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Column 1118including different risks, will help. I am not sure about venture capital trusts, but no doubt a little help will be given there. It will cost £150 million only, which is not very much.
At the end of the day, the Budget will not create jobs and start the engine of the economy. It is only by starting the engine of the economy that we shall create jobs, more people will be able pay income tax and public expenditure will fall because fewer people will have to rely on the state through income support or family credit. I would have been delighted for the country if I could have said that the Budget would create jobs, but I am sorry to have to say that it will not. Indeed, we shall be again stuck with public spending restrictions. Any real increases in the funding of the national health service will be illusory. No doubt, in the support rate, at which I have not had time to look, there will be efficiency savings in the own resources that the health service already has, which will be taken into account in the figures. Any half per cent. increase will be swallowed up, of course, because the rate of increase in funding demanded by the NHS is always higher than the retail prices index, for well-known reasons. The medical index is always higher. The Chancellor took great pleasure in saying that overall savings will be £24 billion over the next three years. I do not understand that at all, because the country is crying out desperately for investment in our infrastructure. The railway service is falling to pieces. In my area, trains are regularly half an hour or 45 minutes late and today a train carrying some visitors of mine broke down at Crewe. Timetables are not integrated. There is no doubt whatever that the railway system is in desperate need of investment and new equipment. The sense of professionalism and morale, which the staff have always had, is under great strain.
The Government are not going to help that at all. They are more interested in privatising Railtrack, which I think that the Opposition will be able to thwart. When we form a Government, we shall be able to set maximum prices for access charges to Railtrack. If our Front-Bench spokesmen make it clear that we intend to do that and make it clear that we shall call in any planning applications for speculative development gain on city-centre railway car parks and not allow those gains to take place, I suspect that, with a little luck, we may save the nation from the disaster of Railtrack being sold to the private sector. Instead of infrastructure development and infrastructure renewal, however, we are to save a further £24 billion overall in the next three years.
The real Budget, of course, was the Budget that the Chancellor did not talk about--VAT on fuel being increased to 17.5 per cent., the married person's allowance being reduced, mortgage tax relief being reduced and the other taxes which have been introduced, such as that on insurance and travel by aeroplane. As my right hon. Friend the Member for Sedgefield (Mr. Blair) said, it is equivalent to an increase of 7p in the pound on income tax. That was what the Budget was about, but the Chancellor did not have to say a word about it because the increases had been announced previously, to take place in the 1995-96 financial year.
The Chancellor could have tackled tax abuses by increasing the number of tax inspectors and not sacking 4,000 Customs and Excise officials, which is the plan. A few years ago, each tax inspector collected about £77,000 in unpaid taxes and the figure is probably a lot higher
Column 1119now. Each tax inspector would be worth his or her weight three or four times over--not in discovering loopholes found by people who do not want to pay taxes, but simply in chasing unpaid taxes, which would be paid immediately the tax inspector called on the person who had not paid his or her taxes. Why did the Chancellor not mention that?
The Chancellor could have introduced a stamp duty on share transactions after 1996. That would have realised £1 billion. For dogmatic political reasons, however, the plan is still to get rid of stamp duty on share transactions, which will create the very type of economy that we had to suffer in the 1980s when Mrs. Thatcher was Prime Minister--short- termism. No one thought about what was going to happen tomorrow. If a company's analysts said, "Sell tomorrow", it did not matter if people were going to lose their jobs or what the company itself thought about what would happen when its pension fund or shares were sold. If the analyst said "Sell" in respect of the pension fund, that is what happened.
Our rip-roaring economy ended in disaster. We badly need a dose of long- termism and fiscal policies designed to make people think in the long term rather than the short term. Stamp duty on share transactions achieves that, of course, and it would keep £1 billion per annum, but for dogmatic reasons the Chancellor is prepared to do away with that.
I want to reflect on what has happened in 16 years of Conservative government. I shall not be able to mention all the statistics, but I will refer to a few. What happened to manufacturing output between 1979 and 1994?
Dr. Marek: I do not think that that is a proud record. Manufacturing output was just 9 per cent. higher in the second quarter of 1994 than it was in 1979. If the hon. Member for High Peak (Mr. Hendry) thinks that that is a record, it is a pretty poor one. In 16 years, we have been able to increase manufacturing output by only 9 per cent.
