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Mr. Maude: I am listening carefully to the hon. Gentleman's thoughtful and reflective speech. Does he recollect that, whatever the interest rate at the time, successive shadow Chancellors always called for it to be 0.5 per cent. lower?

Mr. O'Neill: I take the right hon. Gentleman's point. We can arm-wrestle over interest rates, but we should not speculate about currency. Although the two are linked, they are not inextricably intertwined in the context of political debate. The point that I am trying to make is that it is easy for peripheral parties to talk flippantly about aspects of economic and monetary policy, because nobody gives a damn about what they say or pays any attention to them. It is dangerous continually to carp at and criticise the way economic forecasting is done, particularly as the general thrust of these forecasts seemed, by and large, to be accurate.

Mr. Mark Field (Cities of London and Westminster) (Con): I entirely accept the hon. Gentleman's view that it would be wrong to suggest that there was dishonesty on the part of the Treasury, and I hope that no sensible commentators in the House would do so. However, he will accept that much of this is down to interpretation, and the Chancellor's interpretation is that there will be substantial growth rates in the years ahead. He has been proved right about growth rates in the past, just as many of us have been proved wrong. Equally, does the hon. Gentleman accept our concern that if the economy were to continue growing as it has in recent years over the next three or four years, along the lines that he has suggested, that makes a mockery of the interpretation, or perhaps misinterpretation, of the so-called £35 billion of spending cuts that would need to be made according to the projections in our own economic outlook?

Mr. O'Neill: On growth rates, we have been successful in growing at a time when the growth rates of most of
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our trading partners and competitors have not been as good, although they are beginning to improve at an encouraging rate. That tends to suggest that growth rates, coming from a firmer base, will reflect a healthier European and world economy in which we will be able to play a substantial role. In that sense, we contend that our figures are feasible within the constraints that we have. The hon. Gentleman and I are both talking about guestimates, but he is using conservative figures, with a small "c" and a large "C". We were able to extract from the hon. Member for Havant (Mr. Willetts) today the fact that spending would be in the order of £35 billion less than what we would do in the way of increases over the suggested period.

Mr. Bercow rose—

Mr. Michael Fallon (Sevenoaks) (Con) rose—

Mr. O'Neill: I will take an intervention from the hon. Member for Sevenoaks (Mr. Fallon) and then I had better try to make some progress, although I know I have plenty of time.

Mr. Fallon: I am grateful to the hon. Gentleman, and we are enjoying his speech. He is right to say that one should not carp where the Chancellor has been proved to be right—and he has been right on economic growth. However, there is one matter on which he has been consistently wrong for more than four years, and we have wrestled with it on the Treasury Committee—his forecast for tax revenues. We are not accusing him of dishonesty, but if he is wrong because he is overly optimistic or because he has been ill advised, it is a very serious matter that, four years in a row, the tax revenues have not come in as high as he has forecast.

Mr. O'Neill: They have not. As Robert Burns would say:

      An' downa be disputed".

I suppose that I shall have to write that out in longhand for the Hansard writers.

I take the hon. Gentleman's point. We must recognise, however, that, for example, there was a late surge in tax revenues in this financial year, that such things are sometimes difficult to forecast, and that, as the Chancellor said yesterday and as has been repeated fairly widely in the press, one advantage that the Inland Revenue has over most of the rest of us is that it has inside knowledge of the operation of companies, and there does seem to be a healthier mood. The figures offered by bodies such as the Engineering Employers Federation, the banks and the energy players tell us that many major contributors to revenues are showing far bigger prospective returns than they have done for some time. Therefore, in the next 18 months to two years, there is every prospect of sustaining this growth. Whether we can go beyond that, I do not know, and it would be a very rash person who tried to do so. All that I am saying is that so far we have had growth.

We have not had spot-on figures on tax revenues in every year, but equally we have not had anything like the deficits that occurred prior to 1997. As I am sure the
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hon. Member for Sevenoaks is aware, those would have been of the order of £90 billion in 1997.

Mr. Bercow: I am sorry that the hon. Gentleman is standing down at the general election; it was a great privilege for me to serve under his excellent chairmanship of the Select Committee on Trade and Industry in the last Parliament.

Given the growth rates of which the hon. Gentleman is inordinately proud and the point that we have reached in the economic cycle, does not he think that it is a matter for concern that the Government are sharply overshooting on public borrowing, and that that is all the more serious in light of the Chancellor's worst policy decision, his best being the independence of the Bank of England—the decimation of the British savings industry?

Mr. O'Neill: I thank the hon. Gentleman for his compliment. I enjoyed working with him on the Select Committee, where he was an assiduous colleague and, in the non-partisan atmosphere, followed the evidence—something that he does not always do when he is cast in a partisan role on the Conservative Benches.

We are not yet at the point of overshoot; we are still within the parameters. Let us not paint too gloomy a picture. We may be hanging on by a thread, but hanging on we are, and that must be taken account of.

