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Mr. McAvoy: On the subject of politicians putting their votes where their words are, would the hon. Gentleman care to comment on the local Liberal party in my constituency, which supported a Tory Government and a Tory Secretary of State for Scotland in turning over to a private company an NHS hospital for geriatric patients? Does the hon. Gentleman support that?

Mr. Hughes: The hon. Gentleman raises a matter of which I have no knowledge, so I shall not comment. I shall consult my colleague who speaks on Scottish affairs--as the hon. Gentleman knows, the health service in Scotland is run through the Scottish Office--and my colleague will no doubt give him an honest and accurate answer. In my view, the Government are not engaged in an exercise to privatise the health service, but as a by-product of their policies, more people are turning to private health care. That is unsatisfactory and shows that the Government lack a persuasive fundamental commitment to the NHS.

The figures have been analysed time and again. Last week the Secretary of State and the Chancellor made their much heralded announcement of an extra £1.6 billion for patient services. I accept that that is a true cash figure, but what it means in real terms entirely depends on the level of inflation in general and in the health service. I accept that, for capital and revenue spend, there is likely to be a small increase in the budget next year. There is a relatively large budget in revenue spend, but a reduction in capital spend. The overall figure shows a 0.9 per cent. net increase in budget. In the view of independent commentators, that is at best extremely tight, and may not be sufficient to meet the demands of the NHS.

I shall make two other comments, which make it clear that, to understand the figures, we must consider, first, inflation in the economy as a whole--whether it is likely to be 2 per cent., as the Government calculate, or more likely to be 2.7 per cent., which it is now--and secondly,

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whether there is additional inflation in the health service. The Chancellor accepted last week that there was, and that has been the case until now.

In its commentary, which I do not regard as the most impartial, The Guardian last week under the heading, "Ken's economy with the truth", quoted the Chancellor as saying:

and commented:

    "True, but not the full story. Most of the increase comes from cuts elsewhere. Projected NHS investment has been slashed in real terms by 10 per cent. in 1997-98. The Budget assumes that the Private Finance Initiative will plug the gap, but only one new hospital deal has been signed so far. Only £470 million of new money has been allocated to the NHS next year, on top of the zero growth planned last year."

I commend to colleagues, although I do not propose to read it into the record, the Budget special in the Health Service Journal this week, which makes it clear that after deducting all the sums needed for inflation, growth in the number of elderly and so on, about £436 million is left, which has been taken over from personal social services, and about £97 million in the pot as real new money for this year. The most striking feature is that for the second year running, there has been such a significant cut in the capital budget--16.4 per cent. last year and 16.9 per cent. this year--a one-third reduction in Government-funded capital spend in the NHS. That takes place against a background of £2 billion--according to a Government answer a couple of weeks ago--of arrears in funding in the repair bill facing the NHS.

It was interesting that the Secretary of State said so little about the private finance initiative. Perhaps we shall have to return to the matter. The PFI always promises much, but delivers much less. Of all the approved projects, few have been signed up--so few that the Chancellor found only one example to give in his Budget speech. The figures last year showed £100 million committed by April 1995, £250 million in the pipeline and £1 billion by the end of next year.

It was noticeable that in this year's Budget statement, the figure projected over three years was less than that, and it is noticeable that the amount coming through in the PFI is decreasing in relative terms all the time. That is not surprising, because many contractors say that, without insurance, it is not worth their tendering.

The effect of the cut in personal social services looks extremely worrying. Hon. Members on both sides of the House will feel the impact on community care and social care out there in all our constituencies. The figures suggest a real needs increase per year of 12 per cent. since 1992-93, but a real fact increase this year of only 1.8 per cent. Local councils will be asked to pick up the tab, but many will not be able to do so, because of the effect of the Budget decisions announced last week on the Department of the Environment and local government spend.

I welcome--as I hope do all hon. Members--the fact that we are moving towards accurate, weighted capitation in the health service. Unfortunately, the Budget does not yet reflect the needs of all health authorities across the country. Although I am glad of the significant cash injection of £18 million in my health authority area, which brings us much closer to our target--I shall argue about

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the details later--some colleagues in outer London may argue that their health budgets are falling short and that local authorities will face considerable difficulties next year.

