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7.21 pm
Mr. Nicholas Winterton (Macclesfield): It is always a great pleasure--I mean that--to follow the hon. Member for Great Grimsby (Mr. Mitchell). The hon. Gentleman and I share a number of common campaigns, one of which he has highlighted today when talking about his support for manufacturing industry and for increased investment in it. I also share that campaigning spirit with the right hon. Member for Ashton-under-Lyne (Mr. Sheldon), who heads an important Committee of the House, the Public Accounts Committee. On many occasions in the House, I have heard him speak with knowledge and fervour about what the Government should do for manufacturing industry, which is perhaps the only source of non-inflationary sustainable economic growth.
The manufacturing industry is vital to a sound, stable economy. Over many years in this place, under--dare I say it--successive Governments, I have highlighted the importance of manufacturing. The benefits that manufacturing can bring to this country have not been properly appreciated by successive Governments.
Like the hon. Member for Great Grimsby, I welcome the fact that we came out of the exchange rate mechanism, which had slaughtered industry and enabled us not only modestly to devalue but to reduce interest rates, which were such a penal impost on investment, which is so essential to manufacturing industry. The hon. Member for Great Grimsby and I also share common ground on the subject of the Governor of the Bank of England; our views are identical. I have said it before and I will say it again: I would award Mr. Eddie George his P45. I agree with the hon. Member for Great Grimsby that the Governor has no understanding of manufacturing industry, of what motivates those in manufacturing industry and what motivates people to create wealth.
I am delighted that, earlier this year, my right hon. and learned Friend the Chancellor resisted the tremendous pressure brought to bear on him by the Governor of the Bank of England to increase interest rates. We all knew that, if interest rates had been increased, the impact on the economy would have been disastrous. I am delighted that my right hon. and learned Friend resisted that pressure; in hindsight, he was shown to be absolutely right and Mr. Eddie George was shown, yet again, to be absolutely wrong. I agree with the hon. Member for Great Grimsby, who stressed the importance to genuine wealth creation in this country of our industrial and commercial sector.
I did not have much sympathy with the contributions made by the Leader of the Opposition, the right hon. Member for Sedgefield (Mr. Blair), or the leader of the Liberal Democrats, the right hon. Member for Yeovil (Mr. Ashdown). The Leader of the Opposition appeared to criticise the Chancellor, not on what he said in his Budget speech but on matters that the Opposition consider to be their strengths. The Opposition did not say what they would do with the economy and I hope that, during the Budget debate, they will spell out to us and, through the House, to the people of this country precisely how Her Majesty's Opposition, the Labour party, would seek to manage the economy.
I understand from what I have heard since my right hon. and learned Friend the Chancellor, the Leader of the Opposition and the leader of the Liberal Democrats spoke that Her Majesty's Opposition will not vote against the 1p reduction in the basic rate of tax. I warmly welcome my right hon. and learned Friend the Chancellor's responsible decision not to cut the basic rate of tax by more than 1p. Many Conservative Members would like to have seen a much greater cut, but I believe that, if my right hon. and learned Friend had reduced the basic standard rate of tax by more than 1p in the pound, the policy would have been misunderstood. I warmly congratulate him on his prudent and responsible move--a move that will not be perceived as the Government seeking to bribe the electorate of this country with their own money. I warmly welcome that decision, which was perhaps not welcomed by Conservative Members as warmly as it should have been.
To continue with my right hon. and learned Friend's strategy, he was entirely right to increase dramatically the tax thresholds. We all know that, if thresholds are raised, the lower-paid benefit to a much greater extent than if the
basic rate of tax is reduced. My right hon. and learned Friend has increased the threshold--from the lower rate to the basic standard rate to the higher rate. That will be warmly received and I congratulate my right hon. and learned Friend on his policy.
