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9 Apr 2003 : Column 335—continued
Tony Baldry: My hon. Friend makes an extremely good point, echoing what my right hon. Friend the Member for Charnwood (Mr. Dorrell) said about
public expenditure racing ahead of the private sector. Not only is that a matter of concern; we will inevitably see higher taxes. The Government seem to be making little attempt to get to grips with that.In the past, we have seen attempted reforms to the competition regime, designed to make markets more competitive by stamping out abuses of power. They did not. We have seen complicated changes to capital gains taxes that sought to encourage investment for the longer term. They did not. The Treasury justified raising corporate taxes on dividend payments on the basis that it might encourage companies to retain profits. It did not.
Tax credits for research and development spending aimed to correct a potential market failure: that companies under-invest in research and development because their competitors would also gain from their innovations. However, that has resulted in an imbalance in research and development, which I doubt can be addressed by today's announcement, welcome and limited though it might be.
Today, sadly, with the Government halfway through their second term, the UK's productivity performance shows little discernible improvement. If anything, it has deteriorated since the Government came to power and is now at a 10-year low. That is not my judgment; it is the assessment of the Bank of England's latest inflation report, which notes:
- "The growth of labour productivity per person has been below its long-run average".
- "Raising productivity remains a key challenge."
An article in the Financial Times this week observed that
- "there appears little appetite left for more government-directed measures to remedy the shortcomings. The City is preoccupied with the immediate economic outlook and the health of public finances. Business is in a lather about rising taxes and national insurance contributions. And employees are growing fearful that their private-sector pensions will not provide the retirement income they had expected."
What would have happened if, during the 1997 general election, I had knocked on doors in Banbury and Bicester and told people, "Hey guys, I've got news for you. By 2003, under a Labour Government pensions for people retiring will be worth half of what they are today"? I wonder how many people would have voted Labour in that election.
Rob Marris: On that point, the principle reason that pensioners are getting less is that annuity rates have
come down considerably. That has happened because, under a Labour Government, interest rates have more than halved from their levels under the previous Conservative Government. Does the hon. Gentleman support low interest rates, or not?
Tony Baldry: When they start knocking on doors, Labour Members will have to face the fact that the various stealth taxes introduced by this Government, including the raid on pension funds, are less stealthy now. People—pensioners, and those in business—appreciate the impact of those taxes, and the damage that they are doing. Sooner or later, a tax will have an impact. The Government's chickens are coming home to roost.
Mr. James Wray (Glasgow, Baillieston): Was not the hon. Gentleman embarrassed, when he was knocking on doors at the general election before the one that he mentioned, about the fact that the previous Prime Minister advised old people to have equity? They got their houses at a knock-down rate of 6 per cent. but, after 18 months, the interest rate had risen to 18 per cent. Thousands of houses were repossessed, and local councils had to rehouse the old people who were thrown out of them.
Tony Baldry: Clearly, the hon. Gentleman was not listening to what I said earlier about people's concerns about negative equity. In my constituency, those concerns remain alive today. People who can afford to buy houses are concerned about them losing value and about falling into negative equity as a result.
I am sure that, in the coming year, we will witness higher growth in the US, France and Germany, where people worry a lot less about higher taxes and lower personal savings. Nothing in today's Budget changes that outlook. The reality is that Labour is taxing, spending and failing. From this week, people are working for less as a result of the Chancellor's national insurance increase. It is a tax on jobs and on pay. Given increased council tax bills, a typical family in my constituency and in every constituency will find itself £568 worse off this year.
Understandably, all my constituents are anxious about their futures, and concerned about their jobs, savings and pensions. Meanwhile, our public services are just not good enough. This Government have brought us more taxes, more spending, more borrowing, more promises, more failure and more excuses—and still no results.
Mr. Deputy Speaker (Sir Michael Lord): Order. Before I call the next speaker, may I tell the House that a considerable number of hon. Members are seeking to catch my eye. Unless contributions are considerably shorter, a very large number of hon. Members will be disappointed.
4.39 pm
John McDonnell (Hayes and Harlington): I hope, Mr. Deputy Speaker, that you meant to say John McDonnell. There is some similarity between me and my hon. Friend the Member for Dumbarton (Mr. McFall)—although not necessarily politically.