Some factors did not feature in the Secretary of State's list of priority areas. All the four specific, top-sliced areas are important and I am grateful that they will receive more money. Obviously, everyone would like to see more than has been allocated, but I think that extra funding is going to the right areas: mental health, mentally disordered offenders, primary care, and training for people in the health service.

However, we are yet to hear how quickly the Government plan to deal with the scandal of mixed-bed wards. We need to know when the Government will address the problem of recruiting and retaining staff in many areas. It does not matter whether they come from Finland, Hackney or the Caribbean: we first need the staff. Their genesis is a secondary issue. We still face enormous staff shortages. I heard only this morning that one department at Guy's lacks a senior sister and that two others have unfilled posts. It is sad that there appears to be a reduction, in relative terms, in funding for campaigns--let only cures--for conditions such as HIV and AIDS. I say that in the knowledge that yesterday was World AIDS Day and that tomorrow the Secretary of State will address the all-party AIDS group.

Three questions remain unanswered by the Government: first, what criteria do the Government use when plucking an arbitrary figure for efficiency savings, which many feel is completely without justification; secondly, why have we still not moved to three-year contracts in the health service rather than one-year negotiations, which would save much money; and, thirdly, why have the Government not given up the silly idea that pay must be negotiated locally? That takes up too much time and uses more money and health resources than national pay negotiations.

I believe that, in the circumstances, the health settlement is relatively generous and that the health service should be grateful for it. Some problems remain: the funding is not enough. The Government must devote more money to the health service as a percentage of gross domestic product and as a percentage of the annual allocated taxpayers' cake. My colleagues do not believe that that will be achieved by cutting taxes. I believe that people would have forgone the tax cut in favour of an extra allocation to public services.

Despite those reservations, I am grateful that the Government have realised, as the right hon. Member for Selby said, that health is the nation's priority area of concern. I am glad that the Secretary of State and his colleagues have ensured that next year's expenditure increase will be greater than this year's increase. We wait--with some frustration, impatience and disbelief--to see whether, between now and the eve of the general election, the Labour party will come near to matching the commitments of, surprisingly, the Government or my own party to the NHS.

Madam Deputy Speaker: Before I call the next hon. Member, it is abundantly clear that a number of hon. Members wish to contribute to the debate. Unless speeches are considerably shorter than they have been, I fear that many hon. Members will be disappointed.

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6.53 pm

Sir David Madel (South-West Bedfordshire): I shall follow your advice, Madam Deputy Speaker, and get a move on. I noted the qualified support of the hon. Member for Southwark and Bermondsey (Mr. Hughes) for next year's health expenditure, but I shall not dwell on it. I shall refer to the forecasts of my right hon. and learned Friend the Chancellor and to two items of Government expenditure that are always tied to the Budget.

In referring to the economic situation, my right hon. and learned Friend said correctly that we needed another five years to fulfil the Government's commitment to raising the wealth-creating potential of the British economy. In other words, we need more industrial expansion and greater industrial innovation. That is the only way that we can fulfil his wish for unemployment to

He added:

    "But that is too high. I want it to go on falling and I expect it to go on falling."

That is welcome encouragement for Conservative Members.

My right hon. and learned Friend referred also to the need for inflation to stay low, which is another encouraging sign. He said:

Persistent low inflation points to three-year wage and salary deals becoming the norm in industry, with resulting industrial peace. If we move to three-year deals, we should concentrate on achieving single-union deals and no-strike clauses through voluntary agreements. That will assist industry--and the Government should remember that they are still an employer in several important sectors.

My right hon. and learned Friend also said that he would pay particular attention to industry's views when considering his interest rate policy. I share his optimism when he says:

That is encouraging. Slightly less encouraging is the November quarterly inflation report from the Bank of England, which states:

    "To ensure this outcome, i.e. inflation staying low, some further rise in interest rates is likely to become necessary in due course."

