House of Commons Hansard Debates for 29 Nov 1994

Mr. Duncan: It was 27 per cent.

Mr. Riddick: Yes, as my hon. Friend said, inflation was 27 per cent. when the Labour party was last in office.

We must not forget that inflation went up to high levels in the early 1990s because of our involvement in the exchange rate mechanism and Lord Lawson's efforts to prove to the then Prime Minister that we should join the ERM. As a result of those efforts he lost control of monetary policy. The Labour party wanted us to join the ERM. At the time it was calling for interest rates to be lowered still further, which would have made the inflation problem even worse than it turned out to be.

Returning to today's economic position, interest rates are at competitive levels. As my right hon. and learned Friend the Chancellor said, investment in plant and machinery is increasing by about 5 per cent. British exporters are expanding in existing markets and winning new orders in new markets.

Earlier this year, I led an all-party delegation of Members of Parliament to India. Yesterday, I talked at a Sino-British trade fair in Harrogate. It is interesting that British companies are doing much more business in both those countries than they have done before. They are exporting more goods and services to India and China and to many other countries throughout the world. They are setting up companies in those two countries, in many cases joint venture companies. It is extremely good news that the recovery is export and investment led.

The most important point is that the fall in unemployment is the result of all those favourable economic indicators. Unemployment has fallen by 450,000 since the end of 1992. Last month, it fell by 330 in my constituency of Colne Valley--the biggest monthly fall in unemployment there for more than six years. The number of people who are unemployed in Colne Valley is now at its lowest level since June 1991. That is obviously extremely good news, but more needs to be done. I hope that the downward trend in unemployment in my constituency and in the country will continue.

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I welcome the specific measures in the Budget to help people who have been unemployed for a long time and the measures to help people on low pay. My right hon. and learned Friend the Chancellor has introduced measures that exempt employers from national insurance contributions for the first year and that cut the national insurance rate for employees earning less than £205 per week by 0.6 per cent. My right hon. and learned Friend rather lost me when he talked about the expansion of job schemes to help people back into work. He talked about job finder's grants, work trials, Workstart, Workwise and 1-2-1 schemes. I am sure that all those schemes will play a useful part in helping the long-term unemployed. I welcome the fact that the Government have shown their terrific commitment to getting people back to work. I also welcome the extra help that my right hon. and learned Friend announced today for small businesses. The venture capital trust scheme will be useful in attracting new investment into small firms.

Exporters will welcome the extra cover that the Government will provide through the export credits guarantee scheme and the fact that guarantee premiums will be 10 per cent. lower. The Government, however, can only do so much in terms of specific measures to stimulate enterprise and to help generate wealth. They need to create the right economic environment. We have that now, as we had in the mid-1980s. It was a tragedy that, because Lord Lawson played around with interest rates to prove his point about the exchange rate mechanism, we lost control of the money supply and suffered from everything that flowed from that.

The right economic environment is now in place. Monetary policy is firmly under control. Inflation is low. Companies in this country want, more than anything else, long-term stability. That is what they need to have the confidence to plan for the future. Those plans must not be knocked off course by sudden changes in Government policy. The Government must ensure that we have reasonable personal tax rates, so that people have incentives to work, and reasonable corporate tax rates, so that companies are encouraged to make profits. Where necessary, the Government must make supply-side changes, as they have done in the past. They reformed trade union law so that trade unions operated in a responsible way as opposed to the irresponsible way in which they operated in the 1960s and 1970s. The Government have privatised a number of firms, including British Airways, British Gas and British Telecom. Many of those companies have improved their performance as a result of being taken away from the control of politicians and bureaucrats, which I welcome. Deregulation is another matter on which the Government must act. We have made some strides on that front, but more must be done. Too much Brussels-inspired regulation is still being introduced and the Government must do all that they can to ensure that unnecessary regulation is resisted.

I suppose that the most important point is that the Government must allow companies to run their businesses without unnecessary impediment. The British people are entrepreneurial, innovative and hard working. We should let them get on with it. In the past two years, they have gone out and done so because the Government have

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created the right economic conditions. As a result, those companies have gained market share, won export orders, generated more wealth and created more jobs.

Government can be destructive. Policies that harm British businesses and that destroy jobs may be introduced. I fail to understand why the Labour party continues to be so wedded to the social chapter and to the minimum wage, particularly when it hears clear evidence of the results of the minimum wage in other countries. Unemployment rates for young people and unskilled people are much higher in France and Spain than in this country as a direct result of the minimum wage.

It is interesting to compare job-creation achievements in the United States of America with those in the European Community. In the past 20 years, about 30 million new jobs have been created in the USA as against 5 million new jobs in the European Community. Most of the new jobs in the EC were created in the public sector. The reason for the gap is that the American companies operate in a much freer market system and labour market than do British and European companies, which are shackled in unnecessary regulation and bureaucracy. The key point is that continually improving productivity is crucial to companies retaining competitiveness.

A recent manufacturing bulletin published by the Confederation of British Industry shows clearly how productivity in this country has improved in the past 15 years. A graph in the bulletin shows that, since 1979, the British worker's average output has increased quite markedly compared with that of the German worker. In 1979, the British worker's output was about half that of the German worker. Now, however, it stands at about 90 per cent. of that of the German worker. More needs to be done, but that is a significant improvement that I obviously welcome.

