Previous Section Index Home Page

I welcome the commitment the Secretary of State gave earlier about adults and young people with special needs. Whatever the Government may have been saying for the past few months, the Learning and Skills Council, in its drive to ensure that most of the money for adult education goes to courses that provide accreditation, has failed to take into account the fact that young adults with special needs often need different provision. They do not progress at the same rate as other people and courses for them have been lost. At my local college, the number of places for those
22 Mar 2007 : Column 1024
young people has been halved and the situation is similar at Oldham college. There is a lack of support and provision for young people with special needs, so I welcome the Secretary of State’s commitment to look into the matter. I hope that later in the year there will be concrete proposals to ensure that they have the education they deserve.

The Budget and the Green Paper published today include commitments for 16 to 19-year-olds, which I very much welcome. The measures on the statute book go back to 1918 so it is good that at last they will be implemented. My hon. Friend the Member for Brent, East (Sarah Teather) questioned the Secretary of State about the figures. Clarification is important. What will the capital investment of £200 million deliver and what is the time frame? The same questions apply to the £700 million. From the revenue figures we have seen, those amounts are nowhere near adequate to deliver the commitments.

I hope that the Secretary of State will implement in full the Dearing review recommendations about courses. If more young people remain in education and training, there must be appropriate provision. I have been involved in introducing diplomas. Back in 1992, when the Conservative Government allowed schools to introduce BTECs, my school was one of the first to do so. I greatly welcome the use of diplomas and other vocational education and training, but there must be proper funding and, as Dearing recommended, there must be a continuum so that young people can move from and between various forms of education, otherwise the whole system will fall down.

Over the past 10 years, Rochdale council has been Liberal Democrat, Labour, Liberal Democrat and Conservative working together and is now Liberal Democrat again. Nevertheless, there has been a strong commitment throughout that period to improve education. When this year’s results came out, I was delighted to see that Rochdale, building on our earlier success at key stage 3 and key stage 4, topped the league for key stage 2.

One area where we have not performed so well— there remains a huge amount to do—is in post-16 provision. I met representatives from the Aimhigher consortium from Greater Manchester last week. They produced figures on the number of young people in Rochdale going into higher education. Despite seven years of Excellence in Cities and Aimhigher funding, numbers in the Heywood and Middleton constituency went up by only 5 per cent. and those in the Rochdale constituency by only 10 per cent. That 10 per cent. means only an extra 50 young people going on to higher education, which is not good enough.

One of the first things I did when elected two years ago was to meet the Learning and Skills Council to see whether we could develop better sixth-form education in Rochdale. I was delighted when a consultation exercise was carried out last year, with the majority of people saying that we needed a brand new sixth-form college. A scheme was put out to consultation and has now been evaluated. It will mean improvements at Hopwood Hall college as well as the building of a brand new sixth-form college. It will cost upwards of £75 million, which is why I asked earlier for clarification of what exactly the £200 million was for. If Rochdale is to perform as well as other constituencies
22 Mar 2007 : Column 1025
and districts, I believe that investment is vital, so I hope that the Minister will give an assurance that we will see the right level of investment.

Rochdale was also successful this year in securing Building Schools for the Future funding for our secondary schools. Ministers are making massive claims. Yes, the £150 million is very welcome, but it will not rebuild every secondary school in the borough of Rochdale. It will carry out a partial rebuild of some schools, but it will not compete the job. It is welcome, but people should not run away with the thought that everything is developing as we want.

I hope that Ministers will also be able to begin to address the backlog in primary schools. Probably like many authorities, Rochdale has more than its fair share of Victorian primary schools. Although we have been able to refurbish some through a private finance initiative agreement, we have not gone far enough.

In conclusion, as usual with this Budget and this Chancellor, the devil is in the detail. The Chancellor has wasted opportunities to tackle some of the problems that he spoke about. I referred earlier to environmental taxation, but very little has been done about that. We have had a broad commitment to tackle Government waste, but why for goodness’ sake could we not do something about getting rid of the number of targets that the health, education and other sectors have to meet? Then there are schemes for ID cards, Trident and nuclear power that will all suck in vast sums of money, which cannot then be spent on improving core services.

I welcome some of the commitments in the Budget, but if this is an indication of what new Labour is likely to be like under Gordon Brown, I am not impressed and we should be quite worried.

