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Mr. Bercow: The Chief Secretary likes to pose as the high priest of prudence. Perhaps I can put to him the question that I put unavailingly to the Paymaster General the other day. What assessment has the right hon. Gentleman made of the impact of the change in the rules for the use of capital receipts from the sale of council houses on the size of interest repayments on local authority debt?

Mr. Smith: A prudent assessment. [Laughter.] It is because we have been prudent that the Chancellor was able to announce that he can pay off £34 billion of debt this year. That will cut the cost of debt interest which, when we came to power, cost more than the entire schools budget, and we are now putting more than £10 billion extra into the schools budget.

We remain on track to meet our fiscal rules. The Chancellor announced that we will retain our 2.5 per cent. inflation target. He has rejected calls by Conservative Members to set a lower target, a policy that would lead to upward pressure on interest rates.

With stability as the foundation, our ambitions for Britain can be met--more investment, not less, and targeted tax cuts on the nation's priorities. For example, as my hon. Friend the Member for Luton, South (Ms Moran) said, the community investment tax credit can bring great benefit to disadvantaged communities.

Mr. Kenneth Clarke: The right hon. Gentleman takes great credit for this extraordinary repayment of national debt, which was plainly unintended, and resulted from the Government failing to spend the money proposed in the Chancellor's previous spending plans. Does the right hon. Gentleman appreciate that over the past four years, the average European country has achieved faster growth than this country? Many have created employment at a faster rate than us, and all of them have enjoyed that with low inflation. Does he accept that his basking in the glory of the past four years is due to the lucky event of having had a good inheritance followed by four boom years for the world economy?

Mr. Smith: I can understand the right hon. and learned Gentleman's regrets about the way in which things turned out, but it is not a question of luck. Who put the fiscal discipline in place? Who paid off the debt? It was not "plainly unintended". We set out the fiscal rules. Unlike the right hon. Member for Kensington and Chelsea (Mr. Portillo), we set out the rules when we were in opposition--the golden rule that we will keep debt at prudent and sustainable levels and below 40 per cent. of GDP and keep the current account balanced over the economic cycle, borrowing only for investment. We are benefiting from prudence in cutting the national debt, saving £4.5 billion in interest payments a year. We are also benefiting from the cut in unemployment. That is not a matter of chance; it was a deliberate act of policy that was assisted by the new deal, which was greatly maligned and attacked by Conservative Members. They would abolish the new deal.

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Mr. Letwin: Will the right hon. Gentleman tell us how long the economy has been growing?

Mr. Smith: It has been growing for more than a decade, but the last economic cycle ran from 1997 to 1999. The question is who is putting in place a foundation for sustainable and continuing growth in the economy, based on sound public finances, on more people in jobs and enabling us to act--

Mr. Clarke rose--

Mr. Smith: I cannot give way. I have to reply to other matters raised in the debate.

As my hon. Friends the Members for East Lothian (Mr. Home Robertson), for Halifax (Mrs. Mahon), for Watford (Ms Ward) and for Kilmarnock and Loudoun (Mr. Browne) said, this was a Budget for families and a Budget to tackle poverty.

Mr. Clarke: I am grateful to the Minister for giving way again. He is vehement about the fact that the spectacular repayment of national debt was intended--it was a deliberate act of policy. It is extraordinary, a once-socialist Government are cheering that fantastic repayment of national debt. However, all the forecasts for taxation and expenditure were wrong. When did the Government predict that they would repay £35 billion of public debt as a policy target?

Mr. Smith: I found it revealing when the right hon. and learned Gentleman said in his speech that he saw merit in the way in which we acted to make the Bank of England operationally independent. The question that he must answer is why he did not do that when he had the chance, if that is what he believed.

This is a Budget for families and a Budget to tackle poverty. As a matter of choice, we increased child benefit to £15.50, which is a rise of 30 per cent. in real terms. We did it as a matter of choice, not chance or good fortune. We are introducing the children's tax credit at £10 a week--from next year it will be £20 a week for those with a child under the age of one. As a matter of choice, we are increasing maternity pay to £100 by 2003 and we will increase the payment period from 18 to 26 weeks, as well as introducing two weeks' paternity leave for new fathers.

The Budget also takes further steps to make work pay for hard-working families--25 million families will gain from the widening of the lower 10p tax rate. Now, more of their income will be taxed at that lower rate rather than at 22p. We have increased the working families tax credit by £5 and increased the minimum wage. That means that full-time work brings with it a guaranteed income of £225 a week. As my hon. Friend the Member for Halifax pointed out, together with the minimum wage, that makes an enormous difference to families on modest incomes.

Conservative Members, such as the hon. Member for Bury St. Edmunds (Mr. Ruffley), who attacked working families tax credit, would deny that money to hard-working families. They would deny it to those who need it most. Families are receiving on average £30 a week more than they were getting under the old family credit and many more of them are getting it.

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Labour's Budgets mean that households will, on average, be £240 a year better off because of the measures we are introducing this year alone. Families with children will, on average, be £420 a year better off and 2 million of the poorest pensioners at least £800 a year better off. That is the measure of our commitment to building not only a strong economy but a strong society--one that is making everyone better off, with living standards having risen 10 per cent. since the general election, but giving particular help to the poorest and those who need it most. Of course, if we had not rejected unaffordable tax cuts, we should not have been able to offer a balanced approach in the Budget, nor could we have met the investment priorities of the people of Britain.