Britain is now an attractive country with which to do business and in which to invest. As we know, inward investment has played a large part in creating new jobs here in recent years. In its recent annual report, the Yorkshire and Humberside Development Association states that in 1993-94 38 overseas companies invested in the region, as a result of which nearly 6,000 jobs were created or safeguarded. Those companies would not have come to Britain if we had had all the regulation that the European Community wants us to impose on companies.

The British economy has made sound progress in the two years since we left the exchange rate mechanism. Further progress needs to be made so that we can get more people back to work and create more wealth so that our standard of living rises. The Budget has made an important contribution in that respect, and I am happy to give it a warm welcome.

7.50 pm

Mr. Clive Betts (Sheffield, Attercliffe): I shall deal with the three key issues in the Budget: the economic prospects for this country and the general economic situation; taxes; and public expenditure. They are the three issues on which the Chancellor also concentrated.

Listening to the Chancellor and to the Conservative Members who have spoken since the Budget announcement, one could believe that there was nothing wrong with the British economy, that we have nothing but success and that everything is going in the right direction. I wonder whether Conservative Members talk to the

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majority of their constituents who have to face the problems of everyday life in Britain in 1994. Conservatives Members must be the only people in the country who believe that everything is going well; most of my constituents believe that the country is going rapidly downhill while the Government simply sit and watch and take no effective action to solve the problems that they are experiencing. We have heard the Government praise themselves for how they have brought about economic recovery, a recovery from high inflation, from even higher unemployment and from a £46 billion public sector borrowing requirement. There is little mention of the fact that they created the problems in the first place. Indeed, having created problems of such dimensions, it is hardly a great achievement if they manage to make a modest improvement.

The Chancellor and Conservative Members give us a snapshot of the current situation, but we do not get a longer-term perspective on how the economy has been performing. Our economy went into recession sooner than that of our economic competitors in Europe; that recession was the deepest since the war; and Britain came out of recession first only because we went into recession first. It is, therefore, hardly surprising if, judging by some short-term and immediate indicators, we are currently seen to be performing better than some European countries. However, if one looks back over the past 15 years, a different picture emerges.

The Chancellor said that inflation was back to the level of the 1960s, but he did not say that unemployment was not back to the same level. It is hardly an economic miracle to get inflation down to 2.5 per cent. when unemployment still stands at around 2.5 million even on the Government's own figures, which they have adjusted so many times since 1979. Indeed, it would be a source of amazement if inflation had not come down, given the fact that the unemployed had paid the price for it.

What should surprise us is that while unemployment still stands at around 2.5 million the Government are already talking about the economy overheating. They are already admitting that there are bottlenecks in the economy and constraints of capacity, which mean that the recovery has to be slowed down to the point that interest rates are being increased. The reason is that productive capacity of the economy is now so small in relation to the number of people who want jobs that we cannot provide all the jobs that they require. I have visited firms in my constituency and I admit that they now say that things are better than they were a year ago. Yes, there are more orders, one or two firms are taking on more employees and certainly those in the export markets have seen improvements, but I cannot visit the firms that no longer exist. Britain has lost many firms and jobs but not because those firms were bad and could not produce the goods. Many were squeezed because they had taken the initiative and invested only to find that,

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because of the lack of real opportunity for venture capital in this country, the price of borrowing increased and they went out of business.

Mr. Day: Is the hon. Gentleman seriously suggesting that the phenomenon of unemployment and companies going under in the recession was peculiarly British?

Mr. Betts: I am saying that, in the 15 or 16 years that the Government have been in power, the failure of Britain's economic performance has been comparatively much greater than that of the developed economies in the European Union and elsewhere. I shall provide the hon. Gentleman with some figures if he will be patient for a moment.

One of our problems is our past failure to invest in our infrastructure and industry. Our failure to invest in our people has produced a shortage of capacity and a lack of skills, which is all too evident on the ground and shows in international comparisons.

Mrs. Lait: Will the hon. Gentleman comment on the fact that, in recent years, the north-east, Scotland and the north-west have suffered least from the recession, simply because of the investment in roads and industrial building already made under the Government's regional development policy?

Mr. Betts: That is incredible. It cannot be said that the north and Scotland did not suffer, but the reason why the south suffered more in the latest recession was that the recession hit the service sector hardest and that sector had developed to a greater extent in the south-east. That does not mean that constituencies such as mine and cities such as Sheffield have not suffered, too. We have lost manufacturing jobs in the past few years, but we also lost jobs in our service industries. The north suffered more in the recession of the early 1980s, but we were also hit by the recent recession, with the result that the capacity no longer exists for recovery. That is highlighted in the longer-term figures, although Conservative Members may want to dispute them.

The British economy grew by 2.7 per cent. in the 30 or so years between 1948 and 1979. The Labour party was in power for half that period. Since 1979, the economy has grown by 1.7 per cent., or 1 per cent. less. That is the reality of the economic miracle that Conservatives mention so often. They also talk about other economies having similar problems, but, on average, the economies of the Group of Seven countries grew by 2.4 per cent., or 0.7 per cent. more than the British economy. In other words, had the British economy grown at the same rate as those of our G7 competitors, we would have a 10 per cent. larger capacity than we currently have. Those figures highlight the failure of the past 15 years. They are not my figures; they are the official figures accepted by the Government.

