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Mr. Tom Watson (West Bromwich, East) (Lab): What about interest rates?
Mr. Luff: If the Whip on duty wants to know about interest rates, I am happy to quote from Ruth Lea's pamphlet, which states that
"interest rates were falling quickly—the official base rate was down to 6 per cent. by May 1997. And yields on long-dated gilts were already beginning to fall in response to the lower short-term interest rates and the lower inflationary expectations."
Perhaps most worrying of all is our slide down the competitiveness table. The World Economic Forum and the Institute of Management Development show that we have transformed one of the most competitive economies in the world into one that now languishes a long way down the league table. It is a scandal that that has been allowed to happen. Crucially, the public finances are nowhere near as strong as they were. It is common wisdom—we all know, on both sides of the House—that a massive black hole is opening up.
The list of bodies that believe that is enormous. The Institute for Fiscal Studies, the International Monetary Fund, the Organisation for Economic Co-operation and Development, the ITEM Club, the National Institute of Economic and Social Research and the Centre for Economic and Business Research all say that there will be a big problem with the public finances after
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the coming election. It genuinely is a vote now, pay later Budget, and it is about time the Chancellor was more honest about that.
There is one thing that the Government did right, and they will be remembered for it. When the history of the Government is written, as it will be in a few weeks, it will become clear that the independence of the Bank of England was the defining moment. By that one move the Chancellor of the Exchequer succeeded in—to use his words—locking in the legacy that he had inherited. But it is an interesting question how well the Bank of England managed the policy. We do not know. Although the Bank appears proficient at the process, it has not been the most taxing time to conduct the analysis.
Sir Alan Budd, who was a member of the Monetary Policy Committee between 1997 and 1999, judged the policy development as follows:
"After the election of May 1997 we saw the establishment of the Monetary Policy Committee with the responsibility for controlling inflation and with the power to set interest rates for that purpose. That has been a brilliant success, but I want to repeat my point it was able to build on a very good foundation."
What an important point that is.
Briefly—because at least two of my hon. Friends want to contribute to the debate, although I notice no one on the Government Benches wants to do so, which is interesting—on council tax, a £200 one-off election year bribe is not good enough. Some changes to the system to provide long-term security for pensioner households is needed. I was hugely amused by what the Chancellor said about buses in the penultimate paragraph of his peroration in the Budget. He said:
"It is now time with the resources available to legislate so that in every community of the United Kingdom there is, from next year, free local bus travel for every pensioner and every disabled person too."—[Official Report, 16 March 2005; Vol. 432, c.269.]
As always with the Chancellor, it is the small print that matters.
that rather ugly modern wording—
that is, pensioners sharing in national prosperity—
The words "off peak" did not feature in the Chancellor's conclusion of his Budget, but it is an important qualification. If a pensioner's hospital appointment or doctor's appointment is at 9 am, tough. They will have to pay just the same, in the Chancellor of the Exchequer's nirvana. What does "local area" mean? Moreover, the measure does not come into effect immediately but in a year's time. Who will pay for this? A city council such as Worcester, which I know well, will find it extremely difficult to find the money to fund the scheme. It is already monstrously short-changed by the Government.
Finally, the Chancellor refers to
I have news for the Chancellor: many communities in my constituency have no buses. What good is free bus travel if there are no buses to catch? That is the real
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scandal. The money should have been used instead to develop innovative, community-based transport schemes that would benefit all elderly people without access to cars and the young people in rural England who are caught without proper transport.
I suspect that I have spoken almost long enough—[Interruption.] I am grateful to my hon. Friends for their encouragement. Perhaps they will spare me two or three more minutes on the subject of schools. I disagree about the desirability of starting school at the age of three. Yesterday in his speech the Chancellor trumpeted a 15-year compulsory education system, but I think that he is wrong to do so. The experience of Scandinavia shows that starting school later can be better for the intellectual development of children. We should be discussing raising the school starting age to six, not lowering it to three. I accept that for working mothers proper child care provision is important, but the idea that some kind of academic process begins at a very young age is outrageous. Bribing young people to stay on at school when they want to leave and get out into the work force is equally wrong. I do not share this great love affair for the 15-year compulsory education system.
Dawn Primarolo: Will the hon. Gentleman give way?
Mr. Luff: I give way to a Minister whom I greatly admire.
Dawn Primarolo: I am speechless. The hon. Gentleman read from what he claimed was source material on the economy. Given the points that he has just made about children's access to nursery education, has he ever studied any of the British or international research showing the huge benefits of nursery education to the development of young children through their entire school education, which must be good for raising skill levels? Why does he choose to ignore that bit of evidence?
Mr. Luff: I have studied some of the evidence about which the very able and talented Minister speaks. The loss of play in the early years of children's development is a matter of great concern. Children need to go to school—playschools, playgroups and other pre-school arrangements—to learn to socialise and play, and the way in which academic pressures are being forced down to a very young age group is profoundly disruptive. Academic studies in Scandinavia show that beginning the academic process later is better for children's development. Those studies are there too and I invite the Minister to look at them.
I must conclude by making a point about school funding. The Chancellor made great play of this yesterday in his speech. He spoke about the extra money that he is giving to head teachers in primary and secondary schools, and I am glad that he is finding a bit of money here and there. How much better if he had used that money to narrow the growing monstrous and unfair funding gaps between shire counties in particular and the national average. I do not deny that Worcestershire county council has had real-terms increases in school funding, but those increases are significantly lower than those of its neighbours and significantly lower than the national average, and the gap is growing.
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My constituent Helen Donovan has written an excellent letter to the Prime Minister that he should have received by now. She met him during a visit that he made to Worcestershire. He was not terribly keen to meet her, but she persuaded him to do so using her own very particular charm, and she has written him this excellent letter since. She says:
"You quoted the increased figure of £680 per pupil per year for Worcestershire children since New Labour came to office. For the same period Warwickshire has received £910, Gloucestershire £800, Herefordshire £850 and Birmingham £1,170 per pupil per year increases. Worcestershire has again fallen further behind our neighbours as well as the Shires Average payment."
"There are many cases of Worcestershire schools bordering their Birmingham counterparts, (some only 1 mile apart), who receive £750 per child less per year in funding, and yet who have a large percentage of their pupils who actually live in Birmingham. So they live in an LEA who receives the extra funding, but go to school in an authority that doesn't."
How much better it would have been if that money, which was used to get cheap headlines yesterday, had instead been used to address that fundamental unfairness.
There is no doubt this Budget is deeply flawed in its detail and in its strategy. It is indeed a vote now, pay later Budget.
4.39 pm
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