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House of Commons

Thursday 18 May 2000

The House met at half-past Eleven o'clock


[Madam Speaker in the Chair]


London Local Authorities Bill [Lords] (By Order)

Order for consideration, as amended, read.

To be considered on Thursday 25 May.

Mersey Tunnels Bill (By Order)

Order for Second Reading read.

To be read a Second time on Thursday 25 May.

Oral Answers to Questions


The Chancellor of the Exchequer was asked--

Employee Share Ownership

1. Mr. Jim Cunningham (Coventry, South): What assessment he has made of the effectiveness of regional conferences held to promote his new employee share ownership scheme. [121370]

The Chief Secretary to the Treasury (Mr. Andrew Smith): The conferences went very well, with over 1,000 companies taking part. The scheme was well received. We expect a lot of firms to take part and more than 500,000 employees to own shares in their companies for the first time.

Mr. Cunningham: Will my right hon. Friend tell us whether there is a size limit for the small companies that can participate in the scheme? More importantly, what benefits will the labour force get out of such a scheme?

Mr. Smith: The scheme has been designed--through consultation with companies, the Trades Union Congress, financial advisers and academics--to be flexible in responding to the needs of small companies. As for the benefits for employees, for the first time they can set aside money from pre-tax income to buy shares. Those can be matched by the employer with up to two free shares for every one that is bought. On top of that, employees can be awarded up to £3,000 worth of free shares a year from their employer; the amount can be performance related.

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As my hon. Friend implies, the real benefit derives from the link between the participation of workers who identify with their firm and the benefits to the productivity of individual companies and the whole economy.

Mr. Desmond Swayne (New Forest, West): So why does the Chief Secretary devalue the potential value of the shares by the huge burden of regulation that he is imposing on the relevant companies?

Mr. Smith: We are not devaluing the shares. Conservative Members would do well to put aside their churlish criticism and welcome the scheme as a huge boost for a shareholding democracy, in which they used to claim that they believed. In practice, they are obsessed with share options for the few, while we provide shareholding for the many.

Mr. Denis MacShane (Rotherham): In that spirit of bipartisanship, has my right hon. Friend read the extravagant praise that the shadow Chancellor showered on the British economy? He used the sort of sycophantic language that even the most on-message Labour Member would not dare employ.

Does my right hon. Friend agree that employee share ownership should command support from all parties, unions and employers? Previous Conservative Governments initiated moves in that direction and we are building on them. The House should unite and support it so that it is a big success in Britain.

Mr. Smith: I agree wholly with my hon. Friend. Compared with the shadow Chancellor's statements about the strength of the economy, we have been modest in our claims. There should be a bipartisan spirit about the scheme. I hope that all hon. Members will welcome the huge extension of shareholding to many employees who were previously denied that opportunity.


2. Mr. Peter Luff (Mid-Worcestershire): If he will exempt horticulture from the climate change levy. [121371]

The Financial Secretary to the Treasury (Mr. Stephen Timms): No. We have recognised the unique position of the horticultural sector, with a special package of support, including a 50 per cent. discount on the levy for up to five years while energy efficiency measures take effect.

Our approach will help improve energy efficiency in the horticultural sector, while protecting its competitiveness.

Mr. Luff: Although the concessions are welcome, why is the Treasury pressing ahead with the imposition of the tax? Is that not another example of the Government's gimmick-ridden, soundbite-driven policies, which are stealthily strangling British business? Why, instead of imposing a tax of £12,500 per hectare on glasshouse growers in the United Kingdom, do the Government not follow the example of the Netherlands, where growers have been granted a 100 per cent. exemption from the levy in return for an agreement on emissions?

Mr. Timms: The hon. Gentleman is wrong on several points. There is no longer a 100 per cent. exemption in

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the Netherlands. We have taken account of the way in which the horticulture sector is treated elsewhere in the European Union. That is reflected in the strong additional package of support for horticulture that we have announced. I am glad that the hon. Gentleman welcomes it. The climate change levy arose from work that was carried out by Lord Marshall, who began it when he was president of the Confederation of British Industry.

Organisations such as the Council for the Protection of Rural England and the Royal Society for the Protection of Birds have said:

I hope that the hon. Gentleman does so too.

Mr. Barry Sheerman (Huddersfield): Does my hon. Friend agree that if horticulture needs some second thoughts and perhaps more concessions, manufacturing industry, too, needs a break? The manufacturing sector is trying to export at a time when the exchange rate is causing difficulties. It takes that on board, but it does not want a double hit through the levy. Could not we put it on hold for a while or ameliorate the position in some way?