It gets worse if we examine the current position. Let us not talk about the current 4 per cent. growth, which represents only a snapshot; let us talk about the fact that, in the five years from 1988-93, the British economy grew at a rate of 0.5 per cent. That is an abject failure by comparison with any of our overseas competitors. Investment as a percentage of GDP has fallen from 18 per cent. in 1979 to 15.5 per cent. today and investment in plant and machinery has fallen by 28 per cent. since 1990. They are the problems facing our economy, but the Budget does not contain one proposal to tackle them.

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The manufacturing capital stock of our country is 0.5 per cent. higher than it was in 1979--0.5 per cent. higher after 15 years of Tory Government. In France and the United States, the figure is 20 per cent. higher; in Japan, it is 65 per cent. higher. That is a great difference. How can we create decent jobs that pay decent wages with such a level of investment in our economy and such an economic performance?

Since 1979, we have lost 3 million jobs in manufacturing industry; one third of the jobs have gone. That is a higher percentage than is the case for our industrial competitors. Where are the Government's economic policies in the Budget to arrest that decline and do something to create the jobs that people want, certainly in my constituency? In reality, the jobs around are part-time jobs, often in the service industries, which pay far lower wages than the jobs we have lost in steel, engineering and coal. That means a lowering of living standards for many people. There are real problems for people which, again, the Budget did nothing to address.

The Government have talked about the 400,000 reduction in unemployment. In the same period, we have lost 400,000 jobs. There is a problem out there which has not been addressed. The 400,000 reduction in unemployment is not matched by an increase in jobs. There are real difficulties out there which, again, the Budget does nothing to address.

On the standards used by the world economic forum on

competitiveness, Britain came 18th out of 23 OECD countries. It is no wonder that our living standards are falling and it is no wonder that people do not feel better off when, having had average living standards above those in the European Union in 1979, we are now only above Spain, Ireland and Greece. For how much longer will we remain above those countries?

There is a theory prevalent among Conservative Members--the Governor of the Bank of England reflects it on occasions--that all we have to do is to get inflation down. It is believed that somehow, by some miraculous process, higher growth and more investment will follow. I do not subscribe to that view. I do not think that the German economic miracle, to which Conservative Members constantly refer, shows that either. It is more the case that if one has constant, long-term growth, improvements in real living standards and increases in real wages and profits, one takes inflationary pressures out of the economy. By sorting out investment and growth, one will then deal with inflation. Dealing with inflation may be admirable in itself. However, if, as the Government have proved to us, it is done at the price of the unemployed and if there are no mechanisms for working from low inflation to growth, because it is believed that it will happen of its own accord, we shall get nowhere in improving our long-term prospects.

There were tax increases today. The increase was £10 a week for the average family in April and it will be another £7 a week next April. That is the tax increase in the pipeline. As my right hon. Friend the Leader of the Opposition rightly said, for the majority of people out there, the Budget will be remembered as the Budget that acknowledged and nodded through the second instalment of the imposition of VAT on fuel, unless Conservative Members have the courage to vote next week for an amendment that will give them an opportunity, once again, to reject the second increase and to do something

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for the pensioners, the disabled and the poor in our society. Those people will have to pay far more of the cost than is the case for other sections of society.

Today, the Chancellor announced help for people with the VAT increases. That was little short of misleading. He added the promises of compensation for pensioners already given into today's figures. There is no new money for pensioners in the overall compensation figures; the Chancellor merely restated what had been said before. One of the only two new initiatives was the increase in cold weather payments, which only apply to some pensioners. The way in which they are administered leaves much to be desired and they are paid only if the weather is cold enough. They do not go to help with the general increase in fuel bills. The other new initiative, the home energy efficiency scheme to help people with their heating bills, amounted to £10 million out of a total tax take from VAT on fuel of £2.5 billion. That is little short of insulting to the people who will suffer the real damage from that VAT increase. There is no change there in Government policy, but there will be a real change next April in what ordinary families have to pay for their fuel. Damage will be done to their living standards.

The changes in mortgage tax relief next April, which had been announced previously, will hit living standards as well. I am in favour of the changes in mortgage tax relief. I would like that relief to be abolished and I do not believe that it does anything to improve housing conditions and living standards. However, I would have liked the money to have been used to deal with the real housing problems and not to have gone simply to fill the black hole that the Government have created through their problems with the public sector borrowing requirement.

The Government claim that they are all in favour of tax cuts and that the Conservative party is the party of tax cuts. Why do they not address the reality? In 1979, 34.3 per cent. of our gross domestic product went on tax; in 1995-96, the figure will be 37 per cent. Once again, a party that claims to be the party of tax-cutting has failed to deliver its promises. It has failed completely to address the real issues that have faced the country in the past few years. We can recognise the basic unfairness of the tax increases that the Government have introduced. The people who benefited from the tax reductions at the end of the 1980s were the richest sections of our community. The people who have felt the biggest impact of the tax increases, especially VAT on fuel, are the poorest sections of our community. There have been broken promises on VAT and broken promises on the Government's overall tax take. It is no wonder that when we talk to people outside the Chamber, we find that they have no confidence in the Government. They are still frightened for their jobs and for their homes, and they are frightened because of the tax increases they have had and the tax increases still to come. The Government's public spending record does not bear examination. The reality is that public spending is 44 per cent. of our GDP, which was exactly its level in the last year of the previous Labour Government. The difference, of course, is that social security spending has risen from 22 per cent. to 31 per cent. In return, investment in the public sector has fallen. The Government have transferred public sector investment in long-term benefits for this country into payments for the

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waste of unemployment. That is what has happened to public sector spending while the Government have been in power.