Mr. Bercow rose—

Mr. O'Neill: Did the hon. Gentleman make a second point?

Mr. Bercow: I am grateful for the opportunity to repeat it. I asked whether the hon. Gentleman accepts that the treatment of the British savings industry, in the form of the abolition of the tax credit on dividends, was the Chancellor's single worst decision.

Mr. O'Neill: Well, it has not harmed the profitability of some of the major banks, and it has added considerably to Government revenues at a time when it had been argued that there was a gap—

Mr. Bercow rose—

Mr. O'Neill: I do not intend to sustain this debate, because I am talking about the 2005 Budget, not the 1997 Budget. All I would say is that this was an area in which the taxman's hands had never been dirtied, and the Government chose to go into it. It was associated with other difficulties in the pensions industry. It could be argued that the cap on pension contributions was an equally significant factor in the medium to long term, in that companies may have made contributions to works pension schemes and the like that they did not have to make, because although the funds were oversubscribed, the cap was probably sustained for an unduly long period. But I do not want to spend too much time drilling down into the last decade of British economic history.

We are under no illusions that our trading partners and competitors have not been buying from us in the way that we should like. Britain has been at a
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disadvantage among players in the international economy as a result of the world recession, yet we have been able to keep reducing unemployment and to keep growing, with the prospect of future improvements. However, those are no grounds for pre-election largesse on a scale that Governments of all parties have previously indulged in.

One matter in which we can take some pride is our unwillingness to increase direct taxation. I know that there have been stealth taxes, but before 1997, the then Chancellor raised them to an art form from which my right hon. Friend the Chancellor learned some lessons. However, there are occasions when taxes, even stealth taxes, must be mitigated, and the handling of the council tax for pensioner households this year is a significant and helpful advance. More than 10,000 pensioner households in my constituency will benefit.

The grey vote is an element of the electorate that frustrates all politicians because we cannot satisfy it. At a recent council election in my constituency I was talking to a retired man who told me that he was paying more in council tax than he had paid in mortgage repayments prior to clearing his mortgage. In some ways that is a meaningless statistic, but it is important to him and an important fiscal concept. I was not slow in telling my colleagues about that. They lost control of the council at the election, but have since regained it and are doing rather well. They took account of the cavalier approach to local taxation of some local authorities, which, if the Government say they can increase it by 5 per cent., shamelessly increase it by 4.9 per cent., regardless of the consequences. That is dangerous, and more astute and prudent councils are learning to avoid doing that. There is a pressing social problem of elderly people on fixed incomes paying a disproportionate amount of their income in council tax, so the Chancellor's move is welcome and I hope that it will be sustained.

When the Government addressed fuel poverty, they continued to honour their commitment and increased the winter fuel payment. I hope that that will happen with council tax. However, it is understandable that no Chancellor will commit himself to unlimited consequences. Historically, social security payment rises are announced in the autumn statement, so we must wait until then to find out whether it will continue.

I am pleased that the winter fuel payment has been sustained at £200, and I hope that the £150 will be subject to adjustment. Some of us question the profits made by British oil and gas companies, but it is difficult to establish how much of those profits comes from activities in the North sea, and whether there is a case for a windfall tax. The early payment of corporation tax by those companies will make an impression on their budgets and should provide elbow room for the Government to help the fuel poor.

I am not sure about the terms of the scheme for free bus travel for pensioners. The Liberal Democrats introduced that in Scotland, but the scheme there is half-baked. Having reached the age of 60 a few weeks ago, I obtained my over-60s bus pass, but travel is free only after 9.30 in the morning. I am not sure whether the largesse of the Scottish Executive extends to funding it beyond that, but the scheme keeps buses on the road for
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the whole day. I wish that more over-60s went to discos and late-night drinking facilities in Edinburgh, because we might then have buses after 7 o'clock at night. One problem with the scheme is that it is fine during the day, but buses after 7 o'clock at night are not as frequent as we want. Perhaps I am being unreasonable and perhaps the grey vote element is coming out in my thinking. However, for those areas of the country that do not have concessionary fare schemes for the elderly, the Chancellor's announcement is particularly worth while.

It is interesting that after more then 30 years we are beginning to consider raising the school-leaving age. The Chancellor did not expressly refer to that yesterday, but his attempts to provide financial support and assistance for young people who stay at school after 16 suggests that the ground is being prepared for raising the school-leaving age. I do not want the position here to be like that in Germany, where youngsters go to school at the age of 6 or 7, leave at the age of 19, spend five, six or seven years acquiring a degree and a diploma, eventually join the labour force at 29 and expect to retire within 30 years. That has been a problem for the German economy, but we ignore at our cost the possibility of extending education provision in this country. One of the great achievements of the past eight years has been the extension of nursery care and pre-school facilities and the inventiveness with which we have considered how to accommodate and educate our teenagers. However, there are difficulties. I was a teacher when the school-leaving age was raised in the early 1970s. It was done speedily and thoughtlessly, although it was well intentioned. It did not carry the teaching profession with it and there were not sufficient resources. It improved the life chances of some youngsters but caused problems in the education system. The rather cautious way in which the Government are approaching the matter now—providing money for financial assistance and changing course content and the nature of the education—is important. The way in which we educate our young people will enable us to take advantage of the real economy.

