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5.7 pm

Mr. Ken Purchase (Wolverhampton, North-East): May I start by congratulating the Chancellor on a truly remarkable Budget? His announcements on the national health service, although widely trailed, are none the less breathtaking in their scope and vision. Talk of opportunities wasted is a travesty of the truth. In what must have been the dullest and most inept response to a Budget made in this place for many years, the Leader of the Opposition never really got to grips with the detail, generality and politics of this extremely important Budget.

The Chancellor and the Government deserve our congratulations on their management of macro-economic policy. It is the best report that the House has heard in many years, particularly given the downturn in world trade that has been with us for a considerable time.

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The Chancellor referred to the difficulties, particularly in the high-tech sector in the United States, which then thread their way through the world.

Inflation is the lowest that we can recall; interest rates are now converging—my hon. Friend the Member for Bolsover (Mr. Skinner) will not be pleased to hear—with European rates; unemployment is now becoming manageable and making a serious contribution, in that we no longer have to meet considerable unemployment benefits; growth is outstripping that of the G7 generally; and we have stability that has not been matched for a long time.

The Chancellor tells us that growth in the G7 was 1 per cent. World trade has been down and manufacturing worldwide is down, and that is the background to the remarkable figures that the Chancellor has presented to us today. On his predictions of 2.25 per cent. to 2.75 per cent. growth, he reports 2.2 per cent. actual growth, against the doom and gloom in all the financial papers.

David Taylor (North-West Leicestershire): Does my hon. Friend agree that it was simplistic in the extreme for the leader of the Liberal Democrats to link the undoubted difficulties of the manufacturing sector to the value of the pound when the great proportion of its problems have been caused by worldwide recession?

Mr. Purchase: My hon. Friend may know my position on the question of the euro, and I shall not fall for that silly little trap that he has set for me.

Let me continue in the same vein. The predictions of the financial press, which was filled with doom and gloom, have been exceeded. The Chancellor has been pessimistic and cautious in his predictions, but, none the less, to report actual growth of 2.2 per cent. in this circumstance is truly remarkable. The current forecast for the G7 is 1.6 per cent., and, for the UK, 2.5 per cent., which, again, is cautious. Given the most recent figures from America, where hope of a recovery is rising—with a genuine baseline from which to work and to develop the American economy, notwithstanding its disgraceful decision to increase and raise tariff barriers against steel products—there seems a real possibility that the American economy will pick up. Just as it is true that if America sneezes the world catches a cold, equally, if America is feeling well, the rest of us feel a darned sight better, too. That seems to give real hope.

The return of growth to the manufacturing sector is a most important signal. As someone representing a west midlands seat, I witnessed and was part of the horror of the 1980s, when, in a very short time, 400,000 manufacturing jobs were lost. It has been an increasing worry that, under my party's Government and their policies, which have been more sensitive to manufacturing than those pursued by the early Conservative Government in the 1980s, the manufacturing sector has still been haemorrhaging jobs. It is therefore welcome to see a sign that manufacturing is returning to growth. It must be said that everything that we hope for in public services is clearly predicated on improving our performance in terms of what we can export abroad and how we pay our way. An improving manufacturing output—I mean output, not just productivity—is at the root of being able to finance the improvements that we desperately want.

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Many of the fiscal results that the Chancellor was telling us were well trailed and well understood, but they are worth repeating to congratulate the Chancellor on his performance. Debt has been reduced massively. Tax receipts are down at the same time, unfortunately, but an underlying strength in our economy has meant that we have continued to deal effectively with the mountain of debt with which this country has been burdened for many years.

In fact, £21 billion of debt has been repaid, bringing the proportion down from 44 per cent. to 31 per cent. of national income. Interest payments are down to £22 billion and, as my right hon. Friend the Chancellor said, that leaves room for improvement in our public services without the need for corresponding increases in taxation. A surplus is predicted, not a deficit, and debt as a percentage of total national income is expected to remain stable. That is worth noting. The Chancellor has presented a set of figures that, in the present circumstances of world trade and economic conditions, amounts to a truly remarkable report.

I turn now to supply-side measures. I have a continuing concern about education. There is no doubt that investment has gone into education, and that our primary schools have improved, according to the measures that were set for them. However, my concern is that we place too much emphasis on the training element of school life, at the expense of education.

