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Mr. Michael Howard (Folkestone and Hythe): I am grateful to the hon. Gentleman for giving way. He is making an extremely interesting speech, but he seems to have overlooked one important factor in his comparison: the first Conservative Government in 1979 inherited an economy that was on its knees and were engaged in the very process of industrial restructuring that his former employer, the Prime Minister, seemed so keen to praise in his appearance on "Breakfast with Frost" on Sunday morning. However, the current Government inherited in their first term in office a very strong economy and had no need of the industrial restructuring of which the Prime Minister talked.

Mr. Miliband: I am sorry that the shadow Chancellor was not present when the former Conservative Chancellor was speaking. I believe that he and others argued that the 1977 Budget—its popularity has been discussed—fuelled great growth in the economy, which the Conservative Government had to control. In fact, so busy were they controlling it that they created the deepest recession of the 20th century.

In 1997, the Labour party promised to raise education spending as a share of national income as it cut the cost of economic failure. That has been done. It is good that the spending review will raise public spending, but more significant is the challenge to squeeze unproductive investment in favour of a further shift in the spending bias towards productive use—towards education above all, but also towards transport and crime prevention—so that year on year, the composition of public spending continues to change.

Of course, shifting input is the first step to better outcomes. I have spoken before in the House about education reform in South Shields, and about policing reform and changes to the Employment Service, but today I want to focus on the NHS. The official Opposition claim that the NHS is different from other services. The shadow Chancellor calls it Stalinist, and the Leader of the Opposition describes it as Soviet-style. The Opposition say that it cannot improve because it is a predominant provider, and that only by changing the funding system can we spur improvement in delivery.

However, experience in my constituency proves that that assertion is wrong. Over the past four years, an under-performing trust with a £4 million deficit has turned South Tyneside district general hospital into a hospital at the leading edge of change. Waiting times have been cut: some 69 per cent. of patients are seen within two months, and currently only 151 patients have to wait longer than six months. Consultants from Germany and Austria are being recruited, and they are making a fantastic contribution to the hospital. The treatment of elderly people with fractured hips is being transformed; more than nine out of 10 with routine breaks are admitted to a ward within an hour. Maternity services are being improved through the investment of £1.3 million in new delivery suites, and treatment time has been cut to less than 30 minutes for more than seven in 10 heart attack victims.

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Tough reforms and big challenges lie ahead. We need to use the new powers of primary care trusts to tackle the health inequalities that disfigure our community. Our lung cancer and heart disease rates are more than 70 per cent. higher than the national average. We need to discuss with the new strategic health authority how we can be a good partner with other providers in the region, so that secondary care is spread out to centres of excellence. We need to discuss with the Department of Health the potential and flexibility of foundation status, and to continue to change working practices, so that a patient-centred service can be delivered.

Of course, change is hard, but the vast majority of people in the health service know that it is vital. In fact, the health service offers what the private sector would die for: 1 million staff who are committed to their work and, above all, to their patient-customers. It is not a system unable to change, trapped by sclerotic structures and doomed by vested interests. With national standards and national inspection, we can ensure that such structures and attitudes are exposed and tackled wherever they are found, as they must be. With decentralised delivery, and front-line staff and patients empowered by information and financial clout, they can be overcome.

The second political divide is not just about the theoretical role of the state, but what counts in the delivery of care. The Conservatives have had nearly a year to tackle the issue of public service reform, and they have committed themselves to searching far and wide for the answer, but what is the question that they have been addressing? They have considered not how to deliver better health care, but how to get the state out of paying for it. They are the only people with no view on the powers of primary care, the functions of doctors and nurses, and the role of national standards. Why? Because they are obsessed with breaking the link between tax finance and medical care.

During the debate on the pre-Budget report, the shadow Chancellor took part in an extremely revealing exchange. When he was challenged to reaffirm the Conservative manifesto commitment to a comprehensive service that is free at the point of use, he could confirm only the first part of that commitment. He could not confirm the commitment to a service free at the point of use—the one thing that the hon. Member for Tiverton and Honiton (Mrs. Browning) did not mention in her speech.

The Conservatives say that they need time. They say they need a mid-career gap year to broaden the mind, allowing them to set off on a policy safari to discover new truths and to find new friends. But instead of looking like trendy young students with a future in front of them, full of idealism and promise, the wanderings of the Conservative party remind me of nothing so much as the pitiful window shopping of a faltering old dowager. All she desires from the winter sales is that elusive foreign frock, but none of them will fit either her waist or her purse.

Mr. Kenneth Clarke rose

Mr. Miliband: If other hon. Members will not penalise me later, I will give way briefly to the right hon. and learned Gentleman.

Mr. Clarke: It has taken the Labour Government five years to get where they are now. The NHS plan, at least

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in its rhetoric, says that by 2005 every patient will have the right to choose whether to be treated in an NHS hospital, a private hospital, an independent hospital or a hospital abroad. Does the hon. Gentleman think that the right hon. Member for Holborn and St. Pancras (Mr. Dobson) would agree with a word of that? Does he think that the right hon. Gentleman was saying that when he first came into office? Does he wonder why the first Secretary of State for Health under the Labour Government has absented himself from these entire proceedings?

Mr. Miliband: I am flattered that the current shadow Chancellor and the former Chancellor should intervene on a humble Back Bencher. I believe that my right hon. Friend, who set up the National Institute for Clinical Excellence and the Commission for Health Improvement to crack down on standards in every hospital trust, has much to be proud of in his record on the health service.

