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Mr. Tom Harris: The right hon. Gentleman decries the Government's decision to treat the NHS as a priority. Does he not agree that, if the Government to whom he belonged had treated the NHS as the priority that it was in the 1980s, we might have avoided the crisis now facing the service?

Mr. Dorrell: I shall come to the NHS later, but just now I shall simply observe that the Government cannot say that difficulties in the NHS must give rise to a tax increase. I am depressed by the fact that we have been misled by Government spin in this debate. I congratulate the Chancellor on the way in which he has presented his tax increase. He has introduced a big, tax-increasing Budget and has invited us to debate health care.

If I wanted to introduce a tax-increasing Budget in today's world, I should take the same approach, but that does not mean that we—the legislators being asked to approve the tax increase—should vote it through just because of a convenient argument in support of the Budget. I believe that we should look at the downsides of the case that the Chancellor has presented. One of the key downsides is that the rise represents a significant increase in the tax burden on business, and that it will significantly undermine our economy's competitiveness.

Matthew Taylor: There is an argument—it is legitimate, but I do not agree with it—that says that tax burdens need to be lowered to improve competitiveness. That can be done in two ways. First, one can build up a big deficit. That is not a legitimate approach: it happened under the previous Conservative Government, although I admit that they planned to reduce it later with tax rises. The second option is to cut expenditure. How would the right hon. Gentleman cut expenditure significantly, and in which services? I remind him that Conservative Front-Bench Members have ruled that out.

Mr. Dorrell: I shall make my speech in my own way, as the hon. Gentleman did. However, I wanted to focus the House's attention on the fact that this is a tax increase. That rather obvious point seems to have escaped much public attention so far.

In his speech, the hon. Member for Truro and St. Austell said that we needed to reconnect voters with the political process. He may find that tax increases are quite a good way to achieve exactly that.

There is another reason for attacking this tax-increasing Budget, and this proposal in particular, which represents the bulk of the tax increases. Several speakers, including the hon. Member for Truro and St. Austell, have noted that the Government said that the increases would not be necessary. Indeed, before the last general election, the

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Government cut income tax. They cut the direct tax burden and told people that they would do more of the same if they were re-elected.

The Government's actions are breathtakingly cynical—there is no other way to describe them. The Government cut income tax before the election, but raised national insurance contributions after it. Labour Members should not be surprised at what happens when their constituents come to understand that the NHS will not change overnight, but that their tax bills will, on 6 April next year. Labour Members will then have to explain why tax bills are rising, despite their repeated assurances less than 12 months ago that no such rise was necessary.

How do the Government defend the tax increase? I repeat that the Chancellor has introduced a tax increase and tried to persuade us to avert our eyes from all conventional economic arguments and focus on the health argument. It has been said that the tax rise is necessary for health.

In an intervention on the hon. Member for Truro and St. Austell I said that that is simple arithmetical nonsense. The Chancellor is raising £8 billion in extra tax, and is spending £2.4 billion of it on the NHS. He must therefore justify the other £5.6 billion. He cannot say that all of it is needed by the NHS, as he is not committing to the NHS well over half of the sum that he is raising. In fact, he is committing at least as much to the tax credit programme as to the NHS, as my hon. Friend the Member for Havant (Mr. Willetts), the shadow spokesman on work and pensions, has made clear. So it is arithmetically untrue to say that the tax increase is justified by increased health spending.

There is another argument to be made. As the Red Book makes clear, total Government expenditure in 2003–04 will be £390 billion. The Chancellor of the Exchequer is asking us to believe that we must accept all the economic damage flowing from this huge tax increase in order to deliver an extra £2.4 billion to the NHS next year—extra money that amounts to 0.6 per cent. of expected Government expenditure.

This Government say that they embrace the need to make hard choices. Does any hon. Member really believe that it is impossible to find, in total Government expenditure of £390 billion, an extra £2.4 billion for the NHS? If the Chancellor and the Prime Minister want those extra resources to be made available to the NHS, is it impossible for what the Prime Minister has called hard choices to be made to free up those resources?

