| Previous Section | Index | Home Page |
8.40 pm
Mr. Bernard Jenkin (Colchester, North): I am grateful to have caught your eye, Madam Deputy Speaker. I confess that I had not intended to detain the House for long. I have a few, I hope, pithy things to say, but I feel that I have a responsibility to expand on the comments that I intended to make, because there has been such a paucity of speeches from Opposition Members. I do not unduly criticise them for failing to produce a lot of crocodile-tears speeches on the social security system, but I wonder what it means. I am interested in the speculation of my hon. Friend the Member for Southport (Mr. Banks) on their silence.
Could this be the reason? The age of reality seems to have dawned on certain Opposition Front Benchers, notably the right hon. Member for Dunfermline, East (Mr. Brown)--he is the ghost at this feast, because he instructed the Opposition social security team to stick to the spending plans set by this Government, but it is my guess that not many people, particularly in the Labour party, want to support the proposals of the ghost at the feast. For years, the Labour party has established itself on the principle that increased Government expenditure is the way to solve the ills of the nation. That has been the bedrock philosophy of the Labour party. Having that foundation stolen from under their feet has left many Opposition Members drifting in the ether. I regret that we could not hear from more Opposition Members with their drifting speeches this evening.
I take great pleasure in taking part in this debate and following my hon. Friend the Member for Southport. This budget is probably the most important issue that we ever discuss in the House, not simply because it is by far the biggest, but because we do not have a political system that enfranchises the poor--there are various definitions of the poor, including the bottom 20 per cent. and those on income support--as a pressure group. When we change benefits for poorer people, there are no riots in the streets, the trade unions do not rush to the barricades and there are no particular groups in the House that can sway large numbers on those issues. The poor of this country are the responsibility of every hon. Member, because each and every one of us represents a constituency in which the recipients of this budget live, so it is up to each and every one of us to represent the interests of our constituents as best we can in respect of this budget.
I never lose the opportunity to remind whatever audience I happen to be addressing, whether the House or elsewhere, of the background that we have to live with--the three numbers that stick in my mind when considering
the growth of social security. When the Conservative Government of 1974 left office, social security expenditure represented 7.4 per cent. of gross domestic product; when we regained office in 1979, it had risen to 9 per cent.; and by the time the Social Security Select Committee dealt with the growth in social security expenditure in 1994, it had reached nearly 12.5 per cent. of GDP.
The great achievement of my right hon. Friend the Secretary of State during his tenure of office has been to begin to reverse that trend of inexorable growth. Even during Mrs. Thatcher's Administration, the trend rate of economic growth may have been about 2.2 per cent., but the trend rate of growth in social security expenditure was 3.3 per cent. We are stuck with that history.
It was my right hon. Friend the Secretary of State, in his famous Mais lecture, who burst open the problem of that structural growth in social security expenditure and forced it on to the political agenda, forcing hon. Members of all parties to discuss the issue and face the consequences of not doing anything about it. Only my right hon. Friend has been able to do something about it, and that is what we need to discuss today. His great achievement has been to reduce the rate of growth in social security expenditure to something that we can conceivably afford into the future--a rate that is below the trend rate of economic growth--so that we can look forward to that expenditure becoming a reducing proportion of GDP, and so that we can, as many Opposition Members have suggested, transfer expenditure to other priority programmes and to the general competitiveness of our economy.
One of the ironies of this debate is that new Labour grudgingly admires that achievement. The Labour party, or certainly the Front-Bench team, has switched its attack. The old attack was based on the gut reaction that we should spend more and that every problem should be dealt with by more money.
Mr. McLeish:
You are spending more.
Mr. Jenkin:
The hon. Gentleman has switched his attack. He says that we are spending too much. As I explained, that may be why so few of his colleagues are here to support him, because they do not agree with that policy. His attack is that we spend too much and that the growth in social expenditure that he aided and abetted during the Thatcher years has become an evil to be attacked. The Opposition have switched their attack the other way--we have not cut expenditure enough.
