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Mr. Dorrell: The hon. Lady indicates that she was right; but she was not quite right, because more than half the doctors in the health service have now applied for fundholding status. If she is concerned to see the quick, successful and effective development of the private finance initiative--I believe that her leader is, and I sincerely hope that she is--we can make common cause. But in terms of her forecast, I say, "Watch this space."
Mr. Eric Martlew (Carlisle): Two years ago in my constituency, we were about to set forth on the new stage of
Cumberland infirmary, which was stopped because of the PFI. That is a reflection of what has happened throughout the country: hospital building has come to a standstill because of the PFI. Now, only one company is interested in that contract. Does there have to be competition, or will the contract be given to that one company?
Mr. Dorrell: I shall give the House the response that I always give to such questions in the House: any spending programme that I approve must first pass the value-for-money test. I shall be anxious to ensure that the hospital mentioned by the hon. Gentleman, and any other projects that come up under the PFI, pass the value-for-money test.
On the subject of delay, I invite the hon. Gentleman to look at the programme that we approved under the PFI last week at Amersham hospital. It was a replacement programme for a succession of single-storey, corrugated iron huts that were erected in 1940 as a temporary measure to deliver health care to the victims of the blitz. Those huts are still delivering health care today.
That is not something of which any Government, Conservative or Labour--they have both been in power while those temporary buildings have continued to deliver health care--should be particularly proud. I am proud to have been the Secretary of State for Health responsible for changing the rules that imposed that sort of delay, not just on Amersham hospital but on hospitals all around the country.
Anyone who has looked at the history of the health service knows that it is littered with capital projects that have been stopped by the short-term actions of Chancellors of all political persuasions because of Treasury capital planning processes. We have abolished that policy, and ensured that viable projects for which there is a need within their communities can be financed and built on time. That is an important, fundamental change, which I hope the hon. Gentleman will endorse and support.
Mr. Martlew:
The hospital that the right hon. Gentleman has just mentioned was built in the 1940s; the hospital that I mentioned was to replace a Victorian workhouse. Will the Secretary of State give an assurance to the House that, if the PFI fails, public money will be made available immediately to build the Cumberland infirmary?
Mr. Dorrell:
I have made it clear that there remains a public capital programme as well. I hope and believe that viable projects for the development of the capital stock in the health service can be carried out in the context of public-private partnerships, which are an important source of new capital as well as new expertise in the development of the health service.
One of the key issues--indeed, the key issue--that underlies every Budget involves the choices that every society has to make about taxation and expenditure. Some people have been tempted to suggest that the present structure of our public services is insupportable. I am regularly told that the pressures on the NHS are irreconcilable--that has been a continuing story in the history of the NHS since the day it was founded. The first royal commission into the irreconcilable pressures on the NHS was set up in the early 1950s, and the theme has recurred through the history of the health service.
We have also been told that our welfare state provision--our social security expenditure provision--is too generous and, as a result, public finances are
unsustainable. I am pleased to be able to tell the House that the subject has been examined, not by a Government spokesman or a friendly force that can be relied on to produce a convenient set of statistics for us, but by the Organisation for Economic Co-operation and Development.
In its report of June this year, the OECD examined exactly that issue--the services most often held responsible for the instability of public finances. Its finding was not that public finances in Britain were unstable, but quite the contrary. It reached a clear, decisive conclusion that the United Kingdom was alone among G7 countries in running a consistent financial surplus beyond 1995.
Over the period that it examined--up to 2030, a third of the way through the next century--it found that the United Kingdom and Canada were the only two G7 countries that would not only be paying off public debt, but would have paid off their entire national debts by 2030 if the continuing trends of taxation policies were followed through. Those who argue that the present balance of public expenditure is unstable and insupportable have to explain why the OECD--an independent body examining precisely that proposition--reached precisely the opposite conclusion.
That analysis is extremely good news for Britain, for two reasons. First, it gives us the assurance that the public expenditure plan set out in the Red Book this year can be followed through without a funding crisis, which was so often the experience of Labour Governments. Secondly, and more importantly, it allows to us continue doing what we did this year--making choices at the margin about how much we want to tax and how much we want to spend.
There is, of course, a precise and inevitable connection between taxation and expenditure, and this year my right hon. and learned Friend showed that, by reducing the Government's spending plans by £3 billion, he was able to take £3 billion off our tax burden. That emphasises another important conclusion that can be drawn from the Budget: stable public finances are essential, but they are not the complete answer to the questions that politicians are asked about public finance.
People are interested first to ensure that our public finances are stable, then they want to know what level of taxation, and therefore expenditure, we choose to operate. That is an important political issue, as it affects the society in which we live, but it is a more important economic issue, as high public spending means high taxes, and high taxes, even in a closed economy, blunt incentives.
It is simply wrong to look at the total share of national income accounted for by taxation and say that it does not matter that, over the past 15 years, we have cut the marginal rates of income tax from 98 per cent. to 40 per cent. and the marginal rates of corporation tax from 52 per cent. to 33 per cent.
There is no more eloquent commentary of the change in Britain in the past 15 years than the fact that when the Government came to power in 1979, a 15 per cent. additional rate of tax was imposed on savings income. This year, for the first time, my right hon. and learned Friend has introduced a special low rate of tax for savings
income, reflecting the importance that we place on encouraging people to provide for themselves and invest in their own and society's future.
Mr. Chris Mullin (Sunderland, South):
At the bottom end of the scale, people on benefit lose £1 in benefit for every £1 they earn. That is a marginal tax rate of 100 per cent. Do the Government have any plans for addressing that?
Mr. Dorrell:
The hon. Gentleman is wrong. Since the reforms introduced by my right hon. Friend the Member for Sutton Coldfield (Sir N. Fowler) in the late 1980s, the replacement ratio no longer exceeds 100 per cent., although it is still quite high.
I am focusing on the incentive to save. It is interesting that the hon. Member for Sunderland, South (Mr. Mullin) is not interested in the incentive to save as an important part of free and functioning democracy and economy. I welcome the fact that my right hon. and learned Friend has able to substitute a lower rate of tax on savings income, whereas, under Labour, savings income used to be called "unearned income", and attracted a special rate of tax.
That is only to look at the effect of marginal tax rates in a closed economy. Our economy is not closed. I am pleased to say that it is one of the most open economies in the world. The tax rates charged by the British Government are part of the burden that any business bears if it chooses to establish or remain in the United Kingdom. It has been of significant advantage to this country that, through the end of the 1980s and in the 1990s, we maintained the lowest corporation tax rate of any industrialised nation--a key factor in attracting foreign investment to this country.
The Government are committed to applying that precedent across the whole tax system--not simply to corporation tax--to seek to lead the tax burden imposed by market economies down, to attract investment and activity to this country. That is the significance of the declining trend in terms of the share of national income taken by public expenditure that is set out in the Red Book.
Page 142 presents one of the most dramatic tables included in a Red Book for many a year--five years of public expenditure freeze while at the same time safeguarding the Government's key spending priorities, to allow us to ensure that tax rates in Britain are among the most competitive in the world. The Labour party fails to understand that proposition.
The hon. Member for Dunfermline, East (Mr. Brown) has made himself a laughing stock. On one day, he promises lower tax on investment in business through capital allowances. The next day, he promises lower tax on small businesses through value added tax relief. The day after, he promises a personal tax rate of 10 or 15 per cent. He comes in exactly on cue, but cannot quite work out which it will be. Nevertheless, there will be a personal rate of 10 or 15 per cent. at the same time as capital allowances and VAT relief.
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