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14 Apr 2003 : Column 695—continued

8.26 pm

Mr. Alex Salmond (Banff and Buchan): Last year, I broke the parliamentary habits of a lifetime by voting for the amendment of the law resolution. I had never done that before, but I did so last year even though I received no gratitude. I voted for the resolution because I agreed with the central tenet of the Budget, which was to increase direct taxation to fund public services. The increase was to national insurance and not to income tax as it should have been, and the increase took place some years late after public services had been starved of funds. I even ignored the fact that the Labour party attacked me vigorously when I tried to reverse its 1p cut in income tax four years ago. However, I thought it is better that one sinner repenteth and that we had to forgive and forget. I therefore supported last year's Budget because its central tenet was correct.

David Burnside: Will the hon. Gentleman give way?

Mr. Salmond: I will do so in two seconds after I have come to the climax of my point. I would have loved to support the amendment of the law resolution again this year if I had been able to find a central tenet to support, but this Budget is totally directionless. It is complacent to the point of ignoring a whole series of key economic problems, with the Chancellor relying on growth forecasts that have declined again. He suggests that they will miraculously go up in a year or two, but, as key aspects of the economy move into reverse, he says, "It is better than it is elsewhere". The Budget is without a central focus and direction that would take the country forward.

David Burnside: Has my hon. Friend calculated the impact on Scotland of the increase of national insurance

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contributions in April? Every independent business commentator, including those from chambers of commerce, the CBI and the Institute of Directors, has said that it will lead to major job losses throughout the United Kingdom. How many jobs will be lost in Scotland?

Mr. Salmond: Exactly. That is why I would have preferred a 1p increase on direct income tax, rather than on national insurance contributions. However, I still think that direct taxation is the best way to fund public services. If public services were not funded and if they continued to decline as they did during the Conservative years—unfortunately that was supported by the Ulster Unionist party—and the early years of the Labour Administration, tens of thousands of jobs would continue to be lost in key public services.

Mr. Mark Lazarowicz (Edinburgh, North and Leith): If the hon. Gentleman is so keen on direct taxation, will he tell me why the Scottish National party manifesto for the next election says that

Mr. Salmond: That is precisely because the Labour party has moved on to the ground on which we so bravely stepped out four years ago. We fought the election in 1999 on the programme of a penny for Scotland and we were vigorously attacked by the Chancellor of the Exchequer. He said that that was a reckless move, but some three years later he pursued a similar policy, yet he expects to take all the credit. I am prepared to concede that the Chancellor has moved on to our ground, and of course the hon. Member for Edinburgh, North and Leith (Mr. Lazarowicz) was dragged along with him, but the hon. Gentleman cannot expect us not to claim victory when the Labour party ends up in the position that it should have adopted a considerable time ago.

We come to the complacent bits of the Budget. The hon. Member for Dundee, East (Mr. Luke), for whom I have the highest regard, made a speech that I can describe only as the "it hasn't happened to the same extent in Scotland" speech. He listed a range of good things that he thought were happening, but said that they had not happened to the same extent in Scotland—too right. Scotland, under the Labour party, has the lowest rate of growth in the European Union. Our economy has contracted during the past year and manufacturing and exports have collapsed by 25 per cent. in a single year. We have the lowest rate of business survival in the United Kingdom. He cannot say that things have not happened to the same extent in Scotland because they have not happened at all. That is the reality of the Labour party's control of the Scottish economy.

What does the Budget have as a surprise? It is differential pay for the public sector in the regions. We all know that the Chancellor wants to use the "flexibility" that has replaced "prudence" to reduce the pay of nurses, policemen and firefighters in the English regions, Scotland and Wales while increasing the relative pay of those in London and the south-east of England. How on earth will it benefit the regions of England and the nations of Scotland, Wales and Northern Ireland to reduce further public sector pay and demand in those economies?

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The Government have started to retreat from that policy, now that they have announced it. That is probably because I was on the radio with Jack Dromey on Thursday morning and he said that there would be a national strike if the Chancellor pursued the policy. We do not need a national strike in Scotland because all we have to do is to kick the Labour party out two weeks on Thursday, and that is exactly what we intend to do.

I liked certain aspects of last year's Budget's central direction, although I was severely critical of individual measures. I cannot find the central direction of this year's Budget, but I do welcome one key measure for which I argued last year. Once again, Ministers have moved on to SNP ground because they have acknowledged that pipeline taxation for the North sea was differential and costing jobs. The Chancellor's move to end this discrimination will stimulate £1 billion of investment in the medium term, which is the equivalent of having three or four major finds in the North sea because of the incremental investment that will take place. That is the welcome development in the Budget.

However, more is needed because after last year's tax hike, the number of exploration wells in the North sea has collapsed to 16. That represents a crisis situation. The Chancellor's Budget documents show that the Treasury is examining the matter. The time is right for that; it is urgent to do that quickly. We need further tax incentives for exploration and development. That is needed not to influence North sea production and revenue this year, or in five or 10 years, but because of what will—or will not—happen to production in 15 or 20 years without additional exploration development.

