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National money is being invested in the regeneration of some of what must be termed our outdated stock of terraced housing. All our secondary schools are being rebuilt under the Building Schools for the Future programme. The public sector in its various guises, through the regional development agency, the Higher Education Funding Council and the Learning and Skills Council, is putting together an exciting project for a university in Burnley town centre that will specialise in advanced manufacturing, building on our experience and skills base. I am sure that Members will be intrigued to learn that phase 5 of the development of Burnley general hospital, which has involved capital investment, is opening today. I am only sorry that I cannot be there.
I have talked about the national macro-economic situation and the dramatic way in which it has tunnelled into one of the poorest parts of the country, in terms of both direct transfers and individual opportunities for my constituents. The Budget will be good news for them. The 5,000 or so who are pensioners will benefit from the increase in pension credit and the tax-free allowance, while working people will benefit from the £1 billion being spent to raise the value of working tax credit. Families will benefit hugely from the increase in child benefit.
I want to say something about the environmental measures in the Budget. My constituency contains more terraced housing, and more people eligible for the warm front scheme, than any other constituency. The hon. Member for Ribble Valley (Mr. Evans)my neighbournods. The Warm Front scheme is providing precisely the type of energy efficiency help, central heating help and similar measures that will reduce fuel poverty. The hon. Gentleman questioned their existence earlier. I can assure him that they do exist, because I see them being implemented throughout my constituency.
The Warm Front scheme is a win-win. It is good for our carbon footprint, and it also benefits people on low incomes who will end up spending less on fuel as a result of the Governments investment. As a result of that and our measures to reduce pensioner poverty, we need no longer deal with the problems with which my predecessor says he had to deal. Elderly people were coming to his surgery and saying, I dont know what to do. I dont have enough money so I have to choose between heating and eating. That used to happenI am sure that it did not happen only in Burnleybut it no longer happens because of the investment that we have put in. In terms of what we have achieved, that, if nothing else, is something to be incredibly proud of.
There has been huge progress on fuel poverty, as has been mentioned. However, in the last year that progress has plateauedand perhaps has gone slightly backwardsbecause of the blip in oil prices that translated into astonishing fuel bill costs for everybody, and which hit the poorest the hardest, of course. I want to highlight how some of the measures that the Chancellor announced today will prevent such problems from arising in the future. When people are
on a budget they budget their income, and they might do so for every element of their expenditure. Therefore, the last thing they need is a fuel bill that they were not expecting that blows all of that budgeting out of the water. That is fundamentally unempowering, and when that bill comes from a private sector company very little can be done. Of course, we can help in various ways, but volatility in fuel bills affects the poor disproportionately.
There are various things that we can do immediately to alleviate that, and we have heard about some of them. I am attracted by the solution of smart metering technology, which enables people to realise on an hour-by-hour, day-by-day basis the value of the energy that they are consuming. Therefore, if there are simple things that people can do that will make an impact, such as turning down the thermostat by 1° or washing clothes at 30° rather than 40°, they will be aware before it is too late that they need to start doing them now. I understand from people who know more about this subject than I do that there is a new generation of smart meters that will not only tell people how much in monetary terms they have already spent, without them having to put 50p pieces and pound coins into the machine or having to buy a card at the newsagent which costs more per therm than any other way of paying for heating. The new generation smart meters can also be used to provide the necessary infrastructure to enable people to sell surplus electricity generated at home back into the grid. It is inevitable that everybody will have such kit in a few years time and I urge my Front-Bench colleagues to work with Ofgem to try to find a way to accelerate the roll-out.
Let me explain what the Chancellor has, effectively, done today. He has provided a mechanism for the fuel poor to trade their way out of fuel poverty by giving grants for microgeneration and financial instruments that can be usedas I mentioned in my intervention on the hon. Member for Ribble Valleyto invest in the necessary capital equipment that will reduce peoples fuel bills and enable them in time to sell surplus generation back into the grid. That will not require there being huge eyesore wind turbines. I do not know whether the right hon. Member for Witney (Mr. Cameron) is selling any surplus generation back into his local gridor, indeed, whether he needs to do so. [Interruption.] Just hot air, an hon. Friend says. What I am discussing is theoretically possible. It happens in other parts of the world. I am told that it happens routinely in Germany. However, it need not just apply to wind turbines; it can apply to many other forms of generation, such as solar panels.