It remains my belief that our first and most important duty to the generation of young people in our charge is to ensure that their education—in the English language and in literature, in the sciences and mathematics—is first class. What my right hon. Friend the Chancellor has announced today in respect of instilling more enterprise in schools' ideas needs careful thought, especially with regard to delivery. Teachers already complain—rightly, and with some justification—that there is little room left in the curriculum for yet more new measures, especially when those measures do not directly improve our young people's educational standards. That is especially important in connection with the generation now in secondary schools.

My right hon. Friend the Chancellor stated that 55 per cent. of all jobs—10 million jobs in total—are now in the small and medium-sized enterprise sector. Corporation tax is to be reduced by 1 per cent., and that is a very welcome measure.

Last week, I met a number of clothing manufacturers in my constituency of Wolverhampton. They accept that useful measures have been taken, but they complain that the requirements on employers to implement social legislation are a considerable burden. They claim that meeting those requirements takes them away from producing economically and efficiently, and they are looking for a reduction in that administrative burden.

However, I believe that my right hon. Friend the Chancellor has met those complaints, at least in part, with the new measures that he has announced, and especially with the changes in respect of VAT. The VAT regime has been a nightmare for small companies, especially for those without administrative back up. In such cases, the employer—usually the owner of the company—has to deal with all the administration of tax and VAT, and often has to burn the midnight oil to get the returns in on time.

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People in that situation will be pleased that the charges for late returns are to be dropped, but the simplification of the VAT regime will be widely welcomed by small companies. My right hon. Friend is to be congratulated on his response to the problems experienced by many small companies.

The new tax credits available for investment in research and development by large companies are clearly to be welcomed. There is no question in my mind but that the beginning of the end for British manufacturing was evident in the 1960s and 1970s—and certainly in the 1980s—when investment in research and development and blue-skies research plummeted.

Our universities were stripped of any incentive to carry on with the vital work of research and development. As a result, there were fewer of the inventions that need to be made before innovations and developed products can be brought to market. In the absence of new ideas, British industry as a whole was failing to compete. As investment in research fell away, we became unable—except in a very few instances—to claim that we had world-class companies.

That is now starting to change. The British have always been good at innovation—at invention, rather. I should not have got those two words mixed up, should I? The British have been very good at invention, but have failed to bring their products to market. Now, however, we are seeing the process involved in innovation more clearly, which will enable us to compete on a much stronger basis in world markets.

It worries me that the British share of export markets is falling, however slightly it may be falling. Imports must be paid for by exports. We can fill a gap with national wealth for a time, but ultimately imports must be balanced by exports, and exporting must be the nation's forte.

I want to say something about the health service in particular. It is surely right that it is receiving record investment, and also right that the Chancellor recognises that attracting and retaining staff is a critical—if not the most critical—element of a good strong health service.

I have experience of my own health authority, and I served on health boards and other such bodies in various capacities for nearly 30 years. I believe that, given the pace of change demanded by health service workers, targets must be set with current working practices very much in mind. People need a period of calm, a period of stability, a period during which they can deal with the enormous changes that we have asked them to make over the past few years. That will help them to settle into a better routine, and to understand their jobs better. It will help us to retain vital staff, and will ultimately attract more people into the health professions.

I hope that the same message, about the provision of time in which people can settle down, will be conveyed to those in education, particularly further education. Good lecturers are leaving because the rate of change, and the amount of intervention in teaching practices, has become more than they can cope with. They feel that they are failing their students by having to deal with so much administration rather than dealing directly with teaching. I think that we are now learning the lessons—we must, if we are to improve our public services.

I applaud the Chancellor's decision to deal with stamp duty. I congratulate him on opting for what I consider to be a far better way of flattening and cooling the hottest

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parts of the property market than a general increase in interest rates, which would hurt those on the first and second rungs of the housing ladder. I also welcome the lowering of small firms' corporation tax to zero for the first £10,000 of profit, which will be very helpful.

Let me now say something about the working families tax credit, and the general principle of tax credits for those in work. I was among the sternest critics of the 1970–74 Heath Government when they introduced family income supplement. I felt that, in general, it would be seen as a substitute for low pay and would encourage employers to keep workers on low pay, knowing that the state would step in and act as a wage payer. I am still concerned about our system of tax credits. Employers are tending to rely on state intervention to make up wages that should really be paid for by efficient, effective, economic working—smart working, rather than old-fashioned working. The advent of the minimum wage and this week's welcome increase have taken the edge off my reservations, but having nailed our colours to the mast of tax credits, which are generally welcome, we should keep our eye on them.

Overall, this is as good a Budget as the House and I have heard for many years, and my right hon. Friend the Chancellor deserves congratulations from us all.

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