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3.18 pm
Mr. Ian Pearson (Dudley, South): People and businesses across the borough of Dudley welcome this Budget. It is a Budget for the future, for success and for fairness. There is something in it for everyone. In the borough, more than 40,000 families will benefit from the increases in child benefit and child care tax credit. Around 50,000 pensioners will benefit from the £100 winter fuel allowance. Many of them will also benefit from the increase in the minimum pensioner income guarantee and the continuation of the married couples allowance.
Patients and staff at Russells Hall hospital will welcome the money for the accident and emergency department because improvements are still badly needed.
Parents and teachers will welcome the £2,000 for school books for each school in the borough. I was particularly pleased that the over-50s who have been out of work for six months or more will get new hope and practical financial support when they look for employment. That measure will be warmly welcomed by them.
The whole community across Dudley borough will welcome the extra money to fight crime. People everywhere in Britain will welcome the cut in the basic rate of income tax to 22 per cent. and the cut in the starting rate to 10 per cent. I hope that, over a period, the Government will have the opportunity and resources to move to four rates of tax--0, 10, 20 and 40 per cent.
Businesses will welcome the cuts already announced in corporation tax, which will bring the rate down to 30 per cent. for large businesses and 20 per cent. for small and medium-sized companies, and the new 10p starting rate. I welcome the extension of 40 per cent. capital allowances, which is timed exactly right at this stage of the economic cycle. I welcome, too, the tax credits for research and development. They will have a significant impact and will help to build a more enterprising and dynamic economy.
I believe that it is sensible to align income tax and national insurance rates. That is something that businesses of all sizes will welcome. Businesses have also given a warm welcome to the formation of the small business service. We look forward to seeing the detail of how that will operate.
I do not know exactly how the British economy will perform in the next 12 months. I do not know anyone who does, but I believe strongly that the Government have the balance right in their overall fiscal and economic policy. I am certain that investment in skills to make the economy more enterprising, and investment in our infrastructure are vital to our economic success.
I believe that the Budget will go down as a landmark Budget. It embraces the role of government in supporting economic growth and driving productivity in a modern economy. I am also glad about some things that are not in the Budget. I am glad that there was not an aggregates tax. It would have been damaging to industry, and I hope that one will not be introduced in the future. Although I welcome the anti-avoidance provisions in the Budget, I am disappointed that there seems to be no great willingness to proceed with either a general anti-avoidance rule or a mini GAAR.
Inevitably, there are some areas on which we want to know more and need to see some of the detail. Pensioners will be disappointed that no announcement was made about the dividend tax credit, which is still an issue with non-taxpaying pensioners. I do not believe that it will go away. Similarly, there is some uncertainty about the fact that it seems as if pensioners will start to pay tax at a rate of 20 per cent. on their savings while all other individuals in the community will start at 10 per cent. That is something that we might want to consider when we examine the Finance Bill.
On manufacturing, it is important to welcome the introduction of the energy tax. I am glad that the Government have decided that it will be revenue-neutral overall. However, we have to be very careful to make sure that manufacturing industry is not hit. I do not want to see the introduction of a tax that will benefit supermarkets but harm our manufacturing sector. We need to think carefully about how it is introduced so that we do not
penalise capital-intensive, relatively low-employing sectors such as the forging industry, and reward less capital-intensive sectors such as retail.
While manufacturing will welcome the announcements about share schemes and encouraging employees to buy shares in their companies, incentive schemes are much more difficult in unquoted companies, which form the vast bulk of manufacturing companies in my constituency. I warmly welcome proper incentive schemes from which small and medium-sized companies can benefit.
I have to raise the issue of road hauliers. If as a Government, we believe in modern growth theory, which says that skills and infrastructure are important, we must recognise that the road infrastructure is highly significant. There is no doubt that the road fuel duty escalator imposes an additional cost on business. That is obviously a significant problem for the road haulage industry, but it is also a problem for business as a whole. The escalator is increasingly making our industry less competitive than businesses outside the United Kingdom.
Mr. Grieve:
Will the hon. Gentleman give way?
Mr. Pearson:
If the hon. Gentleman will forgive me, I have only two minutes left. I think that over time, we need to do something about the road fuel escalator. Over the next three years, we shall raise about £8 billion as a result of the road fuel duty escalator if we do not change our policy, and we must consider the effects on our industry and what we can do to ameliorate them. When we look back in five or 10 years' time, we will ask whether we should not have put more money into researching clean fuel technology rather than penalising our road haulage industry. A balance needs to be struck, and there is more for the Government to do on that.