What better solution can we offer to the less well-off than the following? Instead of just saying, Were using Warm Front to introduce central heating so you dont have to rely on expensive electric heating, or were using Warm Front to put in cavity wall insulation, we can say, Were also, with a Government-assisted scheme, giving you the means to control your own billsand, what is more, there is the potential for you to make a small income out of it for yourself.
I urge colleagues to consider this measure. It works on several levels. It reduces the amount of CO2 emissions that we produce as a country. We could catch up with, and possibly overtake, other European countries in being innovative in this way. It is good for
the fuel poor, too, as it reduces their budgets. It will also, of course, provide more jobs in the type of 21st-century advanced manufacturing of the future in which constituencies such as mine have the potential to be involved. I am extremely encouraged by what the Chancellor said about mortgages for capital investment in energy efficiency and working with Ofgem to offer that. I am encouraged that he specifically mentioned the possibility of selling back into the grid. In a few years time, such ideas will be regarded as obvious.
The past 10 years have confounded standard economic thought. As I said at the outset, if we put more than one economist into a roomperhaps just one would dowe get several different views. However, one point on which future economic historians will be united is that we have seen something spectacular in the past 10 years.
Mr. Mark Field (Cities of London and Westminster) (Con): It is always a great pleasure to speak in a Budget debate, representing as I do the City of London, as well as the city of Westminster. In many ways, this Budget has not involved that much economics. Bearing in mind the contribution of the hon. Member for Burnley (Kitty Ussher), I am always a tad sceptical when people suggest that the economic cycle has ended or that this Governments economic record in the past 10 years is beyond any norm. I am afraid that it is always the way that, on thinking that one has reached a new paradigm, reality comes back to bite before too long. The hon. Lady raised a number of issues that I, too, wish to discuss, but I am less convinced than she is that there has been a turnaround in all economic fortunes and that it is entirely down to the current Chancellor.
To a large extent, this Budget will be remembered as a great political Budget. For those who were here, the first 48 minutes or so perhaps did not seem terribly exciting. Then, the Chancellor pulled the rabbit out of the hat in the last 30 seconds with a cut in the level of income tax, but it has to be said that it will not come into play until some 13 months timefrom 5 April 2008. This Budget reminded me of one that seemed to go down very well with the press, as I suspect this one initially will, on the television tonight and in the headlines tomorrowthat of March 1992, which was presented by the now ennobled Norman Lamont. As Chancellor, he introduced the lower, 10 per cent. tax rate, which has now been abolished. I suspect that it will reappear before too long, when a future Chancellor wants to pull such a rabbit out of the hat. There are similarities between the two Budgets, and as I say, I suspect that this one will also go down quite well. People will then begin to unravel its fiscal and economic sense in the weeks and months ahead.
Todays Budget is also politically quite clever. Its income tax and corporation tax cuts could drive a wedge between members of my party, and bring the tax cuts debate nearer to the surface in a party that considers itselfrightlyas a potential Government in waiting.
Like one or two other contributors to todays debate, I feel it appropriate to take a broad overview of the past decade. It might well be the Prime Ministers last Budget, butwho knows?it might not necessarily be
the Chancellors last. We assume that he is going to make the move from No. 11 Downing street to No. 10. He may yet produce further Budgetsperhaps notbut presumably, this 11th Budget will indeed be his last. It is only fair to give credit where credit is due: there has been a tremendous record of economic stability. As someone who used to be in business, I wanted stability, and most incumbents in business do. However, one problem with a somewhat flat level of stabilityI am not suggesting that we have that nowis that it is often a big disincentive to innovation. So we should not look upon stability itself as a tremendous goal, but it must be recognised that we have had great stability in the past decade, and most people in business would give the Government credit for that.
It has been remarked that one of the most important early developments was giving independence to the Bank of England. However, it is less well remembered that in transferring responsibility for interest rates to the Bank, the Government took away its regulatory role. As a result, the Treasurys role within the City and economic affairs has been enhanced, compared with that of the Bank.
