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6.39 pm

Mr. Jim Cunningham (Coventry, South): Obviously we welcome more money for the national health service, and it is interesting that two or three times tonight the Opposition have declined to say how they would fund it. We hear vague statements about other systems, but it is about time that their criticism became constructive and

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they told us exactly which system they would use. I am certain that Members on both sides of the House want to make sure that NHS staff get their just rewards and receive their fair share of any extra money going to the NHS. That issue, I know, is likely to be the subject of negotiations; nevertheless it should be flagged up in the House.

Obviously we welcome the continuation of the £200 chill weather payments. Some of us who were in the House prior to 1997 know of the battles that used to be waged here on a Friday morning. The debate was not about £200 then; it was about an increase in the £10 allocation that had been made for several years. I am glad too that the Chancellor is doing a little more for pensioners—a subject to which I shall return.

Hon. Members have not touched on the fact that there is more money to tackle crime. I always thought that crime was a big priority, but the Chancellor has now allocated more money to the Home Office to fight the various facets of crime. We could all give the House a catalogue of statistics on crime. I do not want to do that, but I think that the debate should have been more concerned with crime.

Another issue that caused a great deal of controversy in the run-up to the general election—I am surprised that I have heard no one mention it tonight—is the freeze on fuel duty. Some hon. Members will remember blockades by road hauliers. At that time, I was a member of the Trade and Industry Committee, which took evidence from road hauliers. We should welcome the freeze on fuel duty because it demonstrates that the Government are listening. Whether they can always meet the demands that are made of them is another matter, but they have gone some way to address those grievances. Road hauliers also raised the question of lorries coming from abroad, which use our roads but make no tax contributions. There will be a charge for that. Anybody who knows anything about industry knows that haulage and transport are the biggest costs after research and development, and together they can build up to a considerable amount.

That leads me on to the next measure that I welcome. As somebody from an industrial background, I appreciate the fact that, as I said, the bulk of a company's expenditure goes on research and development. I therefore welcome the tax credit for research and development, based on volume. Obviously, I should like that measure to go further, but I know that it will certainly be welcomed by companies with which I have corresponded and whose delegations I have met. Before 1997, I used to accompany numerous delegations to meetings with Ministers of the then Tory Government, who were not very happy, to say the least, about the idea of giving any concessions on research and development. That issue was raised with us in meetings with the chairmen of various companies. There are a number of measures in the Budget that have not been touched on in the debate, and which I think are vital to the British economy.

It is well worth reminding the Conservatives that, before 1997, when there were arguments about whether taxes would go up, they indicated that there would be no increase in VAT on fuel, but we all know what happened. They demonstrated that it is not only on one side of politics that people are forced to do things that they do not want to do—it happens to every Government. We talk about the enterprise economy, and I am sure that people remember negative equity and the lives and businesses

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that it wrecked. It would be interesting to compare the number of businesses that went bust under the previous Conservative Government with the number which it is alleged are going bust under this Government.

Not much has been said about the minimum wage. When it was introduced, the Opposition said that it would cost about 1 million jobs. Anyone from the pre-1997 Parliament could highlight cases—I certainly know of one—in which people were being paid £1 an hour, which is amazing. There was a lot of publicity about that. The Conservatives were never able to demonstrate that they were good managers of the economy, although if this Government have any success, the Opposition are the first to rush to claim it. I am sure that hon. Members remember when interest rates were between 17 and 20 per cent., and the Conservative Government had to pull out of the exchange rate mechanism.

The hon. Member for Sevenoaks (Mr. Fallon) mentioned the amalgamation of health authority trusts. That started under the Conservative Government. I have never been too happy about that, and some hon. Members will know that I introduced a ten-minute Bill on the subject. I wanted trusts to have patient representatives with sole responsibility for patients' interests, and that is an area that needs reform. There were a number of hospital closures under the Conservative Government. It is well worth reminding the Opposition of their record in government.

I welcome the move to do something about the thorny question of VAT for small businesses, which is a step in the right direction. For turnover below £100,000, businesses will be charged VAT at a flat rate. I am sure that in future Budgets the Government will want to do more about that.

