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Angela Eagle (Wallasey) (Lab): I am grateful to the hon. Gentleman for giving way while he is on the theme of abandonment. Will he clarify a confusion that has arisen about the Conservative party's policy on tax relief for private medical insurance? In a speech last year, the leader of the Conservative party, the right hon. and learned Member for Folkestone and Hythe (Mr. Howard), said that it fully intended to give private tax
relief for medical insurance to the tune of £1 billion. However, yesterday, the hon. Member for South Suffolk (Mr. Yeo) said:
- "I can announce that it will not be the policy of the next Conservative Government to offer tax relief to people who take out private medical insurance."—[Official Report, 22 March 2004; Vol. 419, c. 595.]
Mr. Willetts: It is not, and has not been, our policy to reinstate the tax relief for private medical insurance. I am happy to place that on the record.
The hon. Lady interrupted me in my paean of praise for the Budget. There is a third item to which I was about to give a grudging welcome. I refer to the £100 for pensioners that, admittedly, is being provided to help them out of the mess of the Chancellor's own creating—the escalation in their council tax bills. That problem has been compounded yet again by the complexity of the means-tested benefit that is supposed to help pensioners.
The take-up of council tax benefit has been declining, and more than 1 million pensioners who are entitled to it do not receive it. In fact, when the Chancellor recognised in his Budget speech the failure of means-tested benefits to help pensioners with high council tax bills and introduced a universal payment for all pensioners over 70, I wondered whether he had recognised a wider strategic point. In the words of Help the Aged:
- "There would be no need for gifts like this if the government was to review its fixation with means-testing."
Mr. Willetts: The hon. Gentleman ought to be aware of the distinction between outputs and inputs. We are committed to efficiency in the public services—the Prime Minister used to talk about that in the old days. My right hon. Friend the Member for West Dorset (Mr. Letwin) has not made a specific statement on defence spending, but we are committed overall to ensuring the efficient delivery of public services.
My attempt to find common ground with the Government on the Budget does not seem have to have met much of a welcome.
Mr. Willetts: I was going to move on to some criticisms of the Budget, but of course I shall give way to the Secretary of State.
Mr. Smith: The hon. Gentleman made a point about inputs and outputs in response to my hon. Friend the Member for Coventry, North-West (Mr. Robinson),
but will he give us a clear yes or no answer? Is it the policy of those on the Conservative Front Bench to keep defence spending flat in cash terms?
Mr. Willetts: My right hon. Friend the Member for West Dorset set out our public spending plans clearly in his statement a few weeks ago. He set out the areas in which we would be able to increase spending in real terms—on health and education—and outlined an overall framework for total public expenditure. However, he did not make a statement specifically on the defence budget.
On pensions, I am afraid that I found the Budget sadly lacking. The Chancellor failed yet again to recognise the scale of the crisis in funded pensions. Just about everyone recognises that we cannot carry on with more and more pensioners on means-tested benefits, and the erosion of funded pensions. Everyone from the Adam Smith Institute to Mr. Alan Pickering recognises that the way forward is to reform benefits so as to reverse the spread of means-testing and to produce new incentives to save, so that people are encouraged to build up more funded occupational pensions. Under this Government, the country is heading in the opposite direction, with more means-testing and a decline in funded pension savings, and nothing in the Budget will reverse that trend.
The Chancellor is being optimistic in assuming that corporation tax receipts will increase to the extent suggested by table C8 of the Red Book—the light reading to which we have all been turning in the midnight hour. He assumes that corporation tax receipts will increase from £28.7 billion this year to £34.8 billion next year. It would be interesting to hear why he believes that there will be such an extraordinary recovery in corporation tax receipts, given that many companies will have to put more money into their pension funds to rescue them from the effects of the £5 billion tax that the Chancellor has imposed on them.
