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5.35 pm
Mr. David Ruffley (Bury St. Edmunds): The Budget must be the most expensive job application in British political history, for it is a blatant attempt to play to the Labour MPs, and members of the union movement and the wider Labour movement who may vote in the next Labour leadership election. That tells us that the Budget is from a real Labour Chancellor—the tax-raiser general who is now unambiguously committed to high tax and high spend. But that explicit tax and spend agenda was not so clear during the general election campaign.
At that time the Labour party was much more coy about its tax intentions, and the Prime Minister told the Daily Express:
- "We are not going to clobber people on higher incomes. We have not the slightest intention of hammering people on £30,000 and £35,000"
Buried away in the Red Book is box 2.1, which is entitled, with, I think, unintentional irony, "Informing households about tax and spending decisions".
Some electors might suppose that the information has come a year too late, because it was not flagged up in the election. The Government's reticence on tax last June probably reflected their lack of confidence that the public would buy such a Budget.The Government have said clearly that the Budget has been well received, that the public are happy to pay more tax and that it will all work out okay in the end for the good old British taxpayer and, indeed, this Labour Government. However, disillusion will set in swiftly among Ministers, for two reasons.
First, the public will understand that the tax increases are simply not over. We have a 1 per cent. stealth tax for those over the top rate ceiling, but that is the beginning of a long series of increases—the thin end of the wedge—and the Chancellor has his foot in the door. The measure is a nice little earner for him, and perhaps his successor in this Parliament. It will raise more money from national insurance, which has always been his aim.
Mr. Siôn Simon (Birmingham, Erdington): Will the hon. Gentleman give way?
Mr. Ruffley: Time does not permit; the hon. Gentleman will understand.
The Chancellor wanted to jack up top rate income tax liability in 1997 and 2001, but the Prime Minister prevented him from doing so. He has had his way this time, but he will have to revisit his top rate national insurance measure, because the Wanless projections clearly imply that that is necessary. Assuming no increase in private medical insurance take-up, by 2022, in cash terms at today's prices, £154 billion a year will be spent on the health system. As the Financial Times said on 18 April,
- "the issue will certainly have to be reopened . . . these tax rises are only the first in what will have to be a continuing series if Mr. Wanless's blueprint is to be followed."
Never mind 2022, in 2006–07 and 2007–08 there will be big increases in funding for the health service, which will have to be covered by reining back non-health service expenditure. The Institute for Fiscal Studies has sensibly said that that implies tight control of other politically sensitive programmes, such as law and order and transport, to name but two. It is far from confident that, on past record, any Government, let alone this Government, will be able to rein in those demands. Given the projections for economic growth, it seems highly likely that in the short term, never mind the medium and long term, tax will have to rise.
The second reason why disillusion will set in is that the promised improvements in public services are unlikely to be delivered. The Chancellor has talked about reform, but we have heard that one before. Since 1997, the Government and the Chancellor have talked about injecting market disciplines and enterprise values into the school system and the NHS, but that has not come about. We were promised free enterprise incentives and penalties in the school system, but all that has happened is that troubled local education authorities have had their payroll administration and grass cutting privatised. That is not structural reform of the things that count.
We have also heard from my hon. Friend the Member for Sevenoaks (Mr. Fallon) about the shambles of public service agreements, which are not open even to an audit of their assumptions by the Audit Commission. They are often soft targets. Many of them that are not soft are missed. We were promised that performance against public service agreements right across the public services would result in good performers being rewarded and less good performers having sanctions imposed on them. Not one of those sanctions has been applied. I am afraid that on this, as on so much else, the Government are just talking without delivering anything of substance. We are on a pointless paper chase with all those structures and systems, and it simply will not wash.
I have counted more than 30 new quangos that regulate and oversee the national health service. We will now have the new and hastily cobbled together commission for healthcare audit and inspection, although we do not know when it will be up and running—probably towards the end of this Parliament, just in time to miss a general election I fancy.
What is most troubling about the NHS reforms is that there has been no serious, intellectually respectable, careful, detailed analysis of the alternatives to the 100 per cent. taxpayer-funded model. If we think that that model is adequate, we should consider the statistics. Since 1997, there has been a 40 per cent. increase in spend, but activity has gone up by barely 6 per cent. In 1999–2000 alone, there was a more than 9 per cent. increase in spend, but the number of cases dealt with increased by 1 per cent. There has to be something wrong with the system. It will not wash for the Government simply to say that they will reform it using means that are not clear in the Budget or from any of the debates that we have had so far.
We have heard criticisms about the expensiveness of alternative models in Germany, France and Australia. Those systems have at least two things in common: they deliver better outcomes—survival rates for coronary disease and cancer are much better—and they provide greater responsiveness to the patient. They are market led to an extent, but the results are what we should be most concerned about.
We have had lots of ducks, feints and dodging. The national insurance increases, which are tax increases, have been linked with the health service by calling the NHS the best insurance policy in the world, but there is no true element of insurance or responsiveness through insurance. The social insurance models that have been examined by my right hon. and hon. Friends on the Front Bench deserve serious analysis, not some half-baked report from the witless Wanless, who did not cover himself in glory in his previous job. The health service is too important to be entrusted to such a shoddy and shallow piece of work.
