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7.7 pm

Mr. Ian Liddell-Grainger (Bridgwater): I, too, must apologise to the House for being slightly late.

I want to begin where I left off in my intervention on the hon. Member for Bassetlaw (John Mann), in which I spoke of the effect that the increase in national insurance will have in areas such as mine that have been affected by last year's foot and mouth epidemic. Rural economies are fragile at the best of times; they have very little meat on their bones to keep themselves going. Last year, we saw the meat on those bones devastated in entire constituencies.

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We lost all our tourist trade. Tourism is now trying to bring itself back from the brink. Last year, business was down by 80 per cent., and those companies depend totally on part-time rural labour. The problem in tourism now is that people are beginning to say to their banks, "I can see my way out of this." They hope that they can trade their way out of the problems. This national insurance increase will make that much more difficult. These companies have very little to play with, and they have made budget predictions, not only for this year but for a couple of years, which will now be wrong, and, as we well know, banks are somewhat less than forgiving.

What about farming itself? The industry has gone through a massive change in the past five years. It has cut the number of people employed on the land, and the problem now is that it will have to make further cuts. The average income for a farmer is £5,000. If a farmer employs somebody, he will lose 1 per cent. of that person's wage in national insurance. That is yet another increase that farmers and rural businesses can ill afford. There is no way out for farmers—they have to be on the land, working the land. Are we seriously suggesting that, despite the working time directive, farmers will now have to work 24 hours a day because they can ill afford to employ people to help when they need it most?

What about small businesses in seaside towns? I was talking to a company that supplies slot machines. It has a problem because business is cyclical, so it shuts for six months of the year. It takes on part-time workers and, after the six months of work, it gets rid of them again. With an increase in national insurance, any business that is cyclical and totally dependent on one sector of the community will find it very difficult to expand.

I wonder whether the Government are aware that over the past few years there have been £6 billion a year of extra taxes and £5 billion a year of extra red tape. In my constituency, we have Butlins, which has 9,000 guests a week. It employs 750 people who are all local part-time workers. Butlins will be affected by the increase, because red tape is a disaster for such a business. People will go overseas on holiday. That is what Butlins is competing with. The market is large and aggressive, and it is fickle, depending on what the pound does that year or at the time.

I also have a tea company in my constituency. It obviously relies on imports from around the world to blend and make tea. It is a tiny company that has done very well. I am trying to get its products into this honourable place. The increase will affect such a company in the long term. The company will find it more and more difficult to get the sort of people that it wants, because of the overhead costs. A tea blender or a tea taster is a professional person, not just someone who can be picked off the streets and trained. We would not be very happy downstairs if that were the case.

Productivity growth has slowed under this Government and is faster in the United States. Royal Ordnance plc in my constituency is looking to move production to America, because its overheads make it uncompetitive in this country. Its parent company, BAE Systems, is looking to move Royal Ordnance overseas because it is not economic. Its production in this country does not make the money that is required.

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I recently introduced the Patents Act 1977 (Amendment) Bill. In that connection, I was intrigued by the fact that Mr. Dyson is moving his production overseas because of the increased cost of his work force in this country. The reason for introducing the Bill was to protect people such as him. As a result of the increases in taxation, they will now go offshore—in Mr. Dyson's case, I believe, to Malaya.

Whether or not a company is making a profit, it still has to pay national insurance contributions, so companies that have been affected over the past year by circumstances beyond their control are still being charged NICs, which cannot be healthy.

Another aspect of the problem is the cost to local authorities. For instance, West Somerset district council has a budget of only £4 million. The increase will make a substantial difference to the local services that it can provide. Somerset county, which is Liberal Democrat- controlled, increased its provision by 12.9 per cent. That will cost more this year because of the rise. Over the past few years Somerset has lost 248 care beds, and will lose more. Somerset county cannot afford to pay the money necessary to keep the beds going. Greater pressure will be put on county and district councils because of the increases in taxation and red tape.

I do not believe for one minute that the Government have thought through the implications of the measure. Areas such as Somerset can least afford it. It will result in a substantial lack of investment in long-term help for the elderly and in care homes. If we continue to shut care homes at the present rate, bed blocking will become even more prevalent.

We have three cottage hospitals. The pooling of resources could mean that those hospitals will come under threat. With the loss of care home places, people will end up being bed blocked because there is nowhere else to put them. The local hospitals that provide some relief to doctors and to larger hospitals will have gone. That is the depth and width of the problem that we face.

Raising taxes penalises people in rural areas who can least afford it. Companies such as Nissan have been mentioned. Those have a better chance, but the Government cannot take away what we have not got. Many people in rural areas will go out of business because they cannot afford to continue.

7.14 pm

Mr. Christopher Chope (Christchurch): The debate has been fascinating. It was about the £8 billion increase in tax and the Government's litany of broken promises:

That is what the Secretary of State for Trade and Industry said to the "Powerhouse" programme on 29 May 2001 during the general election campaign. The Government have broken their promise to the electorate about employees' national insurance and abandoned their own words about employers' national insurance.

On 6 October 1999, the Government responded to the report of the Select Committee on Trade and Industry dated 19 July 1999. In paragraph (i) of their response they stated:

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During the debate the Government have turned those words on their head. If it is true that reducing national insurance contributions will reduce the cost of labour and encourage employment opportunities, then it must be true that increasing national insurance contributions will increase the cost of labour and reduce employment opportunities. That is the charge that the Government must answer.

The speeches of my right hon. Friend the Member for Charnwood (Mr. Dorrell) and my hon. Friends the Members for Fareham (Mr. Hoban), for Westbury (Dr. Murrison), for Epsom and Ewell (Chris Grayling) and for Bridgwater (Mr. Liddell-Grainger) demonstrated that they are extremely sceptical about whether the £8 billion that is to be raised will generate improvements in the health service. They are also gravely concerned about the impact of the additional impost on employers in their constituency, including the public sector.

The point was made earlier that the Government are raising £300 million in additional tax from local authorities. At the time of the Budget, the Government made much of the fact that they would give £300 million to local authorities to help them with the burdens of social services. What the Government give with one hand they take away with the other.

My right hon. Friend the Member for Charnwood made an incisive and hard-hitting speech. He spoke of the burden on business and showed that the United Kingdom is increasing tax at a time when our competitors are cutting tax. He drew attention to the fact that of the £8 billion, only £2.4 billion is earmarked to go to the NHS, and he asked what will happen to the other £5.6 billion. My right hon. Friend's most devastating critique was on the issue of conditionality. There are no strings attached to the way in which the money is to be spent.

I can tell the House that I do not have a closed mind. I have an open mind. Last night I attended a fascinating lecture by a Swedish expert on health care. He illustrated how it is possible to have better health care without having to increase tax. He said that in 1991 the funding system in Stockholm was changed to one based on outputs. As a result, health service output increased by 19 per cent. He said that St. George's hospital and other hospitals in Stockholm became independent boards in 1994, thereby generating 40 per cent. extra productivity. In 1999, St. George's hospital in Stockholm was sold to the private sector, producing a reduction in costs of between 10 and 15 per cent. If health care can be improved in Sweden without taxing, spending and wasting, we can do it in this country as well, given the will.

The hon. Member for Truro and St. Austell (Matthew Taylor) repeated that the people of this country are not taxed highly enough. All I can say is that he is totally out of touch with the reality on the ground. Five years ago today I was elected in Christchurch to succeed a Liberal Democrat who had failed the people of Christchurch. I am proud that this is my fifth anniversary of representing that constituency.

What we want is an end to this tax, spend and waste, and a genuine reform of the NHS. That is why we will vote against the resolution.

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