No one has touched on the climate change levy. I welcome the fact that there will be certain exemptions from that for companies that take environmental issues into consideration. However, we must do more. I also welcome the 7 per cent. increase in the science budget. Anybody who talks to university chancellors and vice-chancellors knows that there is tremendous pressure on university budgets.

I want to draw the attention of Ministers, including the Minister for Pensions, to the fact that the pension schemes of companies such as Peugeot face problems with deficits caused by falling investment returns. Peugeot has a shortfall of about £85 million, and the people on the receiving end of that are the employees who make contributions, which Peugeot intends to raise by about 5 per cent. Some hon. Members may have read in the newspapers that a west midlands company called Caparo Group is to abolish its pension scheme, which could affect about 500 workers. I think that my right hon. Friend will be hearing a little bit more from us about those two issues.

I have already indicated that I welcome what the Government are doing for pensioners, but I still think that travel provision is patchy throughout the country. Pensioners in the west midlands can get free bus travel, but those in other parts of the country cannot. That issue will not go away, and nor will the question of pension payments. Most pensioners would rather be paid through the post office than through a bank. I am sure that Ministers will address those issues. Some pensioners who own their own home have difficulty getting a grant for repairs. We have debated those matters before, and I am sure that we will do so again.

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Returning to the health service, I welcome some of the new measures, particularly on bed blocking, about which there is considerable concern throughout the country. I welcome the 6 per cent. increase in resources to tackle that. However, I suggest to my colleagues that, as with all the other resources that we are putting into the health service, we have to look at how that money will filter through. There is a structural difficulty concerning chief executives and local authorities, and I hope that Ministers will consider that because Coventry has had major problems with bed blocking.

I support the Budget, but we still have to take action on those areas that I have highlighted.

6.49 pm

Mr. Peter Duncan (Galloway and Upper Nithsdale): It gives me great pleasure to follow the hon. Member for Coventry, South (Mr. Cunningham) and the hon. Member for West Aberdeenshire and Kincardine (Sir Robert Smith), which makes this a tripartite Scottish treble. I am the first Scottish Conservative to respond to a Budget proposal since 1997, and that represents both an honour and an opportunity to set this Budget in a Scottish perspective, and particularly to assess how it relates to the progress made since 1997.

The Scottish economy has always been driven by trade and commercial activity. My area of south-west Scotland is centred around Glasgow, which was the heartland of the Commonwealth, the trading capital and the second city for many years. Two snapshots of the Scottish economy, however, give the lie to many of the rose-tinted perspectives on the economy that we have heard from those on the Government Benches this afternoon.

Scottish unemployment is now rising. The International Labour Organisation rate is now 6.8 per cent. as opposed to 6.4 per cent. only a year ago. Suddenly, therefore, the great fiction of constantly reducing unemployment—which we have heard from numerous Labour Members today—is shown in perspective and, regrettably, it has some chance of being reversed. Scottish manufactured exports have fallen throughout 2001. The hon. Member for West Aberdeenshire and Kincardine knows only too well the importance of exports to the Scottish economy, but the rate for the third quarter of 2001 is 5 per cent. below the rate only a year prior to that. There has been a collapse in its contributions in the UK. As has been mentioned, the UK economy has slipped, in terms of competitiveness, from ninth to nineteenth in the world, and the balance of trade—a figure that is quoted ever- decreasingly—has been in deficit in every quarter since the fourth quarter of 1998.

Scotland's progress is not looking terrific. Sadly, the "Silicon Glen" view of Scotland—the progress that we made in the 1980s—is part of history. We have an image of a fast-track economy, but over the past 30 years the Scottish economy has grown by an average of only 2.1 per cent. per annum compared with a UK average of 2.3 per cent. There is therefore a history of underperformance in the Scottish economy, but it has been deteriorating. It has not exceeded the UK rate in any quarter since 1997. We are falling further and further behind. Our GDP fell by 0.4 per cent. in the third quarter of 2001, while that of the UK increased. The Budget did

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nothing to reverse the trends that are now emerging in the Scottish economy. Fuel tax continues to cripple residents north of the border, and, to take one tax proposal at random, the aggregates tax looms like a death knell on the horizon for many of our small economies.

