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Mr. Pound: I hope that the hon. Gentleman will understand me when I say that I do not mean to be presumptuous, but to my mind his dire prognostications for the United Kingdom economy echo precisely the comments that were made from the Conservative Benches about the national minimum wage. The Conservative party was wrong then. Why should we believe it tonight?

Mr. Chope: I am not making any dire prognostications about the economy. All I am saying is that, each time the Government increase the burden of taxation, they make our economy less competitive. The process occurs gradually—a point that is flagged up in the inflation report produced by the Bank of England. I do not know whether

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the hon. Gentleman had the chance to read the Bank of England's inflation report of May 2002 during his recent two-week break in his constituency, but I commend it to him. It shows that the Bank of England is on the ball and realises what is happening, even if the Government are not prepared to face up to its criticism.

We will see the consequences over a period of time. We will not see much immediately, because the national insurance contribution increases will not come in until next year. However, when people get their pay packets next year, they will see exactly the high costs that they are paying and, over time after that we will see the damage that the Government have done to the economy.

9.5 pm

Dr. Evan Harris: The Liberal Democrats' support for the Bill is based on reasons opposite to the Conservative party's reasons for opposing it: we support the increase in funding for the health service. The health service and social services desperately need extra funding, and that has to be welcomed.

We are not entirely happy with the precise way in which the funding is to be raised. For the reasons that have been outlined in the debate, we have made it clear that we would rather have an increase in the top rate of income tax on incomes of more than £100,000 and not an increase in employers' national insurance contributions. Such an increase will impose a burden on businesses that are struggling to cope with a strong pound and the difficulties of exporting.

The Government have previously recognised that taxing employers for employment is a negative approach. As the hon. Member for Christchurch (Mr. Chope) said, when we debated the climate change levy in 1999, the Government said that they wanted to reduce tax on good things such as employment. Although we support the extra funding and support raising the extra money through taxation on income, we are not happy about raising the money from businesses. However, the NHS is so desperate for the increase that we will not take the position that it should not receive any extra funding at all. Unlike the Conservatives, we do not want to defend a view that means that there would be no extra money, or a cut in the growth in funding. We are therefore prepared for the money to be raised in the way suggested in the Bill.

Mr. Bercow: Goodness gracious. I never thought I could be taken aback by a contribution from a Liberal Democrat Member. However, on this occasion, the hon. Member for Oxford, West and Abingdon (Dr. Harris) has confounded me. In the light of what he has just said about how the Liberal Democrats opposed the increase in national insurance contributions, did not want it to happen and tried to stop it but are prepared to support a Bill whose principal element is such an increase, is he surprised that the Liberal Democrats are regarded as two-timing, fence-sitting, unprincipled political chameleons?

Dr. Harris: When the hon. Gentleman grows up, he will know that grown-up politics is about making choices that are not necessarily in one's hands. He must understand that a mature attitude to politics involves saying that this is what we would like to happen, but that

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we have a second-best option if it cannot happen. For us, the second-best option is to raise money partly through employers' national insurance contributions even though we are concerned about that.

Our top priority—the hon. Gentleman will rue the fact that the Conservative party does not recognise this—is public investment in the public services. Although we accept that they need changes and reform, they fundamentally need resources, and we are prepared to accept tax changes that we would not otherwise have supported because that is such an important priority. That is nothing new and, if the hon. Gentleman is dumbfounded by that approach, he will have a dumbfounded political career.

We are critical of the way in which the Government have governed the health service and their history of investment in it. The investment has arrived five years later than it should have done under a Labour Government and five years later than people expected when they voted in 1997 for a party that said that it would save the NHS as soon as it was elected.

