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8.48 pm
Mr. Philip Dunne (Ludlow) (Con): It is a great pleasure to contribute to the debate and to follow the hon. Member for Blaydon (Mr. Anderson), who gave us an impassioned history lesson on the politics of 20 years ago. As I was not a Member of the House in those days, I found it quite refreshing to imagine what life must have been like in the Thatcher years.
Let us turn to the real subject of this debate, which is not what happened in 1986 but what is happening in 2006. I have to say that I was disappointed by the Chancellor’s contribution, as I am sure many Members in all parts of the House were. I was anticipating that, in his farewell appearance at a Queen’s Speech debate in the role of Chancellor, he might put on a magisterial display and range across the successes under his Chancellorship. Instead, we had a policy-lite speech that consisted primarily of attacks on Conservative Back Benchers. When we look at Hansard tomorrow, we will see that he spent more time criticising members of the No Turning Back group than he did on Labour party policy. That may have had something to do with the fact that he threw away most of his speech on Labour policy because he was so enraged by the reaction of Opposition Members. That is not a particularly encouraging sign of what we can look forward to should he become Prime Minister shortly.
I shall talk about what the Chancellor did not want to talk about—his legacy—and the need for sound public finance. We hear often from the Chancellor about his successes, but he chooses to gloss over those elements of the economy that have been less successful. I shall focus on a couple of those elements tonight.
In 1997, we had had five years of rising GDP and, as a Labour Member who spoke earlier seemed conveniently to forget, that growth rose at a higher rate in the last five years of the Conservative Government than it has on average in the nearly 10 years of the Labour Government. They do not like to be reminded of that.
Kelvin Hopkins: The hon. Gentleman claims credit for growth between 1992 and 1997. That is fair enough, but the Conservatives first dug a gigantic hole in the economy, because of their exchange rate mechanism policy, so it started from a very low base—
Mr. Philip Hammond: You supported it!
Kelvin Hopkins: I did not support it. I was not a Member of Parliament at the time, but I would have opposed it root and branch. In any event, the hon. Member for Ludlow (Mr. Dunne) is starting with a year in which growth was extremely low and therefore exaggerating his claims of Tory success.
Mr. Dunne: I am grateful to the hon. Gentleman for giving me the opportunity to highlight the fact—I was not going to refer to it and the Chancellor certainly never refers to it—that the Chancellor was a more enthusiastic supporter of British membership of the ERM than anyone in that Conservative Government. The point that I was trying to make about GDP growth was that we are repeatedly told about the success of this Chancellor’s conduct of the economy and the many quarters of steady economic growth, forgetting that the foundations were laid during the Chancellorship of my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke).
The other issue I wished to address is that of taxation as a proportion of GDP. In 1997, taxation was under 39 per cent. of GDP, but for the year ending April 2007 it is forecast to have increased to 42.6 per cent., which will be the highest proportion since 1986. That is not a record in which the Chancellor should take much pride.
What are the consequences of those fragilities and frailties in the economy? One that we need to bear in mind—it has been touched on by other hon. Members—is record levels of debt in the economy. Public sector debt is at record levels, personal debt is at record levels and the debts that are not on the Government’s books, because they have been carefully kept off them, are also at record levels.
Kelvin Hopkins: I have recently been looking at the Government’s debt compared with that in the past and of other countries. Actually, our overall debt is quite low and it would make sense to allow public debt, especially for investment, to rise. We could substitute public debt for private debt and save a lot on revenue spending by the Exchequer.
Mr. Dunne: Again, I am grateful for the opportunity to highlight the fact that public debt is nudging the levels that the European Union allows. If the Government had not changed the figures—thankfully we will in due course have an independent body to stop them doing so—we would have broken both the EU rules and the Government’s own borrowing rules.
Mr. Newmark: In fact, through clever devices, the Chancellor has been using off-balance sheet financing, which has increased so that today it is almost £1 trillion, compared with the £486 billion of on-balance sheet borrowing.
