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There are also two major problems looming up with which the Chancellor’s successor will have to deal. They are not easy. The first is the big squeeze that the Government envisage in respect of public spending. I do not want to exaggerate it. The Institute for Fiscal Studies captured it very well: in the Government’s period of office, public spending growth has moved from famine to feast to diet. Whether that diet is painful depends critically on what happens in respect of the so-called Gershon efficiency savings. The Government are making some heroic assumptions about the ability to deliver improved front-line services through efficiency. I hope that they succeed, but the
problem that the recent National Audit Office study identified is that, of all the savings in efficiency that the Government have claimed, they can verify only 25 per cent. The rest are either non-existent or cannot be traced. That is a pretty damning indictment.
The other area where the public spending squeeze will be more painful than is currently appreciated is in relation to the knock-on costs of a lot of the hire purchase agreements—normally called private finance initiatives—that are feeding their way through the system. It is striking to look at the table in the Red Book showing the current PFI contracts. Half of them are in the Ministry of Defence, which is not an obvious area for PFI negotiation. Essentially, the Ministry of Defence is purchasing services on an HP basis. That is already taking up 4 per cent. of its budget and it has another £50 billion of contracts on the way. In that way, it is postponing the choice between front-line military services and military equipment, but that will have to be faced—and it will be brutal—when the comprehensive spending review appears in a few months’ time.
My final point is about stability. Of course we have had economic stability and let us hope that it continues, but there was a revealing comment last week from Eddie George, looking back retrospectively on the period that he spent chairing the Monetary Policy Committee. He acknowledged that, in order to save the country from a serious downturn in 2000-01, he and his colleagues had injected monetary expansion into the economy, the consequence of which was a major bubble in debt and in the housing market. He used the phrase, “This is not sustainable.” If we look at the figures, it is all too clear why it is not sustainable. House prices in relation to disposable income have doubled in the period since the Government came into office. That is exactly what happened in the period between 1982 and 1988. This is a cyclical and unstable market.
I do not want to predict doom and gloom; I have no idea what will happen, but at the very least the Government should think ahead about a scenario in which things go badly wrong, debt becomes unsustainable and the market deflates. They should talk to the banks about how to handle the large number of people who may well find themselves having mortgage payment difficulties. The numbers are already growing rapidly. There are no safety nets, because the right hon. Member for Hitchin and Harpenden (Mr. Lilley), when he was the Minister with responsibility for social security, removed social security support. The argument at the time was that the gap would be filled by insurance in the market. That has not happened. People are not protected if their incomes disappear and they are made redundant. We are going to face large numbers of people who are in great distress and who are unable to service their debts. At the very least, the Government should give an indication that they are thinking ahead about how to handle a problem that in the medium term could be the most serious threat to stability.
7.55 pm
Mr. David Anderson (Blaydon) (Lab):
I welcome the Budget, but I have a few points to raise about issues of concern. We need to look at exactly where we are. The
truth is that employment has risen by over 2.6 million since we came into office. We have the highest employment rate in the G7 economies. The new deal has helped nearly 900,000 young people into work. The adult rate of the national minimum rage will soon be £5.52 an hour and the national minimum wage will be £4.60 for young people. But those of us from areas that have suffered economic deprivation over the last 20, 30 or 40 years, are watching closely to see the impact of the Budget.
I accept the points raised by the Opposition about the impact of the 10p rate being removed and also about the issue of working tax credits. Working tax credits themselves are a good thing. If they are not working properly—as in far too many cases—they do not help. If they help, it will be true that, by 2009, a family with two children will, in effect, be able to earn £24,000 before paying tax. That is a good thing. However, it behoves the Government, the Treasury and the Department for Work and Pensions to make sure that the tax credit system is sorted out and works—for the benefit of people outside and of our party and our Government.