It is interesting, in view of his record of involvement with housing, that the Financial Secretary to the Treasury is now sitting on the Government Front Bench. He cannot be proud of a Government who have cut expenditure on housing in the public sector by 57 per cent. during their period of office. Social house building has fallen from 131,000 properties to 37,000, a cut of 72 per cent. The further reduction today in money for housing associations is a disgrace alongside the reduction in credit approvals for local authorities. I do not know who comes to the surgeries of Conservative Members. I know that the biggest number of people who come to my surgery-- other Labour Members have the same experience--are people who want housing and who cannot get a home. They include homeless families and young couples living with their parents and in-laws. The social tension that that causes is alarming. Conservative Members behave as if there were no problems there. They seem to believe that there would be enough houses if only we managed to get rid of vacant properties. Most vacant properties are in the private sector or are owned by Government Departments.

The cuts today are a disgrace, especially when set alongside the backlog of disrepair. The local authorities produced an excellent booklet last week in which they calculated a £50 billion backlog of disrepair, only £10 billion of which was in the local authority sector. The real disrepair is found in homes owned by the poor and the elderly, and in older housing. Even to deal with the mandatory grants currently lodged with local authorities would require £500 million extra spending each year for the next three years. That is the amount required to deal with the worst unfitness in the private sector, not the total backlog of disrepair. What do we have? We have more cuts in the credit approvals, which means even longer waits, even for the mandatory grants given according to the Government's own standards.

The Government's proposals on housing will seriously damage people in very real ways. Of course, the poverty trap needs attacking. Of course, the way in which housing benefits are withdrawn is wrong. At present, when people earn an extra pound, they lose 97p in council tax and housing benefit. The same applies to pensioners with a small occupational pension. That is a disincentive to work. However, the proposals today to leave people eligible for housing benefit for four weeks after they get a job does not address the fundamental problem. After those four weeks, many people will still lose because of the interaction of income tax increases and benefit loss. There is no proposal to date to deal with that. Instead, we have a further proposal to take money out of local authority rent accounts. In my view it is immoral to ask local authority tenants to pay for the benefits of other local authority tenants, when other benefits in our society, including benefits for private sector tenants, are paid for by all taxpayers. That is discrimination against one sector of the community, which is wrong. All that the Budget does is to worsen it. It is surely the hallmark of the Government that they create problems for the community, then blame the community for those problems and introduce penalties to

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punish the community for those problems. That is exactly the position in the private housing sector, which the Government deregulated and encouraged to create market rents. Those rents have now risen and, due to people being on income support or housing allowances, the Government have seen the cost of funding those benefits rise. The Government then say that the people who are to blame are either the local authority staff who are administering the Government's own scheme of support to housing, or the tenants who are going into properties with such high rents. Why do not they accept that what is to blame is their deregulation of the housing market, which created those rent increases in the first place? It has not produced more homes to rent. It has forced rents up and the Government are paying the price. Their solution, of course, is to make local authorities or the tenants pay the price, either by the tenants losing their homes or by local authorities paying the cost, which means cuts for other services under finance capping. That is the reality of what the Government are proposing.

Then, there are measures relating to income support for people with mortgages. Again, what an appalling position in which to put people. Did not the Government recognise that some people on income support who have a mortgage will simply not be in a position, if they get a job, to take out insurance? It is quite possible that they will be denied insurance or that insurance will be at such a high premium that they will not be able to pay it. The people who I am thinking of are those who get a new mortgage today, when they are in a job. They may lose their jobs and go on to income support. They may then be offered the possibility of a temporary job, which are the norm for many people today when re-entering the labour market. Who would provide insurance for someone with a temporary job to insure their mortgage payments? No insurance company would give someone with a temporary job that sort of facility. What will happen is that the individual will say, "I am not going to go back into work on a temporary basis if it means that the next time I become unemployed, after losing my temporary job, I have no insurance and the Government will not cover, through income support, my mortgage payments. I might as well remain unemployed so that my mortgage payments are being covered." That is a major disincentive to people going back to work and it is time that the Government addressed it and halted the stupid proposal that they have made today.

The issues of real concern in the Budget include the local authority settlement--a 0.9 per cent. increase. It is not an increase of 2.2 per cent. because that includes the community care grant. For local authorities, that means cuts of more than 1 per cent. on top of the cuts that they have suffered, or their communities have suffered, in past years. All of us can see the real problems today in every local authority. There are increases in class sizes. Class sizes are up to 35 students--up to 38 in my constituency. We can all see the inadequate funding of community care. We can all see people coming out of institutions--rightly in most cases--to find that there is inadequate support to enable them to live in the community safely from their point of view, as well as that of their neighbours. The under-funding is chronic in local authorities of all political complexions.

The Budget will not address those problems. It will squeeze local authority spending further and it will increase class sizes. Conservative Members should not

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talk of increasing the education budget, because if local authorities have not got the money, it will not go into schools. It is as simple as that. The Government know it and they should stop being dishonest with the people of this country in pretending that it will. Once again, local authorities are being used as scapegoats because it is easier to pass the problem on to someone else. Conservative Members should not lecture people about partnership initiatives. The Government can claim the credit for one or two initiatives, but local authorities invented partnership initiatives. That is where those initiatives began in the 1980s. Why have they stopped? They stopped because of part V of the Local Government and Housing Act 1989, which introduced so many restrictions on partnerships that it effectively killed them off. The Government are now having to bring in proposals to rectify the damage that they did to partnership initiatives through that legislation.

