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Mr. Prescott: It is in Cabinet papers. The right hon. Gentleman discussed it and gave it the name "the Prescott option".

The Deputy Prime Minister: I am giving the right hon. Gentleman some credit. He should be proud of it.

What emerged from the hon. Lady's approach is that, deep down, Labour has a gut detestation of anything that involves a relationship with the private sector. She also drew attention to another cost in Labour's plans. According to the Red Book estimates for the Department of Health, nearly £500 million over the next two financial years involves PFI. If Labour is in favour of it I understand that, but if it regards it as some hideous Tory innovation, how would a future Labour Government be able to accept our public expenditure figures?

The Opposition do not speak with one voice on the subject. The hon. Lady might have done well to speak to the hon. Member for Sheffield, Brightside (Mr. Blunkett). As one would expect, he received high praise from the shadow Chief Secretary, who described his ideas as follows:

Let us consider what happens when imagination gets hold of public finances. The hon. Member for Brightside envisaged local authority schools borrowing from the private sector--from the banks--to increase capital spending on schools. The problem is that such borrowing by local education authority schools would count as public expenditure. If it continued for 10 years, it would add another £320 million a year to the costs not accounted for in the Red Book.

Labour's policies are littered with such mistakes. Let me use the example of local authority receipts for house building and the extension of student loans. Labour has set out plans for student loans, but its proposals would make sure that the loans were included within the definition of public expenditure. That would lead to an increase in expenditure of £950 million a year.

Perhaps the biggest and bravest of all the announcements is that which centres on the phased release of local authorities' capital receipts. If the capital receipts that are there were released over five years, they would amount to about £2.6 billion a year. I will not inflict my views on the House; I will give the views of The Economist, which said:

That is a wholly independent and accurate assessment of the position.

The first problem with the proposal is that it actually adds to public expenditure. That is only the start, however. Where are these capital receipts? They are all in the wrong places. Inner cities would not benefit very much. Thirty-six councils have no capital receipts to

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release. Although it could be argued that there is plenty of need in Birmingham, there is not a penny to be released there. There is bad news for the hon. Member for Blackburn (Mr. Straw), and the cupboard is bare in Hackney, Newham and Southwark.

There are, of course, receipts to come in some areas--the prosperous suburbs. That is very convenient for the Labour party, but not, of course, for new Labour. This is old Labour: this is Herbert Morrison. This is called building out into the Tory marginal constituencies. Releasing receipts where the receipts actually are serves a new political purpose--not a social purpose, or an economic purpose. On the assumption that it costs £40,000 to build a council house, Crawley will have 2,200 new council houses, Newbury 1,600, Bromley 1,500, Surrey 1,300, and Malvern Hills and West Dorset 1,000 each. The policy and the targets are wrong.

That leads me to the new panacea. Labour calls it a windfall tax. Perhaps we have been a bit slow: it is not a windfall tax at all, but a tax on jobs, savings and pensioners. I cannot say how much it will be, because Labour will not tell us, and will not tell us which company will be taxed and when. Whenever the tax comes, however, it will affect pensioners, savings, jobs and investment. There is no such thing as a cost-free tax, plucked out of the air without doing any damage.

The fact is that Labour is blithely uninterested in the effect of this latest tax on gas, electricity and water prices, jobs, consumers, pensioners and shareholders. What a dramatic contrast that is with the policies that we introduced so painfully in order to achieve the dramatic results that the country is now enjoying. Today, we have the conditions that are right for businesses to thrive, for investment and for the creation of real jobs. The figures are as eloquent as one could possibly ask. There are 1 million more small businesses than there were in 1979, and we have the lion's share of all the inward investment coming into Europe. There has been a remarkable and continuing fall in the claimant count of unemployed people over the past four years. We have viable businesses, proper jobs and the best outlook for the country for a generation. What is the Labour party offering?

Let us look at what Labour is offering in a bit more detail. It is offering three new policies. There is a programme for the young unemployed, of which the main elements are a job subsidy for the long-term unemployed and the abolition of the 16-hour rule. I confess at once: we all know that it is perfectly possible to pay employers to offer temporary jobs to the unemployed. That is what used to happen in the 1970s. In the nationalised industries, subsidy after subsidy was paid to loss-making companies such as British Leyland and British Steel to keep them afloat, and to enable them to employ more people than the market justified. That was madness then, and it would be madness to revert to it now. Paying billions of pounds in subsidies to employers to take people off benefit for a couple of years, parcelling them up into some new parallel, artificial economy, is retrograde, and would destroy British competitiveness.

Such action is also foolish. What happens when the money runs out? Money has been taken from the utilities and--let us assume that Labour's case is right--new employment for those affected has been created for a short time. The money, however, is supposed to be a one-off--a windfall. What happens when those who have taken it

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must face the fact that they have used it? The cycle begins all over again. Where will the new subsidies come from? From the employers, who then say, "We can no longer afford to employ the people whom you have been subsidising"? Will there be another one-off levy on some other sector of the economy that happens to be doing well, or happens to have offended against the ideology of the Labour party? All the young people will be back where they started--back on the dole.

Let us be clear. Labour's policies start by reducing overall demand in the economy. Labour will take money from the utilities, take money by means of the minimum wage, take money from the social chapter, and use it in part to subsidise 250,000 young people. There will be higher taxes, no extra demand, but 250,000 more young people in jobs. What will happen to those whose jobs the young people take, who are displaced because subsidised labour are available to do the work more cheaply for the employer than those currently employed in the companies that would take the young people on? There is no answer to that question. There will be no higher demand in the economy, just a switch from people who are now employed at market rates to a group who are temporarily employed at subsidised rates.

It is not good enough for the state to shovel people en masse into employment, and simply hope that it will be all right on the night. It does not work. We have proved that time and again, and I cannot say how strongly our experience justifies our indignation at Labour's policy. We have been more successful in rebuilding our urban areas in the renaissance of the great towns and cities of this country, and drawing jobs, opportunities and wealth back into those areas, than any other Government in modern times. That can be done only by changing the climate, so that it is attractive to those who can afford to invest--those who can make the choice, and live, build or buy their homes and create jobs in such areas. That is the way in which it must be done, and we have shown throughout urban England and the rest of the United Kingdom how successful it has been.

We shall build on all that. We are already doing so, with the single regeneration budget, city challenge and a range of partnerships between the public and private sectors, which have never been seen in this country during this century. That is a remarkable tribute to the Government's policies. What is Labour going to do? It is not just about some cosy gesture to try to buy a quarter of a million votes from young people; it is much worse than that. Labour's policies for the urban areas--the stress areas--are all about destroying the climate of opportunity: the job-creating opportunities on which those areas depend. Let us take the destruction of the grammar schools. We all saw what happened.

Mr. Prescott: You closed 400.

The Deputy Prime Minister: Is the right hon. Gentleman saying that he will keep the grammar schools open? Is he saying that?

If anyone wants to know why we have a vicious circle of decline in the most stressed areas of the country, it is because the Labour party's social engineering persuaded any parent who could exercise choice to leave those areas and move to the leafy suburbs where the comprehensives were just as socially polarised as the old grammar schools

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and secondary modern schools were. Hon. Members should not ask me whether that is right or wrong; they should ask the leader of the Labour party, who did exactly the same. He could afford to choose. He did not care about the rancid Labour local authority that he had left behind, with some of the worst levels of performance in factor after factor. He turned his back on it, just like hundreds of thousands of middle-class families have done, leaving stress and a vicious circle of decline. The Tories came riding to the rescue of those declining areas with policies designed--

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