There was nothing in the Budget on wind-ups. We wanted it to include measures to tackle the problems facing the 60,000 people who had hoped that after the collapse of their pensions and the disappearance of their hopes for a decent retirement, the Government would examine ways of assisting them out of serious financial distress. Several rumours went round. For example, the Chancellor was reported to be interested in a proposal made by the right hon. Member for Birkenhead (Mr. Field), in which we have also been interested, to use some of the unclaimed assets held by building societies and banks to set up a fund to help people in such circumstances. We read that the Chancellor is targeting the unclaimed assets, but, sadly, not to help with the problem of pension wind-ups. There could be no better use of the unclaimed assets than in helping to tackle that problem, and it will be a great pity if the Chancellor takes money from the unclaimed assets but does not use it for that purpose.
James Purnell (Stalybridge and Hyde) (Lab): I am worried that the hon. Gentleman might have inadvertently—I stress the word "inadvertently"—misled the House. I was looking at the Conservative party website last night—honestly, I am that sad—and the quote from the shadow Chancellor is very clear. He says that there would be increases in the budgets for
health and education but that those of all other Departments would be frozen in cash terms for two years. He admits that that would mean tough decisions. Will the hon. Gentleman correct what he said if it turns out to be wrong?
Mr. Willetts: My right hon. Friend the Member for West Dorset was setting out an overall framework for those Departments. In his announcement on public spending the other week, he specifically stated that there would be scope for reallocating money among specific Departments. The hon. Gentleman would have been better occupied in studying the fine print in the Chancellor's Red Book than in making up such questions on the basis of our website.
Mr. Willetts: I have given way to the hon. Gentleman once, but I am in a generous mood, so I shall give way to him once more.
Mr. Robinson: The hon. Gentleman is most generous. We are trying to get at some of the detail of what the Conservatives have in mind for defence. A copy of "Community News" put out by the Conservatives says that we should not have put as much money as we have—£20 billion—into the Eurofighter. I can make the article available to the hon. Gentleman. Would he scrap the Eurofighter? Would that be one of the specific cuts?
Mr. Willetts: Let me quote from the authoritative statement made by my right hon. Friend the Member for West Dorset to calm Labour Members' anxieties, given that, just for once, they are troubled about defence. He said:
- "I recognise, moreover, that there will inevitably be cases in which particular programmes, or even the expenditure of whole departments, will need to rise at a rate faster than this."
I now turn to what the Government are doing to encourage saving, because not a word on that subject passed the Chancellor's lips throughout his statement. He has not referred to saving in his last two Budgets; in fact, he has been attacking saving. He has attacked the form of savings that many people have been using, and that the Secretary of State previously encouraged people to take out.
Let me quote what the Secretary of State said in a debate on the subject in 2002, when a Conservative Member asked him a question about individual savings accounts. Asked what vehicle he would recommend people to save with and how he would encourage people to save, he replied:
- "The hon. Lady specifically asked what we could offer to younger people to ensure that they were saving, and I quite reasonably pointed to ISAs".
- "The answer is the ISA, a more flexible vehicle which is attracting more savings, especially from younger people."—[Official Report, 2 July 2002; Vol. 388, c. 103.]
Let me also ask the Secretary of State about his welfare-to-work initiatives. As he knows, when I am not reading the fine print of the Chancellor's Red Book, I plough through the Department for Work and Pensions' evaluations of its welfare-to-work schemes. Ministers always come to the House to announce new programmes, but they never admit to the House what their evaluations show about the performance of existing programmes. If Ministers take any account of what used to be called evidence-based policies—they used to be proud of those—why does the Secretary of State not explain the latest research report to the House?
The report, published last month, is entitled "Evaluation of Lone Parent Work Focused Interviews: Final findings from administrative data analysis"; it is a light read if ever there was one. It says on page 12:
- "The introduction of Lone Parent Work Focused Interviews"—
- "brought no detectable change in exit rates from"
- "for eligible new or repeat claimants".
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