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Mr. Don Foster (Bath): I am sure that the whole House would wish to pay tribute to the hon. Member for Warwick and Leamington (Mr. Plaskitt) for an excellent maiden speech. I have no doubt that the House appreciated his tribute to his predecessor, Sir Dudley Smith, and to his work for individual constituents.
I have no doubt that the House has suffered, almost in silence, for 75 years from not having heard more details about the hon. Gentleman's constituency. Not only were we grateful to have heard more about it; no doubt his constituents were, too. That may ease his passage to the knighthood that he so clearly craves.
I suspect that there will not be uniform agreement in the House about the hon. Gentleman's comments on the undemocratic nature of local government capping. Liberal
Democrat Members entirely agree with him and feel it a great pity that other hon. Members on the Government Benches do not seem, at the present time at least, to support his view.
The hon. Gentleman referred to his concern for schools. I shall pick up on one or two of the points that he made, because I share his concern about the situation in our schools and fear that the Budget will not offer the comfort that he currently believes is contained within it.
Yesterday, my right hon. Friend the Member for Yeovil (Mr. Ashdown) made it clear that the Liberal Democrats believe that there are some good elements in the Budget, but we do not believe that, when taken together with the many aspects of the Budget, with which we fundamentally disagree, they can lead us to support it. Therefore, as my right hon. Friend made very clear yesterday, we will not support it. We believe that the Budget is rather like the proverbial curate's egg--good in parts. Some of those good bits offer jam tomorrow, but frankly there is precious little of it, as I shall demonstrate shortly.
The right hon. and learned Member for Rushcliffe (Mr. Clarke), in an excellent speech that the House will have thoroughly enjoyed if not entirely agreed with, made it clear that the more one analyses the content of this Budget the more one will see that it will not deliver what the Chancellor, in his hype, suggested it would deliver. Indeed, it is probably fair to say the Budget is more of a triumph for the spin doctors than for the British people.
As the former Chancellor said, the British people will certainly be hit by higher taxes. There is nothing intrinsically wrong with higher taxes. Indeed, my party has been clear and consistent on the issue. We have long argued for increased taxes, and have said very clearly what those increases should be. We have said clearly that they should come through the fair, open and honest form of taxation--income tax. We have made very clear what we would use the revenue from an increase in income tax to fund.
The Liberal Democrats have also made it very clear that we would have had a different Budget. Our proposals to increase carbon tax while reducing employers' national insurance contributions would have meant a switch away from things that are bad, such as pollution, to things that are good, such as creating employment.
Sadly, that is not what the Chancellor did in his Budget. He has certainly raised taxes. It is estimated that the average taxpayer will have to pay an extra £234 per year--£1,100 extra during the course of the Labour Parliament. Those taxes have been raised not through fair taxation but through hidden taxes, which the Chancellor hoped that the public would not notice. We believe that such taxes are wrong. They will not stop interest rates from rising, because they will not cool the consumer boom. Nor will they, in many cases, help businesses.
The Institute of Fiscal Studies has today analysed the Budget and argues that the net effect of the various tax measures will be a £3 billion tax increase on businesses. Because the consumer boom is not being tackled, businesses will face high exchange rates, which affect exports, and the very real likelihood of higher interest rates. In other words, the Budget is offering a triple whammy to businesses in this country.
The extra taxes that are being raised are also wrong, because they are not being used to improve our essential public services. What warning were we given for the taxes
that are in the Budget? What reference was made to them in the lead-up to the Budget? Indeed, what reference was made in the Labour party's election manifesto to a tax on pensions?
The current Chancellor of the Exchequer must believe that it is right for political parties to make clear in advance their taxation plans, because, after the Lamont tax-raising Budget of March 1993, following the 1992 general election, he said:
After all, despite repeated questions from my right hon. Friend the leader of the Liberal Democrats, from me and from many of my parliamentary colleagues, we were told categorically, time after time, that individual departmental spending ceilings would not be breached. Yet there has been a significant U-turn by the Government in a very short time. In the two keys areas of health and education, the departmental ceilings are to be broken. It is a U-turn, but I congratulate the Secretary of State for Education and Employment on persuading the Chancellor to break the clear commitment that they gave only a few days ago.
