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Michael Fabricant (Lichfield) (Con): Does the hon. Gentleman agree that there is a real problem getting young people to enter engineering and science? One of the great difficulties is motivating people to explore education in those fields. Will he join me in paying tribute to the Engineering and Technology Board, and will he invite it to give evidence to the Select Committee on its work in trying to persuade young people to enter engineering and science, and to become technicians, whom he also mentioned earlier?
Mr. Sheerman: I should be very happy to invite members of the board to give evidence.
I have spoken for some time, and I should like to conclude by making one more appeal to the Government. I am going to end on a high note by saying "thank you very much" for a proposal that I first saw emerging as a recommendation, and which I have seen being extensively evaluated because it is expensive. I am referring to the educational maintenance allowances. The Government have made the decision to spend the money where it counts: on pre-school, and on big increases right through infant, junior and secondary schools. They have made the hard decision that although they are going to expand higher education, it will not get as much as the earlier years provision. We know that 90 per cent. of those who get to the age of 18 and get their qualifications will go into higher education. It is too late then. Good research evidence shows that most kids from poorer backgrounds drop out between the ages of 16 and 18. Educational maintenance allowances have been properly evaluated and they are wonderful, but they are only available in one third of the country. I want them to be available in 100 per cent. of the country. As soon as we have an announcement that EMAs will be rolled out right across the country, I shall be delighted.
Mr. Sheerman: Well, I hear that that might be the case. Will my hon. Friend give the House a copper-bottomed guarantee of that?
Mr. Lewis: I am more than delighted to make the announcement today that we will be rolling out educational maintenance allowances for 16-year-olds from September and to 17 and 18-year-olds the following year. They will be available universally for young people from low-income families.
Mr. Sheerman: Well, there is nothing more copper-bottomed than that.
I have had a real opportunity today to range around some of the subjects that the Select Committee has looked at. There are issues on which we agree with the Government and others on which we disagree. I think that we have fairly pointed out the Government's deficiencies, and commented on the positive elements of their policies. In the true tradition of a Select Committee, we have tried to ensure that we scrutinise the Executive and hold them to account. That is our job, and it is a great pleasure for me to be doing that in the Education and Skills Committee during this Government.
3.12 pm
Sir Michael Spicer (West Worcestershire) (Con): Mention has been made today of the paucity of attendance on both sides of the House. In that context, I cannot resist putting it on record that the Liberal Democrats have had absolutely nobody on their Back Benches throughout the whole of our second debate on the Budget. I suppose that that is because making figures add up nationally is not their special interest.
Mr. Rendel: I am not sure whether the hon. Gentleman was here when I started my speech, but I did point out that, unfortunately, our Front-Bench spokesperson was ill today and was therefore unable to be here.
Sir Michael Spicer: I was here all the time. I was talking about the Liberals' Back Benches, which have been green and empty throughout. The hon. Gentleman has sat there like a palm tree in a desert for the whole debate.
Mr. Rendel: I am not on the Back Bench.
Sir Michael Spicer: No, the hon. Gentleman is on the Front Bench. But the fact is that there has been absolutely nobody from the Liberal party here to support him, which is very sad for him.
I want to make most of my remarks on the economy in general, and on the Chancellor's speech yesterday. Before I do that, however, as we are focusing on education, perhaps I could make a couple of points on education finance. I am amazed that the Government have not used the opportunity of the Budget to readjust the area cost adjustment formula, which provides money to local education authorities. This argument has carried on for many years. We were debating the issue even when I was at the then Department of the Environment. It is not new. Every time I have gone to see Ministers about it, I have said that it is a subjective formula. Attempts are sometimes made to attach some kind of spurious science to it, but it is subjective. That is why we get comparable authorities having very different area cost adjustments. That is particularly unfair in the case of Worcestershire, where we come out of it very badly. I would like to use this opportunity to make a plea to Finance and Education Ministers to think again. I know that they have been doing so, but nothing ever seems to come out of the thinking-again machine. As a matter of fairness, I would ask them really to address the issue this time and to examine the logic involved in the way in which the Government provide money to local education authorities.
The Conservative Front-Bench spokesman has spelled out our excellent position on parents' passports. One of the good things about that proposal which has not yet quite reached the public domain is that by giving money directly to people we are bypassing the bureaucracy of the local education authorities. In so doing, we would be addressing about 70 per cent. of the cost of local expenditure, and could, if we thought it through, therefore address the enormous rise in the burden of council tax and all its associated problems. This might possibly provide a way through the vexed question of council tax, to which I shall refer later.
A number of speakers in this short debate have said that, on the surface, the economy feels—to most people—as though it is in good shape. Interest rates are relatively low, though rising. Inflation is also low, though probably also rising—certainly above the Chancellor's projected 1.7 per cent. for next year. Both are rising because of significant increases in, and the hardening of, world commodity prices, and also because of lax domestic monetary and fiscal policies. Unemployment is low because public sector—not private sector—jobs are plentiful; jobs in manufacturing are falling.
Beneath this apparently calm surface, however, there are signs that the British economy is in an almost identical position to the United States economy's just before the dollar went into decline. This raises the question of whether pressure on sterling is around the corner. Certainly, sterling fell 4 cents to the dollar in one day last week, following the news of an appalling £4.6 billion trade deficit in January. People might be wise not to delay their buying sprees in the United States for too long.
