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9.12 pm
Mr. Jacques Arnold (Gravesham): When my right hon. and learned Friend the Chancellor sat down on Tuesday, we all heard a somewhat strangled cry of, "Is that all?" It came in jeering tones from the hon. Member for Bolsover (Mr. Skinner) and in anguished tones from the Press Gallery. The gentlemen of the press had already written their headlines and articles. Those headlines read, "Panic-stricken Tories wreck Government finances and shatter recovery". They went on to long articles about scorched earth and things of that sort, assuming that the Conservatives would throw in the sponge and give up on the Government.
That just proves that the gentlemen of the press do not understand the Conservative party. Not only do we intend to win, but we want to carry out our patriotic duty and, in so doing, we will regain the support of the public because they will respond with the respect that has led us to victory after victory at the polls.
The appropriate headline for the Budget is, "Boring but responsible". It is clearly tackling the deficit. It is continuing the tight control on inflation. It is tightening up the control on borrowing. Indeed, it is creating the conditions for the interest rate reductions that we want to see. I am frustrated that we have not yet seen them, and that, of course, is because we handed over the decision to the Governor of the Bank of England. I ask my right hon. and learned Friend the Chancellor to give Eddie George his marching orders and get those interest rates down, because they will accelerate growth and will cut unemployment. Indeed, in my constituency, unemployment is already down to the level of April 1991 and is continuing to drop steadily.
A drop in interest rates would also bring about a recovery in the property market. It would be good for business and for home owners, but not quite so for savers, and that was one of the more significant aspects of the Budget. It did not escape our notice that my right hon. and learned Friend created a 20 per cent. tax band on savings, which would offset the effect on savers of the reduction in interest rates that the economy, home owners and the public wish to see.
The Budget is good for education, good for health and good for the police. This afternoon, we heard that there was an extra 4 per cent. for schools in my constituency. But those very services sowed the seeds of our current conditions, because we have just been through the worst recession since the 1930s, and any financially responsible Government would have responded to a drop in revenue by cutting their expenditure. Yet the Conservative Government continued to increase expenditure on health to the extent that today it is up 70 per cent. in real terms on the figure left behind by the previous Labour Government. We continued the increase in spending on education, which is now up by 50 per cent. We protected the pensioners.
Contrast that with the Labour Government who preceded us. Let us remember the Labour Government in the recession of 1976, when they slashed the hospital building programme. They cut the pay of nurses. They cut the pensioners' Christmas bonus. But even that did not work and they carried the begging bowl of this proud country to the International Monetary Fund to queue up behind the sub-Saharan countries for a loan. We did not have to do that. Why? Because the Conservative Government have a reputation for sound finance. The
trouble is that one does not keep that reputation if one continues to borrow heavily. That is precisely why, during the past three very difficult years, we had to borrow and, above all, taxes had to be increased.
Mr. Harvey:
Will the hon. Gentleman give way?
Mr. Arnold:
No I will not, because I am short of time and the hon. Gentleman has just walked in.
I shall press on by saying that we have now got through the difficult period. We are now in the great period of getting off the backs of the taxpayers. It is interesting to note where we have done that. We have got off the backs of the less well-off. We have the 1 per cent. cut in the basic rate. The personal allowance is up by £240 and we have the extension of the 20 per cent. band, all of which will help the less well-off into jobs and help them and their families to greater prosperity.
I would argue that that it is not enough. But where are we to make the cuts? We have seen thoughtful proposals from my right hon. Friend the Member for Wokingham (Mr. Redwood), with his proposals for £5 billion of cuts, which should be handed back to the public.
