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14 Apr 2003 : Column 691—continued

Mr. Deputy Speaker: Order.

8.10 pm

Mr. Archie Norman (Tunbridge Wells): I draw the attention of the House at the outset to my declaration in the Register of Members' Interests.

From the point of view of business and enterprise, this Budget will probably be memorable for being the least memorable that the Chancellor has made to date. It is no criticism from the point of view of business people to say that it is largely devoid of substance. The fear for the business community is that it sits between the last tax-raising Budget that the Chancellor produced and the next tax-raising Budget that he will be obliged to produce, because, as my hon. Friend the Member for Mid-Sussex (Mr. Soames) outlined, the speeches of the Chancellor and the Secretary of State were both redolent of a total detachment from the reality of the business world. At the very least, there is a huge divorce in perception between what the business world and business leaders expect to happen to the economy and what the Chancellor expects.

Business leaders will generally not be impressed by an approach that is simply glossily optimistic in outlook. The Chancellor said that he expects—it is all in the Red Book—a step up in ICT expenditure in the course of the next year. Business people do not expect that to happen, and none of the chairmen and chief executives to whom I have spoken in the last few months is planning an increase in ICT expenditure. He said that he expects a dramatic turnaround in investment and 5 per cent. growth in investment next year, but it is getting very late in the day for companies to be planning that. The Red Book says that a recovery is expected in the financial

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markets, and predicts a dramatic recovery in our export markets, which depend not least on a recovery in the European economies that is not currently anticipated by any independent forecasters.

That all adds up to a view of the world that is simply not shared by practitioners. I make that point not in a partisan way. The extent to which the Government appear detached from the view on the ground in the business and enterprise community is alarming. As was pointed out in the opening address, the Secretary of State came across as being simply out of touch with business realities, which is worrying for both sides of the House.

There is nothing wrong with optimistic forecasts; what is wrong is to depend on them. Business has learned to its cost that the Marconi approach to budgeting leads to an early demise. We hope that the Chancellor is right in his forecasts, but I fear that few believe that he will be right.

Against that background, the test of this Budget, which is broadly tax neutral, is whether it will do anything for the supply side of the private sector at a time when it is in comparative recession. My hon. Friend made an important point: what we have today is public sector boom and private sector recession. Were it not for the growth in public spending and the growth in private consumption, which is now faltering, the reality is that most of the private sector would be flat or declining. It is the public sector in Britain that is in growth, and that will continue next year. It is therefore important to recognise that while the Chancellor talks about the productivity gap, productivity growth in the public sector is much slower than in the private sector. He is doing nothing, and the Budget contains nothing, to boost productivity growth in the public sector.

The hon. Member for Huddersfield (Mr. Sheerman), who is no longer in his place, made a powerful point about the absence of measures to drive better management and quality performance in the public sector. I shall give the House one example: in the last two years, expenditure in the NHS has increased by 22 per cent. but there has been only a 1.6 per cent. increase in treatments. That kind of result would be simply a recipe for disaster in the private sector, yet nothing is being done to change it. The Red Book talks about an incremental addition of 70,000 employees a year in the public sector. As things stand, those employees will go into some of the worst managed institutions in Britain, with anachronistic, old-fashioned, highly unionised work practices, and the Budget contains no measures to address that problem. That is a recipe for widening the productivity gap in Britain.

When the Red Book talks about the productivity gap, it refers entirely to the private sector, as if productivity is something that happens in the private sector, not the public sector. Nothing is being done to improve the almost delinquent quality of management in large parts of the public sector, or the absence of quality management in the NHS, local authorities and elsewhere. We have no institute of public sector management in this country, and nothing is being done to address that problem, even though the public sector is growing fast. Amazingly, all we have in the Red Book is a reference to Professor Porter's study and a completely baffling proposal to ask the European Coal

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and Steel Community to spend some £17 million on further researching the skills gap. It seems that not much skill is evident in closing the skills gap.

That brings me to the question of deregulation. The Budget represents a huge failure to address the problem of deregulation. As my hon. Friend the Shadow Secretary of State said at the outset, what is required is not picking away at bits of regulation, or removing 500 regulations, which were identified last year—only a quarter of them have been removed—but a change of culture in Whitehall and in Government Departments. Overall, in the last year, we have had 3,839 new regulations, not 500, and we have had 19,000 regulations in the last five years. That is not a trickle but an avalanche, and a step change in attitudes and processes is required. We need a fundamental approach to address the Government's propensity to introduce more and more taxation and regulation.

I want, for example, to draw attention to one particularly pernicious small element of the Budget that is exactly the kind of tax that the Chancellor and the Secretary of State said they had set their minds against: the proposal to increase the stamp duty on leaseholds. That is a tax on mobility, on transactions and on business flexibility. Although the Government say that they are consulting on the tax, I notice in the Red Book that the Chancellor has already taken account in his forecast of some £210 million in receipts from the change in tax. For many businesses, that will be a fourfold increase in the stamp duty that they currently pay on leaseholds. That is exactly the kind of anti-enterprise stealth tax that should not exist, and I hope that the Government will think again about it.

