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Modernising public services
I have one further set of announcements to make.
After long years of neglect, step by step this Government are rebuilding our public services.
On top of the £40 billion we are already investing in education and health, we can today allocate increased resources for key public services.
We have identified specific areas where step changes can be made through additional investment from our capital modernisation fund.
We are allocating an additional £170 million for crime prevention in areas where crime is highest. The Home Secretary will make a detailed statement on this to the House.
For public transport, in addition to the rural transport fund we have created, we will make a further allocation that will be announced by the Deputy Prime Minister.
For Northern Ireland, today we allocate additional capital spending of £50 million; for Wales, £80 million; for Scotland, £165 million. Full details of the new investments will be given by the Secretaries of State.
The £19 billion we are already providing for education will finance smaller class sizes, more nursery education, better pay for better teachers, our drive to improve literacy and numeracy and we will help 700,000 more young people to go on to further and higher education.
But, so that every child will have that chance, we need specific and targeted help for our inner-city schools. For upgrading their technology, the Secretary of State for Education and Employment will receive an additional £100 million.
And for every school in the country, we will not only invest in new technology. As a result of our prudence in the last year, and following the huge take-up of the additional money provided last year, we are able this month to make another extra and larger allocation for school books: £2,000 to every school in every constituency in every part of the country; immediate new resources of £60 million; a total of 10 million new books in all.
I turn to the health service.
The £21 billion extra money is making possible the largest hospital-building programme since the war; a £1 billion investment in modern technology taking place in the NHS; the recruitment of 7,000 new doctors; 15,000 more nurses; and a fair pay award for nurses.
The Government's new programme, NHS Direct, is a proven success.
And the Secretary of State for Health will announce detailed proposals not only to extend it to all of the country by the end of next year, but to carry NHS Direct
right into communities, with a network of health and drop-in centres where people can get immediate advice about treatment.
We have already provided additional resources for upgrading one third of all accident and emergency units that need modernisation.
Today, we can go further.
To enhance in every part of the United Kingdom the health care that people most urgently require, we today make an additional and immediate cash allocation, to be spent in the next 12 months, for the upgrading of every single accident and emergency unit that needs it, in every part of the country.
For this and other improvements that the Secretaries of State for Health, for Scotland, for Wales and for Northern Ireland will announce, I am providing for the NHS almost half a billion pounds of extra investment today.
Throughout the public services, more than £1 billion of additional new investment, on top of the £2 billion that I have allocated to families and pensioners.
Public services in the months and years ahead, safe in this Government's hands.
I have one final announcement.
We promised to get inflation and interest rates under control, to sort out the public finances, to make this the Government of economic competence, and we have.
We promised to invest billions more in health and education, and we have.
We promised we would cut youth unemployment, and we have.
I can confirm to the House that, while rebuilding our public services, our prudence in office also enables us to hold to our pledge made at the election not to raise the basic rate of income tax.
In fact, to reward work and ensure that working families are better off, I will match the new 10p starting rate of income tax this April with a cut from next April in the basic rate of income tax to 22p, the lowest basic rate of tax for 70 years and under this Government.
Today's Budget is a better deal for work, a better deal for the family, a better deal for business. It is for a Britain now united around values of fairness and enterprise. This is a better deal for Britain and I commend this Budget not only to the House but to the country.
Motion made, and Question,
Mr. Deputy Speaker:
I now call the Chancellor of the Exchequer to move the motion entitled "Amendment of the law". It is on that motion that the debate will take place today and on succeeding days. The remaining motions will not be put until the end of the Budget debate next week, and they will then be decided without debate.
Motion made, and Question proposed,
Mr. William Hague (Richmond, Yorks):
I begin, as ever and as usual, by complimenting the Chancellor on his fortitude in delivering a lengthy speech, and there are some things in the Budget that we wish to welcome. I of course welcome the reduction in the standard rate of income tax, which the Chancellor announced with great fanfare at the end of his speech after passing quickly over the abolition of the 20p band, with much less fanfare, earlier in his speech. Labour Members may also wish to know that all the announcements that the Chancellor made about the capital modernisation fund come from a Budget that has already been announced and that they cheered at the time. As the press release that I have just received appears to show, all those figures are from a fund that has already been announced, with no net increase in the total.