I am worried about the rural economy. In a Budget speech that was padded out with this, that and the next thing, I am surprised that the Chancellor did not find time even to mention the crisis of incomes in our rural farming economy, the crisis in the fishing economy or the range of pressures that our rural areas face.

The Budget's complacency is suffocating. Its specifics often relate to trivial matters, while central key questions relating to the rural economy and other issues are ignored. I welcome bits and pieces in the Budget, such as the oil tax and the freeze again on whisky tax, but its measures will do nothing to address the low growth record of the Scottish economy under Labour or to give the Scottish Parliament and Executive the economic levers that are required to do the job. Incidentally, an opinion poll that was published today shows that 75 per cent. of the Scottish population would support that. As usual, the people are ahead of the politicians. In this case, they are dramatically ahead of the Labour Government. The time is close—it is a matter of days and hours—when their record and stewardship of the Scottish economy will be held to considerable account at the ballot box north of the border.

8.35 pm

Mr. Tom Harris (Glasgow, Cathcart): I received a pager message just five minutes ago that said, "Don't worry, baby, your turn's coming up." I assume, Mr. Deputy Speaker, that that is not a new system of warning Members that they are about to be called to speak.

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A recurring criticism of the Government's record—we heard it from the hon. Member for Tunbridge Wells (Mr. Norman)—is that too many jobs are being created in the public sector, and that growth and employment over the past six years has largely been the result of an expansion in public sector jobs. My friend the hon. Member for Eddisbury (Mr. O'Brien)—I use that phrase carefully—regaled the Government last week on television because, according to figures that he quoted, there are 9,000 fewer jobs in the private sector today than there were in 1997. That exposes an interesting agenda.

The Conservative party are in a difficult position, as any Opposition are when the Government have a large majority. They want to give the electorate the confidence that public services would improve under a future Conservative Government, but are understandably reluctant to give spending commitments, and they want to restore their reputation as a tax-cutting party. So they end up in the ridiculous position of claiming that less investment in public services will produce better public services provided that they are reformed. Of course that is absurd.

I agree with my hon. Friend the Member for Huddersfield (Mr. Sheerman) that public sector reform is essential. There has to be a balanced ticket. There is no point in saying that investment on its own will produce the better services that all our constituents require. Similarly, there is no sense to the argument that only an increase in public investment will produce those improvements. I would go at least as far as my hon. Friend and say that if we were not reforming public services, I would actively oppose any major increases in investment because my constituents and constituents throughout the country are not convinced that extra money alone is what is needed. We need radical reform of the public sector. Yet the Conservatives persist in a fantasy that they can dispense with that balance because only reform is needed.

The last thing an official Opposition want is to acknowledge that the Government's economic record is impressive. Conservative Members have gone through contortions to convince themselves that Labour's economic record has been poor despite the fact that we have the lowest inflation for 30 years, the highest employment levels in our history—neither of which they mentioned—the longest period of sustained economic growth in living standards for half a century, a UK economy that has grown uninterrupted, free of recession in every quarter of the past six years, and historically low interest rates.

Earlier I quoted from "The World in 2003" published by The Economist and have two more salient quotes from it. That article states:

It goes on to say:

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I would find it difficult to improve on that.

The Conservatives face some difficulty in opposing our economic agenda. Listening to the hon. Member for South Suffolk (Mr. Yeo) at the Dispatch Box earlier, I was almost reminded of watching television last week, when the Iraqi Information Minister was insisting that the American troops had been driven back from the gates of Baghdad just as an American tank came into view behind him. The Conservatives have been saying tonight that all is doom and gloom: unemployment will go up, and investment and productivity are on the way down. They completely ignore the economic reality outside this place.

That has left the Conservatives in a very difficult position. What can they do? How do they attack the Government's record? They cannot attack the number of jobs in the economy because it is at an all-time high. They cannot attack the quality of jobs because we are all supporters of the national minimum wage now—except, perhaps, for the Liberal Democrats. The Conservatives can only attack the sectors in which those jobs are being created.

My right hon. Friend the Chancellor pointed out in his Budget statement last week that investment procured by this Government means that, by 2008, there will be an extra 80,000 nurses and 25,000 doctors in the NHS. Is that the public sector employment that the Conservatives are so unhappy about? What would be their solution? Would they cut the number of NHS nurses? Will that be a manifesto commitment? I hope so, but I suspect that they are too clever for that. They seem, however, to be on a difficult wicket.

It is not particularly surprising that public sector employment has grown along with public investment. The public sector is, after all, the one area with which the Government have a direct relationship—money spent by the Government goes directly into the public services. The Government do not have that relationship with the private sector, so clearly they cannot directly create jobs in the private sector, but they can create the right economic conditions for the sector to flourish; indeed, they have a duty to do so.

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