I want to focus on the use of national insurance contributions to raise revenue for the public sector, particularly for the health service, as such contributions have a special effect in several ways. They are, without question, a tax on jobs and on employment opportunities. They are not a tax on savings or on investments; they are a tax on employing people. They cut in at a lower rate—those earning a low salary per week start paying national insurance before they start paying tax. They are top-limited—there is a level of earnings per week beyond which employees do not pay any more national insurance. Crucially, however—I want to concentrate on this—they are paid in increasing percentages by the struggling self-employed. This area has been totally ignored by the Government. The smaller the business, the greater the significance of this tax, particularly for those who are self-employed. Importantly, however, this is a very good public relations exercise. The Government quote a figure of 1 per cent., but it is actually 2 per cent.—1 per cent. levied on the employer, and 1 per cent. on the employee. As my hon. Friend the Member for Bury St. Edmunds (Mr. Ruffley)—who, sadly, is no longer present—mentioned, it is a stealth tax. My hon. Friend was queried by Labour Members, but it is a stealth tax, because 1 per cent. is actually 2 per cent. It is also a double whammy, because it has an effect on our public services. The increased cost of national insurance to the health service in Scotland is estimated at £100 million.

As I said, the increase in the national insurance contribution is an extra burden on the self-employed. The Government seem fixated on big business at the expense of small business. They forget that only 27 per cent. of businesses in Scotland are incorporated. The average self-employed income in Scotland is £13,890. The average employed income is £21,800. People who are earning less are therefore paying more as a result of this Budget. There are 3 million self-employed people in the UK, and I suggest to Labour Members that this action will not be forgotten easily.

I welcome the review of company law to which the Secretary of State referred earlier. The matter requires consideration, and we should no longer penalise the smallest businesses—those who can afford it least. Since the Enterprise Bill has turned out to do nothing for enterprise, I hope that, when the company law Bill is introduced, it will deliver what is promised.

Clearly, the national insurance increase impacts significantly on small businesses in my constituency, particularly those struggling to cope with foot and mouth disease. Small farmers, most of whom are self-employed, are now paying national insurance at a higher rate than previously, even though their farm incomes are 70 per cent. less than in 1997. Tiny family businesses in the tourism sector, which have been given nothing in compensation for the losses that they faced last year, are now in an even worse situation than they were in a week ago.

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It is no surprise that fewer businesses are being formed in Scotland. In the fourth quarter of 2001, the number was 3,856, which was down 3.8 per cent. on the year. It is no coincidence that Labour Governments are delivering fewer new company formations, more receiverships and a threat to Scotland's entrepreneurial history. Small firms are also in dismay at their new role in delivering the Government's welfare agenda. Changes to working families tax credit and children's tax credit are imposing new burdens in terms of red tape and the down time in managing businesses. Firms are delivering benefits when they should be earning money.

On e-filing, the Secretary of State made the incredible suggestion in her opening remarks that a form is not a form if it is e-filed. That is a ridiculous proposal. E-filing does nothing to reduce the burdens for small businesses. It only changes the method by which red tape is delivered to Government.

In the few minutes remaining to me, I want to flag up a double whammy that faces Scotland. We are paying the extra national insurance and the extra tax burden that has been levied on us by the Chancellor of the Exchequer. Who is to say, however, when tax is mentioned beside spend, and investment is mentioned beside innovation, that the reform in public services that is being promised south of the border will be delivered in Scotland? Taxpayers in Scotland are coughing up, but will they receive from the Scottish Executive the reforms that are being promised by a Secretary of State south of the border? So far, the indications are not promising. There is no requirement to spend the Barnett formula amount on health north of the border as there is south of the border.

More importantly, however, the Secretary of State for Health's reforms, limited though they are, are being rejected north of the border. Only 10 days ago, the Scottish First Minister was in Perth to sign a concordat with the unions and the health service, and to sign a memorandum of understanding, as if they did not understand each other well enough. North of the border, the Scottish Executive's idea of working with the private sector is to nationalise hospitals. It was announced on Budget day that negotiations are under way to buy the Health Care International hospital in Clydebank. The Scottish Executive's great idea about working with the private sector on health is to buy the hospital—its bricks and mortar—rather than to treat the patients who are there in the first place.

I conclude that this Budget will do nothing for Scotland's economy.

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