Mr. Hendry: I am sure that the hon. Gentleman noticed last week's announcement to the effect that manufacturing output is now at all-time record levels. Will he contrast the fact that manufacturing output has risen over the past 15 years with the fact that between 1974 and 1979 it actually declined?
Dr. Marek: Those points are well known. We had the oil crisis in 1975-76-- [Interruption.] It certainly was not very funny when we had that crisis. I was talking about percentages. Of course the level will be the highest ever, because we are getting richer as a country, but our relative rate of becoming richer as a country is rather poor.
Dr. Marek: I will give way in due course, after I have responded to the hon. Member for High Peak. As a member of the European Union, our relative increase in manufacturing output is rather poor. As I said, the increase has been 9 per cent. over 16 years. That is not a record; it is a rather poor and dismal performance by anyone's standards.
Column 1120militancy, which all but wrecked manufacturing industry in this country. This Government's trade union reforms have allowed manufacturing output to rise to an all-time high, as my hon. Friend the Member for High Peak (Mr. Hendry) rightly pointed out.
Dr. Marek: I shall not repeat the point. Manufacturing output may be at an all-time high, but that has nothing to do with the Conservative party. It has to do with the general prosperity in western Europe, of which we have partaken to a much smaller extent than at least nine of the other 11 countries in the European Union. The hon. Member for Blackpool, South (Mr. Hawkins) is aware that the Benelux countries, France and Germany overtook us years ago in terms of standard of living. Italy overtook us in that respect a few years ago and Spain is going to overtake us. I suspect that it will not be long before Greece, Portugal and Ireland overtake us. Manufacturing output has increased by only 9 per cent. in 15 years, despite £123 billion of accumulated revenues from North sea oil. Has manufacturing output increased by only 9 per cent. because we have been paying for unemployment? The answer to that must be yes. Between 1974 and 1979, about 1 million people were claiming unemployment benefit. Since 1979, however, although the unemployment figure has gone up and down, it has never been below 1.5 million. The average has been about 2.5 million, and that is despite the 30 fiddles and changes to the statistics perpetrated by the Government.
The most telling point is revealed in the table of taxes as a percentage of gross domestic product. That table always appears in the Red Book and it is a nice big table this time. Between 1974 and 1979, the maximum tax as a percentage of GDP was 36 . By 1981-82, it had risen to 39 and it was never been below 36 until 1992-93. That was the effect of our catastrophic recession.
Labour is the party of low taxation-- [Hon. Members:-- "Oh."] If Conservative Members had been listening, they would realise that they cannot challenge my figures. The figures are probably in an annexe to chapter 4 of the Red Book. Before Conservative Members laugh, I respectfully urge them to examine the Red Book to see whether I am right. I believe that they will discover that my comments are pretty accurate.
United Kingdom manufacturing investment is still poor. It is about 80 per cent. of what it was in 1979. In addition, the Government have had getting on for £60 billion in privatisation receipts. A very interesting table of gross fixed capital formation gives the figures for 1979 through to 1992. For every year that the Government have been in office, in terms of gross fixed capital formation the United Kingdom has been below the Organisation for Economic Co-operation and Development average, below the average of the European states of the OECD and below the average of the European Union countries. That is telling. It is not just for one or two years: it is for every year from 1979 until the present day.
The Government have been unable to increase investment to get our country going, to charge the engine of the economy and bring unemployment down. That has not been possible; nor do I think that the Government wanted to do it, despite what the Chancellor said earlier.
The Chancellor said that lorry duty rates will be unchanged while vehicle excise duty on cars is to increase by £5. That is very disappointing. It is no use having taxes on dumping rubbish in holes in the ground and trying to
Column 1121be environmental while being anti- environmental elsewhere by increasing not the price of petrol, but vehicle excise duty. I am also against the proposals because, by and large, according to the Government's figures, cars cover their track costs by two and a half times. Some lorries, however, and especially some of the big articulated lorries, do not cover their track costs even on the Government's own figures, which do not include environmental costs. The Chancellor's proposals in that respect are very regressive. I accept that nothing can be done about it now that the Chancellor has made his announcement, but he cannot get away with being thought of as a green Chancellor or a Chancellor who worries about the environment. He has a long way to go and I suspect that he could probably take lessons from any Opposition Member in that regard. My next point concerns duty on alcohol and tobacco. The Chancellor very carefully said that he was going to increase tobacco duty by 3 per cent. plus inflation so as to discourage smoking, as we all wish--there can be no doubt about that. However, he then said that a great deal of smuggling and bootlegging occurs across the channel and that, for that reason, he would not increase the duty on beer, wine or spirits. The problem is that tobacco produces the real gain for the bootlegger and smuggler because the volume is so much less. I suspect that the Chancellor was trying to pull the wool over our eyes when he made his comment. I will give a simple example. The Treasury and Civil Service Select Committee is considering this difficult subject at the moment and I do not pretend to have the solution. However, the Government have a problem. A packet of hand-rolling tobacco costs £1.78 in Belgium and £7 in the United Kingdom. That is a huge price difference. As a result, bootlegging or smuggling accounts for about 20 to 25 per cent. of the hand rolling tobacco market in the United Kingdom.