No doubt, next year, or perhaps the following year, the tax cuts will arrive as the bribe for the election to come. For every individual who will accept that those tax cuts, when they come, are the result of the Government's economic success, 10 people will see them for what they really are--a cheap election bribe, which the public have already paid for out of their own pockets. It will simply deepen the whole community's distrust in the Government.

On all the tests that the Government have set for themselves in improved economic competitiveness, there is not one figure over the past 15 years which justifies their claims. Claiming to be a party of taxation cuts, it has broken its promises since the previous election. Since 1979, taxes in this country have not been cut. They have been altered, they have been made more unfair, but they have not been cut. Conservative Members claim to belong to a party which cuts public expenditure. They have failed. They have cut investment and the real benefits to be gained from public expenditure. They simply transfer that expenditure on to the waste of subsidising the unemployment that they have created. They have failed to improve economic performance, they have failed to cut taxation, and they have failed to cut public spending. They have failed by their own tests and their own standards. The Government have failed the people of this country and it is time that they went.

8.15 pm

Mr. Stephen Day (Cheadle): Before I come to the main part of my speech, I must respond to some of the points made by the hon. Member for Sheffield, Attercliffe (Mr. Betts). He said an awful lot. His speech contained some very instructive comments if one listened carefully. The first half of his speech was a grave criticism of the Government for increasing taxation. He then went on to list a whole number of issues on which he thought that the Government should be spending more money. There lies a contradiction in the hon. Gentleman's thinking, which is at the heart of the Labour party's present difficulties. It is easy now, two years from an election, for Labour to hide behind that facade. Come the election, however, Labour Members will have to square that circle, and they will not be able to do it. Come the next election, it will be very different from what the hon. Gentleman seems to think will happen. If I were him, I would not count my chickens until they were hatched. I remember Labour politicians doing that before.

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We were also accused by the hon. Gentleman of being totally out of touch and of not speaking to our constituents. I certainly speak to my constituents as, I know, do the vast majority of my colleagues. I live right in the heart of my constituency, in the same sort of house as the vast majority of my constituents. I visit the local pub, I visit the local clubs, and I know the exact difficulties that people are facing. The question is how one deals with them.

This Budget is part of a long process of dealing with the problems felt by average people. I readily recognise that the Government, and therefore myself, are highly unpopular. But that does not mean that one should abandon the policies that one believes are right, just because one believes oneself to be unpopular. In politics, one should also have conviction, and it is my conviction that this is the right Budget for this country and this economy at the present time. I shall comment on a couple of the main provisions in the Budget which I know will bring great joy to small businesses, certainly in my constituency--the constituency which has small businesses to which we never talk. Not far from my constituency in Knutsford--outside the boundaries of Cheadle, but quite near--there is an organisation called the Forum of Private Business. A meeting was organised in the House last week, at which a large number of Conservative Members were present. We were briefed on the problems of small businesses, in relation especially to the question of insolvency and the way in which banks deal with small businesses in those circumstances. Indeed, I have met area management representatives of banks to plead with them to take a very different and more tolerant line towards many small businesses, especially in the depths of recession through which we have gone through and in which small businesses have suffered. I am delighted that the Government have taken on board the problems experienced by small businesses. The 28-day moratorium will help deal with the problems that we debated in the meeting upstairs with the Forum of Private Business. These small companies, which are basically sound trading organisations, may well be in difficulty on a short-term basis because a larger company has not paid a bill on time. I am pleased that the Government have announced something that will help those businesses enormously.

I am also pleased about the proposals to help people back into work. Getting back into work is another of the problems that my constituents--who I never talk to--raise with me at my surgeries. A constituent recently told me that he could not afford to take a job simply because he would lose his benefit and would have to work a month without receiving any money. It is an obvious disincentive if someone is willing to work, and wants to work, but that person must experience a month in which he cannot cover his costs because he has no income until the monthly cheque arrives. The Government have accepted that difficulty, and the proposals will definitely help my constituents to ease themselves out of dependency on benefits and into a job. I welcome that as a practical step forward in terms of defeating the scourge of long-term unemployment.

The nation has had to address the Budget deficit in general, and I applaud the Government for the way in which they have addressed it and the speed with which they have brought the projected Budget deficit down.

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Despite the pressure, political problems and unpopularity that that has created for the Government, we have still managed--the Opposition never give credit for this--to increase funding for the national health service. We have done that year after year. I seem to recall that the amount of new money announced for the NHS a few years ago actually exceeded the amount that the Opposition were demanding, but even then they accused the Government of underfunding the NHS. I take great pride in being able to say that I do not belong to a private scheme and rely totally on the NHS. I have been lucky enough to have good health and not to be a great burden on the NHS. However, many people are not so lucky as I am. Thank God, because of the success of the NHS many people are now alive who would not have been alive 10 years ago. Happily, people are walking around today who would not have been with us 10 years ago. They have had costly operations which have rightly been provided by the NHS.

