That is reflected in the reception that the Budget has received throughout the City and especially from the CBI, the Department of Trade and Industry and not least an organisation based in my constituency, the National House Building Council. The chief executive, Basil Bean, said : "We have been encouraged by this month's signs of recovery in the UK's private house-building industry, and by today's Budget which should sustain this recovery We were particularly pleased to see the Government's continued commitment to the same level of social housing production over the next few years."

The figures show that an average of 636 new homes were sold per day in November--a return to the levels of June and July. That is certainly a sign that the Budget has brought a great deal of confidence.

However, there are a few areas that do not perhaps grab the headlines, and certainly have not been mentioned frequently in the Chamber--especially the Export Credits Guarantee Department premium rates reduction. I was delighted that the President of the Board of Trade announced those reductions, because any cut in premiums is good news.

Banks and companies involved in exporting have been complaining for some time that ECGD premiums in a number of markets are much higher than those of a number of our competitors. Many United Kingdom exporters have felt that they have entered the bidding process with, effectively, one hand tied behind their back.

The announcement of the premium rate reduction clearly shows that the President of the Board of Trade has been listening, but there is still progress to be made in those markets. For a recent project in Mexico, for example, the French premium was quoted at 2.1 per cent., and on capital only, while the ECGD figure, even with a new lower premium, was 3.5 per cent. on both principal and interest. One of the keys to our economy's continued good growth is our ability to export more to a wide range of markets. The world markets, while increasing, are also being approached by our competitors in a more organised fashion. Only a couple of weeks ago, there was a successful Asia-Pacific Economic Co-operation Forum meeting--a precursor, I believe, to a more formal regional trading alliance among the Pacific rim countries. Even China and Taiwan managed to sublimate their continuing political differences to discuss matters of common interest.

We need to be well aware of the levels of co-operation that could emerge from this highly productive region, which we ignore at our peril. Even with the extra cover announced, there is still more to be done. I ask my right

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hon. Friend the President of the Board of Trade to monitor our rates constantly and to give the extra help that our exporting companies require.

I now turn to fuel, but not the fuel that has come to the forefront of our Budget debates. I refer to the North sea oil industry, and to the problems of competition and the possibility of wasteful expenditure resulting from changes in that region.

My hon. Friend the Financial Secretary said in Committee on 29 June :

"It is not the Government's aim to encourage wasteful duplication of infrastructure as opposed to fair competition. We embrace the objective of competition in an undistorted market".--[ Official Report, Standing Committee A, 29 June 1993 ; c. 633.]

I remind him of his words, and I should like him to focus on some continuing problems which require his attention despite the attempts to address the competition problems identified by the participants in CATS, the central area transmission system--the gas transportation system.

Concerns have been expressed to me about the unfair way in which the petroleum revenue tax changes distort the competitive position of other long-established companies operating in the North sea. There is also some concern that PRT, which was intended as a tax on oil and gas production, continues to attract profits from the transporting of oil and gas. The abolition of PRT for some but not all fields puts long-established North sea participants at a competitive disadvantage. Why should a long- established field be subject to PRT on its income from transporting oil and gas when a new field is not ?

That unfair competition could lead to wasteful and environmentally unfriendly expenditure on new pipeline systems that the North sea and this country do not need. The Government really should not pick and choose. If North sea tax changes have distorted the competitive position, they should be looked at as a whole and not selectively. Could we consider taking tariff income out of charge to PRT for new and old fields alike, or at the very least, could we reinstate the tariff receipts allowance on income from new fields ? To do nothing could put existing pipeline systems at a competitive disadvantage and could lead to wasteful expenditure on unnecessary pipeline systems. Our resources should be targeted at finding new oil and gas fields around our island and not at littering the sea bed with extra pipelines which we do not need. I hope that these matters can be discussed more widely, so that the fears expressed to me do not become a reality.

I welcome the proposal to simplify the taxation of the self-employed and to move to self-assessment. However, although it may be a simplification to change to a current-year basis for the self-employed, the change from the present position will be far from simple. I shall look at the Finance Bill carefully to see how that change will be achieved.

Are we right to change to self-assessment so rapidly, more or less at the same time as we are changing to a current-year basis? That warrants further consideration, especially from the perspective of the timing of the changes. I hope that my hon. Friend the Financial Secretary can give me assurances on this matter, which affects many of my constituents.

I speak now as a member of the Select Committee on Science and Technology. I express my concern about the

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support that we are giving, or rather not giving, to research and development, especially as it relates to industry. I know that many hon. Members on both sides are, like myself, concerned about the reductions in defence expenditure. I am especially concerned about the reductions in Department of Trade and Industry expenditure, because, if I have interpreted the figures in the Red Book correctly, the DTI appears to face a reduction of almost 60 per cent. between 1993-94 and 1996-97.

