| Previous Section | Index | Home Page |
Mr. Jenkin: I have not studied that particular piece of evidence, but I refer the hon. Gentleman to the OECD surveys on the national minimum wage that are absolutely clear that a minimum wage would cost jobs. Closer inspection of the operation of the minimum wage in countries that Opposition Members describe as exemplary reveals that the relevant legislation is often either ineffective or so decentralised that it does not constitute a national minimum wage. The only concrete example is France, where unemployment is high.
I particularly welcome the following comment in my right hon. and learned Friend's Budget speech:
That comment reflects the work that I carried out in the summer along with my colleagues on the Conservative Back Bench committee on smaller businesses to produce a pamphlet entitled "Fairer Business Rates". It showed that the distribution of business rates lent heavily on smaller businesses and represented a far higher proportion of their overall costs. Businesses with a turnover of between £50,000 and £100,000 were paying business rates of up to 14 per cent. of their overheads, whereas larger companies were paying only 2 or 3 per cent. It is therefore not surprising that shops and smaller high street businesses are struggling to compete with out-of-town supermarkets, which pay only a tiny proportion of overall costs in business rates. I very much welcome my right hon. and learned Friend's promise to address that problem. I appreciate that a radical redistribution of the business rate burden may be required so that larger businesses pay just a little more in order to provide relief for the thousands of small businesses that have made representations to us.
28 Nov 1996 : Column 523
I welcome the increase in key programmes that reflect our priorities. My local health authority will receive a 2.6 per cent. rise in its budget in real terms, lifting North Essex health authority expenditure to £370 million. That above-average increase reflects the continuing trend of redistribution of health resources according to capitation funding, redressing an imbalance in funding towards conurbations, particularly London.
I am grateful for the increase in funding for schools. We hope that local authorities--particularly in Essex, which is not under Conservative control--pass that increase on to the schools that need the money. I am also pleased that an extra £280 million has been allocated to higher education. It represents a much-needed cash injection for the hard-pressed universities that are eagerly awaiting the outcome of the Dearing review on higher education funding. I hope that the system will be restructured to enable substantial growth in higher education funding in future. We all know that the rise in the number of students has not been matched by increases in resources to universities. Perhaps a move to genuine capitation funding for higher education would be beneficial.
Finally, the police will receive a 3.7 per cent. increase in funding, providing 2,000 more officers in England and Wales against the background of a 10 per. cent reduction in crime over the past three years. I am particularly pleased that the Essex police force will receive a 3.9 per cent. increase in spending power and an extra 55 officers.
The spending priorities of the Opposition parties are revealed all too dramatically by their major complaints about the Budget. It is clear that they are most worried about their friends in local government. If they were seriously concerned that local government might be underfunded, they would vote against the tax cuts that we are giving the British people rather than suggesting that expenditure should be reallocated--away from the police, education or the health service--in order to support local government. The Opposition should see the mote in their own eye before criticising the Government's efforts to streamline the national health service. They always say that we should get rid of administrators in the NHS, but never complain about the number of administrators in the town halls--there are often far too many of them.
No doubt the Liberal Democrats are planning a 1p increase in the basic rate of tax in order to fund their education promises. I hope that the hon. Member for Rochdale will have noticed that schools are getting extra money and the British people are getting a penny off the basic rate of tax. The Conservative Government can provide such double benefits time and again.
Ms Lynne:
The hon. Gentleman must appreciate that the council tax payer will have to pay for the Government's education commitments. Liberal Democrats will vote against the reduction in income tax as we believe the money should go into education and training. I wish that the official Opposition would join us in the Lobby.
Mr. Jenkin:
I certainly agree with the hon. Lady that it would be a good deal more honest for the official Opposition to do as she suggests.
The underlying concern of the Budget must be the rise in monetary growth. My right hon. and learned Friend said very little about monetary policy and did not refer to
28 Nov 1996 : Column 524
I shall draw attention to the strong correlation between money supply indicators and future inflationary pressure. The Library has kindly produced a graph showing M4, M0 and inflation over the past 20 years. It is striking how the peaks in monetary growth precede the peaks in inflation.
I draw particular attention to a comment made by Professor Tim Congdon, one of the wise men, the day after my right hon. and learned Friend delivered his Budget. The advice sent to his gilts clients was headed:
I therefore very much welcome the report in The Times today that my right hon. and learned Friend the Chancellor
Ms Angela Eagle (Wallasey):
It was nice to hear the hon. Member for Colchester, North (Mr. Jenkin) espousing the old creed of unalloyed monetarism, quoting M0, M4 and other similar numbers and measures of the money supply. We do not often hear the old faith quoted in here. Of course, it is as wrong now as it was when it was first adopted, as any look at the effectiveness of monetary policy in the early 1980s demonstrates.
