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2.23 pm
Mr. Robert Sheldon (Ashton-under-Lyne): The right hon. Member for Wells (Mr. Heathcoat-Amory) had great fun with the public sector debt, but I should point out that it has certainly reduced a lot, whatever the figures may be--not only that, but we are paying much less interest on even that reduced amount so there is great positive advantage from the work of my right hon. Friend the Chancellor.
The right hon. Gentleman dealt with health expenditure, which I shall discuss, but I want first to deal with an innovation from the pre-Budget report. In his statement, my right hon. Friend the Chancellor said that the £300 million that he would raise from tobacco duties would be passed to the health service, and few could disagree with that approach. He said:
- "There is a strong public health case for year-on-year, real terms increases in the price of cigarettes. While we will now make our decisions Budget by Budget, I can announce a new approach: the extra revenues from a 5 per cent. real terms rise in cigarette duties would go straight to additional investment in the national health service, worth £300 million a year--that is £300 million extra for hospitals and health care which could start next April."--[Official Report, 9 November 1999; Vol. 337, c. 891.]
When choosing his excursion into hypothecation, my right hon. Friend the Chancellor was right to select the NHS. To me, such expenditure satisfies those rare conditions that can justify its introduction. One thing is clear about the health service: its cost will rise ever faster than the rate of inflation or even the growth in the economy. In the early post-war years, the NHS was a beacon of hope among the privations of the period and met many of the highest aspirations of the time. In a society that is more affluent than when the NHS was created 50 years ago, more of the basic needs of our people are being met--they have adequate food and heating in their homes and can indulge themselves in ways unimagined in the early post-war years--but much of that private affluence draws attention to the fact that, despite the £20 billion that was given to it by my right hon. Friend, our national health service will continue to be underfunded because of the way in which new treatments are made available.
Increasing demand will make it difficult for future Governments to avoid either ad hoc rationing or its more formal acceptance. A health service that delivers at the point of need will have to embrace newer and increasingly expensive forms of treatment as medical solutions pour out of the world's research laboratories. As a proportion of our gross domestic product, our national health service represented 3 per cent. in 1960, but that figure is rising to about 7 per cent. for next year. The United States spends more than 15 per cent. and France and Germany more than 10 per cent.
Dr. Starkey: I am listening with interest to the point that my right hon. Friend is making about the advantages that science can bring to the health service, but would he not admit that some scientific advances could reduce the cost of treatment in the health service? They would not necessarily always add to it.
Mr. Sheldon: Some treatments could achieve a reduction in cost, but the overwhelming effort goes into research work and that effort will increase indefinitely. I shall come to explain why I think that that will continue ever more.
We have an efficient health service, but it will come under ever-increasing strain if we do not provide further resources, and the demographic effect is only one
problem. The population are ageing and, as wants are met, those of health will represent perhaps the major example of increasing expenditure. The consumer society means rather less to older people compared with their increasing concern for their personal well-being, and the time is coming when we shall have to think more of private medicine, which I do not favour, or introduce a special NHS tax.Anyone who has served in the Treasury has a visceral feeling about hypothecation, and I am sure that it is shared by the Treasury Ministers on the Front Bench. An important weakness of hypothecation is that it does not take account of changing patterns of priorities in expenditure--the road fund licence still casts its shadow 70 years on--but a certain aspect of health is that, whatever efficiencies may be provided that might limit parts of it, demand will increase into the indefinite future.
In an important study of health care, Hoffmeyer and McCarthy have demonstrated the almost exponential growth of health expenditure in every country. It is possible that people will be willing--more willing, at least--to accept a national health service tax when they can see the direct consequences of their expenditure than to accept other taxes, in respect of which their expenditure disappears in the vast generality of public spending. The time has surely come for the introduction of such a tax to be sensibly explored.
An aspect that will need to be examined is the relationship between the tax and, in particular, the present income tax rate. Some recasting will be necessary. Much work will be needed. Although the Treasury normally opposes hypothecation, it should examine the matter along with the Inland Revenue. However, the case for such a tax is greatly helped by the Chancellor's move in that direction.