Ultimately, the people of this country will judge my right hon. and learned Friend's Budget. Tomorrow we shall see what the economic pundits say in the columns of both the heavy and the tabloid press. We shall also hear what the City, the Confederation of British Industry, engineering employers and the smaller business community think of the Budget.
Dare I say to the hon. Member for Middlesbrough (Mr. Bell) that I see the Budget--I have not been prompted by anyone to say it--as the first stage of a package. The second stage will be seen this time next year. I am sure that the hon. Gentleman will accept that that is the strategy of the Budget. We have laid the foundations for the Budget of November 1996, and the benefits of today's Budget will arrive in people's pockets in April, May, June and July next year.
I accept that the benefits--which may be substantial-- in next year's Budget will not arrive in people's pockets until, possibly, the 1997 general election campaign; indeed, I believe that will happen. We may be in an interesting position then, however: if the sound, stable economy of November 1996 allows the Chancellor to announce some goodies--if this year's satisfactory economic position is improved further--the election may be contested on the basis of whether the official Opposition support those extra tax reductions.
Mr. Jon Owen Jones (Cardiff, Central):
Earlier, in an intervention, the hon. Gentleman commended the Chancellor for not attempting to bribe the electorate with their own money. Is he now saying that there is a better time at which to do that--this time next year?
Mr. Winterton:
No, I am saying that, by this time next year, it will be clear that we have a strong economy. In terms of economic activity and strength, we shall be at the top rather than the bottom of league tables. I do not merely quote Tory party sources; I quote the International Monetary Fund and the OECD. Many people now predict that the United Kingdom's economy will become stronger.
In his interesting speech, the Leader of the Opposition emphasised that only a pathetic 1 per cent. tax reduction had been made, as against the 7p increase that had taken place under a Conservative Government since the last general election. Is it not appropriate, however, for the country to return to its people some of the money that has been, and is being, taken from them, if it can afford to do so? I predict that--given the responsible, prudent, constructive and progressive Budget that has been announced today--we shall build on the strength of our economy.
We want low interest rates and low inflation. We have that, and I predict that, before Christmas, there will be a modest reduction in interest rates. That will give further confidence to industry and commerce; our exports will benefit, there will be more investment and we shall have a stronger economy. That will enable us next year to repay to the taxpayers some of the money that they currently entrust to the Government of the day.
I look forward to the future with confidence. If there is an aspect of the Budget that makes me a little sad and disappointed, it is the decision of the Chancellor and his advisers not to introduce a package to help the housing market. As many hon. Members know, I have championed the property-owning democracy for many years, and it is generally agreed that the housing market is in a very depressed state. We need to give it a kick-start--and we could do that in a way that I have suggested publicly in the House.
We could help first-time buyers by raising the MIRAS threshold from 15 per cent. to 25 per cent., and raising the threshold for tax relief eligibility from £30,000 to
£50,000. The arrangement could be limited to five or 10 years, but it would kick-start the housing market without creating the property inflation of the late 1980s that led to the severe inflation problems faced by the Government as a result of certain decisions made by Lord Lawson when he was Chancellor.
I am prepared reluctantly to accept the Treasury's judgment. I believe that the Chancellor is right in saying that the housing market will recover in any event, as long as we have a low inflation economy with low interest rates. If I may be party political for a moment, however, I must add that I do not expect that improvement to feed through in time to assist the Government in a general election in the spring of 1997.
I feel that this Conservative Government owe a great deal to those whom they encouraged to buy homes-- council houses, newly built houses and houses in the private sector. Home ownership has proved to be a successful policy, and has served the Conservative party well in many general elections; I only hope that the Chancellor's expressed belief that the housing market will recover is proved right. Sadly, I do not think that any such recovery will produce the confidence that will help the party to win the next general election.
My right hon. and learned Friend has felt the pulse of the nation. When I ask my constituents--and those in other constituencies that I visit, particularly in the north-west--about their main concerns, they cite the national health service, education and law and order. The order in which they mention those concerns may be reversed, but they represent people's priorities. The Government have allocated substantial additional resources to all three. An extra £878 million or so is being given to education, of which some £774 million will be channelled directly into local education authorities. I hope that the money will then be channelled into the classroom, so that children can benefit.
