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Mr. Love: Can the right hon. Gentleman tell us what contribution would be made by the patient's passport that his party wishes to introduce, which would probably take in excess of £1 billion out of the national health service?
Sir George Young: It would have been welcomed by poor pensioners in my constituency who were unable to wait for the NHS to treat them and dug into their modest savings to pay for private treatment. If I may say so, Labour Members are wrong to assert that the only people who would benefit from that policy are the very well-off; that is simply not the case.
The Chancellor decided against raising tax allowances above inflation and is instead putting the money into tax credits. The House should pause and consider the practical and philosophical issues behind his decision, which I do not find easy to endorse. In the briefing that we all have today, Age Concern tells us that nearly one third of pensioners eligible for pensioner credit fail to claim it. This is not a new benefit, and there has been time for the take-up campaigns to kick in, but there is still a very low take-up, coupled with the horrendous complexity of filling in the forms and then operating the system. In today's post, I received a typical letter from the Inland Revenue. I quote:
"I am sorry to hear of the difficulties that Mrs W has experienced with her tax credit claim. Having looked into her claim, I can confirm that we have issued Additional Tax Credit Payments to the sum of £269.92 on Feb 22nd in order to prevent any further hardship."
We all have letters like that from the Inland Revenue about tax credit cases in our constituency. Of course, the claimant will have to pay back that money in the years
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ahead. The regime that the Chancellor keeps on developing has become so complicated and top-heavy that it is time to stand back and have a look at it.
When the Inland Revenue makes a mistake, it will ask the person to pay it back if they have not spotted it. How many of us who fill in our own returns will check the Inland Revenue's calculations line for line? Most of us will assume that it is a professional department and that having given it the correct information, it will provide the correct assessment. But what about the single parent who has filled in the form correctly, gets incorrectly assessed and is overpaid, and is then told that she should have spotted the overpayment and that the money must be repaid? Then the payments stop, she cannot pay the childminder and has to give up the job, and is back where she started. The House should have a serious debate about the alternative of raising the allowances, reducing the interface and streamlining and simplifying the system rather than piling extra resources into an increasingly complex scheme.
One or two Members mentioned council tax. Here we have another one-off payment to council tax payers alongside the one-off increase in grant of £1 billion to local authorities that was announced last December. What will happen next year, when the council tax payer will not get the £200 and when the £1 billion to local authorities is not repeated? It strikes me that the approach to local government finance is hardly joined up or coherent—it seems to be a rather ramshackle and unstable structure.
I want to say a word about the emergency action that the Chancellor took in the Budget. Of course, from time to time the Chancellor has to act quickly to stop an abuse, and I have no quarrel with that. However, the withdrawal, without notice, of stamp duty for commercial property in disadvantaged areas struck me as odd. The Chancellor introduced that with a great fanfare in 2003, and such inner-city initiatives take time to bed down and get taken up. The wards that the scheme applied to were chosen by the Chancellor, and there may be developers who were induced to invest and develop and now find themselves some 4 per cent. out of pocket. I hope that that does not damage the credibility of the Government's initiatives, which depend on trust and genuine partnerships with the private sector.
I want to end with three brief points on education. First, on school meals, I cannot be the only Member who has been e-mailed and written to over the weekend following the Channel 4 programmes with Jamie Oliver. There has been a very good response, and it may be that those programmes have the same impact on school meals as "Cathy Come Home" had on housing policy some 20 or 30 years ago. I was a little disappointed with the Secretary of State's response and delighted to hear my hon. Friend the Member for Westmorland and Lonsdale say that my party's response to the challenge of a policy on school meals will come out shortly and will be more imaginative than that of the Government.
Secondly, the Chancellor made a big play about deregulation in his Budget, but we heard nothing from the Education Secretary about deregulation in education. There is a real appetite on the part of teachers for less regulation and a more streamlined approach so that they can use their skills on the interface with children.
