House of Commons
Wednesday 21 March 2007
The House met at half-past Eleven o’clock
[Mr. Speaker in the Chair]
Oral Answers to Questions
The Secretary of State was asked—
Numerous ones, as we want to combat climate change and secure our future energy supply.
I thank the Secretary of State for his response. In the light of the energy review’s acknowledgment of nuclear power as an essential component of the energy mix, will he confirm that any proposal to replace the Wylfa power station with a new station would have his enthusiastic support?
Yes, and I have told the local Member of Parliament, my hon. Friend the Member for Ynys Môn (Albert Owen), and the local county council that I back their request to have the replacement, Wylfa B, put in place. That will provide enormous opportunities for Anglesey.
Microgeneration is also an important facet of the energy mix. If I write to the Secretary of State, will he please investigate what has happened to the Dolgarrog wood-burning scheme, which would have provided energy for the whole of that part of the valley? It seems to have hit the buffers on funding. Will he liaise with his colleagues in the National Assembly to see whether that important model, which might be a template for many other places, can be restarted?
I would be happy to do that and to work with the hon. Gentleman to encourage microgeneration wherever possible. It is essential that Wales becomes a world leader in renewable energy. Whether in microgeneration of the kind that he describes, wind power, wave power, tidal power or the Severn barrage, Wales has a tremendous opportunity to be at the forefront of such developments.
Does my right hon. Friend agree that the new research and enterprise partnership launched at Westminster yesterday by the university of Wales, Aberystwyth, and the university of Wales, Bangor, with its emphasis on the development of new technologies, products and services, will have the opportunity to contribute significantly to sustainable, energy-efficient development in Wales, the UK and internationally?
I agree with my hon. Friend, and I commend her and the work going on at Bangor university, which I visited last year. I was enormously impressed by its attempt to make Wales a leader in the fight against climate change. We therefore hope that Opposition parties will back our policies to make sure that renewable, clean energy is the dominant energy supply in Wales.
The energy White Paper has still not been published, despite being promised for the beginning of this year. That delay is caused by the Government’s admitted failures to consult over the energy review. It is now certain that Wylfa nuclear power station will close in 2010. Will the Secretary of State tell the House how the Government propose to make up for the loss of generating capacity as a result of Wylfa’s closure? Why did the Government not act sooner to formulate their energy policy so as to secure the electricity supply in Wales?
We are confident that an electricity supply will be secured for Wales. It will certainly be secured if the hon. Gentleman changes his policy on the giant Gwynt-y-Môr wind farm project 9 miles off the north Wales coast, which is capable of powering nearly half the households in Wales. He has opposed that, and the Leader of the Opposition has opposed it, despite putting a little windmill on his home in Notting Hill—a lot of good that will do. There is a prospect of massive electricity generation—
Environmental Liability Directive
My right hon. Friend and I have regular discussions with the First Minister and ministerial colleagues on a range of issues. The Welsh Assembly Government are currently considering responses to the consultation on options and will announce their conclusions later this year.
An ELD can only fully implement the “polluter pays” principle if there is strict liability for all occupational activities on land that lead to biodiversity damage. It is therefore regrettable that a weak English regime is proposed that exempts some hazardous genetically modified organism operations from financial penalties. Will the Minister congratulate Welsh Assembly Ministers on their more robust ELD line, which removes those permitted get-outs, and ask them to encourage their counterparts on this side of Offa’s Dyke to take a firmer stance, without exclusions, in the interests of environmental protection?
My hon. Friend is right that the directive establishes strict liability for environmental damage to land, water, protected species and habitats. In line with the “polluter pays” principle, offenders will be required to remedy any damage caused. The Department for Environment, Food and Rural Affairs and the Assembly Government are considering responses to the consultation before deciding how to move forward. A second consultation will focus on draft regulations. The same high standards are being applied across England and Wales. DEFRA and the Assembly Government are liaising closely on implementing the directive. The details of how it will be implemented in Wales are a matter for the Assembly Government. I will raise his concern with DEFRA Ministers, and I will also meet Carwyn Jones, the Minister in the Assembly Government with responsibility for those matters, tomorrow.
Nation states have a duty under the ELD to include European designations of protection, but no such duty to include national designations. It appears that Wales will take a more inclusive approach. Many designations have cross-border significance, and DEFRA will have an input there as well. Will the Minister urge DEFRA to take a more inclusive approach to ELDs, and ensure that any cross-border designations are dealt with appropriately?
Not only will the proposed directive cover the issue, but, as the hon. Gentleman knows, domestic legislation already provides extensive protection for the environment. I am sure that the hon. Gentleman will be able to contribute to the consultation and make his point then: all responses will be considered carefully. However, I will raise his concerns with the relevant DEFRA Minister, along with those of my hon. Friend the Member for North-West Leicestershire (David Taylor).
Royal Naval Armaments Depot Llangennech
Can the Secretary of State explain why, when central Government Departments such as the Ministry of Defence—or, indeed, Her Majesty’s Revenue and Customs and the Treasury—cut jobs, they cut them in places like Carmarthenshire or Pembrokeshire, which need them most, whereas when they create jobs they create them outside the convergence fund region, in the places that need them least? Is it not about time that the Government had a policy for west Wales, and indeed for all Wales, so that jobs can be created throughout the nation?
I agree that we should be creating jobs throughout the nation, and in fact we are doing so. As the hon. Gentleman will know, in west Wales and the valleys—he represents a valleys constituency, as I do—unemployment has fallen and more jobs have been created. The Llangennech example is part of a restructuring of the Ministry of Defence, and we are working with all concerned. My hon. Friend the Member for Llanelli (Nia Griffith) has visited the site, and the local Assembly Member, Catherine Thomas, is involved with the unions and work force.
I do not accept the hon. Gentleman’s analysis. What would really hit jobs in Wales would be any chance of Plaid Cymru’s bankrupt economic policies holding sway there.
MOD Llangennech—locally known as the RN—has been an integral part of the community for several generations. What assurance can my right hon. Friend give that if the MOD leaves Llangennech and the site is disposed of, full consideration will be given to making part of it a community facility, as well as providing the maximum possible support for those who may lose their jobs after many years of loyal service?
As I said earlier, my hon. Friend has been extremely active in defending the aspirations of the local community. I know that she will take the matter up with the Defence Minister responsible for such matters, and we in the Wales Office will be sure to support her in her objective.
I have regular discussions with the First Minister on a range of issues, including the automotive industry in Wales.
I accept that some automotive companies have been relocated from Wales to eastern Europe, but does my hon. Friend accept that there have been major expansions and relocations within Wales? There has been what the Western Mail has called a “mini-surge” for the Welsh automotive industry. I am thinking particularly of a company called Mollertech, in the borough of Caerphilly. Will my hon. Friend acknowledge that that is an indication of the strength and success of the Welsh economy?
Yes, indeed. Wales now has record levels of employment, and part of that success is due to investment in the automotive sector there. My hon. Friend mentioned the Mollertech investment, which will create 99 jobs in Caerphilly with a £10.7 million expansion and support from the Welsh Assembly Government. Ford Bridgend is creating more than 200 posts over the next two years with a £100 million investment; Toyota is investing about £100 million in its Deeside plant, safeguarding 680 jobs; and Takao Europe Manufacturing is investing £3.2 million, which will create 100 jobs in Ebbw Vale. It is clear that, having gone through a particularly difficult period, the automotive industry is now seeing the benefits of expansion and investment, which are safeguarding existing jobs and creating new ones.
The Minister must not be complacent, because in each year of the Labour Government manufacturing jobs have been lost in Wales. Ford Bridgend employs more than 1,600 workers and has made more than 13 million engines since 1980 when it came into being, including the world-beating Land Rover engine. In an hour’s time, in an attempt to appear green, the Chancellor will double the taxes on so-called 4x4s. What effect does the Minister estimate that that will have on jobs at that plant, and also on the incomes of our hard-pressed Welsh farmers, who rely on such vehicles?
The hon. Lady will have to be patient and wait to hear what announcements the Chancellor makes in a little over half an hour’s time. I am surprised that she implies that there is no real improvement in, and investment going into, the automotive industry. I have listed the successes that we have had in recent years. Frankly, the last thing that the Welsh economy and Welsh business need is a return to the failed Tory policies—[Interruption.] Those failed policies led to two recessions—[Interruption.] They led to two recessions since the war and 160,000 unemployed in Wales—
Last Friday, I attended a rally of about 1,000 Airbus workers from Broughton who were concerned about their future. I ask my right hon. Friend to press the Assembly Government and the Department of Trade and Industry to invest further in research and development in composite materials in order to secure the United Kingdom’s position as world leader in wing-building technology.
I will be happy to continue to work with my hon. Friend to achieve that objective. I applaud him for joining many of his constituents at that rally. I believe that the future of Airbus is secure. It is the jewel in the crown of the economy of that part of Wales and nearby across the border in England, and it will continue to get the support of both the Welsh Assembly Government and the Government at Westminster.
On that point, does the Secretary of State agree that Airbus in Broughton has achieved its remarkable success through research and development investment in wing technology, and that that, together with a superb work force, has secured the contract for the A350 composite wing? Will he join me in backing Broughton’s goal of winning the wing contract for the next generation of single-aisle aircraft, which would guarantee a world-class role for Wales in aerospace technology for decades to come?
Indeed; I am happy to do so. I also emphasise that although provision has been made for job reductions at Airbus Broughton, none of them is on the engineering or production side; they have been made to enable Airbus to be much more competitive and to compete with Boeing, which I know it will be able to do successfully, partly for the reasons that the hon. Gentleman has given.
We all agree that Airbus is a fine company, but can the Secretary of State help me on the following point? Because of direct political lobbying last month by German politicians, Wales lost out on, and Germany won, the wing-equipping work for the new A350 XWB. Can the Secretary of State reassure me and the workers at Airbus in north Wales that the reports that our Government dithered and made only weak representations at the last minute are untrue, and if they are untrue will he prove it by immediately publishing the details of the case that the Government made to Airbus and EADS—the European Aeronautic Defence and Space Company—on behalf of Wales and the UK?
That is just a load of rubbish. The hon. Lady clearly does not know what is going on at Airbus. The truth is that Airbus has extra work for its wings as a result of the deal negotiated. The management and unions there are extremely confident about its future, not least because during the past 10 years during which it has succeeded we have had the best economic climate for Airbus and Welsh business ever in our history—and that is because we have had the best Chancellor for British business and Welsh business ever in our history as well.