As ever, the most interesting thing about what the Chancellor said was what he did not say. He did not say--but it is the truth--that the total tax burden will rise next year as a result of his cumulative decisions. He did not say--but it is the truth--that, as a result of his decisions in three Budgets, this is the third year running in which we will have higher taxes because of the decisions of this Government. Last year, he had imposed higher taxes twice in a row, and that gave him a reputation for higher taxes. After three years in a row, he gets to keep that reputation for ever.
It would not have been apparent from the Chancellor's speech that he has already announced in previous Budgets tax increases for the coming year that add up to £7,200 million, including taxes on pension funds of £5.4 billion, earlier decisions on the married couples allowance of £1 billion and increases in petrol duty of £1.4 billion. [Interruption.] Labour Members like to cheer reductions, but they do not like to hear the truth about the increases. There have also been increases in stamp duty of £1 billion. People who have invested in pension funds, people who are married and people struggling to run their cars have already been paying for this Budget and those increases have already been locked in.
The Chancellor said that the Budget is good for families. It is good for families who do not have a mortgage, who are not married, who do not run a car, who do not smoke and who do not save for a pension. For a family like that, the Budget is fine. There may even be
a family like that somewhere in the country: it sounds suspiciously like the Chancellor to me. If we add it all up, he has already levied additional taxes of £1,500 for every taxpayer in the country--to which he has made marginal changes today--including increases in income tax in previous Budgets amounting to an extra £200 for a typical married couple with a mortgage.
The Chancellor is now posing as the man who likes to distribute a few little goodies, when he has imposed for the current year a huge rise in taxation. He is the man you meet in a pub who says, "Lend us a fiver and then I'll buy you a drink." He is the pickpocket Chancellor who shakes your hand with a smile after he has stealthily removed your wallet. He is the pickpocket Chancellor, aided and abetted by his next-door neighbour, the artful dodger.
The Chancellor seems to try to deny the facts of the matter. The actual fact of his first year as Chancellor was that he raised the tax burden by £6,000 million. Let him get up and deny that if it is not right. If it is right, he should tell the Prime Minister, because he has only just realised that in the past couple of weeks. In the Chancellor's second Budget, he raised taxes for this year by £7,900 million. He might have said in his Budget speech what the total rise in the tax burden will be as a result of his decisions. He had over an hour. We heard a lot of waffle, but he forgot to mention that line.
It is no good the Chancellor claiming that taxes are not rising. Last week, the Prime Minister finally let the cat out of the bag. He had denied for months that taxes were rising, but last week he looked at his folder and accidentally read out the truth. He said:
The truth after three Budgets is that the total of taxation is still rising, and the Chancellor did not have the guts to say so in his speech. Nor did he draw attention to other matters that are becoming apparent as we look into the facts that are emerging about his announcements. For example, there is a dramatic fall in the savings ratio. Not only has it fallen from 11 per cent. to 7.5 per cent. over the past two years, but there has been a fall from the Chancellor's own previous forecast, from 9.25 per cent. to 7.5 per cent. The Chancellor said nothing about savings, on which the story of the Government's policy is one of emerging disaster.
The Chancellor will understand it if I say that we must see emerging information about, and figures for, much of what he has announced, because he is not only an expert on stealth taxes, but an expert in giving a stealth speech. Last year, the £3.6 billion hike in corporation tax was described as
In 1997, the Chancellor's £5 billion tax on pension funds was described in the pocket guide to the Budget as
The Chancellor talks about investment, but we all know that his first Budget introduced a £5 billion tax on pension funds, and that tax has hit investment. We already know that, while he claims to cut taxes, taxes on people and businesses are soaring. We already know that the Government say one thing and do another, take a pound and give back a few pennies. They cannot be trusted to be straight, even on Budget day.
