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9.29 pm
Mr. Richard Ottaway (Croydon, South): One needed to do no more than listen to today's opening speeches to get some feel for the contrasting approaches to the Budget. My hon. Friend the Member for Woodspring (Dr. Fox) opened with flair and imagination. He repeated our party's full commitment to the national health service and said that we would match spending and expand the private sector. He drew attention to the scandalous report by Dame Rennie Fritchie, and he pointed out that the Government have said nothing on long-term care.
In complete contrast, the Secretary of State for Health continued where the Prime Minister had left off, with nothing but waffle and spin. They tried to reinvent the wheel. The Secretary of State was completely floored by
the intervention of my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke), who asked him about performance and how the extra funding would be reallocated to health authorities. As my hon. Friend the Member for Poole (Mr. Syms) has just said, it is clear that this pledge has been introduced out of panic. The Secretary of State failed to recognise that it is not the amount that is being spent on the health service that is important, but how it is spent.
My right hon. and learned Friend the Member for Rushcliffe, in his excellent speech, said that this was the strangest Budget that he had ever known. Many of us agree with him on that. He rightly drew attention to the fact that the Budget emanated from the "Breakfast with Frost" programme, when the Prime Minister blurted out that he was going to increase expenditure on the national health service to take it up to the European Union average. From the figures that were announced yesterday, it is clear that that will not be achieved. My right hon. and learned Friend also drew attention to the spending parameters, and pointed out that this announcement covered three years, yet performance will be reviewed year by year.
In the exchanges I had with the right hon. Member for North Durham (Mr. Radice), he made it clear that he does not believe the Chancellor's figures showing that growth will continue year on year. By implication, he disagreed with the Chancellor about there being no more boom and bust. He is right to argue that the strong pound is hurting British trade.
We agree with the hon. Member for Isle of Wight (Dr. Brand) that NICE is taking too long in its assessment of new drugs. The hon. Member for Hemsworth (Mr. Trickett) said that the Government's position on the coal industry was not entirely plausible--he was right to criticise them for that. We also agree with him that their position on TECs is lamentable.
In an excellent speech, my right hon. Friend the Member for Fylde (Mr. Jack) emphasised our solid support for the NHS, and he was right to query whether his local hospital was safe. He asked when the tax rewrite plan would be debated. He rightly brought up the issue of the simplification of the tax system, which I would have addressed if I had had more time. This Budget is not is simple. My right hon. Friend rightly drew attention to the continuing problem of IR35.
My hon. Friend the Member for Esher and Walton (Mr. Taylor) described this as Lord Winston's Budget, and that was aptly put. He also made constructive comments on the regulation of the housing market. The hon. Member for Bury, South (Mr. Lewis) admitted that there are problems with exchange rates. Curiously, he started his speech several feet further down the Bench and moved to the left during his contribution--he was almost over here by the time he had finished.
In a delightful little cameo speech, my hon. Friend the Member for Boston and Skegness (Sir R. Body) could not resist a reference to the euro, but rightly drew attention to the problems of smuggling and beer duty. My hon. Friend the Member for Lichfield (Mr. Fabricant) drew attention to the Rowntree report and the fact that the gap between rich and poor is greater than ever. My hon. Friend the Member for Poole rightly said that this was the 9p up, 1p down Budget.
After the general election, the Government, with their huge majority, were confident, poised and ready to sweep all before them. They called their first Red Book
"Equipping Britain for our long-term future". They set out clearly in black and white their long-term tax objectives. I shall begin by measuring this Budget and its predecessors against those objectives.
The first thing the Government said was that they wanted to keep
But the verbiage in that initial policy statement continues. The Government say that
One thing that this Budget is not--like its predecessors--is simple. Even The Sun says:
Nor is the tax and benefit system simple. As my hon. Friend the Member for Havant (Mr. Willetts), the shadow Secretary of State for Social Security, said the other day,
We already have the working families tax credit, which includes a child care credit. Next year we shall have a children's tax credit; after that we shall have an integrated child credit; and then we shall have an employment credit. Each will involve different rules of entitlement and different methods of means-testing.