The Budget is intellectually honest, but what is not, however, is the approach of the Labour party, particularly the speech of the hon. Member for Dunfermline, East (Mr. Brown) the shadow Chancellor. He was jeering over tax. Would he cut tax more? If so, what would he cut to finance it? He would not answer. His comments about the poor taxpayer of Britain are just like the devil worried about sin. What a nerve. In the debate on Wednesday, he was asked question after question. He did not answer. I asked him how he would finance the cost of his 10 per cent. rate. No answer. My hon. Friend the Member for Blackpool, South (Mr. Hawkins) asked him what would be the impact of the social chapter and a statutory minimum wage. No answer. My hon. Friend the Member for Beaconsfield (Mr. Smith) then went on to ask him about the 20 per cent. band extension at a cost of £800 million and asked whether the hon. Gentleman would support it. He did not answer then, any more than we will get an answer yes or no from the official Opposition to the Budget.
My hon. Friend the Member for Wyre Forest (Mr. Coombs) then asked the shadow Chancellor what target he had for inflation, referring to the 27 per cent. inflation that the last Labour Government achieved. Again, no answer. This is the person who would run our economy in 18 months' time, if one believed him and some of the pundits.
One of the most interesting parts of the Budget was the private finance initiative. It is thoroughly new and a great departure. Let us remember that this reforming Government progressively introduced local financial management to schools, which progressed to grant-maintained schools, which are very effective in delivering the goods. In the national health service, the Government introduced fundholding practices and NHS trusts, which again are delivering the goods. I find it a matter for great optimism that we Conservatives are still coming up with the new projects.
On the private finance initiative, I will cite the example of the NHS in my constituency. We have been waiting year after year for our brand new general hospital at Darenth park at a cost of £100 million. We have not got
it. Why? Because the Chancellor of the Exchequer cannot sign a cheque for £100 million. The Treasury keeps saying, "How about sticking the hospital on a ropey old site?" We combine the ropey old facilities with the phased development of our hospital. Now that the project has been put out to the PFI, what does the private sector opt to do? It says, "We would build it all in one go, on the better site at Darenth park and we can do it on the following financial conditions." The PFI is a major departure and will get the massive new capital projects that we need in the NHS and elsewhere.
Mr. Mike O'Brien (North Warwickshire):
This has been a good debate--there have been some interesting contributions from both sides of the House--and I welcome the opportunity in this, my first speech from the Opposition Front Bench, to welcome it.
I should declare an interest. I have been the parliamentary adviser to the Police Federation for the past two years. I shall cease to have that role at the end of the month, but it is right that hon. Members should be aware of it.
Perhaps I might begin on a positive note. I have always taken the view that it is not in the interests of an Opposition to criticise and oppose. We should also support and encourage a Government, where that is possible. Mere party political posturing does nothing to enhance the public's view of politicians. I want to make it clear that the Labour party welcomes aspects of this Budget.
The raising of the benefit threshold for pensioners in long-term care is a positive move. The previous levels were low and the increases from £3,000 to £8,000 and £8,000 to £16,000 respectively will spare some pensioners a bill for long-term care, especially since the Government had frozen the thresholds since 1988, thereby making the problem worse.
Nevertheless, £16,000 will not prevent the sale of the matrimonial home. Long-term care is a serious issue with enormous implications, as the hon. Members for Bury St. Edmunds (Mr. Spring) and for Croydon, North-East (Mr. Congdon) said. It is difficult for any Chancellor easily to resolve that issue, but the Government have taken a step forward. I suspect that there will be many further debates on the issue before we get it entirely right.
The Labour party also welcomes the proposals to help and clarify the position on share ownership. We too believe that employees should be encouraged to take a share in their firm. We shall consider with care the proposals that the Chancellor details in the Finance Bill and, if we can, we shall be supportive.
The call for a simpler and more coherent tax regime is also welcome. Indeed, it is something for which Labour has called for a long time. I seem to remember that, in the Standing Committee debate on the Finance Bill last year, our votes, with those of the hon. Member for Beaconsfield (Mr. Smith), pushed through a resolution. Although we must ensure that the detail of the legislation is simplified, we must also ensure that we do not create new loopholes. Nevertheless, the wording of tax law tends
to be incoherent to the ordinary person at times and it is good to see a real attempt being made to come to grips with the issue.
