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6.43 pm
Mr. Dafydd Wigley (Caernarfon): I shall not follow the hon. Member for Morecambe and Lunesdale (Miss Smith) into the intricacies of the one-armed-bandit Budget that she described. I am conscious that this may be the last time I address the House during a Budget debate, because I am standing down at the next election. The 10-minute contribution that I shall make contrasts with the speech that a predecessor of mine in Caernarfon made in 1909: Lloyd George spoke for four and a half hours, which would constitute the whole of our debate.
Mr. David Davis: Go on, beat it!
Mr. Wigley: No, I shall resist the temptation.
We are considering what appears to be an election Budget. We must welcome aspects of it--for example, its recognition of the need to help children in the poorest families, as well as the much-needed increased spending on health and education.
Mr. John Hayes (South Holland and The Deepings): Will the right hon. Gentleman give way?
Mr. Wigley: I am sorry, but it is difficult to give way under the circumstances.
I should have liked the Budget to include more spending on specific social programmes, especially housing. In my constituency--and I suspect in many others--there is a massive backlog in house renovation. People have to wait years for work to be done. That backlog is at the heart of many difficult social problems. For that reason, it would have been better if the income tax rate had not dropped from 23p to 22p in the pound, and for the £2,000 million to be available for spending on housing programmes and perhaps for doing a little more for state pensioners. If resources are to be used to reduce
the effect of income tax, I should prefer them to take those on the lowest incomes out of the taxation system altogether.The 9p per gallon increase in the price of petrol will devastate rural areas at an immensely difficult time. People in rural Wales pay the highest cost for petrol anywhere in the world, at a time when our economy is suffering great difficulties. That should be considered.
I want to refer in greater detail to increases in resources for the health service. The Secretary of State for Wales estimates that it will mean an increase of £99 million for health in Wales in 2000-01, and £153 million in the following year. However, that will depend on the way in which the National Assembly for Wales decides to share out the block money that is passed to it. A problem arises with that. I want to consider the way in which the Barnett formula interacts with the Chancellor's intentions in the Budget.
The Barnett formula dictates that the money that goes to Wales and Scotland depends on the size of the population. Expenditure on health in Wales is 9 per cent. higher than in the United Kingdom in general. That is because we have an older population. Many people retire to Wales. That is understandable; it is a lovely place. However, a large proportion of health costs are incurred in the last six months of a person's life. There is therefore a greater demand for health expenditure in Wales. If the increase through the Barnett block is based on population, that means that there is relative convergence and less money to fulfil the needs of the population. The simplistic approach of such a per capita share-out causes difficulties.
Over the next three years, there will be a drop in the proportion of expenditure on health in Wales as compared with the rest of the United Kingdom--from 5.5 per cent. this year, to 5.2 per cent. next year, to 5.1 per cent. in the subsequent year. The Government's correct and laudable Budget objectives of trying to ensure that more money goes to the sharp end of health care will thus not be achieved in Wales because of the workings of the Barnett formula. I hope that we can move towards a more sophisticated approach to the distribution of money by developing need indicators so that resources can be distributed in a way that corresponds to need.
Mr. Hayes: Will the right hon. Gentleman give way?
Mr. Wigley: I am sorry, but I cannot give way because of the 10-minute rule. I am trying to squeeze in what I have to say.
Mr. Hayes: On a point of order, Mr. Deputy Speaker. For the benefit of all hon. Members, could you confirm my belief that Madam Speaker has ruled that interventions add to an hon. Member's time and do not subtract from it?
Mr. Deputy Speaker: The general principle is that the clock stops for an initial intervention and restarts when the hon. Member who is addressing the House responds.
Mr. Wigley: I hope that points of order come into the same category.
Mr. Hayes: The right hon. Gentleman is renowned for his generosity and courtesy. He will be glad to know that I wanted to support him by saying that his points apply
not only to health but to education. It is all very well saying that extra money is to be given, but funding should be granted according to need. The Budget announcements did not make allowance for that. The smallest, least fashionable schools in rural Wales and in rural Lincolnshire will benefit least from the extra money, while the big, popular schools will benefit most. The right hon. Gentleman's points on health apply to education.
