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Adam Price: I do not want to detain the House long, but I am happy to send the hon. Gentleman a copy of our alternative Budget, which has not been mentioned so far in our debate, although I am waiting. We favour abolishing the upper limit, introducing a higher tax band to restore a progressive element in the tax system and raising the standard rate. That is probably enough to be getting on with.

The increase in employers' national insurance contributions will affect business's ability to invest in growth and will delay economic recovery. It will hit labour- intensive businesses disproportionately, particularly small businesses with higher staff-related costs. A major Canadian study estimates that a 1 per cent. increase in payroll costs one year reduces total employment by 0.2 per cent the following year. As a 2 per cent. rise is proposed in the Bill, that analysis suggests a loss of 110,000 jobs in the United Kingdom in the year ending April 2004. Oxford Economic Forecasting has come up with the not dissimilar figure of 110,000 job losses over the next three years.

If predictions of an economic recovery in manufacturing are true, that recovery remains fragile, which is certainly the case in Wales, Scotland and areas where labour market problems involve not supply side constraints but an effective lack of demand.

Mr. Kevan Jones rose

Adam Price: I should like to make progress. The hon. Gentleman cannot have it both ways; he cannot accuse me of speaking at length and being generous in giving way.

There was an opportunity to introduce an element of regional economic policy in the Government's thinking following the pre-Budget report, when we were promised a review of such policy. A number of us in Wales and Scotland have called for a look at regional incentives in

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economic policy, especially in national insurance contributions. There is an opportunity to target reductions in national insurance on economic black spots where they could have a significant impact. Indeed, the right hon. Member for Birkenhead (Mr. Field) made such a proposal two years ago, when he suggested targeting reductions in employers' national insurance contributions on unemployment black spots. It is therefore a shame that we are still waiting for Government proposals on regional economic policy.

Previously, we have discussed the impact of employers' contributions, particularly on the public sector, where there are still pent-up demands and wage inflation. Public sector employees, particularly nurses and ancillary staff in the NHS, believe strongly that much of the extra investment going into the public sector should be used to improve their wages and conditions. Logic is on their side; we cannot improve the NHS and other public services without tens of thousands of extra members of staff, as the Government have admitted, who will have to be enticed with higher wages, which involves a significant deadweight cost.

In that context, the increase in employers' and employees' national insurance contributions will only add to pent-up demands and public sector wage inflation. Scotland and Wales, because of the operation of the Barnett squeeze, will have a lower real-terms increase than that promised across the rest of the UK—6.8 per cent. and 6.5 per cent. respectively—and, in addition, the rise in national insurance contributions will increase public sector wage inflation. The public sector in Wales may therefore be left with a small real-terms increase, which is why Plaid Cymru and the Scottish National party have argued for the public sector to be exempted from the employer contribution. That solution is not perfect—we are not arguing that it is—but at least it would ensure that the NHS receives the full benefit of the promised additional revenue.

In conclusion, we support Second Reading, because the Bill is the only way to overcome the 20 or 30 years of underinvestment referred to in the Wanless report, including the last five years of wasted opportunity, raised expectations and little delivery. We look forward to continuing the debate not just about the additional investment now going into health, but about other public services facing a similar shortage of funds. We hope that this is a beginning of a new debate with a different emphasis on taxation and public expenditure than has hitherto been the case.

8.44 pm

Dr. Stephen Ladyman (South Thanet): The debate has been going on for some time. Elements of it were being discussed before the Budget, and discussion has continued at a fierce pace since then. Much of what needs to be said has been said, but that will not stop me saying it again, though perhaps not at the same length as one or two Opposition Members have spoken, as I know that some of my colleagues want to get in. Before my own contribution, I shall comment on some of the remarks from those on the Opposition Benches.

We have heard much about whether the tax is progressive or regressive, but we cannot look at just one tax. We must consider the whole tax system, which is made up of progressive taxes, regressive taxes and

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contributory taxes. The entire package must be examined and a judgment made about whether people at particular levels of income are paying the right contribution to society.

In choosing national insurance contributions to fund the proposed increase in public spending, the Government made some finely balanced judgments. We can argue about whether they have got it right, and Opposition Members can suggest that they have not, but the Opposition cannot attack the increase on the grounds that rich people are not paying enough into the tax system. That is an argument about the whole tax system, which we should have as part of the wider Budget debate, not in the context of a rise that is being levied specifically for the purpose of rebuilding the health service.

The Liberal Democrats tried to wriggle out of accepting that in their 1997 manifesto, they proposed an increase in national insurance to fund national health service spending. They cannot deny it; the proposal is there in black and white for anybody to see. Admittedly, the amount was piffling. The sum that the Liberal Democrats claimed was necessary to rebuild the NHS in 1997 was just £540 million a year, of which half would go on making prescriptions free. Their total extra spending on NHS investment for a five-year period would have been one fifth of the sum that the present Government put into the NHS.

The Liberal Democrats cannot claim now to be guardians of investment in the national health service. They were not when they faced the electorate in 1997, and all that they have done since is ramp up their demands every time Labour has put more money into the health service.