There is no doubt that growth has been maintained and that is partly as a result of global expansion. The economic power of India and China, which are the great super-powers of all of our lifetimesI suspect that we will see accelerated evidence of that in the decade to come, let alone in the generation to comehas had a great deflationary effect and will continue to do so. There is an enormous amount of spare capacity in both India and China, assuming that neither has any political upheavals.
I recognise that there has been some skilful management of the economy, both here and in the US. One looks at Alan Greenspans actions, especially in relation to the downturn in the fourth quarter of 1998 in south-east Asia, but also in the aftermath of 9/11. We also had a terrorist attack, on a much smaller scale, less than two years ago, which might have had a negative effect on the City and tourism in London, and we have to give credit where it is due to the Chancellor and the Treasury for the skilful management after that event.
That management stands in contrast to what has happened with many of our European neighbours, but as I said in an earlier intervention, it smacks of a paucity of aspiration for us to talk endlessly about our record in relation to Germany, France or Italy over the past 10 or 12 years. In many ways, those countries have not succeeded to any great extent and we should aspire higher.
Kelvin Hopkins (Luton, North) (Lab): Would the hon. Gentleman also give credit to the Chancellor for keeping us out of the euro, which has had a deflationary effect on those countries across Europe to which he has just compared us?
I would give the Chancellor even as much credit as the hon. Gentleman would do for that policy. I know that the hon. Gentlemans view on that important decision is supported by many of his colleagues. The practical reality is that there is now, and
has been for many years, a single world currency in the US dollar and its relative strength, but we have had great benefits from remaining outside the euro. A certain amount of credit has to go to the Treasury for that decision.
An issue close to my heart is the continued strength of the City of London. In the US, New York and Wall Street have been deeply concerned about the great strength of the City of London in recent years. Undoubtedly, after WorldCom and Enron, there was a rapid move towards regulation that was not entirely thought through and had unintended consequences, such as Sarbanes-Oxley. That has given London yet another competitive advantage. The lesson is plain. It is not that we want to be a bandit stateand we should be careful about the accusations that have been made about overly deregulated areas, whether in private equity or hedge fundsbut we should ensure that regulation is kept to a sensible minimum. We also need to keep taxes low. The lesson comes not only from the past five years after Sarbanes-Oxley, butperhaps more importantlyfrom the fact that the whole Eurobond and Eurodollar market came about only as a result of high US taxes some 40 years ago. We need to remain aware of problems that may arise. If there are crooks around, they will find a way to abuse any system, but I hope that the City of London has the balance right. It is greatly to the advantage of the UK as a whole to have a strong City. In many ways, without a strong financial services sector, our country would be in deep trouble.
There are knock-on effects, as was mentioned yesterday, of effectively having a City state in London, with so many of our indigenous population being left behind. That applies not only in London, but beyond. The hon. Member for Luton, North (Kelvin Hopkins), for example, must look in horror at the way in which house prices have exploded in his constituency, and the same applies in many other areas in the home counties. There is a risk that those who do not work in the financial services or do not inherit wealth will be left behind and be unable to get on to the housing ladder, which so many of our young people wish to do.
In years gone by, the Opposition may have lacked a nuanced approach to certain aspects of the Governments record on the economy. We all remember in 1998 the downturn in Downing street that was about to take off. We have also been confounded many times by growth figures that turned out better than predicted. However, as I mentioned earlier, the practical reality is that more people are in work, although some of the jobs are part-time. In recent years, we have been able to maintain a high level of growth partly owing to migration, which has brought with it problems to do with housing, health and so on. Nonetheless, we must give credit where it is due, and the growth figures have remained fairly intact.
Even so, the Chancellor will leave the Treasury with many of the fundamentals not looking nearly as good as they did in 1997. The tax system is very complex and, although I accept that todays Budget contained a certain amount of simplification, the Tolleys tax guide is twice as thick as it was a decade ago. The spirit of the age supports simplicity, and we must simplify our tax system if we are to make a full impact in a global economy.
Mr. Field: In fairness, India is the only country with a more complicated tax code than ours. My point was that, in a global world, we need to have an eye to simplicity. In many ways, our tax system has become overly complex, so I am happy to take this opportunity to welcome the Chancellors move today to simplify income tax. It also makes absolute sense to align the higher rate of tax with the national insurance level, as that will remove all the little overlaps with which I am sure that the Financial Secretary is familiar.