Welsh Border (Governance)
The hon. Gentleman will know of the recent memorandum of understanding between the West Midlands regional assembly and the Welsh Assembly Government. Rural communities in mid-Wales, Shropshire and Herefordshire share many interests, and it makes sense for them to co-operate where appropriate.
I am grateful to the Minister for that reply. He has already spoken to me about this issue, and he knows how concerned I am for my constituents who live right on the Welsh border, because of the differences in funding from the Welsh Assembly for services for Welsh citizens who cross the border to use facilities such as the Royal Shrewsbury hospital. He knows that my hospital loses £2 million a year because of the difference in funding from the Welsh Assembly. Will he please ask the Assembly to increase co-operation with English authorities on our side of the border, to make sure that the treatment of citizens is fairer on both sides?
From what I gather, the hon. Gentleman wants to see further investment, but it certainly will not come from him and his party, given their policies. The memorandum of understanding outlines the commitment of both organisations to building stronger cross-border collaboration in policy and service delivery. Cross-border working has been highlighted as a key priority for each of the Wales spatial plan areas. An official level working group has been established, which led to the memorandum of understanding, and I am happy to convey the hon. Gentleman’s further suggestion to Welsh Ministers when I meet them. I know that the Welsh Assembly Government share the hon. Gentleman’s concern to ensure proper co-operation on cross-border issues.
The development of the St. Athan defence training establishment brings great potential to my Bridgend constituency. Will my right hon. Friend agree to hold discussions with the First Minister to ensure that an appropriate skills base is developed at Bridgend college, so that such employment opportunities can be grabbed by my constituents? [Interruption.]
Yes, I will happily do so. As a result of the excellent programme that Welsh Labour has drawn up for the next Assembly Government, new skills academies will provide key industries, including the St. Athan project, with access to excellence in training and learning. My hon. Friend can maximise the potential of local further education and training opportunities in her constituency by working with the Welsh Assembly Government, and I am happy to help facilitate that. [Interruption.]
My right hon. Friend the Secretary of State and I regularly meet ministerial colleagues and others to discuss issues affecting Wales, including rail services. There has been a very encouraging rise in rail use over recent years. There are now more than 1 billion passenger journeys every year throughout the UK—a 35 per cent. increase on the 1995-96 figure.
I thank my hon. Friend for that response. Labour’s extra investment in north Wales has resulted in improved services and increased demand. However, he will be aware of Virgin Trains’ plan to replace the Pendolino trains with Super Voyagers post-2008. Will he agree to meet me and a small delegation to discuss this issue in detail, to ensure that we get the improved services on board that such demand requires?
Yes, I am more than happy to meet a delegation led by my hon. Friend. As he says, Virgin is replacing the Pendolino carriages on the north Wales route with the more reliable Voyager trains. Although the Voyager carriages have fewer seats, there will be no decrease in service because there will be more trains and therefore more seats, and a better service. I know that he met Virgin recently to discuss these matters, and I understand that a follow-up meeting has been arranged for a few months, but as I said, I will certainly meet him and his delegation to discuss these matters.
Notwithstanding the rosy picture that the Minister has painted, does he agree that there are particular problems on the mid-Wales and Cambrian coastline lines, and will he convey to the Assembly Government and his ministerial colleagues the concerns of many of my constituents about a service characterised by clapped-out rolling stock, overcrowded trains and missed connections? That is the reality of train use in mid-Wales.
While I understand that there are problems throughout the rail network, the issue is one of demand and supply. We are seeing a rapid increase in rail use and the rail companies are lagging behind with their investment. The hon. Gentleman will be aware that the Government have announced a further 1,000 carriages over the next few years, and the Welsh Assembly Government are putting in a further £1. 6 million to reduce overcrowding on the Cambrian main line. I am sure that he will see an improvement in the near future.
Wales may represent only 4.5 per cent. of the British population, but we provide 9 per cent. of the British armed forces. In addition to the figures that the Secretary of State announced just now, we will get another 5,500 jobs in St. Athan, thanks to the new contract that we have just won for Wales. Should not we in Wales be proud of our contribution to the British armed forces, rather than try to get them thrown out of their bases in Wales, as some people in Plaid Cymru would like?
I completely agree with my hon. Friend. The St. Athan project, and all the defence investment in Wales that is of such benefit to jobs and the Welsh economy, comes as a result of the strong partnership between Westminster and Wales, between our Labour Government here and the Welsh Assembly Government in Cardiff Bay. It is as a result of that partnership that we will continue to build a strong Welsh economy, unlike Plaid Cymru’s president, who wants all Army activity and defence investment, including training, removed from Wales.
My right hon. Friend and I have regular discussions with the First Minister to discuss a range of issues, including marine and environmental matters.
My hon. Friend will recognise that the Dee estuary is a globally important environmental site and that when in the late 1990s a decision was taken on dredging in the estuary it was done on the basis of a balance between economy and ecology. Can he assure me that when a new application comes in for further dredging, he will take a balanced view and consult all the agencies on it?
I pay tribute to my hon. Friend for pressing this issue regularly. It is important that we do everything that we can to protect the Airbus jobs at Broughton on which thousands of people in North Wales and in constituencies such as his depend. I understand that the Welsh Assembly Government, the Environment Agency and the Marine Fisheries Agency met recently to agree a plan and timetable for consideration of new consents, and those will be required by August this year. They have been in contact with the Port of Mostyn throughout the duration of the existing consents, and the port has been apprised of the environmental reports that will be required in support of the new application.
My right hon. Friend and I have regular discussions with Assembly Government colleagues about a range of matters. Encouraging visitors to use sustainable forms of transport is a key aim of the Assembly Government’s tourism and transport strategies.
When my hon. Friend next meets colleagues in the Assembly, could he make representations on the Swansea-Cork ferry? As he will be aware, it has recently been reintroduced as a lorry service, but given its role in supporting tourism in the city, the passenger ferry should be reintroduced as soon as possible.
I will meet Andrew Davies, the Minister with responsibility for such matters, next Monday. My hon. Friend is right: tourists spend more than £8 million a day on trips to Wales, and about 100,000 people in Wales—around 9 per cent. of the work force—are employed in tourism. The reintroduction of the new freight-only ferry is welcome, but I understand that Swansea Cork Ferries intends to resume a full passenger service when it has purchased a new vessel. However, I shall discuss those matters with Andrew Davies next week.
The Prime Minister was asked—
Every year, approximately 33,000 pedestrians are killed or injured in road accidents, yet the Department for Transport has no idea how many accidents are caused by uninsured or disqualified drivers. For example, over a four-year period Sajjid Hussain from Rochdale—
How we deal with fatalities and injuries arising from road accidents is a very important matter. Over the past few years, the number of fatalities has fallen significantly, especially among children. That is a major achievement, but the hon. Gentleman is right to draw attention to the fact that there are too many people without proper insurance on our roads. That is one reason why we are looking at ways to toughen the penalties for people who drive without insurance, and it is also why the police are able to make spot checks to discover who those drivers are.
My right hon. Friend is also First Lord of the Treasury, so may I ask him which of the following he finds preferable: a Chancellor of the Exchequer who follows policies imposed on him by Whitehall mandarins that drive us into the exchange rate mechanism and create economic havoc, or one who carries out Labour party policies that have created record employment levels and unparalleled prosperity for this country?
My right hon. Friend makes his point extremely well. Some people remember that, under the Conservatives, we had Black Wednesday, interest rates at 15 per cent., 3 million unemployed and an economy in recession. This Chancellor has delivered the longest period of economic growth in our history and we should be proud of that.
I do not know why the Home Secretary is smiling—he will soon be running a power station in Siberia.
The beating of Morgan Tsvangirai last week demonstrated the depths to which Zimbabwe has sunk under Robert Mugabe. Will the Prime Minister confirm what the Foreign Secretary said yesterday—that the Government will press the EU for an extension of sanctions against Zimbabwe? Specifically, what will he do to make sure that that happens?
We will press the EU to widen the political sanctions that were introduced in 2002 very much as a result of prompting by Britain. We will seek to extend the assets freeze and travel ban as far as we can, but it is also important that we take action in the UN Security Council and the UN Human Rights Council. We will be urging partners in both those institutions to make strong statements against what is happening in Zimbabwe, because that is appalling, disgraceful and utterly tragic for the people of Zimbabwe.
I am grateful for that answer, but may I press the Prime Minister specifically on how the sanctions will be widened? Will he make sure that the scope of the assets freeze is widened, and that EU visas and residence permits for those on the EU sanctions list are cancelled? In addition, will he ensure that the governor of Zimbabwe’s central bank is added to the list? Crucially, will he also ensure that none of those people, including Mugabe, is invited to the EU-African Union summit later this year?
In respect of the summit, the very reason it has not taken place for a significant period of time has been problems over Zimbabwe. However, as well as extending sanctions on assets, the travel ban and so on, the most important thing is for us to make sure that other African countries, particularly in the neighbourhood of Zimbabwe, do everything they possibly can to make it clear that this is a disaster not just for the people of Zimbabwe but for the reputation of good governance in Africa.
The right hon. Gentleman and I met the President of Ghana last week. Ghana is a country that has got on its feet, held democratic elections and is doing extremely well, giving an example of model governance to the rest of Africa. It will be tragic for the reputation of Africa if Zimbabwe is allowed to remain in the state it is in.
Specifically on that point, will the Prime Minister be having further discussions with Thabo Mbeki on that vital issue? What does he think can be done throughout South Africa and across the whole international community to isolate that despotic regime and ensure that it is no longer able to bring desolation, poverty and tyranny to the people of Zimbabwe?
Obviously, we will do everything we can with the South African Government and others. In addition, the UK Government and therefore, through the Government’s financial support to people in Zimbabwe, the UK people have provided £140 million over the past five years to try to help the poorest people in Zimbabwe. The Zimbabwean Government say that we are not prepared to help with land resettlement, but we have said that we will set aside a specific sum to help with the problem, provided that the money is routed through the UN Development Programme and not through the Zimbabwean Government.
Let us be clear, however. The solution to Zimbabwe, ultimately, will not come simply through pressure applied by Britain. Pressure has to be applied within Africa, in particular in the African Union, but I assure the right hon. Gentleman that we will continue to do all we can to make sure that Africa realises that it is a responsibility for Africa as well as for the Zimbabwean Government.