Mr. Wigley: Restart the clock, Mr. Deputy Speaker! I rapidly move on from that valid point to the effects of the Barnett formula and the way in which it interplays with European objective 1 money for Wales. We looked for that in the Budget, but it was not forthcoming.
Two years ago, before Wales got objective 1 status from the European Union--I congratulate the Government on achieving that--we had a total control budget for the Welsh block of £7,908 million. The basic budget for the National Assembly for Wales remains at that level this year. The original budget that was published in November was £7,909 million. The figures are almost identical. No additional money was available to enable us to provide match funding, or even public expenditure survey cover for the European element.
Wales is supposed to receive £360 million a year from objective 1 spending in areas of acute poverty in the coming financial year, but owing to the operation of the Barnett rules we shall not receive an extra brass farthing. For every £10 million paid by Europe to meet Wales's needs, the Treasury will knock £10 million from the Barnett block. We are no better off than we would have been if we had not been given objective 1 status. I can identify with what was said by the hon. Member for Liverpool, Walton (Mr. Kilfoyle), and the same applies to South Yorkshire and Cornwall.
The Budget has done nothing to deal with that central dilemma. If we are to find match funding and PES cover from within the Welsh block, we shall have to do it at the expense of health and education--the very priorities that the Chancellor tried to promote in the Budget.
That brings me to the central weakness of the Budget. I refer to the problem caused to the economy of Wales and, indeed, other parts of the United Kingdom by the overvalued pound, to which others have referred. It undermines manufacturing industry. We have seen what it is doing to Rover now, and there will be knock-on effects in Wales. We have also seen what it is doing to the steel industry. I do not accept the Government's line that the steel crisis is being whipped up by the media; I know of companies in my constituency whose margins are being hit by up to 30 per cent. because of the level of the pound. They are finding it difficult to compete in export markets, and are being undermined at home by the sucking in of imports. The same applies to farming and tourism. The three bases of the Welsh economy--manufacturing, farming and tourism--are all being hit.
The right hon. Member for Haltemprice and Howden (Mr. Davis) spoke of the danger of inflation. Any inflationary pressure will tempt the Bank of England to raise interest rates again. That will put the pound up again, which will undermine manufacturing, farming and tourism. All the gains that we hope to secure from the strategy of the Budget will then be undermined, and we will be back where we started.
6.52 pm
Mr. John Grogan (Selby): The right hon. Member for Haltemprice and Howden (Mr. Davis) was right to try to characterise the three Budgets presented by the current Chancellor. Although I disagree with the right hon. Gentleman's conclusions, I think that the Budgets have a common theme. Rather than re-establishing the principle of meddling, they have re-established the principles of European democratic socialism and made them popular for a new generation in Britain.
It is not meddling to provide decently funded public services of a certain quality. It is not meddling to re-establish, once and for all, the goal of full employment as a central element of our policies. Nor do I consider it meddling to make the alleviation of poverty another such goal. One of the things that make me proudest of the Budget is the conclusion by the Institute for Fiscal Studies that those who have benefited most from the three Labour Budgets, taken together, are the poorest 10 per cent.
I want to explore the impact of the Budget on three traditional industries. I shall conclude with references to coal mining and agriculture, but I shall concentrate on a traditional British industry, albeit one that occupies only a small part of the Budget. I refer to betting and bookmaking. Buried in the Budget papers, and given even less publicity initially than the welcome reduction in VAT on women's sanitary products, was a press release headed "Reform of Betting Duty". That was a very definite title: it referred not to a review of betting duty, but to a clear commitment by the Government to reform it according to a tight timetable. Customs and Excise must present its proposals to the Chancellor by July, and he has promised to make his own definite proposals in the pre-Budget statement in November.
Why does the betting industry matter? It is a traditional industry and a traditional British success story, but like many other such industries it is having to adapt to a new age of increased international competition and to the challenges of e-commerce. In the press release to which I referred, the Chancellor has set out his objectives, which are
- a fair basis for UK bookmakers to compete internationally; a fair opportunity for horse racing to secure financial support; and a fair contribution from the industry towards general tax revenues.
I have a bit of an interest in this. One of the first things that I did after being elected was collect my winnings from William Hill in Selby. In an entirely legal form of insider trading, I had obtained odds of 3:1 against myself. Nine per cent. of my bet went to a levy; 6.75 per cent. of that went towards general betting duty. In the case of a bet on horse racing, the extra money goes to the horse racing industry, but in the case of a general bet such as the one I made, it goes to the bookmakers.
