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7.47 pm
Mr. Wayne David (Caerphilly): There are two clear themes in this year's Budget: fairness and enterprise. To the Labour side of the House, the fairness of the Budget is self-evident. We have unprecedented investment in the national health service, confirming its principles but at the same time ensuring that modernisation takes place. We have two new tax credits that will help the less well-off: the child tax credit and the working tax credit. Assistance is being provided to the long-term unemployed and single parents to help them secure long-term employment, and there is much else besides.
It is important that, taken as a whole, the Budget is progressive in character. Numerous references have been made to the Treasury Committee's report. It is important to note that the draft report states that the Institute for Fiscal Studies has calculated that, when all the measures are examined in total,
- "the effect is a redistribution from the top half to the bottom half of the income distribution."
It is significant that when we refer to the national health service, the Opposition fail to offer any alternative proposals. We have heard about their grand tour of Europe and their various experiences in different European Union member states. We can only hope that that infatuation will lead them to a more genuine appreciation of some of the benefits that the European Union can bring to this country.
If we have had a Budget for fairness, is it a Budget for enterprise? It is true that several employers' organisations have expressed reservations—for example, the CBI is worried that national insurance increases will be unfair on employers and impede job creation. In all fairness, however, we should bear in mind several factors. There is a moral argument in favour of increasing national insurance contributions. As everyone benefits from an improved national health service, it is only right that everyone contributes.
We must recognise the need, in economic parlance, for a healthy labour supply. Many employee absences in British industry are due solely to illness. In 1999 alone, £10 billion was lost as a result of the large number of people away from work because of illness.
We should not forget that in recent times the national insurance system has been reformed, nor that projections show that this country's gross domestic product growth will probably increase from 3 per cent. to 3.5 per cent. in 2002–03. That will lead to greater prosperity and, in turn, more jobs.
The Bill also contains a whole panoply of provisions that will encourage enterprise, including greater support for research and development, simplification of the VAT regime and reduction of red tape. Other measures will help those parts of the United Kingdom that are less prosperous than the south-east of England. It is therefore a shame that no Plaid Cymru Members are taking part in the debate.
Mr. Weir: The hon. Gentleman will know that the Scottish National Party and Plaid Cymru are a joint group in this Parliament, and I shall speak on behalf of both parties.
Mr. David: That is a pretty lame excuse for Plaid Cymru's absence from the debate. I am talking not only about the present moment, but about the whole afternoon from 3.30 pm onwards, during which not one single member of the Welsh National party has set foot in this Chamber. That is a complete and utter disgrace, because parts of the Budget will help areas like Wales—for example, the community investment tax credit, which will help disadvantaged communities, and the positive changes to stamp duty, which will help small and medium-sized enterprises, including those in Wales.
The Budget as a whole is as much an enterprise Budget as a Budget for fairness. The two concepts go hand in hand. Over the past few years, an enterprise culture has
been created throughout the United Kingdom—a culture that the Government are helping to nurture and to sustain at every opportunity. It has become part of the psyche of the nation, and long may that continue. The Budget takes a positive step further in that direction.The Treasury Committee report refers to the European stability and growth pact. On the Budget deficit, Treasury forecasts show that public finances will be within the confines of the stability and growth pact in 2002–03, but there is a question mark over whether that will continue into 2005–06 and 2006–07. The operation of the growth and stability pact has already demonstrated greater flexibility as regards the attitude taken towards the position of Portugal and Germany. It would be useful if that flexibility were to be enshrined more permanently to create a more prudent and sensible approach. The growth and stability pact needs to be reformed to take account of the economic cycle, debt sustainability and investment expenditure. I am grateful that the Government have acknowledged that point, and that it is being addressed by the European Union through the Economic and Financial Affairs Council—ECOFIN. I hope that that debate will reach a successful conclusion.
Today in this country, 28.4 million people are in work and the lowest number of people are claiming unemployment benefit for 25 years. That is a record. The Labour party's goal is to achieve sustainable full employment. That goal can be achieved in the near future, and the Budget takes us closer towards it. In essence, the aim of the Budget is to create a country that is prosperous and compassionate. In other words, it is about fairness and enterprise.
7.56 pm
Mr. Michael Weir (Angus): Scottish National party and Plaid Cymru Members welcome the central tenet of the Budget, namely that there should be more investment in the national health service and that it should come from general taxation. It is heartening to note that the Chancellor has finally accepted the position of the SNP, which has called for that for some considerable time. It is worth recording that in 1999, the SNP sought to reject the Chancellor's 1p cut in income tax and said that priority should be given to investment in public services. We were roundly condemned by new Labour at the time, but we seem to have come full circle. Indeed, I am told that some Labour Members are describing the measure as 1p for Scotland—vindication indeed.
Mr. Tom Harris: Can the hon. Gentleman confirm whether the 1p for Scotland policy will remain part of the SNP's manifesto at next year's Scottish Parliament elections?
Mr. Weir: As the hon. Gentleman knows, our manifesto for the Scottish Parliament elections will depend on matters within the Scottish Parliament, not on the Bill.
The Bill makes no change to income tax—it provides instead for a rise in national insurance contributions—but that is merely to spare the Prime Minister's blushes. All hon. Members know, as does everyone outside the House, that what has happened is a rise in taxation. The mental gyrations performed by Labour Members to justify that method of raising revenue have been a wonder to behold.
In effect, it does not matter to the average employee whether the increase is in direct taxation or national insurance contributions—it is still an increase in the amount of tax that they pay.That method of raising revenue has a serious impact. Clauses 30 to 32 impose changes in corporation tax, especially in relation to small companies. Although that is generally welcome to small companies, it does not address the needs of the vast majority of small businesses in Scotland, as more than 75 per cent. are not incorporated and therefore do not pay corporation tax.
Kevin Brennan: While the hon. Gentleman is talking about the effect of the changes on small businesses, and as he is speaking on behalf of Plaid Cymru as well, will he give his reaction to the response to the Budget by the CBI in Wales and the Trades Union Congress in Wales?
Mr. Weir: The changes to corporation tax will be beneficial to companies in many ways. When I asked the Chief Secretary about the difference between companies and unincorporated bodies, he gave a great deal of detail about the effect of the changes on companies. They will benefit, but the point is that unincorporated bodies will not. Far from being a Budget for business, it is a Budget for big business, as the Bill reveals.
Last week, in its Budget coverage, The Financial Times gave the example of Safeway in relation to national insurance contributions. It pointed out that because a large number—40 per cent., I think—of Safeway's employees were part time, they did not cross the national insurance threshold. A further 25 per cent. crossed it by so little that it made a marginal difference to the company. It makes a big difference to those enterprises with a small number of well-paid employees. That is often the case with innovative small businesses in Scotland, not least because of the difficulties that they experience when they seek bank finance.
Mr. Weir: No doubt that also applies to Wales. The two Labour Members from Wales may feel free to keep interrupting.
Unincorporated business receives no benefit from the reduction in corporation tax. Most small businesses will pay increased national insurance contributions personally and for their employees but will not receive the benefit of reduced taxation. They are therefore doubly penalised. That is patently unfair. By raising national insurance contributions, the Chancellor is not taxing profit, but increasing the cost to business, which must be met even if there is no profit. It is worth noting that the average self-employed business owner in Scotland makes approximately £14,000 per annum, compared with a UK average of £22,000.
Unincorporated business will not benefit from the change in the research and development grant.
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