House of Commons Hansard Debates for 26 Nov 1996 (pt 18)

7.14 pm

Mr. Dafydd Wigley (Caernarfon): I agree with much of what the hon. Member for Bradford, South (Mr. Sutcliffe) said about the additional expenditure needs for many programmes--for local government, for community care, for our transport infrastructure and all the rest. I part company with him on his castigation of the Government for having pushed taxes up, since I must assume that he would prefer a lower level of tax.

To sustain the level of public expenditure we need--I agree with him on the expenditure that is needed--the money must come from somewhere. We cannot go on borrowing indefinitely. If we believe in the need for the expenditure, we have to believe in the means of raising the wherewithal to fund it. Sooner of later, the Opposition will have to come clean. I shall come to some of the details in a moment.

The background to the Budget in Wales is that our income per head has dropped to the lowest of any country or region in the United Kingdom. We are at something like 82 per cent. of the UK average. Our unemployment does not differ much from the UK average--it is very similar, although there are pockets of high unemployment and pockets in which the economy is going fairly well. That underlines the need for specific action in those areas that still have high unemployment and those areas with very low income per head.

I am thinking particularly of the western parts of Wales--the old counties of Gwynedd and Dyfed--and of the old coal mining valleys of south Wales. In an all-Wales context, we need a strategy from the Chancellor to ensure that the economy in those areas is stimulated. If the overall economy does not need stimulation--that is the general thrust of the Chancellor's strategy--we need some devices to ensure that resources, either through public expenditure or some other means, are targeted on those areas that have pressing needs.

We can compare and contrast our position in Wales with that over the water. My nearest capital city is Dublin, which has a growth rate two to three times that of the United Kingdom. The GDP per capita of the Irish republic passed that of Wales for the first time ever in 1995. During the past two years, the Irish republic has created 56,000 new jobs. I know that the level of unemployment there is still too high, but the Irish have a dynamism that we are failing to achieve in Wales, and we need policies geared to achieving it.

How have the Irish achieved that? Obviously part of the answer can be found in Ireland's internal strategies and the way in which it attracts internal investment. Ireland's rate of corporation tax is an incentive--at 10 per cent., it cannot but be an incentive. It has negotiated a

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derogation on that. That leads to the second part of the answer, which relates to Ireland's success in achieving a substantial input from the European Union--some £478 per head a couple of years ago, compared with £45 per head in Wales.

Given the need to target, I have no doubt that we should make a serious approach to gain objective 1 status for the western coast of Wales--the old counties of Gwynedd and Dyfed--and for the old coal mining areas. On all the criteria by which objective 1 status is calculated, it is needed.

That provides the background to the Budget, because such approaches are needed to overcome our economic problems. I judge the Budget against that background, and I find it deficient. It is deficient on the central issue of creating employment. Some 100,000 people in Wales are unemployed. We would prefer them to be paid perhaps £160 a week to do work that needs to be done in our communities than £80 a week to rot on the dole.

We know that work needs to be done in the environmental sector, in the transport sector, in community care and in education. All around us is work that needs to be done, and people who want to do that work. They may not have the right training, but work can be done on that as well. We would prefer the cost of the depression to be borne by the taxpayer, paying those people to do the work that needs to be done, rather than leaving them idle on the dole.

Of course, that would presuppose a higher rate of tax. We voted against last year's reduction in income tax, because we believed that the money was required to pay for work to be carried out in our communities. That is why we shall be voting against the penny reduction in income tax this year as well. We would be happy to retain a standard rate of income tax of 25p in the pound, and raise additional resources.

That does not mean that people on low incomes should be hit so hard by the taxation system. Therefore, I welcome the steps taken by the Chancellor to raise the tax threshold by £280, but, frankly, it is not enough. The erosion in the income tax threshold since the war, and particularly in the past 20 years, is staggering. Before I came to the House in 1972, the personal income tax allowance for a single person represented some 30 per cent. of average earnings. It is now down to 19 per cent. of average earnings. In order to restore it to its previous level, it would have to rise to more than £6,000. That how far people on low earnings have been drawn into the tax net.