I think we can conclude from what I have said that the Budget has failed every long-term test that the Government have set themselves; but, as usual, it is more about what the Chancellor did not say than about what he
said. It is about what he said he would do, and what he did not do. The list is becoming glaringly obvious. The Chancellor did not end his war on the motorist; he raised fuel prices yet again. Britain has far the highest petrol and diesel taxes in Europe. Why should it cost £50 to fill a Mondeo in the United Kingdom, and only £14 in the United States? With the 2p-a-litre rise producing £715 million, but with only £280 million extra for transport, hypothecation is clearly out of the window. It is not surprising that the Deputy Prime Minister looked so fed up during the Chancellor's statement.
The Chancellor did not take the opportunity to end his assault on marriage. He is phasing out the married couples allowance, but we will get no child tax credit until next year. We have a new definition of the gap year. Not only is there no compensation for the phasing out of the married couples allowance; there is no recognition of marriage in the tax and benefit system, something that a future Conservative Government will recognise.
The Government failed to deal with the collapse in savings. They could not resist tinkering with, and abolishing, personal equity plans and tax-exempt special savings accounts, the most successful share-owning and savings schemes that the country has ever had. It is all very well for them to say they will extend the £7,000 for another year; PEPs and TESSAs combined would have allowed £11,000 per person. Given artificial caps of that kind, no wonder the savings ratio is collapsing.
But it is on the new taxes that the Chancellor lives up to his reputation as the stealth Chancellor. Did we hear any mention in the Budget of the new aggregate levy, which will hit the construction industry hard, and will hit first-time house buyers especially hard? Did we hear about changes to double taxation relief for corporations? Did we hear about the extra taxes on insurance companies and Lloyd's? Did we hear anything about the abolition of the approved profit-sharing scheme which will affect the employees of many of Britain's old economy firms? We have heard from Tesco employees how they feel about the erosion of their pension scheme by the Government. How does the Chancellor think others will feel about the abolition of their profit-sharing schemes?
Just when everyone is worrying about new stealth taxes, we have increases in the old stealth taxes on tobacco and stamp duty on share transactions. What is the Chancellor trying to achieve by increasing stamp duty on property? It will hit business. With house prices rising at 15 per cent. a year, a 0.5 per cent. increase in stamp duty will not make any difference to housing demand. It is a return to the old politics of envy: attacks on those who have made enough money to the benefit of the British economy but with no thanks from the Government.
What is there for manufacturing in the regions? Not a lot. As my right hon. and learned Friend the Member for Rushcliffe said, while the Chancellor is saying that exchange rates are a consequence of interest rates set by the Bank of England, and Eddie George is saying that they are a matter for the Chancellor, Rover is going bust in the midlands--and the Chancellor calls it a Budget for enterprise.
There is nothing in the Budget to decrease the burden of £30 billion-worth of business tax over the Parliament. National insurance contributions are rocketing. Will the Paymaster General take the opportunity to explain why the costs of IR35 have been doubled by the Red Book:
from £475 million in 1999 to £900 million this year? Nearly £1 billion out of the pockets of the self-employed is serious money. The brain drain could develop into a mass emigration.
the overall burden of tax as low as possible.
Well, that is out of the window. They went on to say that
how and what is taxed sends clear signals about the economic activities which governments believe should be encouraged and discouraged.
What signal does it send when they tax pension funds, so that Tesco says it cannot meet its pension obligations? Do they mean to discourage marriage when they eliminate the married couples allowance? What do they mean when they leave the typical working family £600 worse off as a result of their Budgets? Are these the values that they want to entrench in society?
tax policy is based on clear principles. These are to encourage work, savings and investment and fairness . . . it must keep tax-payers compliance costs to a minimum . . . and attention must be paid to any implications for the United Kingdom's international competitiveness.
They have not done very well on that lot either. How are we doing? Savings are down; we have slipped from fourth to eighth in the international competitiveness league, and it is not necessary to look far for the reason. Compliance costs are rocketing, which is having a damaging effect on small businesses. The Budget provides very little help, apart from £50, which is utterly inadequate, given reports to the Inland Revenue about the cost of compliance to small firms.
The Sun has given a whole-hearted welcome to three Brown Budgets only to find there was hidden bad news on taxes.
My right hon. Friend the Member for Fylde illustrated that point.
This time we're taking a leaf out of his book. We're being prudent.
We're giving this Budget the seven-day test. It may look different next week.
Only a few experts can master the complexities of the elaborate tax and benefit schemes which the Treasury is designing. Social policy is becoming like nuclear physics.
Personal taxes are paid by individuals on their annual income, but means-tested benefits are paid to households for their current needs. Trying to merge them in tax credits has absurd and unpopular effects.
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