Mr. Timms: No, it is important that we go ahead with the levy. We have given a long period of notice so that everyone can make the necessary preparations. We have introduced a range of measures to boost the position of United Kingdom manufacturing, including the measures in the Budget on capital allowances, and there have been announcements recently about new orders for UK manufacturing.

We have recognised the particular position of the horticulture sector. We have recognised, too, the special treatment afforded to horticulture elsewhere in the European Union, but our approach is the right one. My understanding is that 60 per cent. of the energy used in manufacturing will be covered by the concessionary negotiated agreements.

Mr. David Heathcoat-Amory (Wells): Is the Financial Secretary aware that the brief flirtation between British industry and the Government is now well and truly over, because of the endless stream of new regulations and new business taxes, of which the levy is a good example? Will he confirm that the required CO 2 reductions could easily be achieved by other less damaging means, as has been confirmed by the Government's own figures? Will he also confirm that sectors such as horticulture are likely to try to avoid the tax by moving to other countries, including those with lower environmental standards? Therefore the new business tax will damage not only British industry and jobs, but the world environment.

Mr. Timms: The right hon. Gentleman is wrong. As I have told the House, the levy emerged from discussions with the CBI. The then president of the CBI carried out the initial work that led to its introduction. He recommended the use of taxation to deal with the climate change problem.

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I remind the right hon. Gentleman of the views of the previous Government's Secretary of State for the Environment. I have already put this quotation to him, and I would have hoped that by now, he would have taken it to heart. The former Secretary of State said:

We are making the changes that need to be made. That is the right thing to do.

Public Services

3. Mr. Bill Rammell (Harlow): What representations he has received on the Government's plans, announced in his Budget, to invest additional resources in public services in the coming year. [121372]

The Chancellor of the Exchequer (Mr. Gordon Brown): My colleagues and I have received a number of representations on the Budget spending announcements, welcoming the £2 billion extra that we provided for the health service, the £1 billion extra for education and the over £0.5 billion extra for improving transport and fighting crime, all within our prudent fiscal plans. In total, that means that public spending on the national health service will rise by £5 billion this year and spending on the other services as a whole will rise by £25 billion.

Mr. Rammell: I thank the Chancellor for that response. Does he agree with the House of Commons Library analysis that I have obtained which shows that the three-year spending increase for the NHS has never been matched by any Government in the history of the NHS? Does he agree that any political party that said that it would match those spending increases while at the same time cutting taxes regardless of economic circumstances would be not only economically illiterate, but deliberately trying to mislead the British public?

Mr. Brown: Yes. The politically driven tax guarantee of the Conservative party means that the tax cuts would go to a privileged few, public services would be denuded of money, and the monetary and fiscal stability in our economy would be put at risk.

If we look at what the Conservatives have said about the extra money that we are providing for the health service, we see that they refused to vote with us on the £400 million that we have raised from cigarette revenues; in other words, that money would not be available for the health service. They now say that £1 billion of the money should go to private medical insurance; in other words, that money would not be available to the health service, either. As for their other promises, it is absolutely clear that their politically driven tax guarantee cannot ensure that the health service has the money that it needs. The Conservative party is for privatisation in health. We are for a health service that is safe in people's hands.

Sir Peter Tapsell (Louth and Horncastle): Does the Chancellor accept that whenever he increases public expenditure, he makes it more likely that the Bank of England will raise interest rates still higher, and that that

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in turn will force up the exchange rate of sterling against the euro? Is there not now a clear and damaging conflict between the Government's fiscal and monetary policies?

Mr. Brown: If we had listened to the advice of the shadow Chancellor--who at the time of the Budget said that there should be a fiscal loosening--there would have been a problem, but over the next two years there will be a fiscal tightening over and above what we have locked in in previous years. We have managed to do that by cutting debt interest payments, whereas the Conservative Government doubled the national debt. We have also cut the bills for social security, because we have got 900,000 more people into work. That is why we can spend more on the health service. That is why we can spend more on education. That is why public services in this country are improving--whereas they would be privatised under the Conservatives.

Mr. Michael Connarty (Falkirk, East): Can the Chancellor confirm that his plans for the health service will mean an increase of 50 per cent. in cash terms, and 35 per cent. in real terms, for the health service through the period 2003-04? Does not that increase mean that £2,800 will be spent per household, compared with current spending of £1,800 per household? Can he also give us the figures for Scotland? Will Scotland receive the same percentage increase? What benefits will accrue to the Scottish health service?

Mr. Brown: The Scottish Administration will receive its full settlement under the Barnett formula. I can confirm to my hon. Friend that the figures for the health service are £49 billion--that was for last year--then £54 billion, £59 billion, £64 billion and £68 billion, showing a 50 per cent. cash increase in the money going to the health service over five years.