In summary, this Budget represented an opportunity to address the problems of the supply side of the economy and the question of public sector reform. It has completely failed to do that, and it is, sadly, a missed opportunity. I hope that the Government will listen to the points expressed in the powerful speeches made on both sides of the House, and that they will address those problems in the months ahead.

8.18 pm

Mrs. Helen Clark (Peterborough): I want to begin by offering my right hon. Friend the Chancellor congratulations on the Budget, built as it is on the strength of an economy that has been consistently well managed since 1997. The widespread predictions of a difficult Budget have been made to look foolish, but I want to pick up one point concerning the future of fuel duty.

There are unpleasant examples from the past of Governments not taking the best opportunities to reduce avoidable deaths in the population. We know from Cabinet papers that the dangers from smoking—I speak now as a non-smoker—were understood in the 1950s, but Governments covered it up. Governments knew of the dangers of London smogs decades before the Clean Air Act 1956, with its attendance costs of implementation, was enacted. The truth is that what Government do by commission or omission bears a cost in human life and health, and that cost is often avoidable.

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Let us consider the case of diesel emissions, which are now avoidable by the use of new technology or alternative fuels. I shall cite American figures, because they are more dramatic. The American Lung Association points out that diesel exhaust is a complex mixture of thousands of chemicals, including more than 40 contaminants recognised as toxicants, carcinogens, reproductive and developmental hazards and endocrine disruptors. In 2001, it estimated that expected lifetime cancers in the US population would be conservatively estimated at 125,000 as a result of diesel exhaust.

One of the many hazardous constituents of diesel exhaust is particulates. The health gains in the UK from reducing particle levels are greater than for those of any other pollutant. High PM10s levels—PM10s are the larger particulates—cause congestive heart failure, heart disease and asthmatic attacks. PM10s are estimated to advance 8,100 deaths a year in Great Britain and to cause an additional 10,500 admissions to hospital. Diesel exhaust and particulates are just part of a range of pollutants that emerge from conventionally powered vehicles and that have not yet been tackled effectively by Government policy and by shifting the burden of taxes from environmental "goods" to environmental "bads".

We in the Environmental Audit Select Committee issued a pre-Budget report last week that questioned whether the Treasury had a clear long-term strategy on fuel duty that reflected environmental benefits. Let us consider liquefied petroleum gas, for example. It emits 99 to 99.8 per cent. fewer ultra-fine particles even than ultra-low sulphur diesel. Governments—and particularly my right hon. Friend the Chancellor—have taken incremental steps towards tax breaks to the extent that the market is now showing promise, with some 90,000 LPG vehicles on the road from a start of virtually zero only a few years ago. That means that LPG fuels about 0.3 per cent. of the UK vehicle parc, but its potential is largely untapped. "Fuelling Road Transport", a joint report of November 2002 by the Energy Saving Trust, the Institute for European Environmental Policy and the National Society for Clean Air estimated that the

was as high as 10 per cent. and that the possible LPG vehicle parc was more than 30 times as great as it currently stands. That would deliver 30 times as much benefit to the environment and human health. That would surely be a valuable achievement for Government, the environment and society.

The freeze on duty on LPG has encouraged car buyers and fleet managers to invest in cleaner cars. I note that my right hon. Friend the Chancellor intends to consult on the future fuel duty on LPG. I suggest that it is not the right time to reduce the incentive on the ground that it has begun to work. I say that for a number of reasons. First, as "Fuelling Road Transport" suggests, the market still has a long way to develop. Secondly, reducing the incentive would give the wrong signal to people thinking of investing in LPG cars. Where have previous commitments gone to giving motorists clear signals well in advance? Thirdly, what message does indecision, the uncertain nature of tax breaks and the potential removal of the incentives when the market is barely at a thirtieth of its potential give to those companies or people thinking of investing in a new,

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cleaner car fleet? Fourth, is it not the intention that the shift of taxation from environmental "goods" to "bads" should be permanent rather than temporary?

Our Select Committee also made positive recommendations about the potential for biofuels. The European Union wishes to set targets for the consumption of biofuels so that their proportion of the total is 2 per cent. by 2005. Targets are a very good thing, because they are a test of the strength of the policy measures designed to achieve them. Perhaps if the Government had set a target figure for the LPG vehicle parc, we would be better able to judge where we were on the arc to success and to evaluate the justification of continuing the fuel duty concession. It is not too late to set such a target for LPG, and neither is it too late for biofuels. Why should officials fight shy of such targets? Far be it from me to suggest that benchmarking success might also result in the embarrassment of identifying failure.

Let me return to my opening theme. People are dying because we have not cleaned up our conventional vehicle parc. The technology to do so is available now and not at a hazy and uncertain future date. The more we fudge and mudge in not setting targets and sticking with the environmental tax balance to achieve them, the more time is wasted in improving health and lifespans. I ask my right hon. Friend the Chancellor to throw these considerations into the balance when he considers the future balance of taxation on fuel and not to concentrate simply on measuring the relatively small scale of revenues forgone.

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