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Mr. Swayne: Will the hon. Gentleman give way?
John Healey: If the hon. Gentleman will forgive me, there are other hon. Members on both sides of the House who made contributions and I want to pay tribute to them.
The hon. Member for Boston and Skegness (Mr. Simmonds) criticised the Government on the management of the economy and jobs performance, despite the fact there are 2 million more jobs in the British economy than there were in May 1997. May I ask him to take care? Unemployment in his constituency is down by 673 since the last election—150 more than his majority.
The right hon. Member for North-West Hampshire (Sir George Young) made a curious plea at the outset for more bullet points in the Budget. He then went on to suggest that the standard rate of income tax is the thermometer by which the Budget and the Government are judged. May I remind him that the Chancellor's Budget last week raised the child tax credit? Also, as a result of the announced rises, the new system of tax credits, offsetting income tax liabilities, means that the effective rate of income tax for a family with two children, collectively earning £25,000 a year, is 6 per cent.—not 22 per cent., which is the basic rate of income tax, but 6 per cent. The effective rate of tax for a family on £30,000 with two children will be 10 per cent.
The right hon. Gentleman also expressed concern about higher spending on the NHS being eaten up by increases in the drugs budget. Efficiency savings in the drugs budget last year led to savings of £370 million, and for this year, next year and the following years the target is for efficiency savings in the drug purchasing budget of £1 billion.
The hon. Member for Ruislip-Northwood (Mr. Wilkinson) made a reflective but characteristically right-wing speech. As he considers leaving the House, which he entered in 1970, we wish him well. I am sorry that
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he did not find the Budget exciting, but as the CBI said, it was a measured Budget and in many ways provides the continuity and stability that the British economy needs. The Chancellor has made it clear that he will do nothing to put that stability at risk, but the further challenge is to lock in our economic success and stability for the future. That means securing the high levels of capital investment, innovation and science, technology, business support and skills that our economy needs for sustained improvement in productivity and prosperity.
Let us look at the shadow Chancellor's plans. The medium-term expenditure strategy is the basis for his economic credibility. In that strategy, he said that he had
"agreed with my Shadow Colleagues that the baseline for spending across all of these departmental budgets will be 0% growth for the first two years except for schools and the NHS . . . across the cycle, public spending will grow by about 1% more slowly than the Treasury view of trend rate of nominal GDP growth".
A cash freeze means that cuts will be necessary from day one. We should take the shadow Chancellor at his word: a cash freeze imposed across Government on all Departments apart from those he specifically excepted. That means cuts not just in the essential public services on which many people depend, but in the investment essential to secure the long-term stability and success of the economy—in skills, training, science, research, business support and enterprise.
When the shadow Secretary of State for Education and Skills was asked by the Secretary of State if he would match our extra spending on skills, modern apprenticeships, further education and Sure Start, the hon. Gentleman said, "Yes"—not from a sedentary position; he rose to the Dispatch Box to say, "Yes". The House heard one of two things from the shadow Secretary of State at that point. Either we heard a new contradiction and confusion about what the Tory Front-Bench team will spend and what it will cut, or we heard the shadow Secretary of State for Education and Skills make a new spending commitment that the shadow Chancellor has not made. I invite the hon. Gentleman to confirm whether the shadow Chancellor has agreed to the announcement that he made at the Dispatch Box this afternoon. Yes or no?
Mr. Collins: Yes, the shadow Chancellor agreed to what I said. What my right hon. Friend said after the publication of the James report overtakes and replaces what was said at the time of the quotes the Minister used. I suggest that he gets his Labour party research officers to update their files.
John Healey:
This is an interesting conclusion to our debate. It takes the Tory spending plans and their whole claim to economic credibility further into the realms of fantasy—[Hon. Members: No, no."] It does, because it means that the year-on-year cuts and the £35 billion that the shadow Chancellor is committed to achieving must come from less and less credible sources, from fewer and fewer areas of Government spending. If the Tories want to be taken seriously on that, they must explain where they will make the year-on-year cuts in
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our spending plans to find the £35 billion public investment cuts that the shadow Chancellor has confirmed and described as vast figures.
Mr. Swayne: The hon. Gentleman need not speculate; all he need do is read the book—it has all been published in the James report.
John Healey: Is that the same James report that double counts the £21 billion that we have already set aside and plan to reinvest under the Gershon review? Is that the same James report that claims that more than £600 million can be saved by abolishing the strategic health authorities, when the cost of running the SHAs is only £130 million? Is that the same James report that claims that £100 million a year can be saved by privatising the driver, vehicle and operator group test, when that was privatised by the Tories in 1996? Instead of adding to, that undermines the credibility of the shadow Chancellor and a future Tory Government.
Let us be clear. The shadow Chancellor has said:
"Our plans provide the ability over a six-year period for us to be spending about £35 billion less per year in the sixth year than Gordon Brown's plans provide for".
That means year-on-year cuts in spending plans from year one. Based on the shadow Chancellor's own figures, under his plans there would be £7.5 billion in cuts next year; £13 billion in cuts the following year; £16 billion the year after; £22 billion the year after; £27.5 billion the year after; before reaching £35 billion after six years. That is the reality of what this country would face if we get a Tory Government committed to that sort of scale of cuts.
Instead, the Budget is built on the strength and stability in the economy. It strikes the right balance between tax cuts that are affordable, investment that is essential and stability that is paramount throughout. It is not a give-away Budget—in fact, there is a marginal tightening of the public finances, as several hon. Members have recognised in their speeches—but it is a pre-election Budget: it sets out the choice facing people if and when the Prime Minister calls an election.
People have a choice to consider: the track record, priorities and experience of 18 years under the Conservatives and eight years with Labour. A period under the Conservatives when inflation was 6 per cent. on average; a period with Labour when it has averaged 2.4 per cent. A period under the Tories when interest rates averaged 10.5 per cent., and with Labour less than half of that. A period under the Tories when mortgage rates for families averaged 11.5 per cent., or a period with Labour when they have averaged 6.1 per cent. for eight years.
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Since 1997, while 2 million children and almost 2 million pensioners have been lifted out of the condemnation of living in absolutely poverty, we have seen living standards rise, on average, by 3 per cent. each year, and Britain today has the best combination of low inflation, high employment and rising living standards for a generation. There will be a choice at the next election: a choice of Labour with more help for pensioners, children and working families, with most help targeted on those who need it most; or the Tory party, with a threat to tax credits and the pension credit. We know from the past that the Tories leave poor, low and middle-income families worse off.
The choice is between a Labour party and Labour Government who will continue to invest in essential public services and to meet the long-term economic challenges that Britain faces, or a Tory party that is pledged to spend less in each and every year and to cut £35 billion from the public spending plans and from the investment that we need for our economic future. The choice is between a Labour Government who, for eight years, have run the economy to provide 2 million more jobs in Britain, 300,000 more businesses, 150,000 more self-employed people and 1.5 million more home owners; or a Tory party that is pledged to make the same short-term decisions and the same mistakes with the economy as they made before. The Tory party risks returning Britain to the stop-go economy that we saw before—the stop-go economy that brought to British families higher mortgages, higher inflation and higher unemployment. I end, as did the hon. Member for Rayleigh, by quoting his leader: "Bring it on."
It being Ten o'clock, the debate stood adjourned. Debate to be resumed tomorrow.
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