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7.26 pm

Mr. Malcolm Bruce (Gordon): I was interested to hear the right hon. Member for Epsom and Ewell (Sir A. Hamilton), who made many fair points in defence of the Government's record, but seemed to be remarkably unconcerned about the social fallout from the massive changes that have taken place during that period. There is a fear among people that constant change, constant privatisation, the constant shedding of labour and the constant attempt to drive down public expenditure, all of which might be legitimate, nevertheless create significant social casualties, to which the Government have at times seemed rather indifferent.

An interesting fact, which brings that into sharp relief, is that the total number of extra people who have been claiming unemployment benefit since 1979, and the cumulative cost of those extra benefits, almost exactly equals the entire value of the taxation receipts from North sea oil and all the privatisation yields. That is why, at the end of 18 or 19 years, the Government's overall tax take is slightly higher than it was under the last Labour Government, and tax cuts have not been achieved across the board.

There have been changes in tax rates, and the burden of taxation and its impact have been changed, but the overall take has not significantly changed. That is because such an upheaval cannot be achieved without both social and economic costs. I am not saying that the changes were wrong or that benefits did not flow from them, but the Conservative party occasionally seems a little unconcerned about the people caught in the maelstrom, who have no control over the situation in which they find themselves.

For the record, I want to point out that my party--the Liberals, as well as the Liberal Democrats and the Social Democrats--did not oppose every privatisation. We did not oppose the privatisation of BP or British Airways. We were concerned about the way in which British Airways was privatised, to the disadvantage of other airlines and with the eventual destruction of British Caledonian and a number of other airlines. Similarly, we did not oppose in principle the privatisation of British Telecom, the electricity companies and British Gas.

However, we were concerned about the lack of competition and the consequences of privatising those companies in a monopoly state. We believe that those privatisations cost us a great deal, and their consequences have not yet been fully addressed. That is not to say that there will not be benefits at the end of the day. Nevertheless, the privatisations could have been conducted in a manner that advantaged the taxpayer: a greater yield could have

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been secured, as the Chairman of the Public Accounts Committee, the right hon. Member for Ashton-under-Lyne (Mr. Sheldon), pointed out, and the consumer might have also had a real choice.

We actively supported much of the legislation reforming the trade unions--indeed, we pressed the Government for such reform on several occasions. We were ahead of the Government in calling for the abolition of the closed shop. I vividly remember calling for the abolition of the dock labour scheme in this House on a Monday, and the Government announcing on Thursday that that would occur. The port of Aberdeen was then paralysed by a dockers' strike, and the Prime Minister prayed in aid my remarks to justify her decision.

I put those facts on record because, although this is billed as a public expenditure debate, the tax implications and the changes that are taking place are part and parcel of it. I am somewhat intrigued by the Government's tactics regarding business planning. This is the third or the fourth Conservative Opposition day. I do not know how many more there will be but, by the time the House reconvenes in May, I am sure that the Conservatives will be well practised in the art of opposition--which is just as well because they will experience it for many years.

There is consensus across the parties that we need to control public expenditure not just in the interests of regulating borrowing, bringing down inflation and keeping taxation low, but because we know that the efficient targeting of public expenditure enables the effective delivery of public services to those who need them most. A specific aim of Liberal Democrat policy is to continue to bear down on, and control, public expenditure. We have made a commitment to hold non-education and non-health expenditure below the level of real gross domestic product growth in order to allow us to concentrate first on increasing real expenditure on education and health and secondly on reducing borrowing. That clear priority has been costed into the Liberal Democrats' alternative Budget, and it will also be costed into our manifesto programme.

Like Conservative Members, we were intrigued--indeed, somewhat astonished--by the shadow Chancellor's announcement that there would be no changes in income tax rates under a Labour Government, and that he would adopt the Conservatives' spending envelope for the next two years. I doubt very much whether the Conservatives really intended to adopt their spending envelope for the next two years--especially as they had tended to review it twice a year.

We part company with both the Conservative and the Labour parties in our belief that certain areas of public service expenditure are now so seriously deprived of funding that they cannot maintain acceptable provision at current spending levels. We accept that quality education and health are not all about money. However, we do not believe that it is possible to see real and significant improvements in standards and to achieve specific objectives without injecting additional resources.

We believe that every three to four-year-old child whose parents wish it should be entitled to nursery education. Both the other parties claim to support that concept, but neither is prepared to fund it. We believe that it should be funded from this year. We want to reduce class sizes, starting with the first three primary classes.

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We want to increase expenditure on books and educational equipment and improve the physical quality of the teaching environment in schools.

We have identified that expenditure as totalling about £2 billion a year, or £10 billion across a Parliament. We do not believe that that investment can be delayed any longer or that it can be funded by an increase in borrowing--which we all agree is too high. We believe that that investment could be funded by reversing the decision to cut the standard rate of income tax by a penny, which the Government announced in the last Budget. The Liberal Democrats have made a clear, unequivocal commitment to returning the standard rate of income tax to 24p in the pound in order to fund that expenditure.

I visited Wirral--where I have some family connections--the day before polling. I was interested by the number of people--many of whom were lifelong Conservative voters--who told me, "We shall certainly vote against the Conservatives. We are absolutely determined to get rid of this Government and we shall vote Labour to do that." However, quite a few added, "But we are not sure that voting in a Labour Government will make any difference." The Labour party has boxed itself in to such an extent--in the light of its record, I understand the reasons why--that people wonder whether it will be able to deliver the much-needed extra investment in education. Education was an issue in that by-election.

Those are perfectly honourable debating points: it is a matter of priorities and of legitimate choice. The Labour party is setting out its stall--I do not complain about that--and the electorate are entitled to make their own judgment. I contend that the people of this country believe that it will not be possible to improve the quality of education and maintain the quality of the health service within the existing spending priorities and via the modest changes that are on offer. When one says, "Whichever Government get in, taxes will go up," people just nod; they are resigned to that fact.

The sad thing is that people do not believe any of us any more. Their experience, particularly over the past five years, is that politicians will say almost anything to get elected and renege on their promises once that happens. That is a sad sign of the decline in the relationship between politicians and the electorate. We must try to re-establish that confidence. We should tell people honestly what can and cannot be achieved. I do not take issue entirely with the Labour party: I accept that Labour Members are trying to be honest about what may be achieved. However, there are some gaping holes when it comes to how Labour's pledges will be honoured.

At present, Conservative politicians are fond of attacking the credibility of Opposition spending and tax programmes, which distracts attention from their own policy. However, upon examining the Red Book and reading the speeches of the Prime Minister and his Ministers, I find it hard to believe that the Conservative party has a credible tax and spending programme for an entire Parliament--which is all right, because it will not need one. Nevertheless, I think that the public do not find it credible either. Most Conservative attacks on the Opposition are designed to distract attention from the fact that the Red Book forecasts do not maintain a credible scenario beyond the first two years.

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The Conservatives' promises depend on achieving some very optimistic forecasts. That is a significant point. The Chancellor assumes that, between 1992-93 and 2000-2001--that is the basis of his overall working assumption--there will be eight years of continuous economic growth at above 2 per cent. per annum. That has never happened in recorded British economic history.

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