One legacy of 10 years of this Chancellor is the level of public debt. The golden fiscal rule, insofar as it still exists, has been breached on a number of occasions. The date of the economic cycle has been changed three times to force the facts to fit the theory. Spending is at almost £600 billion a year, and is reliably forecast to rise to about £670 billion by 2010. Too much has beenand will continue to befunded by debt.
The public finance initiative is another problem. Much of the building of schools and hospitals to which the hon. Member for Wolverhampton, South-West (Rob Marris) referred earlier has been funded by the PFI, and there is a sense that we are relying on future generations to pay for what we are consuming today. Much of that off-balance sheet financing is delaying the tough decisions that need to be made about the future of public expenditure. I fear that this era will come to be regarded as the best of times, because we are consuming now without paying proper regard to future generations.
Mr. Newmark: Off-balance sheet financing is a legitimate device, and I appreciate why the Government use it, but they are never going to let NHS buildings or schools collapse. Does my hon. Friend agree that there needs to be far greater transparency in off-balance sheet financing? Should not items such as hospitals or schools that the Government stand fully behind be put on the balance sheet, or be noted somewhere in the accounts as Government liabilities?
Mr. Field: My hon. Friend is absolutely right. We have long argued that much of the off-balance sheet financing, especially in PFI and the public-private partnerships, should appear on the balance sheet. The obvious reason why that does not happen is that, if it did, public debt and public liabilities would rise to levels much higher than any prudent Chancellor could like. The invidious effect of the PFI is that it creates liabilities today that others in the future will have to pay for. The criticism has been muted, understandably, because contractors, lawyers, accountants and people in construction have benefited from PFI to a large extent. The great genius of PFI has been the way in which, in my view, it was abused over the past decade.
The hon. Gentleman seems to be making a critique of PFI, which I should be happy to support, especially if he went further and said that it would be much more sensible to invest with publicly borrowed money. That would be much cheaper and
save the Exchequer a lot of money in the long term. I have written an article on the subject that he may have read in The House Magazine.
Mr. Field: The operative word is seems. I disagree with the hon. Gentlemans analysis. I would rather that we did not take on such debts. If we cannot pay for things now, the golden rule, which supposedly guides us, should not be breached. It should be for todays taxpayers to pay for the benefits that we receive.
From the Treasurys point of view, the real genius is that the increased tax burden on all of us for decades ahead to pay for many of the schools and hospitals built in recent years will be difficult for any incoming Government, Conservative or otherwise, to reverse. Furthermore, in 25 years, districts will need new or upgraded schools or hospitals. In many ways, we have the mirror image of privatisation in the 1980s and 1990s. Labour went into the 1997 election with a firm commitment to reverse the rail privatisation that had taken place only a year earlier, but the Labour Government quickly discovered that they had to jettison their commitment. I fear that when the Conservatives come back into government, we, too, will have limited room for manoeuvre due to the PFI liabilities that will come on stream in great number.
David Taylor (North-West Leicestershire) (Lab/Co-op): It is estimated that the tax to GDP burden in the year we are about to enter is about 42 per cent. Does the hon. Gentleman care to recall the typical tax to GDP level at the time of Mrs. Thatcher?
I have another general concern about the Chancellors recordthe unreformed state of our public services. The real losers now and in the future will be the impoverished, the vulnerable and the voiceless. The question that faces all of us in the political world is how to manage an ever larger state, which within the next few years will gobble up £680 billion and rising. Whether health care, law and order, education or security, the public services are in something of a messalthough not for the want of significant expenditure over the past six or seven years.
Many of the Governments more recent NHS reforms are to be welcomed, even though, to a large extent, they merely re-establish the position before 1997. My party has started a campaign to say No to what are regarded as NHS cuts, although we all appreciate that they are not actual cuts and that ever more money is being spent on the NHSalbeit at a decelerating rate. The Government used similar tactics to criticise the Conservatives during the general election two years ago. However, we need to consider not just tactical benefits; we need greater strategic insight on the better running of health care.
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