Mr. Dunne: As I have just said, off-balance sheet debt is of great concern and I thank my hon. Friend for highlighting the figure.
I have already mentioned the increase in on-balance sheet debt. If we look at the current year, the Chancellor predicted public borrowing of £36 billion
for the year ending this April as recently as the March Budget, which was a minor fall in the level of new public debt compared with the previous year, which stood at £37.1 billion. We have just received the figures for the first six months of this year, which show that net public sector borrowing has increased by 19 per cent. since last year, and is now £25.4 billion. That compares to a figure of £21.4 billion for the same period last year. The Government, at this stage in the year, are way off beam in their forecast of what will happen in respect of public sector borrowing this year, as a whole.
To turn briefly to off-balance sheet debt, my hon. Friend mentioned a figure, but the figures before me show that £46 billion of off-balance sheet debt has resulted from private finance initiative projects, and more than 700 PFI deals have been used to fund infrastructure. I do not have a problem with that, because it is important that we use private sources of funding to improve infrastructure. However, we have to be honest about the impact that that will have on public finances, and the legacy that will result for years to come.
Mr. Dunne: I have been very generous in giving way to the hon. Gentleman, but I must make progress.
There are several other aspects of off-balance sheet debt. Hon. Members have talked about the Child Support Agency, which has run up an astonishing £3.5 billion in outstanding maintenance payments. I accept that that figure is not the Government’s obligation, but the obligation of absent parents. The Government are due to collect that money, but are failing to do so. The agency calculates that almost £2 billion of that £3.5 billion is uncollectable, and in recent reports in The Times, it is anticipated that the Government will recognise that they have made a mess of managing that debt accumulation. They are unable to write off those debts using their own computer systems and will have to legislate to do so.
The third liability with which the Government are saddling us is on the whole issue of public sector pensions. There has been some reference to pensions in the debate, but not enough, and very little reference has been made to public sector pensions. I welcome the proposals stemming from the Turner report. We have had many discussions about pensions in the Chamber, and we will continue to discuss the subject when the pensions Bill comes before the House, but at this point, it seems that no attempt will be made in the Bill to try to address public sector pension liabilities, which have mushroomed in recent years.
A detailed research report put together by the Institute of Economic Affairs calculates that public sector pension liabilities have exceeded £1 trillion. An accurate calculation, such as those made by actuaries, would recognise the Government’s cost of borrowing. The Government use a discount rate, based on the rate that would apply to a double-A corporation that was borrowing to fund its liabilities. Of course, the Government are triple-A rated, and can borrow much more cheaply than that. That simply understates the scale of the liability, presumably for political reasons. In the pensions Bill, there has been no attempt to
recognise that the public sector needs to bear its share of the challenges that we will face in dealing with demographic change in coming generations.
It is not only Opposition Members who have raised that concern. Many outside commentators have castigated the Government for dropping the ball as a result of the deal done in Warwick before the last election. To name just one, David Frost, the director-general of the British Chambers of Commerce, has said:
“The huge cost of public-sector pensions is one of the biggest issues facing this country and the government is doing nothing to address it. It is totally unfair that the burden of pension reform is being left to the private sector.”
I turn from the Government to the subject of the personal debt legacy. Earlier this evening, it was mentioned that personal debt in the UK has risen rapidly, by more than £100 billion, or 10.2 per cent., in the past 12 months. It totalled £1.258 trillion at the end of September this year, and it has more than tripled since 1993. That accounts for a large part of our economic growth, which has been spurred by consumer spending over the past few years. The legacy of the Chancellor that concerns me is the problems that will be posed for people who have run up substantial debts that they are unable to pay and the impact on the economy of that debt bubble bursting—something almost too frightening to contemplate.
Companies are making good business from encouraging people to enter into individual voluntary agreements; in other words, taking a short cut to declaring themselves bankrupt. Rates of personal bankruptcy are at a historical high—not something from which any Chancellor should take great comfort.