I agree wholeheartedly that we should support women with children through the new provisions on child care. I am absolutely delighted, as are many of my constituents, by the announcement of the help that we are giving to those least able to pay VAT on fuel. But surely we should be doing more to help our wealth-creating sector. Such help is not immediately obvious to me from the figures for the DTI. I look forward with great interest to a more detailed analysis of the DTI's programme from my right hon. Friend the President of the Board of Trade.

On behalf of my constituents, I say a big "thank you" to my right hon. and learned Friend the Chancellor and his Treasury team. I say that especially on behalf of the editors of my local newspapers, including the Examiner , the Advertiser and the Bucks Free Press . It makes a change for a Member of Parliament to advertise local newspapers in this place and not criticise them. I also say a "thank you" on behalf of Halstan's, a very small specialist printers in my constituency which still produces hand-written sheet music. All those organisations would have been badly affected if we had introduced VAT on publications. I ask my right hon. and learned Friend the Chancellor to remember, if he is thinking of introducing VAT on publications in his next Budget, that newspapers and small printers, such as Halstan's, will be in real trouble if he does. This Budget was a thoughtful one, and a difficult one to deliver. I believe most fundamentally, after the reaction in my constituency, that it has manifestly improved the Government's chances of winning the next general election. This was my right hon. and learned Friend's first Budget ; it was a first-class Budget.

8.5 pm

Mr. Bill Etherington (Sunderland, North) : In 1968, I listened very carefully to the Budget, because I was concerned that there was likely to be a rise in interest rates, and I was contemplating purchasing a house. I mention that so that Conservative Members realise that there are people who still remember what life was like before a Conservative Government. Having heard Conservative Members reciting commercial data and saying how satisfied the City and industry are, I am even more determined to ensure that I never forget those days.

I am concerned about the person in the street. My constituents, unlike those of the hon. Member for Chesham and Amersham (Mrs. Gillan), do not take a sanguine view of the Budget. That is understandable, because in my neck of the woods male unemployment stands at 20.4 per cent.

I want to register a protest about the misuse of words by the Chancellor. He no longer talks about unemployed people, but about job seekers, and we now have job seeker's benefit instead of unemployment benefit. The new expression has connotations of the workhouse mentality. In a sensible and civilised society, anyone who was seen to be seeking something that did not exist would normally be

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regarded as a fool. We now have job seekers who are seeking jobs that do not exist. In Sunderland, North, they have not existed for a long time. There is little in the Budget to lead us to believe that that position will change.

I was pleased by two points. I was very pleased to hear that the Chancellor intended to do something about tax evasion and tax avoidance ; I thought that that was admirable. I then pondered a little, and I realised that that objective was unattainable under this Government, because it would bring them into direct conflict with the business interests on which they rely. Tax evasion does not come only from odd individuals who do not have much money, and it does not come from social security scroungers. It normally comes from fairly large vested interests, as the record shows.

I remember Lord Healey as Labour Chancellor saying that he would tax the rich until the pips squeaked. He probably meant what he said, but unfortunately, after his term in office, the rich got richer and the poor got poorer--although not to the extent that has been the case since 1979.

We have also heard that we are going back to the apprenticeship scheme. I am pleased about that. Like many other people, I was an apprentice in the north-east, and, at that time, there were apprentice electricians, fitters, boilermakers, welders and shipwrights. Almost every trade was covered, because a tremendous amount of industry was thriving at the time when I served my apprenticeship. If the apprentice scheme is brought back now, all my constituents can look forward to is being apprentice job seekers. That is what would be brought back to the north-east.

The Chancellor has said four or five times that he is a great believer in indirect taxation. I am not, because I recognise it for what it is--a redistribution of wealth away from the poor to help the rich. It is no coincidence that, at a time when we have a massive public sector borrowing requirement debt, the estimated amount of tax which has been given back to the wealthy since 1979 by various pieces of legislation is now worth the equivalent of approximately £5 billion per annum. That would have gone a long way to help to get rid of the debt.

Another alarming thing is that the debt is not a slow thing which has accrued gently during the years. Three or four years ago, the nation was in profit. It is only in the past three years that the debt has escalated to its present level.

The Budget is likely to cause more unemployment, not less. Local authorities will be under greater financial pressure than they are now, and that will lead to unemployment. The Chancellor talks about efficiency in the public service industries. If those industries are to get no extra money and they are expected to carry out the same work and be more efficient, that can only mean one thing--more people unemployed, with those who are left having to do more work for the same money. That has been the history of the Government, and it is the way they operate.