Let us consider how much the Labour party has put into the health service in those years and compare that with what the Government are proposing now. On Second Reading, I invited the Paymaster General to specify by how much social services spending—adjusted for special transitional grant, community care arrangements and population changes—had increased between 1997 and 1999, because the figures for 1997–98 and 1998–99 are missing from the Wanless report. She did not answer that question, but a Library paper clearly states the percentage changes. In 1995–96, under the Tories, it was minus 2.9 per cent.—a real terms cut in funding to social services for the vulnerable. In 1996–97, again under the Conservatives, it was minus 1.8 per cent. In 1997–98, under Labour—despite "24 hours to save the NHS"—the change in real-terms spending, adjusted for special transitional grant and population changes, was minus 2.7 per cent. In 1998–99, it was minus 2 per cent.

So after years of Tory underfunding, when many social services departments could not take any more, they got another hit from the Labour Government from which many, including the social services department in Oxfordshire, have not recovered. Five years later, we have the opportunity to give social services departments, as well as the health service, the funding that they need. However, we do not believe that the Government will adequately allocate the funding provided by the Bill into social services. It is clear from returns from social services departments around the country that they are more than £200 million overspent on their budgets. The Government may say that that is tough and that they should simply cut £200 million from caring for the elderly, the mentally ill, the disabled or the vulnerable young and children in care. Many are having to do that. However, as the bulk of their funding comes from central Government, central Government will have to account for that.

On top of that, there is a £1 billion gap between what the Government say social services departments should be spending—the standard spending assessment—and what they are spending. That is £1 billion taken from other services and from steep rises in council tax, which is a more regressive tax than that proposed in the Bill. Before considering tackling the problems of delayed discharges and the underprovision of funding to deal with the crisis in care for the elderly and for children, the Government

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should deal with the £218 million overspend and the £1 billion reality gap between what social services departments are having to pay and what the Government say they should be spending. The Government are giving a welcome few hundred million pounds to tackle the issue of delayed discharges, but that in itself will not be enough.

As the hon. Member for Christchurch said, there are questions to be asked about how well funding for the health service is being spent, and it is right that we should ask those questions. There are false economies in three areas, for which the Government must take some responsibility. I hope that the new Chief Secretary, who is in charge of public service agreements for spending Departments, will ask the Department of Health to explain how huge amounts of NHS capacity can be lost because of delayed discharges. If funding was made available to social services departments and, indirectly, to the private health care sector, we could at a stroke release significant amounts of capacity—much more quickly than by training more nurses to open more beds, as we need to do and are doing.

John Mann: The hon. Gentleman may care to visit my constituency to see what a Labour county council can do. I am perplexed by his prognosis on cuts. Where does the money come from for the 20 brand new intermediate care beds that were opened last year in my constituency? Where does the money come from for the 20 or more additional intermediate care beds at an alternative site that is being developed in my constituency? Is that the difference between the prioritising of a Labour county council and that of his county council?

Dr. Harris: Oxfordshire county council has been subject to cuts under Liberal Democrat-Labour administrations, Labour-Conservative administrations and Conservative-Liberal Democrat administrations. I have never criticised those administrations in the House, even when my party was not involved. All local politicians recognise that without central funding to ensure that services grow, let alone remain the same, we let down the most vulnerable in society.

The hon. Gentleman should look at the figures on delayed discharges, especially for areas outside his constituency, with its ministerial visits. I am delighted that a few more beds have been provided in his area. I suspect, however, that he does not issue a press release every time a private care home bed closes there. What we have is closure by stealth and announcements by acclamation. I am happy to visit Bassetlaw to see what is happening there, and I urge him to come to Oxfordshire where councillors of all parties are in despair at the cuts. I suspect he does not want to come—see no evil, hear no evil, speak no evil. Nevertheless, the cuts are taking place in many authorities, including some that are Labour run.

The second false economy is the cost of employing agency staff. The Chief Secretary and I know that the problems of health service staffing, including under- recruitment and under-training, are predominantly the fault of Conservative Administrations and have been inherited. None the less, the fact that the investment was not provided as early as it should have been has meant that the problem of paying agency staff over the odds remains because of a shortage of established posts in the NHS. That has cost a huge amount of money that need not have been spent. Indeed, we could be five years into a significant increase in funding.