There are tremendous opportunities for the British betting industry to expand in the coming years. We lead the world in that respect. Ladbrokes is the biggest bookmaker in the world, and gambling is cross-cultural--that is one of its attractions. An American writer, Heywood Hale Brown, commented:
- The urge to gamble is so universal and its practice so pleasurable that I assume it must be evil.
Many hon. Members may not be particularly interested in sports betting, but I draw their attention to a column in the New Statesman by Charlie Whelan, who has had comments to make about previous Budgets. Each week, he highlights particularly interesting bets that people can make on politics and other issues. A few weeks ago, he asked which national newspaper Piers Morgan would be editing on 1 October 2000, offering odds of 6:4 on The Mirror, 7:4 on The Express and 50:1 on The Sun. In February, following the resignation of my hon. Friend the Member for Liverpool, Walton (Mr. Kilfoyle), he asked which Labour Minister would be the next to resign. I shall leave hon. Members to look at the odds, given such an unlikely event.
In another column, Charlie Whelan asked whether the Leader of the Opposition was likely to become a father in the millennium year. He offered 6:4 against that, 6:4 against the Chancellor's marrying, and 8:1 against a certain baby's being called Tony.
Many innovative bets are available, but they face two challenges. One is international competition. Not too long ago, in May 1991, Victor Chandler International set up business in Gibraltar offering telephone bets to the British public, with a levy of not 9 per cent.--which I had to pay on my bet in Selby--but 3 per cent. That posed a big challenge to the British betting industry, to which all three major bookmakers have responded by setting up their own offshore operations. The Irish Government have responded by cutting betting duty from 10 to 5 per cent. Perhaps not unconnected with that is the fact that the Irish Prime Minister, Finance Minister and Agriculture Minister are often to be seen at the Curragh and at Cheltenham--they clearly have a particular interest in the industry. However, the lower levy in Gibraltar is plainly having an impact on the competitiveness of British bookmaking.
On the other hand, there is expansion in e-betting--betting on the internet. At present the figures are quite small, but MMD, a London research agency, predicts that by the end of next year internet betting--on sports alone--could account for £9 billion. Britain has a competitive advantage in sports betting. In America, it is all but outlawed. A Bill presented by Senator Jon Kyl of Arizona, who wants to kill off e-betting, is currently going through Congress.
British bookmakers have a tremendous opportunity to gain that competitive advantage. What should we do? I think the Chancellor was right not to reduce betting duty in the Budget. At present the revenues are holding up--£490 million will be raised in betting duty this year, as opposed to £480 million last year. Nevertheless, I think that he should do what the press release promises he will do, and consider radical solutions such as abolishing betting duty altogether and replacing it with a tax on the profits of the bookmakers. That might be a very effective way of maintaining the revenue, while allowing the industry to compete. At a stroke, it would also abolish any form of illegal gambling, as there would no longer be any incentive to engage in it, and the anomaly in the levy, which means that some of the 9 per cent. levy on non-horse racing bets goes direct to the bookmakers, as with my bet in Selby. I would welcome that small but important measure.
I want to use my final couple of minutes to refer to agriculture and coal mining in Selby. Both those traditional industries are exchange rate sensitive, both are
going through difficult times and both are looking for a restatement of that other traditional principle of European social democracy: that we are not afraid, when necessary, to intervene in the market--not to prop up failing industries but to aid transition from one phase to another.This is an extremely important week for the coal mining industry. My right hon. Friends in the Cabinet have before them a paper that talks of modest state aid--perhaps £60 million to £70 million--compared with the £3 billion of state aid that subsidised the French, Spanish and Italian coal industries last year. That money would allow the most efficient deep-mined coal industry in Europe to bridge the gap between the price that it can offer and the price of internationally traded coal, which is on the increase. The subsidy would last for only two years, until the relevant European treaty runs out in 2003. Although pits will close under Labour and industries will contract, I urge the Government to come to a quick decision on the coal subsidy and to reaffirm the principle that, unlike the Conservatives, we will not allow industries to contract overnight in the completely uncivilised and uncaring manner that characterised the 1980s and 1990s.
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