Increasing the personal allowance by some £500 would have taken some 830,000 people out of income tax, and would have made a considerable difference to those on low incomes. Had that same allowance been applied to people over 65, it would have taken a further 300,000 people out of income tax, including some 20,000 in Wales.

We needed such a strategy. It would have cost money, but it could have been funded by removing the upper limit on employees' national insurance payments. The present ceiling of £455 a week has been increased by £10 in the Budget. If that limit were removed, the proceeds would be more than enough to pay for the changes that we have

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advocated. We believe, therefore, that our proposals could be implemented. However, the Budget implements a strategy that is geared to the general election.

Mr. Tim Devlin (Stockton, South): That is silly.

Mr. Wigley: The hon. Gentleman, who has just entered the Chamber, is making sedentary remarks. If he wishes to intervene, I shall give way to him. As he does not, I shall continue.

We are aware that the Budget is geared to the general election, so there is a give-away on the standard rate of income tax. I do not believe that the electorate will buy that as a strategy. They want services to be maintained rather than eroded.

The Red Book sets out the cuts in expenditure that accompany the reduction in taxation. I am particularly worried about the cuts in capital grants to local government by £1.5 billion. The Department of Education and Employment has lost £1 billion. Overseas aid has been reduced by £150 million, although we see on television starving children around the world. Should we rest quietly before a general election when that cut is paying for our tax bribe?

On agriculture, apart from spending on BSE, there is a reduction of £90 million. The Department of Trade and Industry, the Department that would create the jobs that I mentioned, has also suffered a reduction of £90 million. The Department of National Heritage faces a reduction of £60 million. We know what that will do to the Arts Council. In other words, there is no such thing as a free lunch.

Tax reductions have to be funded. My great fear is that the biggest cut of all will be in the money available to local authorities. Given their additional burdens, local authorities will be forced to increase council tax significantly to make up the deficit. The Welsh Office budget is to be cut by £120 million, rising to £270 million in 1998. I have little doubt that that will impact on the money available to Welsh local authorities.

There are some good points in the Budget. We welcome the approach to pollution and sustainability, and the increase of £280 in the tax threshold, although it is not enough. We also welcome the steps to close tax loopholes on VAT and the limit on the business rate, which is a severe burden on small businesses. We welcome the small reduction of 0.2 per cent. in the employers' national insurance contribution. Although we welcome those small matters, the overall strategy is not putting the resources were they are most needed.

In conclusion, let me draw the attention of the House to one group of people who have not been mentioned today--pensioners. The state pension will rise from £61.15 to £62.45--an increase of just £1.30. Let me quote the Chancellor of the Exchequer directly:

"Individual living standards continue to rise."

That may be true for some people, but, over the past 10 or 12 years, living standards have not been rising for the 40 per cent. of pensioners who have no income other than their state pension and benefits. Benefits have increased with the cost of living, but decoupling them from the link to earnings has meant that, instead of £83, a single pensioner receives only £62.45 after the increase in the Budget.

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Some people have benefited from the increase in living standards, but pensioners are the only group who have not benefited, and who can do nothing about it. The Government will pay a severe price for letting pensioners down and not allowing them to enjoy any increase in their standard of living. Against that background, we find the Budget unacceptable, and we shall vote against it.

7.25 pm

Mr. Tim Devlin (Stockton, South): I welcome the Budget because it is pragmatic, effective and philosophically correct. It is pragmatic because, contrary to the assertions of the hon. Member for Caernarfon (Mr. Wigley), it has not been framed solely with the election in mind. As my right hon. and learned Friend the Chancellor made clear, he was looking at the medium and long term as well as the short term. I know that he very much looks forward to presenting another Budget next year and in the subsequent years of Conservative government after the next election.