4.24 pm

Mr. David Gauke (South-West Hertfordshire) (Con): Yesterday we heard what we all assume will be the final Budget from the current Chancellor. I thought that it would be worth while in examining it to look back to his first Budget in July 1997, to assess what progress has been made on the various items that he identified in his opening remarks on that occasion. He identified what he perceived as four weaknesses within the British economy: instability, under-investment, unemployment and waste of talent. It would be fair to say that unemployment and waste of talent were closely linked—indeed, he dealt with them together in his speech—so his very first statistic in his very first Budget speech should probably have referred to three weaknesses instead of four. Perhaps he was setting the tone as far as numbers were concerned.

The first weakness that the Chancellor identified was instability. He referred to the independence of the Bank of England, which, even at the time, I supported. It has undoubtedly been a success. He also referred to public finances, stating how important it was that they should be sustainable. In our debates yesterday and today, we have heard how there have been three phases for the Chancellor. From 1997 to 2000, he was fiscally prudent, conservative and careful, and he reduced the budget deficit substantially. From 2000 to 2006,
22 Mar 2007 : Column 1026
however, we saw a sharp deterioration in public finances. Public spending took off dramatically, while tax revenues at times disappointed. We have seen a sharp tightening since the 2005 general election, and we saw further evidence of it yesterday with the announcement of the public spending plans—the envelope, as it were—for the next few years.

In assessing the Chancellor’s record as a whole in this area, it is worth citing the findings of the Institute for Fiscal Studies, which noted some improvement over the past 10 years but made an international comparison: of the 22 countries for which comparable data are available, 17 improved their structural budget balance by more than the UK. We have been living through a time in which the budget balances should have been getting better, yet the Chancellor’s record is not all that impressive. Indeed, he has been able to recover a degree of sustainability in the public finances only by means of a rather sharp slow-down in public spending, in which we have seen spending falling as a percentage of national income.

During the last general election campaign, my party put forward proposals in which public spending would rise in real terms but fall as a percentage of gross domestic product. The Chancellor’s response to our proposals was that they would result in £35 billion of public spending cuts. Applying the methodology that he used to reach that conclusion to yesterday’s spending announcement, the Institute for Fiscal Studies has made it clear that the Chancellor would yesterday effectively have announced £8 billion of cuts by 2010-11, or £10 billion worth by 2011-12. The methodology is absurd. What the Chancellor announced yesterday were not really spending cuts in the normal sense of the word. If he is to be consistent in his choice of methodology, however, that is precisely what he did.

As a member of the Treasury Select Committee, I had the opportunity after the pre-Budget report to ask the Chancellor how he would define a cut in public spending. He evaded my question, saying that we would have to wait and see what the public spending envelope looked like. That was no answer; we do not have to wait and see at all. I had another go at the question when I asked the Chief Secretary to the Treasury what constituted a cut, and he said that it was in the eye of the beholder. We are in the rather curious position of having a new irregular verb, as far as the Chancellor is concerned: “You cut spending. I demonstrate fiscal discipline while increasing real-terms spending.”

One innovation in the 1997 Budget was the introduction of the fiscal rules, and they have served a useful purpose. We all know, however, that the golden rule that current spending must be met by taxation over the economic cycle has largely been discredited by the various changes to the economic cycle, which have always made the Chancellor’s job somewhat easier. The Chairman of the Treasury Committee, the right hon. Member for West Dunbartonshire (John McFall), raised one or two concerns about the golden rule and the economic cycle yesterday. I intervened on him yesterday, and I have an opportunity today to raise with the Financial Secretary my concern about what one might call a fiddle.

22 Mar 2007 : Column 1027

In the past, the last year of an economic cycle has always been treated as the first year of the next, and it so happens that those last years have always been surplus years. Yesterday the Chancellor said that the current economic cycle will finish in early 2007, which I think probably means within the 2006-07 financial year, so my question is: will the 2006-07 financial year, which is a deficit year, be treated as part of the next economic cycle? The question seems fairly straightforward, and if the answer is yes, that would be a continuation of the policy that has applied in the past. However, when asked the question, Treasury officials before the Treasury Committee were unable to give an answer, and no answer has been given in response to parliamentary questions that I have tabled. When he winds up the debate, I hope that the Financial Secretary will clarify whether the last year of one economic cycle will continue to be the first year of the next. As far as I can see, the Government will meet the golden rule for the next economic cycle either way. According to their current projections, there is no reason why not. None the less, it is important to have consistency if the golden rule is to have any sort of credibility.

