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Dr. Vincent Cable (Twickenham) (LD): It is a privilege to follow the right hon. Member for Darlington (Mr. Milburn), who is a former Treasury Minister and therefore speaks with some authority on these subjects. I was disappointed that he said nothing about a subject that he knows even more aboutthe national health service, on which the Budget has been remarkably silentand I want to put a specific question to the ministerial team.
All hon. Members are worried about the implications of the NHS funding crisis, and I want to make a specific point to which the Minister may be able to reply by 10 o'clock. One of the Government's great achievements in health has been the roll-out of cancer screeninga major challenge to which there has been a huge response. The next step, which was to start in three days' time at the beginning of the financial year, was to begin a programme of bowel cancer screeningssomething long awaited by people in the cancer campaigning world. Stories have been reported in the press and to me by a leading charity in the field that, at the very last moment, the programme has been pulled because of financial difficulties in the Department of Health. I wonder whether the Minister could set my mind at rest on that issue this evening.
Mr. Willis : Does my hon. Friend share my concern that, at a cancer briefing this morning, the Minister responsible announced that the bowel cancer programme would be rolled out from Rugby, where an existing programme has been in place for the past five years, yet not a single other roll-out place was named? Is that not highly cynical?
It is because, as my hon. Friend implies, the pilot schemes have been run already and have proved highly effective, but what had been promised was a universal scheme, which now seems to be in the process of being abandoned.
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I congratulate the Conservative spokesman, the hon. Member for Rutland and Melton (Mr. Duncan), on his emollient and consensual approachat least, he started like that. He is someone who describes himself, like some of his colleagues, as a fellow liberal. I am not sure how far up the Back Benches that view is to be found, but it is a good start, and perhaps we saw a new style of debate today, which has been characterised by one wag as the debate between new Labour and blue Labour, although I do not know how the hon. Gentleman positions himself.
The overall Budget debate has been somewhat frustrating, because we are essentially dealing with two different issues, one of which is the Government's overall economic performance and the other is the Budget, which has become a somewhat ritualised event. Most of the decisions have been made in the spending review and the pre-Budget report. The sum total of what is proposed amounts to 45 measures, costing £380 million. That is less than one tenth of 1 per cent. of all Government spendingwell within the margin of error of any Government forecast. We are talking about a series of changessome of which are very welcome and sensible, such as the spending on schools and sciencethat have absolutely no impact whatever on the overall macro-economy.
On the macro-economic picture, the view that I have taken ever since I took on my current role is to acknowledge the positives, and it is certainly still true that we have steady growth, low inflation, rising employment and fairly low unemployment, although unemployment has now risen for 12 of the past 13 months, which may be the beginning of an ominous trend. However, the Government tend to spoil their own very positive narrative with endless spin, hype and exaggeration. One little phrase always creeps into the Budget statement that reveals a lot: it is a lovely line about how they have the best period of steady growth, going back to 1700, or the Tudorsor the Normans, I am not sure. That nice line is true in one sense, but it is produced by a sleight of hand by using quarterly data.
If we use annual data, we could argue that after 1949, for example, there were 25 years of steady growth. It is worth reflecting back on that period, because many of the strengths and weaknesses of the current long boom were apparent then. As some of us dimly remember from our childhood, it was a period of steady growth and rising living standards. Many of our parents were for the first time enjoying consumer durables bought on hire purchase. It was also a period of low unemployment, low inflation and general optimism; however, there was a fundamental problem that we see reproduced today.
Back then, the structure of the economy and of demand was very unbalancedit was led by consumption. Of course, in those days such imbalance appeared in the form of crises, because consumption spread over into imports and produced balance of payments crises. That no longer happens because of the liberalisation of capital markets; nevertheless, we have the same problem today. Consumption has grown by 3 to 3.4 per cent. a year since the mid-1990s, while the economy as a whole has grown by about 2.8 per cent. As a result, household savings ratios have fallen from 10 per cent. to less than 5 per cent., and the end product is a growing problem of personal debt. The Minister will
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have seen this morning's report from the Financial Services Authoritya very conservative regulatory body not given to hype or outragewhich points out that some 2 million families, over and above the 500,000 who have already defaulted on debt, are on the edge and in considerable difficulties in terms of managing domestic debt problems.
Figures published by the Organisation for Economic Co-operation and Development a few weeks ago point out that the comfort that we derive from low interest rates is illusory. Because of low interest rates, people are borrowing very heavily, which means that principal repayments are growing much more than they did in earlier generations. People are also taking on credit card debt, which has to be serviced monthly. The OECD concluded that the share of household income being spent on debt servicing is approaching 20 per cent. The same was true in the early 1990s, when the last economic boom crashed disastrously under the previous Conservative Government. In many respects, the conditions today are very similar, and we can expect a painful correction in the years to come.
The other parallel with that period is also very striking. Throughout the 1950s and certainly in the 1960s, as we moved into the Wilson era, politicians talked endlessly about productivity growth and science, because in comparative terms there was an underlying weakness in the UK economy. That weakness was very apparent, because Germany, Italy, France and Japan were recovering from the wartime period. It is less apparent now because the real breakthroughs are occurring in non-G7 countries, but the problems are still very real.