I am sure the whole House will unite in sending sympathy to the family of my constituent, Kodjo Yenga, who is yet another of the teenagers who have met a violent death on the streets of London in recent weeks. Is my right hon. Friend aware that far too many children and young people fear violence, crime and bullying on the streets, and even in our schools? Does he agree that although effective policing and strong deterrents for violent crime play a vital role, it is also crucial that we redouble our efforts to engage with our young people, to talk to them and invest in strategies that will deter them from violent crime and the gang culture?
I agree entirely with what my hon. Friend says. However, it is important to recognise that in London overall violent crime was down by more than 5 per cent. last year and gun crime was down by almost 14 per cent. In addition, we are taking new measures on knives and the use of knives under the Violent Crime Reduction Act 2006. It is also important to recognise that the problem is specific to specific cultures in specific of our inner cities, so we have to take very specific measures in respect, obviously, of the help and support we give young people, but also where families are dysfunctional and out of control and causing real problems to the whole of their neighbourhood. We shall outline some of those proposals in the coming weeks.
I associate myself with the expressions of sympathy from the hon. Member for Regent’s Park and Kensington, North (Ms Buck) on behalf of her constituent.
Is the Prime Minister disappointed that after 10 years in government the gap in wealth between the rich and the poor in this country is greater than it was under Margaret Thatcher?
That is simply not correct. [Interruption.] No, it is not. It is absolutely correct that wealthy people have got wealthier, but it is also correct that the poorest have got wealthier, too. Let me tell the right hon. and learned Gentleman how they have got wealthier. [Hon. Members: “The gap!”] I am sorry, he is absolutely wrong. Those at the bottom end have actually done extremely well over the last 10 years. Let me tell him why—[Interruption.] Tories shake their heads, but people have done well because of the minimum wage, which the Tories opposed. They have done well because of the tax credits, which the Tories opposed. They have done well because of extra child benefit, which the Tories opposed. I do not know whether the Lib Dems ever had policy positions on any of those things.
Let us be absolutely clear. The average family, particularly with children, has done better under this Government. We have not penalised high earners, but we have helped the lowest earners a great deal.
That is simply not correct. [Interruption.] No, it is not correct. As a result—[Interruption.] Sorry, but as a result of the measures that we have taken, families who are on the lowest incomes do not pay tax until far higher up the income scale than they used to. If we look at how the lowest earners are treated in this country, we see that it is infinitely better than 10 years ago. It now compares very well with other European countries. So as well as the Chancellor having delivered the highest employment rate, the lowest unemployment for 30 years, low interest rates, and the strongest economic growth, he has done a lot for income inequality too.
In a diverse constituency such as Tooting, a good museum can be invaluable in teaching young people in a stimulating way about local history and local heritage. It can give young people a real sense of belonging. Despite a generous grant settlement, Wandsworth council is considering closing down Wandsworth museum. The council meets next week to make its final decision. What does the Prime Minister think about a local council risking community cohesion and choosing tax cuts over public services?
The museums do an immense amount of good for our young people and the broader community. As a result of our introducing free entry for our national museums, we have had millions more people going to museums—some of them from some of the lowest-income families. What my hon. Friend draws attention to is the reality of Tory government.
We will certainly make sure that those projects are not the casualty of any problems to do with funding. As a matter of fact, we have already said that projects that have got funding agreed will continue to have that funding agreed. In addition to that, the core funding for the arts has gone up by some 73 per cent. in real terms since we came to power. The reason why a lot of those projects are supported in the hon. and learned Gentleman’s constituency and elsewhere is precisely the investment that we have made.
Yes. In particular, obviously, we will keep the investment going in our schools and also in the apprenticeship programmes. We will make sure, as I think that my hon. Friend will find from later announcements, that we do even more to encourage young people to stay on at school and to go into proper training. Of course, it is important that we provide the proper training for them, and that is why the quadrupling of the number of apprenticeships since 1997 has been very important. I was told yesterday, when visiting the Department for Education and Skills, that more new schools have been built in the last five years than were built in the previous 25. Going round the country, I can see, as I am sure he can, how the programme for refurbishing and rebuilding every school in the country is not just doing wonders for pupils, but is making sure that our school results go up, so that, whereas in 1997 there were only about 80 schools with over 70 per cent. of pupils getting five good GCSEs, the figure is now over 600.
The 200th anniversary of the ending of the slave trade in the British empire is the right time to acknowledge the pain and devastation that was caused by that evil trade. Does the Prime Minister agree that the bicentenary should also be a reminder of those who are still suffering slavery in our world today? Will he confirm that 120,000 women are trafficked for sex in Europe every year and that some European countries have named Britain as the No. 1 destination? Does he think that that is accurate?
I do not know whether that is an accurate description—I certainly hope not. However, I do know that on Friday we will sign the convention on human trafficking. We will also ensure, through the measures that we are taking, especially in relation to serious and organised crime, that we do everything that we can not only to bring to justice those engaged in this appalling activity, but to try to disrupt those people’s activities by seizing their assets. When new measures on the seizure of assets and organised crime are proposed, I very much hope that we will get the full support of the House.
I am delighted that the Prime Minister will be signing the EU convention, as we suggested earlier this year.
Does the Prime Minister agree that one of the most useful things that we can do to end this sickening trade is to ensure that when women flee their captors, there is a safe place for them to go? Will he join me in praising the work of voluntary sector organisations, such as Sister Ann Teresa’s, that provide safe places up and down the country? Instead of listening to the man who is about to go off to the power station, will he make sure that the Government do all that they can to support those excellent voluntary bodies?
My right hon. Friend the Home Secretary was pointing out that it is all very well for the right hon. Member for Witney (Mr. Cameron) to say that he is in favour of supporting the voluntary sector and voluntary bodies, but he voted against the national offender management service Bill, which will allow people in precisely the situation that he describes to be helped by the voluntary sector. As a result of the additional funding that we have given to many of these voluntary bodies, we are able to help women in that situation. It is also important that they recognise that they will not be at a disadvantage if they come forward to give evidence against the people who have trafficked them. Part of the problem is that a lot of these women are ignorant of what is going to happen when they get to this country, and they are then very frightened of what will happen if they give evidence against the people who have trafficked them.
I agree with both the first and the second part of what my hon. Friend says. The most important thing to understand is that the Olympics will not merely be a huge showcase for the country, but that they will result in thousands of jobs being created, thousands of new homes being built and the development of state-of-the-art facilities that will be there for the whole country. The Olympics will benefit people in my constituency and her constituency, as well as people in London. They are a fantastic thing for the country, and I know that the country is proud of them.
In fairness to the ambulance and paramedic services in the hon. Gentleman’s constituency, I think that he will find that they will tell him that they have improved considerably over the past few years. Massive investment is going into our ambulance services and paramedics, although of course we always have to improve on it. However, I heard for myself the other day from people who had been treated for heart disease that as a result of the work done by paramedics today, as well as the additional number of consultants, doctors and nurses working on heart disease, we have saved some 100,000 lives over the past 10 years. I do not doubt that there are significant improvements still to be made, but the health service in the hon. Gentleman’s area and others is getting better.
Since the European Union will this weekend be celebrating the 50th anniversary of the signing of the treaty of Rome, and since the Prime Minister will be attending the European Council meeting in June, can he confirm that the recent agenda on the environment is one that can unite all the peoples of Europe in this continued forward march?
As I pointed out to the House the other day, I think that it is very important that the issue of climate change should become a major question and challenge for the European Union. We have now agreed a very ambitious and bold set of targets. As I pointed out to the House—as it is slightly fuller now than it was for the last European statement, I might just repeat it—there was one member of the European Council who was against including climate change as one of the forward projects of the European Union, and that was the Czech Prime Minister.
I do not know enough about the details of that particular campaign to give an endorsement to it, but I am very happy to meet the hon. Gentleman and the campaign to discuss it. Autism is a very serious issue that has to be taken seriously by our medical services and schools.
There is no doubt at all that it will be impossible to meet our CO2 emissions targets unless we also do much more on energy efficiency. My hon. Friend will know of the very strict new regulations on energy efficiency for the building of new homes. Work is being done by the Carbon Trust and others, and obviously there are plans to switch to low-energy light bulbs and so on that are immensely important. One fact that shows the significance of small changes is the fact that if every home had at least three low-energy light bulbs, it would save the amount of energy used for the whole country’s street lighting, so there is a massive amount that we can do. Again, over the next few weeks, we will announce further proposals on that issue.
Will the Prime Minister kindly explain why, in relation to the Equality Act (Sexual Orientation) Regulations 2007, he has treated the House of Commons with contempt, and why, in relation to the question of unequal treatment, he has given those who stand for gay rights preference over those who are concerned with conscience, family and religion?
I am afraid that I just do not agree with the hon. Gentleman. First of all, we have had a very full debate on the issue in public, and we have followed exactly the procedure that we said we would follow in relation to the regulations. I am afraid that in the end there is a basic choice; he takes the view that there should be discrimination against gay people in respect of this—
Well, it is no use him shaking his head; that is the impact of voting against the regulations. I happen to think that we can, if we are sensible, find a way of preventing discrimination against gay people, while allowing Catholic adoption agencies to carry on doing the excellent work that they do. It is a difficult balance to strike, but I believe that we have struck the right balance, and I think that most sensible people would agree with it.
I agree entirely with what my hon. Friend says, which is why I am opposed to the Opposition’s proposals to—I think—put VAT on domestic flights. We have got to be very clear about this: the fact is that people are going to travel. Indeed, there is no possibility whatever of trying to restrict access to airlines now, in a modern world where people want that access. I think that the right way of dealing with the issue, as my hon. Friend rightly implies, is to deal with it within the European Union emissions trading system. It allows us to bring aviation within that system, which we will do from 2011 onwards, and it allows us therefore to move in concert with other countries. If we end up penalising our passengers in this country, it will do us no good at all.
I understand why the hon. Lady raises that concern, but the truth of the matter is that we need more homes in the south and elsewhere, particularly for couples and first-time buyers who need to get a foot on the first rung of the housing ladder. We will not be able to deal with the housing problems of an expanded number of households unless we build new homes. We will protect the green belt—in fact, we have increased it. We have dramatically increased the amount of new build on brownfield sites, but it is not a realistic policy, I am afraid, to say that there will be no more house building in the south-east.
I wonder whether the Prime Minister will take the opportunity to tell the House what plans are being discussed to cope with the possibility of tens of thousands of migrants entering England, Wales and Northern Ireland from a future independent Scotland because of a failed independent Scottish economy?