As was the case with the United States, Britain is no longer paying her way in the world. For several years, she has been running a vast and growing balance of payments deficit, especially with the European Union. This fact was neatly skated over in the Red Book and went totally unmentioned in the Chancellor's speech yesterday. Britain is buying around £30 billion more goods and services abroad each year than she is selling. The value of Britain's visible and invisible exports actually fell between 2001 and 2002 by 5 per cent., which is a very large figure. During that year, as in previous ones, Britain made a surplus on her sales to the United States, but sadly, these did not make up for the vast losses that she made on her trade with continental Europe.
As was also the case in America before the dollar fell, this very significant trade gap has in the past been balanced by a heavy inflow of foreign funds, both in the form of direct investment and through the purchase by people abroad of UK Government bonds and securities. As was the case in America when the dollar began its plunge, the inflow of funds to the United Kingdom, which peaked in 2000, is drying up. In the American case, the result was a fall in the requirement for foreigners to hold dollars. There is absolutely no reason why the same principle should not apply to the willingness of foreigners to hold sterling if the present trend in both the balance of payments and the compensatory capital flows into the United Kingdom is maintained. The foreign account is therefore the first reason why pressure on sterling must be mounting.
The second, related, similarity with the American economy before the dollar went into its slide is the growing financial deficit in the United Kingdom—the continuing gap between public spending and the revenue raised to cover it. According to the Chancellor himself, that is running at an annual rate of well over £30 billion a year—currently about £40 billion—despite massive tax rises. On past form, the £37 billion he promised for the current year will be exceeded.
That financial gap has been caused, essentially, by a vast rise in public spending, set to reach well over £500 billion, or 42 per cent. of gross domestic product. All that must require one of two things: either a massive rise in tax rates or the Government substantially increasing their borrowing. In the context of what I am arguing today, the question then arises as to how successful the Government will be in raising the necessary loans, especially at current rates of interest.
It is arguable that, as with America, the appetite for British Government stock will begin to wane as more of it begins to flood the market. Again as in America, that will not only put pressure on long-term interest rates, but add to the vulnerability of the currency as foreigners begin to fear an interest rate rise and a fall in the value of Government stocks. I am saying that, contrary to the impression left yesterday by the Chancellor, the Government are dangerously gambling with the future of our country's economy and with its currency, the backing for which has been greatly weakened since the bulk of our gold reserves was sold.
What has caused those two major deficits in our trade and our finances? On the trade account, it is quite clear that since the Government took office the competitiveness of the British economy, relative to others, has declined. Productivity rates have fallen virtually continuously since Labour came to power. That is presumably why the Government no longer publish productivity rate tables in their general reports on productivity.
The reason for that decline in the competitiveness of the British economy is that from being one of the least restricted, lowest taxed western economies in the 1980s and 1990s, it has returned to being one of the highest taxed and most regulated. According to the Office for National Statistics, a further contributory factor to the decline in productivity has been the remarkable growth in non-productive public sector jobs. Whereas, for instance, the number of full-time teachers rose between 2000 and 2003 by 6.8 per cent., the number of full-time education administrators rose by 26 per cent. in the same period. A comparison between full-time nurses and administrators provides figures of 7.3 and 15 per cent. respectively.
In that context, it is of course to be welcomed that the Government have introduced a proposal in the Budget to amalgamate the Inland Revenue and Customs and Excise. I suppose I am bound to be enthusiastic about that, because I chaired the Treasury Committee that twice made such a recommendation. The amalgamation will undoubtedly create administrative savings.
The effect of the decline in the productivity rate has combined in our country with a switch from growth markets in north America and the far east to the sluggish
markets of Europe. Far from benefiting the balance of payments, trade with the European Union has been to its detriment. It used to be said of the Germans and the French that the EU had an economic price for a political benefit, whereas Britain paid a political price for an economic benefit. For our trade account, the economic benefits are highly questionable.As for the deficit in the financial account, this raises one of the central dilemmas facing British Governments of all political complexions: how to recreate for ourselves public services on a par with those of comparable countries while keeping taxes down to a level at which people are willing to invest and to work.
The problem is aggravated by the fact that certain taxes have begun to hit their ceiling in terms of public acceptance. Council taxes and much VAT are the most recent example of high taxes hitting the relatively poor hardest and becoming unacceptable. The resentment against local taxes is unlikely to be reduced by changing their form or name. People simply want to pay less tax, whether it is called council tax, local income tax, property tax or, for that matter, poll tax.
The answer to the conundrum of getting better public services and keeping taxes down is to pursue the path on which this Prime Minister's Government claimed to have set out under the label "new Labour": revitalising public services through a mixture of public and private money and management. Labour's attempt to do that failed in the starting blocks with, effectively, the dismissal of the right hon. Member for Birkenhead (Mr. Field).
A good place to start the whole process would have been state pensions. Launching a properly funded, actuarially based pension scheme to which state funds were applied where premiums were beyond the reach of contributors, and paying pensions properly related to previous earnings, would have been an excellent start. That should have been followed by radical reforms to the management of the health and education system, on which we are basing today's debate.
It has become a proven fact that when patients, for instance, are given financial power to make their own choices, as in the case of most European countries, not only have more resources become available, but the whole system begins to respond with much greater effect and efficiency. In this country, it remains a privilege to visit a doctor and to receive treatment in hospital. When the patient is financially in charge of his own destiny, it becomes a right and an obligation on the health provider to give him or her the best possible service.
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