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Mr. Weir: Will the hon. Gentleman give way?

Kevin Brennan: I will give way to the hon. Gentleman, as he was kind enough to give way to me earlier.

Mr. Weir: Would the hon. Gentleman like to comment on the differential growth between areas of the UK? As I pointed out, the growth in Scotland is less than half that of the UK as a whole.

Kevin Brennan: The growth in different parts of the country is a matter of concern, and we need to ensure that we have regional policies to deal with that. I have no doubt, however, that the Government's overall macro- economic strategy is correct, or that the nationalists' policies would bankrupt Scotland and Wales. Indeed, the policies of Plaid Cymru, of which the hon. Gentleman has a detailed knowledge, are all to do with public subsidy and devaluation, and provide no answers as to how they would be paid for by the taxpayers of Wales.

As I was saying, unemployment is at its lowest for more than a generation—in Wales, as well as in the rest of the United Kingdom. In some parts of the country, the only unemployment that is left is frictional unemployment. There is hard-core, long-term unemployment in some parts of the country—let us be honest about that—and I am glad that the Chancellor referred to it in his statement, and that the Government are introducing measures, such as the step-up programme that is being piloted in my constituency, to deal with some of the hard-core, micro-level, supply-side problems of unemployment.

Mr. Michael Connarty (Falkirk, East): My hon. Friend mentioned regional unemployment. Is he aware that in most Scottish constituencies, as in England, we have the lowest level of long-term unemployment and youth unemployment, and the highest level of employment, of the last 20 years?

Kevin Brennan: I was aware of that, and I can confirm that that is also true of Wales. To listen to Opposition Members sometimes, anyone would think that we were presiding over an economic wasteland. That is a false impression; they do not make their case well when they exaggerate those issues.

We should remember that all this has been achieved by growth in labour market participation. Inflation, too, has been pegged back and subdued, threatened only, perhaps, by the possibility of cost-push inflation from overseas, which could result from the instabilities in the middle east. Nevertheless, we have a remarkable record. Growth, as I mentioned earlier, is strong compared with that of the other G7 countries. Last year, the UK topped the league, and we have every reason to suppose that that will continue in the next year as the world economic position recovers.

It is against the background of a strong economy that we can debate the Finance Bill, which will help to build the strong public services that we need in the years to come, and help to rebuild the national health service. As my hon. Friend the Member for Bolsover (Mr. Skinner) has often said—and might say again if he were here now—"You can't do nowt without brass." The Government's record on that is very effective. Against

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this backcloth, the Government have rightly understood the key factors that will ensure that this sound long-term economic base is sustained.

In the first instance, the Government understand that enterprise—the creation of wealth, and the continuing quest for growth in productivity—is the foundation stone of prosperity. Secondly, they understand the need for strong public services, first-class education, help for those who cannot help themselves, and a modern, efficient national health service that preserves the principle of health care free at the point of use according to need—a principle that the Conservative party will not pledge to preserve.

The difference between this Government and their Conservative predecessor is the clear understanding that those two goals are complementary rather than in conflict with each other, as my hon. Friend the Member for Caerphilly pointed out so eloquently in his speech. Prosperity and social justice go hand in hand. You can't do nowt without brass, but you can't earn the brass without a well-educated, healthy work force. The Tory way was to squeeze public services in the belief that every penny taken out of the public sector would be better used in the private sector. They got the balance completely wrong, however, and our schools crumbled, our health service declined, our people failed to reach their potential and our economy became unstable during that period of boom and bust. The Bill, and the associated measures allied to it, are part of the continuing process of redressing that balance, to allow public services to be rebuilt.

Current United Kingdom public spending stands at 39.5 per cent. of gross domestic product, compared with 43.2 per cent. in Germany and 49.3 per cent. in France. Even when the measures outlined in the Bill and the Budget take effect, UK public spending will still be more than 3 per cent. lower than the European Union average. It is, therefore, false to portray these measures as profligate or as ones that will endanger UK economic growth.