The hon. Member for Chesham and Amersham said that she was pleased with the housing situation. Compared to what this nation showed itself to be capable of in the 1950s and 1960s--under both Labour and Conservative Administrations--the present housing programme looks poor indeed. There is the plight of the homeless and of those who are badly housed. The only answer that seems to be put forward is to bring back the private landlord system.

Mrs. Gillan : Will the hon. Gentleman give way?

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Mr. Etherington : I only have 10 minutes to speak, so I am not prepared to give way. That is not out of churlishness, but because there is a shortage of time. I find that 10 minutes goes by quickly. The hon. Lady mentioned research in this country. I attended a Committee meeting last week at which I elicited the fact that research in the United States and in Japan represents 3 per cent. of their GNP. In this country, research represents 2 per cent. of GNP. That is quite a difference, and it has come about because the nation has completely abdicated its responsibility. The Government have left everything to free market forces, and those forces are not working. We are not creating wealth in this country. Instead, we are recirculating money, and that is what the Budget is about. Until the Government have the courage and the political will to ensure that our citizens who do well in times of prosperity make a commensurate contribution in times of adversity, we will get no further on. It is an absolute insult that the Government are looking for scapegoats, be it the unemployed, single mothers or, worst of all, those who are drawing invalidity benefit.

It is all very fine for hon. Members who are earning £30,000 a year, and for Ministers who are on twice that, to be speaking out from on high and telling the poor how they should run their lives. The Government say that the poor are a burden on the state and they they cannot afford to service them properly.

I will now speak about motoring tax. There are many people in my constituency for whom the only way to get work is to travel up to 100 miles a day for civil engineering or building work. They need vehicles to enable them to carry out that work. I do not see them running many Jaguars or Porsches--the vehicles are usually fairly modest--but the increase in taxation on fuel will hit them particularly hard.

I will not be altogether ridiculous and say that the £5 increase in vehicle tax will make any difference. Every hon. Member will not notice the increase, but there are many out there who will, including people who live in villages where there is one bus per hour, and the only way in which they can get about is by the use of their own transport. If we had a better public transport system, that would not be the case.

I have heard a lot of complaints and worries expressed during the past year concerning the overseas aid budget. I am afraid that the budget has been cut in real terms. It is a bad state of affairs when a country which agrees in principle to pay 0.7 per cent. of its GNP then pays one third of that. That does not give much sense of pride as a Member.

I remember when this country used to be known as the workshop of the world. Under the present Administration, it is becoming the sweatshop of Europe. The Budget must be taken within that context. 8.16 pm

Mr. Nigel Forman (Carshalton and Wallington) : I wish that I had the time to take up many of the points made by the hon. Member for Sunderland, North (Mr. Etherington). I will content myself by commenting that the hon. Gentleman predicted in his speech that one effect of the Budget would be to reduce the prospects for his

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constituents who are seeking jobs and those who have been seeking them for a long time, in the case of the long-term unemployed. I believe that the hon. Gentleman is wrong about that, for some of the reasons which I mentioned in my intervention on the hon. Member for Bath (Mr. Foster) regarding the package for small businesses. I would gently point out to the hon. Gentleman that the shadow Chancellor, the hon. Member for Dunfermline, East (Mr. Brown), predicted at the time of the March Budget that unemployment would rise as a result. Unemployment has fallen very agreeably since then and it will continue to fall under the sensible macro-economic policies of my right hon. and learned Friend.

I welcome this responsible Budget, because the Chancellor set the public deficit reduction as his highest priority. He sought to achieve that, at least in the coming year, more by putting the emphasis on public expenditure restraint than on increased taxation. I recognise that increased taxation is in the pipeline--including a good deal of taxation brought in by the previous Chancellor--but the broad judgment of the Budget was right for two principal reasons. First, there is a continuing fragility in the economic recovery--however much that recovery is welcome--because of the fact that our main export markets are going deeper into recession, rather than coming out into recovery. Consumers in my area--southern London and the south-east generally--are still rather risk-averse and they are not inclined to borrow if they can avoid it. They are spending more time trying to restore their personal balance sheets. Secondly, there is a good deal of taxation in the pipeline from the Budget of my right hon. Friend the Member for Kingston upon Thames (Mr. Lamont) earlier this year. If one looks at those two Budgets together and logically one should, they represent a considerable and timely fiscal tightening. That has had many good effects, not the least of which has been to reassure the markets that the way will be left open for further interest rate cuts. We must also tackle what is almost as much a moral challenge as an economic one--the enormous public deficit. If that deficit had been left untouched or unaddressed, we would have passed on unacceptable burdens to future generations.