It is for precisely that reason that we asked Sir Michael to look at the way in which council tax works, and he has published his report today. It is one reason why we have given more support for pensioners, although I do not think that there will ever be a situation in which local taxes are popular.
Early-day motion 992, signed by 84 MPs, concerns the injustice done to a local community football team, AFC Wimbledon, whose hopes of promotion are over because it has been docked 18 points. It did not know that one of its players, who previously played for Cardiff City in the English championship, needed a—[Interruption.]
Thank you, Mr. Speaker. AFC Wimbledon did not know that it needed an international registration for that player to cross the river Severn to play football in south London. Will my right hon. Friend the Prime Minister give his support to the thousands of football supporters up and down the country who believe that there should be justice for everyone’s teams, whether in the Ryman or the premier league?
Let me tell the hon. Gentleman something. Fortunately, one of the things that I have not had to be bothered about in the past 10 years is the running of the economy, because the Chancellor has done such a good job. I am afraid that the hon. Gentleman and his hon. Friends must realise that in the end, that is what people will judge his record on—the results. Those results mean that in constituencies such as his, as well as in the constituencies of Labour Members, there are more people in work, people are earning more, living standards are rising and interest rates are at levels not heard of for years and years and years. As a result, schools in his constituency have had money put into them, the health service has had money put into it, and there are more police on the streets. That is the difference between a Chancellor who delivers and a Conservative party that failed.
Has my right hon. Friend had a chance to see the recent analytical report in the Daily Record that highlighted the potential loss of thousands of jobs in the shipbuilding industry in Scotland? If those who wish to break up the UK are successful, does he agree that that is an act of unpardonable folly, and something that all of us should be bothered about?
It is an extraordinary situation when it is suggested that we break up the oil and gas industry and the way that it works, and that we break up institutions like defence and shipbuilding which have done so much for the people of Scotland. Scotland has had 200,000 extra jobs in the past few years, living standards have risen, there has been massive investment in education and health, and that is why I am sure people will not want to put that at risk.
I certainly undertake to do so. I agree entirely with what the hon. Gentleman says. It is important that we respond positively to that report—I am sure we will do so—in order to make it clear that anti-Semitism or any form of racism is unacceptable in this country. The hon. Gentleman is also right that this is a good and timely moment to send a signal across Europe too.
Orders of the Day
ways and means
Before I call the Chancellor of the Exchequer, it may be for the convenience of hon. Members if I remind them that at the end of the Chancellor’s speech, copies of the Budget resolutions will be available to them in the Vote Office.
In this, my 11th Budget, my report to the country is of rising employment and rising investment, continuing low inflation, and low interest and mortgage rates. This is a Budget to expand prosperity and fairness for Britain’s families, and it is built on the foundation of the longest period of economic stability and sustained economic growth in our country’s history.
I am told that in the past two centuries only one Chancellor before now has delivered 11 Budgets, and then a 12th. That was when Mr. Gladstone combined the positions of Chancellor and Prime Minister, something no one should ever contemplate doing again.
As I report on the economy and public finances and the progress that we have made, let me thank for their hard work and, on occasion, forthright advice the civil servants—should I say the comrades?—with whom I have worked on Budgets present and past.
This Budget will set out the long-term reforms that we must now make to meet the global challenges ahead, and to build a Britain of high aspiration and high achievement for the years to come. I can report that the British economy is today growing faster than all the other G7 economies. Growth is stronger this year than in the euro area, stronger than in Japan, and stronger even than in America. After 10 years of sustained growth, Britain’s growth will continue into its 59th quarter—the forecast end of the cycle—and then into its 60th, 61st and 62nd quarter and beyond. Before 1997 we were bottom in the G7 for national income per head. We were seventh out of seven, behind Germany, Italy, France, Canada and Japan. Now we are second only to America and ahead of all those other countries.
Every country has faced a trebling of oil and commodity prices, but while inflation peaked at 4.7 per cent. in America and went as high as 3.3 per cent. in the G7, here in Britain, inflation has never gone beyond—[Interruption.] Here in Britain, inflation on the same index has never gone beyond 3 per cent. While on that index it was 4.7 per cent. in the United States, it has fallen from 3 to 2.8 per cent. in Britain, and will fall further this year to 2 per cent.
Our forecast, which is also the consensus of independent forecasters, agrees that looking ahead to 2008 and 2009 inflation will also be on target. Since 1997, inflation has averaged 1.5 per cent.; it is half that of the previous decade. After examining the historical records, it is Britain’s best inflation performance for a century. By holding firm to our commitment to maintain discipline in public sector pay, we will not only secure our 2 per cent. inflation target but create the conditions for maintaining the low interest and mortgage rates that since 1997 have been half the 11 per cent. average of the previous 20 years. We will not return to the old boom and bust.
In the last year, investment has grown by 6 per cent., and business investment by 7 per cent., with inward investment up 10 per cent. Ten years ago and for decades before, Britain’s economy was held back by chronic under-investment; we had the lowest investment of the G7 countries. Now, alongside North America, Britain has the G7’s fastest growing business investment—it has risen in real terms by 48 per cent. since 1997—and overall investment is now 17½ per cent. of our national income. This year, business investment is forecast to rise again by more than 7 per cent., and the figures that we are publishing today show that as a result of that sustained growth and investment we have closed the productivity gap with Japan and Germany, narrowed it with America, and halved it with France. From a platform of high investment, we can now equip ourselves as a country for the next challenge of the global economy: to raise the quantity and quality of investment in physical capital but also in human, scientific and intellectual capital.
I can also report that in the last year employment has risen, with 220,000 more men and women in work. It is now almost forgotten that in past decades Britain suffered higher unemployment not only than America and Japan but than France, Germany and the rest of Europe. But today, with unemployment falling and with 2.6 million more people in work, Britain has a higher proportion of men and women in employment than America, Japan and all our major European neighbours. The next stage in this Budget is to do more to equip British people with the new skills for the new jobs in the decade ahead.
With consumption forecast to rise in each of the next two years by 2¼ to 2¾ per cent., and investment and exports by more than 3 per cent., we expect that next year also, in 2008, alongside North America, our growth will again be the highest in the G7—between 2½ and 3 per cent., with the same rate of growth also in 2009. Under this Government, with stability in this as in every Budget the foundation of all we do, we have sustained growth year on year.
Just as our monetary discipline is the foundation for economic strength, fiscal discipline is the foundation of the strength of Britain’s finances. Our first fiscal rule is that over the economic cycle Government current expenditures are paid by tax revenues. In this economic cycle, not only have we balanced current spending and revenues but I am able to report a surplus of £11 billion, demonstrating that for the first time in four decades Britain has met the golden rule. This contrasts with the economic cycle from 1977 to 1986, when the first fiscal rule, under the previous Government, was not met with a surplus of £11 billion but missed with a deficit of £140 billion; and in the previous cycle, from 1986 to 1997, the golden rule was missed by the previous Government with a deficit of £240 billion.
Our forecasts of the current balance from 2007-08 to 2011-12 are affected by one major change in the last year—the sharply lower levels of production and yet higher costs in the North sea, which have this year reduced tax revenues from £13 billion to £8 billion and for each year into the future cut them by an average of £4 billion a year. Even with this reduced revenue, we are on track in the new cycle to meeting the golden rule, with figures from 2007-08 of minus £4 billion, plus £3 billion, plus £6 billion, plus £9 billion and plus £13 billion surpluses for the years to come. And we have also met our second fiscal rule—that debt should be at a sustainable level—enabling us over the cycle to borrow to meet the country’s investment priorities.
Debt is actually 44 per cent. of national income in America, 50 per cent. in the euro area and 92 per cent. in Japan, but in Britain, we expect debt from 2007-08 to 2012 to be 38 per cent., 38.5 per cent., 38.8 per cent., 38.8 per cent. and 38.6 per cent. in successive years—at all times meeting our second fiscal rule. That contrasts with a debt level of 44 per cent. that we inherited when we came to power, but we have both kept debt low and at the same time more than doubled capital investment in schools, hospitals and infrastructure from just £18 billion a year in 1997 to £43 billion of investment a year today.
Britain’s net borrowing, which in the early 1990s went as high as 8 per cent. of our national income is this year just 2.7 per cent. In future years, it will be 2.4 per cent., falling to 2 per cent. and then falling to 1.8 per cent., 1.6 per cent. and just 1.4 per cent. Compared to a deficit equivalent to over £100 billion in a single year in the early ’90s, the figure for this and future years will be just £35 billion—£1 billion less than forecast at the pre-Budget report—then falling to £34 billion, £30 billion, £28 billion, £26 billion and £24 billion. That means borrowing therefore over the economic cycle not for current consumption, but for essential investment in the future of our country. So having met both our fiscal rules, we can now take forward the final work for the next spending round to take us to 2011.
With interdepartmental reviews on youth services, disabled children, mental health, employment and the future of our regions and localities all nearing completion, we will now—in advance of the final expenditure allocations, which will be published in the autumn—set in place a national, regional and local consultation to discuss and debate issues that arise from the work in the reviews under way to build a shared national consensus around future priorities for our country. But I am also able to announce now reforms that will release resources for priority services.
In the pre-Budget report in December, I said that from now to 2011 asset sales would release £18 billion for front-line services, but because I can announce today the sale of the spectrum, a £6 billion sale of the student loan book and further financial and corporate sales at home and overseas, asset sales will rise from £18 billion to £36 billion. I have agreed with Departments savings in administrative costs worth £1 billion a year by 2011, which will also release money for front-line services. The same front-line services will benefit from below-inflation spending review settlements for the Department for Work and Pensions, Her Majesty’s Revenue and Customs, the Cabinet Office, the Treasury, the Department for Constitutional Affairs and the Attorney-General’s Department. That will release for front-line services £2 billion, and with efficiency savings of 3 per cent. a year, we release, in total, £26 billion a year by 2010 for front-line services.
Just over a decade ago, when unemployment and debt were high and as much as three quarters of all new public spending went to pay for debt and social security costs, it left only one quarter of new spending for health, education, transport, defence and policing. But because of our success in cutting debt by a quarter and claimant count unemployment by a half, those front-line services will, in the coming spending round, receive not 25 per cent. of all new spending as in the past, but 75 per cent. of all new spending.
In this new spending round, our aim has also been—in line with the Gershon report and with continuing reform—to ensure that resources for improving the front-line services, our service priorities, will continue to grow at the 4 to 4.5 per cent. yearly rate of this spending round.