I shall turn to some specific measures in the Bill. The Chancellor will have thought long and hard about the best way to raise the revenue that we need to invest in the NHS, and to find the £40 billion increase needed by 2007–08—the 43 per cent. uplift in real terms that is to come for our health service. He could have raised it by increasing income tax. Indeed, some revenue will be raised from that source through the freezing of thresholds. But there is little scope for that at a time of low inflation, and there are problems with that approach when inflation is higher, because revenues are raised. Raising income tax rates would also have affected many pensioners.

The Chancellor could also have raised VAT. In fact, clause 23 simplifies VAT for small businesses. Raising VAT was a favourite approach of the Conservatives when they were in office. When they first came to power, they almost doubled it from 8 per cent. to 15 per cent. I do not remember that being in their manifesto. They then used it to pay for the total debacle that was the poll tax, by raising it from 15 per cent. to 17.5 per cent. They brought in the council tax at that point. They then famously tried to put up VAT on fuel.

But the Chancellor did not put up VAT because he knew what the Tories knew, which was that, although it is an ad valorem tax, it is a regressive tax that impacts most on those on low incomes, such as pensioners. It is

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paid even by children when they spend their pocket money, which is in stark contrast to the thinking behind the child tax credit introduced by the Government. In short, VAT was an ideal tax for the Tories to increase, but not for us.

The Chancellor could have increased excise duties in many different ways, but those, too, are regressive taxes that impact most on the less well-off. Despite Lord Liverpool's 19th century warning not to interfere with the people's pleasures, that was a favourite option for modern Tory Chancellors. It is true that the Bill puts up the tax on cigarettes, but it does so in a way that is predicted to be revenue neutral, suggesting that there will be a fall in demand in equal proportion to the price rise. That will promote better health, as the Budget should, and as it is intended to do in the long term by targeting smoking, while raising revenue.

Yes, the tax on alcopops has been raised to remove the anomaly of treating them like wine, but the tax on beer produced by small breweries has been cut, and excise duties on spirits have been frozen for the fifth year in a row. Moreover, the tax on bingo has been abolished.

This Budget, however, is about more than beer, bingo and Bacardi Breezers. The decision to fund the necessary investment with national insurance contributions was surely appropriate. As the House knows, because the hon. Member for Buckingham tried in a rather silly way to make a debating point about it—I am sorry that he is still not present—national insurance does not feature in the Bill, because national insurance contributions are paid into the national insurance fund rather than the consolidated fund. National insurance changes do, however, exercise a powerful gravitational influence on the Bill, and it is therefore appropriate to say something about them now.

Funding the investment with national insurance rather than tax contributions is right, because it emphasises that the NHS provides the best possible insurance scheme. Furthermore, as my hon. Friend the Member for Caerphilly said, it is right for both worker and employer to pay. Good health care is as fundamental to the business as it is to the individual, but the market alone will not allocate health care in the interests of the economy and the nation as a whole—as the Conservatives will doubtless discover when they are announce their proposals in due course.

These measures have been built on the economic prosperity created by the Government. They encourage enterprise, and contribute to public services the investment that the nation needs. In marrying economic prosperity with social justice, the Government are pursuing the agenda that we all need. Their priorities are the NHS, education and jobs—the things that will make the nation healthy, wealthy and wise.

8.21 pm

Sir Robert Smith (West Aberdeenshire and Kincardine): The Bill clearly has many aspects. The hon. Member for Cardiff, West (Kevin Brennan) seemed to think that he could talk about national insurance while others could not. We should bear in mind the fact that the vast bulk of NHS funds still come from general taxation; it is the additional funding that the Government propose to take from national insurance. Besides, as was pointed

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out by my hon. Friend the Member for Kingston and Surbiton (Mr. Davey), our alternative Budget would not have required the national insurance changes.

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