The Chancellor announced an extra £1 billion for education--taken, incidentally, from the contingency reserve. One might argue that that will leave them in a rather parlous state and perhaps unable to sustain the pressures that may well come because of the pressures on many other public service areas. He implied that it is only a one-off increase in spending, a one-off payment into education. Even given that, one could argue that something is better than nothing, but the real question is whether it will be enough. One thing that is clear is that it will do nothing to help this year. It will do nothing to help resolve the crisis that exists in our schools at present. Class sizes will continue to rise. Already one in three primary pupils are in classes of 30 or more. I wonder how that figure will look in a year's time.
Were he in his place, the Secretary of State would no doubt intervene to say that the Government are doing something; that they will reduce class sizes by the transfer of money from the assisted places scheme for children aged five, six and seven to maintain the pledge, that they gave to the British people.
But it is worth reflecting that, from the figures that we now have of the amount of money which, in the forthcoming year, will be transferred from the assisted places scheme, that amounts to the equivalent of 1p per pupil per day. It is simply not enough. I have consistently said that it is not enough to deliver that election pledge, but the Government have consistently said that I am wrong.
The story has now broken. Only yesterday, the Minister for Education and Industry, Scottish Office, the hon. Member for Cunninghame, North (Mr. Wilson), also
acknowledged that there will be insufficient money from the assisted places scheme to ensure that the Government meet their commitment on class size. That was plastered all over the Scottish press. Class sizes will continue to rise.
Similarly, the Secretary of State referred to the 600 primary schools with outside loos. They will continue with outside loos for at least the next 12 months. He referred to the 25,000 temporary classrooms. For the next year at least, there will continue to be 25,000 temporary classrooms. Buildings will continue to crumble, and roofs, as the right hon. Gentleman said, will continue to leak. There is nothing in the Budget for education this year. Therefore, there is no comfort for the hon. Member for Merthyr Tydfil and Rhymney (Mr. Rowlands) who, only three weeks ago, addressing members of the Government Front Bench, said:
But if there is no jam today, what of the jam for tomorrow? We are told that there will be £1 billion extra for schools. It sounds like pennies from heaven until we start to analyse the reality. Put simply, it goes like this. First, there is no extra money for further education, at a time when, under the previous Government's Budget, the money for further education was to be cut. That means that there will be further cuts in further education. Secondly, there is no additional money for higher education. That means that there will be further cuts in the higher education sector.
Yesterday the Chancellor announced that he was increasing the inflation targets for the current year and the next financial year and that, in turn, he was therefore increasing the GDP deflators, in both cases from 2 per cent. to 2.75 per cent. Taking those two years and that increase together, it will cost somewhere in the region of £500 million to meet that increased cost of inflation to the education sector. Therefore, the amount of money that is now left of the £1 billion to spend on any improvements is only £500 million.
But then the Chancellor announced his taxes that will hit pensions. They will hit the local authority pension schemes as well, and the local authorities will have to find the money to replace the money that is lost. That too will reduce the amount left from the £1 billion.
We now have a situation where the increased money that is available in real terms is less than £500 million. Yet if we go to the local education authorities and ask them simply how much money they need to stand still to take account of the continuing overhang of the second half of the teachers' pay award, changes in legislation on school transport and seatbelt rules and, in particular, the increased number of pupils that there will be in our schools, they will tell us that in England alone they need well over £500 million, so in the Kingdom as a whole they will need even more than that.
The net effect of all that is that the £1 billion on offer for next year--not for this year; there is nothing for this year--will not even be sufficient to allow our education service to stand still. As a result of the Budget announced yesterday, there will be further cuts in our schools. Therefore, as I said, jam tomorrow but not very much of it.
That, sadly, is true in so many other areas of the Budget. The hype was impressive. For example, we are told that £150 million will come each year from the mid-week lottery to help child care. We are also told that £200 million will come from the windfall tax over the lifetime of the Parliament. That amounts, roughly speaking, to £200 million a year.
If that is the case, and if we accept that there are about 1 million lone parents each with two children, that £200 million a year amounts to the staggering sum of £2 per week per child. Frankly, one cannot buy much child care with that. Not widely reported is the fact that the new Government are continuing the plans of the previous Tory Government and freezing benefits to lone parents, so that the extra available is effectively wiped out.
The Government may say that that may be true but, nevertheless, they are extending the child care disregard, uprating it from £60 a week to £100 a week, so they are doing something. However, if one looks at the figures, one sees that only one in 20 of lone parents entitled to family credit currently benefit from the existing child care disregard, so the chances of more being helped by the uprating are slim. Let the House not forget that the increased disregard is available only to those lone parents with more than one child. It is no wonder that the so-called bonanza is reckoned to cost the Treasury only £10 million.
