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8.22 pm
Mr. Paul Goggins (Wythenshawe and Sale, East): The principal challenge facing any Member who speaks at nearly 8.30 pm on the fourth day of the Budget debate is to find something different to say or a new point to make. I have concluded that that is probably impossible, although I have noticed that those who speak today have one advantage, which is that they speak after the weekend, having had a chance to get away from the politics and punditry of Westminster and hear what their constituents think about the Budget.
I shall talk about two particular groups of people who have spoken to me over the past few days while I have been in my constituency. The first group are the pensioners whom I met on Friday and Saturday. They are fairly typical of the 21,000 pensioners who live in my constituency. Many will benefit from the Government's commitment to uprate the minimum income guarantee in line with earnings. It is worth remembering that the single rate of £78 and the couple's rate of £121 announced in the Budget mean that there has been an increase of nearly £10 for single pensioners and £16 for pensioner couples on the equivalent rate when the Labour Government entered office.
Some of the pensioners in my constituency will benefit from the tax changes, including the new tax threshold which raised 200,000 pensioners out of tax altogether; but all the pensioners to whom I spoke were agreed on one point: the high point of the Budget was the £100 extra help with their heating costs that they will receive next year and in subsequent years. They did not expect such an announcement and they were absolutely delighted to hear it. Pensioners in my constituency view that, along with free eye tests, the reduction in VAT on fuel and the extra money that they know is going to the national health service, as a clear indication that the Government are serious when they say that they want to help today's pensioners as well as set a framework for future pensioners.
The second group are the parents and teachers in the three schools in my constituency that I visited on Friday. At each school, I met parents who were delighted with the announcement on child benefit--from next year their oldest child will qualify for £15 each week, and each subsequent child for £10 each week. Likewise, teachers were delighted with the announcement that every school is to receive £2,000 next year to purchase new books. The drive to literacy is extremely important and teachers are crucial to that effort, but without new books they cannot succeed in the task.
Like other hon. Members, I read the more abstract analyses of the Budget over the weekend. As I mulled over some of the millions of words that have been written about the Budget since last Tuesday, I was struck by the way in which many commentators used two words--"fairness" and "redistribution"--as though they were interchangeable. In fact, they are quite different: fairness is a value and a political objective, whereas redistribution is a method or means of achieving that political objective--at least, it can be. I say "can be" because redistribution can go in either direction, as my hon. Friend the Member for Brighton, Kemptown (Dr. Turner) said. I well remember the 1988 Budget, which took £4 billion out of benefits and fed it back through the tax system as a reward to the better-off.
That and similar policy decisions had, by the middle of the 1990s, led to one in four people in this country living in a household that had less than half the average income, and one in three children being born and brought up in poverty. By that time, with the exception of New Zealand, ours was the most unequal industrialised society in the world. The impact on the community in terms of crime and ill health was plain for all to see. It is right that progressive redistribution has been an element in the three Budgets of this Parliament, because the better-off should shoulder a fairer share of their responsibilities.
I welcome the announcements on national insurance, such as the increase in the upper earnings limit to £575 a week. I also welcome the zero rating of earnings between £64 and £87 a week, which means that many low-paid, part-time workers will receive benefits without having to make contributions for them. It is a positive step that maternity allowance is being extended to women workers earning £30 a week or more. On tax, I welcome the new 10p starting rate. No one who is working and bringing up a family will pay tax until he or she earns at least £235 a week. It is also right that higher earners will not gain from the children's tax credit, and that the maximum benefit of that new tax credit will go to those on low and middle incomes--an extra £8 a week for those groups.
Redistribution is only one method of trying to deliver fairness. Another route to fairness is better public services. The Budget makes a commitment to investing £1 billion more in information technology, in improved accident and emergency facilities in our hospitals and, crucially, in measures that will sustain community safety. It is also important to improve employment prospects. That is a focus of the Budget, which strengthens the new deal for under-25s and introduces employment credits for unemployed workers over 50. There is the minimum income guarantee for pensioners, the guarantee of £200 a week take-home pay for workers with families, and a guarantee of £170 for older workers as they move off benefit and into work.
