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The Labour Government have rightly taken credit for increasing the amount of money that goes to the research councils; they have more than doubled it since I was the responsible Minister, when I was unable to persuade the
then Chancellor of the Exchequer that he should do the same thing. I therefore give credit to Lord Sainsbury for changing attitudes to the research councils. However, it is interesting that both his retirement report, "The Race to the Top", and this month's report from the Royal Society draw attention to the fact that, in terms of expenditure as a percentage of research and development, the expenditure on public R and D is the same now as in 1997, when I left office as the Minister for Science and Technology, at about 0.7 per cent. of gross domestic product. So, despite the increase in the research councils' budgets, there has been a diminution in public investment in science across the board in other Government Departments. We need to be careful about that and to watch it.
My view is that scientific expenditure stimulates growth in other sectors of the economy, although not always predictably. President Obama has put in place massive science and technology stimulus projects that will have a big effect progressively on the way in which the United States recovers, because it will have a lot of value-added industry and skills in universities. Some of the money going into American universities will attract talent from throughout the world, so there will be an influx of top academics and research institutes, perhaps including those from the United Kingdom. We need to be careful, so I hope not only that science expenditure will be ring-fenced, but that the importance of science will be underlined and understood in Government Departments, so that each Department's chief scientific adviser, and perhaps their engineering advisers, will ensure that every Minister understands the importance of projects that lead progressively to more scientific expenditure and the application of science in Government decision making.
As I said, I shall make a comment about space, and I make the specific disclosure that I am a non-executive director of a company involved in satellite broadband. I welcomed this week's Government announcement on the space agency; Lord Mandelson and Lord Drayson were right to make the decision. This country needs a stronger position on space activity. It is one of the most innovative industries and contributes about £7 billion a year to the UK economy. It involves cutting-edge technology, a lot of which reads across to the non-space sector. The sector is therefore important, so I hope that my Conservative Front-Bench colleagues will not only endorse the space agency, as I think that they will, but understand that it will need Government funding along the lines that have been announced if it is to bring in the proposed industrial funding, which I know about from the industry and Government policy group report that preceded the space agency announcement.
Let me focus on a final point that the Government need to take on board and on which I hope my party will focus more explicitly. The Budget included a mention of small and medium-sized companies tendering for Government contracts-I call that smarter procurement. It is vital that that happens, although it is not easy to achieve. The Government spend more than £160 billion on all procurement. For 30 years or more, America has put in place a set-aside of about 20 per cent. of such expenditure for small and medium-sized companies, which leads to a tremendous pull-through. The best form of capital for a smaller company is revenue, so if a
company wins an order, it will be much more likely that outside investors will back it. The difficulty in this crucial area arises due to the costs of tendering. The Budget envisages such expenditure representing 15 per cent. of the total, which would mean that upwards of £20 billion a year would go into smaller companies. Obviously, that would have a tremendous impact, and it would be a much greater amount than the budget for the science research base. If we can get this right, as I hope that we will, the results could be dramatic.
Britain deserves to be a leading-edge, innovative economy. I commend a recent report to Conservative Front Benchers by Sir James Dyson, which covers much of the same ground as, and makes similar recommendations to, a report that I gave to the shadow Cabinet in 2007. The time for such ideas has come, but I felt that the Budget was tired in the sense that it contained a lot of little initiatives, but no real vision of how we can drive this country back into a situation in which we can afford, through the growth of high-technology industries, the very services on which we know that the public depend. That is a real gap. I hope that during the election and beyond it, we will recover our self-confidence and determination not to be dependent on what goes on elsewhere in the world for our livelihood, and show the rest of the world that British industry can compete and that we can have the skills base that will enable us to hold our head up high.
Those are my final words in the Chamber. I have enjoyed 23 years here, and it has been a privilege. The Esher constituency between 1987 and 1997, which became Esher and Walton from 1997 to the present, has been a wonderful constituency to represent. I have been greatly supported by my wife, whose father was a Member of the House from 1950 to 1961, when he went Upstairs, so we have a long association with the Commons. It has been a great honour for me to serve here.
I hope that debates in the next Chamber flourish and that Members speak without notes, preferably, because it is a debating Chamber. It would be even more stimulating if people were to think things through and understand what they want to get across to the British nation in the Chamber, rather than waiting to put out a press release. I have enjoyed my time here, and I am very grateful to everybody in the House for allowing me to do so.
5.6 pm
Lynne Jones (Birmingham, Selly Oak) (Lab): This may well be my last speech to the House, although there are a few days left of this Parliament. During my 18 years here I have spoken in a few Budget debates, and without exception the issue that I have always raised has been my concern about the lack of investment in our infrastructure in this country, including the research and development infrastructure. I echo the sentiments expressed by the hon. Member for Esher and Walton (Mr. Taylor), whom I count as an hon. Friend in the House. We served for a while on the Science and Technology Committee.