The Chancellor touched only fleetingly on another aspect of his legacy—the growing increase in unemployment in the UK, on which he puts a somewhat different spin. We have had 18 months of trend increase in unemployment, which is running at 5.6 per cent. across the country as a whole. That is of concern to all of us, but of particular concern to me is the fact that unemployment appears to be rising much more rapidly in some rural areas that have historically relied on basic manufacturing. My hon. Friend the Member for The Wrekin (Mark Pritchard), in a characteristically impassioned intervention on the Chancellor, pointed out that over the past 12 months unemployment in Shropshire has risen by an astonishing 36 per cent. In my constituency, much of that unemployment has been in the aluminium capital of England—Bridgnorth—where we have lost 200 manufacturing jobs in the past six months alone.
The consequence of the Chancellor’s legacy is that corporate Britain feels that it is under much more pressure than he seems to believe. My hon. Friend the shadow Chancellor referred to the CBI survey published this morning, which makes a timely contribution to our debate. Three quarters of the people surveyed believe that the corporate tax regime is worse than it was in 2001. The Chancellor rather disparagingly said that the survey was based on responses from only 89 companies. However, if he had taken the trouble to read it, he would have found that it was based on the FTSE 350 companies, so 89 responses represent about 25 per cent., which is a high response
rate from any type of corporate survey and indicates the concern among most of the largest companies in the land that took the trouble to respond.
Areas of concern relate to over-taxation and over-regulation and to the fact that both may encourage businesses to move away from this country. The headline tax rate for corporate Britain, at 30 per cent., is about five percentage points ahead of the European Union, which is significantly higher than the rate in Ireland, as we heard earlier. The tax burden on companies has increased as a whole, and the proportion of direct taxation is more than 22 per cent., compared to about 19 per cent. 10 years ago. The increase is significant and explains the concerns. Although the headline corporate tax rate has gone down, the overall proportion of tax contributed by corporate Britain to the Treasury has gone up considerably.
In an intervention earlier, I referred to a report, published last month, by KPMG for the Investment Management Association on the City’s contribution to that increased taxation. The report argues that funds that in the past we would have expected to be domiciled in the UK are increasingly being domiciled outside this country to avoid the taxes levied on the financial services sector. As I pointed out earlier, over the past 10 years twice as many funds have been attracted to set up in Ireland and 10 times as many in Luxembourg as in the UK. The conclusion of the report is that
“the UK’s tax system is to blame”.
The other concern that emerges from these reports is that if we continue with an over-regulated and over-taxed corporate environment, we will increasingly lose many of our corporates, which will domicile in more favourable climates. The Chancellor is living in the past once again. He repeated with some glee the numbers that he had quoted at Treasury questions earlier this month. He spoke about the number of companies that have located here in comparison with other European countries as if it provided a magnificent rebuttal of my point. In fact, he was talking about companies that located here over the past nine years, but we are talking about companies today that are thinking about moving overseas. It is apples and pears. We are not interested in what has happened over the past nine years, but concerned about what is happening now and what is at stake in Britain today.
In that regard, the comments of Mr. Chris Spooner, the head of financial planning and tax at HSBC—one of the largest companies currently domiciled in this country—in a speech given to the Chartered Institute of Taxation earlier this month, are revealing. He said that he was no longer happy with the tax situation in Britain:
“The UK used to be a good place for tax reasons. I am not sure that this is the case any more. We take the competitive environment very seriously and there are others like us”.
The Government and the Chancellor should not take that threat lightly.
I should like to make two final points before closing. One relates to the centrepiece of the Queen’s Speech and last year’s Budget: the focus on education and the importance of increasing standards to maintain our economic competitiveness. There has been a series of
studies attempting to understand why this country’s science community is under such pressure. I met someone at the weekend who is the managing director of a substantial software IT company. He told me that he attended a conference the other day at which he found out that there are 3,000 physics PhDs in India, which is more than all the PhDs in the whole of Europe. Last year, the number of students taking physics A-level in this country was down 24 per cent. on the number in 1994. The number of chemistry students taking A-level is also down, though not by quite so much— [Interruption.] It was up in one year, but is down significantly over the period since 1994. In fact, since I am being challenged on the number, it is down 8 per cent. since the Government came to power in 1997. There is a very serious risk that we will not generate the students we need today to become the business leaders of tomorrow.
