Pre-Budget Statement (Implications for Wales)

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Mr. Jon Owen Jones (Cardiff, Central): I thank my right hon. Friend for referring to my comments. Under the constitutional arrangements, the Government negotiate Bills with the Welsh Assembly. Once negotiations are complete, and the Government have decided which Bills will come to the House, the Government are accountable to the House. What is the role of MPs in holding the Government to account if it is perceived that a Bill negotiated with the Assembly will pass unaltered? How can we make the Government accountable in that process?

Mr. Murphy: Before I respond to my hon. Friend's points, may I say how relevant that is to the pre-Budget report? We cannot improve public services in Wales without the necessary resources—the responsibility of the UK Government and the House, or without the necessary reform and change agenda. It is more complicated in Wales than in England—where resources are dealt with through the Chancellor's pre-Budget report, the Budget and the spending review and the reform and change agenda is dealt with by the House—because of devolution.

We should have more draft legislation. The follow-on to the health Bill is a draft Welsh NHS Bill, which I hope will soon be placed before the House. It also has to go before the relevant Committee in the National Assembly. Any Bill presented to the House will obviously have been drawn up by the Government of the day and will express Government policy. The difference here is that we have to liaise with the Assembly so that the content of the Bill results from a partnership between the Assembly and the Government. Additionally, this place provides a further opportunity for pre-legislative scrutiny, though we shall have to debate that more fully, and my hon. Friend the Under-Secretary will meet the Assembly's Health and Social Services Committee next week to discuss the NHS Bill.

My right hon. Friend the Chancellor of the Exchequer referred yesterday to reform and change in the health service, and the resources necessary to promote that process. That will be discussed with the Assembly's Committee and, in turn, with the House in an agreed way.

Mr. Nigel Evans (Ribble Valley): After four and a half years of a Labour Administration, more people in Wales are facing longer NHS waiting lists, so who takes the blame—the Government because of insufficient resources or the National Assembly because of its mishandling of the NHS in Wales?

Mr. Murphy: I am pretty clear about who is to blame—the Conservative Government. However, that provides a neat entry to the next part of my speech.

The thrust of the Chancellor's statement yesterday about reform of the health service—he referred to the Wanless report—was that in a sense we are all to blame over 40 or 50 years for underfunding the health service in comparison with services in other European and western countries. We have to decide how best to deal with the results of that underfunding—despite the extra £1 billion for the NHS in Wales in the previous spending review and despite the extra £1 billion for the NHS in the UK next year. A tremendous amount of money has been invested in the health service in Wales and the UK more generally.

Lembit Öpik (Montgomeryshire): The Secretary of State says that we are all to blame for underfunding the health service. Does he accept the Liberal Democrat point that successive Conservative and Labour Governments have vastly underfunded the NHS and that we are receiving a confession about it from Ministers only now?

Mr. Murphy: The hon. Gentleman knows that I am more used to going to confession than he is. I am not sure about the penance for what has been done over the years. Parties have largely had a consensus about the health service for many years, but we have dropped behind in comparison with other European countries. That has to be resolved.

The consequence of the extra £1 billion invested in the health service next year is £49 million for Wales. The Committee will know that it is for the National Assembly to decide how to spend it. I welcome the Wanless report and the consultation exercise, which allows the National Assembly to be consulted over the months ahead. The report refers to the devolved administrations and to the importance of recognising that health is now devolved to Wales, Scotland and Northern Ireland. The resource issues of course remain the responsibility of the UK Government. It is for us to decide through the block grant system how to finance the health service.

I am sure that we all welcome measures to tackle pensioner poverty in Wales. The winter fuel allowance is to stand at £200 a year for the remainder of the Parliament, which will benefit 460,000 households in Wales containing someone aged 60 or over. About 275,000 pensioner households will benefit from the new pension credit scheme. Pensioners on small occupational pensions who have moderate savings were disadvantaged but will now benefit from the new system.