I hope that the Bank of England will have less anxiety about interest rates and more faith in the Chancellor's correct interest rate policy. He has listened more attentively to the voice of industry than to those at the Bank of England, who are almost invariably pessimistic.

As to state spending, I welcome the increased expenditure for schools and universities--particularly the extra £20 million for science equipment. In his Budget speech, the Chancellor referred to student loans and who will manage the debt. I think that it will take time for the student loans policy to fit comfortably with the arrangements for financing the cost of higher education. Whatever the Dearing committee recommends next year, surely this country can afford to maintain the present tuition fee arrangements--if Government spending

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priorities must be rearranged, so be it. Referring to his attempts to change student debt and push it to the private sector, my right hon. and learned Friend said:

    "I emphasise that the sale will have no effect on the terms on which students can get loans".--[Official Report, 26 November 1996; Vol. 286, c. 159.]

That is very reassuring for students in the higher education system and for those who will enter it next year.

As we have a merged Budget and spending programme--I am glad of that fact--I turn to the roads programme, the car industry and the general manufacturing industry. We need to have a much more sharply focused debate on which roads can be afforded and what is needed. I do not think that anyone advocates the everlasting widening of motorways: our priority should be strategically situated bypasses. There should be bypasses in certain towns that need a boost to industry and bypasses around other towns and villages that are choked by traffic. That should be the Government's priority for roads spending.

We should worry less about the increase in car ownership in this country. I have long felt that a mobile work force is much more efficient than one that is not. We should remember that the continued growth in car ownership is caused in part by the increasing number of women in paid employment who make a major contribution to the country's wealth. No amount of propaganda by anti-motor car groups will convince me or my constituents that somehow the private car can be replaced by a mass of buses or by railways that cover the country. That is simply not practical. Of course, there is an onus on Government to improve public transport--particularly in the London area--but the best way to get people out of cars and on to tubes or buses is by ensuring that industrial peace, which was at last attained on the tubes in autumn, is here to stay.

The Government need to examine their regional policy. A fresh look should be taken at the way in which regional grants are made available, as it should at travel-to-work areas. The Government should pay special attention to infrastructure and to the grants that are given for manufacturing in the south-east. It is 50 years since we started a policy of London overspill into the home counties. People were moved out of London not just to live in the home counties, but with the prospect--it was fulfilled--of having jobs near where they lived. A huge transfer of population did not take place merely to ensure that people had to commute all the way back into London to work.

There has been a tilt in regional grants to areas away from the south-east for so many years that there is no longer a level playing field. Now is the time for the Government to take a fresh look at regional grants and make the necessary changes. They should remember especially that it is the road systems in certain south-east towns that need attending to critically if we are to keep competitive industries in the region.

Linked with the Budget--we had a statement the next day--is the revenue support grant settlement. It is relevant to ask for how much longer capping on local authority expenditure should continue. Of course, no tax is popular. Taxation has never been popular, and it never will be. The council tax, however, has proved far more acceptable to

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the public than ever rates or the poll tax did. When we introduced council tax, of course, we separated out the question of taxation for businesses.

There would be a difference this year if we were to lift the caps on shire county expenditure. There is an automatic braking system--the local elections on 1 May. In shire county halls, all three parties are jockeying for position. In my view, however, nothing concentrates their minds more carefully than the fact that all three parties must face local elections on 1 May. It is for them to justify what level of expenditure there should be and on what they will spend that money. In my view, the change should be phased, because not every authority has an election next year.

I think that we can now safely start to move powers back from Whitehall to local government, but not in one fell swoop. Let us base that movement on the proximity of elections, when the people locally can decide whether they approve or disapprove of what has been carried out.

All Budgets are balancing acts for Chancellors. They become more and more difficult every year, given the intense pressure for a higher level of state spending, and this year is no exception. What stands out in this Budget, in my view, is the commitment of my right hon. and learned Friend the Chancellor of the Exchequer to keep inflation low and to continue policies that reduce unemployment. With that economic background, as long as we talk nicely and politely to the electorate, the governing party, the Conservative party, can still see the general election there for the winning.

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