I was amused by the confession of the right hon. Member for Northavon (Sir J. Cope) that he contributed so much towards the great detail of our tax laws, although I am not sure how advisable it was to confess it to the many small business men in his constituency who no doubt have had great trouble working out their tax bill. I bet that he will get the accountants' vote.
My Scottish colleagues have campaigned long and hard to bring the duty on whisky down, and the 4 per cent. cut in whisky duty will be helpful. The issues of cross-border sales--bootlegging--are complex, as the Treasury and Civil Service Select Committee agreed in its recent report. What the Chancellor has done is not a solution to the problem but merely an interim measure and the Treasury must now explore all the options. I hope that the Minister will be able to set out how the Government seek to achieve some of the aims and conclusions identified in the Select Committee's report.
The right hon. Member for Worthing (Sir T. Higgins), as befitted a former and much respected Chairman of the Treasury and Civil Service Select Committee, gave a balanced speech. He supported the Budget but conceded that it had not been well received, especially in the press, and hoped that it would be better appreciated in the months to come. He may live in hope--but it will be in vain, I suspect. The right hon. Gentleman was right to draw attention to the slowing of the economy and to say that unemployment had not fallen as much as the Government had hoped. I shall return to the subject of unemployment later.
My hon. Friend the Member for Sherwood (Mr. Tipping) made a valuable contribution. He expressed his concerns about some spending and questioned several spending programmes, especially the countryside stewardship programme and the arable areas scheme for set-aside. He raised the disturbing issue of the Government's refusal to answer questions about the number of farmers who receive more than £1 million, and about what was the highest sum received. I hope that the Economic Secretary to the Treasury will be able to reassure my hon. Friend on those subjects. If she cannot do so today, perhaps after she has had the opportunity to read his speech she will make inquiries about the matters that he raised and deal with them in correspondence.
My hon. Friend also made a strong plea for help in his constituency to deal with transport issues. I was pleased to see that a Minister from the Department of Transport took the trouble to listen to him, so I hope that the Secretary of State for Transport will do something about those problems.
It was interesting that the hon. Member for Beverley (Mr. Cran) described the Confederation of British Industry's response to the Budget as tepid and somewhat dismissive. That is not what the President of the Board of Trade said earlier. I wonder whether the Government are divided not only on Europe, but on the size of the tax cut and on their attitude to the CBI.
My hon. Friend the Member for Barnsley, West and Penistone (Mr. Clapham), in a strong speech, described the low wages that were on offer in his constituency as a
result of the abolition of the wages councils. He said that the Government had promised much in the way of extra jobs, but that the jobs had not come.
The hon. Member for North Devon (Mr. Harvey) raised a number of issues. He called the Budget a missed opportunity, said that unemployment in the construction industry was especially high, and called for something to be done about that. He also pointed out that the increases in council tax would probably be three times the rate of inflation.
The hon. Member for Bristol, North-West (Mr. Stern) made a learned contribution, and as he is an accountant he used his considerable knowledge of balance sheets. He warned that the Government had champagne tastes but a beer income and called for more stringent cuts than those delivered in the Budget. In defence of the Chancellor, let me say that I fear that the hon. Member for Bristol, North-West sounded like the quiet cold voice of the man from a warm office who makes decisions about people's lives without balancing logic and calculation with the need for humanity.
I shall now consider the Budget as a whole. It was a give with one hand and take with the other, something and nothing, a 7p up, 1p down Budget, and it left the typical British family £670 worse off than when the Tories were returned to office in 1992. It followed news that Britain had fallen from 13th to 18th place in the league of international prosperity since 1979. After the Budget, Britain is 18th and still falling.
The Budget did nothing to tackle unemployment, to deal with job insecurity, or to heal the wounds of a divided society. It did nothing to tackle the fundamental problems of the British economy, such as the failure over 16 years to encourage long-term investment. It did nothing to provide incentives for the people in the one in five non-pensioner households with no wage earner to move from welfare to work.