When we consider the various options that were floated before the Budget--including massive tax cuts and various other amazing vote-winning strategies--it is clear that the Chancellor has been extremely pragmatic, working within the strict parameters that he set himself, to ensure that the economy is well based and on an even keel for the future, whether we win, lose or draw at the next election.

The Budget affects matters that concern people in my constituency. It provides an extra £875 million for education, an extra £450 million for law and order and the police service, and a substantial increase of £1.6 billion for the national health service--and that does not take into account the important news about jobs and the economy.

I very much welcome the extra £50 million grant for urgent school repair. I draw the attention of the House to my visit to a school in my constituency in July which resulted in the headline:

"We need to spend more cash on schools now".

I should mention to the hon. Member for Bradford, South (Mr. Sutcliffe) that one of the big problems about giving money to local authorities to spend on education, among other matters, is that they do not hand it over. If Stockton council is serious about providing a new primary school at Preston in my constituency, I hope that it will apply to the Government for the money now and not wait until 1997-98, as I was told in a parliamentary answer last week. There is no reason for delay. Two years is a long time in the education of four, five and six-year-olds. The council should apply for the money and start work as soon as possible.

I welcome the £50 million for school buildings, and hope that Labour-controlled local authorities will hand the money over to the schools that need it.

I also welcome the £129 million provided to nursery education, particularly the introduction of the voucher scheme, which will enable parents throughout the country to choose the education that their children receive. It is very important that this Budget should be a Budget for the family and that the Conservative party should be the party of the family. I therefore think that it is important

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to give money to parents so that they can make real choices about their children's education. If local authority nurseries are so good, as local education authorities contend, I am sure that parents will stick with them and hand over their vouchers to them. Parents would still be exercising an important element of choice in doing so.

I welcome the £280 million that is to go to universities and further education colleges. Under the Government, there has been an enormous growth in higher education. In 1979, only one in eight young people went on to higher or further education. Now, one in three do. We have a much better educated work force and many people enjoy the many benefits--not just academic ones--of further education. I welcome the extra money that will be given to such institutions.

I welcome most particularly the £450 million that will be spent on law and order. More important, the underlying philosophy taken forward by the Government of judging all our public services by results and what they deliver, rather than allowing them to continue with age-old containment strategies, means that we are getting much more value for our taxpayers' pounds.

I was very heartened by a report in The Daily Telegraph on the adoption by Cleveland constabulary of a profiler--a Cracker-style person who will profile criminals and be able to track them down more successfully. I was even more heartened when I read that our assistant chief constable said:

"It is only recently that the police have come to the conclusion that we can cut crime. In the Eighties we perhaps mistakenly felt we could only contain crime. Now we are putting our money where our mouth is, we can and we will cut crime."

Coupled with the money that is being spent by the Exchequer on law and order, that will be a very welcome piece of news to the electorate in my constituency.

The hon. Member for Bradford, South said something about congestion in London bringing the whole city to a halt before very long. He put me in mind of when I was reading up for my history degree many years ago. I remember reading that a leading pundit in the 1890s said that, if the growth in horse-drawn carts in London continued at the rate at the time, London would be 6.5 ft under horse muck by 1915. That did not happen, although the roses in London may have been spectacular during those years. I am very dubious about some of the predictions about traffic congestion and traffic growth. In my experience, an invisible hand guides people, and they leave their cars at home when they find that it is too difficult to take them on the road.

The hon. Member for Bradford, South asserted that the railways were far worse since privatisation. I was interested to read a commentary in one of the newspapers that said:

"Trains are running on time more frequently under privatisation than when they were State-owned, according to official performance figures.

The statistics, compiled by the Office for Passenger Rail Franchising, show that the first eight operators to be sold to the private sector increased service punctuality by two per cent between February and October, compared with the previous 12 months under British Rail."

