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8.46 pm
Mr. Archy Kirkwood (Roxburgh and Berwickshire): We have had a good debate and I shall make a brief contribution to it. I am aware that colleagues are waiting to participate.
First, I shall deal with process. Secondly, I shall talk briefly about poverty, and thirdly, I have a constituency point that I shall share with the House.
The hon. Member for Wolverhampton, South-West (Rob Marris), a fellow member of the Select Committee on Work and Pensions, complained that he had not received big announcements about education expenditure. It occurred to me that we have come a long way from the old days. Perhaps I have been in this place for longer than is good for me. In those days, Budgets used to be about raising revenue, not about spending. I accept that a November pre-Budget statement is good, because it gives us an idea of what is coming up. A comprehensive spending round announcement will come in July, and there will be another round of spending announcements. Many tax measures are announced for implementation in a year or two's time and, as a result, the situation becomes extremely complicated to follow. I accept that modern life is complicated, and we are a sophisticated democracy. I am not complaining about that.
The hon. Member for Dumbarton (Mr. McFall), the Chairman of the Treasury Select Committee, made an interesting and sensible speech. He talked around some of the new ideas for Budget scrutiny that are being exchanged. That is a long way round saying that we should be thinking more seriously—the hon. Member for Banbury (Tony Baldry) mentioned this—about how we cope with complicated Government financial announcements. The Chancellor makes the most of them politically, and we would expect that. He does it with some style, as he did this afternoon. But the House needs to think more carefully about how we scrutinise the work that the Government are doing and how we explore spending and revenue raising.
I think that tax raising and spending should be done all at once. There is a case for making announcements of spending and revenue raising at the same time. We should try to make it easier for Members better to understand the Red Book, taxation forecasts and other press releases. We would serve our constituents more effectively if we did that.
Complexity is another important part of the process issue. Those on the Treasury Bench should think seriously about some legislative consolidation. I know that in the past the Treasury Select Committee has considered disaggregating some of the technical tax changes and introducing a tax Bill every year, which would be for the real anoraks. That could be safely parked on one side while the rest of us could get on with a sensible debate about issues that affect our constituents directly. That would be helpful.
One complaint that I would make about the Budget is that the complexity of what the Chancellor is doing is loading complication upon complication. The social security system has been sucked into the Treasury purlieu in a way from which it may never recover, I fear. Some of the new tax credit ways of developing and delivering services are certainly interesting. However, they risk complicating the benefit situation in a way that makes it ineffably complicated.
There is also an irresistible temptation for all Governments to seek to centralise power in Whitehall. That might seem a strange view, coming from someone who welcomed the devolution to the legislatures of other nation states in the United Kingdom and the Greater London Authority, but I believe that there is still a propensity in Whitehall to seek to control. For the Chancellor of the Exchequer to state in one of his rhetorical flourishes the pounds, shillings and pence that he plans to send to every school seems to me to be ridiculous—as someone said earlier, Ministers like listening to the sound of bedpans. Ministers are for ever trying to influence local agendas, whereas we should be content to set limits, thresholds and ceilings for expenditure and let the decision-makers at a much lower level get on with the job.
Finally on process, the hon. Member for Preston (Mr. Hendrick), who made an interesting speech, said that the penny increase was nothing more than a slight change to the national insurance system. In my view, the national insurance fund is now completely redundant. The Government have made no secret of the fact that they have been making substantial changes to the way in which they deal with the contributory benefits system. The national contributory system has been substantially changed by the Chancellor's announcement this afternoon. If that happens entirely by default, it is a shame. The Beveridge contributory system has served us well. I am a little old-fashioned about that. To make such changes and to increase national insurance as the Chancellor has done—it is an income tax increase by any other name—is a shame. It is a retrogressive move in many ways.
Mr. David Rendel (Newbury): I am grateful to my hon. Friend, as I know that he is trying to speed up. Has he taken on board the point, which has not yet been mentioned in the House, that not only is that an income tax increase, but it is tax increase on income worth 2p—1p from the employer and 1p from the employee? It will
affect most of all those with smaller incomes, because there is a cut-off for employees' national insurance contributions.
Mr. Kirkwood: Indeed. I am happy to concur with that view. There are unintended consequences that will start to unfold in terms of the increase in the employers' contributions. National insurance contributions have a specific focus and incidence, and I would have been much happier to use the income tax system, which is more transparent and more progressive. It is a great shame that the Government have decided to use the national insurance machinery to increase resources, but, then again, about time too. I have been waiting for this day since 1997. Some Labour Members reflected that in the euphoria of their reaction.