These four major levers of change—better use of assets, cutting administrative costs, efficiency savings, lower debt and lower unemployment—will allow me to release new money for front-line priorities, and I can now set out total expenditures for each year to 2011.
In 1997, capital investment stood at just £18 billion. It will rise from the £43 billion of this year to £48 billion next year and then in successive years to £52 billion, £55 billion, £57 billion, and then £60 billion of capital expenditure—more than three times what it was in 1997—as we invest in our future. Consistent with the figures set out in the 2005 and 2006 Budgets and the most recent pre-Budget report, I can announce that total expenditure, which is £552 billion this year, will rise by £34 billion next year to £587 billion, and then rise in 2008 by £29 billion to £615 billion, rise in 2009 by another £29 billion to £644 billion, and then in 2010 by an additional £29 billion to £674 billion, as we continue year after year to invest in the future.
For the year to come, I can also allocate money to security and defence. At all times, as the Prime Minister and the Home Secretary have emphasised, we will put the security of the country first. So for the coming year, intelligence and counter-terrorism will receive an additional £86 million. Our budget for security and intelligence, which was just £1 billion in 2001, will now be for 2007-08 £2¼ billion. We owe a huge debt of gratitude to our armed forces. To support those who serve us with courage and distinction in Afghanistan, Iraq and in other demanding international commitments, I am allocating the Secretary of State for Defence an additional £400 million for this year alone.
For the coming year starting next month in April, I can also confirm that the money available for investment and reform in the NHS in England will be £8 billion more than this year. It is the biggest cash increase ever. It is a cash rise of 10 per cent.—7 per cent. in real terms. For the future years from 2008 to 2011, allocations will be made in the spending review later this year, but taking the whole of the United Kingdom together, I expect total additional expenditure on the NHS from April this year to be almost £10 billion above last year—also a 10 per cent. rise in national health service expenditure.
I have examined a proposal to introduce what is called a third fiscal rule, but I can tell the House that it would require us to cut spending this year alone by £21 billion, and I have therefore rejected that rule.
In setting the right balance between tax, spending and the stability of the economy, we will not take risks with or break from the stability essential to our long-term economic performance. Let me be absolutely clear: with the economy now growing strongly, faster than any other major economy, this is not a time for a fiscal loosening, and the changes that I make today will be broadly neutral for the public finances and overall, which is the right decision for Britain at this time in the economic cycle.
But it is also right to proceed today with major reforms and modernisation that will prepare and equip Britain for all the long-term challenges ahead—reforms that are now possible because they build on the higher employment, investment and the greater stability of the last 10 years, and reforms that focus on the three major priorities vital to our future. The first is to promote long-term investment and environmentally sustainable growth. That is necessary now and in the future to Britain’s success in the global economy. The second is to encourage work and to reward savings, which is vital to the week-to-week prosperity of every family in the country. The third is to support and strengthen families. That is essential to the welfare of parents and children and the stability of family life.
First, to lead in global competition—and particularly to secure our place in the high value-added, investment-driven growth sectors of the future, from modern manufacturing and the creative industries to business and financial services and the City—Britain must champion open markets, flexibility, free trade and an open and inclusive globalisation, not protectionism. Here the right policy for industry is to combine the most modern and flexible competition regime—including, as announced today, the further extension of risk-based regulation, into employment tribunals—with the most effective incentives and support for British investment and innovation.
My view is that, in all the advanced industrial economies, public and private investment in the great new drivers of growth—innovation and education—will need to rise towards 10 per cent. of national income. As part of our plan to double investment in science, I can announce that in the next four years public investment in science will rise from £5 billion this year to £6.3 billion by 2010—a 25 per cent. cash increase in the science budget of our country.
The Secretary of State for Trade and Industry is also announcing today a £100 million competition for Britain to lead in high-tech innovation, challenging universities and businesses to come together, from medical research to environmental transport, to convert British scientific breakthroughs into British commercial successes and jobs.
In 1997, I cut corporation tax from 33p to 31p and then to 30p. Having continued to look carefully at the requirements for a modern corporate tax system for the global economy, I propose the following changes that reflect the increasing importance in investment decisions of research and development, skills, intellectual property and environmental innovations. I propose to modernise the system of capital allowances —many of which were first introduced for the needs of the post-war economy—by simplifying them to just two categories based on how long an asset will last. I will provide more generous relief for long-life assets, raising the relief from 6 per cent. to 10 per cent., at a cost to the Treasury of £380 million in 2009; I will phase out the relief worth £230 million originally intended for industrial buildings but now poorly targeted; and I will align allowances for plant and machinery with the economic rate of depreciation at 20 per cent.
I will increase the value of the main R and D tax credit by an extra £100 million, and expand the scope for business to draw on environmental capital allowances by an extra £40 million, while leaving the overall tax rate for North sea companies unchanged. From April 2008, for all businesses, I will put in place a new annual 100 per cent. investment allowance of £50,000.
Because our goal is and will continue to be the most competitive business tax regime of the major economies, I have decided to cut mainstream corporation tax from April 2008 from 30p down to 28p—a rate lower than America, Germany, France, Japan, and all our major competitors—making Britain’s corporate tax regime the lowest of all the major economies.
Changes that I will announce in this Budget will also improve the position of the self-employed. But I need to act to deal with individuals artificially incorporating as small companies to avoid paying their due share of tax—a practice that, if left unaddressed, would cost the rest of the tax-paying population billions of pounds. I will take action in a way that will not raise the tax burden on the self-employed and small businesses overall.
To reduce the tax difference between self-employment and small company incorporation, I will raise the small companies rate in three stages from 20p this year to 22p. I will recycle all those revenues to legitimate small businesses investing for the future. Small firms will be able to claim the new 100 per cent. relief for new capital investment up to £50,000, a 175 per cent. tax credit for R and D, and the new tax credit for environmental investment. A small company with profits of £150,000 and investing £50,000 of that will effectively pay tax of just 15 per cent. A firm investing the same from profits of £100,000 will pay tax of 11 per cent.—lower than today.
I have one further announcement on business. When the Secretary of State for Northern Ireland and I meet all the Northern Ireland parties tomorrow morning, we will announce details of a new Northern Ireland innovation fund, a new fund for industry and jobs to be available for the restored Executive that we all want to see.
Six months ago, when we published the Stern report, we set a framework for environmental action that combined a call to personal and social responsibility with European and international co-operation. Since then, we have secured support for a strengthened European carbon trading scheme on the road to a global scheme, and a new agreement for 2020 on cutting European emissions by at least 20 per cent. and potentially 30 per cent. I can also report that we have agreed bilateral partnerships with China on clean coal, Brazil, Mozambique and South Africa on biofuels, India on clean energy investment, Mexico on carbon markets, and Norway on carbon capture and storage. The Secretary of State for Trade and Industry is announcing today that Britain will launch a competition to go ahead with our first full-scale carbon capture and storage demonstration.
Britain will also lead the way in helping developing countries to address climate change. I can announce financial support of £50 million for a path-breaking 10-country initiative across central Africa to prevent the destruction of the second largest rain forest in the world. Led by Nobel prize winner Wangari Maathai, it will help 50 million people in those 10 countries whose livelihoods are now under threat.
Environmental action also requires us to co-operate internationally in new ways. To help meet our commitment to international poverty reduction through environmental protection, I will allocate to the environmental transformation fund, jointly run by the Secretaries of State for International Development and for Environment, Food and Rural Affairs, a total of £800 million for the coming spending round.
At home and abroad, the test that we must apply is what is the most environmentally effective, economically efficient and socially equitable way of reducing emissions: first, through better information and incentives; secondly, through higher standards and investment.
Homes account for one quarter of carbon emissions: our objective is for low-carbon homes benefiting the climate through lower emissions, and consumers through lower bills. Having already announced measures to speed up home insulation and to design out energy-wasting products, we have been consulting the banks and building societies and encouraging them to create a new market of mortgages for immediate capital investment in energy efficiency that would cut consumption and bills and, in the end, not only pay for itself but increase the sale value of the home.
To play our part, we are offering grants of £300 to £4,000 for pensioners and others installing insulation and central heating. From next month, we will increase by 50 per cent. microgeneration grants for homes. I can confirm that until 2012 all new zero-carbon homes up to £500,000 will be exempt from stamp duty. I have asked the Office of Gas and Electricity Markets to examine how green homes can benefit more from the prices paid when they become not just sources of clean energy for themselves but sell energy back to the grid.
I am placing in the Library of the House of Commons the representations that the Foreign Secretary, the Minister for Europe and I are making to European Ministers for a Europe-wide decision that would reduce the rate of VAT from 17.5 per cent. to 5 per cent. on energy-saving and environmentally friendly products in the home.
Business accounts for 40 per cent. of emissions: our objective is that we have not only the most economically competitive but environmentally sustainable companies too. Since 1997, business and Government together have achieved a 25 per cent. reduction in the carbon intensity of the economy. To complement the new environmental tax credit that I have just announced, the advice, support and incentives available from Business Link and our regional development agencies to small businesses for environmental improvement, innovation and energy audits of their work will rise from £140 million this year to £240 million in the coming year.
To encourage recycling and to reduce landfill, the landfill tax will, from April next year, rise by £8 each year to 2011. To reduce the environmental impact of quarrying, the aggregates levy, which has been frozen since its introduction, will rise in April 2008 from £1.60 to £1.95 per tonne. Those measures, our membership of the European emissions trading scheme and the inflation increase that I propose from next April in the climate change levy, will together each year contribute 16 million tonnes of carbon reductions.
As recommended by the Barker report and today by the Lyons report, and in line with representations from the Federation of Small Businesses, commercial property lying empty should not continue to be given such generous business rate relief, particularly because that leads to higher rents in the areas with highest demand. To encourage the better use of commercial premises, I will restrict the relief available for empty industrial properties to six months, and for empty offices and retail to three months. There will be special exemptions for charities.
Transport accounts for a quarter of emissions: our objective for Britain is the lowest carbon cars using the least polluting fuels. Average new car emissions are around 167 g of carbon dioxide. A medium-term objective is 100 g per kilometre. We want Britain to lead in developing the next generation of low and no-carbon vehicles and fuels. The Secretary of State for Transport and I have invited Sir Nicholas Stern and the vice-chancellor of Aston university, Professor King, to report to us on the energy saving potential of innovation in this area.
