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Dr. Murrison: I am not going to commit my party or indeed myself, but I would like to make an observation, as a member of the medical profession. The hon. Gentleman said that the medical profession would always side with the Conservatives; I think that our experience over 18 years suggests the opposite.
Mr. Harris: I am delighted that the hon. Gentleman has raised that point, because I wanted to deal with a proposal that I know to be supported by many of my colleagues.
We have talked of the importance of reform of the NHS, hand in hand with the increased investment. Every health service employee works full time for the health service and is paid full time by it, but the problem of waiting lists can never be dealt with through the national insurance increase until we can get consultants' contracts sorted out.
If a consultant is paid full time by the NHS, he or she should work full time for the NHS. That is an important reform that must be made if the money we are asking people to contribute from their income is to be used properly. I expect considerable opposition to that proposal from the Conservatives: after all, the idea of a consultant's working full time for the NHS is presumably anathema to many of them.
Mr. Mark Hoban (Fareham): I wonder whether the hon. Gentleman has read a document called "Delivering the Change", which is the Government's blueprint for delivery of the NHS plan. It refers to increasing the provision of health care provided by the private sector. If the hon. Gentleman rules out consultants' working—
Madam Deputy Speaker: Order. That is a little wide of the subject. I again remind all Members that we are debating national insurance contributions. There can be reference to the financing of the NHS.
Mr. Harris: Again I am grateful for your guidance, Madam Deputy Speaker, and I shall try not to deviate further.
As I have said, national insurance is not an income tax. I believe that the modest increase proposed by the Chancellor is welcomed by the public, and should be
welcomed by the House. I know it will be welcomed by nearly all those employed by the NHS, and by all who are treated in the NHS.5.39 pm
Mr. Stephen Dorrell (Charnwood): I begin by declaring an interest. I am a director of, and a shareholder in, two businesses that operate in this country. They employ people, so they have an interest in the burden that this national insurance measure will impose on employers' costs, and which I want to discuss.
I think it fitting that the House should debate this increase in national insurance contributions on the fifth anniversary of this Government's election. The fact that the increase forms the centrepiece of this year's Budget finally strips away any shred of respectability from the balloon of rhetoric that secured the Government's election in 1997. They were elected on the basis that new Labour was going to be different from old Labour, that the third way was something different from what we had seen before in British politics, and that it would usher in a new way of doing business in politics.
It is worth reminding ourselves of why we were asked to believe that new Labour was different. We should look at such claims in the context of this Budget and the national insurance contribution's role as its centrepiece. The most important claim made for new Labour, as distinct from old Labour, was that the latter was in favour of tax and spend but that the former had somehow found a new way of dealing with the dilemmas at the heart of the delivery of public services. New Labour was going to be something different. Amid all the rhetoric, it was not entirely clear why it was going to be different, but under new Labour we were definitely not going to witness merely a return to the tax and spend ways with which we became extremely familiar under Labour Governments of the 1960s and 1970s.
I enjoyed the contribution of the right hon. Member for Llanelli (Denzil Davies), who does not worry too much about the distinction between old Labour and new Labour. In his own rather endearing way, he reminded the House that the centrepiece of this year's Budget is the national insurance surcharge that he himself had justified as a Treasury Minister 25 years earlier. The fact that the man who introduced the tax increase that was necessary under the old Labour days of the Callaghan Government is supporting—on exactly the same basis as 25 years ago—this year's increase rather makes my own case for me. He said that he introduced the national insurance surcharge 25 years ago, and that he is happy to support in the House of Commons today the introduction of the same policy under a new Labour Government.
As I said, the right hon. Gentleman is not too concerned about distinctions between new Labour and old Labour. He recognises the essential truth of this Budget: the national insurance contribution increase is a simple, straightforward, £8 billion tax increase. That is what this Budget introduced, and that is what we are debating in today's ways and means resolution.
Mr. Luke: Is it not true that the UK's economic situation was completely different 25 years ago? One major initiative of this Government was to put the power
to change interest rates in the hands of the Bank of England. The past five years have been very prosperous. The right hon. Gentleman is talking about different era.
Mr. Dorrell: I suspect that you might interrupt me, Madam Deputy Speaker, were I to discuss monetary policy. I do not propose to go there, other than simply to observe that I actually agree with that aspect of Government policy. What I disagree with is a return to tax and spend, and that is what we are debating this afternoon.