The TUC brief was clear. The TUC said that it believe that, as a result of the personal tax changes, by April 2009 families will be at least £200 a year better off. The poorest fifth of the population could be £50 better off. A single earner, on median earnings, with two children could be as much as £500 a year better off. But that will happen only if we get the tax credit system right. That is a challenge for our Government. Child poverty figures will be 200,000 lower. It is welcome that 600,000 fewer pensioners will pay income tax. It is right that only 43 per cent. of pensioners will pay tax.
I want to talk about what is happening where I live. In 1986, I worked in the coal-mining industry in a village where male unemployment was 19.6 per cent. Then the pit was shut and 720 men were sacked, so the situation got even worse. Today, unemployment is 3.7 per cent. Even going back to 1997, there has been a drop in unemployment of 57 per cent. since then. Two years ago, the jobcentre was knocked down so that a factory that builds earth-moving equipment could be extended. That is a great sign of progress and we should all welcome it.
I want to move on to education and, in doing so, I want to try to answer the questions that the Opposition have asked over the last four or five days about where the money goes—a theme I want to come back to. The truth is that education spending will rise to £90 billion by 2011—the highest level ever. Spending will be increased from 4.7 per cent. of GDP in 1997 to 5.6 per cent. in 2011. Surely we should all welcome that. Because of that increased investment, we will be able to provide one-to-one tuition for 600,000 children, to double apprenticeship numbers to 500,000 and to increase higher education student numbers to 1.2 million. We will be able to make every school an extended community school—the schools are up for that. We will be able to increase spending from £2,500 per pupil in 1997 to £6,600 in two short years from now. Surely we can all say yes to those figures.
We have to welcome the Government’s commitment to implement the Leitch review. We all know that there
is a skills shortage in this country and that we must up skill our adults to ensure that they can compete in the global world. When the Bill to achieve that comes before the House, I hope that it will receive cross-party support. We should welcome the fact that there will be 3,500 Sure Start centres in this country in the next two years. We will also increase the amount of education received by three and four-year-olds to 15 hours a week.
Mr. Graham Stuart: The hon. Gentleman’s passion for education and support for increased investment is clear to the entire House. Does he feel betrayed by the breaking of the promise in the Labour manifesto to increase the share of national wealth spent on education, which the Budget fails to deliver? By 2011, which is the year that he cited, the proportion will not have increased.
Mr. Anderson: I could argue about the figures, but I will not because I do not have time. The reality is that the spending will be more than it was when we came to power. It will represent 5.6 per cent. of gross domestic product—£90 billion. I wonder what the amount would have been if the hon. Gentleman’s party had won in 1997. It would have continued going backwards, as it did when the Conservatives were in power.
We have been successful locally. I will probably bore people to death by telling them what has happened on the ground, but I do not mind that. Let me point out the A-level pass rate in five comprehensive schools in my constituency. The pass rate at Whickham comprehensive school is 98 per cent. It is 94.4 per cent. at Hookergate and 100 per cent. at Ryton comprehensive. The rate is 100 per cent. at St. Thomas More and 97.1 per cent. at Lord Lawson of Beamish.
Let me turn to O-levels. In 2005, Gateshead was ranked as the eighth best performing local authority in the country with 65 per cent. of pupils achieving five passes at A to C. Last year, nearly 70 per cent. of pupils achieved those grades, which made Gateshead the fifth best authority in the country, with a figure well above the national average of 59 per cent. The percentage of passes at A to C increased at Hookergate from 39 per cent. to 52 per cent. The figure at Lord Lawson stabilised at 78 per cent. The rate increased at Ryton from 59 per cent. to 62 per cent. At Whickham, the figure increased from 78 per cent. to 84 per cent. Unfortunately, the rate at Thomas More stayed the same—at 100 per cent.! We should all be proud that those people are getting more than five O-levels.
Our primary schools have achieved results that are well above the national average. Whickham Parochial school is the third best school in the country for top 200 scores at level 5. Results in maths, English and science are above the national average. Our primary schools are ranked 26th in the country for added value, and we will open seven brand new schools in the next year. That is where the money is being spent.