Even then, there is a fundamental inconsistency. Opposition Front Benchers are playing two tunes: one tune to try to reassure the electors that the next Labour Government--whenever they will be elected--will not need extra taxpayers' resources, and the other for their trade union supporters, their Back Benchers and the constituency Labour parties, telling them that more money will be available.
The policies that Labour espouses--for example, the minimum wage--will indirectly and directly increase social security expenditure by adding unemployed people to the dole queues. Welfare to work has been properly costed at more than £800 million and may return some people to work, but the net cost would be more than £440 million.
It is a failure of understanding on the part of the Labour party if it thinks that there are easy stones to turn over to find self-financing schemes to get people back to work more readily and to reduce the social security burden. That is the Midas touch that Labour promises to bring to the social security budget. If it were easy, would not every western Government with a large welfare budget leap at its proposals? Experience shows that, where such experiments have been tried, they prove to be more difficult to achieve--and more rigorous, perhaps even more authoritarian--than Labour would have us believe.
Another Labour policy is abolition of the 16-hour rule. How nice it would be to allow people to work more than 16 hours a week and not confiscate their benefits, but that promise would cost another £875 million. Labour has failed to live up to that promise. The introduction of local discretion in social security policy is a desirable aim, but if introduced in isolation--as if it could ever be a revenue-neutral policy--the most conservative estimate is that it would cost another £410 million.
Most staggering of all is the proposal for a guaranteed minimum pension. All evening, Opposition speakers have railed against the evils of means testing, yet they want to introduce the most massive increase in means-tested benefits for pensioners that can be imagined, amounting to an annual expenditure increase of £2.2 billion. That is against the background of their opposition to every revenue-saving measure proposed by my right hon. Friend the Secretary of State during this Parliament. The idea that the Opposition--I am tempted to use that uncouth phrase, "that lot over there"--could be responsible guardians of the public purse when they offer a concoction of inconsistency, economic moonshine and downright dishonesty, is extraordinary.
Perhaps the greatest irony is the saga of the windfall profits tax. Let us explore its background. It is true that, early in the life of this succession of successful Conservative Governments, my right hon. Friend Lord Howe, the former Chancellor of the Exchequer, introduced a windfall profits tax on the banks. The background to that was a quantum change in the method of calculating interest, so that, overnight, the banks had a windfall gain in their profits. It was not actual cash coming into the banks but a change in bank regulation which suddenly and dramatically improved their balance sheets. Because it was a regulatory change, a windfall profits tax was justified. There is nothing of that nature with the proposed windfall profits tax on the privatised utilities, which lies in the background of this debate. At least a bank is a bank; there is argument about what constitutes a privatised utility.
Labour's friends in the former privatised companies are trying to wriggle out from the obligations that are to be put upon them. [Interruption.] It would be invidious to mention names in this place. There is also the question of what constitutes a windfall profit.
All our 33 privatisations have been opposed by Opposition Members, who said that they would not work. The right hon. Member for Glasgow, Garscadden (Mr. Dewar) told us that British Airways would be the pantomime horse of capitalism, but that turned out to be one of our most spectacularly successful privatisations. Their opposition continued right up to our latest
privatisation, that of British Rail. We privatised Railtrack, created and sold the leasing companies, and introduced rolling stock companies and the passenger rail franchise companies. We are attacked by the Opposition not because it has not worked, as they forecast, but because it is too successful.
So successful and cash-generative have our privatisations been, and such are the quantum leaps in services to the customer that have been achieved, that the Opposition think that those companies are too profitable and they want to take the money away. It is ironic that the policies that they wish to fund if, God forbid, they are ever returned to government, and that they would have us believe would be the fruits of their efforts, are actually the fruits of our policies. That underlines how unsustainable is their philosophy of public spending and Government.
