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Mr. Damian Green (Ashford): Will the hon. Gentleman give way?
Mr. Williams: I may take an intervention later, but I want to develop my argument.
As interest rates fall and are, perhaps, halved over the next three years, there is a danger of a take-off in housing, business and other sectors and of the economy growing out of control. That is why it is important to expand the work force and encourage skills and training. Our policies, like those of Clinton in the United States, will help unemployed people, including the long-term unemployed, to move from welfare into work. The new deal is also working exceptionally well to provide the option of work for the disabled. Today's Budget also included measures for the over-50s.
One of the previous Government's appalling policies resulted in many men in their 50s retiring prematurely on incapacity benefit following redundancy. That certainly happened in my part of the world, where coal mine closures in the late 1980s affected virtually all the miners. Many people in their 50s--perhaps 1 million in Britain--could be working. There are problems of low economic activity in older industrialised areas, where only 70 per cent. of people aged from 18 to 65 are in work. We want as a Government to ensure that there is work available for those who can and want to work. That is part of our anti-inflation strategy, which will be very important next year and the following year, as the economy resumes substantial expansion.
All of our achievement has been made with low inflation, which has been sustained at 2.5 per cent.,or thereabouts. In granting the Bank of England independence to set interest rates, the Chancellor and the Government chose very wisely to give it a symmetrical target inflation rate of 2.5 per cent. If inflation looked like being higher than 2.5 per cent. in two years' time, interest rates would therefore rise, and if it looked like being less than 2.5 per cent., interest rates would fall. It seems as if, over the next six or 12 months, inflation will undershoot the target. Eddie George--I noticed that he was present to hear the statement--has made it abundantly clear that he will be just as vigorous in cutting interest rates if we threaten to undershoot as he was in putting them up 12 months ago.
I wish that the European central bank had the same symmetrical target. In the euro economy at the moment, inflation is under 1 per cent., and interest rates are set at
3 per cent. When the ECB met last week, it decided not to cut interest rates. The European economy--I return here to some of the comments of the hon. Member for Bexhill and Battle--is crying out for expansion. Unemployment stands at 10 per cent., while inflation is below 1 per cent. The combined balance of payments surplus in euro countries last year was $177 billion. As the hon. Gentleman pointed out--I agree with him--the United States deficit last year was $256 billion. The economies are almost mirror images of each other. The American economy is being run at a large deficit so that the rest of the world can market its products mainly in America.
The European surplus is a very deflationary influence on other countries. The German Chancellor, Oskar Lafontaine, is absolutely right to put pressure on the ECB to lower interest rates. Interest rates of 3 per cent. are absurd when inflation is below 1 per cent. and unemployment at 10 per cent. The ECB should not take just inflation into account.
In debates on the Maastricht treaty in this House and within the parliamentary Labour party, I remember Bryan Gould, the then Member for Dagenham, arguing vigorously, time after time, that the terms of the ECB were deficient. I remember the arguments of some of the Euro-sceptics, too, such as my right hon. Friend the Member for Llanelli (Mr. Davies) and Lord Shore, the former right hon. Member for Bethnal Green and Stepney. The treaty that set up the ECB was far too monetarist in taking account only of inflation. The bank would be much better run if it adopted the same system as the US Federal Reserve, under Alan Greenspan, which takes into account growth and unemployment--a much wider set of parameters.
Mr. David Maclean (Penrith and The Border):
It is a pleasure to follow the hon. Member for East Carmarthen and Dinefwr (Mr. Williams). As I was listening to his wish list, and his incredible economic theories of how the economy would perform if the rest of the world and the European economy did not exist, I unkindly concluded that the only soft landing that he was likely to encounter would be on his head. That is too unkind; he did not make any unkind remarks, and I should desist from doing so.
I agree entirely with the hon. Gentleman on one point. His Government are certainly trying to model the British economy on other European economies. That means over-burdensome regulation, powerful trade unions that control too much of their industries, stagnation, high unemployment and, of course, an arrogant presidential style of government that ignores the national Parliament.
It was a real pleasure to listen to the right hon. Member for Bishop Auckland (Mr. Foster) and the hon. Member for Alyn and Deeside (Mr. Jones). The only criticism that I would make of the right hon. Gentleman's speech--I shall pass this on to him--is that, with customary
modesty, he denied that he could interest the House as much as the Chancellor. He does himself a disservice. He made a fascinating speech. Although neither he nor I could match the Chancellor's rhetoric, the right hon. Gentleman came across as a man of intense integrity, who is passionately concerned with rural areas in his part of the north of England, as I am with those on the western side of the Pennines.
This is a clever Budget, which has increased taxes by stealth yet again. Labour's first two Budgets increased taxes by more than £40 billion over the course of this Parliament. It is legitimate to use that figure because we keep hearing about the £19 billion on schools, which is of course for the whole of this Parliament, and the £22 billion that is supposed to go into the health service, which is of course to be spent over the whole of this Parliament. It is therefore legitimate to say that, over the whole of this Parliament, Labour--so far--has increased taxes by £40 billion. In fact, most taxpayers will be paying more income tax under this Government in the coming year.
Why do we say that this is a stealth Budget? I shall give a little example of the Chancellor's sneakiness. We heard about the abolition of the married couples allowance and the introduction of the working families tax credit. Two things that the Chancellor did not tell us were that the amount to be paid out in working families tax credit is infinitely less than that lost through the abolition of the married couples allowance, and, of even greater importance--one does not discover this until one goes through all the fine details, the small print and all the Budget statements, which the media will no doubt catch up with in the next few days--the married couples allowance will be abolished 12 months before the introduction of the working families tax credit. The Chancellor spins that the Government will do much for married couples, but that may happen 12 months after the abolition of the married couples allowance.
We heard much from the Chancellor on, for example, the 10p tax band, but no mention, as my right hon. Friend the Member for Richmond, Yorks (Mr. Hague) said in an absolutely brilliant speech, of the abolition of the 20p band. We have to wait to find those things out, by searching for them. However, the Chancellor then said that that would mean a saving of 90p a week for the average family. Earlier in his Budget statement, he made the passing remark that petrol duty would rise by the normal rate of 6 per cent. That includes the inflation rate--[Hon. Members: "Plus inflation."] By my calculation, that works out at an increase of about 13p a gallon, so the average family which benefits from the 90p a week reduction as a result of the 10p in the pound income tax band will pay £3.50 a week extra in fuel duty. The Chancellor did not mention that in his Budget. We must wait to find that out ourselves.
Mr. Paterson:
If my right hon. Friend turns to page 109 of the Red Book, he will see that unleaded petrol has increased by 17.24p per gallon.
Mr. Maclean:
I am grateful to my hon. Friend for that observation. Perhaps my maths are as good as the arithmetic of the hon. Member for East Carmarthen and Dinefwr. I thank my hon. Friend for his better mathematical and arithmetic skills.
Throughout the Budget statement, the Chancellor spoke about the 10p corporation tax rate and the 10p in the pound income tax rate. There is also 17p a gallon on petrol; that is why he does not mention the figures. That is typical of the 1998 Budget.
Throughout the seven days of the 1998 Budget debate, no one in the House heard the Chancellor or any Treasury Minister mention the new tax that would be imposed on the purchase of a motor vehicle. We had to wait until the appearance of the Finance (No. 2) Bill before that fact was discovered. That is why we can say that this Chancellor is adding taxes by stealth.
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