Mr. Hendrick: If the right hon. Gentleman wished to find that money from elsewhere in the £390 billion he mentioned, which services and provisions would he cut?

Mr. Dorrell: It is one of the joys of government that the Government have to make choices. I am simply asking people to embrace the concept that in £390 billion of public expenditure there is not, somewhere, £2.4 billion—roughly 0.5 per cent.—that could not be better spent on health. I challenge Labour Members to say that they could not find, if they really had to, 0.6 per cent. out of that budget to spend on health.

Mr. Tom Harris: The right hon. Gentleman served in a previous Government as Secretary of State for Health. Can he tell us from his experience how easy it would have

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been to persuade his Cabinet colleagues to surrender £4 billion of their own budgets, and if it was easy, why did he not do it?

Mr. Dorrell: It flatters my vanity but achieves almost no other purpose to tell the hon. Gentleman of the headline that said, "Dorrell wins £4 billion for the national health service". I guess that that answers the hon. Gentleman's question.

There is no escape from the conclusion that the Government are introducing this tax increase because they are running away from the need, to use their own rhetoric, to make hard choices and decisions.

Is the economic damage associated with the tax increase at least mitigated by the fact that extra money is being voted into the national health service? I stand as a strong supporter of the principle of access to health care. We must continue to embrace the ideal that health care should be available on the basis of clinical need, not on ability to pay. We should also embrace the ideal of delivering world-class health care to those who need it on the basis of clinical need. Last year, the World Health Organisation concluded that we were among the worst performers of any European country against those two ideals.

The question is whether the Budget can be justified by the fact that a proportion at least of this tax increase is being committed to health care. To answer that, I invite the House to cast its mind back to a day that we shall all remember—11 September 2001. It is, of course, carved in history as a day of infamy. However, when the Prime Minister got up that morning, he wanted 11 September 2001 to be remembered for a quite different reason. On that day the Prime Minister was planning to address the Trades Union Congress about the need for fundamental reform in the delivery of public services.

There had been extensive briefing ahead of 11 September that the autumn of 2001 was going to be when the re-elected new Labour Government engaged with their supporters about the need fundamentally to reform delivery of public services in Britain. The Prime Minister was making it clear that there would, in principle, be extra resources available, but that those resources would be conditional upon the delivery of reform.

I believe that the Prime Minister played a distinguished role in international events at the end of last year, and I do not criticise him for not following those plans through. However, when he re-engaged in British domestic politics at the beginning of this year, we had another round of briefing about the importance of fundamental reform of the delivery of public services. That was to be another of the reasons why new Labour was different from all its predecessors. However, while the Prime Minister was away, the Chancellor of the Exchequer had taken control of the argument. The Chancellor had, by the beginning of the year, made it clear that there was to be more money for the health service and despite what the Prime Minister wanted and had briefed about last autumn, it was not going to be conditional on the delivery of fundamental reform.

The Red Book has one fleeting reference to the importance of conditionality associated with the money going into the national health service. The message that comes out of the Budget and the tax increase is that the

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Government are absolutely committed to a £30 billion increase in health expenditure over five years and—in parenthesis, and very much sotto voce—that that is conditional on reform. At its annual conference immediately after the Budget, the Royal College of Nursing made it crystal clear that it understood that the money was available and the conditionality had simply disappeared.

The Budget introduces a huge tax increase, avoiding the need for difficult decisions in public expenditure programmes, and the Government are vacating the ground of fundamental reform of the national health service. We are being asked to bless a huge increase of extra resources for a fundamentally unreformed structure.

I come back to the point with which I began. Today, five years on from the election of the new Labour Government, we see that they are, in truth, simply another tax-and-spend Government who run away from the hard decisions about choices within public expenditure and the need for fundamental reform of public services.

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