The Government must do something to remedy that situation. Yet there is nothing about it in the Budget speech. We need more Customs officers; yet the Government plan to sack 4,000 of them. Where is the sense in that? The only solution is long-term harmonisation. I understand that we face problems in this area because the tobacco industries in some European Union member states are state owned and, unlike the United Kingdom Government, their Governments do not get their cut from tobacco taxation. Nevertheless, I hope that the Government will adopt my suggestion: harmonisation is the only solution.
When I was shadow spokesman in this area, I remember Ministers and Paymasters General saying, "Oh no, we don't believe in harmonisation; we want nothing to do with it". But the chickens have come home to roost: 25 per cent. of the hand-rolling tobacco industry is already in the hands of bootleggers, there is criminal activity in the north-east of England, and bootleg cigarettes and, to a smaller extent, alcohol are making inroads in Government revenue. The Government have a chance to confront this problem now and they must take that chance.
The Budget does nothing for the average working man or woman and very little for the average unemployed man and woman. I have conceded that it contains a few measures which will make it easier for the unemployed to
Column 1122assess whether they will be better off in employment, but that will not create jobs. The Budget will not do anything of substance for the British people; it is an opportunity missed. That should not surprise Opposition Members because, at the end of the day, the Conservative party has always been the party of the rich and the privileged who feed off the rest of the country.
Mr. Nick Hawkins (Blackpool, South): The hon. Member for Wrexham (Dr. Marek) exemplifies the old-fashioned failed politics of envy. Let us get back to the real issues of a strong Budget which will create jobs, cut unemployment and prioritise the expenditure of taxpayers' money on the national health service, the education system and law and order.
I was delighted with the Chancellor of the Exchequer's Budget, delivered this afternoon, and its stress on increasing resources for what the electors want: a strengthened health service, better resources for law and order and improved education facilities. I was particularly pleased that my right hon. and learned Friend drew attention to the underlying strength of the economy, which has allowed him to increase spending on those three priorities. The figures show that British exports have grown by 8 per cent. and investment has grown by 5 per cent., while consumer demand has grown by only 2 or 3 per cent. It is particularly important to note that underlying inflation has fallen to its lowest level for a generation and that that strength has ensured a continuing fall in the level of unemployment-- a decrease of 450,000 since December 1992. I have no doubt that our continuing economic strength over the next few years will mean that people will no longer need to look over their shoulders in fear of losing their jobs and that the feel-good factor will be restored to the economy.
As my right hon. and learned Friend the Chancellor said, we are the only country in western Europe in which unemployment has fallen in the past year. At the same time, according to the national employment survey, the number of people in employment has increased by 226,000. My right hon. and learned Friend is correct to ensure that the Budget strategy continues to concentrate on keeping down the rate of inflation. We all remember the terrible economic disasters perpetrated by the last Labour Government. It is no use Labour Members trying to rewrite history and blame the oil crisis of the mid-1970s for their manifold sins and wickednesses. Trade union militancy destroyed the British manufacturing industry and it was Mrs. Thatcher's trade union reforms of the 1980s which secured our present record levels of manufacturing output. We shall maintain those reforms, and we have won the battle of ideas to such an extent that the Labour party now says that it will not try to reverse them. The measures are crucial to the Chancellor's continuing sensible economic management system.
Mr. Clive Betts (Sheffield, Attercliffe): I thank the hon. Gentleman for giving way. In the face of that economic miracle, will he explain to the House why between 1948 and 1979-- a Labour Government were in power for half that time-- the British economy grew at a
Column 1123rate of 2.7 per cent., yet since 1979, the average growth rate has been 1.7 per cent., which is 1 per cent. lower than for the previous 30 years?