What I have noticed in the ensuing debate is that not one former Conservative Chancellor has supported the policy now being promoted by the shadow Chancellor. The former Prime Minister, the right hon. Member for Huntingdon (Mr. Major), has said that the Conservatives' politically driven tax guarantee is "mad". The former Chancellor, Lord Lamont--whom the shadow Chancellor might expect to support him--has said that no party could responsibly propose what is being proposed. Both Lord Lawson and the most recent Conservative Chancellor have admitted that the private health insurance plans do not get value for money, and that the money would be better going where the Government are putting it--into the national health service.

Mr. Michael Portillo (Kensington and Chelsea): How can the Chancellor be so self-satisfied and puffed up when public services have got worse while he has been in office? Class sizes have gone up, police numbers have gone down by 2,300, 100 vital road improvements have been cancelled--although the roads position in this country is the worst for 20 years--and an extra quarter of a million people are waiting to see a consultant. Why does the Chancellor not talk about services delivered rather than what he has promised for the future?

As the question concerns what representations the Chancellor has received, will he please confide in the House and tell us what his attitude will be to any representations from the Secretary of State for Northern Ireland?

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Mr. Brown: The Secretary of State for Northern Ireland and the whole Cabinet have been arguing the case--[Laughter.] Yes, we have done that in every region of the country. What the shadow Chancellor should face up to is that in his call for extra spending on transport, crime, health and education--that is exactly what he is implying--he is driving a coach and horses through the politically driven tax guarantee that he says that he supports.

I do not think that people will listen to a shadow Chancellor who was responsible for some of the biggest tax increases that this country has ever seen, introduced VAT on fuel, increased national insurance, introduced the airports tax and the fuel escalator--all of which he put through the House of Commons--and said that he wanted to cut public spending, but who now says that he wants to increase public spending.

Mr. Portillo: I do not think that the country will believe a Chancellor of the Exchequer who can never look me in the eye when he answers one of my questions. I wonder why the Chancellor of the Exchequer finds it so difficult to maintain eye contact. Could it be because, after three years of non-delivery, Labour voters in Labour heartlands know that he has let them down? Could it be because they know that he has wasted £7 billion on fraud, which has been identified by the right hon. Member for Birkenhead (Mr. Field)? How does the Chancellor of the Exchequer respond to the criticisms made by the British Medical Association, which said that the Government have not focused on what is "important" for the national health service, but have become preoccupied with "totally artificial indicators"?

Will the Chancellor of the Exchequer not take some personal responsibility for the message from the local elections, which is that people know that Labour has broken its promises, not only on tax, but on public services, and that he is a Chancellor who taxes more but delivers less?

Mr. Brown: I know what the BMA will say. First, it will support our policy on cigarette taxation, which will bring an extra £400 million for the health service. Secondly, it will support our policy on private medical insurance and giving money to the national health service.

The shadow Chancellor said on the Jimmy Young show:

The Leader of the Opposition is always saying that the economy is doing badly, but the shadow Chancellor has admitted that it is doing well. The Leader of the Opposition wants the politically driven tax guarantee, but the shadow Chancellor does not. The Leader of the Opposition is at odds with the shadow Chancellor on all the major economic issues. I know who the shadow Chancellor is shadowing, and it is certainly not me.

Mr. Portillo: I am delighted that the Chancellor keeps quoting me. Does not that demonstrate that I will be a much more honest Chancellor than he has ever been?

Mr. Brown: The shadow Chancellor went into the 1992 election saying that there would be no tax rises.

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He then introduced VAT on fuel, the fuel escalator, a national insurance rise and the airport tax. He is not the solution to the Conservatives' problems; he is the problem for the Conservative party.

Mr. Christopher Leslie (Shipley): May I look my right hon. Friend in the eye and tell him that I welcome his priorities for investment? Is he aware that spending on the NHS in the Shipley and Bradford district has gone up by 9.3 per cent. this year to £344 million? That will have a major effect in reducing waiting lists, despite the criticisms from the Conservatives that it is reckless spending.

Mr. Brown: Yes, and we know what my hon. Friend's constituents and the BMA would say about the present Conservative party policy on health. The Conservative health spokesman has said:

that currently involve long waiting times. In other words, the Conservatives' policy is that pensioners and others would be told to get their operations outside the national health service. The Conservatives would compel people to take out private health insurance. The shadow Home Secretary has said that the problem with the health service is that we do not charge for much of what we do.That is the Conservative health policy. The shadow Chancellor spent two years outside the House of Commons looking again at Conservative policy. He might start by looking at that.

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