The Government have never backed away from a commitment to increase NHS funding. No Labour Government ever matched the increase in NHS funding in real terms provided by this Government. I welcome the Government's continued commitment to the NHS by the further increase in funding. The hon. Member for Wrexham (Dr. Marek) said that he thought that the extra money would somehow be lost in efficiency savings, as though that was a crime. Why should we not have efficiency in the NHS? It is taxpayers' money that is being spent and they deserve to have it spent efficiently. So long as the money that is saved by removing inefficiency is directed to patient care, which is what has happened within the NHS under the stewardship of the present Government, we should welcome and applaud that. We should certainly not denigrate it, as the hon. Member for Wrexham did. The Leader of the Opposition rounded off his speech in his usual way by saying how he felt that he identified with the feelings of the people. According to him, the people feel that the Government are not exactly their best friend. He agreed with that, and it was easy for him to do so. He recounted a list of things that he believed that people wanted. He said that they wanted fair taxation and a fair national health service. He always says things like that, but he never tells us how he would deliver such things. That brings me back to the point that I made to the hon. Member for Attercliffe. At some time in the future, those points must be addressed.

I took particular offence when the Leader of the Opposition said that the Conservative Benches represented privilege while the Opposition Benches represented the people. As one who was educated at a state school and proud of it, I find it hard to take someone who has had the privileges and advantages of a private school--and good luck to him--making such comments about my party and me, and many others like me on the Conservative Benches, who did not have the advantages that the right hon. Gentleman has enjoyed in life. As a general election approaches, the people will not accept such bland statements as proving the real differences between the two parties. Such statements are, indeed, manifest nonsense.

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We have also heard criticism of the Government's approach during their 15 years in power. In a way, I am glad that Opposition Members raised that point because, as they were allowed to raise it, I believe that I can respond to it. One does not often have an opportunity to talk about the 15 years of Conservative rule, of which I happen to be very proud. It will take more than a soundbite from the Leader of the Opposition to convince me that this country is anything other than far better off than it was when we came to power.

There are many reasons for that. I do not believe that everything that the Government have done is correct. No party could get everything right. Parties comprise human beings, and human beings make mistakes. On occasions, I have accused the Government of making mistakes--

Mr. Wray: Are you saying that you are proud of what you have sold off? Are you proud of all that public ownership that you have sold off? Are you proud of the privatisation of the water industry in England? Are you proud--

Madam Deputy Speaker: Order. I should not have to repeat this more than once. I remind the hon. Gentleman again that he must address me and not direct his remarks directly to the hon. Member concerned.

Mr. Wray: Is the hon. Gentleman proud of all the people who lost their homes as a result of the high interest charges? The Government encouraged people to buy their homes when interest rates were at 7 per cent. and 8 per cent., but two years later people had to pay 16 per cent. and two years after that they lost all that they owned. Is the hon. Gentleman proud of that?

Mr. Day: The hon. Gentleman has referred to many things and I am very proud about the vast majority of what he listed. I will respond directly to his points.

With regard to the privatisation of the state industries, most of them have been a great success. No one can convince me otherwise. British Telecom is providing a service in competition with other companies. It has improved service to the consumer beyond recognition. British Steel used to employ many people, but unfortunately they were manufacturing steel which no one wanted and at the wrong price. Standing up, waxing lyrical and crying crocodile tears about people losing their jobs does not save those jobs or secure their future. What secured the future for the steel workers was creating a company in the private sector, which we are now proud to call British Steel, which sells steel around the world that people want and which provides real secure jobs. There may not be as many jobs as the hon. Member for Glasgow, Provan (Mr. Wray) and I would like. I would like to see more jobs in British Steel, but we shall not obtain such jobs by resorting to the old way of politicians--the last people in the world who should do so--deciding where money should be invested.

Mr. Betts: Will the hon. Gentleman give way?

Mr. Day: I will give way in a moment. British Leyland is a classic example of why politicians should never be allowed to decide which companies receive investment. State control of British Leyland proved a disaster. The cars became a joke, no one wanted to buy them and the company was riven by strikes and restrictive practices. If the hon. Member for Provan is asking the country to go

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back to that state of affairs, I hope that he will say so regularly on public platforms up and down the country. If anyone is out of touch with the real issues, it is the hon. Gentleman.

Mr. Betts: My hon. Friend the Member for Glasgow, Provan (Mr. Wray) referred to the privatisation of various utilities. There are certainly steel firms in the private sector. One in my constituency of Sheffield is extremely successful. But the company has a big problem with the privatised monopoly in the electricity industry, which last year effectively increased prices to stainless steel producers by 20 to 40 per cent. The regulator proved powerless to stop those increases. Is that not a problem that the Government have created, but which they are doing nothing to resolve?

Mr. Day: The hon. Gentleman has reminded me that I want to talk about water, which was mentioned specifically. The privatisation of the gas and electricity industries has produced real benefits for the consumer. Gas prices have fallen. I am not trying to mislead anyone: I accept that the imposition of value added tax has wiped out the reduction in prices to a considerable extent, but a price advantage to the consumer remains even after VAT is imposed to the full limit. Both industries are far more responsive to customers' needs now than when they were state owned.

The Government are looking to introduce more competition in the supply of gas. That competition is overdue and should have been sought when we first privatised the industry. I would believe Opposition Members when they criticised the Government about privatisations if they also made the commitment to reverse them if, God forbid, they ever came to power. Despite their rhetoric, however, they will not reverse those privatisations because they know deep down that the benefits of privatisation are indisputable. I recognise also that what I say is not accepted easily in the country--it is probably not recognised by many of my constituents, who would vociferously disagree with me--but I believe that what I say is right and it will take more than sniping from the Opposition to make me change my mind.

