Mr. Hugo Swire (East Devon): I welcome the hon. Gentleman's comments on long-term care for the elderly. Which part of what the Chancellor has said to date in relation to looking after the elderly in the long term does he most welcome?
Mr. Hendrick: As I shall say in a moment, there will be a 6 per cent. increase for social services. As county councils and unitary authorities up and down the country administer social services budgets, that money can be spent on those services, as it can on other things.
An annual report on how much is spent, where it is spent and what is achieved is an excellent part of the Chancellor's proposals. As I said, the Conservative party does not want that, as it prefers the myths and anecdotes that we have heard today rather than the facts from an independent audit body.
We have heard a great deal about the increase in national insurance contributions, which has been referred to as if, in some way, it is income tax. It is not income tax. National insurance is what the name impliesinsurance. Many companies up and down the country are happy to pay for private health insurance for their workers. The Chancellor has made it plain that the money that is raised in this way will be invested not in private health but in public health and public health provision. I am surprised that that should be presented as anything other than what it is. If we remember why national insurance was originally introduced, it was to pay for pensions, health and benefits. Let us not forget that or try to present the increase as something that it is not.
There will be a freeze on beer, wine and spirits, a freeze on fuel duties, a freeze on vehicle licences and, as I said, 6 per cent. extra for social services. UK health will benefit from a 7.4 per cent. increase each year, and my health authorityNorth West Lancashirewill welcome that, despite its recent statement that the 10 per cent. increase in its budget was still insufficient, even though that increase is five times higher than inflation. I believe that the doubling of expenditure since 1997 over the next five years will turn the Royal Preston hospital into, if not the top hospital, one of the top 10 hospitals in the north-west of England. I look forward to that investment.
The Chancellor has often reaffirmed the Government's commitment to ending child povertyin the pre-Budget statement and in the publication, "Tackling Child Poverty", issued in December last year. He is right to do so again today because poverty blights so many lives, particularly in my constituency. Many people suffer from poor health in Wales, for example, specifically because they are poor.
The Chancellor highlighted the child and working tax credits, and I want to concentrate briefly on the principles of those tax credits. My colleagues in Plaid Cymru and the Scottish National party will consider other issues in the debates over the next few days. The Government emphasise the need to make work pay, and they emphasise that there should be a seamless system. Again, the emphasis is on work, but my party and others are worried about the impact of tax credits in areas of high unemployment, such as my own, where the work is not available, and in rural areas with small populations and scant public transport. In such areas, the costs of owning a car are highly significant.
The Red Book shows that a fund of £5 million will be established to help with travel costs. I have some reservations about that, as my area suffers from severe out-migration by people who otherwise would be economically active and contributing to the local economy. I am afraid that I may be hearing an echo of the phrase "on yer bike".
The working tax credit will guarantee a higher income from work than from benefits, and it is targeted according to income. It is not means-tested in the conventional sense, but there are inevitable concerns about the disincentives to take-up. I am sure that the House would be interested to know the projected percentage take-up of the tax credits, for example in comparison with the take-up of universal benefits, which is very high.
We in Plaid Cymru remain uneasy about the lower wage subsidy implicit in tax credits. That possibility will now affect all workers, including those without children. We fear that credit levels will become the ceiling for wage rates, rather than their floor. We in the north Wales travel-to-work areas have some experience of that. The results of the little noticed top-up experiments introduced by the previous Conservative Government do not convince people familiar with them that the new system will be much better.
Child tax credits will be paid to the carer, typically to the mother. That is very much to be welcomed. However, the emphasis on payments to the first child risks masking the costs arising from other children, especially as they grow older. It should be remembered that those costs are recognised in support levels. The House will note too that universal child benefit levels again hardly rated a mention today.
A significant feature of the child tax credits regime is the recognition of the costs of child care. However, we in Plaid Cymru have serious concerns about the lack of child care in some areas, especially in rural areas. Often, they are areas of high unemployment, or of high underemployment.
Child care is not available extensively in Wales, and to some extent the solution to that problem is a matter for the National Assembly for Wales. We have a national child care strategy, and I hope that my colleagues in the Assembly will take the matter up. I hope too that the Labour party will produce some joined-up government in Westminster and Cardiff, so that people will be able to take up work because proper child care is available.
I note with interest that the child care element will now cover those approved to provide child care in people's homes. The important word in this connection is "approved": what does it mean? The payments in the past have been called, pejoratively, "grannies' wages" or "nannies' wages". We will see how approval is worked out, but I note that the Department for Education and Skills is to consult shortly on the regulation scheme. Let us hope that the scheme fits in with patterns of family care in rural areas such as my constituency.
A change in income could affect the maximum credits available. I see that an increase in income of up to £2,500 will be ignored. However, when income falls, will claimants be required to contact the Revenue? People dealing with the difficulties and sometimes chaos caused by income change will have to decide to reapply. We know that the Revenue will be there to help, but I am not casting aspersions when I say that ordinary men and women facing the chaos and difficulties of income change will not, as a first instinct, reach for the telephone to call the Revenue.
Given the variations in income due to seasonal factors that affect agricultural areas such as my own, where there might not be much employment available in the hard winter months, does the new system of tax credits fit the real world of work better than the working families tax credit? I have my doubts.
Further ominous words about a fall in income appear in the document dealing with tax credits, which states that people who take a fall in income will be able to reapply. However, taking a fall in income to stay in work sounds rather like pricing oneself into a job. Many people have bitter recollections of what that means.
May I be the first this evening to welcome the reduction in the taper on tax credits to 37p in the pound? However, the level is still too high to provide the soft entry into well-paid work that has worked so successfully in countries such as Ireland. There is concern about the effect of the taper when it is combined with the respective tapers for housing benefits and for council tax.
We in Plaid Cymru welcome the extension of the new deal and the introduction of personal mentors, but we hope that the system will not be oppressive, especially in areas of high unemployment. However much people in those areas are mentored, the jobs are not available.
The tax credit system emphasises targeting, but there is the risk that targets will be missed. That compares with the high degree of success that universal benefits achieve in terms of reaching targets. Child benefit is very much the ghost at this particular feast. Targeting individual families also draws attention away from the value of universally available public services, especially in connection with those servicessuch as the provision of free school mealsthat are significant for poorer families.
Finally, I note that the BBC is reporting that the Government underspent last year to the tune of £11 billion. I regret that that underspend extends to the poorer, deprived areas of Wales, which cannot afford it.