The second weakness that the Chancellor identified was under-investment. As my right hon. Friend the Member for Witney (Mr. Cameron) pointed out yesterday, the savings ratio has halved since 1997. In addition, business investment in this country is less than 10 per cent. of GDP and has averaged a smaller proportion of GDP than in France, Germany and the United States since 2000. A matter raised in 1997 that is topical again this year is the rate of corporation tax. In 1997, the Chancellor reduced the mainstream rate from 33 to 31 per cent.; he subsequently reduced it to 30 per cent. and, of course, yesterday he reduced it to 28 per cent. In 1997 he boasted that our rate was lower than our competitors’ and that we had a competitive advantage, which would help both inward and domestic investment. However, that competitive advantage has been allowed to slip in the succeeding 10 years.

It would be churlish not to welcome the change in mainstream corporation tax. It is right to lower the rate and to simplify the system by having fewer allowances, exemptions, reliefs and so on. That is to be welcomed. The change was foreshadowed in the report produced by the Tax Reform Commission chaired by Lord Forsyth, and the shadow Chancellor was advocating that approach only this week. In fact, the tax cut can safely be said to be the first of many tax cuts initiated by my hon. Friend the Member for Tatton (Mr. Osborne).

Mr. Kevan Jones: I have been listening carefully to the hon. Gentleman and I find what he just said and what the hon. Member for Tatton (Mr. Osborne) said very strange. Their argument seems to be to claim credit for everything in the Budget, but then to go out to the television studios and elsewhere to condemn the Budget. Is not that a bit schizophrenic of them?

Mr. Gauke: There were some good bits—or perhaps one: the cut in corporation tax. Of course we take some credit for a measure for which we campaigned, but that does not mean that every single aspect of the Budget was correct. Let me give another example. The Chancellor’s position on mainstream corporation tax is
22 Mar 2007 : Column 1028
to reduce the reliefs, allowances and so on, but to reduce the rates as well. That is entirely sensible, but for smaller companies, he has done quite the reverse: increased the rate and increased additional allowances. That seems an illogical, and perhaps unfortunate, position. Perhaps there is an explanation that we have not heard. I raised a point earlier about the curious phrase “legitimate small businesses”. There may be an explanation there. [ Interruption. ] The reference was to “legitimate” businesses, as if those businesses that did not invest were somehow illegitimate, but I do not intend to pursue the point.

Also on investment, we have the abolition of tax credits for pension funds—the most notorious aspect of the 1997 Budget. Curiously, in 1997, that was justified as helping investment. The Chancellor referred yesterday to the 125,000 people who lost their work pensions through no fault of their own. He was absolutely right: it was not their fault. That is more than can be said for the Chancellor, whose tax raid has contributed to some of the difficulties with occupational pension funds. However, the Chancellor made an announcement yesterday about the financial assistance scheme.

Mr. Jones: Is it not a fact that, in addition to the changes in corporation tax, many of those companies and pension funds did very well out of that change? Some companies then took pensions holidays and did not put any of the money into their pension schemes. Is it not wrong for certain companies to cry wolf and blame the Chancellor, when a lot of them did very well but chose not to put extra money into their pension schemes during the good times for the bad times that came along later?

Mr. Gauke: That was the justification that the Chancellor used at the time for the abolition of tax credits on pension funds. However, with the benefit of hindsight, actuaries calculate that the cost to pension funds has been something like £100 billion since then. Clearly, some occupational funds have been severely affected.

The hon. Gentleman raised the point about the financial assistance scheme. He welcomed what was said. The issue is important for Members on both sides of the House. I represent former workers of Dexion who have been left without their occupational pensions. There has been widespread concern about the plight of those people as a consequence of their occupational pensions no longer being available to them. A lot of us have worked, campaigned and raised the profile of this issue.

Many of us have worked with Ros Altmann, a former Treasury adviser who has won the respect of pensioners and MPs on both sides of the House. I spoke to her last night about her assessment of the announcement of £8 billion extra for the financial assistance scheme. She pointed out that no new money was identified in the Red Book for that. It is going to be paid for a long time in the future. No additional funds have been allocated to it within the Department for Work and Pensions budget.

There is a reference to getting 80 per cent. of the core pension. A core pension is a concept that has been created by the Government. Essentially, we are talking about only 60 per cent. of the expected pension. The
22 Mar 2007 : Column 1029
FAS pays out only from the age of 65, whereas many people were looking to retire at 60, and would like to be able to do that. There is no inflation linking. All FAS payments will be taxed, although to some extent perhaps the tax changes announced yesterday will be of some assistance. There is no tax-free lump sum. Widows lose out significantly. On the basis of Ros Altmann’s comments—we should at least respect what she has to say—it seems that what the Government have done has not been quite as generous as it first appeared. Indeed, the word used by Ros Altmann was “spin”.