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The third false economy is the use of the private sector as a short-term measure. Some people are getting their operations quicker than would otherwise be the case, but in terms of value for money, the Chief Secretary must understand that it is highly likely that spot contracts, the costs of which are usually kept secret because of commercial sensitivity, are more expensive than releasing the capacity in the health service to tackle delayed discharges. We have to consider whether the money raised from an increase in NICs will simply be chucked away as we pay over the odds in secret contracts with the private sector. Even when private firms bid for contracts, they do not bear the same overheads as the NHS, which provides almost all the training and research. It is the only market for contracts in which one competitor trains the staff of its leading competitor, which has to bear none of the overheads. The time must come when we impose a training levy on private sector employers to pay back the costs to the NHS of training those staff.

The Government did not announce before the election that the increase would be needed. To some extent, I agree with the hon. Member for Christchurch on this. He said that the Labour party failed at the election to recognise the truth that taxes would have to rise to pay for the health service. On that basis, the Conservatives also failed to recognise the truth, although they would say that taxes do not need to rise to pay for the health service, and we discussed how they would pay for everything that is needed.

On Second Reading, I asked the Chief Secretary's predecessor why, as No. 2 to the Chancellor, he could not forecast that a year after the election he would be raising taxes in such a significant way through national insurance contributions. He did not answer, but the hon. Member for Christchurch kindly put the point to him again in summation, for which I am grateful. He said:

during the general election—

The right hon. Member for Oxford, East (Mr. Smith) said that he had no such knowledge.

The right hon. Gentleman is a man of his word—he is an hon. Member—and I am sure that that is true, but it worries me, as it should all hon. Members, that the second-in-command at the Treasury had such a poor grasp of the economic outlook and of Government receipts for public spending that he could not predict at the general election a year ago that taxes would have to increase in this way. I think that that is either frightening or that he was mistaken. I would be interested to know whether the post's current incumbent believes that it was reasonable for his predecessor to be out by a factor of a few billion pounds and in terms of significant tax changes within one year. Can he not look a year ahead?

One aspect that has not been covered in our short debate is the complexity that the Bill produces in the tax regime. In an ideal world, we would have a simplified tax system that would make things more transparent, keep money from accountants and leave more money in taxpayers' pockets. We have a very complex tax system.

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My hon. Friends have been proposing that simplification should be one of the Government's priorities. It is sad that the welcome resources that are to be raised by the measure are to be raised in such a complex way.

We must consider how the Government will face the next election in terms of delivery. What worries me is that it will take a long time for the health service to produce the changes. I am worried for the patients who have to lie in pain awaiting their surgery, and I also worry that people will think that the extra resources that are going in so late were not sufficient to do the trick. Hon. Members should realise that even the resources that are going in now will take some time to work through to increased capacity. I am worried that the Government have been five years late, so that people will think in the next few years that the money is going in and will not allow enough time for improvement. In that respect, the Government are hoist with their own petard. They announced huge increases in 1997 and 1998, but the significant increases that we have seen recently were not made at that time. I think that the health service as a national service is more under threat now than at any other time as a result of the Government's complacency in terms of giving it the resources and reform that it needs.

I fear that the Government will seek to blame anyone but themselves for their slowness to deliver. They will blame the hard-working staff in the health service, scapegoat a few hospitals that do not have sufficient capacity and seek to pick fights with the unions for opposing untested and unreasonable reforms. As we have heard, they will also seek to blame patients for not turning up. The reason why many patients do not turn up for appointments is that they are either already dead or in hospital. The idea of fine collectors wandering around cemeteries to try to fine patients for not turning up to appointments is beyond the pale.

I hope that the Government will accept in humility some responsibility for the delay in delivery that their lateness in putting in the resources has caused. In supporting the Bill on Third Reading, it is right to let the Government know that the resources are welcome but that to date their record on managing the health service has not been good.

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