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5.43 pm

Mr. Luke: Thank you, Mr. Deputy Speaker. I am glad to have caught your eye in the twilight of our deliberations on the Budget and to be able to make a further contribution to the debates on the Finance Bill as it proceeds through its final stages towards enactment. As a Back Bencher new to the ways of the Budget and to the intricacies of the tax-raising powers of this House, I feel privileged to have been able to make contributions at every stage of the Budget process.

I am glad to have witnessed at first hand the nature of the response by Opposition Members to the proposals brought to the House by the Chancellor in his Budget on 17 April. There has not generally been a great deal of heat in the arguments that they put forward, despite the contribution just made by the hon. Member for Arundel and South Downs (Mr. Flight), but sufficient light has been engendered in Committee and on the Floor of the House for us to recognise that although there have been genuine areas of disagreement, the many positive aspects of the Budget have met with general agreement.

The Budget was carefully crafted and constructed not to deceive the British people but to create a fairer and more efficient tax regime that will benefit the majority of taxpayers, investors and companies that contribute so much to the well-being of the economy and to the UK's continued economic health and prosperity. I firmly believe that, as the Paymaster General said, the initial view of many of the informed commentators who voiced opinions on the nature of the Budget will be fully substantiated: that view was that it was a defining moment in the life of this Government.

The major issue of this Budget is close to my heart, close to the heart of the labour and trade union movement of which I am a representative and, indeed, close to the hearts of my constituents and all those who believe in Britain: it is the health and well-being of this country in

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the widest sense. The future of the national health service and how it will be financed was certainly the major focus of the Chancellor's Budget.

I shall take up the points made by the hon. Member for Arundel and South Downs. In the past two to three years, the people in my constituency have noted the much improved health service in Scotland. We have done away with the internal market. We have reorganised the service in Scotland to provide a sharper, leaner service, and I believe that the money coming from the Budget will obviously deal with many of the criticisms that have been levelled at the Scottish NHS and ensure that the services are delivered properly.

I shall not linger on this, but there has to be recognition of the fact that rates of illness are obviously higher in Scotland. There is a need for greater spending given the higher levels of cancer and coronary heart disease. It is right in a country that cares for all its component parts that the Government should take account of that in their Budget formulae.

Leaving that aside, the Budget was certainly crafted to ensure not only that the NHS survives but to secure the health of Britain's poorest communities, the health of the British economy and the health of this country's companies and corporations—the sinews and muscles of Britain's economic health.

I am certain that, just as the people's Budget at the beginning of the last century laid the foundations of Britain's nascent welfare services, in bringing the Budget proposals to the statute book at the beginning of the new century, this Finance Bill will reaffirm this Government's and this nation's belief in and commitment to modern, inclusive welfare provision, where wealth and opportunity are in the hands of the many, not the few.

The Government and the Chancellor have clearly indicated the need for a process of redistribution to ensure the vitality and the very existence of Britain's poorest, most disadvantaged communities and social groups, so that they are given an injection of assistance and support, delivered, in the words that Winston Churchill used when Chancellor of the Exchequer, via the ambulances of state aid.

Many fellow Members of Parliament will welcome those Budget provisions that directly relate to their constituencies, be they the community development tax credits and community development funds; the new incubator funds to help new innovative companies to grow; the removal of the stamp tax on the sale of property in Britain's most socially deprived areas—I am glad to say that my constituency will be one of those that benefits most from those innovative provisions—or the encouragement of small business start-ups and enterprise. All those provisions will help areas that have suffered significantly through urban and social change and economic decline to begin to make serious starts to regenerate themselves.

I believe the Budget proposals in the round are to be welcomed. They clearly show the political differences between the two major parties, despite the many agreements that we have had in Committee and on the Floor of the House. The Government believe in social justice, equity, enterprise and opportunity, but the Opposition put business first, not the people. In Committee, the Conservative party defended the tobacco industry, just as Conservative Members have today

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defended the drinks industry. They have promoted the abolition of inheritance tax and the complete removal of the stamp tax, while opposing the Government's prime proposal to improve this country's health service.

Politics can best be defined as the battle of two conflicting groups of ideas, struggling to achieve popular endorsement for policies and programmes. The Budget has been branded as unwise, but the British people have clearly indicated their massive endorsement of the Budget proposals—even a majority of Conservatives endorse them—and by implication accept the means by which they are to be funded. In a question asked recently at Prime Minister's questions reference was made to our all being Thatcherites now, but the Budget and the Labour party's stewardship of the nation's finances invite us to beg to differ.

5.49 pm

Mr. Edward Davey: May I start by agreeing with a major point made by the hon. Member for Arundel and South Downs (Mr. Flight)? He said that the Paymaster General's opening remarks describing the performance of the British economy and its management under the Government were far too rosy; I would say that they were Panglossian. There may have been successes in the last five years, particularly Bank of England independence and the increased stability that that has given to monetary policy, which Liberal Democrats have welcomed on many occasions. To suggest that the whole picture of the macro-economy is rosy, however, is far from the truth.

I suggest to the Paymaster General that, rather than simply reading the briefing from Treasury officials, she should go to the House of Commons Library to read the latest research paper on economic indicators, published this week. Merely browsing through that will show her that a whole range of indicators are flashing red, which the Government appear to be ignoring totally. I was therefore very worried by the right hon. Lady's speech.

Manufacturing output has fallen in the last five quarters. Indeed, in 2001, it fell by 2.3 per cent. We can also consider other industries, such as agriculture, hunting and fishing, whose output has of course been falling for many quarters; it fell in 2000 and 2001, and it fell in the first quarter of this year. Other industrial sectors show similar falls. Manufacturing is perhaps the most worrying because of its importance to the tradeable sector. We have seen large falls in that sector, especially in manufacturing employment, which fell in 1998, 1999, 2000 and 2001, and is falling again this year. In fact, manufacturing employment is falling at around 5 per cent. a year, while manufacturing output is falling at 6 per cent. a year. Can the Government be proud of that?

I remember that, when the Chancellor of the Exchequer was in opposition in his role as shadow Chancellor and, prior to that, as the Opposition spokesman on trade and industry, he was on the television night after night talking about manufacturing—manufacturing investment, manufacturing output and manufacturing jobs. Under his stewardship, however, we have seen declines in all those areas. He does not have a record of which to be proud.

Mr. Tom Harris: I had not intended to intervene at this stage. I must point out, however, that when my right hon. Friend the Chancellor was making those points in opposition, it was in the context of interest rates of

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10 per cent. or 11 per cent., which are debilitating to manufacturing industry. The fact is that we have the lowest interest rates for 40 years, which is testament to the success of the Government and to my right hon. Friend's policies.

Mr. Davey: The hon. Gentleman is right about interest rates. The problem with the Government's management of the economy has been a totally benign approach to the exchange rate.

Mr. Flight: With respect to the hon. Gentleman, he is wrong about interest rates. As soon as we came out of the exchange rate mechanism in 1992, interest rates fell like a stone, and they were miles lower than 10 per cent. while the Chancellor of the Exchequer was making his points throughout the period from 1992 onwards.

Mr. Davey: I would caution the hon. Gentleman about intervening too much to praise the Conservatives' record on managing the economy. I am afraid that I will not agree with him on their overall performance, given that we saw debt triple and years of high interest rates.

I was focusing on Labour's record. Because of the high exchange rate—which is still too high—the manufacturing sector has been haemorrhaging jobs.

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