| Previous Section | Index | Home Page |
9.14 pm
Mr. Andrew Smith (Oxford, East): This Budget fails the test of investment, fails the test of prudence and fails the test of fairness. That is why we shall vote tonight to give this House the chance to cut that most iniquitous of taxes, VAT on fuel, and why we could not accept the amendment to the law motion as it stands.
Mr. Fabricant: Will the hon. Gentleman give way?
We shall abstain on the tax changes in the Budget resolutions because although they do not include measures that we should have liked to see, we believe that people have suffered enough from the Government's broken promises and we do not intend to stand in the way of the small relief that the resolutions provide. In addition, we shall not only vote for the public expenditure amendment, moved by my right hon. Friend the Member for Kingston upon Hull, East (Mr. Prescott), but we shall vote against the Government's public expenditure programme because it is a product of wrong priorities and fails totally to provide the employment, investment and skill strategy needed for a fair society and a strong economy.
My right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) spoke with characteristic wisdom of the importance of investment, which is now growing more slowly out of recession than at any comparable time this century. He referred to the need for capital allowances--something that we urged on the Government in our Budget submissions.
My hon. Friend the Member for Barrow and Furness (Mr. Hutton) deplored what he rightly called the "depressing short-termism" of a Budget that leaves the construction industry in slump and does so little for investment or fairness.
The right hon. Member for Guildford (Mr. Howell) raised the issue of the cuts to the British Council, as did a number of hon. Members on both sides of the House. I look forward to the Chancellor explicitly referring to that in his winding-up speech.
My hon. Friend the Member for Falkirk, East (Mr. Connarty) said that it was an unfair Budget and, of course, he was right. A fair Budget would not have made the poorest fifth of the population even poorer as a direct result of its measures. A fair Budget would not have rejected, as the Chancellor did, our proposals for a windfall levy on the excess profits of the privatised monopoly utilities. I do not see how the Government can possibly claim fairness for measures which make more from the poorest while doing nothing about the privatised utilities in which £100 million on share options remain to be cashed in and in the very week of the Budget Yorkshire Water increased its profit by 50 per cent.--not by supplying the people of Yorkshire with water, but by not supplying them with water.
On privatisation, that industry had a green dowry of £1.4 billion, with £6 billion of debt written off and £3 billion in investment credits set against tax. Yet since privatisation, executive pay has gone up by 339 per cent., profits have trebled, dividends have risen by 57 per cent., pollution incidents have gone up 53 per cent., investment has gone down by 20 per cent. over the past year and almost no mainstream corporation tax has been paid.
As my hon. Friend the Member for Ogmore (Mr. Powell) argued, a windfall levy on the excess profits of the privatised monopoly utilities applied to fund a welfare-to-work programme to help the young and long-term unemployed into real jobs with quality training would have been the cornerstone of any fair Budget. As for the Government's claims that their measures make people £9 a week better off, as my hon. Friends have said, we have exposed and will continue to expose the truth that, even on the Government's figures, only £2 of that can be set against the measures in the Budget, the rest is a Government assumption of earnings growth.
In his letter responding to my challenge on the matter, the Chancellor conceded that he cannot make his claims stand up as a direct effect of tax changes--only as speculation on growth and wages next year.
What becomes clearer by the day is that even that little bit the British people have been given back in the Budget will be taken away in other charges. Council tax, travel costs, rents, postal charges, water charges, prescription charges, dental charges, school meal charges and television licences will all go up. Everywhere they look, people will see that what is given with one hand is more than taken away with the other. As always, it is those on the lowest earnings, who are struggling to get off benefits and into work, who will be hit hardest by the increases. If the Government think that people will suddenly start to feel a lot better off as a result of the Budget, they are in for a shock.
Some of the measures in the Budget are welcome. The lower tax rate on savings income is a step towards the fairness on savings for which we have been calling. The increase in the thresholds for contributions to long-term care is welcome. The cut of 1p in the basic rate, the increase in personal allowances and the 20p band all provide a little welcome relief against the huge tax increases the Chancellor has imposed since the general
election, but they will still leave typical families £670 a year worse off. People are still paying the price for the Government's record of failure--broken promises year on year and not the tax cuts year on year that they were promised.