I happen to know that that is a fact because I am a regular traveller on the railway system, especially on the east coast main line, which has recently been taken over by Great North Eastern Railway. Not only are the trains

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running far more punctually and, with the new blue livery, looking nicer, but the range of services on trains and at stations has broadened enormously because of the concentration on service delivery and customers rather than the operating convenience of the unions and the service providers. That underlying philosophy has been very effective in all our public services.

It is very easy to say that local government is strapped for cash, but it is possible to go to certain parts of the country, such as where I live on the borders of Stockton, Middlesbrough and Hambleton district councils, and discover that two councils, which are controlled by Labour, impose some of the highest band D council tax anywhere in the country, whereas the third--Hambleton--imposes a considerably lower council tax. When we ask why, we are told that Stockton and Middlesbrough have much worse social problems than Hambleton, which is in North Yorkshire. We find also that council tax in Stockton and Middlesbrough is considerably higher than it is in Hambleton despite the fact that the Government hand over more per head to Stockton and Middlesbrough than they do to Hambleton.

It is important that we guard our environment as we approach the millennium, and I very much welcome tax differentials for less polluting fuels such as low-sulphur diesel. When I was a newly elected Member of Parliament, I visited the first lead-free pump in Stockton-on-Tees, filled the car up and gave an interview to the media about the importance of tax differentials to encouraging good environmental behaviour. Since then, lead-free petrol has taken off throughout the land and I hope that, in due course, low-sulphur diesel will do the same.

Above all else, the people in my constituency care most about jobs. They will be very heartened to learn from the Chancellor today that unemployment throughout the country has fallen by 950,000 from its peak and that 750,000 more people are in work than at the end of 1992. They will also be particularly pleased to learn--if they do not know it already--that at 8.1 per cent., the United Kingdom's unemployment rate is lower than that in Germany, where it is 9 per cent., lower than that in France, where it is 12.5 per cent., and lower than that in Italy, where it is 12.2 per cent. Indeed, of all the countries in Europe, the UK has the highest proportion of its population in work.

My constituents also recognise the importance of Europe as a framework and a market in which to expand and operate. They see, almost weekly, huge inward investment coming to the north of England from Japanese companies such as Nissan, Korean companies such as Samsung and smaller companies such as Tabuchi and Sanyo. Such inward investment is being made because we are full players in the European Union but do not have the burdens of social legislation that other countries have.

When I consulted businesses in my constituency about what they would like to hear in the Budget, 83 per cent. replied that they would not want any form of minimum wage, and 79 per cent. said no to the social chapter being introduced. Opposition Members will have a job to explain to the business men of the north of England why they want to saddle them with such additional costs when businesses so clearly do not want them.

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I am also very pleased that the tax on jobs in the form of employers' national insurance contributions has been cut and that it will be partly financed by the landfill tax--a tax on waste.

The Budget is effective because it helps the real engines of growth in our economy: small businesses. As I have already said, they do not want to be saddled with unnecessary social legislation. They will be pleased by today's announcement on the non-domestic rating system and by the reduction in small companies' corporation tax to 23 per cent. Many of them in villages are already pleased by the changes in the rates for village shops. Indeed, Cleveland council's voluntary services wrote to me to tell me how delighted it was and how important such changes are to the future of our local communities.

As we consider the effectiveness and correctness of the Budget, it is important to take into account whether we shall get borrowing back into balance. I am very pleased that we are, and that we shall do it relatively quickly. That move has been financed not just by the success of our domestic companies, but by the success of our exporters. If I have one tiny criticism of the Chancellor, it is that, when he said that we now have the best trade figures for many years, he did not mention the sterling efforts of my hon. Friend the Minister for Trade, who is at this very moment negotiating yet another big trade deal for us in Buenos Aires. I look forward to seeing him back in this country, and I am sure that companies in my constituency and many others will look forward to the contracts that he will bring back with him.