Last week, the Prime Minister said that he wanted our economy to be more like the American economy. One week has passed, and the Chancellor has made his Budget speech. Where is the American dream? Where is the radical plan to reduce welfare bills? So far, the Government have added £40 billion to welfare bills; America is cutting its welfare bills.
Where is the programme to curb union power, or to increase labour market flexibility? The Federation of Small Businesses says:
Another remarkable part of the Chancellor's speech concerned the economic forecasts on which his whole Budget is based. Experts will be astonished that his forecasts for GDP growth remain unchanged from the figures announced last autumn. He forecast 1 to 1.5 per cent. growth this year, but the upper end of his forecast is three times the rate of growth forecast by independent economists and published by the Treasury. He forecast 2.25 to 2.75 per cent. growth next year, whereas the
consensus of independent experts is that growth will be 1.8 per cent. That is the basis of the whole Budget and of all the Chancellor's calculations--the basis on which, even on his own figures, in the coming years there will be no repayment of public sector debt at any point in the cycle. That is not how the right hon. Gentleman chose to put it in his Budget speech, but it is the truth of the figures.
Behind the statistics of an economic slowdown, we see families under pressure, and businesses struggling in a manufacturing sector that the Chancellor will have further hit today, as I shall describe shortly. Since the right hon. Gentleman entered office, the forecasts for this country have been downgraded more sharply than for any country in the western industrialised world. Much of our manufacturing industry is in recession, and our entire agricultural industry is in deep recession. The extracts of the Red Book that I have seen so far cover that up with statements such as:
On enterprise, of which the Chancellor has made much, there are policies that we shall welcome. We shall welcome the new corporation tax starting rate of 10p for small businesses, although we shall want to know who will judge whether they are taking the right amount of risk, as the Chancellor appeared to foreshadow in his speech. He made much of his new package of reliefs and incentives for enterprise and, when we have looked at the details, we shall welcome some of them, including the research and development credit.
The very fact that the Chancellor appears so pleased with his latest package of measures, however, shows that he has completely missed the point. Does he not realise that what businesses need, much more than a new incentive here and a clever relief there, is to be set free from the massive burden of new taxes and regulations heaped on them by the Government? It is no good handing out one relief today and putting up other taxes tomorrow. It is no good the Chancellor coming here to talk about introducing tax breaks when the new Paymaster General chairs an Economic and Finance Council committee that is abolishing the tax breaks for the film industry that the right hon. Gentleman introduced less than a year ago.
The shipping industry will be deeply disappointed by the Chancellor's announcement today. It is hypocritical of the Government to fail to act, having raised such high expectations before the Budget. British shipping is an industry with desperate problems, and the right hon. Gentleman will have to explain why he has not been able to resolve the problems that he talked about previously. It is because he has been unable to do that that the president of the CBI says that regulations are now producing "creeping paralysis." The Association of British Chambers of Commerce said this morning that the Government have abolished 20 regulations and introduced more than 2,000. A small business man, quoted in a Sunday newspaper said:
The effects can be seen in the dramatic fall in the savings ratio, of which the Chancellor made no mention. The pensions tax that he introduced is costing a typical 30-year-old saver an average of £150 a year. The abolition of tax credits for non-taxpayers, many of whom are pensioners on modest incomes, is costing 300,000 pensioners an average of £75 a year. Today, the right hon. Gentleman had the opportunity to put that right, but he decided not to do so.
The Chancellor also announced the crazy abolition of PEPs and TESSAs--the most successful savings vehicles in our history. One month before the general election, the Prime Minister said:
The figures about the tax burden are beginning to come through. It seems that the tax burden is set to rise from 38.9 per cent. in the first year--which was already an increase--to 39.5 per cent. of gross domestic product in 2001 and 2002. When we do the arithmetic, it also appears--[Interruption.] Some of us must make sense of the Chancellor's distorted announcements as we go along. Today's Budget will raise taxes next year by £1.6 billion. As a result of the Chancellor's three Budgets, taxes are set to rise by £8.9 billion. That is the actual total.
