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7.39 pm
Mr. David Prior (North Norfolk): As I listened to the Chancellor's Budget statement, my impression was of massive complacency, and that same complacency was exhibited by the Secretary of State for Trade and Industry this afternoon. There was more than a touch of Dr. Pangloss about both statements. Where have the Chancellor and the Secretary of State been for the past year? Do they have industrial companies in their constituencies? Are they aware that orders, sales and
profit margins are being squeezed, and that many manufacturing and engineering companies are laying off employees?
Almost worse is the impression that neither right hon. Gentleman has grasped the lesson that the country had to learn so painfully in the 1980s: we operate in a global marketplace, so we have to be the best by the best world standards. It is because this country embraced those two lessons that we were able to attract so many foreign companies during the 1980s and the early 1990s. The benefits of that investment, such as improved working practices and product quality, are still with us today.
Whereas the challenge in the 1980s was for this country to catch up with Europe, especially our competitors in Germany and France, today's challenge is no longer confined to Europe; we have to be better than our competitors in the United States, Asia, south America and other parts of the world. It is becoming increasingly widely recognised that the European way of doing business is not competitive. Take the case of Germany today: many large industrial companies are disinvesting from Germany and reinvesting in new manufacturing capacity in the countries of eastern Europe and south America.
We have to judge the Budget against that background because only if we get right the fundamental decision about what sort of economy we want in this country will we be able to afford in the long term decent pensions and public services and to achieve a high level of employment. Getting that judgment right is crucial, but I believe that, as we adopt an increasingly dirigiste style of government, with bigger government, more interference and more regulation, we build a higher costs base that will eventually lead to protectionism in Europe.
The lead measure in the Budget was the reduction in the headline rate of corporation tax. I welcome that, but have to point out to Ministers that the problem currently facing British industry and commerce is not the level of corporation tax, but the fact that our costs are too high to enable us to compete. Our regulatory costs, employment costs, transport costs, energy costs and administrative or bureaucratic costs have become too high.
Let me give a few examples. Take inspection costs in our abattoirs, which are going through the roof because of new European Union regulations, or the hygiene and welfare standards imposed on our pig and livestock producers. Take the effect of the minimum wage on a company in my constituency that employs a lot of casual workers and now faces the bureaucratic problems of filling in all the forms needed to comply with the minimum wage. Take the effect of the working time directive, which has had a big impact on companies that work in shifts, especially those that have night shifts. Take the effect of the increased recognition of trade unions. Most damaging are the new rules on unfair dismissal, which will deter many companies from taking on new employees. Finally, the social chapter is, in effect, a means of making all EU countries operate at the same level of uncompetitiveness.
Mr. Stephen Hepburn (Jarrow):
I shall concentrate my remarks on the effects of the Budget on the northern region and the constituency that I represent. I shall explain how the Government's actions are continuing to improve the quality of life of the people in my area, by rewarding work and supporting families. However, first, I pay tribute to my right hon. Friend the Chancellor and his team and to the team at the Department of Trade and Industry who have worked since the beginning of this Parliament to bring about that better standard of life for the many and not the few. The many are the people on low incomes and middling incomes--the real wealth creators in this world.
The great thing about the Budget is that it continues that work in a spectacular way, by recognising and rewarding the central aspects of life--families and work--and putting great investment in public services. Families are given more by increasing child benefit to £15; 12,000 families in my constituency benefit from that. That increase plus the new child tax credit mean that families will be hundreds of pounds better off and that the youngsters in those families will have a better start in life.
The £40 billion for public services, such as health and education, was promised some time ago, but the fact that it was widely discussed before the Budget statement should not take off the shine. The importance of public services to the poor, who cannot afford private health services or to send their children to private schools, cannot be stressed too strongly. The modernisation of my local accident and emergency unit will be greatly appreciated; and the £2,000 for every school for books will be gratefully received by hard-pressed teachers and governors. The Budget also delivers a better deal for pensioners by increasing the winter fuel allowance from £20 to £100 which, taken together with the earlier cut in VAT on fuel and the minimum income guarantee, means that more than 16,000 pensioners in my constituency will be hundreds of pounds better off.