Fairness requires not that everyone be treated the same, but that everyone is included in the equation. As The Economist pointed out this weekend:
The Budget raises two long-term issues that I must mention in passing: national insurance and means-testing. The Chancellor moved in the Budget closely to align national insurance contributions and income tax. The hon. Member for Twickenham (Dr. Cable) described some of those changes as complex, but I believe that they introduce greater fairness and transparency. It is right to smooth out the system in that way, but it is also right to keep the national insurance and income tax systems separate. That is necessary, first, for practical reasons--for example, most pensioners receive national insurance benefits but do not make national insurance contributions--and secondly, because keeping them separate reinforces the important connection between work, contribution, entitlement and benefit. That is especially important when we are trying to overcome barriers to work and tackle the issue of mass unemployment.
We must face the fact that we need to modernise the national insurance system. The Beveridge principle of flat-rate benefits for flat-rate contributions no longer works. Income differentials have widened and many more people in society are relatively better off. While it is important to keep the two systems apart, it is right that more progressive payments should be made.
As to means-testing, I am amazed at the bare-faced cheek of Opposition spokespeople. The previous Government introduced changes that, over 18 years, led to an increase of 5.5 million in the number of people on means-tested benefits. Some 2.3 million children were dependent on income support--
Mr. Deputy Speaker:
Order. The hon. Gentleman's time has expired.
Mr. Peter Brooke (Cities of London and Westminster):
I declare two interests: the first that I am the father of a son who is a self-employed letter cutter and stone carver; and, secondly, that I am of pensionable age. I sympathise with the hon. Member for Wythenshawe and Sale, East (Mr. Goggins) about the hour at which we both find ourselves speaking. I made my maiden speech on this day of the Budget debate in March 1977, and I think speaking at this hour in this debate--just before the winding-up speeches--is worse than making my maiden speech.
On that occasion, I was speaking about the Budget introduced by the noble Lord Healey. I do not have a single drop of Scottish blood, which distances me somewhat from the present Chancellor, but the one eighth of my blood that is English is Yorkshire blood. I therefore say with some pride that one could always rely on the noble Lord Healey to give one bad news straight and not allow one to find it out in the watches of the night, the Red Book or in the Budget tables.
There has been some remark about the Budget--perhaps derived from the phenomenon that I have just mentioned--that it does not smell as sweet today as when the Chancellor sat down last Tuesday. The late Iain Macleod's law about Budgets--those that are well received on Budget day are less kindly regarded in the autumn--is true in this case, although the process has clearly speeded up.
In his speech in the Budget debate last week, the hon. Member for Halton (Mr. Twigg) said that it was "an excellent performance". The hon. Member for Northampton, North (Ms Keeble) called the Budget a "resounding success". The hon. Member for Lincoln (Gillian Merron) quoted the judgment in the headline "Flash Gordon", and the hon. Member for Harrow, West (Mr. Thomas) said that it was "another excellent Budget". "An outstanding Budget" was the verdict of the hon. Member for Watford (Ms Ward). The hon. Member for Croydon, Central (Mr. Davies) began:
All that said, it would be churlish not to remark on those aspects of the Budget where the Chancellor is maintaining Conservative policies. Given his reluctance to come clean and be upfront about his bad news, it should not surprise us that he makes no reference to the golden legacy that we bequeathed him which even commentators with no partiality towards our party acknowledge is the bedrock of his success. Not for him the fate of some of his Labour predecessors, to whom the hon. Member for Wirral, West (Mr. Hesford) referred, who came into office under economic conditions similar to those that, when I was working in New York, caused The Wall Street Journal to remark on its front page:
Throughout my four years with my noble Friend, I also served on the Budget Council of the European Union. It may be that it is euro enthusiasm that has contaminated the Treasury under the present Administration. The EU budget consisted of small programme after small programme in penny packet after penny packet. That made negotiation between the Council of Ministers and the Parliament a nightmare, because the house of cards constructed in Strasbourg was so delicate a piece of fiscal architecture that one could not withdraw a single card without bringing the whole structure slithering down on the table. As a process, it shared another characteristic with the Government's conduct of public expenditure, in that no one ever went back rigorously to test whether the programme had delivered the goods that were claimed for it.
The process was also distorted by being spread over several years. The manner in which the Government chronologically set out their expenditure and taxes may be a political paradigm, but it is a three-dimensional mathematical monkey puzzler. That may have more to do with getting a Government elected than with good government itself. Those who went on to the Terrace at lunchtime today to visit the science, engineering and technology reception will have noticed a billboard entitled "Predictions of Pressure Fluctuations over Stealth Aircraft". Had one amended "aircraft" to read "taxes", the title would still have been meaningful.