Renewable transport fuel obligations mean that biofuels will, by 2010, account for 5 per cent. of all fuel in road vehicles, and by 2020 potentially 10 per cent. So I am extending to 2010 the biofuels duty differential worth 20p per litre—a fuel duty discount of 40 per cent. I am also extending to 2012 the biogas incentive, worth 40p per litre—a discount of more than 60 per cent. For this year I will maintain the differential for rebated oils. I can also announce that we will triple our funding for targeted enforcement against unfair competition from haulier companies from outside the United Kingdom.
We inherited a one-band system of vehicle excise duty in 1997. Britain now has environmentally graduated bands. That is one reason why the proportion of least polluting cars on our roads has risen by 30 per cent., while that of the most polluting cars has fallen. So there are potential gains from enhancing the incentive. In addition to maintaining a zero rate for the lowest band, aligning petrol and diesel rates at the diesel rate and raising the rates by £5 each year for the next three years, and for band F by £10 this year, I propose an immediate 30 per cent. cut in band B from a top rate of £50 down to £35 for the most fuel-efficient cars. That will be matched by moving the top band 30 per cent. higher to £300, and then again to £400 next year. Taken together, those measures will cut vehicle emissions since 1997 by 2 million tonnes. For the coming year I will set fuel duty rises at 2p a litre, for 2008 at 2p, and for 2009 at 1.8p, but I will defer this year's annual fuel duty increase by six months to October.
I have had representations to put VAT on airline tickets—a 17½ per cent. rise in the cost of airline travel. I have investigated the detail of that proposal. It gives me no pleasure to have to tell the House that the substance of the measure has not been properly thought through. It would apply only to domestic flights, business would be able to claim back the VAT, and even by 2020 it would save just 50,000 tonnes—fewer savings in one year than achieved by the climate change levy in just one week. So I have rejected the proposal in favour of the 6 million tonnes of carbon saving achieved by the fairer and more environmentally efficient measures that I am outlining in the Budget today.
I propose only the normal indexation of alcohol duties, with one exception. From midnight on Sunday, beer will rise by 1p a pint, cider by 1p a litre, wine by 5p a bottle and sparkling wine by 7p, but for the 10th Budget in a row I will freeze duty on spirits. While I will go ahead from 6pm tonight with the annual inflation rise on a packet of 20 cigarettes—of 11p—I want us to do more to support the health advice campaign initiated by my right hon. Friend the Secretary of State for Health, with a new incentive to encourage people wishing to give up smoking. For a year from 1 July, for nicotine replacement and other products that help smokers to quit I am cutting VAT to the lowest I can, from 17½ per cent. to 5 per cent. I propose to align the bottom two rates of gaming duty at 15 per cent., and for the largest casinos to set a 50p rate.
Our culture of volunteering and giving defines Britain as a fair and compassionate society. To help small local community organisations, my hon. Friend the Member for Doncaster, North (Edward Miliband), the Parliamentary Secretary, Cabinet Office and Minister for the third sector, is announcing for the years to 2011 a new fund for local communities worth £80 million. Hundreds of millions of pounds worth of giving is eligible for tax relief through gift aid, but is not currently claimed. My right hon. Friend the Chancellor of the Duchy of Lancaster and I will consult the charitable sector on measures that we will fund to increase take-up of gift aid, and in the run-up to the spending review my right hon. Friend the Secretary of State for Culture, Media and Sport and I will examine the help we can give the churches and heritage buildings that are at the heart of so many of our communities.
I turn to the tax incentives with which we propose to help more people into jobs, and to make work pay. More than 1½ million low-income workers in Britain receive the working tax credit, worth to them on average £48 a week. In making work pay, we ensure that people on low incomes get more benefit from the working tax credit than either the minimum wage or any other tax measure, whether it be the 10p rate or personal allowances.
If I invested a billion pounds in helping low-income workers by raising personal allowances, they would be only 68p a week better off. If I used the same money to lower the 10p rate, they would be just 67p a week better off. But the use of the same money to extend the working tax credit means that they are £7.10 a week—£370 a year—better off. That is a clear incentive to take jobs, to gain skills, and to work your way up from a lower-paid to a better-paid job.
This Budget will invest over £1 billion a year in raising the value of the working tax credit, so that—building on the minimum wage of £5.52 from October—for the parent in full-time work with one child it will rise to £7.70 per hour. Because of the working tax credit, that is £290 for a 35-hour week.
Since 1997, lone-parent employment has risen from under 45 per cent. to over 56 per cent., and 300,000 more lone parents are now in work. In addition to helping them by increasing the working tax credit, I will extend the £40 a week in-work bonus paid for their first 12 months in work. In London the bonus will be extended to £60, and for up to 50,000 workless parents undertaking training we will extend access to free child care.
With this additional support to make work pay and our new conditionality, announced by my right hon. Friend the Secretary of State for Work and Pensions a few days ago, and building on the successful employment partnerships in the new deal, we are now able to announce a partnership for jobs with our major retail companies—Tesco, Sainsbury's, Asda, B&Q and Marks and Spencer—and the British Retail Consortium: an agreement that in every part of the country, unemployed men and women who successfully pass work trials or induction courses will be considered for jobs by those leading firms. It is a new and innovative partnership that will, across the sector over the coming five years, help create 5,000 jobs in Wales and 10,000 in Scotland. In total, for Britain it will help 100,000 men and women to find employment in our country.
Since 1997, the number of 16-to-24-year-olds in full-time education, employment or training has increased from 5.2 million to 5.8 million. For those who have fallen through the net, over the next spending period we will do more. We are setting aside new funds today, so that 50,000 out-of-work 16-to-17-year-olds who sign activity and learning agreements will now receive a training wage in return for gaining skills. For small companies that take on an employee needing to acquire the most basic skills, we will also offer £2,000 training help per employee, and in some cases £3,000 for training.
There are 125,000 employees who, through no fault of their own, lost their work pension when their employer became insolvent,. My right hon. Friend the Secretary of State for Work and Pensions is announcing that he will extend the financial assistance scheme from its present budget of £2 billion to a total of £8 billion. Every one of those 125,000 workers will now receive help. Reporting later this year, my right hon. Friend will also investigate in full the assets within the affected schemes, and how those funds can also now help those who have lost their pensions.
In meeting our objectives to support families and children, I have also received representations for the return of the married couples allowance, and for a transferable tax allowance between husbands and wives with children under five. On closer inspection, I have discovered that such a proposal would penalise 3 million widows and their children who would be denied the allowance, and would also penalise wives or husbands who had been left by their spouses. I have also discovered that the transferable tax allowance earmarked for families with children under five would be available to just under 1 million married couples. I can tell the House that, far from rewarding marriage, it would exclude the vast majority of the 11 million married couples in this country, and 11 million children would be excluded and left out of this help.
Marriage is not supported by penalising most married couples and 11 million children. It is right to recognise marriage in the tax system, but in ways that do not penalise children through the arrangements that we make for assets to be transferred free of tax between husband and wife in inheritance tax and capital gains tax. I can announce that the annual tax exemption for capital gains will rise from £8,800 to £9,200, and will be £18,400 for married couples. I can announce that the inheritance tax allowance, which is £285,000 today, will rise in each year and will in 2010 be increased to £350,000, ensuring that 94 per cent. of estates do not pay inheritance tax.
I am also today making changes in VAT, which will especially help grandmothers and grandfathers living with their sons and daughters. I can announce that for a specified list of alterations to housing, to support the needs of older people I will again reduce the rate of VAT, from 17.5 per cent. to 5 per cent.
For many families, especially young couples, the major concern is affordable homes. To further our ambition for this Parliament and the last one of 2 million new owner-occupiers, the Secretary of State for Communities and Local Government is launching the first stage of a new shared equity competition that will bring homes within the reach of first-time buyers.
I also want to send a signal about the importance we attach to encouraging savings, so while maintaining our savings rate at 10p, I will extend for the 17 million men and women with ISAs—individual savings accounts—the amount of cash that can be saved tax-free from £3,000, raising it by 20 per cent. in April next year to £3,600.
After independent taxation was introduced by the previous Government on income, there has been general agreement that the best way to help the income of families with children is to raise child benefits and to help all children. For the first child of all parents, child benefit was £11 a week in 1997. This year it is £17.45. I can announce today that we will raise child benefit annually for the first child in three successive stages to 2010—raising child benefit by a total of 15 per cent. to £20 for the first child. So child benefit, which was £575 a year in 1997, will by 2010 be more than £1,000. For 6 million families on both child benefit and child tax credit—that is the vast majority of families—the minimum payment, which was just £11 in 1997, will rise to £31; that is a rise from £575 a year to £1,600 a year.
I can also do more to help those who need it most. Help for the poorest children, which in 1997 was £28 a week and is today £61, will now rise in three successive stages by more than 25 per cent. to £75 a week, almost three times the 1997 level. That measure will, with others, lift out of poverty 200,000 more children. With children’s credits offsetting income tax liabilities, the effective point at which a family with two children starts paying income tax, which was £16,000 in 1997 and which is £22,500 now, will be £24,250 in April 2009—tax credits therefore effectively wiping out income tax liability until earnings of £450 a week.
We will match financial support for children with more help for parents to do the best by their children. I have set aside today funds for expanding ChildLine, Parentline Plus and the services parents and children use and rely on. We now know the importance of early-years learning in developing the talents of children and the significance of investment early to determine the qualifications and success that they have later. So the Secretary of State for Education and Skills and I have today made available the funds for each of the years to 2010 to honour our promise that there will be six children’s centres in the typical constituency, and 3,500 children’s centres in total. We have also set aside funds for the years to 2010 so that we can expand the numbers of hours of free nursery education, meeting our promise to raise nursery hours for every three and four-year-old from 12½ hours to 15 hours a week. Also, to encourage the community use of schools sports facilities we will remove the VAT restriction and enable academies to make their sports facilities available to their local communities.
I am also able today to take several hundred thousand of today’s pensioners out of income tax. When we came to power, elderly citizens started to pay income tax when their income exceeded £5,200. Today, no tax is paid before an income of £7,280. For those under 75, the tax-free allowance will rise in three stages from £7,280 to £8,990 to £9,500 and then to £9,770 in 2011—a tax-free allowance of almost twice as much as in 1997. For those over 75, the tax-free allowance will rise annually from £7,400 to, by 2011, £10,000. Couples under 75 will have a tax-free married allowance up to £19,540, and for a couple over 75 up to £20,000. Measures in this Budget mean that we will lift out of income tax a total of 600,000 pensioners in this country. For elderly people with either no works pension or small works pensions, I can confirm we will raise the pension credit guarantee from £114 a week this year to £119, rising to £130 in 2009-10. The pension credit will be raised by earnings as we move towards our commitment to link the state pension to earnings.