Mr. Hawkins: It is because previous Labour Governments were not quite as ridiculous in their economic mismanagement as the Labour Government of 1974 to 1979. The hon. Gentleman is the former leader of a city which, under his leadership, mismanaged its economy by wasting vast amounts of money on stupid ideas such as the world student games. One would think that the hon. Gentleman would have learned from his mistakes, but it appears that he has not. The Chancellor is right to continue a policy of eliminating Government borrowing entirely by the end of the decade. It is essential that we concentrate on that valid objective.
I was particularly pleased that my right hon. and learned Friend announced extra help for pensioners. As the Member of Parliament with the greatest number of pensioner constituents, I know that the people of Blackpool, South will welcome the fact that my right hon. and learned Friend has been able to increase help for pensioners over and above indexing for inflation.
Mr. Hawkins: No. I have given way previously and we must make some progress in the debate. As a result of the Budget, pensioners in my constituency will see not only an increase in their benefits but a substantial increase in cold weather payments as well as further increases over and above the likely inflation rate to be introduced in April 1995 and 1996. Everyone who receives an old-age pension will get that additional help, which I have no doubt will be widely welcomed.
Further steps will be taken to expand the private finance initiative in future years, especially in transport. This will benefit the British people enormously. Private financing of rail projects will feed the future development of our transport infrastructure.
If the hon. Member for Wrexham wants to see proof of the success of private investment in transport, he should look to the United States and the development of station premises such as Union station in Washington DC, where private sector funding has provided much better facilities for the travelling public. He could look at similar examples in other countries which have involved the private sector in their transport infrastructure. In only a few years' time, he will see precisely the benefits of that policy to this country. I sometimes wonder where Opposition Members think that investment in capital projects comes from. It comes from profits that are made by the private sector. It does not come from Government subsidy, which is an appalling waste of taxpayers' money and a mistake that Labour Governments have always made.
I welcome the Government's steps to move from direct to indirect taxation. The move from taxes of compulsion to taxes of choice is widely welcomed by British taxpayers. Before the last election, the Opposition proposed to increase taxes of compulsion in excess of anything that we have seen from the Government, so it ill behoves them to criticise the Government for reluctantly imposing taxes. The Government will return to their tax-cutting tradition in years to come. Labour Members
Column 1124have learnt nothing and forgotten nothing. They will continue to put forward ever-greater plans for taxes of compulsion that they will waste on subsidies. That is the lesson that the Labour party will not accept.
Ms Diane Abbott (Hackney, North and Stoke Newington): The hon. Gentleman supports indirect taxation, which, in relative terms, bears much more heavily on the incomes of the poor. That is why successive British Governments have resisted VAT on vital items such as food and children's clothing. Is the hon. Gentleman aware that, when he lauds indirect taxation, he lauds a system of taxation which, in relative terms, hits the poor hardest?
Mr. Hawkins: I do not accept the hon. Lady's specious figures. I am very much in favour, and I will remain in favour, of taxes of choice rather than taxes of compulsion. I repeat what I have said: Labour Members will never learn the difference between the downside of taxes of compulsion and Government subsidy as opposed to taxes of choice. That is the mistake of political philosophy that they always make.
I am particularly pleased that my right hon. and learned Friend has stressed the importance of spending not only on education but on training, especially for the young unemployed. I want an even more accelerated fall in the number of unemployed. I am concerned that, in the drive for greater efficiency, we should not allow
disproportionately greater unemployment in certain areas such as my constituency and the surrounding area in the north-west.
I inject a note of caution. My right hon. and learned Friend correctly drives for greater efficiency in the civil service. However, there are areas, one of which is my constituency, where the civil service is an important part of the local economy. That point must be borne in mind when considering measures such as those that my right hon. and learned Friend has announced.
My constituents welcome the fact that my right hon. and learned Friend has been able to announce increases in resources available for the single regeneration budget. It is right for me to mention that my constituency has a bid under the single regeneration budget scheme, which I will discuss with my right hon. and hon. Friends in the next week or two and which I hope will succeed.
I have mentioned my interest in the increase in education provision. It is welcome that, under the Conservative Government, the rate of young people going on to university has increased from one in eight to one in three. It is important to continue to expand resources for education.