Of course, the distinction to which I referred was not the only one that we were asked to believe that the new Labour Government, led by the current Prime Minister, would draw between themselves and old Labour traditions. We were asked to believe that whereas old Labour had been distinctly suspicious of the wealth creation process and tended to regard the business community as a milch cow to pay for its public spending ambitions, new Labour would be totally different. After all, it had—we were told—spent many years in opposition on the famous prawn cocktail circuit, it had many friends in business, it understood the wealth creation process and it would be a business-friendly Government. However, in recent months and years, the business community has grown more and more suspicious of the developing record of the Government. In the light of the Budget—especially the £8 billion tax increase—it is crystal clear what the friendship between new Labour and the business community is worth.
Despite all the crocodile tears about the manufacturing sector, the difficulty of trading in a global economy on the basis of a strong pound, and all the rhetoric about the importance of employing people, about wealth creation and about a Budget for enterprise, we have already had a £5 billion tax increase on pension funds in the Government's first five years—
Madam Deputy Speaker: Order. The right hon. Gentleman is well aware of the comments I made earlier, and I remind him of them.
Mr. Dorrell: Indeed, Madam Deputy Speaker, but I was linking the £5 billion increase in tax on pension funds that has already been introduced with the £4 billion—of the £8 billion that we are discussing today—that will land directly on the cost of employing people in the British economy. When we consider whether that is a sensible tax policy, we should recognise that those two measures alone—ignoring all the smaller measures that the Government have introduced—constitute a direct increase of £9 billion in the cost of employing people. Through those two measures, this pro-business new Labour Government will be responsible for a £9 billion increase in the cost of employing people. The two measures that we are discussing today alone constitute a tax increase of £8 billion from 6 April next year.
I agree with my right hon. and hon. Friends on the Front Bench that we should oppose this ways and means resolution tonight, because I regard it as simply a tax increase. What is worse, it comes on top of previous tax increases that have already constituted a substantial increase in the cost of employing people.
John Mann: The right hon. Gentleman talks about tax increases on business. Have the corporation tax and capital gains tax paid by his businesses gone up or down?
Mr. Dorrell: I am delighted to say that the corporation tax burden is lower than it used to be, but I am focusing the attention of the House on what is alleged to be one of the policy objectives of the Government—the encouragement of the employment of British people in the British economy in the wealth creation process. It is an odd way to encourage something to happen to put an extra tax burden of £9 billion on that activity.
Mr. Hendrick: When unemployment is a fraction of what it was under the Conservatives, does not the right hon. Gentleman accept that this Government's judgment is better than his own was as part of the previous Government?
Mr. Dorrell: I am coming to exactly that point, because I wish to explore why I am opposed to tax increases in this economy at this time. I shall talk about health later, in which I have a political interest, but I wish first to focus the House's attention on the economic consequences of the tax increase and the reasons why we should not support it.
It is important not to allow ourselves to spend—as we have—many years focusing on the importance of competitiveness and the need to compete in a global economy, and then to throw that analysis out of the window the moment that we have some tough decisions to make on health. Simply because it is said to be necessary for the NHS, a tax increase of £8 billion is allowed to go through with no questions asked. The line adopted by the hon. Member for Truro and St. Austell (Matthew Taylor) was that we should be content to vote through the tax increase simply because the Chancellor has said that it is needed for health.
Before I return to that argument, I shall focus on the economic case against a tax increase. Britain led the way in Europe towards a low-tax, competitive, flexible and market-oriented economy. We did not do that through any great foresight. By the end of the 1970s, Britain faced worse problems than any other country did. We had no choice but to cut taxes and make the economy more flexible so that we could be more competitive.
After 18 years in opposition, the Labour party finally said that it had taken the point and that it understood the need for a low-tax, competitive economy. Since the Labour Government came to power, however, they have started to increase the tax burden again. I have already mentioned two measures, and there are many others. This Budget takes the process a big stage further, just when our competitors around the world are understanding the importance of cutting the tax burdens on their economies.
The hon. Member for Preston (Mr. Hendrick) asked about the low levels of unemployment and Britain's economic success in recent years, and it is true that there has been more competitive economic activity and more successful wealth generation here. That has happened because we have had a lower-tax, more flexible economy than our competitors. The Government are reversing that: they are raising taxes in the British economy just when
Germany, France, Italy, Spain, the United States and Japan—our competitors in an increasingly open and flexible world market place—are cutting taxes.It is not good enough for hon. Members to say that a private problem in Britain with respect to health care means that we are locked out of the global economy. We are throwing to the winds everything learned in the past 25 years, and we are raising taxes just when the lessons that we learned the hard way are being applied by our competitors to make their economies more competitive.
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