The income tax reductions in the Budget are offset by indirect tax increases. The Budget gives with one hand and takes back with the other. We have one new tax--
28 Nov 1996 : Column 525
However, I praise the Chancellor for having done something that I have found useful--releasing the Budget details on floppy disk so that we can put them into our computers and have them readily accessible. That is a good innovation. I hope that there will be a CD-ROM with fanfares, trumpets and sound effects at some stage in the future. Releasing the information on disk is a good start and I hope that we shall pursue it. I hope that that innovation was not responsible for the leaking of the Budget. I suspect that it was the privatisation of Her Majesty's Stationery Office, but time will tell where the leaks came from, when MI5 has done its job.
The spending commitments in the Red Book and the accompanying press releases are phantom. The Government claim a £1.6 billion increase for the NHS, but a 0.7 per cent. real-terms cut in the resources allocated to the health service is forecast for the year after the election. The 16 per cent. cut in capital expenditure has not been replaced by private finance initiative commitments. We have heard today that only one of the PFI commitments promised at the last election has been delivered in the past year.
The Government claim an increase of £875 million in the resources available for education, but if the Government's total spending figure was applied, £73 million less would be available for education than is currently spent. That is yet another phantom spending commitment.
Most of the £450 million claimed as extra spending to tackle crime will go on building new prison places, not on preventing crime. We need to go to the causes of crime to prevent it, rather than spending ever-increasing amounts on building prisons all over the country. We need to deal with the problems of social breakdown caused by inequality and poverty, which are the legacy of the Government.
The Budget is already unravelling. There is scepticism on where many of the revenue claims will come from in reality. The spend and save plan is causing commentators particular problems and there is outrage at some of the more blatant examples of what might generously be called creative accounting which are coming to light as we take a more careful trawl through the complex series of documents released on Budget day.
Various comments have been made by economists in the past couple of days. Adam Cole of the City brokers James Capel said:
The Treasury also incorporates assumptions about falling unemployment benefit spending, which it has never done before. The Government have made a big assumption about the numbers due to come off unemployment benefit, allowing them to deduct several hundred million pounds more from their spending plans.
"I realise that the current system of business rates bears particularly hard on smaller businesses, for which it represents a much bigger proportion of total costs compared with their large competitors."--[Official Report, 26 November 1996; Vol. 286, c. 169.]
He pledged to address that inequality in his next Budget, and I very much look forward to that.
"Mr. Clarke silent on high money growth. Cautious fiscal stance disguises monetary laxity."
I am acutely aware of Professor Congdon's unnerving credibility for forecasting inflation. He wrote an article in June 1987, long before most people were worried about the overheating of the British economy, called, "Mr. Lawson's secret inflation". In it he said:
"The growth of credit and money is too high, the economy is expanding too quickly and interest rates are too low to prevent the return of inflationary pressures."
I do not for a moment suggest that we are approaching any such difficulties in the economy, but it is clear that Professor Congdon is sending out warning signals and that his feelings are shared by others. The "Economic Viewpoint" written by Samuel Brittan in the Financial Times--no anti-single currency monetarist he--says:
"there are many signs of inflationary pressures in the pipeline."
Those pressures may not be showing up in the more solid leading indicators yet, but we must be ever vigilant of the dangers of returning to inflation.
"pledged to raise interest rates if necessary".
He said:
"I will do whatever is necessary, but we have at the moment a lack of inflationary pressures. As soon as they show signs of growing, I will act."
It is commendable that my right hon. and learned Friend is keeping a firm eye on inflation to ensure that there is no danger of returning to boom and bust.
"I am staggered by it. It incorporates fiddles which would make the French blush."
The £7 billion savings from loopholes and avoidance are especially disbelieved. David Mackie from the investment bank J. P. Morgan said:
"This is the kind of thing the Italians put in their Budgets. It is not at all clear that the plans on paper can ever be delivered."
28 Nov 1996 : Column 526
Economists have been particularly outraged by a convenient but unhighlighted change in the conventions for presenting spending plans to the House which has allowed the Treasury to claim that the control total will be £2 billion lower than would have been the case without the change. That has been achieved by subtracting the receipts from the sale of the student loan book and the privatisation of the Ministry of Defence housing stock from departmental spending totals rather than entering the revenue as a privatisation receipt, as has been the case in the past. If those factors are added back in, departmental spending plans are £3 billion higher than the Budget documents claim. That means that we do not have as tight a public expenditure round as the Chancellor claimed. It is looser.
| Next Section
| Index | Home Page |