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What would have been a better Budget? It would have been one that recognised the huge contribution that private investment and private money could make to our public services. It would be one that mended fences with the private sector, especially in transport, rather than preserving them in their broken form. It would have been a Budget that contained some humility about what had been achieved so far with large increases in taxation and spending, and one that contained more careful thinking about how we might secure the real improvements that we need in a crucial area such as health.
The Chancellor has gone ahead with the eye-catching headlines on large sums without thinking about how he can find nurses, doctors and other important care workers who so obviously need to be recruited. As a result, we may see more of the samethat is tax and wastethat has characterised the Government's first five years.
Mr. John McFall (Dumbarton): I do not recognise anything that the right hon. Member for Wokingham (Mr. Redwood) was talking about. I have been in this place since 1987, and I was on the Opposition Benches when the right hon. Gentleman was a member of the Cabinet. We then had 3 million unemployed; inflation was in double digits and we had what have been referred to as three booms and busts. They were deep economic troughs. That is the history of the right hon. Gentleman when he was a practitioner in government. He is a clever man, but there is a meanness of spirit in every political utterance that he makes. He offered not one good comment on anything that the Government have done[Interruption.] Apart from that, he is finethere is always some good in everyone.
Let us consider what the Government have achieved. We have the lowest unemployment for more than 20 years; since 1997, an extra 1.5 million have been in employment. We have the lowest rate of inflation for 20 or 30 years. For the first time, we are paying back more of our debt than any other British Government since the second world war, as my right hon. Friend the Chancellor of the Exchequer said. There must be something good about what the Government have done.
Mr. Redwood: The hon. Gentleman did not listen to my speech. I said that I thought that some business tax reliefs were welcome, but that it was a great pity that business had to pay for them several times over.
Let us take economic stability first. We have that stability because we learned lessons from the past decades. I have mentioned the Tory record in the 1980s and 1990s. Labour Governments had records in the 1960s and 1970s. It could be said that we had jam straight away with Labour Governments, but bread and water for the ensuing few years.
My right hon. Friend the Chancellor said in 1997 that that approach would have to be changed. His brave act, against all the odds, was to give the Bank of England independence. Monetary issues have been taken away from politicians and placed with economists. As Chairman of the Treasury Select Committee, I know that Sir Eddie George and his colleagues on the Monetary Policy Committee are accountable to the Chancellor and Parliament through our Committee. That is much healthier than having monthly meetings between a Chancellor and a Governor of the Bank of England.
I was in Brussels yesterday for a meeting of the European Parliament's chairpersons' budget committee. We are not in the eurozone, but our monetary and fiscal policy framework is delivering towards the stability and growth pact that the EU is setting down. It is striking that we have low and stable inflation compared with many other European countries. We have the fastest growth in the G8. If we go into Europe, after a referendum, we will be well placed; I shall not go into that debate in more detail.
The MPC is well placed to respond quickly to risks to the symmetrical inflation target. We have a sound model with the Bank of England, which I would not like to see jeopardised. We must be careful in the run-up to the referendum in Europe to ensure that the lessons that we have learned in the United Kingdom are taken on board by the rest of Europe.
My right hon. Friend the Chancellor of the Exchequer has adhered to his fiscal policy. Indeed, he announced today a tightening of that policy by a few billion pounds. The code for fiscal stability has ensured that. In the next few months, the Treasury Select Committee will undertake an inquiry into Europe and fiscal policy to evaluate the lessons that can be learned from the monetary
There are five characteristics of fiscal stability: transparency, stability, responsibility, fairness and efficiency. These serve us well in the medium and long term. They ensure that spending and tax impact fairly. That is a big issue, especially when it crosses generations. Currently, we have a pensions problem. The problem is not unique to the United Kingdom. Germany, Italy and other countries have enormous problems in that regard. It is important to treat today's pensioners fairly, but we must also treat tomorrow's adults and pensioners fairly. There is an inter-generational aspect to the problem. The framework established by the Chancellor contains a long-term element and will serve present and future generations well.