Water was mentioned specifically. The privatisation of water is unacceptable to many people because they believe that water is God-given and free. It is certainly God-given, but it was never free. Water must be supplied. Great benefits have accrued to the people of my constituency, and to Stockport borough in general, from the massive investment that has been made to replace lead pipes and to create a new sewerage system. The sewers in Stockport and south Manchester were collapsing because the public system had let the public down. We are now seeing long overdue investment. There is no point in Opposition Members grumbling about privatisation. When they were in power they did not provide the money to spend on those utilities. That is why the sewers in my constituency were crumbling. However, a private water company has invested money to provide the water service that we should have had years ago. That is the reality of the situation, whether the Opposition like it or not.

When hon. Members think about the Budget, they should consider how we have arrived at our present economic position, which the Opposition would love to inherit after a general election. But it will not be that easy. If Opposition Members came to power, they would find

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one of the best economic situations ever seen in this country. They know that that is true, but they will not get up and say so. As they will not say it, I have said it for them. It is what they think, but it is not what they say.

The Opposition cannot deny that this country's true economic situation is reflected by the magic figures of low inflation and greater inward investment. Whatever Opposition Members say, I do not believe that the British people will throw away those advantages at the next general election. If they were to elect the Labour party, its policies would destroy everything that has brought about our economic improvement.

The Labour party would immediately bring in a minimum wage and sign us up to the social chapter. It would immediately increase spending. When we look at the tax proposals in the Budget, I ask hon. Members to think--

Mr. Peter Ainsworth (Surrey, East): They would put up taxes.

Mr. Day: Exactly. I ask the whole country to think about where we would be if a Labour Government had been elected at the last election. In addressing the budget deficit, the Labour party would have increased taxes to the same extent as we have done. But they would have gone beyond that. The public would have been paying taxes to deal with the budget deficit, plus taxes to pay for all the spending promises that the Labour party made. Opposition Members talk about the Government's failure to deal with the budget deficit--that is nonsense in itself--but the idea that somehow the deficit would be smaller under a Labour Government is preposterous. That is at the heart of the difference between the Conservative and Labour parties. I have no doubt that this Budget is right for this year. If the Government were playing politics with the finances of the nation and introducing tax cuts just to win favour with the populace before an election, it would be much easier to sustain the argument politically if we had cut taxes this year. Then Opposition Members could not have said, "Oh, you are cutting them just before the election so that you can get votes". That would have been the easy option. If we had done that, Opposition Members might have been right to say that we were playing politics with tax policy and the Budget. But we have not done that and they are wrong. I commend the Budget to the House. 8.37 pm

Mr. Bill Etherington (Sunderland, North): One of the problems with a debate such as this is that one does not have time to reflect on the Chancellor of the Exchequer's Budget statement before one is required to speak about it. On that basis, my speech may be a knee-jerk reaction. It is also good to read other people's views and widen one's knowledge on the subject before speaking in a debate, but that is not always possible.

Like many others, I welcome the economic recovery which the Chancellor graphically spelt out--at perhaps inordinate length--this afternoon. However, I do not welcome what I perceive to be the effect of the economic recovery on society in general.

There have been two recessions since 1979 and, therefore, there have been two economic recoveries. Both of those recoveries led to increased unemployment and a widening of the wealth gap between the rich and the poor.

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We are told that unemployment is decreasing --although there seems to be a problem with the equation, because as unemployment comes down, jobs are disappearing. As my hon. Friend the Member for Sheffield, Attercliffe (Mr. Betts) has pointed out, that is a puzzle. Although one welcomes a decrease in unemployment, what is not welcome is the nature of many of the jobs being created. I am not one of those who say, "Jobs at any cost." Since the Government came to office, the difference between wages in the north-east and those in other parts of the country has caused us to drop from third out of eight to second-last out of eight in wage rates. I commend my hon. Friend the Member for Darlington (Mr. Milburn) for obtaining those figures. One problem is that if reasonable, decent jobs are replaced by part-time low-paid jobs, although in numerical terms it might appear that there has been a decrease in unemployment, the relevant area loses revenue. That has knock-on effects for the whole region. One thing that the Government cannot claim is that in this, or in any other Budget since 1979, they have done anything to eliminate regional disparities. There has been a total, absolute and dismal failure on that front, and nothing that I have heard today implies that that will change.

Much has been said today, as it has been for many weeks, about the problem of VAT on fuel. The matter relates mostly to pensioners and others on various forms of income support. I agree with my hon. Friends that the compensation on offer is inadequate. The Chancellor said that those people are not as badly off as they might have been because there have been price reductions in certain fuels or because prices have not gone up for four or five years. That was a poor argument, and unworthy of this place. Everyone has had that benefit, not just pensioners and others on income support.

Another group of people who receive scant mention in this Chamber are the relatively badly-off, who do not claim any benefits whatsoever and who are just above the poverty line. They will not receive relief from the increased VAT on fuel, and they represent many millions of people. Taking their families into account, they are a sizeable proportion of the population. They are being neglected. It is all very well the Chancellor pointing out what is being done for one section of the poor. He omitted to mention that nothing is being done for another section which is perhaps not quite as poor but is still very badly off.