As quite a few economic analysts have pointed out, in the past few years the British economy's productivity growth has fallen. A report published this morning by the Economist Intelligence Unit shows, for example, that Britain is now the seventh biggest recipient of inward foreign investment; last year, it was the fourth biggest. That is very strange and difficult to explain. Britain has a very open economyunlike France, Italy and Spain, we have no problem with foreign acquisitions and mergersyet foreign investors are very reluctant to come here. According to the EIU's analysis, a combination of very complex business taxationincidentally, the corporation tax threshold was not raised this year, so more companies have been dragged into the higher ratesregulation and poor infrastructure is having a cumulatively damaging effect on the Chancellor's claim that he is overcoming problems of low productivity.
On the Budget's specifics, one has to judge them on whether the Government are meeting their declared fiscal objectives in terms of the golden rule and the debt rule, and the Government themselves say that they are. Sadly, although the fiscal rules were a good idea and a very good way of restoring confidence in public finances, they have been discredited by the Government's marking their own exam papers in a favourable way. I acknowledge that the Government propose to take the big and positive step of introducing legislation to make the Office for National Statistics more independent, but there is another part to all this that is not happening. There should be a much greater degree of independence in the auditing of the Government's own accounts. An
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independent examination should be made of their assumptions and forecasts, and of whether they have actually met their rules. That would be a small step, but it would do an enormous amount for Government credibility so I cannot understand why they do not take it.
Because the Government have not taken that step, many little details in the Red Book raise suspicions about what they are trying to do; for example, in 200708 and beyond there is no contingency fund in public spending. The contingency fund was extremely important for funding the Iraq war, but it now appears to have disappeared, which implies a highly optimistic approach to future budgeting. Perhaps the Chief Secretary can explain what has happened.
There are some optimistic assumptions about the clampdown on tax avoidance. I am all in favour of tougher measures to clamp down on tax avoidance and I wish the Government well in their efforts, but they assume that they will achieve a 100 per cent. success rate and raise an extra £1 billion a year from those measures. Have the proposals been independently audited? Has anyone in the tax industry been able to confirm that the figures are meaningful and sensible?
Items on the spending side need to be questioned, too. During his Budget statement, the Chancellor said that an additional £970 million would be spent on public housing through shared ownership schemes, which at the time I thought was positive and encouraging. However, although I and other people have searched through the Red Book, there is no reference to that sum anywhere. Shared ownership is difficult to operate, but it appears that the figure simply reflects commitments made last year and the year before, so it is not a new commitment at all. Can the Government confirm that?
Various other spending items need some explanation. Perhaps the Chief Secretary can advance it. For example, it is stated there will be a 5 per cent. real cut in the spending of the Treasury, the Cabinet Office and the Department for Work and Pensions. I am all in favour of tightening up discipline in spending Departments, especially if they can reduce headquarters overheadsthe principle is splendid. However, when Gershon reported just over a year ago, he argued that any cuts beyond 2 per cent. a year would be likely to result in a deterioration of service provision. How do the Government square that with their proposals?
We already know from our constituents who are grappling with the problems of Jobcentre Plus that when they are put out of work it can take weeks to receive an answer to a call or to regularise their payments. There are already serious problems in the DWP. We know from National Audit Office reports that the Inland Revenue is falling short in its revenue collections by about £3 billion a year because it cannot get codings right. How taking out large swathes of capacity in that department will help is not clear. Where will the real savings of 5 per cent. come from?
I have questions about the £30 billion that the Government plan to raise from privatisation, or asset sales. I have no problem with the principle, but the Government have already experienced considerable difficulty in realising maximum value for the public from asset sales. I closely followed the Qinetiq deal, where clumsy intervention by the Treasury, pushing the
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Ministry of Defence into selling the assets prematurely, resulted in the taxpayer receiving only a fraction of what should have been achieved by the sale. One has to be a bit sceptical about whether those sums will be realised.
What guarantees will underpin asset sales? One of the biggest sales will be shares in British Energy. In principle, there is no reason why there should not be a private shareholding in the company, but if I were buying a share in British Energy I should want to know about its long-term business. The only way that can be secured is if the company is guaranteed an expanding new nuclear power programme. It is difficult to see how privatisation can proceed without the kind of guarantee about which the Government claim to have an open mind. There is clearly a link between the two.
I have some specific questions about tax measures, one of which has been touched on by my hon. Friend the Member for Kingston and Surbiton (Mr. Davey) and relates to the strange events surrounding the tax concession on work-based laptop computers. I quote to the Chief Secretary what his colleague the Chancellor said in 1999, when the measure was introduced. He said:
"We hope this new measure will encourage businesses to loan computers to their employees and that it will be as successful as a similar scheme developed in Sweden, where household computer use increased dramatically as a result. There are real benefits to businesses, employees and the wider community."
Well, why has the measure been pulled? As I understand it, it was pulled at about 24 hours' notice, following warnings from the Revenue about the difficulties. What has happened? Why was there no consultation?
"As a business we have spent months working with other suppliers to set up processes, systems and contracts to help businesses finance this scheme. In fact we had just embarked on a scheme to provide finance for small to medium sized businesses so they would be able to let their employees take advantage of the scheme."
Unfortunately, that follows a pattern. Last year, we had the self-invested personal pensions scheme. Partly as a result of warnings from Liberal Democrat Members, it was clear that the Government were opening the door to all kinds of problems related to giving tax relief on second homes and luxury holiday homes overseas. They had to retreat and did so in an embarrassing way, when people had already invested in the arrangements.
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