Nevertheless, there is a danger in the kind of hypothecation that the Chancellor is introducing. In the case of a partial hypothecation, when part of the spending comes from Government grants and part of it comes from ring-fenced revenue, the danger is that the expenditure round may include a reduction to offset part of the increase arising from the hypothecation, and that the public expenditure element raised by the Chancellor in tax may be reduced. That may not be a problem in the short term--my right hon. Friend the Chancellor is committed in this instance--but I am looking to the future. Treasury involvement in future expenditure rounds may not indefinitely retain the attitude that my right hon. Friend has accepted. It is possible that, following any close examination of the case for an hypothecated NHS tax, the real choice will be to go the whole distance to an all-embracing tax.
2.32 pm
Mr. Stephen Dorrell (Charnwood): The fact that the debate focuses on a relatively narrow set of economic policy issues--issues raised by taxation, and associated issues relating to public expenditure--is an important reflection of the way in which economic ideas have changed over the past quarter of a century.
When I entered the House in 1979, every debate on economic policy covered the whole field. We used to discuss, at great length, monetary policy and the correct position for the interest rate. I make no apology for welcoming the fact that that is no longer regarded as a
mainstream short-term political responsibility. I also welcome the fact that my right hon. Friend the Member for Horsham (Mr. Maude), the shadow Chancellor, has set up a commission--I anticipate--to move the Conservative party's position in the direction of an independent status for the Bank of England. I am glad that that is no longer regarded as the focus for a short-term debate in the House of Commons.When I first entered the House, we used to engage in endless debates about incomes policy. I am glad that all Members--or, at least, virtually all Labour Members--consider incomes policies to be the responsibility of employers and employees, and not a subject for political debate here. We also used to have endless debates about industrial policy, but I am pleased to say that industrial policy is now considered to be the responsibility of customers and their suppliers, and is not regarded as a focus for political debate in the Chamber.
Nowadays, our economic policy debates are much more narrowly focused. They deal partly with trade and competition policies but, as my right hon. Friend the Member for Wells (Mr. Heathcoat-Amory), the shadow Chief Secretary said, a regulatory framework is necessary to the operation of an open-market system, and we take account of that as well. We also now recognise that, although the issues are important to the House, the House is part of an international trading network.
That is one set of issues with which we deal here. However, when it comes to economic policy, there is a supremely important set of issues, which is unambiguously the responsibility of the House of Commons and no one else. I refer to the two critical questions that lie at the heart of fiscal policy. First, how can we, or should we, tax the people who elect us? Secondly, what are the proper priorities for spending the money that they pay as a result of those taxes? Those are, unambiguously and without qualification, issues for debate here in the House of Commons.
I make no secret of my welcome for the more plural world that I have described, in which the majority of key influences on the evolution of the economy are not politicised in the Chamber, but are widely diffused throughout society and removed from short-term party politics. I am glad that, throughout the House, we now recognise the global nature of a sophisticated economy. In particular, I welcome the fact that those developments imply for the British House of Commons, and for British domestic politics, a clearer focus on the central questions of fiscal policy. It is on those questions--first, how much should we tax; secondly, what are our spending priorities in regard to the use of tax revenues--that I want to concentrate.
I think that those questions should be taken in order. The first does not, in fact, relate to how much we would like to spend; it asks what is the right level of taxation. There are a number of reasons why taxation must determine expenditure, rather than the other way round. The Government's plans in regard to the right level of tax are swathed in obscurity. The Chief Secretary waxed lyrical on the importance of transparency. I agree with him about that, and especially about the essential question of the Government's intentions in regard to the tax burden
imposed on those who elect us. However, having ploughed through the 160 pages of the pre-Budget report, I found precious little.I then picked up what I assume to be an appendix to the pre-Budget report, entitled "Analysing UK Fiscal Policy". I thought that that might be a hint that we would be given some signposts somewhere setting out the Government's intentions for tax policy but, as I flicked through the pages, it became increasingly clear that all I would find was algebra.
I think it important for my electors to know that, according to the Government's policy,
- "PSNBt = CBt + PSNIt".
As my right hon. Friend the shadow Chief Secretary made clear, what we have is the record of what has happened to the tax burden during the two and a half years during which the Government have been in office. As we are not allowed to look into the crystal ball, we have no option but to look at the record, and the record is clear enough.
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