The Chancellor is moving closer to the European high tax, high regulation model. He is miles away from the American model he prates on about so assiduously. The reality is that the Budget gives us cause for hope in one respect, and we welcome it for that. It marks the end of banal, post-ideological politics. The battle lines are clearly drawn between the Conservative party, which stands for free enterprise, and Labour—
Mr. Deputy Speaker: Order. The hon. Gentleman has had his time.
5.45 pm
Mr. Nigel Beard (Bexleyheath and Crayford): The financial consequences of meeting the ambition of this country to modernise and invest in a world-leading national health service were not dreamt up in a moment of emotional gush by someone with an urge to be philanthropic with other people's money. Mr. Derek Wanless was chief executive of the National Westminster bank. He is well known and respected in the City. His conclusion is that for a given level of health care, all other systems of finance are likely to be more expensive than funding through general taxation.
Why cannot the Conservative party accept that? It could be a golden moment: we could take the financing of the national health service out of political controversy. In those circumstances, many might be willing to forgive the Opposition for past mischief towards the national health service. However, they refuse to accept that escape route, because they are still addled by dogma.
We can see that in the vocabulary used by Opposition Front-Bench spokesmen to condemn the Government's plan. The national health service is a Stalinist organisation, they say. Despite the bureaucratic failure of the infamous internal market, the US experience of personal payment when need arises and the burden that would fall on employers from social insurance, the Opposition are toying with those ideas. Like the Bourbons, whom they resemble in so many ways, they have learned nothing and forgotten nothing.
The Conservatives are not the only people who are confused as to the logic of their position. Mr. Digby Jones, the director general of the CBI is a gentleman with a somewhat shaky grasp of arithmetic, judging from the unfailing way in which he seems to get things out of proportion. I say that in the true spirit of new Labour—more in sorrow than in anger. I know that CBI members will advise him to distinguish between what he says late at night in the bar of his golf club and what he pronounces as the settled view of the CBI.
This Sunday, in an article in The Observer, Mr. Jones had the grace to say:
- "UK business has never had the macro-economic stability in which it currently operates, and the Chancellor has been a major contributor."
- "increase in . . . NI contributions will be another body blow to the UK's global competitiveness".
Let us put that national insurance contribution increase in proportion. It is not 20 percentage points, nor 10, nor even five: to Digby Jones it is one percentage point—something that might have been conceded in the annual round of wage negotiations. It is hardly a body blow, unless the body is particularly puny, and Mr. Digby Jones appears far from puny.
Elsewhere in his article, Digby Jones states:
- "We don't have the transport infrastructure, skills base or historical investment in industrial resources of our rivals."
I do not want to be too solemn about Mr. Jones, but I wish that he and other spokesmen for business, and indeed business men generally, would recognise that we are all part of the same society. Business is not a separate caste that confers favours on society; it is part of society. In his article, Mr. Jones said that
- "the Budget has seriously undermined the confidence that business has in the Government's genuine understanding of how business works".
Let me turn to an issue that ought to concern the CBI, and which concerns many of its members, even though Digby Jones overlooked it. Productivity—the amount produced per person or per hour of employment—is a measure of the country's capacity to generate new wealth, and thus of its ability to pay for community services. Given that we are achieving high levels of employment, it is productivity that will determine the UK economy's ability to grow. There are two aspects to productivity: doing more efficiently what is already being done, with inducements to make necessary changes; and innovating in order to produce something useful that was not available previously. Having spent many years during my career promoting innovation, I should like to address that aspect of productivity.
In January 2000, the Select Committee on Science and Technology concluded its report on engineering and physical science-based innovation by saying that,
- "if Britain is to remedy its declining capacity for science based innovations, large companies will play the major part."
- "There is, therefore, a strong case for extending tax credits to them too. Market research and the provision of demonstrators of the final product are recognized as critical to innovative success. It would substantially reduce industry's risks and encourage innovation if the costs of market research, demonstrators and product launch were included in such an R&D tax credit."
However, in recent years the Department of Trade and Industry's R and D scoreboard has shown that business spending on research and development—as opposed to Government spending—is falling behind that of our international competitors. That decline must stop, because business is the only source of development. Unless development expenditure comes into line with research
expenditure, more and more good ideas discovered in the United Kingdom will be commercialised in the United States or Japan. I hope that the welcome new research and development credit for larger companies will be used as a lever to encourage persistence in development.The modern Labour party is dedicated to the view that economic strength and social justice go hand in hand. This country does not prosper when one political party pursues economic strength to the exclusion of social justice, while another spends money on social justice without nurturing the economic development to pay for it. That zig-zag approach has put this country behind our international competitors, and as a result our public and social services are poorer than they should be. The policy of the third way is working. This Budget is distinct, not as a mythical return to tax and spend, but as a practical example of such a comprehensive approach to social and economic policy and life in Britain.
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