Conservative Members are fond of talking about their instinct on taxation. Yet they now repeat the pledge to end capital gains and inheritance tax. They choose to spend £4.6 billion to benefit the better off, half of it going to the 5,000 wealthiest families in the land, rather than to cut the starting rate of tax which would help the many and especially those moving from welfare to work. It only goes to show that when it comes to instincts, the Tory instinct is for unfairness.
Mr. Riddick:
I very much welcome the fact that the hon. Gentleman welcomed the new 20 per cent. tax on savings, which he said was fairer. Why was it that at the general election the Labour party intended to impose a 9 per cent. surcharge tax on savings income?
Mr. Smith:
The hon. Gentleman is in no position to lecture us on promises made at the general election. He should explain to his constituents why he promised tax cuts year on year and why they have had tax increases that mean that they are £670 a year worse off.
On the expenditure side of the Budget, we see the same sleight of hand at work. We find that the much-vaunted increase for education will depend on council tax increases and cuts in other council services, many of them essential services such as the fire service. Education will face difficulties this year, like the difficulties in Northumberland which have been reported to me. Extra funding, as the Chancellor has promised, does not always translate into improvements in front-line services because of the problems that the Government are causing those services. The extra funding for the police does not add up to the 5,000 extra officers the Home Secretary has promised. In the health service, we see real cuts next year of 17 per cent. in public capital spending and a 6.5 per cent. cut, even including the hoped-for public finance initiative expenditure, with total capital spending from public and private sources together set to fall by 11 per cent. over the next three years. Again, more is taken with one hand than is given with the other.
We have to ask what sort of Government cut overseas aid by 6 per cent. after having wasted £234 million on the Pergau dam and what sort of Government cut the schools subsidy scheme even as they increase UK spending on the common agricultural policy by £100 million. How can it be right to freeze lone parent benefit which, as my hon. Friend the Member for Dagenham (Ms Church) said, will make it harder for single parents to get into jobs, even as the administrative costs of the Department of Social Security go up this year by £100 million? How can it be right to cut training by 4 per cent. even as the community action programme is dumped? My hon. Friend the Member for Birmingham, Small Heath (Mr. Godsiff) was right to stress the damage that those would create. It is no one-nation Budget which ends 40,000 opportunities for young people and in which the Chancellor axes the one programme designed to help young unemployed people with disabilities get into work. For those young people it is not a one-nation Britain but a no-hope Britain. I give way to the Chancellor on no-hope Britain.
Mr. Kenneth Clarke:
The hon. Gentleman has given a long and passionate list of savings in public spending to
Mr. Smith:
I will give the Chancellor some commitments. We would make cuts in the assisted places scheme. We would phase it out to put proper resources into cutting class sizes for five, six and seven-year-olds. We would cut the cost and the waste of rail privatisation and put that money into an integrated transport policy. We would cut the excess bureaucracy in the national health service and put the money into front-line patient care. We would cut the cost of nuclear privatisation. We would look carefully at that extra £100 million for social security running costs which the Chancellor has put in his Budget. Our public expenditure amendment spells out that and much more.
The welfare-to-work programme that we need to get especially the young and long-term unemployed into jobs with training would be funded by the windfall levy. The phased release of local authority capital receipts for social housing would cut bed and breakfast costs. We would boost front-line patient care and cut class sizes. Those are the choices which a fair Government would be making in a prudent Budget. How can the public believe the Government's claims of prudence when they see the neglect of public and private investment in the Budget? The climate of confidence for business to invest will not be created by a Budget which does nothing on capital allowances and nothing to encourage investment for the longer term, which increases VAT thresholds for small businesses by only half the rate of inflation and increases the business rate by 25 per cent. above the rate of inflation. No wonder the deputy director of the British chambers of commerce says:
The Government have taken one or two steps on the PFI that we have long called for. Training for civil servants who will negotiate the scheme will certainly be useful. The Government have failed to clarify the tendering process and the allocation of risk and to establish the new task force that is necessary to get things moving properly.
