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Jonathan Shaw (Chatham and Aylesford) (Lab): What about inward investment?

Mr. Hoban: The hon. Gentleman asks about inward investment, but he forgets that a lot of last year's inward investment flows fall from the merger of the British and Dutch branches of Shell. The business decided to locate in the Netherlands rather than the UK, because the tax regime in the Netherlands made it attractive to do so there.

The City of London corporation's report on the global competitiveness of the financial services sector highlighted the increasing importance of the Government's decisions on personal and corporate taxes for Britain's competitive position. The head of tax at PricewaterhouseCoopers said:

Labour Members may think that that is scaremongering, but Colt telecommunications made an announcement last month to explain why it would move its corporate headquarters overseas. It clearly identified:

The tax regime in the UK has made it unattractive for some businesses to remain in this country, with an impact on corporate taxes, national insurance, employment taxes, pay-as-you-earn, VAT and other duties.

The Chancellor, true to his Labour heritage, is proving himself to be an old-fashioned Labour Chancellor—taxing and borrowing more to pay for more spending. As my hon. Friend the Member for North Essex said, he needs to learn that in an increasingly global economy, higher and more complex taxes drive businesses from the UK, thus harming our economy and threatening future funding of public services. There is nothing in the Budget to demonstrate that he understands the challenge that we face. Indeed, the tax burden is forecast to rise by £5.5 billion, not to fall. When the competitive threat is pointed out to the Chancellor, he is astonishingly complacent about it.

In the booklet about the future of financial services in London published with the Budget, the Chancellor boasts about the cut in corporation tax, but he does not tell readers that other countries have been cutting their
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corporation tax rates as well. That is why we now have the 10th highest rate of corporation tax among our competitors, rather than the 10th lowest, which he inherited from the Conservative party in 1997. On taxes, the Chancellor has failed to learn from his mistakes. He is stuck in the past, failing to act on the realities of a global economy, by not creating a tax system fit for the 21st century.

This is the Budget of a Chancellor who is so dogmatic in the pursuit of his own ambitions that he ignores the evidence. He is stuck in the past, failing to learn from his mistakes, failing to adjust to the global challenges from India, China and eastern Europe and failing to tackle the skills issues and deal with our increasingly complex tax base. High increases in spending have not led to the step change in public services that our economy and our country need, because reforms have been blocked. Money has been wasted, and to finance that spending he has taxed so much that our competitive position has been eroded. He has spent too much, taxed too much and borrowed too much. He is the road block to reform.

9.44 pm

The Financial Secretary to the Treasury (John Healey): This has been a shortened debate, but in a series of time-limited speeches—there have been 15 from Back Benchers on both sides of the House—there have nevertheless been some important contributions. The themes ranged widely, but at the heart of the Budget and this debate on it, is the economy. As the Chancellor reported in the Budget, the British economy is stable, strong and strengthening. In each of his 10 Budgets, he has been clear that his first priority for the UK economy has been, is, and will remain, stability. The decisive macro-economic reforms that he introduced in 1997 to monetary policy, to fiscal policy and to the planning and control of public expenditure were designed first to establish and then to lock in stability and steady growth.

For 50 years, Britain's economy was prone to high and volatile levels of inflation. For 18 years under the Tories, until 1997, Britain was the least stable of the major developed economies—first in, last out, hardest hit by the recessions and world economic shocks. In contrast, in the Budget last week, the Chancellor reported that we have met our inflation target this year and in every year since 1997. In just a decade, long-term inflation expectations have virtually halved to 2 per cent. Today, long-term interest rates are the lowest that they have been for 40 years, at just 4 per cent. He reported that inflation is currently 2 per cent., which is on target. He reported that, in the latest quarter, the UK economy is growing at an annual rate of 2.5 per cent., which is on target. He reported on broad tax revenue projections since the pre-Budget report, which are on target, and he reported on public finance figures against our fiscal rules, which are on target.

No wonder we heard so little from the Tories on the economy in this Budget debate and no wonder the Leader of the Opposition responded to the Chancellor with personal attacks and not criticism of policy—a mistake that the hon. Member for Fareham (Mr.   Hoban) repeated tonight. They have nothing to
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say of their own on how to reinforce the science, innovation and research base of Britain, how to tackle the threat of climate change—

Mr. Jenkin: Will the Financial Secretary give way?

John Healey: I will later. They have nothing to say on how to make Britain a leader in the development of new energy technologies or how to remove and reduce the scar of child poverty in our country. Many of the contributions tonight did not add much to that. I will give way to the hon. Gentleman, but I will come to the remarks that he made if he and other hon. Members allow me.

Mr. Jenkin: On science, now that those in the civil service Box have had a chance to respond to the speech   of my hon. Friend the Member for Havant (Mr. Willetts), will the Financial Secretary explain what has happened to the manifesto commitment to spend £250 million on new laboratories in schools?

John Healey: If the hon. Gentleman looks at the public finance figures, he will see that, by 2007–08, we will be spending £6.4 billion in capital investment in our schools. A high priority for that investment is science funding and science labs.

I will talk about the speeches from Front Benchers first. The hon. Member for Brent, East (Sarah Teather) urged us to have a debate on policy priorities and to deal with the hard facts. There is nothing vague, as she put it, about the Chancellor's Budget commitments on education. First, there will be extra cash going directly to all head teachers from next month, with more to come next year. Secondly, there are hard figures on boosting the capital spending from £5.6 billion in our schools this year to £8 billion a year by 2010–11, matching in five years for our state schools the capital spend per pupil currently going into private schools. The hon. Members for Brent, East and for Havant (Mr. Willetts) asked about the new money that will go directly to schools. There will be £220 million in the next financial year and £365 million in the year after that to boost personalised learning. More will go to schools with the greatest need and those with the pupils who are the lowest achievers.

One of the most important things that the hon. Member for Havant tried to do in his speech was to make clear the Conservatives' approach to the Chancellor's commitment on schools, but we still need clarity. As my right hon. Friend the Secretary of State said, when the shadow Chief Secretary to the Treasury was asked on Budget day about the implication of the third fiscal rule that the Conservatives had, she confirmed that the Tories would spend less on education than the Chancellor set out. When the Conservative Front-Bench spokesman, the hon. Member for Wycombe (Mr. Goodman), was asked during the winding-up speeches in the next day's debate:

he said:

I welcomed what the hon. Member for Havant had to say about schools, as far he could. He said cautiously and vaguely that he was happy to sign up to the
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aspiration. However, just to be clear, will he match the long-term pledge to raise the level of funding for pupils in state schools to that for pupils in private schools? Will he be clear that he will back our immediate commitment to do so on capital spending for schools by 2010–11, or does he maintain the policy of putting tax cuts first?

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