My hon. Friend the Member for Sherwood also made a strong plea for Britain's young people, one in six of whom are out of work. They are Thatcher's children, and too many of them have been left disillusioned, impoverished and without prospects. What are we here for if not for them? Our young people want jobs, hope and opportunity. They want to make a contribution, but the Chancellor's message to them is that he is restricting the amount of housing benefit for single young people. His hope is poverty, his opportunity is the dole queue and his reward will be the further conviction that the Government do not care for younger people and, perhaps, their future alienation from the political process.
The Chancellor complained that housing benefit should not induce young people to leave their families before they need to. Did it not occur to him that what young people want is jobs, skills and training? If he enabled them to have those things, they would be able to support themselves sooner and would not need to look to their parents or the state to provide financial support.
It is because our young people are important to the nation that Labour made its key spending pledge a new deal for Britain's under-25s. We are not prepared to see a generation of young people abandoned. Already in our inner cities--in Glasgow, Merseyside and inner London--one in three young people are without a job. In London, six out of 10 young black men are jobless. Some
280,000 young people have been unemployed for more than six months while 200,000 young people have never had a job.
Labour proposes to give young people jobs, not schemes. We offer each young person a number of options: an employment option, with a job and a real wage; a voluntary sector option; an option to contribute to our environmental task force; and a full-time education option if the young person lacks basic educational qualifications. To pay for that programme, Labour would impose a windfall tax on the excess profits of the monopoly utilities.
We have seen the size of the profits that those companies are declaring. On Tuesday, Severn Trent admitted that its profits were up by 75 per cent. last year. Yesterday, Yorkshire Water--the company responsible for a third of the country's unplanned and unwarned interruptions in water supplies in the past two years-- announced that its profits were up by 50 per cent.
Contrary to what the President of the Board of Trade said at the start of the debate, soaring profits have not encouraged the increased investment needed by those privatised utilities. In the five years since privatisation, capital investment in the water industry has fallen by a total of £282 million. In the same period, profits in the water industry have risen by some £755 million. When it was privatised, the water industry received a £6.5 billion hand-out from the taxpayer in debt write-offs and green dowries. While profits have risen, investment has fallen and, on average, the bills of customers have gone up by 40 per cent. in real terms since privatisation.
Higher water bills are just one example of how families are worse off under the Tories--higher bills, higher charges, higher taxes. That is why a windfall tax would make a contribution to putting Britain's young people back to work. Such a policy would help to reduce benefit bills in the long term and restore hope to our young people.
This Budget was never about Britain or its people, young or otherwise. It was about the Tory party and its divisions. The Chancellor is a one-nation Tory presiding over the fag end of a Government who used to believe in Thatcherite economic policies. As my hon. Friend the Member for Swansea, East (Mr. Anderson) said in a good and balanced speech, the Chancellor knows that the public services are overstretched. I do not doubt that he would like to do something about that, but he knows that he must deliver cuts in the basic rate for the right wing of the Tory party, which worries that the Thatcher legacy is going down the tubes.
Trying to balance the two, the right hon. and learned Gentleman ended up with a package with no overall strategic direction on the economy and no sense of vision for society. It was an attempt to shore up the dissipating Tory vote by scattering alternatively small token tax cuts and shifts in thresholds. Conservative Back Benchers hoped that the Chancellor would buy them votes with tax cuts, but even they know that the vote of the British people is not for sale any more.
I must confess that I have a sneaking regard for the Chancellor. I recall attending this place as a student in the early 1970s and watching the right hon. and learned Gentleman cross swords in an education debate with--if I remember rightly--Shirley Williams, and he appeared very able then. When I was elected to this place, the right
hon. and learned Gentleman was Home Secretary. I was put on the Home Affairs Select Committee and I had an opportunity to see him in action. When he became Chancellor, it so happened that I was moved to the Treasury and Civil Service Select Committee. I always thought that the Chancellor was an able performer, and I told my colleagues in the shadow Treasury team that he would come up with something creative, new, innovative or bold, but he disappointed me--almost as much as he disappointed many Tory Back Benchers.