The Chancellor today introduced the long-awaited and much-vaunted 10p tax rate. We welcome any reduction in income tax, including the 10p tax rate--although I note that the Chancellor also abolished the 20p tax rate. As a result of the Government's decisions, income tax will rise from the level it was at when Labour took office, and should be viewed in that context.
We welcome the decision to bring the starting point for employees' national insurance contributions into line with the starting point for income tax. However, the Government must not forget that a number of benefits are linked to national insurance contributions. We want to ensure that the Government do not use that measure to undermine the contributory principle.
The measures announced by the Chancellor regarding the national insurance contributions of the self-employed look, at first glance, like a higher tax on the self-employed overall. The Chancellor shrugs his shoulders and looks as though it is a matter of no consequence. However, it will greatly concern the self-employed if that reform results in a further increase in taxation for them. I note that the Chancellor is not taking the opportunity to deny that the measure will have that result.
The Chancellor's announcement about shares for all is welcome in itself, but it is in conflict with everything that he has done--and continues to do--in the area of share ownership. It is a bit rich for the Chancellor to talk in glowing terms about the merits of employee share ownership, given that he has spent the past two years undermining share ownership at every turn. What message does it send about share ownership when the Government prevent people who are too poor even to pay tax from claiming back tax credits on the few shares that they own?
What message does it send about having a stake in one's own business when the Government abolish retirement relief on capital gains tax, bringing thousands of small business people who are selling up for their retirement into the tax net for the first time? Such people have worked hard all their working lives and regard their businesses as their pensions for the future. The Chancellor has not thought about them in this Budget. If this were really a Budget for enterprise and work, the Chancellor would have reversed his previous stupid decision. We welcome any move to boost employee share ownership, but we will judge the Government by what they have done, not by what they say they might do.
I welcome the principle of incentives for people to run cars with low emission engines, which is good news. However, it is bad news for the Deputy Prime Minister, who is even now heading for the Maldives and will be delighted to know from the Chancellor's speech that he is to be given the job of reviewing competition in airports. He is presumably in the Maldives examining how they integrate their transport strategy. Looking at how to integrate sunbathing with water-skiing will come in handy in Hull.
Lower road tax must be put in the context of the stealth taxes being loaded on to motorists at the same time. Not only have the Government increased the so-called fuel escalator from 5 to 6 per cent., but they have brought forward the annual Budget increases from November to March and sneaked in an extra Budget. AA figures reveal that average motorists will pay £183 a year more in tax on their petrol next year than at the time of the last election. That is an extra 62p a gallon and it is another stealth tax on motorists. People will be grateful for £55 off the excise duty, but they are left £130 a year worse off than they were going to be in the first place.
Few people will be aware that, after today's Budget, about 85 per cent. of the price of petrol will be tax. The Government hope that people do not understand how much tax they are paying. We think that they have the right to know how much of their hard-earned income is being spent on petrol.
Those are the effects for private motorists, but for hauliers the situation is even worse. When one hard-pressed business man wrote to the Minister for Roads and Road Safety, Lord Whitty, the Minister gave the prize-winning reply that
The truth is that this country started raising those taxes when they were lower than those on the rest of continent, and the Government have continued increasing them by larger amounts after they have become higher than those on the rest of the continent. They have now taken their persecution of the motorist too far. They have taken the damage to the haulage industry too far. A policy change is needed.
We shall want carefully to consider the Chancellor's measures on the environment. Increased taxes on energy use and pollution should be completely offset by tax reductions, and we welcome the intention to do that. However, Back Benchers who cheered the Chancellor's announcements about carbon tax should recognise that it will hit manufacturing industry the hardest because that is the most capital-intensive industry and the most reliant on the use of fuel. The corresponding and compensating reduction in national insurance contributions that the Chancellor announced will give the least help to manufacturing industry because that is the least labour-intensive industry. So that seemingly innocuous announcement by the Chancellor will hit manufacturing industry hard in particular areas; and all hon. Members with such businesses in their constituency will find that it causes a problem for them in the years ahead--a fact not remotely referred to the Chancellor's speech.