In April 2002, the basic state pension will increase by £3 a week for a single pensioner and £4.80 for a couple. In addition, the basic state pension is guaranteed to increase by at least £100 for a single pensioner and £160 a year for couples in 2003–04, and in future years by 2.5 per cent., or the level of the September retail prices index, whichever is higher. The tax credit system will benefit people in other ways; it will help families with children and those seeking work. Lone parent employment, for example, is over 50 per cent. for the first time in 20 years.

We are modernising the welfare state and bringing Welsh people into work. We are paying money through the credit systems into Welsh families rather than taking it away from them.

The measures complement the work of the National Assembly for Wales, as explained in the new document, ``A Winning Wales'', to which my hon. Friend the Member for Caerphilly (Mr. David) referred. It is another example of our partnership in government.

We want to help the 390,000 people in Wales with low skills to improve their skills. We want to provide better training and to give incentives for enterprise and productivity in Wales; some of the measures announced by the Chancellor yesterday have a particular resonance and significance for Wales.

In Budget 2002, we shall build on the research and development tax credit for small firms and extend it to all United Kingdom companies. Reductions in capital gains tax mean that the effective tax rate for higher rate taxpayers will become 20 per cent. for assets held for one year and 10 per cent. after two years. The extension of the enterprise management initiative, the share option schemes for managers, will help more small, innovative companies to recruit and motivate their key employees.

There are reductions in taxes and red tape for small businesses. We confirm our intention to extend the 10 per cent. band of corporation tax. We are reducing VAT compliance costs by up to £1,000 for firms with a turnover of up to £100,000 and we are consulting on the Carter report on the provision of payroll services to new and small businesses.

As the hon. Member for Meirionnydd Nant Conwy (Mr. Llwyd) said, the significance of the 140,000 small and medium-sized businesses in Wales cannot be under-estimated; most people in Wales work in businesses of that size. The Chancellor yesterday gave those businesses hope by extending the Welsh economy in a positive way.

Everyone will welcome the abolition of stamp duty payable on commercial and domestic properties under the threshold of £150,000 in the most deprived areas. More than 350 wards in Wales will benefit from that proposal, which affects every local authority area, especially Rhondda Cynon Taff, Caerphilly and the valleys. Rural areas and cities will benefit from the measure.

We are able to do those things for Wales and for the Welsh people because of the way in which we have managed the economy. We have a strong, stable economy; we have paid off the national debt, which crippled our country, and saved £8 billion in interest rates on national debt; £4 billion has been saved because we have got people into work instead of their lingering in the dole queues. Billions of pounds have gone into the national Exchequer and we can therefore withstand the impact of foot and mouth disease, and of the international crisis, which has meant that the impact has been far less severe on our country than on any other country in the western world, or in Europe. That means that our growth in the coming year will still be between 2 and 2.5 per cent. That is a remarkable achievement, by any measure, in the current economic climate.

Mr. Evans: Everyone accepts that the Chancellor will be spending more than the growth in the economy. Will the Secretary of State say whether that will be paid for by higher taxes or more borrowing?

Mr. Murphy: The hon. Gentleman is aware that we have been able to put billions of pounds into the health service and schools without raising income tax, for the reason that I have just outlined: strong, prudent and wise management of the economy. We took decisions in the first two years of office that might not have worked out, but have paid off. My right hon. Friend the Chancellor made it clear this morning on the ``Today'' programme that he does not rule out future tax increases. None of us can, and it would be foolish to do so.

There is consensus that tax increases are necessary. The hon. Gentleman's party does not seem to be prepared to join that consensus, although it used to be in the good old days of Macmillan and others who, like the rest of the country, believed in the health service. The Wanless report considered all the other options, including social insurance, private insurance and private medicine, and came to the conclusion, with which most of us would agree, that we have to pay for a national health service from the public purse. That is the best way to do it.

We have put billions of pounds into the NHS, but increased technology, greater expectation and the fact that people are living longer mean that we will have to put in even more money in the years ahead. I would be tickled pink if the hon. Gentleman could tell me how his party would finance the NHS. People would be prepared to pay extra taxes if they thought that that was the way ahead. In the months ahead, we will listen to the ideas of the National Assembly and people in Wales of to how best to resource the NHS.

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Prepared 28 November 2001