Budget Statement

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Mr. Murphy: My hon. Friend the Under-Secretary of State has already answered that question. In the operation of a small business, it is important that the paperwork involved in VAT is reduced. Small business men and women talk to me about those issues, and I am sure that they will welcome the benefits.

Kevin Brennan (Cardiff, West): At the risk of being accused of not being very nice, does my right hon. Friend find the intervention of the hon. Member for Brecon and Radnorshire (Mr. Williams)—who is a very nice chap—rather strange? I have just checked Hansard and noticed that last night he voted in favour of the increase in national insurance.

Mr. Murphy: There is no answer to that, but I agree that the hon. Member for Brecon and Radnorshire is a very nice chap.

Mr. Nigel Evans (Ribble Valley): The Secretary of State said earlier that the people of Wales were now the lowest taxed compared to other European Union countries. Is he including stealth taxes, which are indirect taxes, or just income tax? If both, please will he tell us on what survey or analysis he bases his assessment? I understand that the combination of stealth and income taxes makes us the highest taxed country in the European Union.

Mr. Murphy: The hon. Gentleman is the expert on stealth taxes, as the Conservative Government were responsible for 22 tax increases. Well before he became a Member of Parliament, I spent months and months in this Room debating the poll tax. We do not need to talk too much about taxation and the record of the hon. Gentleman's party. I stand by what I said about direct taxation on the individual.

As well as helping businesses and enterprise, the Budget has helped all those families that, jointly, we represent in the House of Commons. The new child tax credit and the working tax credit will help 350,000 Welsh families.

Lembit Öpik (Montgomeryshire) rose—

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Mr. Murphy: I assume that the hon. Gentleman rises to welcome the measure.

Lembit Öpik: Indeed I do welcome it—it is a good move. However, I rise to respond to the point made by the hon. Member for Cardiff, West (Kevin Brennan). The Liberal Democrats support additional investment in the health service, but my hon. Friend the Member for Brecon and Radnorshire was pointing out that it would have been fairer to increase income tax. Surely, there is a responsibility to support the national health service directly.

Mr. Murphy: I therefore assume that the hon. Gentleman wants pensioners in Wales to pay an increase in income tax, because that is what would happen if we had put the increase on income tax. I make no apology for saying that there is a duty on businesses as well as on individuals to ensure that in Wales there are decent public services, particularly health services. The hon. Gentleman knows as well as I that businesses lose billions of pounds every year because of inadequate health services in different parts of the country. That is why a decent health service is as important to a business as it is to an individual or family.

Ian Lucas (Wrexham): As one who ran a small business before entering Parliament, I believe that two of the most important things for small businesses are low interest rates and stability, from both of which businesses have benefited hugely since Labour came to power. We must consider against that backcloth the responsibilities of business to take part in funding our great national health service.

Mr. Murphy: My hon. Friend is entirely right. Our strong, robust economy places far less of a burden on business than the boom and bust of the Conservative years.

Mr. Simon Thomas: I thank the Secretary of State for giving way a second time. I wish to press him on employers' national insurance contributions. Plaid Cymru accepts the central point that the health service is a national burden that should be borne by everyone—workers and employers—in the UK. However, the national insurance increase will have a real effect on public services. Has the Secretary of State seen the research that shows that, for every £100 extra going to the national health service because of the Budget, £3 will be taken back through employers' national insurance increases? Surely, there is a case for exempting public services from the increase.

Mr. Murphy: I do not accept that principle. Public services have to pay in the same way that private business pays. That has always been a fundamental element of the way in which public services help to finance Government.

Mr. Jon Owen Jones: I wonder whether my right hon. Friend realises that what has just been proposed would exempt Members of Parliament from paying the increase. Is that what the hon. Member for Ceredigion (Mr. Thomas) was suggesting?

Mr. Murphy: That is certainly another aspect of the argument.

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As well as the child tax credit and the working tax credit, my hon. Friends and others will know that increases in child benefit will benefit 360,000 Welsh families. Some Opposition Members should reflect on the facts that the minimum wage is to go up to £4.20 an hour from October, and that 80,000 Welsh people, 70 per cent. of whom are women, will benefit from that. Had it been left to the Opposition, we would not have the minimum wage. [Interruption.] The trouble is that the public memory on some such things is too easily wiped away.

Julie Morgan (Cardiff, North): Does my right hon. Friend agree that it is a very good thing that the child tax credit is now to be paid to the main carer, which reflects a recognition of the responsibilities of caring?