The Chancellor made an important announcement about the married couples allowance, and of course we shall consider carefully what is proposed to replace it. He claimed to quote what I would do, but I have always said that the Government should ensure that the tax system recognises the costs of maintaining a family--not only children but elderly relatives--and suggested that we could have a system of transferable allowances for families in which one partner stays at home to look after the children.
The Chancellor's announcement about replacingthe married couples allowance was interesting. The difficulties that may arise are, first, that he announced a means-tested taper. It is possible that the implementation of such a taper will infringe independence in the tax system because it will be necessary to consider the whole household in order to determine it. It will further increase disincentives by introducing another means-tested payment to the tax and benefit system. It risks being another factor that has to be administered by the employer, further loading regulation and complexity on to businesses. The Chancellor may have answers to those points, and I hope that he does; otherwise that change will introduce fearsome additional complexity into the system.
I am glad that the Chancellor has been frightened off his intention to tax child benefit, and we shall try to frighten him off doing so in future. We know that, while he is around, the prospect of that tax will be ever present.
The Chancellor also made announcements about a further increase in stamp duty. That may be his final revenge on the right hon. Member for Hartlepool (Mr. Mandelson). The Chancellor should reflect on how that announcement may damage the property market, and on how making it more difficult for people to sell homes in certain parts of the country will damage the creation of a more flexible work force and labour market.
The Chancellor made much, as he always does, of plans for the new deal. We heard fine words, as ever, but it is time to check how the new deal is working. He may have seen a report in today's newspapers, saying:
The Chancellor made much of spending additional money. As I pointed out at the beginning of my speech, he has made his spending announcements on the capital modernisation fund before. What he announced today was a rearrangement of figures over the next three financial years.
People who are paying higher taxes--as they are--are asking where the money is going. It is mainly going to finance the huge additional cost of the welfare system, which the Chancellor has not reformed. We are in favour of higher spending on health and education--[Hon. Members: "Oh!"] I say that just for the record, against the day when the Prime Minister distorts it again. The Government have presided over higher waiting lists, and people are wondering whether the money is being spent effectively.
The Chancellor mentioned his crime reduction initiative and the additional money for it, which, as it happens, he has also announced before. At the same time as announcing that additional money for crime hotspots, he is reducing the number of police, which of course means that there will be more crime hotspots.
Today, the Chancellor should have been attacking the forest of regulation that is strangling business, but he did not. He should have given a clear signal that the tax system will support marriage, but he did not. He should have cut fuel costs for the road haulage industry, but he did not. Instead of raising taxes by stealth, he should have started to introduce some honesty to the tax system. He should have tackled runaway welfare spending, but he did not. He should have saved poor pensioners from losing tax credits on their shares, but he did not. He should have started to support Britain's savings culture, but he did not. He should have set out a programme to lower the tax burden, but he is continuing to increase it.
That, pursuant to section 5 of the Provisional Collection of Taxes Act 1968, provisional statutory effect shall be given to the following motions:--
put forthwith, pursuant to Standing Order No. 51 (Ways and Means Motions), and agreed to.
(a) Sparkling cider (rate of duty) (motion No. 2);
(b) Hydrocarbon oil duties (rates and rebates) (motion No. 3);
(c) Tobacco products duty (rates) (motion No. 5);
(d) Vehicle excise duty (increase in general rate) (motion No. 7);
(e) Vehicle excise duty (rates for goods vehicles etc.) (motion No. 9).--[Mr. Gordon Brown.]
That it is expedient to amend the law with respect to the National Debt and the public revenue and to make further provision in connection with finance; but this Resolution does not extend to the making of any amendment with respect to value added tax so as to provide--
(a) for zero-rating or exempting a supply, acquisition or importation;
(b) for refunding an amount of tax;
(c) for varying any rate at which that tax is at any time chargeable; or
(d) for any relief other than a relief which--
(i) so far as it is applicable to goods, applies to goods of every description, and
(ii) so far as it is applicable to services, applies to services of every description.--[Mr. Gordon Brown.]
4.40 pm
"the tax burden will increase".--[Official Report, 5 March 1999; Vol. 326, c. 1075.]