As for setting priorities for the PFI, we now have an A-list and a B-list of schemes. It is revealing that they are prioritised not according to their public benefit but according to commercial prospects. It is the privatisation not merely of provision but of the public interest in determining priorities for provision.
As the reaction of the construction industry shows, the whole history of the PFI has been one of reality falling far short of Government rhetoric. It is no wonder that, since the Budget, the chairman of the Confederation of British Industry of Scotland has said of the PFI plans that he is
Let us not forget either that PFI spending carries with it revenue consequences and contingent liabilities for the future which, as my hon. Friend the Member for Barrow and Furness pointed out in an excellent speech, will count against the public sector. I challenge the Chancellor in his reply to say how the public sector accounts will deal with that because not to account for the future consequences of present commitments is not prudent either.
The reality is that under the Government, public assets--the infrastructure of competitiveness and fairness--are being run down to pay the costs of economic and social failure. How can this be a prudent Budget when it not only increases public borrowing projections substantially but does so not for productive investment but to cover the shortfall on current Government spending.
It is bad enough for this year's PSBR to be £7.5 billion greater than forecast last year; for next year's to be £9.9 billion greater; and for the year after next's to be £10 billion bigger. However, for that to happen at the same time as public investment expenditure is being cut by £4 billion over the next three years is imprudence embedded as economic dogma.
In place of the golden rule that borrowing should be for investment across the cycle we now have Clarke's leaden rule: that investment must fall as far as necessary so that borrowing across the cycle can sustain a current deficit. It is the economics of remortgaging the house and forgoing repairs simply to pay the housekeeping bills.
I do not think that it has yet sunk in how serious the position is. If the Chancellor's projections turn out to be accurate--and they are based on what the right hon. Member for Fareham (Sir P. Lloyd) called an optimistic growth forecast--the Red Book shows that the Chancellor proposes to borrow between now and the end of decade twice as much as he said that he planned to borrow last year: an extra £39 billion Tory borrowing plan between now and the millennium.
To put it in perspective, even if the Chancellor's forecasts are accurate, Britain will, over the 1990s, have taken on an extra £200 billion of borrowing as compared with £31 billion in the 1980s. Central Government debt interest payments alone will add an extra £33 billion in interest payments on to the shoulders of the British people. [Interruption.] I got that figure from page 69 of the Chancellor's own Red Book statement. He ought to read it.
It is the old, old story of Conservatives borrowing for their Government before an election that which they would force the people to pay for afterwards. The truth is that the Government are prisoners of their economic failure. It is the same failure on investment, growth, training and unemployment that has plunged Britain down the world prosperity league from 13th to 18th place: 7p
up, 1p down--taking with one hand more than they give with the other and borrowing, borrowing all the way. No--for a strong economy, a fair society, sound public finances and quality public services, Britain needs a new start with Labour, a strategy for productive investment and skills to unite a country so divided by the Conservatives and a welfare-to-work programme which will enlist the talents, skills and energies of all our people in common success.
"Growth is not enough and will be unsustainable without investment . . . As a nation we are good at attracting investment from other countries but the question the Chancellor should be asking is why we are not investing in ourselves . . . If we are to become the enterprise centre of Europe, some redress of these spending priorities needs to take place."
"deeply anxious . . . When the PFI came out in 1993, it was additional to Government spending. In fact what we now have is replacement funding."
Of course, the reality is even worse. The Chancellor's own projections show a real cut of 17.8 per cent. in public capital spending, reduced only to a real cut of 8.4 per cent. when the private finance initiative wish list is included. According to the Red Book, we are faced with the certainty of a £3.9 billion cut in direct Government capital spending, offset only by the hope that the private sector will make up £2 billion of the difference.
| Next Section
| Index | Home Page |