Mr. Murphy: Of course I agree. That will be especially important to single parent families and others in Wales who desperately want to work. The great benefit of welfare to work is that people who never thought of working in days gone by can now make their contribution to society. That is important.

It must be said that, during the past year or two, not only have children benefited from the Government's actions, but so have the pensioners that we jointly represent. Let us look at the figures: some 250,000 pensioner households in Wales will benefit from the pension credit, which is to operate from next year; the minimum income guarantee helps 100,000 people in Wales; free television licences help 200,000 households in Wales; and winter fuel payments help 465,000 people in Wales. Those are staggering statistics. Pensioners in Wales are far better off than they ever were under Conservative Governments.

The main thrust of the Budget, as everyone knows, is our public services. The economic strength that we have built up will be used to ensure that we recreate those public services, in particular, the national health service. It is important to remember that in a few months, we, the Welsh Grand Committee, will consider the spending review that the Chancellor of the Exchequer will announce in the summer. He has already said that public services and other aspects of Government policy will be improved by extra spending. For the details, we await the publication in July of the spending review.

Mr. Llwyd: It is very generous of the Secretary of State to give way to me a second time. Will he comment on the current edition of the Chartered Institute of Public Finance and Accountancy guide to local government finance? It says:

    ''In Wales, Local Authority Spending has fallen . . . in real terms between 1995 and 2001''

there has been

    ''a percentage reduction of 0.6 per cent.''

It goes on to say that net capital spending fell in the same period by 40.7 per cent., capital grants by 20.5 per cent. and gross capital expenditure by 15 per cent., but that in the corresponding period in England, spending in all those areas increased. There is a huge amount to be done in public services, for which our constituents are paying through the nose. Despite all the good things in the Budget, they will be paying far more council tax in the coming months and years. I am

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afraid that that will eat away at all the benefits that the Secretary of State has mentioned.

Mr. Murphy: The hon. Gentleman is aware that the Welsh Local Government Association said this year that it thought that the settlement it received was an extremely generous one. He also knows that matters such as council tax and local government spending in Wales are now devolved. His comparisons with England reflect the fact that, in Wales, those are matters for the National Assembly and the local authorities.

Mr. John Smith (Vale of Glamorgan): On the commitment to public services that was given in the Budget statement, does my right hon. Friend agree that one public service that is often forgotten is defence? Does he welcome the Chancellor's remarks about defence—I refer to questions of defence investment—not only because of their implications for Wales, but because under the Labour Government Britain leads the world in peacekeeping, conflict avoidance and humanitarian support, which are possible only with the proper resources?

Mr. Murphy: Yes, I welcome those remarks because of their particular relevance to my hon. Friend's constituency and because of the more general point that as a member of the United Nations Security Council we have a role in ensuring that there is peace in the world. We have another role in helping poorer countries, which has been well fulfilled by my right hon. Friends the Secretary of State for International Development and the Chancellor of the Exchequer. Britain has been very successful in those roles, which is a great credit to the Labour Government.

I have referred to domestic public services and what the Chancellor said about the national health service. Of course, people from Wales have a particular interest in the NHS, not least because a Welshman—indeed, a Monmouthshire man—founded it. He did so the year I was born—in fact, I believe I was a national health service baby, although it was a very long time ago.

Nye Bevan would have been extremely proud of the Budget, because it means that greater resources than ever before are being given to the health service in the United Kingdom and consequentially to Wales. That is a striking achievement, because the last spending review also gave the health service a bigger increase than ever before. Today we are talking about what will happen in the next few years, but if hon. Members cast their minds back to when the Committee met some years ago to discuss another spending review, they will remember that an extra £1 billion was given to the NHS in Wales at that time. This year, an additional £49 million over and above planned expenditure has gone to the Welsh health service.

The enormity of the new proposals in the Budget is staggering. Let me remind the Committee what they mean for the Welsh health service. Next year, £128 million extra will go to the NHS; the year after that, £493 million more will be spent than is being spent now; the year after that, £907 million more, and the year after that £1,348 million more. In the final year, £1,844 million more will be spent than is spent now, so

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in 2007–08, £5.681 billion could be spent on the health service in Wales.

That is an enormous increase, but we are talking about a large amount even for this year. Currently, the National Assembly spends £3.6 billion on the NHS in Wales. As I have said, in 2007–08, almost £6 billion could be spent. There is a potential health spending increase of 58 per cent.

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Prepared 24 April 2002