What a total betrayal that was from the man who said at the general election that there would be no tax increases at all.
"a new instalments system of payments for . . . corporation tax".--[Official Report, 17 March 1998; Vol. 308, c. 1100.]
There was, however, no reference then to the tax increase that would result.
"other taxes to encourage companies to invest".
9 Mar 1999 : Column 194
As the director general of the Confederation of British Industry has said:
Who knows, then, what will lie behind some of the seemingly innocuous sentences that the Chancellor uttered today? Any apparently nondescript sentence could mean a clobbering for people anywhere in the country--and we heard quite a few nondescript sentences. We already know that, at the same time as the Chancellor is trumpeting tax incentives to help some firms, the Government are damaging businesses across the board with a mass of employment costs, from the social chapter to statutory union recognition and the working time directive.
"There is concern about the accumulation of extra costs which have been imposed on business, of which the biggest was actually the Corporation Tax changes which were very carefully portrayed as a reduction in tax rates but were actually a tax increase, exploiting the fact that the number of people in the world who understood Dividend Tax Credits is remarkably few, which allows the Chancellor to raise taxes while appearing to cut them."
"If the Government wants to take a leaf out of the American book, it would ensure the small firms sector wasn't suffocated with paperwork."
The Engineering Employers Federation adds of the Chancellor:
"He seems to be saying one thing and doing something else."
What a surprise that is. The federation goes on:
"His message is about freeing labour markets while at the same time your average small engineering company is being buried under a tide of legislation and paper."
In the United States, businesses with turnover of under $0.5 million are usually exempt from the minimum wage. In Florida, it costs $150 to set up a new corporation, but in Europe there are thousands of pages of new regulations. In the United States, small businesses flourish because the Government leave them alone. Where are the Government's measures to implement the American dream about which the Prime Minister spoke so proudly last week?
"these undershoots relative to the Pre-Budget Report"
reflect
"a larger negative contribution to GDP growth"
by manufacturing output. In other words, manufacturing is in a mess, yet that is the sort of verbiage that the Chancellor or his civil servants come out with.
"The Government is like a professor in a laboratory tinkering with his inventions and not knowing what the real world is."
9 Mar 1999 : Column 196
The bad news from today's Budget is that the professor is still tinkering, that the whole of business in this country is his laboratory and that he still does not know what the real world is.
If they are to be effective, all the schemes that the Chancellor has announced for enterprise will need to be far more effectively implemented than the Government's policies on saving over the past couple of years. If there is one area that the right hon. Gentleman has hammered more than any other and about which he has done nothing in today's Budget, it is Britain's saving culture, which has been hit by stealth taxes. It says something about the inner mentality of the Government that people who work hard, save hard and try to be independent of the state are finding themselves penalised.
"the idea that the Labour Party is going to take action against PEPs and TESSAs is completely absurd".
What is absurd is the idea that the Prime Minister would keep his promise. In three weeks, those vehicles will be abolished and replaced by the new individual savings account. There was a time when the Prime Minister used to claim that that would produce 6 million new savers. Does he still think that the new savings account will attract 6 million new savers? No, he does not say that any more. He no longer wants to hear my question, let alone answer it. Savings vehicles must be simple, and the Government have made a complete mess of savings policy in this country. They have done nothing in today's Budget to put that right.
"all hauliers who operate internationally can take advantage of lower prices elsewhere".
Is it meant to be good for businesses to take their entire lorry fleet over to France every time that they want to fill up? Is it good for the Revenue if they do that?
"Bosses giving up on Brown's New Deal".
Such reports make sober reading for the Chancellor. Allied Carpets has suspended plans to take on 250 out-of- work youngsters. Bass has taken on only nine trainees even though it offered 50 places. Thistle Hotels offered 100 places, but has ended up with two trainees. Would not it be better to look at how other economies, such as America's, have created jobs by cutting taxes on business and cutting back on regulations--rather than dreaming up new ones? With unemployment threatening to rise again, one thing is clear: the new deal is not the answer--not the answer for young people, not the answer for employers, and not the answer for the economy.
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