Looking in the Red Book, I note that between the current financial year and the next, there is to be a £10 billion cut in the capital budget, followed by a further £11 billion cut the following year. I have grave doubts about whether that is the right way to go. I accept that there will be pain in the future, but cutting
down on investment in assets that will be the engine of our future growth and prosperity is short-sighted. One element of our infrastructure is transport. I cannot see any figures for that, but we recently heard the welcome announcement about high speed rail. I do not know how that is to be financed, and I cannot see in the Red Book what is happening to capital investment in transport.
Rob Marris (Wolverhampton, South-West) (Lab): Would my hon. Friend, like me, welcome an early and positive decision on a major expansion of the tram system in the west midlands?
Lynne Jones: Indeed. The lack of investment in our transport infrastructure puts us to shame, compared with similar economies in Europe. I have been trying to reduce my air travel and have travelled a number of times, both on holiday and on Select Committee visits, by train in France, Germany and Spain. I have also visited continental countries where public transport is superb and where there is substantial investment in cycling. I must put a marker down for that. Although the Chancellor announced today £100 million for mending potholes, which will help cyclists to some extent, and £250 million for our motorways, a very small amount of money could do marvels for our cycling infrastructure. That is all part of the investment that we need for a modern economy.
Another aspect of investment that concerns me is housing. Of course, the announcement that first-time buyers are going to be helped on to the housing ladder is very welcome. In my view, however, we have been too reliant on owner-occupation. There is nothing in the Red Book about investment in our social housing, as regards not only new provision but investment in reducing energy use, improving energy efficiency insulation, and so on. Instead, there have been cuts in the Department for Communities and Local Government capital budget.
In science, we have already started to see some cuts. The Government have a target of achieving expenditure of 2.5 per cent. of gross domestic product on investment in research and development. Not all of that will be public investment. Nevertheless, we are way off target. Public investment in science has grown substantially. It is one of the great success stories of this Government that they have invested in the science budget. I well remember having a conversation with the hon. Member for Esher and Walton in which he expressed regret that when he was a science Minister he was not able to announce such large increases in investment in our research councils and universities, for example.
However, in terms of actual GDP, investment has remained reasonably static at about 1.8 per cent. That means that if we are to achieve the 2.5 per cent. target, let alone the 3 per cent. for R and D that was part of the growth and stability pact in Europe, we should be increasing our science spending year by year. As the hon. Member for Harrogate and Knaresborough (Mr. Willis) has pointed out, public sector investment in science and R and D stimulates development in the private sector. I agree with the hon. Member for Esher and Walton that the science budget should be ring-fenced. Moreover, the Government should think twice about capital expenditure. Spending for investment was part of the golden rule. The Chancellor seems to have abandoned the argument that spending for investment should be
protected because in the end it more than pays for itself, and helps to bring in tax revenues. One of the major reasons for the huge deficit, apart from having to bail out the banks and the over-reliance on the financial services sector, has been the loss of tax revenues.
I agreed with the right hon. Member for Fylde (Mr. Jack)-the Chair of the Environment, Food and Rural Affairs Committee, on which I have served for the past five years-when he said that we need more growth in jobs in the private sector; of course we do. However, I did not agree with him when he argued, in response to the speech by my hon. Friend the Member for Elmet (Colin Burgon), that those of us who see an important role for the public sector in these areas are harking back to times past, and some imaginary golden age that never existed. The fact is that we need both the public sector and the private sector. Surely now, of all times, we should recognise the important role that the state plays in stabilising our economy and in creating an environment in which the private sector can prosper.
Although I have never advocated the nationalisation of the commanding heights of the economy and all the banks, I do not mind one or two financial institutions being owned by the public, or perhaps a return to a larger mutual sector. It is a great pity that we have lost the range of financial institutions that we used to have. I am sorry that the Chancellor did not mention the launch of a people's bank, as the press suggested he would. I welcomed the nationalisation of Northern Rock; it was the right thing to do, and was opposed by the Opposition. It should be used as way to relaunch the mutual sector in financial services, and I should like a people's bank to be developed in the Post Office.
I certainly do not advocate the idea that all our banks and financial institutions should be nationalised, but we need a balance and a recognition of the interdependence of the state and the private sector. Ever since the Thatcherite era, there has been an idea that the market is God, that it will prevail and that it cannot be bucked. Since 1997, my party's Government have gone along with that philosophy. Indeed, the Prime Minister, in his last speech as Chancellor, at the Mansion House in 2007, talked about the success of the City of London and said that it hailed a new golden era that would be seen as even more important than the industrial revolution. Now we have learned not to put our trust in the unfettered market, and that we need a balance between the market and the state.
We can take as an example the over-reliance on the housing market to provide housing. People have been pushed into home ownership who should not have been, and there has been an idea that housing is an investment rather than a place for people to live and build a home in. The role of social housing, particularly council housing, has been denigrated. People who rely on the council housing sector-I was brought up in a council tenancy and my mother is still a council tenant-have been regarded as somehow not aspirational enough, and as lesser beings than those who own their home.