The story of the Budget was told on the glum faces of Tory Back Benchers who filed out at the end of the Chancellor's speech. They had been led to expect flair and imagination; instead, they got a weary, dead-end, dead-beat, dead-loss Budget.
The hon. Member for Beverley sits there with a grin on his face. He denies that Tory faces were so glum at the end of the Budget statement. I recall their looking glum, but I bet those who did not realise that they had every reason to be glum did so when they read the Daily Mail and The Sun the next day.
The economic recovery is so precarious that the Chancellor had little room for manoeuvre. He ended up with a combination of 1p off income tax while putting £9.5 billion on borrowing next year. What price this Chancellor as a sound money man now? The public sector borrowing requirement forecast for 1995-96 has been revised upwards from £23.5 billion in the Treasury summer forecast and from £21.5 billion in the last Budget. It is now £6.5 billion higher than expected in 1995-96, at £25 billion. It will be £9.5 billion higher than expected in 1996-97 and £10 billion higher than expected in 1997-98. That is because the economy is in a mess. Throughout the past 16 years, the Conservatives have neglected investment, squandered the proceeds of North sea oil and, in a display of boom-and-bust economics, put us into the two worst recessions since the war. That in turn has damaged industry's ability to respond to recovery.
The Budget forecast for investment growth in 1995 is now just 1 per cent. The recovery, such as we had, is now precarious and in danger. It was based on an export-led drive, fuelled by a 20 per cent. devaluation of the pound following our ignominious withdrawal from the exchange rate mechanism. But there is a limit to how long we can run the economy on devaluing our currency. This Budget has not dealt with some of the long-term problems of the British economy. It has simply put off resolving them until after the next election, when Labour will be there to deal with them.
It is the ordinary families of Britain whom the Government have really let down: the workers on the assembly line or in the office. For them, right-wing economics have too often meant little or no wage increases in the name of competitiveness, job insecurity to make labour flexible, and the fraying of the safety net. Middle and lower-income people spend more hours working and less time with their children, and they bring home an income that is inadequate to meet housing and other costs. In 1992, many of them voted Tory on promises of lower taxes and opportunities to get on in life. They now feel that the Government have failed them and betrayed their values. For them, Tory promises of opportunity have often meant increased opportunity to lose their jobs.
The failure to reduce unemployment since 1979 has left people paying for big welfare bills of £20 billion, the equivalent of £20 a week for each family. People have seen tax breaks for the very wealthy go unchecked. Their experience of the services that they use, such as schools and hospitals, is of increased commercialisation and financial restraint. They see the immorality of a Government who stand by while a tiny elite prosper and our economic base erodes. They question the fairness of sacrifices made by middle-income families, who must pay higher taxes while, at a time of high dividends, some corporations have paid little tax by taking advantage of tax loopholes that the Government have failed to plug.
The damage done to British families determines Labour's stand on the reduction by 1p of the basic rate of income tax. We cannot vote for it because it does not tackle the fundamental problems of the British economy: lack of investment and lack of jobs. It does nothing to create an incentive to move from welfare to work for the one in five non-pensioner households that have no wage earner. We shall not vote against it because the Tories have damaged British taxpayers enough. They have imposed the biggest tax hike this century--in the year after the 1992 election--beating even Geoffrey Howe's 1981 Budget when personal allowances were not indexed.
Even now, the overall tax burden will be 36.5 per cent. next year, up from 34.75 per cent. in 1992. That is more than when Labour left office. It is forecast to rise each year until the end of the century, reaching 37.5 per cent. by 2000. That is the Tory burden of failure paid by the British people. Labour will not vote to make it worse. Poorly aimed as it is in economic terms, the 1p off the 7p at least gives small relief from the Tory tax rises and broken promises of the past few years.
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