We are now told that there is to be a national child care strategy, but we have to ask what that strategy is. If there is some extra, however small, for child care, for education and health--although we must reduce the increase for health because of the impact of the increased GDP deflator and the abolition of tax relief on private medical premiums--there is no additional money for other vital public services such as the police and social services. As the right hon. and learned Member for Rushcliffe said, the present Government are accepting for those services the spending targets and limits that he set for them, so there is no extra. Yet they will now have to face the increased pressure of that rise in the GDP deflator.
Therefore, it must be questioned whether that extra money for education can, in any shape or form, be ring-fenced or whether it will end up propping up the equally vulnerable services. The overall picture for our public services does not look rosy.
Only today, the Institute of Fiscal Studies, in the briefing to which I referred earlier, looked at the three scenarios for public finances that are offered in the new Red Book. Its analysis, if I understood it correctly, shows that, even taking the most optimistic estimate of growth in public spending, when the new Government's plans are compared with the historic position of the previous Government there would, in the last year of the Parliament, be a cut in public service spending of £15 billion. In other words, according the IFS, Labour will spend £15 billion less on public services, on its current plans, than might have been expected to be spent by the Tories in the last year of this new Parliament.
The centrepiece of the Budget--the part that we heard most about from the Secretary of State today--is the welfare-to-work programme, paid for by the windfall tax. My party fully supports the principle of welfare to work,
and we offer to support the Government in any way that we can when they introduce the measure. Getting people off benefits and into work must be the right way forward; we applaud the new Government for making a start.
We would not have gone about it in quite the same way. We would have helped to boost job creation by cutting employers' national insurance contributions, which are a tax on jobs. We would initially have targeted the additional help on the parts of the country with the worst unemployment. We would have given a greater boost to child care provision. Additionally, we would have tackled the root cause of unemployment by significantly increasing--far more than the Government have--investment in education, especially in schools and nurseries.
Generally, however, we welcome the Government's moves and will do what we can to support them. We believe that they offer real hope to many of the young people who feel that there is no hope. But we must record a severe reservation about the compulsory aspects of the scheme. I am grateful for today's assurance from the Secretary of State that, during the adjudication process or an appeal, someone who chooses not to take up any of the options will still be able to receive benefit. But the vast majority of people who are out of work clearly want to be in work or to take up training opportunities that will improve their employability. So we see no need for a compulsory element to the scheme; indeed, we perceive several dangers in it.
I hope that, when the Financial Secretary replies to the debate she will assure the House that the Government will publish in full the results of the proposed pilots and include in any review of those pilots details of what happened to people whose benefits were cut because they failed to join one or other of the elements of the package.
We certainly do not support the Government's way of funding the welfare-to-work scheme, however. We fundamentally oppose the windfall tax, which is unfair and retrospective. Nor will it hit its intended target: the fat cats. It will hit ordinary people such as pensioners, those who hold endowment mortgages, and many others. It will hit many people who gained nothing when the immediate gains were made just after the utilities were privatised. The House will have noted from the Secretary of State's speech today that he accepts that it is a retrospective tax. He made it clear that he was referring to the taxation of profits made in the past.
An analysis of shareholding revealingly shows that the tax will not hit the fat cats. In my area's water company, Wessex Water, immediately after privatisation there were 186,000 small shareholders. Within two months, that had fallen to 124,000. It now stands at only 60,000--in other words, most of the fat cats have gone. Only 15 per cent. of the shares of Wessex Water are owned by individuals; all the rest are held by institutions which, as might be expected, have moved in and out of Wessex shares over the years.
"If he cannot point out the section of the election manifesto which warned of increased tax rises for the ordinary voter . . . he should be ashamed of himself."--[Official Report, 17 March 1993; Vol. 221, c. 291.]
I believe that the current Chancellor should be ashamed of himself, because he has introduced taxes of which no warning was given in the Labour party election manifesto. He has betrayed the very spirit of the Labour party's promises on taxation. It is also clear that he has betrayed the Government's promise on education. "Education, education, education," said the Prime Minister in the lead-up to the election. But has this Budget really delivered for education? There is no doubt whatever that it has delivered more than many people expected, or could even remotely have expected.
"Ministers must address the crisis facing primary schools now".--[Official Report, 10 June 1997; Vol. 295, c. 957.]
Ministers have failed to deliver for the hon. Gentleman.
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