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My third point on education has not been mentioned—it concerns work force remodelling. That is an initiative due to be introduced this autumn whereby 10 per cent. of teaching time is made available to teachers for preparation, so that for one half-day per week they will no longer have to take classes. I have no difficulty with that policy, but there is real concern that insufficient resources have been given to schools to enable them to pay other people to take over the classes that the teachers will no longer operate. I read in the press a few days ago that although head teachers had initially supported the policy, they were having second thoughts because it was under-resourced. I hope that the Government will take that seriously. It is a small cloud on the horizon, but if they do not get it right, there will be serious disruption in schools later this year.
The Budget is unsustainable economically and has been unsuccessful politically. I therefore look forward to a Finance Bill introduced by my right hon. and hon. Friends in a few weeks' time which will do both tricks.
7.8 pm
Iain Wright (Hartlepool) (Lab): In my brief contribution, I want to focus on some broad macro-economic factors that the Chancellor mentioned in his Budget statement, and then to focus on matters, particularly the need for skills, that directly affect my constituents.
The Chancellor was right to outline the global competition that Britain faces. Members on both sides of the House have mentioned China and India as having the potential to become major economic superpowers in the next few decades. Economic growth rates, year on year, of some 10 per cent. in India and China and their almost insatiable demand for raw materials will naturally have profound consequences for the UK economy. I am worried that that sustained burst of demand will increase the unit cost of raw materials throughout the globe and that that, in turn, will damage the robustness of the UK economy's ability to fend off inflation in the short to medium term.
I am equally worried that the low wages offered in those countries will mean that British firms will not be able to compete. I have been told that workers in many parts of the Chinese economy are paid the equivalent of 75p a day. We cannot compete with that rate, and nor should we want to. The British economy should be concentrating on high-skilled, high-value, high-technology companies, not sweat-shop labour. I shall return to that point later.
I am confident that the structural changes to the UK economy made in recent years will enable us to maintain this sustained period of economic stability. Several factors have produced that stability. First and foremost was the decision taken in the first few days of the Labour Administration in 1997 to make the Bank of England independent. I do not wish to make petty party political points, much as I am tempted to. For example, I was impressed that the right hon. and learned Member for Rushcliffe (Mr. Clarke), who is not in the Chamber, introduced inflation targets when he was Chancellor, although the Conservative party now appears to despise targets as a means of improving performance.
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I agreed with my hon. Friend the Member for Coventry, South (Mr. Cunningham) when he said that he approved of boring Budgets. I think that boring Budgets mean economic stability, so I would rather have them than exciting Budgets that reflect boom and bust and the stop-go economy of the 1980s and 1990s. That was my experience as I was growing up in my constituency. The Conservative Government of the 1980s decimated economic activity in Hartlepool and did that again in the early 1990s, so I would rather not have lessons in economic management and competence from the Conservative party. The fact remains that only a Labour Administration were bold enough to give the Bank of England independence, which was an important building block in helping to produce a stable and prudent economy.
A second key factor that is often grossly overlooked is the decision taken in 1997 to repay a substantial amount of the national debt. The figures provided by the Chancellor in his "Financial Statement and Budget Report" last week were impressive. National debt has reduced from 44 per cent. of national income in 1997 to 34 per cent. today. Apparently we have repaid more debt in one year than the combined total of that repaid during the previous 50 years. Debt interest repayments now represent the lowest share of our national income than at any time since 1915.
The fact that our debt repayments have been substantially lowered has meant that the Government have had the flexibility and added receipts to invest in schools and hospitals. Rather than wasting revenue on loan repayments and unemployment benefits, which is what happened in the 1980s, the Government have had the foresight and ability to spend money on our children's education, our health and law and order. Surely everyone can welcome that.
These factors, among others, have meant that the Government have presided over historically astonishing economic stability and growth. The International Monetary Fund report on the UK economy this month has been cited in some quarters as evidence that all the good work done in recent years will slide into an abyss. After reading the report, however, I do not share that interpretation. I see a British economy that is remarkably robust enough to withstand the shocks and uncertainties that the wider global economy will almost certainly throw at it. As the report states:
"The fiscal and monetary policy frameworks remain at the forefront of international best practice . . . The economy remains enviably"—
I really like the word "enviably"—
That does not appear to paint a picture of a Chancellor who has squandered prudence. Instead it shows that he has put in place and consolidated long-term prosperity and stability as the centrepiece of his economic policy.