There are, however, some concerns about the Chancellor's statement. I welcome the expenditure, but I am worried about households that are in abject poverty. Of course I understand that the national health service deserves and needs expenditure, and I support the Government in the creative measures that they have introduced to change the culture of those who are on benefits for many years and who as families have been locked into benefits for long periods.
The move towards Jobcentre Plus and the concept of welfare to work is right and appropriate, but I worry for those who in the immediate future will get nowhere near the labour market. I know that the child tax credit will make some inroads into that, but I worry about some of the unintended consequences of the working tax credit. The emphasis on people who are in work and on subsidising low-paid work can stigmatise people who are a long way removed from the labour market and in abject poverty. The Child Poverty Action Group and other pressure groups are right to say that we need to give the poor a voice. We must also try to define poverty more clearly. I hope that there will soon be a consultation paper from the Government about how they assess their success in floating people out of poverty. That is an important issue.
Minimum income standards are used to great effect by sister European countries to measure the performance of Governments in terms of the reality of people's earnings—not just relative poverty and all the other difficult statistics, and how the weekly budgets of people who are nowhere near the labour market are affected. That is a group of people about whom I have real concerns. The Government did not do enough for such people in today's Budget.
There are further real concerns about the working tax credit and the way in which it is implemented. It can have perverse incentives within households where there is a working member and a non-working member and, if we are not careful, there is real opportunity for collusion with employers about introducing fraud into its implementation. Depending how the tapers are played out, people can be frozen into the tax credit and that diminishes the opportunity of a later career at a higher wage level than that set by the working tax credit.
The working tax credit poses many difficulties. I am prepared to consider the concept carefully, but we must be careful that we get its implementation right and that we do not forget that if families do not get into the labour market they cannot take advantage of many of the welcome announcements made this afternoon.
I repeat the point that I made to the hon. Member for Dumbarton about the NHS and the King's Fund. In many parts of the UK the NHS is not in a fit state to take big sums of cash and spend them sensibly in the short term. We shall have to deal with that and we must be careful about containing people's expectations about how long big sums will take to come through before they can make a difference to ordinary people.
I was slightly taken aback to learn about the effect of fuel duty rebate on local bus services in rural areas. Indeed, I was astonished to learn from my constituency of the adverse effect that the absence of fuel duty rebate was having on local bus service providers. There has been a strenuous effort in the Scottish borders to reduce social exclusion, both for those who lack access to basic services due to age, infirmity and limited means, but also for those who are physically a long way removed from central services and who are geographically isolated.
Some 30 per cent. of border households do not have a car and they have been particularly hard hit by the imposition of fuel duty on local bus services. Although fuel is duty free on trains—though the borders have no railways—ferries and air services, local bus operators are required to pay fuel duty, only part of which can be reclaimed.
What surprised me was the estimate that local bus operators in my constituency now pay some £320,000 a year in unreclaimable duty. Against that figure, only £193,000 is provided to the council through the rural bus fund, so public transport users in the borders region contribute more to the Exchequer than is received back in public transport support. I do not know whether that makes the region unique in the UK.
The cost of fuel duty is obviously directly reflected in the fares, which as a result are among the highest in Britain. The tax falls on those least able to pay and increases the isolation of most rural communities and the social exclusion of the most vulnerable. That scarcely represents a joined up social or environmental policy.
If that is not bad enough, it is particularly harsh that school transport bus contractors must pay fuel duty in full. In a rural area, where a high proportion of pupils qualify for free school transport, some children face daily journeys of up to 60 miles. The council makes every effort to co-ordinate school and public bus services, but most school services get no rebate on fuel duty. Any efforts made locally to encourage more parents to send their children to school by bus so as to reduce road traffic and improve pedestrian safety at the school gate, are frustrated by the high cost of fares. The estimated cost of fuel duty on statutory school transport amounts to about £115,000 a year, some 4 per cent. of the council's school transport budget.
Those are important issues which I hope that those on the Treasury Bench will note and take to heart. I understand that there is a wider strategy with an environmental dimension, which is very important, but if we are dedicated, as I am sure that we all are, to trying to eradicate social exclusion in our rural areas, such issues will have to be addressed.
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