It is significant that the Budget rewards work by building on the new deal, which has already had an impact in Jarrow where it has halved both youth unemployment and long-term unemployment. The minimum wage will make hundreds of people better off, as will the 10p starting rate of income tax and the future cut in the basic rate from 23p to 22p. Taken together, all those measures mean that there will be more money for people to spend in the area. Individuals and families will be better off, with the result that the local economy will receive the boost it needs. The stronger the local economy, the more jobs are provided for local people.
We in the northern region, in the Jarrow constituency and on the Tyne, still rely to a great extent on engineering. We welcome the service industries, which have created valuable jobs, and we welcome the high-tech industries, because they represent the future and we have to look to the future. However, we have to remember that balance
is important in any economy, so I pay tribute to the employers and the workers in the north who have survived the bad times--the boom and bust under Tory rule.
It is a disgrace that the average age of a skilled worker on the Tyne is now 50. It is more important than ever that Tyneside and Swan Hunter get the Ministry of Defence work for which tenders are currently being submitted. If the £130 million tender for Royal Navy supply ships is accepted, work will be provided for hundreds of skilled men for many years to come. Perhaps more important are the opportunities that that will create for youngsters to learn skills and carry on the good work that made Tyneside great.
In my area, small businesses were set up as the larger firms closed down. Redundant workers used their skill and determination to provide a living, not only for themselves and their families, but for their work colleagues, whom they took along when they set up the business. Although many have gone to the wall over the years because of problems in the economy, some have survived. They have told me that they welcome the new climate of economic stability; they welcome the new deal, which has given them opportunities to employ people who they might not have employed in the past; and they welcome the cut in the small business tax rate to 10p.
Mr. John Townend (East Yorkshire):
We live and operate in a global economy, and this country is very affected by the world economic situation. I find it strange, therefore, that the subject is dealt with only scantily in the Red Book, which devotes a mere two pages to it. I believe that the Chancellor's forecasts are too optimistic when one considers the possible dangers to the world economy in the year ahead. The danger worldwide is no longer inflation but deflation. The problem is that few people alive today--bankers, politicians and business men--have lived through and experienced deflation and know how to deal with it.
Asia is still in difficulties. Japan is, at best, bumping along the bottom and, at worst, heading for even more deflation. Europe's economy is weakening and unemployment is rising. The current world economy is being kept on the rails by the motor of the American economy. This situation cannot last indefinitely because of the growing United States trade deficit. The US cannot, and will not, be willing to be the importer of last resort for ever.
If there is a financial crisis in Brazil--all commentators accept that the Brazilian economy remains fragile--it could spill over into the rest of Latin America. If the American stock market were to fall sharply, it could cause a drop in consumer demand and the world economy would move quickly into recession and deflation unless the European Union was prepared to change its policy to
allow an increase in growth and open its markets. By announcing next year's tax reductions now, the Chancellor has become a hostage to fortune. I do not believe he has taken sufficient account of the dangers.
I turn now to a constituency matter: the burden on the motorist. I represent a rural constituency where people must use cars to travel to work and the shops and to take their children to school. Once again, the Government have used the injudicious commitment given by the Deputy Prime Minister at Kyoto as an excuse for another pernicious attack on the motorist. Fuel tax now constitutes 85 per cent. of the cost of the petrol that we buy--that is the highest percentage in the European Union. I do not know whether the Government are proud of the fact that, since Labour came to power, British tourists, for the first time in history, can fill their tanks more cheaply in Calais than in Dover.
This is an anti-motorist Government, and I am delighted that the Leader of the Opposition indicated in his response to the Budget a change in our policy. I have long advocated abandoning the concept of an automatic escalator for petrol tax. With my right hon. Friend's statement, we at last have a political party in this country that will fight for a fair deal for the motorist.
