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6.59 pm
Mr. Mark Todd (South Derbyshire): It is possible to exaggerate the benefits and disbenefits of a Budget; we have heard a fair array of such speeches this afternoon. In my business career, the key issue was the macro- economic environment within which my business operated. Individual Budget measures, while interesting, challenging and requiring further thought, were as nothing compared with that environment. The main factors were low inflation and low interest rates; linked to that was a low public debt, because a high public debt tends to force up interest rates, and broadly predictable terms of trade.
I did business under Conservative Governments, and there were many times when I did not feel entirely happy with the environment in which I operated. The position
now is that most businesses know where they stand and can plan clearly into the future; they can judge investment decisions realistically and reduce the risks of those decisions. Those are critical factors in deciding whether the Budget continues the trend of a number of the Chancellor's Budgets to strengthen our country's business environment. It easily passes that test. There is limited fiscal tightening, which should be of some comfort to the Monetary Policy Committee in any judgment that it makes about raising interest rates in future; that benefit is modest, but of some value nevertheless. There are steps, in the short term at least, to reduce slightly the public debt in the next couple of years, as we would expect, although predictions of borrowing and spending by the Government and, for that matter, all previous Governments, are subject to large margins of error; that is stuff to which we will return later, with substantial amendment and correction to the Red Book. The key issue for me is whether the macro-economic environment within which business operates is satisfactory for planning into the future; it is.There are useful supply side measures, including further support for training; in an intervention, I commented on research and development assistance, which is excellent and will help a number of companies in my constituency. There are lower tax rates for smaller businesses; lower compliance costs for dealing with VAT; a simplification of the regime of buying and selling businesses, which has not been referred to in our debate, but is of value to people who run small businesses and seek to trade in the skills that they have built up and the enterprise that they have created. Those are all positive changes.
The impact of increased national insurance on business costs has understandably been raised by Opposition Members, and I appreciate that it certainly falls into the category of challenges that I would have had to work out how to deal with if I were running a business. However, it is also fair to say—I do not necessarily offer this as an argument in favour of the change—that if one looks carefully at the Red Book, as well as this country's record on labour productivity and the low level of capital investment on which several Members have commented, the change will alter the balance between the employment of labour and the employment of capital in the economy. Whether that is good or bad is a matter of judgment; we shall no doubt return in future to the question whether it has had a positive impact on productivity. Nevertheless, people will grapple with that issue when deciding how to run their businesses in the future.
The first key risk for the Budget in the macro-economic environment is that the recovery of the United States, on which a fair number of assumptions have been based, may turn out to be not as fast or extensive as expected. Personally, I judge that to be a relatively low risk, but it is nevertheless significant because of our country's unusually large dependence on trade across the Atlantic. The second risk is that the disturbance and violence in the middle east will have an impact on oil prices, which will have an effect on the global economy. That is not something that we can predict accurately; everyone in the House prays that it is not the case, but none the less we can see that it is a possibility in the current climate. The third key risk, which has not been touched on, is the impact of convergence with the euro. A hidden benefit of the fall in the euro—certainly a well hidden benefit for any exporting business—is that a low euro supports low
inflation in this country. If the euro rises against sterling in future, as has been predicted for a number of years although it has not substantially proved to be the case, there will be an impact on inflation which will require the attention of the Monetary Policy Committee.If we look ahead to the challenges, as opposed to risks, of the next year—all challenges, however, are risks if they fail to be met—the first, touched on in the Red Book, is the need for increased market and labour market liberalisation in Europe. In spite of grim warnings from the Opposition, we still have significant advantages in many sectors which cannot be fully exploited in the restricted marketplaces of the European Union, so any rapid progress on liberalising those markets and persuading some of our European partners to adopt reforms that we have already accepted here would be greatly to our benefit.
Secondly, we face the continuing challenge of skills improvement in this country. Under this Government, we have made significant progress in primary education, which needs to be driven right the way through the learning range—essentially, our whole working life—but that process has only just begun. I very much welcome the fact that Derbyshire learning and skills council has been named as part of a pilot programme, allowing it to experiment with the best way of delivering training at work. We still have a great deal to learn about how best to develop skills in employment.
