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Mr. Yeo: I do not have that problem at all. It is perfectly clear that the shadow Chancellor was referring to the overall total across all Departments. I shadow two Departments—the Department for Environment, Food and Rural Affairs and the Department for Transport. I have accepted a cut for DEFRA, but the transport budget is protected. The shadow Chancellor was referring to the overall total: the budgets of some Departments will go down, but other budgets, including health and education, are maintained and we will match the Government's expenditure on transport. However, I acknowledge that I have accepted a cut in DEFRA's budget.

Mr. Darling: I sympathise with the hon. Gentleman, because when one confronts any Conservative spokesman about the shadow Chancellor's freeze for all Departments they all say, "It applies to everyone else except me." There is a point at which that policy does not stand up.

Mr. Mark Francois (Rayleigh) (Con): Has the right hon. Gentleman read James?

Mr. Darling: I have read the James report all right. Before I even opened it and read the first page, I had the pleasure of listening to the Leader of the Opposition, who told Mr. David Frost that £21 billion was already committed to continue work being done by the Government. Even before the Conservatives get going, they must find £21 billion extra. I refer again to an
 
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oddity of Conservative policy and their plan to privatise something that has already been privatised. It is not clear that one can privatise things twice but, if one can, where on earth would the savings come from?

Mr. Watts: Does my right hon. Friend agree that the hon. Member for South Suffolk (Mr. Yeo) must be terrified? Last time that the Tories sold off an asset—the railways—they had to spend the next few years bailing out the system and putting billions of pounds of taxpayers' money back into the system to make it work.

Mr. Darling: My hon. Friend is right. The Conservatives' record on transport is not good, but their record on the railways was appalling. The country paid a high price in both transport and cost terms as a result of privatisation. I do not want to misrepresent the hon. Member for Havant, but I believe that he said a couple of years ago that his party's privatisation of the railways was not one of its finest moments. The country as a whole takes a dim view of it. Railtrack must be one of the most monumentally expensive failures in the history of the railways.

Mr. Gordon Brown: Like the poll tax.

Mr. Darling: Indeed, that was another unhappy time for the Conservative party. We have a strong economy, but what concerns me and ought to concern every hon. Member and citizen of this country is that we face huge challenges in future. There are huge developments on the other side of the world. Unless we prepare for the future and improve our education, science, skills and infrastructure the country will not be able to maintain its competitive position. That is why maintaining public expenditure and essential investment are important and, at the same time, we should do everything that we can to help families in this country, which is what we are doing. As I said, there are two approaches—first, a strong economy, stability and helping families or, secondly, the Tory cuts, the undermining of stability, and a return to the boom and bust of the 1990s. To my mind, the choice is clear, which is why I believe that most people, not just in the House but in the country, will support the Budget of my right hon. Friend the Chancellor.

2.27 pm

John Thurso (Caithness, Sutherland and Easter Ross) (LD): I have listened with great interest to the debate, particularly the part on helping pensioners. I was also interested in the exchange about help for working families. The Paymaster General is in the Chamber, and she will know from the lengthy correspondence that we have had regarding a number of my constituents that, whatever the rights or wrongs of the credits system, there are serious problems with its administration. A number of my constituents have received large sums of money and have thought that that was the answer to their prayers and difficulties. Naturally, they proceeded to spend that money, only to find that they have been asked to return it six months later. It is quite shameful that some of the most disadvantaged people—in many parts of my constituency there is serious deprivation and poverty—should be given money only for the Government to demand its return with a series of
 
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threatening letters from the Inland Revenue. I very much hope that the Paymaster General will look into the cases that I sent to her.

Turning to pensioners, there are two measures that the Government could introduce that would have an immediate benefit for pensioners throughout the country. First, they should not tinker with council tax but scrap it altogether and replace it with local income tax, based on the ability to pay. That would be of great advantage to many of the worst-off pensioners and to many other people, who would be relieved of that tax burden.

Mr. Darling: Perhaps the hon. Gentleman can help us. How much does he expect income tax to rise as a result of that proposal?

John Thurso: The top rate of tax will go up to 50 per cent. for those earning £100,000 or more. I believe—I say this from memory—the amount of income tax is equivalent to 3.75p, but I might be a little bit out. On that basis, over 70 per cent. of households in Britain will be better off.

Mr. Watts: Is it not the case that under the hon. Gentleman's proposals, some of the richest people in Britain would pay no local tax at all?

John Thurso: Not as far as I am aware. Anybody who owns a property—I imagine that the richer people own larger properties—will fall within the ambit of the tax.

Mr. Watts: Is there not a large group of rich people who do not pay income tax and who, under a local income tax-based system, would pay nothing towards the cost of local services?

John Thurso: As far as I am aware, anybody who earns an income in this country is taxed on it. If the hon. Gentleman knows of a method of legally avoiding such tax, I would be grateful if he would pass it on to me.

Mr. Watts: I am grateful to the hon. Gentleman for giving way again. There are thousands of rich people who live off the assets from their capital and who do not pay income tax, but pay capital gains tax or capital tax. Under the Liberal Democrats' proposals, those people would not pay any contribution to local services. I understood that those on the hon. Gentleman's Front Bench accepted that.

John Thurso: Anybody who lives purely on asset disposals will not have an income and—the hon. Gentleman is right—it will not be taxed, but the number of people who fall into that category is extremely small.

The second change that would help our pensioners is a move to a residence-based pension, removing the link to national insurance. Above all, that would help to deal with the discrimination that exists against women pensioners, which is one of the most disgraceful aspects of our current pensions policy.

I, too, welcome the presence of the Secretary of State for Transport, not that I have ever had the opportunity of debating with him anything other than the two portfolios that we share—transport and Scotland. I
 
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welcome him today in his capacity as Secretary of State for Transport. Very often, transport is seen as one of the political also-rans. It is one of the issues that does not get up the polling agenda, so I am grateful to see the right hon. Gentleman at the Dispatch Box today.

Since I took on the transport brief nearly two years ago, one of the comments that I have frequently received—I heard it again this week when I attended the transport committee of the CBI—is a desire expressed by both business and ordinary people for matters of transport policy to be sorted out in Parliament. They want a system that is reliable, safe and affordable, and that works, and they cannot see why we spend so much time arguing about it on a party basis, instead of arriving at common-sense solutions. I therefore intend to use this afternoon to speak about transport matters, rather than other matters that have been raised. It is an extremely important issue—I believe the right hon. Gentleman and I share that view—and one that needs to be taken seriously.

As is often the case with the Chancellor's Budgets, he kept back a little gem till the end. We are getting used to that. Just when he has gone through the difficult bits with all the numbers, there is a little sparkle in one of the last paragraphs. In yesterday's statement it was in the penultimate paragraph, when the Chancellor announced free local travel on buses for pensioners and disabled people, which I warmly welcome. It has been Liberal Democrat policy for four years, it was in our last manifesto and it was a pledge made in our pre-manifesto document published last autumn, so I am delighted to see that the Government have adopted it. The Liberal Democrat Transport Minister in Scotland has already enacted it, and it is nice to see the rest of the United Kingdom catching up.

I am not surprised to see the policy popping up as a Government commitment. There is a long tradition of the Government adopting Liberal Democrat policy. It began—let me get this out of the way—in 1997, when in his first announcement the Chancellor said that he was giving independence to the Bank of England—a policy that had been in our manifesto for that election and upon which we had fought, and on which there was not a word in the Labour party's manifesto. It was an extremely sound move and one that we were happily able to applaud.

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