I very much welcome the 3 per cent. increase in resources for the police in 1995-96. It will go down especially well with everyone that more police will be released for front-line duties and that chief constables will have greater freedom to decide the allocation of their resources.
I welcome many of the measures that my right hon. Friend has announced in relation to the various benefits that will be available to get people back into work, in
Column 1125particular the changes to family credit and the further measures which have followed the jobseeker's allowance. I take great pleasure in the further cut in national insurance contributions, which will help employers with small businesses.
Once again, I inject a slight note of caution in relation to my right hon. and learned Friend's concerns about the smuggling of tobacco and the different duties that apply in the United Kingdom and in continental European countries. I want those duty differentials brought down to zero. I want more measures to cut the smuggling of tobacco. It is a serious problem in my constituency, and large amounts of tobacco are being smuggled through Manchester airport. On behalf of my constituents, I recently had a meeting with my right hon. and hon. Friends in the Treasury about that matter.
Also, I wish to express some concern about the changes that my right hon. and learned Friend has announced in relation to gaming duty. The last attempt to set gaming duty rates was several years ago. Nevertheless, the responsible nature of many amusement arcade owners has been shown by their great contributions to charities in recent years. I hope that my right hon. and learned Friend will be able to take account of the legitimate side of that industry while clamping down hard on rogue operators in years to come.
I broadly welcome the Budget as a Budget for jobs and a Budget which rightly concentrates priorities on matters that are important to the British people, such as education, law and order, help for pensioners and the NHS. I support the Budget.
Ms Diane Abbott (Hackney, North and Stoke Newington): Calling the Budget a Budget for jobs is like calling a vampire a blood transfusion expert. I suppose that the public should be grateful that the governing party has taken time off from its continuing civil war even to produce a Budget. Conservative Members have accused Opposition Members of propagating the politics of envy. On the contrary, the Conservative party is a slave to the politics of envy. Far too many members of the Cabinet envy the Prime Minister's job. We have a lacklustre, stand-still Budget presented by a Chancellor who is saving his money for cynical pre-election tax cuts and saving his energies for positioning himself to succeed the Prime Minister. A Conservative Member said that ordinary people would not believe in the recovery unless there was an upturn in the housing market. That is absolutely true, especially in respect of London and the south-east, an area that I know well. However, the sad news is that an upturn in the housing market will not happen. I refer hon. Members to page 24 of the Red Book, the Government's own document, which states:
"Housing market turnover increased strongly in 1993 but has fallen back this year. House prices have moved erratically with no pronounced trend up or down. In October they were at much the same level as a year earlier."
The Government should leave to one side all the things that they have inflicted on the British people--people have suffered from the housing boom and the reckless financial deregulation of the late 1980s. If no one else, the people in London and the south-east who are burdened
Column 1126with mortgages that they can hardly repay, who have been the victims of repossession and who are stuck with negative equity, will never forgive the Government for their economic incompetence. Conservative Members are right; people will not believe in the recovery, particularly in London and the south-east, unless there is an upturn in the housing market. The Government's figures, and their own statement, make it clear that such an upturn will not happen. Of course, under the Conservative Government, the state of housing is a very sad story. For all their gimmicks and all their professed interest in homes and home ownership, the Government's record on building houses for the British people is deplorable. Since 1979, gross housing investment in England has fallen by 56 per cent. The victims of the Government's appalling record in the provision of private or public sector housing are ordinary people and the homeless.
The Budget will not turn matters round. The Red Book makes it clear that there will not be an upturn in the housing market. Home owners will be badly affected by cuts in mortgage interest tax relief. People looking for social housing or housing in the public sector will have their hopes dashed by the reduction in housing corporation capital provision.