On science and technology policy, I must declare an interest. I am a visiting fellow at Warwick university, and I am writing an article on universities and innovation. I warmly welcome the boost to the science and engineering budgets in the past two years, the extra £100 million that has been invested in the infrastructure fund and the £15 million extra for the university challenge fund, but we are only scratching the surface. Far more needs to be done, and far more radical action needs to be taken. We are spending £6.1 billion as a Government on research and development, of which less than 2.5 per cent. is going to experimental development. We have a development gap. If we are to get better at turning inventions into innovations and commercially exploiting them, we must reconsider the main funding streams in the United Kingdom. When less than 10 per cent. of the research councils' budget is spent on experimental development, we need to do better.
This is a forward-looking Budget which lays the foundations for future prosperity. I have every confidence that it will boost productivity--
Mr. Deputy Speaker:
Order. I call Mr. Nick St. Aubyn.
Mr. Nick St. Aubyn (Guildford):
The hon. Member for Dudley, South (Mr. Pearson) told us that this was a landmark Budget. It was so much so that some of us on the Conservative Benches observed the Prime Minister
The Parliamentary Under-Secretary of State for Education and Employment (Mr. Charles Clarke):
I wonder whether the hon. Gentleman is trying to become the Joe Biden of the Conservative party by stealing other people's speeches.
Mr. St. Aubyn:
I am not sure whether that was an attempt at flattery but I will ignore it, given the prospects of that former member of the Opposition.
We must remind ourselves that when the Government talk about a strategy for transport, they are really talking about raising taxes on running a car or a lorry until the brakes squeak. They are really talking about making a smash-and-grab raid on the majority of the British people. So much for the party that claims to rule for the many, not the few.
If the Government were serious about their transport strategy, we should today have heard the Secretary of State for Education and Employment tell us how he will encourage more people to walk their children to school or to give their children a bicycle to go to school. Last summer, I went with the Select Committee on Education and Employment to Switzerland. One of the striking features of Switzerland is how many--almost all--children bicycle to and from school. At peak travel times, roads in Switzerland are relatively free of cars, unlike in Britain where roads are congested. Reducing traffic congestion would be a strategy worth pursuing.
We should be encouraging schools to have their own budget for special educational needs. At least in my own constituency, too much of the schools' budget is spent on transport. However, enabling schools to manage their own budgets would go against the grain of a Government who like to dictate and run everything from the centre, with all the inefficiencies and waste that that involves. We have a Government who want to control from the centre and take more out of our pockets so that they--not the individual--may decide how to spend it. Central control is at the heart of the Government's agenda and at the heart of this week's Budget.
Let us leave the magic world of the conjuring Chancellor and return to the real world--in which jobs are on the line and businesses are at risk, and in which families have budgets of their own to prepare, children of their own to raise and hopes of their own to fulfil. When those families examine the Budget, they will be asking what kind of Government take away the married couples allowance and mortgage relief this year, but provide them with no help in the form of the children's tax credit until a year later. They will be asking what type of Government think that they should help business by helping something called the serial entrepreneur.
The Government think that the modern economyis composed of high-rolling, risk-taking business enterprises, that all should go to those who brave all, and that those who risk all win all. That is not the economy that the Government inherited.
The Government inherited a Conservative capitalism that believes in saving, in investment and, above all, in commitment. There was nothing in the Budget for the vast majority of medium-sized firms in middle England which underpin our economy and form its bedrock--the many thousands of firms employing millions of people who work hard and save hard simply to secure a decent living, and who are risk averse, not risk takers. There was nothing for those businesses or employees in the Budget. But there was something for them in Conservative Budgets.
The previous Government inherited an economy that had far too few such businesses--but we built them up. From 1986 to 1997, the number of firms with an annual turnover between £250,000 and £5 million rose by 70 per cent., and the number of firms turning over between £5 million and £10 million rose by 80 per cent. The number of businesses turning over less than £250,000 barely increased. Yet the Secretary of State for Trade and Industry announced yesterday that the Government will target the 10p tax relief at the bottom end of firms--at the 250,000 firms which will undoubtedly appreciate the benefit but which are not the firms that will deliver the growth, jobs and stability that our economy needs.
3.28 pm
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