I have focused support on families by raising child benefits and child tax credits and taken 200,000 more children out of poverty. I have done more to support pensioners by raising the level of tax-free allowances. I have improved work incentives for lower income families with children by raising the minimum income from work to make work pay—to, for many, almost £300 for a 35-hour week. My aim in all measures today is a fair system for pensioners and families with children.
Having put in place more focused ways of incentivising work and directly supporting children and pensioners at a cost of £3 billion a year, I can now return income tax to just two rates by removing the 10p band on non-savings income. I can also announce that the point at which people start paying top rate income tax will from April 2009 be an annual income not of £38,000, but of £43,000; and I will align the income tax system with the national insurance system, with its ceiling set at the same threshold of £43,000, thereby creating a tax system for income that has just two rates and two thresholds. As a result of today’s measures, 58 per cent. of pensioners over 65 will not pay income tax; 6 million out of 7 million families with children are better off; and the incentive to work is increased by, for many, up to £350 a year.
With the decisions that I have made today, I am also able to announce that we will invest more in our schools and education. Separate announcements will be made later for Scotland, Wales and Northern Ireland. Education spending in England, which was £29 billion in 1997 and is £60 billion this year, will be £64 billion next year, rise to £67 billion and then £70 billion, and then rise in 2010 to £74 billion. There will be average rises of 5 per cent. cash each year for the next three years, enabling us to provide one-to-one tuition for 600,000 children, do more to double apprenticeship numbers to 500,000, increase higher education student numbers to 1.2 million, and make every school an extended community school. Also, cash-spending per pupil, which was £2,500 in 1997, will from now to 2010 rise by a further 20 per cent.—10 per cent. in real terms—to £6,600 per pupil, thereby continuing to narrow the gap in investment per pupil between state and private schools. Education spending will rise as a share of national income from the 4.5 per cent. that we inherited in 1997 to 5.6 per cent. in 2010. Also, as the Secretary of State for Education and Skills will set out, by changing the education leaving age we will for the first time in our country’s history make education a right for every young person until the age of 18.
I have taken 600,000 pensioners out of tax, raised child benefit in three stages to £20, cut corporation tax from 30p to 28p and increased education spending to the highest level ever. This is a Budget for Britain’s families; it is a Budget for fairness; it is a Budget for the future; and I have one further announcement. With the other decisions I have made today, we are able to hold to our pledge made at the election not to raise the basic rate of income tax. Indeed, to reward work, to ensure working families are better off and to make the tax system fairer, I will from next April cut the basic rate of income tax from 22p to 20p, the lowest basic rate for 75 years. I commend this Budget to the House.
PROVISIONAL COLLECTION OF TAXES
Motion made, and Question,
That pursuant to section 5 of the Provisional Collection of Taxes Act 1968, provisional statutory effect shall be given to the following motions:—
(a) Rates of duty on alcoholic liquor (motion No. 6)
(b) Rates of tobacco products duty (motion No. 7)
(c) Amusement machine licence duty (motion No. 10)
(d) Rates of vehicle excise duty (motion No. 12)
(e) Landfill tax (bodies concerned with the environment) (motion No. 20)
(f) Insurance premium tax (meaning of “premium”) (motion No. 56)—[Mr. Gordon Brown.]
put forthwith, pursuant to Standing Order No. 51 (Ways and means motions), and agreed to.
I now call on the Chancellor of the Exchequer to move the motion entitled “Amendment of the law”. It is on that motion that the debate will take place today and on the succeeding days. The remaining motions will be taken at the end of the Budget debate, next week
AMENDMENT OF THE LAW
Motion made, and Question proposed,
(1) That it is expedient to amend the law with respect to the National Debt and the public revenue and to make further provision in connection with finance.
(2) This Resolution does not extend to the making of any amendment with respect to value added tax so as to provide—
(a) for zero-rating or exempting a supply, acquisition or importation;
(b) for refunding an amount of tax;
(c) for any relief, other than a relief that—
(i) so far as it is applicable to goods, applies to goods of every description, and
(ii) so far as it is applicable to services, applies to services of every description—[Mr. Gordon Brown.]
Well, the Chancellor has finally given us a tax cut. He normally does that before a general election, but he is in such a deep hole that he has had to do it before the leadership election. In the process, he has blown open the argument that he has been making year after year. He is conceding what we have said all along—that it is possible to increase spending and cut taxes; that yes, it is possible to share the proceeds of growth. But this Chancellor cannot run away from his record. He is the Chancellor who has put the tax burden up. He is the Chancellor who has taken one tax down but put 99 taxes up. The average family is paying £1,300 more because of his Budget decisions. We will check carefully what is happening to the aligning of national insurance, because we think that it might be hitting middle-income families. [Interruption.]
Let me tell you, Mr. Deputy Speaker—[Interruption.]
Thank you, Mr. Deputy Speaker. It is a bit like Stalin: they are cheering him on now—he will wipe them out later.
Let me tell you, Mr. Deputy Speaker, what the Chancellor’s real problem is. It is not that he is a Stalinist who holds all his colleagues in contempt, although that probably does not help; it is that he has wasted money on an industrial scale. That is the truth. His great experiment in tax and spending has failed. He is an out-of-date politician wedded to state control, and the question that everybody is asking is: where has the money gone? This is the “Where has the money gone?” Budget. For 10 years, the Chancellor has been telling us that education is his priority—he did it again today—but 40 per cent. of primary school leavers cannot read properly. For 10 years, he has been telling us that he wants a competitive economy, but he has given us the biggest tax burden in our history. For 10 years, he has been talking about child poverty—he did it again today—but the number of people living in severe poverty is up by 400,000. UNICEF says that Britain is the worst place in the developed world to bring up children.
For 10 years, the Chancellor has been telling us about the NHS. Today there was barely a mention. All that he has done is to reannounce this year’s money, which we already knew about. He has the figures for the future. Why will he not tell us about them? Does that not tell us everything that we need to know about the crisis in the NHS? The hole in the heart of this Budget is the failure to fix the NHS.
The NHS was not the only thing that the Chancellor hardly mentioned. Let us look at what was in the Budget that did not get a mention in the speech; that is always an important list. Soon, the Chancellor and his allies will be going round the country saying that the spin, distortions and half-truths of the Blair era are coming to an end; some of them have started already—but actually, with the Chancellor spin will get worse.
Let us look at today’s Budget. The Chancellor did not point out the savings ratio, which is hidden on page 255 of the Red Book; it has halved since he took office. Business investment as a share of gross domestic product, one of the keys to future growth, is on page 257 of the Red Book; again, it is below 10 per cent. and going backwards. What about page 260 of the Red Book, which says that
“the overall trade deficit is up”?
Again, there was not a mention of that from the Chancellor.
The Chancellor talked about research and development tax credits, but he did not tell us that since they were introduced, R and D has actually fallen. He barely mentioned the Lyons report on local government. He normally trumpets these reports and tells us how proud he is, but today there was not even a mention. Make no mistake—the measures in the Lyons report will hit every family in the country. The Chancellor did not mention retail prices inflation, either, which is now at 4.6 per cent.—almost double what he inherited. All those things are in the Budget; none of them was in the speech. [Interruption.] I know that the Chancellor and the Prime Minister are having their annual conversation, but I do not know why he bothers talking to the Prime Minister; he is not “bovvered” any more.
A fortnight ago, the Prime Minister said that the arts were a “core” part of the script. They were not even in the Chancellor’s script. The Chancellor boasted about foreign direct investment, but he did not tell us that the Red Book shows that half of last year’s foreign direct investment was accounted for by the restructuring of one company—Shell. That did not get a mention. In spite of all the extra taxes, let us look at the borrowing figures. The Chancellor listed them through gritted teeth. They might have been whitened, straightened and privately polished—[Interruption.] He has spent all that money on his smile, but he will not even give us one. He is not going to win over Kylie like that.
Let me read back the five-year plan—I mean, the Budget. This year, the Chancellor will borrow £35 billion, then £34 billion, then £30 billion, then £28 billion, and then £26 billion. That is a total of £153 billion by 2011, which is £8 billion more than he told us about just three months ago. This is the Chancellor who has built up a pile of debt. Again, where has all the money gone? We have had a bonanza on spending on the NHS, but nurses are being sacked. He brags about people’s long-term security, but the pension system is shot to pieces. He boasts about spending on young people, but the number not in education, employment or training is up by a third. So he has not just borrowed billions; he has wasted billions. What a wasted opportunity—billions taxed, billions borrowed, billions wasted. [Interruption.]
The Chancellor has run out of money, so let us look at the big tasks, the big things that he said—[Interruption.]
It is difficult for them, Mr. Deputy Speaker; they are just realising that their next leader has the tendencies of Stalin and the poll ratings of Michael Foot. The Labour Front Benchers are all standing in the deputy leadership contest because they know from history that that is the one way to avoid the gulag.
Let us look at the big tasks that the Chancellor set himself 10 years ago. He said that he would make the economy more productive, make work pay and tackle inequality. He called productivity growth the
“fundamental yardstick of economic performance”.
It has almost halved. It is now lower than in France, lower than in the United States and lower than in the G7 as a whole. As the Prime Minister’s former economic adviser put it, the Chancellor is “furring up” the arteries of the economy. Apart from that of India, our tax code is now the longest and most complex in the world. The World Economic Forum says that it takes longer to start a business here in Britain than it does in Serbia. All we have had from the Chancellor is a super-sized bureaucracy.
The Chancellor promised to make work pay. Budget after Budget, he has poured money into the tax credit system. It now costs £16 billion and employs more than 8,000 people. Last year, more than £2 billion was overpaid. Half of all the awards were wrong. The former Home Secretary said:
“The tax credit system is a shambles—such a shambles that I’ve had to help…my constituents financially”.
He added that it is
“such a total mess”.
The Chancellor did not tell us that those in work face effective marginal tax rates that would not seem out of place in Cuba. There are 160,000 people who keep only 10p out of every extra pound they earn. Last time we had a 90 per cent. marginal tax rate, at least it was the richest who paid. Now it is the poorest. It is not surprising that social mobility has gone backwards.
