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27 Feb 2003 : Column 385—continued
National Insurance
3. Mr. James Gray (North Wiltshire): What estimate he has made of the effect on employment of the national insurance rises due in April. [99464]
The Paymaster General (Dawn Primarolo): In line with long-established practice, the Government do not forecast employment. However, estimates by independent analysts show that the impact on employment from an increase in national insurance contributions is likely to be close to nil.
Mr. Gray : Perhaps it is just as well that the Paymaster General does not predict the effects on employment. May I remind her of the words that the Government used in a press release that tried to justify the climate change levy after the 2000 Budget? They said:
- "The lower National Insurance Contributions will act to promote employment opportunities".
Dawn Primarolo: I am sure that the hon. Gentleman welcomes the fact that the reform of national insurance for the low paid removes the barrier that existed for so many people in taking jobs and being employed in the economy. He will remember that he put out a press release calling for more funds to be made available to the national health service. The national insurance rise that provides for that money is supported by people such as Anthony Goldstone, who says that business can benefit from it. If we are to have a first-class health service, we must pay for it. The national insurance rise is the best way to do so and will save money for business, which is currently losing about £11 billion a year in sickness days. It will ensure a healthier work force as well as a more just nation.
Mrs. Ann Cryer (Keighley): Does my right hon. Friend remember that when we introduced the national minimum wage the comments made by Conservative Members were very similar to those that we are hearing this morning about the increases in national insurance contributions? I remind my right hon. Friend that we were told that unemployment would go up by hundreds of thousands and that it would be the end of civilisation as we knew it. I do not think that any Conservative Member would criticise the national minimum wage today.
Dawn Primarolo: My hon. Friend is right. The right hon. and learned Member for Folkestone and Hythe (Mr. Howard) forecast repeatedly over a number of years that the introduction of the national minimum
wage would lose 2 million jobs. In fact, since the election of this Government, there have been more than 1.5 million new jobs in the economy, unemployment is at its lowest rate and employment is at its highest rate. When we compare that with the record of the previous Government—2 million jobs lost, 1 million of which were in manufacturing, and 1.4 million disappearing from the economy—we can see the effect of their proposal for a 20 per cent. cut in public expenditure. That would have a real impact on employment, not the national insurance—
Mr. Deputy Speaker (Sir Alan Haselhurst): Order. May I say to the Minister that her answers are getting overlong and bordering on matters that are outside her responsibilities?
Sir Michael Spicer (West Worcestershire): Does the Paymaster General accept that, typically, low-taxed economies are dynamic and high-taxed economies are static?
Dawn Primarolo: To be brief, I entirely agree with the hon. Gentleman. I am glad that he supports this Government, who, according to the Organisation for Economic Co-operation and Development, have created one of the lowest tax environments in the world, certainly lower than any of our European competitors, and the soundest economy of our European partners. What is more, we are paying for a national health service that this nation wants to be the best health service in the world, so that his constituents will get the treatment that they need.
Miss Anne Begg (Aberdeen, South): Will my right hon. Friend confirm that all the money raised by the national insurance rises will be invested in the national health service and that the largest proportion of money will go towards employing extra staff, extra nurses and extra doctors, thereby helping employment?
Dawn Primarolo: I can confirm that the rises in national insurance have led to approximately £40 billion more for the national health service. They have meant more nurses, more doctors and more patients being treated, including Conservative Members' constituents, who would not be treated if the Conservative party cut public expenditure by 20 per cent. under the Flight plan.
Sir Peter Tapsell (Louth and Horncastle): Why is the Chancellor tightening his fiscal stance by increasing national insurance contributions when the growth rate is declining? Does he expect the Bank of England to accommodate his spending plans through further reductions in interest rates? What is the point of pursuing conflicting fiscal and monetary policies?
Dawn Primarolo: We are increasing public expenditure at a time when it is vital to do that; the Conservative party wants to cut it.
Mr. George Stevenson (Stoke-on-Trent, South): Is my right hon. Friend aware that she has the full support of Labour Members for the increases that will take place in April to ensure that we have a properly funded national health service that is financed through taxation?
I remind her that, in my constituency, expenditure on the health service has more than doubled in the past five years. We will get a new hospital, and the primary care trust's budget has increased by 30 per cent. in real terms. The new hospital will stimulate employment in the constituency—the Opposition often forget that point.
Dawn Primarolo: My hon. Friend is right. There are 20,000 more nurses, 7,500 more consultants, 2,000 new GPs and 60 new hospitals. Those developments create jobs and services in our constituencies. The Conservative party would cut all that through the Flight plan.
Mr. Michael Howard (Folkestone and Hythe): May I invite the Paymaster General to return to the real world for a moment? Will she confirm that the tax on jobs and pay, which comes into force 38 days from today, will cost a typical family £440 a year? Will she also confirm that, at the same time, massive council tax increases—even greater than the huge rises forecast in the pre-Budget report—will take effect? Is it any wonder that the Health Secretary recently said that there would be
- "one hell of a lather about taxes rising",
Dawn Primarolo: The right hon. and learned Gentleman should return to the real world in his constituency, where he calls for more expenditure on health. He needs to tell hon. Members where he would find the extra money. He should explain to the House and his constituents why he supports the Flight plan, which would cut public expenditure by 20 per cent.
Mr. Howard: The Paymaster General and the Chancellor can dissemble all they like about our policies, but we will tell the truth about theirs. Has the Paymaster General forgotten the Labour party's 1997 election manifesto? It stated:
- "The level of public spending is no longer the best measure of the effectiveness of government action".
Dawn Primarolo: The right hon. and learned Gentleman has selective amnesia. He does not remember that he has called for more GPs in his constituency. He says one thing to his constituents about wanting more money and another in the House, where he proposes the Flight plan and 20 per cent. cuts. The Government's record on employment, job creation and funding the NHS and public services forms such a contrast to the economic policies of the Government of whom he was a member. They had the highest unemployment, lost the most jobs and had the highest interest rates.
Travel Insurance
4. Tony Cunningham (Workington): If he will make a statement on his forthcoming report on travel insurance regulation. [99465]
The Financial Secretary to the Treasury (Ruth Kelly): I presume that my hon. Friend is asking about the recent consultation on whether travel insurance sold as part of a package with a holiday should be regulated by the Financial Services Authority. The Government are currently analysing the responses to the consultation on "Regulating Insurance Mediation". The consultation closed on 31 January. I will make an announcement on the outcomes of that consultation, including whether or not travel insurance sold with a holiday should be included in the scope of FSA regulation, in the second quarter of the year.
Tony Cunningham : I thank my hon. Friend for that reply. Given that in 2001 the financial ombudsman said that one in eight of all insurance complaints related to travel insurance, and that last year complaints about travel insurance increased by 14 per cent., does my hon. Friend agree that we need to regulate to protect the consumer buying travel insurance, wherever it is bought from?
Ruth Kelly: I thank my hon. Friend for his comments. There has been an intense debate on this subject with those respondents who have come back to the consultation with diametrically opposite views. Many bodies are in favour of FSA regulation; many are against. We have to strike the right balance between, for example, the perceived benefits of creating a level playing field for firms selling the same product and the evidence that my hon. Friend puts before the House today against the perceived regulatory costs placed on travel agents, for whom travel insurance forms a very small part of turnover. I shall certainly take into account my hon. Friend's evidence when making the decision, which I shall announce in due course.
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