I come to another non-contentious issue: the health service. The Tories say that there was no mention of health in the Budget, but there was. The Chancellor said that there would be £8 billion extra. Yes, that £8 billion had already been announced, but it will be spent in the next year—an extra 10 per cent. spent on health. That will go towards the trebling of health
spending since we came to power in 1997, which was in the manifesto. The NHS now has a work force of 1.36 million, with 300,000 more employees than in 1997. Vacancy rates are at an all-time low.
I have great concerns about the people who have lost their jobs in the health service. I was a president of Unison, which represents more health service workers than any other union in this country, so I have a right to be concerned. Last year, there were 1,446 compulsory redundancies. That was far too many—1,446 too many—but it was not the 21,000 nurses that the Tories were talking about last year. That really was a con trick.
There is no doubt that Ministers and managers in the health service need to get their act together, because what is happening in the health service is not by any means in order. They need to put the health service right. However, the fact that there are 100,000 more nurses and doctors than there were in 1997 is a success. It was a failure that nearly 300,000 people were waiting for operations in 1997, but it is a success that no one now waits as long as people did then.
Mr. Kevan Jones (North Durham) (Lab): Does my hon. Friend agree that another welcome change from those dark Tory days is that we have not had a winter beds crisis, which used to be an annual event under the Conservatives?
Mr. Anderson: My hon. Friend and parliamentary neighbour is absolutely right. Phrases such as “winter beds crisis” and “waiting on trolleys” have gone out of the vocabulary. When did we last see anyone waiting on a trolley? That does not happen any more because people are looked after straight away.
We are asked, “Where’s the money gone?” Pay has gone up. Nurses’ pay has gone up by 61 per cent. in 10 years, or 27 per cent. in real terms. The pay of support staff has gone up by 67 per cent., or 32 per cent. in real terms. That is welcome, but I need to say something to my Government: phasing this year’s pay rise is out of order. That is not what the nurses and health professionals of this country expect or deserve. The pay review award should be paid in full. Health workers deserve no less, and to pretend otherwise is an insult. Go back, please, and look at this again, or we could be facing real problems in the NHS.
Where has the money gone locally? I am sorry, but I am going to bore hon. Members again. New facilities in Gateshead include the Bensham walk-in centre, which opened in 2004. A new medical practice in Teams opened in 2005, as did an out-of-hours service for people not registered with a dentist. New pharmacies have opened and a low-vision centre has been set up. Retinal screening for people with diabetes has been improved. There is a new condom distribution scheme and a health trainers project. We have a triage service in paediatric speech and language therapy—I could use it! New facilities in Blaydon include the new Whickham cottage medical centre and new GP practices, with two additional GPs. There are new facilities in Chopwell—the Pioneer centre—and new optometry practices in Crawcrook and Birtley. That is where the money has gone—but that is not all.
The money has also gone on increasing staff numbers. We had 147 doctors in 2002, yet we had 161
in 2005. We had 135 GPs in 2002 and we have 146 today. There were 574 non-medical staff in 2002, but 793 in 2005. We had 74 qualified allied health professionals in 2002 and there were 102 in 2005—the list goes on. Hon. Members will not be surprised that while we had 29 managers and senior managers in 2002, we now have 55—that is the group that has seen the biggest growth. What are they doing?
Let me move on to pensions. I have spoken to Age Concern and I addressed a conference of the National Pensioners Convention yesterday. Age Concern’s briefing said clearly:
“Significantly while Gordon Brown has been Chancellor the number of pensioners living in poverty has been reduced by almost 2 million”.
Those are the words of Age Concern; they are not my words or those of the Labour party. It is good news that the point at which over-65s will start paying tax will increase and that no pensioner aged over 75 will pay tax on income under £10,000. It is also good news that the financial assistance scheme will be extended and that, at last, all the affected workers will access some help.