For all those reasons, I warmly commend the thrust of the Budget. In the brief time that is available to me, I wish to make two general points which look to the future and which concern my right hon. and learned Friend's approach to future Budgets. First, on public expenditure, I hope that my right hon. and learned Friend will try consistently to focus public spending on investment rather than on consumption. He should focus on programmes which will provide the necessary public services cost- effectively, rather than transfer payments, which so often merely recycles money from one part of the middle class to another or which acts simply as a state savings bank to deal with certain contingencies in a person's lifetime. If Opposition Members asked me which kind of public investment I would particularly advocate, I would unhesitatingly refer to investment in human capital in all its forms and in physical infrastructure. All public expenditure decisions really turn upon three questions. First, how much can the nation prudently afford

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in total at any one time? Secondly, what should be the priorities within that total? Thirdly, how can we ensure the greatest possible value for money? In relation to the last two criteria, it must be right to find extra money for further and higher education, as the Government are doing, and to back real quality improvements in our schools. It must also be right to find the money to invest heavily in the improvement of British Rail's track and signalling and of London's antiquated underground system.

In any civilised and modern society, there is, and always will be, a place for some transfer payments from the rich to the poor and from the invulnerable to the vulnerable. That is what the dreadful jargon word "targeting" should mean. But other financial transfers--for example, to deal with the unfortunate contingencies in our lives--should increasingly be seen as our own responsibility rather than that of the taxpayer whenever that is possible. For example, better-off people in full-time and secure jobs should contribute more completely and directly to the cost of rearing their own children, to the costs of elective health care at a time of their choice, and to the cost of supporting themselves in their old age, when they are likely to need more expensive forms of support.

Provision for such contingencies can be and is being made more cost- effectively even now, and I think with a degree of social justice, via private insurance arrangements, private pensions and specially tailored financial packages to help people who are asset-rich but income-poor to turn their assets into useful income schemes in their old age.

Lest I should be thought to be outlandish in what I say, I stress that all those developments can and should happen only gradually. But I believe that this is the direction in which the Chancellor and his colleagues should move in future Budgets and in future policy on both sides of the public accounts.

My other main point concerns tax policy and the interests of longer-term tax reform. Naturally, I welcome the small steps towards tax reform taken by my right hon. and learned Friend in the Budget--for example, broadening the tax base by pruning two of the most egregious tax reliefs in the shape of the married couple's allowance and mortgage interest tax relief and introducing two new taxes which, between them, will bring in an extra £1 billion. There is more to do in future years. I suggest that what is really needed is the future reshaping and rebalancing of our entire tax system to make it as simple, efficient and publicly acceptable as possible. That could best be done by following and developing the approach of my noble Friend Lord Lawson who in his corporation tax reforms of 1984 and his personal tax reforms of 1988 very successfully broadened the base of tax in those two areas and achieved the concomitant benefits of lower rates of tax and simpler structures.

I believe that the priorities of future Budgets should be to extend the coverage of VAT virtually to all forms of consumer expenditure instead of just over half, which is the present position, and, in the process, to introduce one lower introductory rate--perhaps 8 per cent.--on the real essentials and a new standard rate which could be lower than the present standard rate--perhaps 15 per cent. That is only an illustrative example, but such a package would bring in an estimated net benefit to the Exchequer of

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between £5 billion and £10 billion at current prices and would be worth while in financing desirable forms of public expenditure. Much more important, however, it would constitute a giant step towards more of an expenditure-based tax system, advocated years ago by Professor Meade. Such a change should be accompanied by lower rates of tax on income and a move towards minimal or even no tax upon savings and capital, which would be in the interests of investment. That would produce a better balanced and more buoyant tax system, which would be good for saving, good for investment, good for thrift and good for enterprise. Provided that it was supported by generous but carefully targeted transfer payments on an income-related basis, it could also be fairer and more efficient.

Such a system would not only bring with it the benefits of taxing income and capital more lightly and expenditure and property more heavily ; crucially, it would improve public motivation to work and save and make it easier for us to match our competitors in what is becoming a very competitive world market for investment--inward investment in particular. In the longer run, such a reform will become necessary--perhaps even unavoidable--if we are to safeguard our national revenue base and so enable ourselves to afford those forms of public expenditure that are desirable in a modern society. In a modern global economy--with freedom of capital movements, an information technology that is transparent and instantaneous and firms and individuals becoming increasingly mobile--taxation upon income and capital, both corporate and individual, is becoming increasingly voluntary, or at the option of taxpayers rather than tax collectors. There is growing competition between national jurisdictions to lure in foreign investment and high net worth individuals, and those arriving on our shores can in many cases just as easily leave again if they perceive that the national tax climate is turning unfavourable. The perfectly legitimate tax avoidance industry also needs to be taken into account.

In all those ways, my suggested reforms would produce a better-balanced tax structure. I commend them to my right hon. and learned Friend the Chancellor to be considered in any tax reforms in future.

8.26 pm

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