One problem for the Treasury is that we tend to spend a lot of time on the fine detail of tax and spend but not on the generation of revenue. It is important to give proper weight to the requirements of a knowledge-driven economy, and it is encouraging that the Budget gives proper weight to technology transfer. That has been a vexed question. The Government made a bold stab at trying to get good ideas out of the laboratory and into the workshop and production plant, but the definition of a profitable business and the treatment of capital gains on the shares that were created by spin-off companies were not successful. I welcome what I hope will be the last, and a successful, stab at getting it right.

We have lost out during the past year or 18 months in the number of spin-offs that we could have had. We have the frustrating situation in the United Kingdom of publishing more accredited research papers than almost any other developed industrial nation. Excluding the United States, our higher education system provides more serious research than any other, and often at lower cost. That research is rarely taken on to the patent stage, so we miss out in several areas of the knowledge-driven economy. Therefore, it is important that the Chancellor has looked again at the issue to get the structure right. If we can create the right climate for biotech work and
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stem cell research, and if we can develop new drugs and promote medical advances, that will form one of the economic cornerstones of our future prosperity.

I welcome the way in which the Budget was presented, and the balance that it struck. I listened with ill-disguised incredulity, therefore, to the hon. Member for Havant going on and on about the problems with the child tax credit. Some difficulties were experienced at the beginning, and they were dealt with in a ham-fisted way, but in my constituency there has been a sizeable reduction in the problems with overpayment followed by clumsy retrieval. I welcome the fact that my right hon. and hon. Friends on the Front Bench have not lost heart and have continued to improve the child tax credit. At one time, my constituency had a long-term unemployment rate of 20 per cent., so it is pleasing to see   how many families have experienced a dramatic change in their circumstances as a consequence of encouragement through the tax and benefit system to take up employment.

If Bill Clinton said anything that is worth repeating, it is that we should give people a hand up, rather than a handout. The reward for employment is directed at those who are in the most accessible, and therefore most poorly paid jobs, and they are the ones we have to keep faith with and keep encouraging to stay in work. The kind of work they do is often interrupted, because it is cyclical. At some times of the year, they are incredibly busy, and at other times rewards are scant. That leads to difficulties with the child tax credit, so we need to make it clear that greater sensitivity should be shown by the tax authorities. They need to take a more relaxed attitude towards repayment. We need not go as far as writing off overpayments, as has been suggested, but we could extend the period of repayment and retrieve the money more gently. The problem often affects people who have incredible difficulties making ends meet and organising their lives. For them, getting the kids fed and to school and then getting to work are three major tasks before they even start work. We have to persist with the child tax credit and improve it for far more people.

Pension credit also has to be continued. Those who wish to modify it or get rid of it must have been deaf to the stories that I used to hear from people with a nugatory pension from a badly paid job, or from those who had saved a wee bit, or had been made redundant at age 63, or who had bought their council house. By their lights, they had been careful and astute in handling their money, and they resented being penalised by the benefits system. Those people felt hard done by and isolated by the brutal cut-off of the poverty trap, and we have attempted to change that. The issue has not been resolved completely, but we should encourage the Government in the right direction, not expose them to the carping criticism that we heard from the hon. Member for Havant this afternoon. He is an agreeable man, and he always tries to sugar the pill, but he cannot resist the political dig. I always feel that he is trying to take us back to the dark days of the 1980s, when the leaderene—his goddess—was in charge.

I am coming to the end of my speech, because I realise that many of my colleagues wish to speak—at least, on the other side of the House. However, this will almost certainly be the last speech I shall make in a Budget debate, so I shall share a memory of the dark days of opposition. I used to sit, often late at night, with
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John Smith and my right hon. Friend the Chancellor. John Smith would bang on about the responsibility of a Labour Government to combine economic efficiency with social justice. It has been a great source of pride for me as a Member of Parliament that we have been able to fulfil John's ambition. Over the past eight years, we can take great pride in the reduction in unemployment, the maintenance of low price inflation, the sustaining of economic growth and the ability to distribute the rewards of those efforts to achieve more justice and fairness in our society, which were missing in large measure for a long period before. We can commend my right hon. Friend the Chancellor on this Budget and previous ones, which have helped to achieve those objectives, and we can use this Budget as a springboard to another period of Labour government after the election, whenever it is held. It may be only a few Thursdays from now.

3.27 pm

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