As for the contribution from the Conservative Front-Bench spokesman, the less said, the better. It was a typical performance from the hon. Member for Buckingham (Mr. Bercow)—more entertainment than information. If the national insurance increase that we are debating is so anti-employment, why did the Conservatives leave employers' national insurance at 10 per cent. through 18 years in government? Why, when unemployment was rising from about 750,000 to 4 million, did they never once reduce that national insurance? Why, when manufacturing jobs were disappearing at hundreds of thousands every year, did they never once reduce it? Now they claim that the 1 per cent. increase is anti-jobs.

When asked how the Conservatives would deal with the health service in the future, the hon. Member for Buckingham said that they had not yet decided. On previous occasions he said that he was not in Parliament for the 18 years of Conservative Government, so he washed his hands of everything that they did in the past. Conservative Front-Bench policy focuses on the present—it will never predict or take responsibility for the past. The Conservatives cannot be allowed to get away with that.

We should concentrate on four questions: how the national health service should be funded, in general terms; whether it needs more money; if so, whether we will raise that through some form of direct taxation, and whether national insurance is the right form of taxation for that; and how we will make sure that the money is spent wisely. We can discuss the various alternatives for funding the NHS.

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Although they deny it, the thrust of the Conservatives' thinking is clearly towards some sort of private health care system or the increased involvement of the private sector. I say to the Opposition that there are many different business models, but two tend to predominate: high-turnover, low-margin businesses and low-turnover, high-margin businesses. In health care systems such as that of the United States, which is predominantly private, exactly those two business models dominate: the wealthy go into low-turnover, high-margin and high-quality health care systems and the poor go into high-turnover, low-quality and low-margin systems.

I mentioned in an intervention on the Chief Secretary a recent initiative in Florida, Jeb Bush's state, in which the pharmaceutical industry tried to help the state to reduce its Medicare budget, which was running out of control. The state has to provide such a budget for the health care of poorer people. The industry was asked to help and said that it would try to do so by providing preventive health care and decent primary care systems, on the basis that that might ultimately be the best way of driving down overall costs. For the first time in that state, poor people received preventive health care checks and saw general practitioners who took an interest in their underlying concerns. As we have seen in reports on television and elsewhere, many of those people, a significant number of whom are elderly, could say "This is the first time in my life when I have had a proper conversation and interview about my health needs with a GP."

That is what happens in an essentially private health care system, which is why we should never take that route. In this country, we have a system that is equitable and provides for people's needs when they arise—and it does so for free. Let me give the House a personal example. My mum has quite severe Parkinson's disease and the health care with which she has been provided is absolutely fantastic. She has never wanted for any medication or for the attention of her GPs. The level of care is such that we as a family could never have dreamt of providing it from our own resources. The health service does not quibble about providing that care. She needs it and gets it in its entirety for free. That is the dream on which our health system was built and we must not give it up easily.

My next question was whether we needed more money. I can tell the House that we have put substantial extra amounts into the health care system. In east Kent, I have seen the £2 million renovation of accident and emergency facilities and a new ward block in the Queen Elizabeth the Queen Mother hospital in Margate. Three wards around the area have been refurbished and new scanners have been provided, but it is still not enough. The East Kent Community NHS trust is the sixth biggest trust in the country and we have an elderly population of 20 per cent. above average. Despite the extra money, 835 people are still waiting more than 12 months for in-patient surgery and almost 4,000 people are waiting more than 13 weeks for out-patient work. We have done a huge amount, but we still need to do more. The total increase in spending between 1996–97 and 2002–03 has been almost 50 per cent. The level has gone from £262 million in east Kent to £521 million, so nobody can argue that we

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have not pumped extra money into the health service in east Kent or that we have not made real gains—but the gains have not gone far enough.

Finally, I asked whether national insurance was the right way of raising the extra money that we need. Opposition Members would do well to read the Bill; I fear that many of them have not done so. They would see provisions that I would have thought they would welcome. One of them asked whether the changes that are being made were the thin end of the wedge. The Bill is necessary because many of the changes that are being made require primary legislation. If we were further to increase the contribution that national insurance makes to the health service, that would require further primary legislation. I should have thought that Opposition Members would say that it is a good thing for taxes to be raised in a way that requires primary legislation. I should also have expected them to welcome the fact that clause 4 gets closer than the Chancellor has ever got to hypothecation by making it clear that the extra money has to be spent on the health service.

As we have heard, pensioners will not have to pay because they do not pay national insurance. That also applies to people saving for their retirement. That may give rise to anomalies. Baroness Thatcher and people of similar wealth will not pay any extra towards the health service, but that is a small price to pay for raising the money that the health service needs and delivering it to where it has to go.

There are already 31,000 extra nurses, 9,000 more doctors and 12 new hospitals as a result of the work that the Government have done. In a thoughtful contribution, the hon. Member for Stratford-on-Avon (Mr. Maples) went a long way towards saying that the money would have a real impact, with the proviso that the jury was still out on whether it would have the impact that Labour Members hope. He is right, and I accept his challenge. In four years' time, if the extra money that we are putting in has not reformed health care and our NHS modernisation programme has not turned things around, the onus will be on Labour Members to admit that we were wrong and to be prepared to consider alternatives. However, as the money that we have already put into the health service has led to demonstrable and good progress, there is no reason not to believe that the additional funding—which I hope that the House will take the first step towards approving tonight—will be the next step towards proving that the national health service can deliver the dream of its creators.

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