When the right hon. Member for Dunfermline, East (Mr. Brown) made a speech capping the spending ambitions of his fellow Front Benchers, my right hon. Friend the Prime Minister described it as the jackdaw speech. What a brilliant image that is. New Labour is stealing Conservative policies, but it is stealing them in the manner of a dumb animal picking up bright things because they seem attractive, to salt them away, not knowing their value.
There was a similar lack of understanding in the exchanges between my right hon. Friend the Secretary of State and the hon. Member for Peckham (Ms Harman). She is beginning to mouth the thinking of the Social Security Select Committee about the future of social security. There is a problem with the growth of means-tested benefits, and the Government are fully aware that the growth of means testing, particularly for those in or near to work, discourages work and discourages future pensioners from saving. However, the language of the debate has been created not by Labour Front Benchers but by the Social Security Select Committee and, in particular, by our much-loved and revered Chairman. He created the language; he invented the term "poverty trap" when he was director of the Child Poverty Action Group. He has enlarged the language of the corrosion of positive social virtues through the process of means testing. He is having some difficulties, as we all are, in going further than that.
It is not good enough for the hon. Member for Peckham simply to rail against the growth of means testing and then propose absolutely no solutions for dealing with it. In the background is the implication that there needs to be more general expenditure on welfare and more general benefits to do away with means-tested benefits. Any efforts that Conservatives have made--with the introduction of Parent Plus and family credit--to turn means-tested benefits into positive benefits that help people back into the labour market are immediately attacked by the Opposition as subsidies on low pay. There is no understanding of the problems or their solutions.
New Labour is new; it has changed, but it is still way behind the Conservatives. I have one or two differences with my right hon. Friend the Member for Sutton Coldfield (Sir N. Fowler). After the battles that he had about, for example, uprating pensions in line with prices or wages, I can understand his amazement that the new Labour party has been converted to the uprating of state pensions by prices and to the need for funded second-tier
pensions. However, it is a little late for the Labour party to be converted, because the decisions needed to be made 10 years ago, and to keep being made.
It was the Labour party that fought the provisions of the Pensions Act 1995, which further reformed state earnings-related pension schemes to contain the future liability. The Labour party is still behind us, because, by talking about the introduction of stakeholder pensions, it harks back to the sort of state corporatism that the Social Security Select Committee saw in Singapore. I see that the hon. Member for Croydon, North-West (Mr. Wicks), who joined us on that trip, is in his place. The Labour party is harking back to the sort of state corporatism that the old colonial British Government left behind in Singapore in the 1950s.
When we asked the Labour party who set up the central provident fund system in Singapore, we were told that the Singapore Government inherited it from the colonial administration. Things have moved on since then; we do not want a paternalistic Government-controlled pensions system, whether funded or unfunded. We want a system in which individuals and families have personal control over the capital that they have invested for their future and their families.
To start suddenly talking about second-tier pensions half way through the 1990s--when half the working population has already had second-tier pensions, and been saving for them in occupational schemes for at least 100 years, in personal schemes for at least 50 years, and most particularly and more populously, for the past 10 years--after opposing opting out from SERPS for the past 10 years is extraordinary and inconsistent. I congratulate the Labour party on its progress. We should regard it as a delinquent child who is making unexpected progress, but let us not pretend that it is an adult political party capable of making adult political decisions as an adult Government. There is much more progress to be made.
The hon. Member for Peckham proffered her idea of stakeholder pensions as a second tier, but she is actually proposing a fourth tier. We already have three tiers: the first is the basic state pension, the second is the state earnings-related pension scheme, which can be commuted into a funded personal pension, and there is often a third tier in terms of voluntary savings for retirement. The Labour party now seems to be proposing a fourth tier.
I agree with my hon. Friend the Member for Havant (Mr. Willetts) that part of the origin of the misselling problem is the extraordinarily complex and excessive regulation of the private pensions market. By that, I mean not simply the regulation of salesmen's behaviour but regulation in its broadest sense: regulation creates a broad complexity of pensions products, and the tax system creates many extraordinary anomalies to encourage people to save.
| Next Section
| Index | Home Page |