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7.14 pm
Mr. Ken Purchase (Wolverhampton, North-East): The Budget will be widely welcomed throughout Britain. It has many good features, which will improve the standard and quality of life for thousands, if not millions, of people throughout the coming years as the improvements announced by the Chancellor are introduced.
In the context of my constituency, I welcome the extension of the new deal to older workers. It has been a tremendous success in the case of younger workers, halving the rate of youth unemployment and halving long-term unemployment, so three cheers, or perhaps even four, for the extension of the new deal to older workers today.
There is much else that is good for Wolverhampton, but I should begin by saying that I am sponsored by the Co-operative party, which paid almost a quarter of my election expenses at the last general election. I am proud to be a member of the Co-operative party, but as I intend to speak on the business measures, it is right that I remind the House again of my background in the Co-operative movement.
The Budget recognises that prudence is a good thing, but that in the present financial situation, there is room for improvements in life in Britain, in the public services, in business and for individuals. That must be welcomed, and I am sure that it will be welcomed by people who understand such matters and by ordinary men and women. When the press releases are fully analysed, no doubt
wrinkles will be ironed out and parts will unravel, but we will have a better understanding of the impact of the Budget.
On the business measures, I especially welcome the capital expenditure reliefs. Let me illustrate that. It is an important fact of British economic life, particularly in manufacturing, that although we show good returns on capital employed, we show poor returns on the use of our people. Why is that? It is not hard to find out. First, there has been massive underinvestment over decades, so that a great deal of machinery and other kit in our companies is very old indeed. I have worked in companies where some of the machinery must have been dragged up off the North sea bed following not the second, but the first world war.
That is how rusty, out of date and hopeless in competitive terms some of the plant and machinery is, and it is still being used in Britain today. No wonder we can say that the return on capital employed shows a good ratio, compared with many of our continental competitors. However, the return on labour is poor. Our unit costs are high and productivity gains have usually been made at the expense of jobs, so that there are fewer people doing more work. We have not got to grips with the idea of constant improvement to our methods and way of working, and the investments needed.
I welcome any encouragement, particularly to smaller companies, that will allow them to invest, knowing that remission has been granted on capital investment sums.
The corporation tax measures mean that conditions in Britain are now the best in Europe, if not among the best in the world. It can no longer be argued that Government overtax and overburden the corporate sector. Far from that, a case could be made in other circumstances for an increase in corporate rates of tax. At this stage, however, the Chancellor is right to stay on course and ensure that investment opportunities are at the top of the agenda. One way of doing that is to keep corporate taxes relatively low.
However, I hope that the Chancellor will rethink the rate at which he taxes co-operative enterprises. At the moment, the co-operative sector pays the standard rate of corporation tax but, given the structure and nature of co-operative enterprises, it would be fairer and more equitable if they were to pay the small firms rate. I remind those who want to be reminded that, before the 1997 general election, we considered the restoration of the lower rate of corporation tax for co-operative ventures. I am not talking simply about the big co-ops; the UK has a growing co-operative sector which needs, among others, tax incentives. Community facilities, which had been lost over many years, are now being offered by many co-ops which are helping to revitalise the communities in which they operate.
The banking reforms proposed by the Chancellor are most welcome. Today's Cruickshank report shows that the banks take in tariffs £4 billion to £6 billion more than is necessary to run their businesses effectively. I am reminded of the Woody Guthrie story that, when being questioned by the House Committee on Un-American Activities about capitalism and banking generally, he replied, immortally, that he had been robbed many more times by a man with a fountain pen than he ever had by a man with a six-gun. That is exactly how I feel. I have dealt with banks for many years, both in business and
personally, and there is no question but that bank charges need reforming. The Chancellor has opened the curtains on that and we should put much effort into it.
Hats will be thrown in the air at the amount of money that is to be given to schools, which is well deserved and necessary. However, I sound a cautionary note. Education committees, which were formerly responsible for the distribution of education grant and other moneys, now have little control over what is happening in schools. Many authorities now hold less than 5 per cent. for central purposes, and that is a step too far. Inequalities between schools can be redressed, not by a simple formula, but only by an education committee taking an overview and determining where money would be best spent to obtain the best return on that scarce resource.
As I say, at schools throughout Britain hats will be thrown in the air at the generous and welcome amount of money that they are to be given, but we should be cautious and recognise that education committees--there will always be poor ones, but for 150 years they have done an excellent job overall--have local knowledge that is often far superior to anything that exists in Whitehall. The money is welcome, and on this occasion the distribution is fine, but let us not overlook the fact that local knowledge, through our education committees, is extremely important.
The employment measures aimed at getting workers into jobs are also welcome, and that is especially true in the west midlands where, in the past few weeks, we have been "Rovered", which is not a pleasant sensation. We face in the region of 50,000 job losses. The Secretary for State of Trade and Industry has already announced that between £120 million and £130 million, which would otherwise have gone into the black hole of BMW, will now be rescued and used for regeneration in the west midlands, but that is not enough. Despite the apologies that we have been given for having been told less than the truth about Rover, we still do not know the full story, but we fear that, in the weeks, months and years to come there will be more unemployment and more to think and worry about. Those employment measures need to be built upon. They are an insignificant start when set against the task that faces us.
Before the collapse of Rover, workers at the European headquarters of Goodyear in my constituency were on 21 days' notice of short-time working, which, it is rumoured, may be as little as half-time working. That will affect another 4,000 workers, and the knock-on effect of that, not just in Wolverhampton but throughout the region, will mean the loss of many more thousands of jobs.
Therefore, in welcoming the employment measures, I have to tell the Chancellor that much more is needed. The £500 million in loans to BAe in the north-west and elsewhere is exceedingly welcome, and will help the west midlands, through its aerospace industries, but the blow to our automobile industry is most serious and cannot be exaggerated. The Secretary of State for Trade and Industry is working exceedingly hard on these issues, but I hope that he will seek a solution not only within our own nation, but Europe-wide. This may be the trigger for a Europe-wide auto industry, developing a world-beating science and technology.
The west midlands has a conglomeration of universities, all with extensive contacts with the auto industry. If we diminish much further in the west midlands an already impoverished skills base by taking away the work in the universities that filters out into our communities and educates and informs the rest of the skills base in the region, we shall be heading for serious and deep trouble, which, if left unattended, will be irreparable, at least in the medium term. That is a major problem. We welcome today's employment measures, but much more is required.
Workers in the west midlands are often thought to be highly skilled and able to move around between jobs. During the past 15 years or so, far from being inflexible, workers in places such as Goodyear and Rover have developed flexible working arrangements. But in process work, such as that at Rover and Goodyear, skills are specific and non-transferable, and we do not have the skills base that we had 40 years ago when I was an engineering apprentice. I worked with skilled people who could pass on skills that are now long forgotten but which are still relevant and cannot be replaced by machinery, equipment and kit, however high-tech it might be. People working in the west midlands require certain skills and mathematical knowledge that are being lost, and retraining will be particularly important.
Mr. David Taylor (North-West Leicestershire):
Does my hon. Friend agree that, even in the so-called bleak years of the midlands manufacturing industry, when industrial relations were certainly a contributory factor to its demise, there was at least an equivalent contribution from poor management and low levels of investment, and at least the Government and this Budget are starting to tackle the latter?
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