Let me dwell for a minute on cuts in housing corporation finance. The Government, having savagely slashed local authorities' capacity to build social housing for rent, have made much of their commitment to the housing association sector. What they have done to that sector is particularly cruel. They have encouraged it to expand and encouraged new housing associations to develop, but many people in properties in those developments--particularly in London and the south-east--are dependent upon housing benefit. Cuts in the Housing Corporation budget have forced new associations to charge higher and higher rents, and they are less able to house the very people whom the housing association movement was meant to serve. The cuts in Housing Corporation capital provision are a tragedy for the housing association sector, and a betrayal of the hopes, which the Government encouraged, that that sector would provide social housing. Then, of course, there are the cuts in housing benefit. It comes ill from a Government who took away rent controls to complain about landlords exploiting tenants. It also comes ill from a Government who have used housing benefit as a means of allowing people access to housing now to turn round and cut the benefit. We have yet to hear the details of the cuts in the benefit, but I believe that the consequence will be many more homeless people who are unable to gain access to housing and many more people in housing misery. We also see in the Budget that the housing revenue account subsidy provision is to be reduced, and that local authority credit approvals for housing renovation are to be cut. What is the Budget saying on housing? It is saying that the housing market will remain flat and that people who have a mortgage will have their tax relief cut. It is saying that housing associations will be forced to charge even higher rents, and that they will be unable to build more property. It is saying that councils will be unable to renovate their huge stocks, some of which are in an appalling condition.
Column 1127The Budget is certainly not a Budget for jobs, and nor is it a Budget for housing. I represent one of the poorest areas in the country, and housing problems form 60 per cent. of my case load. Few things cause more misery and damage to family life--which the Government are supposed to be in favour of--than the misery of homelessness and poor housing. Far from doing anything about that, the Budget continues Government policies, which undermine people's access to decent housing, whether in the private sector, the housing association sector or the local authority sector.
A key feature of the Budget is that it is supposed to be a Budget for jobs. The Chancellor, with his normal bravura and bravado, listed a whole series of measures which we are supposed to believe are earth-shattering means of getting people back to work. The things which one must watch in this Budget, as in all, are the figures. We must look not at the grand descriptive phrases or at what the Budget is supposed to be about, but at what the Red Book says. It states that the Department of Employment's spending will go down. I want to know how, if the Budget represents a great leap forward in helping the unemployed back to work, the Department will help in that with less money.
What the Chancellor announced today is a whole series of gimmicks, many of which are not even new. They are old gimmicks which are proving to be not terribly effective. Family credit will be increased, payments of housing benefit are to be accelerated--how the Government are going to accelerate payments of housing benefit when it is local authorities who are responsible for administering it I do not know--and family credit will be paid to people without children. There is also community action, work trial, jobfinder's grant, Workwise, 1-2-1, jobmatch and Workstart--a positive alphabet soup of gimmicky measures.
The unemployed want not gimmicks but a Government who are genuinely committed to the return of full employment, which this Government are not. Even in their own terms, there is something deeply unpleasant about the Government seeking to put people back to work by forcing them--whether by changes in disability allowances or by the increasingly stringent benefit arrangements--back into the labour market to work for poverty wages. If there is a theme to the gimmicky ideas for getting people back to work it is that they are about subsidising poverty wages.
It is old fashioned, and Government Members will sneer, but I believe that if one does a decent week's work, one ought to be entitled to a living wage.
Ms Abbott: The hon. Gentleman perhaps does not know that it is a burden on the economy to keep people unemployed. The level of unemployment is almost entirely responsible for the growth in the public sector borrowing requirement. [Interruption.] Perhaps the hon. Gentleman will let me finish--I did not interrupt him. In the long run, it is better for individuals, for society and for the economy that people get a decent living wage from doing a week's work without having to be dependent on handouts and benefits. It is degrading for men and women who have worked for a full week still to have to
Column 1128look to the state for handouts. I believe that the Labour party's policy of a minimum wage--on which we fought the election and on which we shall sincerely fight and win the next election-- is not just a humane policy, but one that tends towards social cohesion. Why should women work in menial jobs, such as cleaning in the service industries or in supermarkets? [Interruption.] The House hears from the millionaire hon. Member for Welwyn and Hatfield (Mr. Evans). He does not care about people who are living on poverty wages--no doubt he made his money out of paying poverty wages. The Government talk about putting people back to work, but they are concerned only with coercing people to work for poverty wages. That policy will not in the long run build a strong economy and create a cohesive society.
Although we heard the long list of schemes, and although the Chancellor tried very much to boost and promote his little package of gimmicks, we must look at the Red Book and at what the panel of independent forecasters have said. The panel is forecasting not a drop in unemployment but that unemployment at the end of this year will be 2.5 million, and that there may possibly be a drop in 1995 of about 250,000.
It is easy to forget that the figure of 2.5 million is a gross underestimate of the total who are unemployed. Since 1979, the Government have changed 12 times the way of counting the unemployed, to make people disappear off the employment figures. So when the independent advisors say that they are looking to levels of unemployment of 2.5 million in the near future, that is an underestimate of the level of unemployment with which people are living.