The policy has proved an absolute failure on conservation grounds. People have not given up their cars or used them substantially less. My constituents have no alternative: they must pay the tax with money taken from elsewhere in the family budget. The poorest motorists suffer the most, particularly the poor who live in the country. This tax also hits the family because many families' main pleasure is the family car: taking the family out for a day trip is often the highlight of the week.
The change in the vehicle tax does not help the family. The Chancellor clearly has no experience of such things. It is impossible to get two or three growing teenagers and all their luggage into a car of 1,000 or 1,100 cc. Has the Chancellor not heard of the family saloon? This tax hits the family and the countryside.
The Government are proud of their Budget policies for small business. Unlike most Labour Members, I have owned and operated medium-sized enterprises for the past 40 years. I have looked carefully at the Budget proposals, and I have discovered that 98 per cent. of small businesses will get very little. For those who receive something, the benefits will pale into insignificance compared with the cost of implementing the 2,000 additional regulations introduced by the Government through the social chapter, the working time directive, the "Fairness at Work" White Paper, the national minimum wage, the new hygiene regulations, the Sex Discrimination Act 1975 and the Race Relations Act 1976. The list goes on and on.
Most Labour Members have never run a fish and chip shop and they have no idea of the burden that such regulations impose on small businesses. It is not just the financial cost, but the enormous amount of management time that is devoted to such matters that should be spent on productive development of the business.
I shall give an example from my constituency. Mr. Simpson has been a butcher and his family have operated an abattoir for four generations. He spent £30,000 in order to comply with the hygiene regulations introduced by local authority environmental health officers. New regulations will now be imposed from 1 April. Mr. Simpson tells me that when he slaughters
for six hours on Monday--he slaughters once a week--three staff members are present as well as up to five members of the inspection staff, for whom he has to pay. Mr. Simpson will be forced to close his business from 1 April.
Labour Members have made much of the 1p cut in corporation tax for small business. A company that makes £50,000 a year will save £500. Apart from the cost of regulations, that sum will be more than gobbled up by the increase in the cost of petrol. For most businesses, motoring costs are a major expense. Most goods are delivered to customers by road, and sales representatives must have cars to do their jobs. The increase in the tax on DERV will be badly received by the haulage industry. As many of my right hon and hon Friends have said today, more and more hauliers are flagging out their trucks. While returning to my constituency by train last week, I spoke to a man who owns a haulage business in Wakefield, who told me that he had just sent 20 vehicles to be registered in Luxembourg.
The tax increases will also be a bitter blow to agriculture, which is important to my constituency and which is suffering badly at present.
The company car has also come in for another battering this year. The reduction of the rebate for high mileage and the abolition of the reduction for cars that are more than four years old mean that an owner could pay an extra £776 for a five-year-old car worth £19,000 that does about 10,000 miles a year. The changes will hit particularly badly sales representatives who work hard and do high mileage. That is most unfair, and represents another attack on middle England.
My right hon. and hon. Friends have talked about stealth taxes. I draw the attention of the House to the increase in tobacco duty. Hon. Members have probably forgotten that there was an increase on 1 January this year of 21p per packet. Less than three months later, there has been another increase of 17.5p. I do not smoke--I think it is a foul habit--but I think that that increase will simply encourage smugglers. Smuggling is no longer an amateur operation: it has been taken over by professional criminals. Many people are shifting from trafficking in hard drugs to trafficking in cigarettes. That is not the way to deal with the problem--it should be addressed by gradually reducing taxes.
The price of sparkling cider has increased by £1.02 a bottle. That will damage the British cider industry. What is the reason for the increase? The Government have given in to pressure from the Italian Government, who believe that cider competes unfairly with cheap Italian sparkling wine. If the Government wanted to deal with the problem, they should have reduced the duty on sparkling wine to the level of that on ordinary wine. There is no reason why we should pay a tax on bubbles as well as face increased cider prices.
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