I was saddened by the attempt by the leader of the Liberal Democrats, the right hon. Member for Yeovil, to undermine that substantial additional tranche of education spending. I wonder what would appease him. What would he like us to do? Since 1979, the Government have dramatically increased the additional sums spent per pupil: spending has increased by some 50 per cent. in real terms.
Another subject close to my heart is the national health service. Opposition Members will doubtless accept that my commitment to the service is second to none in the House; it is shared by many, if not all, Opposition Members, and by a pretty good number of Conservative
Members. I am delighted that my right hon. and learned Friend the Chancellor has decided to increase NHS spending by £1.3 billion in the next financial year. That is necessary if people's expectations are to be met and if we are to be able to take advantage of the huge advances in medical technology and medical science; so we should do just that.
Again, on law and order, as we know, there will be additional money for 5,000 more police officers. What is more--here I have a vested interest in relation to my constituency--the Government will provide resources for 10,000 closed circuit television cameras. Macclesfield's application for closed circuit television cameras in its town centre failed in the current year. I hope that any new application will be much more sympathetically considered, bearing in mind that additional sums are being allocated, and that it will be successful.
Again, my credentials for believing that the Government must be involved in infrastructure expenditure and have a duty to provide communications, whether by rail, road or air, to ensure that we are as efficient as possible, are, I think, second to none. Obviously, I have long supported the initiative that money should be attracted into infrastructure from the private sector. I hope that the private finance initiative will come up with the resources that the Government have estimated and have put to the House in the Chancellor of the Exchequer's Budget statement.
If industry is to be successful, if we are to increase exports and if, for instance, we are to take advantage of the channel tunnel--I mean not just the south-east but the north-east, the north-west, the northern region, Scotland and Wales--clearly, we must have considerable investment not only in our rail infrastructure but in our road infrastructure. I am delighted to support the proposal, and I encourage banks and other investors to find out how far they can go to take advantage of the private finance initiative to assist this country to be as competitive as possible.
The Chancellor of the Exchequer has been prudent-- perhaps I am repeating some of my remarks. I am one of those Conservative Members who would have been upset and concerned if the basic rate tax reduction had been more than the 1p that he announced. It would have given the wrong signals. It might have resulted in an increase rather than a decrease in interest rates, and therefore it would have done a disservice to this country's long-term economy.
I hope, however, that the Paymaster General will take back to the Chancellor of the Exchequer my congratulations on his imagination, prudence and responsibility. I sat on this Bench deeply concerned that we might have sacrificed a golden opportunity to give the Government a chance to continue governing this country after the next election. I have no hesitation in supporting this Budget and the prudent resolutions that will result from it, especially in relation to the matter raised by my hon. Friend the Member for Saffron Walden (Sir A. Haselhurst): the position of the elderly and of people who may need to use either private nursing homes or private residential homes in their declining years. My right hon. and learned Friend's imaginative proposals to enable those people to receive tax relief on the savings and policies that they will take out to help pay for that cost are long overdue and will prove to be popular.
I have met many people who feel considerable resentment because they have worked hard, been prudent and saved during their working lives but, having saved, have been expected to pay the full and heavy cost of nursing home care or residential home care. Such facilities--again, I have crossed with my party on this-- were previously provided by the national health service free at the point of delivery in hospital geriatric wards. We can all say that that was not ideal and that people's quality of life there was not as we would have wished. That may be true, but I have come across some desperate cases where people who have saved £30,000, £40,000 or
£50,000 have gone through that money in two and a half years because of the heavy cost of certain nursing home fees, especially if they required an exceptional level of care, with fees up to £500, £550 or even £600 a week. It does not take a great mathematician to know that £500 does not go into £50,000 that many times.
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