The shadow of unemployment haunts every family in the land, as well it might. It costs Britain £9,000 to keep someone unemployed for a year, and it costs every family £1,000 a year to keep somebody on the dole. The gap between the highest and the lowest-paid workers is larger than at any time since 1886, and more people in work are reliant on means-tested benefits than ever before. The Government ought to be ashamed of those facts, but they seem to think that they are some sort of benefit.
Since 1979, the number of long-term unemployed has more than doubled. It is a bit late for the Chancellor and his cohorts in the Treasury team to weep about the long-term unemployed. They are the Administration who have doubled long-term unemployment in their period in office. Let us be clear that long-term unemployment has not doubled following a fit of absent- mindedness on the part of politicians. Mass unemployment was a deliberate economic weapon of the Government to keep wages low and, as it transpired, to curb the trade unions. No one is fooled when the Chancellor and his colleagues belatedly express concern about high unemployment.
This is not a Budget for jobs, and it is certainly not a Budget for housing. It is a standstill Budget introduced while the Government bide their time until the appropriate moment to introduce what they believe will be election-winning tax cuts in the run-up to an election.
Of course, what worries people, particularly at this time of year as winter approaches, is the rise in VAT on fuel. Conservative Members claim to prefer indirect taxation, which they call taxes of choice, to direct taxation. I ask Conservative Members what choice pensioners have about turning on their gas fire or central heating when it gets cold. The problem with VAT on fuel and the reason
Column 1129why it strikes the public as particularly unfair is that most people have absolutely no choice about expenditure on heating. The rise in VAT is wrong because indirect taxation bears more heavily on the income of the poor. It is wrong that the poor, the disabled and people on benefits should have to bear the fiscal burden of the Government's economic incompetence.
The Budget offers no hope to the jobless or to my constituents in Hackney. I believe that it will be dismissed by the public as merely a blip, when the important story is the on-going civil war in the Conservative party. Ministers on the Treasury Bench should be ashamed when they look around them and see the destruction and human tragedy that they have wrought with their divisive and ultimately ineffective economic policies.
Mr. Julian Brazier (Canterbury): I do not intend to follow the hon. Member for Hackney, North and Stoke Newington (Ms Abbott) down all the many byways that she explored, but I shall make one observation to her. During the past generation, unemployment has risen throughout Europe. Wherever there are left-wing socialist Governments within the European Union, unemployment is much higher than in Britain. In socialist Spain, for example, almost a quarter of the work force is out of work. We have had five Labour Governments in the history of Britain. Unemployment has risen in all five. Nothing that the hon. Lady had to say convinced me that if we ever had the misfortune to have a sixth Labour Government, the same would not happen again.
I intend to spend three or four minutes on the fiscal position before devoting the main part of my speech to monetary policy. This was an excellent Budget. The overwhelming requirement was for the Government to tackle the overweening level of Government borrowing. That is exactly what the Budget has done so much to achieve. Borrowing is an evil which crowds out private sector investment and leaves a burden for future generations. It is remarkable that the colossal fall in borrowing has been combined with several well-targeted measures directed at those genuinely seeking work, the more vulnerable members of the community and, above all, small businesses, in which most new jobs are generated.
In international terms, we are close to the bottom of the league of borrowing as a percentage of gross domestic product. Our total national debt represents only about six months' GDP. The Budget will go still further and move us, I hope before too long, from second place among the 20 countries listed in this morning's paper to the top.
We have been able to reduce Government borrowing, not because of fisticuffs behind the bike sheds between Treasury Ministers and spending Departments but because of a series of well-crafted policies. Many of us on the Conservative Benches were delighted to hear that the housing benefit scam, under which the landlord and the tenant can connive to take large sums of money from central Government, sometimes without the local authority even showing any concern, is to end.
It is right that we should crack down on mortgage benefit, although I hope that the Government will focus the policy firmly on people taking out new mortgages. Some people with existing mortgages who are in financial
Column 1130difficulties face distinct problems. The reduction in mortgage benefit is a good thing because it will discourage building societies and banks from lending to people at the margin who should not take on the commitment of a mortgage, with the taxpayer underwriting it. I also welcome, as I am sure all Conservative Members do, the greater involvement of private capital in capital projects, which again will help to ease the burden.