I am afraid that the right hon. and learned Gentleman has interrupted my flow, but I shall finish my speech. In the 1970s, the Labour party lost the confidence of the people that it would spend their money wisely. From scepticism about bureaucratic spending came anger about taxation, and from the weakness of taxation as a mechanism for regulating the economy came the final death of traditional tax and spend. Tax policy could not, on its own, stimulate growth, and spending could not, on its own, drive improvement.

That was the basis of Sir Geoffrey Howe's appeal to rein back the state that I talked about earlier. Instead of liberating individuals, it took away the floor on which they stood. Instead of supporting businesses, it left them hamstrung by social failure. Today the terms of trade of politics have changed. No one on the Labour Benches believes that the Government are perfect, have a monopoly of wisdom and can do it alone. That is why reform and partnership are vital.

The Government have earned the confidence of the people that they can run the economy, cut unemployment and reform the welfare state. They have earned the confidence of the people that they can improve education, which in my book remains the key motor of social and economic advance in a country that is still held back by scarring social divisions. Now the Government are setting out to earn the confidence of the people that the health service can be brought up to European standard. I believe that they will earn that confidence, and in the process will contribute further to the renewal of progressive politics that represents the best values and the best traditions of this country.

9.7 pm

Chris Grayling (Epsom and Ewell): I shall keep my remarks brief, as we shall shortly move on to the winding-up speeches, but some important points need to be raised. We have rightly talked largely about the health service, because health is at the heart of the Budget. However, we must also remember that the Chancellor said that it was a Budget for enterprise and fairness. When we look beneath the surface of the Budget, those claims appear pretty thin.

The fair measures for the family involve a massive expansion of means-testing on a level that I have not seen in my lifetime. The few good ideas for some businesses

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frankly leave me cold, because they fail to address the fundamental flaw in the Budget, which is the decision to increase employers' national insurance contributions. That will damage companies and organisations across the nation.

The Red Book says that raising the United Kingdom's sustainable rate of productivity growth is central to the Government's economic strategy, so why take billions of pounds out of the pockets of our businesses? Why put a tax on employment, which will cost small businesses thousands of pounds a year? Where do the Government think that money will come from? Salary bills are fixed: most companies cannot adapt those bills to cope with the change in taxation. Rents and rates are fixed, and are often rising. Most of the costs of small businesses cannot be changed in a few months just to cater for tax changes. Cuts in costs are made by cutting expenditure on new equipment, training or marketing. How does that help a company's productivity? How do the Government expect additional costs through this taxation to encourage productivity in our companies?

Companies are not all that will be affected, because employers' national insurance does not simply apply to the private sector. There are consequences for education. A typical secondary school will probably lose about £30,000 or £40,000 a year from its budget in extra NIC costs, which is equivalent to a teaching post. Will those schools get that money back in the financial settlement for next April?

A primary school typically has a salary bill of £300,000 to £500,000 a year, so it will pay between £3,000 to £5,000 a year extra in tax. Where will that money come from? Anyone who has spoken to a head teacher knows that they have little discretionary spend available, so what will go? Will it be books, playground equipment or classroom facilities or, next April, will the Government give back to those schools the money that they are taking from them in NICs?

Universities are under pressure to raise student numbers and they already need to find significant additional resources to cope with the intake that the Government are asking them to accept in the next few years. How will they fund the extra cost of employers' NICs? How will our other public organisations and public services cope? Consignia faces huge losses and a bill from the tax man for between £30 million and £50 million a year extra. How many extra neighbourhood post offices will have to close as a result of the Government's changes?

On policing, my own force in Surrey is overstretched and underfinanced. Where will it get the funding to pay its extra tax bill? Will that come in next year's settlement or in the form of fewer officers on our streets and fewer services available to members of the public?

Nowhere will the impact of higher NICs be felt more than in the health service itself. My local hospital in Epsom will probably have to pay an additional £300,000 a year in tax from next April. Every GP surgery in the country will have to find thousands of pounds of extra tax. Our community-based care services will have to find thousands of pounds more in tax. Care homes, about which we hear so much, will have to find thousands of pounds a year more in tax. Why tax the NHS to pay for the NHS? Will the NHS get a refund next year or will

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funds that would have gone through the system to pay for new staff and new equipment be devoted to paying extra tax to the Chancellor?

The tax increases will affect not only employers in our public services, but newly qualified teachers, junior doctors, nurses, care home assistants, bus drivers and train drivers, all of whom are in perilously short supply in parts of the country, particularly London and the south-east. They will all pay more tax. As a result, they will all find it more difficult to afford high housing costs. How will that tax increase help to retain, maintain and improve our public services across the south-east of England?

There is no doubt that the Budget will provide a substantial increase for the NHS, but the public are rightly sceptical, as the polls show clearly, about whether the Government taking away all that money from our companies, public services, schools and hospitals to recycle it back into the NHS will deliver the results and improvement that the country needs.

There is no doubt that we all want better health care—there is a consensus on that on both sides of the Chamber—and all hon. Members want a better system of health care in this country. Week after week, we all see at our surgeries constituents who have been waiting desperately for treatment, in pain and anguish for months and months, but are unable to get it. We all want improvement, but no other country runs its health care system in the way that we do and every other country does it better.

The great shame about the Budget and the Chancellor's attitude to the Wanless report is that he does not seem willing to listen and learn. He seems to be stuck, saying dogmatically, "I know what is right. We will do that." Look elsewhere. There is no evidence whatever to support the assertion that running health care through a large national state-run bureaucracy will deliver the health care service that our constituents want and need.

Will the Budget work? That is the key question. Will the money raised deliver improvements in the health service? If that does not happen, there will be an extra burden on employers, schools and hospitals. Head teachers and chief constables will have to find extra money because public service workers will have to pay the tax bills that make up the money that the Chancellor wants to put into the NHS.

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