I have never delivered a speech in the Budget debate before, so I did a bit of research by looking at previous debates, especially those held in 1997 and 2001. When I read the speeches made by Conservative Members, I was struck by their almost universal mantra that we were about to embark on a road of economic doom and gloom and imminent recession. Since 1997, the Chancellor has consistently been able to make a
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mockery of such claims. I am sure that we will see with hindsight that the current claims made by Opposition Members about economic mismanagement will prove to be equally hollow.
I sincerely believe that the future of the British economy is with state-of-the-art technological companies and a highly skilled work force producing high-value products and services, such as disease-eliminating drugs arising from biotechnological advances and environmentally friendly energy sources that can be exported to the rest of the world. That is why the emphasis on research and development and science in the Budget is crucial to the long-term health of the British economy. Equally, the removal of regulation for our companies is a welcome step, and the principle that our well-run firms will be subject to less audit and inspection will go a considerable way towards ensuring that success and compliance with regulations are rewarded with freedom and flexibility.
The fact that added emphasis is being given to enterprise and entrepreneurialism is also welcome. We need to have at the forefront of Government thinking the ways and means of educating and nurturing a highly skilled work force with the capacity to produce world-beating ideas.
By chance, on the day on which the Chancellor delivered his Budget statement, I met David Waddington, the incoming principal of Hartlepool college of further education. The college has been absolutely central in my constituency during recent years in raising aspirations and increasing the number of people in Hartlepool with qualifications. However, David expressed concern over a long-term trend of skilled and educated people leaving the town after receiving a qualification to take advantage of the vibrant economy in London and the south-east. The Hartlepool economy has come a long way in the past 10 years, but I fear that a brain drain will result in fewer opportunities for prosperity in the town, which in turn will create the risk of higher dependency on benefits. Hartlepool people do not want handouts; they want the prospect of additional prosperity and stability.
There is evidence that that is happening, but I want it to go further and happen faster. The number of business start-ups in the town has recently increased massively after being decimated by the recession in the early 1990s, but we need many more businesses in my town to provide opportunities for wealth and employment creation. I urge the Chancellor to intervene, at least in the short term, to ensure that skills and qualifications obtained by Hartlepool people are rewarded with well-paid employment prospects and job opportunities in Hartlepool. We should continue to help businesses by putting in place the infrastructure necessary to compete with the rest of the country and the world, such as a direct, fast rail link to London and incentives for businesses to relocate to, or be established in, the town.
Other measures in the Budget will greatly help my constituents. The doubling of the value at which stamp duty is paid should have a positive effect on the Hartlepool housing market, in which most properties fall within the £60,000 to £120,000 price range. That will enable more people in the town to own their own homes and move further up the property ladder. I am slightly concerned that the move will accelerate still further
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housing market failure in the centre of the town relating to terraced properties, but in general, and on balance, I think that the proposal will stimulate demand.
It almost goes without saying that the extension of tax credits and help for pensioners will greatly assist hard-working families and older people in Hartlepool. The fact that the tax credits mean that a family with two children starts to pay income tax only on income above £21,200 will have a hugely positive effect on the majority—the absolute majority—of my constituents, because average earnings in Hartlepool remain below the national average.
I found a hugely important statistical table in this week's edition of The Economist showing the effects of the Labour Government's Budgets between 1997 and 2004, especially on the income of the richest and poorest in our society. It showed that the net income of the poorest 20 per cent. had increased by some 8 per cent. over that period, while the richest 10 per cent. had experienced a relative fall in their net income of about 5 per cent. I believe passionately that such a redistributionist economic policy, which flattens economic and financial inequalities in our society while encouraging and rewarding enterprise, is exactly what a Labour Administration should be pursuing.
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