Nine months ago, we had a long, late-night debate on heritage issues in the Report stage of the Finance Bill, and the present Paymaster General made soothing noises, saying that we were wrong in predicting a flood of art treasures coming on the market because of the Bill's measures on inheritance-protected objets. It is bad luck for the Government that today should see the threatened flood returning to the pages of The Times at precisely the moment the Secretary of State for Culture, Media and Sport has, in his own words, raided the lottery, thus robbing the heritage lottery fund of the capacity to keep those treasures in the country.
I want, before closing, to draw attention to one serious omission from the Budget--the issue of small and medium-sized companies not being able to get access to equity capital in the markets. The FTSE 100 is spectacularly well funded. I recall a figure of £57 billion going from the markets to our largest companies. It is now commonplace that, in about 37 of the 40 years up to the early 1990s, the small companies sector outperformed the
FTSE 100 share market or its equivalent, but, in nine of the past 11 years, that sector has under-performed it. However, in five of the past six years, the earnings of small companies have grown more rapidly than those of larger companies. Nor has the market under-performance come about as a result of the FTSE 100 growing more rapidly than small companies. Between 1984 and 1998, turnover of all companies in the FTSE 100 share index showed little growth in real terms. An article in the Financial Times a few months ago put the small company sector at its lowest relative market rating since the early 1960s.
The Bank of England, which led such valuable work on improving the financing of small companies since the last recession, is seized of the problem and its consequences and implications, but the reason for mentioning it in this debate is that attention will have to be given to capital gains tax, let alone bed and breakfasting, if we are to find a solution to the problem that I am describing. We have to find ways of increasing liquidity for small companies.
The Government should not regard my words as being a Trojan horse. In 1997, capital gains tax in the Republic of Ireland stood at 40 per cent., with tax proceeds of £131 million. In 1998, capital gains tax in the Republic was halved to 20 per cent. and proceeds jumped to £193 million, an increase of 47 per cent.
"Fairness is a Brown phrase which Conservative Chancellors did not much use."
Curiously, The Economist also accused the Chancellor of being
"obsessed with getting people off welfare and into work."
15 Mar 1999 : Column 784
I say three cheers for the Chancellor's obsession.Probably the most moving letter that I have received since my election to the House was from the father of a 21-year-old woman who had never had a job and lacked confidence in her own abilities. She went on new deal and is now working in a nursery. She is fulfilling her potential and contributing to society. She wanted to do both, and that is now possible through the new deal.
One of the Government's finest achievements so far is the way they have halved long-term and youth unemployment. This Budget takes us much further not only through the measures that I have mentioned, but through encouragement to small business, which will create many new jobs. The extension of benefits to lone parents for their first two weeks of employment after coming off benefit is crucial. The Budget fits neatly with many of the other initiatives that the Government are pursuing, particularly the single work-focused gateway, which reconnects to the workplace the one in five families with no one in work.
8.33 pm
"What a great Budget! . . . a fantastic media reception".--[Official Report, Wednesday 10 March 1999; Vol. 327, c. 450.]
The hon. Member for Sittingbourne and Sheppey (Mr. Wyatt) began by saying:
"I should like to say how brilliant the Budget is".--[Official Report, 11 March 1999; Vol. 327, c. 591.]
This week's letter column in The Times is led by a letter by the director general of the Freight Transport Association, signed also by the CBI, the Federation of Small Businesses, the United Road Transport Union, the British Chambers of Commerce, the National Farmers Union and the Road Haulage Association Ltd., all commenting pithily on the major disadvantages that the Budget confers on their industry. As I spent last Thursday's debate in the Standing Committee considering the Greater London Authority Bill being told by Ministers how well the new Government understand business, I shall re-read Hansard with the letter from the Road Haulage Association by my side.
"The economic recession has become so severe that the mafia have had to lay off two judges in New Jersey."
15 Mar 1999 : Column 786
Before any Labour Members intervene with their selective crib sheet, I repeat last week's observation by my hon. Friend the Member for Chichester (Mr. Tyrie) that
"Britain is the only major country to have reduced the overall burden of debt as a proportion of gross domestic production in the period from 1979 to 1997."--[Official Report, 11 March 1999; Vol. 327, c. 589.]
I served as a junior Treasury Minister under my noble Friend Lord Lawson of Blaby for almost four years, during which time part of the national debt was repaid by the then Government for the first time since 1968. However, an essential difference between those years and these is that my noble Friend, year after year, simplified and made clearer the tax arrangements of this land, whereas, in the three Budgets since 1997, the present Chancellor has complicated them and made them more opaque.
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