A reference was made earlier to Labour's old ways. That shows that I listened to some of the other speeches that have been made. I want to try to tempt my right hon. Friend the Chancellor and the House to consider some of the old ways, and to see whether we can go a little way down that path today.
I concur with many of the descriptions of the budgetary environment in which we are working. It is clouded with risks, in terms of the international situation—there is international deflation, and stagnation within the eurozone.We face different risks in our constituencies. In mine, there is a problem of house prices overheating, but also of job losses at Marks and Spencer, Safeway, the Ministry of Defence and in the aviation industry, where, as a result of the war, 3,000 jobs are at risk at British Airways. I therefore understand the problems that some northern constituencies have experienced in recent years as a result of loss of employment. I also understand the implications of what has happened elsewhere in the country as a result of recession in the manufacturing industry, which I balance with the south-east's problems of house price increases and the concern that some people have about falling into negative equity. There is an edginess about national economic prospects, set in the context, I have to say, of overall growth in recent years from which many people have gained a lot—both through direct income and the benefits of public services.
My main concern is the lack of robustness in the public finances. In my view—returning to what some describe as the old ways—that is the result of a failure to introduce at a sufficiently early stage more redistributive, fair and just tax reforms, which means that we are now having to increase our borrowing. I support that, because our borrowing is minimal by comparison with other countries, and we could borrow more if necessary. Because we did not introduce soon enough adequately redistributive tax improvements or reforms, we have not built up sufficient critical mass in terms of our tax base or tax take to fund all the public service reforms that we wanted. The failure to face up squarely to redistribution through general taxation—on wealthy individuals and on tax-avoiding elements of the corporate sector—has resulted not only in the lateness of the delivery of public service investment and the lack of impact of that investment for some communities in terms of visible improvements, but in large sections of the community missing out on the full benefits of the increasing wealth of the country that has been generated by a relatively successful Government.
I reiterate what my hon. Friends said earlier. We need to remind ourselves that we live in a very wealthy country and that we can afford to provide excellent, high-standard public services and to give all our people a decent standard of living and a decent quality of life. We can certainly afford to eliminate the worst effects of poverty that many of us experience in our constituencies. The Chancellor mentioned the war against Iraq and referred to the amount that has been
spent so far, with £3 billion set aside. What I find interesting about the economics of this war is that the Chancellor was so easily and readily able to find £3 billion for military expenditure. That takes into account neither ongoing military expenditure nor the humanitarian aid that will be required to rebuild Iraq's infrastructure, which has been devastated by sanctions and coalition bombs. The facility with which the Chancellor found that £3 billion led some of us to the conclusion that if he can so readily find £3 billion to pay for a war on Iraq, it should be equally easy for him to find £3 billion to pay for a war on some of the worst aspects of poverty and inequality in our own country. Hon. Members are bound to guess what is to follow. I will set out a limited number of priority spending initiatives that have been promoted for discussion by me and several hon. Friends in the socialist Campaign group. They amount to approximately £3 billion.Let me start with the largest group of people in poverty, who over the past 25 years, under successive Governments, have not fully shared in this country's growing wealth—namely, the pensioners.
I am an admirer of what the Chancellor has done on investment in services for pensioners and of his attempt to bring pensioners out of poverty. However, many of us have received briefings from Help the Aged, Age Concern and others in the past few weeks and we must all admit that to a large extent successive Governments have failed pensioners. Twenty-five per cent. of pensioners live below the Government's official poverty line—the same number as in 1995–96. In the past decade, 17 per cent. have lived in what is described as "persistent poverty", which means that in three out of the previous four years they have been in that poor condition, and 44 per cent. live in accommodation that is in need of repair and what is described as "thermally inefficient". In other words, they are poor and cold. As a result, as we all know, more than 20,000 of them each winter will die from cold-related diseases. Contrasted with some of the coldest countries, such as Finland, we have a very poor record.
The state pension is the main income that we provide to pensioners, but that has declined by 15 per cent. as a proportion of average earnings in the past decade or so—we predict that it will be only 7 per cent. by 2050. It is lower than the rest of Europe in terms of gross domestic product.
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