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Mr. Hendrick: The Monetary Policy Committee would not raise interest rates, because if were joining the euro, the interest rate would, by definition, have to be the same as that of the European Central Bank.

Sir Michael Spicer: There is considerable argument as to whether we would have to be within an equivalent of the exchange rate mechanism, but I am talking about the process of entry into the euro. The Government would be faced either with an artificially permanently uncompetitive rate at which to enter—that would certainly scare off industry from investing in this country—or they would try to talk down or work down the rate of the pound. As a result, inflationary pressure would come into play and the MPC would have to put up interest rates.

Mr. Hendrick: If we entered the euro as a result of a referendum, the Government would not try to manage the exchange rate; the markets would take care of it.

Sir Michael Spicer: I should be delighted if that were so, and that is exactly how exchange rates should operate. They should be market-led, and should reflect the economies of the countries in question. However, that principle is denied under the permanent and indefinitely fixed exchange rate that entry into the euro requires. It is exactly because we do not want fixed rates that some of us are dead against the euro. Whether one is against it or not, my point is that the very commitment to enter the euro is itself a destabilising factor in British economic policy.

The final element of destabilisation is taxation. Despite the denials and obscurantism of the Chancellor and the Prime Minister, taxes have gone up continuously under Labour. In 1994, they constituted 34 per cent. of gross domestic product. They rose to 36 per cent. in 1997, to 37 per cent. in 1999, and to 38 per cent. in 2001. According to the Red Book, yesterday's Budget will push that figure above 40 per cent. in a year's time. Of course, this Budget is the one in which Labour has broken its cover; it has been outed as a high spend, high tax party.

It is not just investors who will be put off. At a level of more than 40 per cent., taxes are bound to be regressive, and will hit the standard of living of people on lower incomes. What does all that add up to? Britain's economy, which was one of the most dynamic in the world, is moving back to being one of the more sluggish. Once that happens, the spiral will be downwards. More public spending will mean even higher taxes. That will mean lower growth, which will lead to yet higher taxes, and so on. That downward spiral is implicit in this Budget.

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The challenge for a future Conservative Government is to reverse the spiral, as past Conservative Governments have done, by removing the shackles from businesses and by releasing the energy not only of the private sector but of the so-called public services. However the Government caricature such matters, new ways will have to be found of running and funding public services. In particular, we must break up the monopolistic position of the providers, and return powers—especially purchasing powers—to the customer. Achieving that—particularly improving the effectiveness of health care provision expenditure—by adopting one of the many funding models that operate throughout the world is the debate that the Government should have launched today, and in which they seemed to want to engage as recently as last year. At some point during this winter, they seemed suddenly to change their mind, and retreated into old-fashioned socialist dogma. That has pleased their own Back Benchers and got them cheers, but we shall have to see what the result of that shift will be.

Mr. Connarty: The hon. Gentleman should consider what happened when we introduced the market into other utilities. The trend has been towards monopoly, not competition. As an expert told many of us in the parliamentary group for energy studies in some detail last night, that is particularly true in the energy field. There are three major energy suppliers in Europe. What we have is not a free market, with lots of competing small suppliers that help the consumer, but large monopolies that, without regulation, would force prices up. It is the regulator that keeps prices down for the consumer. Free market capitalism always leads to monopoly, because monopoly leads to super-normal profit, which is the whole purpose of capitalism.

Sir Michael Spicer: I shall not only defend my position; I shall tell the hon. Gentleman how wrong he is. Contrary to what he has just said, one massive effect of the electricity legislation that as the Minister I piloted through the Commons was the complete break-up of monopoly power. We had a monopolist—the Central Electricity Generating Board—but now we have a multitude of companies, only one of which has more than 9 or 10 per cent. of the British generating market. That is absolutely contrary to the hon. Gentleman's argument. The same applies to the distribution side of the industry—an outcome that we did not fully expect. The hon. Gentleman is factually 100 per cent. wrong. Given that he obviously knows something about this field, and that he attended last night's lecture—I was not there myself—I am very surprised that he takes the view that he does.

Mr. Connarty: As has been pointed out, 10 Downing street's electricity is supplied by a French company that bought London Electric. Such developments are happening throughout Europe. No. 10 would be paying much higher prices if were not for the fact that a regulator controls domestic prices.

Sir Michael Spicer: I do not know the hon. Gentleman's views about the future of Europe. If he wants a united Europe, he should be pleased about the free flow of capital. Personally, I am very relaxed about the free flow of capital around Europe; I simply object to the fact that the rules are such that our capital does not flow into

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continental Europe as easily its capital is allowed to flow into Britain. The hon. Gentleman's basic point that free enterprise leads to monopoly—a good socialist thing to say—is the exact opposite of what has happened. In fact, we broke up a thoroughly inefficient state monopoly—the CEGB—that was running massive overcapacity. Now, prices have come down and there is tremendous competition. We have a thriving industry, into which people want to buy because it is thriving. That is the exact opposite of the hon. Gentleman's argument, and I am very grateful to him for making it.

The sadness for the country of the Labour party's change of heart on a more radical approach to funding for public services, especially the health service, is that it will further delay the time that our people will benefit from the quality of service to which other countries have become accustomed. We discussed health yesterday and today, but Labour Members have not once accepted that other comparable countries with different funding systems have much better health systems. We are looking at those systems because they are better. It is no good shutting our eyes and denying that there is a better way. The result has been that the British taxpayer is paying for our people to receive treatment on the continent of Europe that they cannot get here. Sadly, that will continue to happen for longer because of the Government's refusal to consider alternatives ways to give consumers the purchasing power that they have in other countries.

Those methods do not necessarily require lower funding by the state. For example, France does not spend much less than we do, but it gives the consumer more power, so monopolies are broken up and the health service is provided far more effectively. Because the Labour party has balked on that issue, the electorate will turn against it. This is a turning point in the electoral fortunes of the Labour party and it will be left to the Conservatives to pick up the challenge and put things right in the future.

Mr. Deputy Speaker (Sir Alan Haselhurst): It probably has not escaped the attention of hon. Members that the average length of speeches by Back Benchers so far has been 21 minutes. If that continues, we shall hear from few other hon. Members this afternoon.

4.52 pm

Miss Anne Begg (Aberdeen, South): Before I commend the aspects of the Budget that will encourage people into work, make work pay and bring more children out of poverty, I must tell the hon. Member for Northavon (Mr. Webb), who unfortunately is no longer in his place, that it will come as a big surprise to my constituents with severe disabilities who have moved from hospital wards to supported accommodation, run by such worthy organisations as Cornerstone, Archway and the Richmond Fellowship—I am sorry if I have missed any Aberdeen organisations out—that they are regarded by him as living in an institution. Other disabled constituents have moved out of the family home into supported accommodation to gain more independence, but—according to the hon. Gentleman—they are now living in an institution. The biggest surprise of all will be felt by the hundreds of pensioners who live in sheltered housing complexes, if the Liberal Democrats now believe that that means living in an institution too. Many of our constituents already live in supported housing—that is the exact phrase that the Chancellor used yesterday—for very good reasons. I do

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not understand why the Liberal Democrats have taken against such accommodation for lone parents under 18, as the Chancellor mentioned yesterday.

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