The third challenge on which I want to dwell in the last couple of minutes of my speech is public sector delivery. There is no doubt whatever that many people fully recognise that paying for a quality health service costs money. People are not fools; I met quite a lot of people at the weekend and no one suggested that improvement could be had for nothing or, as is commonly said, by saving a few bob on what we wasted on the dome. Most people recognised that big money was required. However, there is scepticism about whether that money will in fact deliver change. One difficulty is the confusion surrounding the word "modernisation", which, in relation to organisational change, is often cited with efficiency. It is essential to move away from damning the management and bureaucracy in some of our key public services and recognise that many of those people are required to deliver complicated change in extremely complex organisations; they need our assistance and support, rather than the backhanded criticism that we are used to handing out. There are therefore three messages: focus on a narrow range of objectives, thus reducing the number of goals in performance improvement, and empowering people closest to those goals to make sure that they deliver. I hope that those watchwords stay with the Ministers who have to deliver the objectives of the Budget.
7.9 pm
Mr. John Baron (Billericay): Thank you, Mr. Deputy Speaker, for calling me to speak in this important debate. I refer hon. Members to my declaration of interests.
Unfortunately, the Budget will cause more harm than good over the longer term, for yet again taxes are being raised by a Government who believe that they know best how to spend our money. History suggests that that is not the case. Since 1997 every man, woman and child in the
United Kingdom is paying £30 a week extra in tax, yet Labour has failed to deliver improvements in our public services.As we know, NHS waiting lists are rising again, with more than 100,000 people waiting to get on the waiting list. Teacher vacancies doubled last year and truancy has risen. Street crime and particularly violent crime are rising fast, with an increase of about 33 per cent. in Essex over the past three years.
Mr. Kevan Jones: Does the hon. Gentleman agree that according to the national crime statistics, under the present Government the level of overall crime has dropped, rather than doubling, as it did under the last Conservative Government?
Mr. Baron: What concerns people most as regards crime, certainly in my constituency, is the level of street crime and violent crime. There is no denying that that has risen significantly in the past few years. People are asking why, when they are paying more in tax.
In addition, our rail network is deteriorating, with train—
Mr. Jones: I repeat my question. Does the hon. Gentleman agree that the level of overall crime under the present Government has gone down rather than up—yes or no?
Mr. Baron: With respect to the hon. Gentleman, that figure is debatable. From the point of view of my constituents—I am in the House to represent my constituency—crime overall is increasing. If the hon. Gentleman does not believe that, I suggest that he comes and visits my constituency. Street crime, violent crime, burglaries and car crime are significantly on the up and are causing great consternation to my constituents.
One of the main reasons why improvements have not been forthcoming is that the Government believe that the state always knows best, so they legislate, regulate and interfere far too much. Such an approach makes for much waste, bureaucracy and red tape. That is perhaps no better illustrated than in the case of small businesses. When I speak to the owners of small business in the constituency and at Parliament, it is clear that their main concern is the rising burden of regulation and taxes.
I undertook a constituency-wide survey asking businesses their views before the Budget. The overriding wish was for less Government interference in the running of businesses. Indeed, 40 per cent. of the respondents spend between one and five days a month dealing with red tape and bureaucracy, and a further 20 per cent. spend one week or more doing so. That is time that could be spent chasing orders. And no wonder. Research shows that more than 4,600 new regulations were introduced in 2001. That is the highest figure on record and represents a 50 per cent. increase since 1997. The Budget does nothing to relieve the red tape and tax burdens on business, particularly small businesses.
The Chancellor made much of the fact that this was a Budget for small business—a Budget for enterprise. However, as we have heard, employers will not be impressed by the 1 per cent. rise in national insurance contributions, which is the equivalent of a 3 per cent. increase in corporation tax, once both measures are equated. That single tax increase more than negates all the Chancellor's other supposedly business-friendly measures.
As a business man myself, it seems to me that the Chancellor misunderstands the importance of cash flow, as opposed to profits, to a small business. By imposing a tax on jobs, the Government have made a mockery of a Budget that was aimed at enterprise. As Nick Goulding, chief executive of the Forum of Private Business, said immediately after the Budget:
- "National insurance is a tax on jobs and comes straight out of the bottom line. This will be a further disadvantage to employers."
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