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7.52 pm

Mr. Mark Hoban (Fareham) (Con): I note that I am the fifth consecutive Opposition Member to speak. I wonder why so few Labour Members are prepared to defend their record in a health debate.

I want to deal with three aspects of the Budget as they affect my constituents. The theme is clear: we should never underestimate the impact of Budget speeches on individual lives. A sweeping gesture by the Chancellor in the Chamber might generate favourable headlines on Budget day, but it could have a long-standing, negative impact on our constituents' lives.

The first aspect has its origins in the 2002 Budget, when the Chancellor announced a zero-rate ban for corporation tax. Ministers told us that that was to stimulate enterprise. It was based on the false, and perhaps naive, assumption that only limited companies were entrepreneurial. We know, however, that partnerships, sole traders and other unincorporated businesses are also entrepreneurial. Many commentators explained that the measure would encourage unincorporated businesses to incorporate to reduce their tax bill—many hon. Members also made

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that point. Indeed, I explained the problem both on the Floor of the House during the Budget debate and in the Finance Bill Committee.

The Paymaster General recognised what would happen, and I am grateful to Taxation for unearthing a quote from the debate in the 2002 Finance Bill Committee, in which she said:

"the underlying issue is whether the Government have struck the right balance between incentives to incorporate and to remain unincorporated . . . Surely small businesses will not look a gift horse in the mouth."—[Official Report, Standing Committee F, 16 May 2002; c. 116.]

Indeed, they did not. What was predicted at the time transpired. A flood of businesses wanted to incorporate to benefit from the lower tax bills that incorporation brought. It was the right thing to do. Who would pass up the opportunity to reduce a tax bill in such a straightforward way, particularly when invited to do so by the Paymaster General?

However, the increase in the number of incorporations led to the announcement last week of a 19 per cent. tax rate on profits distributed by small companies to minimise the tax benefit that owners of limited companies had, compared with those whose income from their businesses was liable to income tax. It was one of the Chancellor's six stealth taxes announced last Wednesday, taking the total from 60 to 66. It was obvious that that would happen. We knew that business would take advantage of that to reduce the tax bill and, as the Paymaster General said, no small business would look that gift horse in the mouth.

The Government should pay heed to a lesson: changes in the tax system have a behavioural impact. A tax system that is biased towards a particular type of economic activity or organisation will encourage people to move in that direction. The Government should not be surprised if that bias in the system is exploited by people taking advantage of it. Indeed, the further the tax system moves away from a neutral view on a type of economic activity or organisation, the more likely it is that businesses will take the opportunity to exploit that loophole and subvert the Government's objective. Indeed, how can businesses plan for the future if the Government can change their mind within two years about something as fundamental and important to business as changing the nature of taxation for small businesses?

The second aspect of the Budget that I want to touch on is the Lyons report on relocating civil servants out of London and the south-east. The Chancellor said that

"the Government are accepting and will implement the Lyons Review for the relocation of civil service jobs. We will relocate out of Whitehall a total of 20,000 public sector jobs, creating new opportunities in the regions and nations of the United Kingdom."—[Official Report, 17 March 2004; Vol. 419, c. 328.]

The core of the Lyons report focuses on the additional costs incurred by Departments of being in London and the benefits of dispersal to the regions that gain the jobs. Tucked away towards the back of the report, in appendix A on page 101, is the suggestion that nearly 1,000 jobs in my constituency should be transferred to Wales. Those are jobs at the Office for National Statistics in Titchfield. I have to confess that I had not realised that Titchfield was part of Whitehall, as the Chancellor sees it. Clearly, there is a poor grasp of geography in the Treasury.

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I accept that we need to make savings in the running costs of government—my right hon. Friend the shadow Chancellor has made that case so persuasively that even the Chancellor has tried to catch up—but I wonder whether the Minister can tell me the likely cost savings of the move. As I said, the Lyons report was clear about the cost of locating Departments in London, but it was less robust on the costs of locating them in the south-east. If we add to that the circumstances of the individual department of the ONS—the national pay rates for its employees and the lack of a supplement for working in Hampshire—it seems that there would be no cost savings to be gained from transferring employees from Titchfield to Wales. Indeed, the ONS owns the building in Titchfield, so no rental costs will be saved by moving the employees and that department to Wales.

