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6.27 pm
Mr. David Davis (Haltemprice and Howden): I would normally have spent a little time dealing with the welcome parts of the Budget, such as the Cruickshank bank reforms; however, given the time constraints, I shall have to focus on the rest of it instead.
I hope to refer to several of the comments raised by the right hon. Member for Coatbridge and Chryston (Mr. Clarke), especially his interesting points about small businesses. I welcome back the right hon. Member for Ashton-under-Lyne (Mr. Sheldon). I believe that this is his first outing since he has been away, and it is good to see him back on form, punching as hard as ever. He will forgive me if I turn his illustration of a glass half full into one of a glass half empty.
The Budget is dominated by short-termism and flawed foundations. The Chancellor likes to charge business with being short-termist, yet he, too, is guilty of that charge. It is difficult to think how else to describe a Budget which, on the basis of rosy economic forecasts, projects a £25 billion adverse change in the fiscal balance on the presumption that the business cycle will not really bite. If it does bite, that will add about £50 billion to that adverse figure. That adds up to a burden with which the country cannot cope, and that will lead to cuts such as those that we have seen under previous Labour Governments.
Laying aside the aggregate fiscal position--because others have already spoken about it--I turn to the overall strategy set out in this and the last three Labour Budgets. Between 1945 and 1979, the Budgets of both Labour and Conservative Governments were highly interventionist. They piled on to the British economy large quantities of regulations, great complexity, and a very high tax burden. The initial effect of that meddling was relatively benign--it took time to bite; but the process continued through the 1940s, 1950s and 1960s and its effects grew until, in the 1970s, it became apparent that they were disastrous. Politicians do such things because the early effects of regulation and of tax and spend are apparently positive. They have explicit benefits, for which politicians get the credit. The simple fact is, however, that the significant
harm that is done by over-regulation and over-taxation is both diffuse and delayed. That is what led to the slow-motion crippling of the British economy through the pre-Thatcher years.I am afraid that this Budget and its two predecessors fall into a similar trap. The Budget contains a wide range of over-burdensome, over-meddlesome and wholly ineffective measures, as several hon. Members have mentioned.
The right hon. Member for Coatbridge and Chryston spoke about the growth in e-commerce and in small businesses. The measures on e-commerce in the Budget are irrelevant to most e-commerce entrepreneurs. The idea that the dot.com companies will somehow change their tactics because of the minor and rather complex proposals in the Budget is laughable.
Furthermore, those measures will do nothing to reverse the effect of the disastrous IR35 measures that are already in place. They will merely add to the complexity of the system and add to the £10 billion of extra regulation that has been piled on British business in the past few years.
The problem of complexity--often to no end--is the real harm of the stealth tax tactic, in which it is used as a way to conceal taxes from the public. Such complexity is harmful in itself. It creates jobs for tax accountants, but destroys jobs for everyone else.
The commitment to high regulation, high complexity and high spend and tax may create short-term political advantage--no doubt that is the intent of the Budget--but it does long-term economic harm. It is exacerbated by other regulations from Europe--perhaps not as many as some of my hon. Friends may assert, but certainly plenty.
Listening to the Prime Minister's comments on the Lisbon summit today, one had to conclude--particularly given what is happening in France, where the French Prime Minister is signing up to the documents about which we heard today--that if the Government believed what they were told there, they do not understand how free enterprise works,
A more accurate view of the regulatory burden from Europe would perhaps be achieved if hon. Members read the comments and the article by Otmar Issing, the German nominee on the board of the European central bank, who stated in the German papers this week that the entire anti-regulation strategy of the European Union was flawed and would fail. It would serve to increase regulation, rather than reducing it.
As well as the risks of short-termism, the Budget contains other fundamental flaws in its underpinning assumptions. The Chancellor advertised the Budget in advance as a crackdown on the black economy. A survey last week showed that only about one in 10 people believed that it would work, and they are probably right.
So far, all the initiatives, of which there have been many, and all the announcements, of which there have been even more, have led to no real change. Fraud levels have not gone down by a penny. The Government are not alone in that, but if they put the crackdown on the black economy at the centre of the Budget strategy, one would hope for better than that.
The introduction of the working families tax credit is likely to make matters worse, because its complexity will make fraud easier. Its predecessor in the United States, the EITB--the earned income tax benefit--is renowned for being subject to both fraud and administrative failure.
Many of us on both sides of the House want poverty reduced, but the Government have chosen a complex and probably ineffective way of doing that. Moreover, when the Department of Social Security was doing the preliminary work on the working families tax credit, it cancelled a programme that would have allowed that benefit to be better designed to avoid fraud. We all support the aim, but the mechanism will prove to be flawed.
There are similar weaknesses in other mechanisms. The strategic defence review and the funding in the Budget for the Ministry of Defence is dependent on the so-called smart procurement process. Having observed smart procurement, I have not yet seen an improvement in purchase price or purchase quality achieved by the Ministry of Defence. This weekend's papers mentioned selling off Aldershot to fund the SDR--an extraordinary proposal demonstrating the failure of another underpinning assumption in the Budget.
That brings me briefly to the most high-profile aspect of the Budget--the spending proposals for the national health service. The increases there are made necessary by the failure of the Government to meet their own promises--a failure arising from weaknesses of policy, organisation and management, as well as funding, but exacerbated by the cash starvation over the past two years.