On VAT in general, since 1979, the Government have systematically reduced direct taxation and systematically increased indirect or regressive taxation. Financial pundits call it regressive taxation because it redistributes wealth from the poor to the rich. That is the problem. I do not pretend to state present Labour party policy on the subject, but the country would have been better off and there would have been less inequality if income tax had been 7p in the pound more. The wealthy would then have made a more viable contribution to society. They obtain the most benefits from it, so it is only right that they should make the biggest contribution. Instead, we have had the reverse, which has led to many millions of people being made worse off. That problem promises to go on because there is nothing in the Budget to address it. There will be much of the same.

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We are told that everything is successful and that we shall continue to build on it. However, although I said that I welcomed the economic recovery, it was an economic recovery from a very low base. A 4 per cent. improvement sounds good, but 4 per cent. of what? It is certainly not as good as the relative figure for our European competitors. They started in a much healthier position than we did. I was rather surprised at the way in which the Chancellor jumped from subject to subject. We are talking about a £5 increase in vehicle excise duties, but not for commercial vehicles. That was also the case last year. I take exception to that. I have long held the view that commercial vehicles are already heavily subsidised in several ways. That is why operators have been able to corner the goods market, and that is also why rail transport has had such a poor time, not just since 1979 but since the mid-1950s. I should have liked the vehicle excise duty to have been done away with altogether. It is a form of service charge. Why not impose that duty on fuel? I am a great believer in the theory that those who use the roads the most should make the biggest contribution towards them. That can sometimes lead to some heart searching. I know people who live in rural areas, and the only way that they can travel to their work, which is not very well paid, is by way of an old banger--an old motor car--and an increase in duty will affect them. There will always be such anomalies.

It would be good if all taxation for transport were raised from fuel. Commercial operators who use great quantities of fuel, who use the roads 24 hours a day, seven days a week, would pay the proportion which they should pay for their use of the roads network. People will say that that will put up prices, but what about competition? The Government wax lyrical about competition, but, to be effective, competition must be fair. For almost half a century, our railway system has suffered from the disadvantage of having to fight a competitor which is being subsidised by motorists and taxpayers generally.

I trust that the Government--I hope that they are not in office long enough to make the decision--will consider the problem in the light of what was said in the recent report of the Royal Commission on pollution. Unless we do something, we shall end up with more environmental damage and more road crises. In the two and a half years since I was elected to Parliament, I have noticed that conditions from the north-east down to London have worsened dramatically.

The Chancellor's speech stresses doing everything for employers and relieving the burdens on them in every possible way, notwithstanding the fact that they are advantageously placed compared with employers in many of our European neighbours. Corporation tax is a good example of that. There was no mention of the people who need help--the deserving poor--whom the Government seem to have forgotten altogether. We hear about targeting benefits, but very little was said by the Chancellor about that group.

I give some guarded welcome to the proposed freeze on alcohol tax. I welcome what the Chancellor had to say about trying, in the next few years, to harmonise that tax with those of the European Union in general. That is fine, and no one would disagree that each country should compete on an even basis. I only hope that, in the few

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years that that is likely to take, we do not see a drastic reduction in our capacity. That is happening at the moment, and we are suffering from unfair competition.

I believe that the Chancellor of the Exchequer used the word "smuggling". It almost defies belief that the Government would allow people to take large vans over to France, fill them full of liquor and bring them back saying that it is for their own personal consumption. Presumably if they are caught again in five years, someone will ask questions. That situation seems to be rather ridiculous, and it is very much a case of bad legislation. We have seen much of that.

I am concerned about the proposals on tobacco tax. I do not think that there is any history of punitive taxation working. Most smokers will pay the extra tax, and I do not think that the proposals will do anything to cut consumption. That will result from education, public opinion and informing children of the disadvantages of smoking. I ask only one thing. I should like the extra revenue produced from that source to be used for the purposes that I have just mentioned, including educating people and preventing the advertising of tobacco. It is not a simple subject and it will require more than one initiative to bring about the change that I am sure the Chancellor is looking for.

As I have said, I believe that many of the Chancellor's proposals regarding help for employers will exacerbate the problems of part of the low-wage economy. Many proposals have been put forward encouraging employers to pay even less, and for many of them--particularly in my part of the country-- that is the last encouragement that they need. They are quite capable of doing that anyway. As I said, that encouragement has disparate effects in different parts of the country.

I noticed that, as always, the Chancellor was lauding the benefits of privatisation. I ask the Government to consider how, in the long run, we are to benefit from cutting public expenditure and putting all the services in private hands when, in the end, those services have to be paid for from taxpayers' money. My view is that privatisation will come home to haunt the Tory Government because, eventually, only two things can happen--it will either cost more for the same services, or the services will need to be reduced. We are already beginning to see that in the railways, and I fear that we shall see it in many other utilities as time goes on.

The Chancellor also mentioned spending a small amount of money on improving the standard of insulation in houses. I do not want to be churlish, but that was always going to be too little, too late. The finest way to reduce carbon and other emissions from heating houses is by high standards of insulation. We do not have those high standards, and for many years we have lagged behind other countries with not dissimilar climates. A much larger sum of money, and much more urgency, is required on a project that would at least provide much-needed employment.

Much has been said about the housing benefit constraints. I spoke on this issue--not at any great length--last week and, although I do not wish to go over the same ground, some things need to be repeated. The Government's policy of reducing housebuilding--particularly social housebuilding--led to the private sector growing. If that is coupled with the deregulation of

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