I want to raise again the major challenges on pensions with my colleagues on the Front Bench. We must address the problem that 2.1 million people who are entitled to receive pension credit do not claim it. If people will not claim personally, we should go to them. As Lyons recommends, we should set up a one-stop shop with a single telephone line through which people could access pension credit. If the Government wish to argue that the basic state pension cannot be increased beyond its existing rate and that pension credit is the way out, we must make pension credit accessible.
The Government are committed to restoring the earnings link in 2012, if the circumstances are right. We cannot wait until 2012. My Government should support Labour party and TUC policy and reintroduce the link before the end of this Parliament. We all know the history of the breaking of the link—it was done by the Conservative party for political purposes—but if we wait until 2012, 3 million of today’s pensioners will be history, and that would be unfair to them.
Winter fuel payments have remained the same for the past two, three or four years. Since 2003, however, gas prices have gone up by 87 per cent. and electricity prises have risen by 56 per cent. We will miss our 2010 fuel poverty target if we do not address this problem. Earlier this year, Ofgem estimated that 4 million households will be in living in fuel poverty by the end of this winter. Just four years ago, the figure was only 2 million. We should look again at increasing the heating allowance by £100 for next winter.
I want to talk about elderly people living in care. The period during which I worked for Newcastle city council as a care worker was one of the most rewarding times of my life. Some 280,000 people living in care homes receive a personal expenses allowance of £19.60 a week. That is absolutely pitiful, and we should support Age Concern’s campaign to raise that amount to £40 a week. All those proposals cost money, but it is money that would be spent on the most vulnerable in society. I urge the Government to work with the National Pensioners Convention, the TUC, Age Concern and the dedicated people who care for the elderly to try to put the matter right.
I have listened all week to the Opposition parties crying out about a con trick, and I ask myself whether they listened during the Chancellor’s speech. Yesterday, I read an article by Anatole Kaletsky in The Times, which said:
“The con-trick criticisms are mostly spurious. The Chancellor was unusually straightforward in stating, at the very start of his speech, that this Budget would be broadly neutral, with no room for any net tax reductions. It was therefore perfectly clear that any tax cuts announced would be matched by increases elsewhere in the system. All the main tax increases...were presented straightforwardly and were clearly costed in the Treasury’s Budget documents.”
Those are not my words. He continued:
“The fact is that Mr Brown delivered exactly what most economists, tax experts and business lobbyists had long been demanding—a simplification of the tax system combined with an improvement in its efficiency, achieved by reducing marginal tax rates and simultaneously broadening the fiscal base.”
Mrs. Theresa Villiers (Chipping Barnet) (Con): How can the Budget be a simplifying measure if it drives so many more people into the tax credit system, which everyone agrees is complicated?
Mr. Anderson: The hon. Lady should write to The Times and ask Anatole Kaletsky that. To give credit where credit is due, someone did listen to the Budget: the leader of the Liberal Democrats clearly listened, and to his credit, he picked up straight away on the 10p issue. Perhaps the old Etonians were not listening; perhaps they were too busy writing their next joke about Stalin and trying to take the mickey out of the Chancellor, but it is clear that when the country comes to make a choice, people will stand up and say, “We will support a strong leader who is not frightened of the civil service, and who is fair.” They will not entrust the economy of the nation to Lord Snooty and the Bash Street Kids.
8.11 pm
Mr. Kenneth Clarke (Rushcliffe) (Con): I refer the House to my entry in the Register of Members’ Interests. In case anyone has any unworthy thoughts about whether my outside interests will affect my judgment in making my speech, I assure them that they certainly do not. Having put that behind me, let me say that I think that I have listened to my last Budget speech from the current Chancellor. I have listened to 10 of them, and they are a fairly bewildering collection; he has had some fairly dull ones, and some odd ones. This was probably one of the most political that he has made. I suppose that he lived up to my constant expectation that he will surprise everybody. On this occasion, as I shall try to illustrate, his mind was fixed on headlines and politics, not on a responsible policy on public spending, and tax and spend. That distorted his judgment in ways that I shall seek to explain.
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