The hon. Member for Meirionnydd Nant Conwy (Mr. Llwyd) was good enough to acknowledge both that people had been helped into work through the new deal and the merits of the working families tax credit. However, on public expenditure, he should recall that the same balanced approach will enable Wales to gain £100 million from the Budget over three years. That is on top of the £2 billion uplift provided for Wales in the spending review, and the objective 1 funding of £270 million to help those areas about which he expressed concern and about which we, too, care deeply.

It is nonsense to claim that our policies are geared only towards the south-east of England. The Budget and the Government act for all the people of this country--giving extra help to those communities which need it most. There will be a strong partnership for action in Wales between the National Assembly, local authorities and Departments to ensure that those communities facing difficult times of transition and job losses receive the help that they need.

Mr. Letwin rose--

Mr. Smith: I am sorry I cannot give way.

That balanced approach, which puts stability first and makes targeted tax cuts that we can afford, is also one that allows us to invest for the long term in Britain's schools and hospitals. For decades, those services suffered from the wrong choices. We choose not to return to those days of short-termism; instead, we choose a path of sustainable growth, with investment in key front-line services and staff.

As my hon. Friends the Members for Harlow (Mr. Rammell) and for Watford pointed out, we are seeing the benefits in our constituencies--in the classrooms and in the hospitals--as we improve services and are able to recruit more staff. My right hon. Friend the Secretary of State for Health spoke today of how he will spend the additional £1 billion over three years on the national health service. Money will go directly to primary care services. Between £500,000 and £1 million a year will go to each acute hospital trust in communities throughout our country.

Yesterday, my right hon. Friend the Secretary of State for Education and Employment set out his plans to spend £1 billion over the next three years on extra resources for our schools. He confirmed that direct payments will go to schools, with as much as £63,000 for the largest primary schools and as much as £115,000 for the largest secondary schools. Because we want more teachers and more nurses, we have set up special recruitment funds of £135 million for key health service staff and £200 million for education staff.

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The hon. Member for Truro and St. Austell (Mr. Taylor) made some extraordinary claims about how much less he thought was going into health and education under the Labour Government. I checked the figures for NHS spending as a proportion of gross domestic product. The amount was 5.7 per cent. in 1996-97; by the current year, it had risen to 6.2 per cent. of a larger GDP. It will, of course, rise further. The extra spending in the Budget will come on top of the additional funding we have made available in the spending review. Spending as a whole will grow not at 3.4 per cent. but at 3.7 per cent.

Our choice is more investment--not less. Those who suggest a spending increase of 2.25 per cent. would see a shortfall over the next three years of more than £16 billion--resources taken away from schools and hospitals in every part of the country. As my hon. Friend the Member for Luton, South pointed out, Opposition Members must answer the question: on which schools and hospitals would their £16 billion axe fall?

In the brief time left for my speech, I will consider the remarks of Opposition Members. I am pleased to see the right hon. Member for East Devon (Sir P. Emery) in his place. He followed admirably his three-point rule, speaking with understandable feeling about the severity of the problems affecting agriculture, and the rural communities in particular, in his constituency as a consequence of foot and mouth disease. Of course that is a very sombre backdrop to our debate. It is a very serious situation indeed, and I believe that we are all agreed that every effort must be made, and no effort spared, to eradicate this terrible disease, which is inflicting such damage.

The right hon. Gentleman made the case for compensation for consequential loss, while acknowledging that no Government had provided such compensation. I believe that he can appreciate the difficulties of deciding who would benefit and by what amount, and where to draw the line. My hon. Friend the Member for Kilmarnock and Loudoun reminded us of the communities that have been devastated by pit closures and other industrial restructuring. I can tell the right hon. Member for East Devon that the Government do act to help communities that are facing critical challenges such as this disease, which is why we will be acting not only to eradicate it but, as soon as we have been able to do so, to consider what measures can be taken to regenerate the rural economies, including the tourism sector, which in turn is being so badly affected. As we draw up those plans, we shall be pleased to listen to the right hon. Gentleman and other hon. Members whose constituents are affected.

I shall comment all too briefly on the remarks of the Opposition Front-Bench team. This evening we received further confirmation in the debate that their sums do not add up, that they have no fiscal rules and that they have no basis for stability or sustainability in their approach. They say that public spending could only grow within their definition of trend growth of 2.25 per cent. If that is the claim that they make, even if we allow for what they say about honouring our spending commitments for their first year, it still leaves them with a spending gap not of the £8 billion that they claim, and which they cannot cover with spending savings because they have not been able to identify any that stand up, but of £11 billion. That gap shows that no one could believe what they say on tax, spending, the economy or anything else. That spending

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gap wields an axe over the investment that the present Government are making in schools, in hospitals and in combating crime.

The Budget debates in the past few days have made clear the choices that the Government have made. We have rejected short-termism and underinvestment. We have rejected unaffordable tax cuts that would put at risk investment in our public services, and we have decided to invest for the long term. Our choice is to seize the opportunity that Britain has, not through some golden inheritance, not through chance, but through the choices that we have made and through the action that we have carried forward, in partnership with the British people. The choice is to invest in our schools, hospitals and disadvantaged communities, and the choice is to build on the new deal, which has got over a quarter of a million young people into work and cut youth unemployment by over three quarters, instead of cutting the new deal as the official Opposition would.

Our choice is to reward hard-working families with affordable tax cuts and measures to make work pay. Our choice is to make stability our foundation, rejecting the boom and bust of the past and the damage that that inflicted on our country in the past. A return to that policy is held as the threat from a Conservative party, a shadow Chancellor and a Leader of the Opposition who cannot be trusted by the people of this country, because their sums do not add up. We have made the right choices for the people of Britain: choices that will build a Britain of opportunity and prosperity for all.

Question put and agreed to.


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