9.8 pm
Mr. Peter Bone (Wellingborough) (Con): It is a great pleasure to follow my hon. Friend the Member for Ludlow (Mr. Dunne), who, as usual, made a powerful and thoughtful speech.
In her most Gracious Speech to Parliament, Her Majesty stated two fundamental objectives that are extremely relevant to the people of Wellingborough. First, she said:
“At the heart of my Government’s programme will be further action to provide strong, secure and stable communities”.
“My Government will carry through the modernisation of healthcare based on the founding principles of the National Health Service.”
I agree with the Government that we cannot have a strong, secure and stable community without health care based on the founding principles of the NHS. Those founding principles are that everybody should have access to similar health provision, wherever they live in the country.
I would like to speak today about how, due to lack of funding, the Government are failing to uphold the founding principles of the national health service in my area. I would like to stress at this point how grateful I am to the doctors, nurses, support staff and medical professionals who work tirelessly, often under difficult circumstances. If it were not for their hard work and dedication, the NHS would be in a much poorer state.
If Wellingborough constituents need to go to hospital, they will attend either Kettering or Northampton general on most occasions. Both those hospitals can be a 45-minute journey away, which makes the trip extremely difficult for elderly and vulnerable patients. Neither hospital is in the Wellingborough constituency. I have been told several times by Ministers at the Dispatch Box how many more doctors and nurses there are in Wellingborough since Labour came to power. That always amuses me slightly because none of them is based in my constituency. Given the lack of a hospital in Wellingborough, Kettering general finds itself full to capacity, and that is set to get worse.
The Wellingborough constituency consists of two urban towns and a cluster of villages. We are part of the Milton Keynes and south midland sub-regional strategy, under which 167,000 homes will be built in
Northamptonshire over the next few years. Thousands of those homes will be built in Wellingborough. In fact, they are being built now. We have a lack of health care provision now. What will it be like when all those new homes are built?
There is an abundance of plans and information about the development in my area, but no plans or information about the infrastructure that is needed to cope with that explosion of house building. It is no good waiting for the homes to be built before the Government start to think about health care provision. We need more of it, and we need it now. In Wellingborough, it is impossible to get an NHS dentist. New residents find it almost impossible to sign on at a GP surgery, and our nearest hospitals are being forced to make cuts left, right and centre.
This is not the first time that I have brought the issue to Ministers’ attention. Since first coming to Parliament, I have consistently raised the issue of the lack of health care provision through parliamentary questions, a meeting with a Health Minister and Westminster Hall and main Chamber debates. Yet I still have to raise the issue today, and I will continue to raise it until the Government accept that my constituents and north Northamptonshire as a whole are not getting their fair share of health care compared to the rest of the country. With an excellent set of doctors, nurses and ancillary staff, an excellent set of professional managers in both the primary care trust and the hospitals and an excellent performance in efficiency by Kettering hospital, how can it be that we still have the most acute crisis in our local NHS?
Mr. Philip Hollobone (Kettering) (Con): I congratulate my hon. Friend on his remarks, which are, as usual, spot on. Does he agree that the situation has been made far worse in recent months with the forced amalgamation into a Northamptonshire primary care trust, so that north Northamptonshire’s NHS must pay the price for financial overspends in other parts of the county and the east midlands?
Mr. Bone: I am very grateful to my hon. Friend for that intervention. In fact, I was coming to that point.
The answer lies with the underfunding of our local strategic health authority, and in particular north Northamptonshire. It is best explained by Sir Richard Tilt, who was the then chairman of the Leicestershire, Northamptonshire and Rutland strategic health authority. In a letter to the Secretary of State for Health on 15 August 2005, he said:
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