There is nothing great about having an irrational housing market. Again, it is our duty to have a balance and recognise that there is a role for renting, and particularly for the social rented sector. That is a far more efficient way of providing houses, because it is investment in bricks and mortar that is not subject to ever-increasing prices as properties change hands. Such
housing stays in one ownership, and the only investment needed is in maintaining and improving properties. The worship of owner-occupation has been a big mistake in the past 20 or 30 years, and the loss of so much of our council housing has had terrible consequences. There has been a huge increase in waiting lists for social housing, yet there was no mention of the matter in the Budget.
I am concerned also about the growth in inequality that has occurred since the 1980s, which has also been a consequence of the Thatcherite ideology. We have seen a huge growth in inequality; in a recent article in The Guardian the Prime Minister could only claim that the Government had been successful in limiting its growth. We have a huge disparity, as the recent report by the National Equality Panel showed, with the richest 10 per cent. in our society being 100 times more wealthy than the poorest 10 per cent. Parliamentarians-even those of us on the basic parliamentary salary-are among that highest-earning 10 per cent., and compared with other members of our society we are by no means rich, just very comfortably off. However, we enjoy riches beyond the dreams of many of our constituents, and that is why the expenses scandal caused so much outrage.
There is not enough in the Government's tax and spend policy to deal with that inequality. A recent publication by Richard Wilkinson and Kate Pickett-I cannot remember the title of their book-demonstrated that in societies where there are greater inequalities, all the bads of advanced societies, including higher crime rates, poorer mental health, higher child mortality rates and poorer health all round, exist in much greater abundance. That correlates with inequality in a society, and the issue is not just real incomes or wealth, but the comparison between members of that society.
Social inequality is a predictor of many of those bads, which have been described as aspects of the "broken society", and that inequality has led to problems within our communities. The Government have done a great deal to address those problems and slow down the growth in inequality, and there has been financial help for families and children. Indeed, many children have been taken out of poverty, but the glaring inequalities in our society remain.
The Government have moved-in a tokenistic way-to address some of those issues. I was highly delighted, for example, when they started to look at restricting pensions tax relief. It is absolutely outrageous that £18 billion-I think-is spent on tax relief for pensions savings and 30 per cent. of that goes to the wealthiest 1.5 per cent. of people. Some 75 per cent. of the population share about 25 per cent. of that largesse. The Government have just started to restrict that relief, but I have long argued, and I cannot see why they do not accept, that tax relief on pensions should be limited to the basic rate of tax. There is no evidence that that subsidy, particularly of high earners, increases their savings; it just means that savings are made in different ways.
Several hon. Members have said that this is not the time to go into the tax system, but I want to mention it, because we do not have a fair and progressive system. Fairness was the subject of the first question at Prime Minister's questions earlier today, and the Prime Minister talked about the important policies that the Government have introduced, such as tax credits, to improve fairness.
However, while people earning less than half the median income are paying tax, we cannot say that we have a fair tax system; while low earners are paying a higher proportion of their income in tax than high earners, we cannot say that we have a fair tax system. I support the Liberal Democrat policy of a huge increase in the threshold at which people pay tax. That obviously could benefit people higher up the tax scale, so there would need to be a smoothing process to ensure that higher earners did not benefit. However, that is the right way to go-it is a simple way of helping the poorest people.
We also need to look at the balance in our tax system between taxation on earnings, enterprise and investment and taxation on bads and commodities such as land, with which people can hugely increase their wealth by doing nothing, often as a result of public sector investment in the infrastructure to which I referred earlier. Such investment can massively increase the value of land, and enrich the landowner, despite their making no effort, so it is time to take a proper look at a land tax.
Interestingly, an Opposition Member recently raised that issue in an article in The House Magazine. I can remember his name, but after 18 years in the House I still cannot remember the names of constituencies, so he has avoided the embarrassment of being named. At some time or other, however, Members on both sides of the House have raised the possibility of a land tax. A small percentage increase in land values only would be needed. The hon. Member for Twickenham (Dr. Cable) has moved slightly in that direction by advocating the mansion tax, which I also think is a good policy.
Council tax is not progressive enough, although I disagree with the Liberal Democrats wanting to abolish it, because I think that property taxes are a good form of taxation. They are easy to collect and difficult to evade. However, the current council tax system is unfair, and that unfairness has been locked in by the failure to revalue it over the past 20 years. It should have been revalued at least every five years, but the Government have not faced up to that challenge.
We could also look to increase taxation revenues by taxing pollution and through green taxes. A Library report produced in December stated that 7.8 per cent. of taxation could be classified as green taxation, which was the lowest level in 15 years. I am disappointed, therefore, that next year the Government are to increase national insurance but not increase taxes on property, pollution and carbon emissions, and that they are not doing more to create a fairer and more sensible tax system, in respect of what is taxed and why.
Having said that, there will be an election on 6 May. The Government can claim a great deal of credit for having steered us through the recession and for taking the lead internationally in ensuring that the world did not fall into a deep depression. When people vote on 6 May, they will need to look at that record. I am probably more critical of the Government than most Members of this House-I am often more critical than members of the Opposition parties-but I certainly do not want to see a Conservative Government after 6 May.
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