We must recognise that a large savings gap exists. Various figures have been bandied about and the sum of £27 billion has been mentioned. That means that each individual should be saving an extra 9 to 18 per cent. for his or her pension provision. As a Government, we have a responsibility to ensure that people do that. I am a little concerned about stakeholder pensions. Although the Government say that there has been a good take-up, employers are responsible for making the scheme available to employees, not for ensuring that pensions are taken up, so there are a number of empty schemes, as they are called.
The hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood), as Chairman of the Select Committee on Work and Pensions, knows much more about the matter than I do, but I recognise that it is a major issue. I would suggest to the Chancellor that if the voluntary method is not working, he should consider the compulsory route. I see the hon. Member for Roxburgh and Berwickshire indicating his approval.
On economic stability, it is important that we stand by the fiscal rules laid down by the Chancellor. The golden rule is to borrow only to invest over the economic cycle. The second rule is to ensure sustainable investment and make sure that our net debt is well below 40 per cent. over the economic cycle. I am pleased to see today that the Chancellor has fulfilled that.
The second element that I mentioned was fairness. I noted the Chancellor's remarks that he would review the rules for residents and domiciles, and I am a little disappointed. There are glaring examples of individuals who live in the country but pay no British tax. That conflicts directly with the fairness agenda of the Labour party. I ask the Chancellor to examine the issue carefully. Last week The Guardian highlighted the case of an individual worth billions upon billions of pounds, yet there were little or no net tax receipts to the Inland Revenue. It would be helpful if the Chancellor's review were speeded up.
I am pleased by the Chancellor's approach to small businesses. As he said, they are responsible for 50 per cent. of output, and we must assist the nurturing of small businesses. In my constituency, when I was elected in 1987, there were a number of large firms. Those were the norm in the 1950s and 1960s. Now, most large firms have departed and the future is for small firms. Particularly in disadvantaged areas, such as mine, it is important that the
On research and development, the tax credit announced a few weeks ago for large firms is extremely welcome. We experience a phenomenon known as the branch economy, where we have inward investment and companies coming in, but the brain of the company is located elsewhere. A research and development tax credit could help to ensure the stability of such companies in particular areas and the long-term affiliation with those areas.
Reducing red tape and compliance costs for small businesses and exempting some from stamp duty must be welcomed. Competitiveness was mentioned by the Chancellor in passing. The Competition Commission's report on banks was published a few weeks ago. Small businesses feel greatly disadvantaged in that regard. In the next few weeks my Committee will be inviting the banks to tell us what they have done post-Cruickshank to ensure that small businesses get a fair deal. I would say that to date a level playing field has not been established and an awful lot of work remains to be done.
Competition and productivity go hand in hand. The productivity targets that we have set since 1997 have in many cases not been realised. Productivity levels in our country are still disappointing compared with the rest of Europe and especially compared with America. A study of productivity undertaken by McKinsey in America concluded that the driving force for improved productivity was competition. We can learn from that. We must support small businesses through the Competition Commission's proposals. I and my Committee will be doing that.
In accordance with the fairness agenda, we must support families and build a fairer society. I agreed with the Chancellor 100 per cent. when he spoke of the importance of making work pay. The measures introduced by the Chancellorthe child tax credit, the child allowances and the working tax credits for those with and without childrenare extremely important. The more people that we get to work, the better for the individuals, communities and society. From April 2003 the working tax credit will guarantee a minimum income of £183 a week for a single-earner couple without children working full-time on the minimum wage, and £237 a week for a family with one earner working full-time on the minimum wage. That is a big increase which is very much to be welcomed.
There has been some criticism from outside bodies, not least the Institute for Fiscal Studies, that tax credits are a disincentive to savings. I hope that the Chancellor will look into the matter. As long as he is providing satisfactory levels of minimum income, some people may not consider it necessary to save. The Government should consider whether their measures create a barrier to savings.
The third issue of the Budget is the strengthening of the public services. The Chancellor and the Prime Minister recognise that a debate on the subject is needed. A number of hon. Members to whom I have spoken since the Chancellor announced his Budget called his statement