It is hard to see what cost savings will be brought about by relocation. Has an assessment been made of the impact of such moves on the local economy? The Lyons report states:

"Dispersal of government jobs is likely to have positive effects for regional economies with direct spending for departments and their employees creating jobs in addition to those relocated . . . this additional impact ranged from neutral to one extra new job for every two moved."

If that is the case for regions gaining jobs, surely the reverse is true for those regions losing jobs. What assessment has the ONS made of the impact of a move to Wales on the 1,200 to 1,300 employees at Titchfield and what are their chances of finding alternative jobs in the area? Many of those who work in Titchfield are working mothers, for whom the prospect of moving to Wales may not be practical. There are a number of employees whose family arrangements are tied up with living in the area. I understand that no assessment has been made of the number of people who are prepared or able to move out of the area.

One reason that the ONS is such a popular employer in my constituency is the flexibility it allows to those who have particular care obligations to their families, whether that concerns an elderly relative or children. The Government's aim is to encourage more women to work, and to encourage more single mothers to find work to support their family, but moving that department away from Titchfield is likely significantly to affect many of my constituents who work for it. The Chancellor seemed very proud to be shifting those jobs to the regions and nations of Britain, and he welcomed the move in his Budget speech, but do not let him think that what he proposed is welcome in every household in our regions and nations.

I turn finally to a point that my hon. Friends the Members for Reigate (Mr. Blunt) and for North-East Bedfordshire (Alistair Burt) made about the Barker report, published on the same day as the Budget. The report was significant; it announced that between 70,000 and 120,000 houses should be built to tackle supply-side problems in the housing market. That is another aspect of the Budget that sounds dramatic; it creates a sense of a Chancellor able to conjure up new houses, but it has consequences for my constituents. I want to see more people able to afford their own home, but the Barker report seems to be about moderating the real growth in house prices, slightly restricting that growth by building

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additional houses. That approach is unlikely to develop the affordable housing that people in my constituency need.

My hon. Friends touched on some other, broader concerns. The Barker report recommended diluting the power that local councils can exercise over developments in their own area, by transferring more responsibility for planning to regional planning bodies. It states:

"Regional Planning Bodies and Regional Housing Boards should be merged to create single bodies responsible for managing regional housing markets, delivering the region's affordability target".

Miss Barker goes on to say:

"Even in the absence of elected regional assemblies, a streamlined institutional framework is possible and desirable."

If those proposals are accepted, the power of local authorities will be further diminished and the ways in which people in areas such as mine can hold their local councillors to account for planning decisions will be reduced.

The report also talks about land value. It says:

"Building on intensively farmed land would result in far smaller costs. These alternative land values are part of the framework within which the costs and benefits of housebuilding should be assessed."

It proposed:

"Moving towards an alternative approach, whereby land for development is assessed according to its relative value in society . . . including the implication that some Green Belt land should be re-designated."

There is no green-belt land in Fareham or south-east Hampshire, but there is some remaining farmland. If the value of that is further reduced to encourage development and to skew the cost-benefit ratio in favour of more development, we shall see a continuous stretch of development from Southampton to Portsmouth along the M27, all to achieve the goal of moderating the growth in house prices in the south-east.

Where is the infrastructure to support that additional housing? One of the biggest issues facing my constituents is the fact that the current infrastructure fails to meet the needs of the existing housing development in Fareham. Our schools, hospitals and roads are already threatened by planned development. Where will the resources come from to build new infrastructure? The main arterial routes in the area, the M27, A27 and A32, are already clogged with traffic. Only one NHS dentist in Fareham is accepting patients, and even he has a six-month waiting list. It is worth noting that when the Secretary of State for Health talked about increasing capacity throughout the health service, he did not mention dentistry.

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