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Mr. St. Aubyn: Does my right hon. Friend agree that, if those priorities are observed and good housekeeping
elsewhere in the national budget is undertaken, the total tax revenue might go up in the medium to long term and provide even more resources for health and education?
Mr. Dorrell: I agree with my hon. Friend, who accurately pre-empts my next point. It is not only a matter of arithmetic to say that the proposition that one cannot be in favour of lower taxes and higher health and education expenditure is wrong. There is a more fundamental reason why it is wrong. If the tax burden is allowed to rise to an uncompetitive level, we shall not succeed in safeguarding health and education expenditure either, precisely for the reason that my hon. Friend identifies--that an under- performing economy will not deliver the tax revenues to pay for the health and education spending that I for one want to see.
The right hon. Member for Ashton-under-Lyne (Mr. Sheldon) addressed the question of how we deliver an effective NHS for the future. He advocated the introduction of a form of hypothecated specific tax revenue for the health service. I do not agree with that view. I am strongly of the view that the main burden of the financing of health care in Britain should come from the Consolidated Fund because it reflects one of the highest priorities not just of me as a politician, but of the people who elect me. If one asks them what they think they pay taxes for, there are very few services that score higher on their priority list out of the main Consolidated Fund taxes than the NHS. That is where the main burden of health expenditure ought to lie.
As a former Health Secretary, I would not relish the prospect of trying to manage the health service through the peaks and troughs of the economic cycle on the proposition that health expenditure, for some reason, needs to fall because the tax yield from the hypothecated revenue has fallen because we are going through a short-term recessionary period. The right hon. Gentleman may disagree, but that is the implication of linking health expenditure directly to a hypothecated tax yield--the expenditure on health care would rise and fall according to the yield of the tax. We all know that yields from tax rise and fall according to the stage of the economic cycle.
Mr. Sheldon: We know that those who decide on the spending should decide on the taxing, and that is so throughout all public expenditure. However, there are limited circumstances--I can think of only one, the NHS--where expenditure and taxation can be directly related so that we can see what people are prepared to pay for what they are to receive.
Mr. Dorrell: I am repeating myself, but I think that the problem with that argument is that the proposal links expenditure on health to the yield of a particular tax in a particular point in the cycle, rather than allowing health expenditure to be planned in the medium term out of the Consolidated Fund, which I believe to be a better model.
The central charge against the Government is that they have failed so far, in two and a half years, to deliver the control of public expenditure that is one of their central obligations. Because they have failed to control public expenditure and to make the necessary choices, they have failed to control the tax burden imposed on the British economy. That rising tax burden is undermining the competitiveness of the British economy, which is
undermining precisely the objective that the Government say that they hold dear--the proper financing of public services.The Government cannot claim that they are ignorant of the dilemma. Before the general election, the Prime Minister said that he would pay for increases in health and education spending through savings on social security spending. Through their failure to deliver on that central pledge, the Government are delivering slower increases, possibly, on health and education than would have been available had they really faced the difficult decisions. More importantly, the tax burden is rising and the Government are undermining competitiveness, and that will jeopardise our capacity to deliver not just rising living standards, but high-quality public services in the future.
2.57 pm
Mr. Paul Stinchcombe (Wellingborough): As we have heard, through the policies of this Government we have secured £40 billion more for schools and hospitals. That amounts to a significant part of the funds needed to make the necessary investment in the public services that the public need and cherish most. It is £40 billion with room to spare--the room in which the war chest is kept safely locked, and we have the key.
It is investment that the Tories would never have made. They said that it was reckless, irresponsible, the product of Peter Pan economics and the consequences of forecasts that could not be met. We know now that the doomsayers on the Opposition Benches were wrong, and that our forecasts were right. One year on, we enjoy historically low rates of inflation and rates of interest, and more people are in work than ever before.
Since we know that the Conservatives' forecasts were wrong, we know also that had they won the last election, God forbid, the economic policies that they would have followed would have been wrong also--as wrong as the policies that they followed in government. They said then that there was no alternative--at least none that they could think of--to boom and bust, mass unemployment, creeping inflation, 15 per cent. interest rates, two recessions, wrecked businesses, repossessed homes, ruined lives, a huge national debt and underfunded public services.
Mr. St. Aubyn: If the Government's economic policies have been so successful, why has the savings ratio collapsed over the past two years? Can that be a sustainable basis for our economy?
Mr. Stinchcombe: It is interesting that of all the economic failures that I mentioned, the hon. Gentleman did not question one but referred instead to the savings ratio.
Under the past two and a half years of the Labour Government, we have seen that there was a real alternative--one of steady and sustainable economic growth, low inflation, high employment rates and proper investment in our public services. We were told that we had copied the Conservatives' policies, but the Conservatives did not back the new deal, the minimum wage or the independence of the Bank of England. Indeed, they set their face stonily against every one of the prudent policies that have changed their record of economic failure into our record of economic success.
Mr. Geraint Davies: I remind my hon. Friend that a falling savings ratio is associated with growing confidence
in a growing economy. Does he agree that that has been observed in economic history and is a signal of the great success that he is so eloquently painting?
Mr. Stinchcombe: My hon. Friend makes his own point.
There is a new avenue in economic policy: not tax cuts and possessive individualism, the way of the old right; not tax and spend, the way of the old left; but sustained investment and sustainable growth in both private and public sector, the way of the new left and the centre left. Through our enterprise we are prosperous and through our investment in public services all of us can better share in that prosperity.
Our future prosperity surely depends on schools. The Tories had 18 years to invest in schools, yet before the general election I was more likely to see buckets than computers in the classrooms that I visited. What a difference we have made in two and a half years--through our investment, in my constituency we now have boilers that work, roofs that do not leak, more books and more information technology.
This year alone, I opened two computer suites in junior schools--Victoria junior and Park junior--and I have seen others in virtually every other school that I have visited. It is not only computers: it is new build, too. During the general election campaign, I was besieged by letters from angry parents of children at Higham Ferrers infants school facing class sizes of 38. This year, I opened the new classroom that brought the class size down to 30. That is not the only classroom that has been funded. Earlier this year, my right hon. Friend the Minister for School Standards came to Wellingborough to open the extension to Warwick primary school. Not only under-11s but secondary school children, too, will benefit.
Mr. Letwin: Will the hon. Gentleman give way?
Mr. Stinchcombe: No. I have a specific point on which I want to close.
Every summer since I was elected, there have been insufficient secondary school places in Wellingborough and the nearby villages.
Mr. Letwin: Will the hon. Gentleman give way?
Mr. Stinchcombe: I am making a specific point relating to my constituency. I am sure that the hon. Gentleman will be very interested to hear what the new right hon. Member for Kensington and Chelsea (Mr. Portillo) said about exactly this problem.
Because of the shortage of secondary school places in Wellingborough and the contributor villages, children have had to be bussed to other towns. Last week, I received a ministerial letter stating that approval had been given for the expansion of Wollaston school by one form entry, enabling the need to be met. That is what I and the county council asked for. Real money--£927,000--is being delivered to be invested in real students, bringing a real solution to a real problem.
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