Mr. Jones: It is worth nothing that when the hon. Gentleman’s party was in power it did nothing at all to protect occupational pensions. I know that he does not speak for the Conservative Front-Bench team, but is he suggesting that the Government should underwrite completely every single private pension scheme in this country? If he is, that is certainly a huge spending commitment that will not fit in with the spending plans with which the shadow Chancellor said this afternoon he agreed.

Mr. Gauke: I am not suggesting that. However, the Government have lost a case on the basis of maladministration, although they are appealing, and certain legal obligations might thus be forthcoming. This is not a question of underwriting every single private pension in the country, but we must consider what happens when people have been misled, which is the case in the example that I am citing. We need to look carefully at the matter, and I am not sure that the Chancellor’s announcement succeeded in dealing with the problem.

Let me move on to the third and fourth elements of what the Chancellor said in 1997 that remained current yesterday. Welfare reform was at the heart of the 1997 Budget and, to some extent, the 2007 Budget. The right hon. Member for Birkenhead (Mr. Field), who was the Government’s first welfare reform Minister, has said:

Aspects of the programme clearly have failed. I do not want to enter a long debate about the new deal, but yesterday we seemed to have the new new deal. Should anyone want to examine the arguments and evidence, I recommend the pamphlet “Reforming Welfare”, which was written by Nicholas Boys Smith and produced by the think-tank Reform. It lists a range of areas in which the new deal has failed and identifies what should be done about it. It is striking that the Freud report, which was commissioned by the Department for Work and Pensions, comes up with almost exactly the same prescriptions as Mr. Boys Smith: more emphasis on outcomes, not procedures; greater involvement of the voluntary and private sectors; and greater conditionality.

It is also worth considering lone parents. Again, the Chancellor stressed his desire to improve the employment rate for lone parents. There has been an improvement since 1997, but our rate of 56 per cent. is still the lowest such employment rate of any major European country. The Chancellor’s proposals—whether in 1997 or 2007—appear to be a form of gentle encouragement, but they
22 Mar 2007 : Column 1030
do not seem to be working especially well. One can sense the frustration of the Secretary of State for Work and Pensions, who perhaps looks at these things from a slightly different perspective, when he says that we ask very little of lone parents. The Secretary of State’s emphasis is on conditionality, whereas the Chancellor has avoided conditionality when addressing welfare reform as a whole.

Hon. Members on both sides of the House agree that we want to encourage more lone parents to work. However, I think that most Conservative Members hold the view, although it is not necessarily shared by Labour Members, that the best environment in which a child can be brought up is within a marriage, or at least by two parents in a stable relationship. The system has created difficulties because, while the DWP’s figures show that a couple needs more to escape poverty than a lone parent might receive, the levels of tax credits do not necessarily address that adequately. On last night’s “Newsnight”, Stephanie Flanders made the point that one group of beneficiaries of the Budget would be out-of-work lone parents.

Mr. Kevan Jones: Good.

Mr. Gauke: I understand why the hon. Gentleman says that, but if we are trying to encourage lone parents into work, or to encourage couples to stay together, it does not seem sensible to have a fiscal or benefits policy that works in the opposite direction.

Helen Jones: There are two issues that the hon. Gentleman needs to address. First, does he believe that couples stay together merely because of the tax system? Secondly, what does he believe the aim should be: to subsidise couples, or to prevent poverty among children? They are not necessarily the same thing.

Mr. Gauke: If the hon. Lady is asking whether I think that the tax and benefits system—it is important to add the “benefits” part—can contribute to keeping couples together, the answer is yes. To be honest, I suspect that the issue is more to do with the carrot of favourable tax arrangements than the stick of unfavourable arrangements, and that is more beneficial for lone parents. That is an important point.

Mr. Jones: So wedding vows should be changed to “to love and to cherish, till death us do part, or till the tax system changes”?

Mr. Gauke: I find it surprising that hon. Members do not think that there could be any way in which the tax and benefit systems might have an impact on people’s domestic arrangements.

Dawn Primarolo: I listened carefully to what the hon. Gentleman said. He implied that the way in which tax credits and the tax system are constructed discourages partners from staying together, but where is his proof?

Mr. Gauke: The evidence that I would cite for the Paymaster General is a paper that Donald Draper produced in September 2005 for the Institute for Fiscal Studies. It makes my point with much greater clarity. I will certainly send her a copy, if that will be helpful to her.

Next Section Index Home Page