The Prime Minister recognised last week that the NHS could not use the extra £2 billion without sharp changes in its effectiveness. We all agree with that. Let us look at the size of the problem. Suppose that the £2 billion was divided among three possible uses. First, there are those areas that simply need extra money and can be dealt with quickly. The most obvious is the marginal cost of matters such as drugs. We could dramatically improve the drugs policy to make drugs to treat cancer, multiple sclerosis and other conditions available to all patients throughout Britain, so that we could have a truly national health service, rather than the fractured one described by the right hon. Member for Ashton-under-Lyne. It would cost hundreds of millions to put that right, not billions.
Secondly, the money could be used to increase the utilisation of existing capacity. Again, that would cost hundreds of millions of pounds, not billions. That would leave significantly more than £1 billion to spend, with only one possible aim: to increase the capacity of the health service. As the Minister said, we cannot do that through the Government's mechanisms.
When the extra money is spent, it will be interesting to see whether the Government use their new private finance initiative mechanism to bring much more private sector skill and entrepreneurialism into the health service to provide new hospitals and new capacity, and to make their promises on funding amount to something.
All these undertakings and others guarantee an increase in the public service inflation rate. That is one of the effects of increasing expenditure. For a Chancellor who is wedded to the concept of prudence, the Budget is incredibly fragile. Aggregate expenditure--
Mr. Deputy Speaker: Order. The right hon. Gentleman's time is up.
6.37 pm
Miss Geraldine Smith (Morecambe and Lunesdale): The priorities of my right hon. Friend the Chancellor's Budget are also the priorities of the people of Morecambe
and Lunesdale. I warmly welcome the extra money for the national health service and schools, and the additional help for families and pensioners.The Chancellor has delivered a massive boost for the NHS. The immediate cash injection of £2 billion is part of the largest ever package of spending on our health service. Over the next four years, spending on the NHS in real terms, over and above inflation, will increase by 6 per cent.--double the average of 2.9 per cent. achieved by the Tories.
Whereas last year we spent just over £1,850 per household on the NHS, by 2004 that will have increased to £2,800 per household--a cash injection of 50 per cent. That should be compared with the shabby Tory policy on health, which would provide a two-tier health service in which ability to pay would determine the quality of treatment and care received.
I welcome the additional income for schools in my constituency. The extra £1 billion announced in the Budget will help schools to recruit more teachers and purchase more books and equipment. The money will go directly to head teachers and help them to improve standards in our schools. I know that they have been asking for that for some time.
I am pleased to see measures in the Budget to help pensioners. The further increase in the winter fuel payment from £100 to £150 to be paid to all households where someone is over 60 is most welcome. That will benefit almost 21,000 pensioners in Morecambe and Lunesdale. From 1 November, pensioners over 75 will benefit from free television licences, which will help 8,000 pensioners in my constituency, who will save £104 a year on the licence fee.
I am delighted that the Chancellor is to increase the capital limits on the minimum income guarantee. Everyone will welcome the Government's commitment to developing the minimum income guarantee for pensioners who have made some provision for their retirement. After a lifetime of work, those pensioners' financial position has been steadily eroded. That is unjust and unacceptable. I therefore look forward to the proposals of my right hon. Friend the Secretary of State for Social Security to assist those pensioners who have small second pensions and whose income is just above the minimum income guarantee.
I represent a seaside resort and I am pleased about the decision to remove the annual licence charge of £645 on small amusement-with-prizes machines which cost 10p or less to play. The British Amusement Catering Trades Association, along with the seaside group of Labour Members, has campaigned hard on that. I should like in particular to thank a local BACTA representative in Morecambe, Mrs. Norah Slater. Norah and I spent a sunny afternoon in Morecambe visiting all the amusement arcades on the promenade. It made me realise what a wonderful job I had. I could spend my time mixing with holidaymakers and playing in amusement arcades. It was time well spent because I, like many other Labour Members, made representations to Treasury Ministers. I am glad that the Government listened. Their policy will mean that amusement arcades can expand; it will help seaside resorts and give operators a huge boost. It is further proof of the Government's commitment to seaside resorts.
Many seaside towns have been given assisted area status. Morecambe has been successful in gaining that. That will give an impetus to our resorts, which were so badly let down by the previous Administration.
The increases in the working families tax credit and in child benefit are good news. The 1p cut in the basic rate of income tax next month means that next year, the tax burden on working families in my constituency will be the lowest since 1972.
The Tories bang on about tax having risen as a proportion of gross domestic product in the past two years. Although that is true, they neglect to say that that is largely due to the billions of pounds that the previous Tory Government borrowed. The Government are steadily repaying that. The overall tax position has now stabilised and figures are set to fall. My right hon. Friend the Chancellor was able to announce more for our public services, our pensioners and families because we have strengthened the economy.
Today in my constituency we have stability and low inflation. Thanks to the new deal, youth unemployment has decreased by 77 per cent. and long-term unemployment is down by 58 per cent. since the last election. I believe that the Budget will help to provide security and opportunity for all. It is a Budget for the hard-working people of Morecambe and Lunesdale and I commend it to the House.
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