I have only one negative point to make on the fiscal side. It will not surprise my hon. Friends, but I feel bound to make it. Once again, we have seen a further squeeze on defence spending in the new third year of the programme. Even indexed against the retail prices index, which is not a realistic index for any form of Government spending, because wages and salaries follow living standards rather than the RPI, there has been another small 0.4 per cent. cut. We have much smaller armed forces now. We reduced them for a good reason, but we must provide them with the money to be adequately equipped and trained. Nevertheless, I commend my right hon. and learned Friend's Budget for achieving a remarkable balance between a massive and welcome cut in Government borrowing and a series of well- crafted policy changes.
That brings me to monetary policy. An interesting thing is happening in monetary policy at present. We have a clear divorce between the advice from the Bank of England which, even more strongly in its off-the-record briefings than in on-the-record material, is clearly in favour of another rise in interest rates and the clear advice of the independent panel of forecasters that we should hold steady for a while on interest rates.
I have an interest to declare once again. While other people have been rushing out to buy their lottery tickets, I have just doubled the bet that I have on the money market on interest rates. I firmly believe that the Government should hold interest rates for some time yet. Let me tell the House why.
Mr. Brazier: The question that the hon. Lady should ask is why I have just placed the bet. Only one serious economic danger faces us today. It is not a danger that we should underestimate. The danger is that we could underestimate how successful we have been in curbing inflation. First, if one compares this recovery with the three previous ones, the monetary profile is so different that it is difficult to exaggerate. Monetary growth in broad money as the last recovery developed was between 15 and 20 per cent. Monetary growth in broad money this year--calculated by annualising the past six months--is a mere 2.5 per cent. We have never before during this century had an economic recovery in which the banks have had serious difficulties lending their money.
Mr. Nicholas Winterton (Macclesfield): Does my hon. Friend accept that the one thing that manufacturing industry in Britain does not want is another rise in interest rates, which would deter any further investment? Although there has been a rise in investment, it is from
Column 1131a low base. We want more investment in manufacturing industry. That certainly will not be achieved if there is another rise in interest rates.
Mr. Brazier: My hon. Friend has just anticipated almost my next sentence. The second major difference between this recovery and the last one is where recovery comes from. My right hon. and learned Friend the Chancellor alluded to the important role of exports in this recovery. Another major difference is the fact that the output of investment goods has grown so much more quickly than the output of consumer goods. Indeed, in the last quarter it has grown at double the rate of growth of output of consumer goods. Investment is occurring now. There is some difficulty in sorting out the figures. There are various different ways of measuring investment, but it is clearly there. As my hon. Friend the Member for Macclesfield (Mr. Winterton) rightly said, if interest rates rise further, investment could be jeopardised.
The fourth big difference between the current recovery and the previous one, to which several hon. Members alluded, is in the housing market. The fuel of our last three inflationary booms has overwhelmingly been monetary growth driven by large quantities of inflation and tax-assisted borrowing, driving up house prices. Today, house prices are, at most, level in money terms; they may even be falling in money terms, and the level of transactions is definitely falling.
As I represent an east Kent constituency, I am especially conscious of the fact that there is an enormous overhang of empty property in north-west France. Not only are second home owners selling their leafy cottages in my part of the world and, I suspect, in other parts of England, to buy cottages for a third of the price in France--now advertised by estate agents in England--but a growing number of retired people, including two sets of friends of mine in the past 12 months, are taking the opportunity to move to France and realise a huge capital gain.
All those factors illustrate how dramatically different the monetary profile of the current recovery is from the previous one. If we allowed officials in the Bank of England to persuade us to fight this war in the way that it was fought the last three times and increased interest rates now against the current background, we could seriously damage a tremendously healthy export-led and investment-led recovery.
I shall quickly dispose of the three opposing arguments produced principally by the Bank of England "school of thought". The first is the rapid growth in narrow money. I do not go quite as far as Professor Tim Congdon in believing that that measure is always a waste of time; it has some value. However, there is an especially good reason for distrusting it now.
If there is a big transfer of employment, resulting in a much greater proportion of people being in low-paid part-time work, and large numbers of people enter the work force for the first time who are low paid, many of those people are paid in cash, not simply because of the black economy but because they do not have bank accounts. That is bound to mean that the small proportion of the overall broad money figure that represents notes and coins increases. It does not have a macro-economic inflationary knock- on effect, however.