Having failed on the public services, on inequality and on poverty, the Chancellor is posing as a friend of the environment. Last week he told us that he did not want green taxes. Now he is introducing them by changing vehicle excise duty. But he leaves the Treasury with carbon emissions up and green taxes as a proportion of total taxes down. I am not surprised that the Secretary of State for Environment, Food and Rural Affairs is standing by the door. He is probably off to launch his leadership campaign. If he had any courage, he would go for it.
The Chancellor spoke a lot about education. Let me take his big pledge. He promised that spending per pupil in state schools would be made equal to spending in private schools. That was the big Budget promise last year. First it was a pledge. Then it became an aspiration. Then it became a long-term ambition dependent on growth in the economy. So what have we learned today in the Budget about this policy that is meant to be the centrepiece? He has told us that he might narrow the gap; that is absolutely nothing.
There is no timetable for this pledge about matching state and private education. So what is the Chancellor actually telling us? Can he tell us what private school spending will be in five or 10 years’ time? No. Can he tell us what state school spending will be in five or 10 years’ time? No. So that is the great message from the Chancellor. It is his aspiration that one day a number that he does not know might be almost as big as another number he does not know, but he cannot tell us when. Labour Members can put that in their election addresses, but it will not save their seats.
Let me tell the Chancellor what we welcome in the Budget. We welcome the capitalisation of the student loan book. We suggested that three years ago. We welcome the cut in corporation tax. We suggested that three days ago. In fact, if one looks at the whole approach of this Budget, one reaches an inescapable conclusion. Spending is going to grow—[Interruption.] The monkeys opposite jeer, but they do not know this. Spending is going to grow 2 per cent., then 2 per cent. and then 1.9 per cent. The economy is forecast to grow by 2.5 per cent. or more in each of the next three years. So the Chancellor has just announced a third fiscal rule. He is sharing the proceeds of growth. He has spent all year attacking our policy and making up ludicrous figures for cuts in public spending, but now he is introducing it. This is the “great master of strategy”. He has spent months planning this Budget, with thousands of civil servants in a Treasury that costs almost twice as much as when he first walked through its doors. And the best he can do is to introduce a policy that I announced a year and a half ago. What a genius.
When the Chancellor finally gets to No. 10 Downing street, without any sort of mandate from the British people, why not call an immediate election? Then we can introduce all our policies. That is the Chancellor’s problem. He cannot be the change that we need. As the right hon. Member for Birkenhead (Mr. Field) says:
“With such clear responsibility for what has gone on, how can he offer the country a new start?”
The Chancellor is not the solution. He is the problem. That is the tragedy for the Chancellor. For years he wanted to be the young pretender and he has ended up as the old man in the Kremlin. The target culture is his culture. The failing schools are his failures. The pensions system is broken because he broke it. The Blair-Brown era is coming to an end. The great ship of new Labour is now a listing, leaking, rusting hulk, and it is heading for the rocks. He cannot jump ship because he has been the pilot for the last 10 years. They are going down—and he is going down with them.
Just think what a legacy 10 years as Chancellor could have produced. We could have had a Budget about a better NHS, a competitive economy, protecting the environment or strengthening families. But for a Budget like that, we will have to wait not for a change of Chancellor, but for a change of Government.
Once again, I am struggling to match the intellectual rigour of the previous speech. I am pleased to congratulate the Chancellor as he celebrates his 11th and, as we must assume, last Budget. He is now comfortably the longest serving post-war Chancellor, and that in itself is a remarkable feat. I congratulate him warmly. I also note with some relief his expression of suitable reverence for the record of Mr. Gladstone.
Sadly, this Budget does not quite live up to the auspicious nature of the occasion. We have seen, over the years, the Chancellor’s capacity as a conjuror to use sleight of hand to produce proposals that seem attractive on the face of it but which, examined in a little more detail, are discovered to be rather less attractive than they first appeared. We have had seven years of booming, but often wasted, public sector spending. This is the Budget of a Chancellor ready to move on—a wait-and-see Budget from a wait-for-me Prime Minister.
The Budget has not done enough for the hard-working family that is increasingly struggling with the rising cost of living; for the young couple who have finally got on the housing ladder, but are now fearful that the next interest rise may push them off it again; or for the nurse, police officer or firefighter whose reward for service to their communities has been to see their income squeezed by a burden of taxation higher than that imposed on the richest in this country.
The Chancellor had the opportunity today, in this final Budget, to show that he was listening to the people of Britain, but he has delivered a Budget of missed opportunities. He had the chance to build a fairer Britain, but he has ignored it. He had the chance to create a greener Britain, but he shunned it. And he had the chance to shape a prudent Britain by saving billions of pounds on Government waste, but he has avoided it. He has spurned all those opportunities.
The Chancellor has instead concentrated, perhaps not surprisingly, on his own political succession. But I have a warning for him of a vision of the Prime Minister springing up from his political coffin, like Dracula, to confront the Chancellor. A stake through the heart may seem excessive, but he should beware. As the Americans say, “It isn’t over till it’s over.”
To be fair, I must add that this Budget is set against the backdrop of a reasonably strong economy. Growth remains stable and unemployment remains low. I acknowledge that Britain has a reasonably strong economy. We have supported investment in public services through an increase in taxation from the 1997 base, and we supported independence for the Bank of England. I hope that the Chancellor in turn will be generous enough to point out that those were Liberal Democrat policies, which he derided in opposition but adopted in government.
I talked about the Chancellor’s sleight of hand—and I refer the House to page 13 of the Red Book, and item 15. The Chancellor told us as he sat down, to waves of applause, that he would cut the basic rate of income tax from 22p to 20p. On the face of it, that is a Liberal Democrat proposal and a welcome one. But if one looks carefully, one sees that the revenue to justify that reduction will be obtained from the abolition of the 10p rate. To fund the reduction, income tax will be increased for many taxpayers. One could say that we will be asking the poor to subsidise the rich. That is an example of the sleight of hand that the Chancellor has demonstrated in the past.
The sad fact is that despite a reasonably strong economy, the wealth gap between rich and poor is greater today than it was under Margaret Thatcher. By introducing loopholes in the capital gains tax regime, the Chancellor has allowed the wealthiest individuals to minimise their tax bills.
An example of that is the Chancellor’s proposals on inheritance tax. They are obviously welcome, but he did not point out that the number of estates valued at more than £2 million that pay inheritance tax has fallen by nearly 10 per cent. since 2001. That tells us that the rich find ways of avoiding paying inheritance tax, and we are entitled to look for some recognition of that by the Chancellor, and for some willingness on his part to take steps to deal with it.
I am afraid that the Chancellor has proved to be every bit as susceptible as some of his Conservative predecessors to giving tax breaks to our richer citizens at the expense of our poorest. The lowest-earning fifth of UK households still pay a greater proportion of their income in tax than the highest earning fifth. This Budget was an opportunity to rebalance the tax system in favour of the less wealthy, but the Chancellor has refused to take it.
With a proper, full approach to raising green taxes, the Chancellor could have helped to encourage a change in environmental behaviour. Of course his proposals on vehicle excise duty are welcome, but they fall far short of what is required. I listened to his speech with care, but I did not hear him say anything about aviation. Do the Government believe that the right hon. Gentleman’s recent imposition on aviation has had a significant—or even a discernible—environmental effect? We also need to know whether the proposals apply only to new motor cars, or are retrospective.
This should have been a tax-cutting Budget. It should have cut the tax burden on the low and middle-income families who need it most. That is what one should do with the proceeds of green taxation. That is the true moral case for tax cuts, and it is a matter of regret that the Chancellor has not chosen to act on it.
Of course, taxes have been raised significantly since 1997. Neither I nor my party is persuaded by the case for raising them further. The Chancellor must resist the temptation to tax and spend. Indeed, he should seek to save in order to spend.
Large sums of public money have been wasted on unnecessary and unpopular measures, but now the Government are planning to waste more. We should recall that the war in Iraq has cost more than £5 billion so far, and that is quite apart from the human cost that is emerging. We know that the President made the decisions on Iraq, while the Prime Minister made the case for the war, the Chancellor signed the cheques, and the Conservatives voted it through.
Secondly, identity cards will cost at least £6 billion, and some estimates put the cost as high as £18 billion. That money should be invested in the police and security services. Thirdly, we are already committed to spending £76 billion on the decommissioning of the existing generation of nuclear power stations. Building a new series of nuclear power stations—something to which the Government appear to be committed—will simply add to that bill. The Government should not be wasting taxpayers’ money in that way.
The announcements in the Budget were made against the background of an increasingly unbalanced economy. Britain’s accumulated private household debt has now reached a total of £1.2 trillion. Any decline in the housing market would be devastating, for millions of families and for the economy as a whole. Moreover, the burden of servicing that accumulated debt is also rising. The average cost of debt repayment in relation to income is now close to the level experienced during the debt crisis under the previous Conservative Government.
The Chancellor talks about the fiscal rules, but he should take steps to restore their credibility. He should have established an independent fiscal authority, as advocated by the Institute of Fiscal Studies. We should have an independent assessment of the economic cycle on which the Treasury bases its figures. The Chancellor simply should not be allowed to mark his own examination papers.
Some questions arise from the Budget statement that need to be answered. The public are entitled to know the effect of the Budget on their tax bills, and on the overall state of the economy. Will the Chancellor confirm that it raises the tax burden on lower and middle-income earners? Why has he failed to combat rising levels of personal debt, or to set up an independent system of assessment for fiscal policy? And why, in his 11th and final Budget, has he not rebalanced the tax system properly, with proper tax cuts for lower and middle-income earners? Those are questions of crucial importance, and the Chancellor should answer them.
I congratulate the Chancellor on the Budget, which will benefit families, society and business. He has taken 600,000 pensioners out of taxation and increased child benefit, and that is extremely important and welcome. However, he has also given us a Budget for business, with corporation tax being reduced to its lowest level ever, and income tax to its lowest level for 75 years.
I want to congratulate both the Chancellor and the Prime Minister. The Select Committee on the Treasury is undertaking an inquiry into the 10 years of the Monetary Policy Committee. We have had some eminent witnesses, not least the former Governor of the Bank of England, Lord George, who came before us yesterday. Some people are asking whether it is through luck alone that the MPC has managed to keep our economy stable, with low interest rates and inflation. However, almost all the witnesses who have appeared before the Committee have rejected that notion. Instead, they have described the instability in the rest of the world and pointed to global difficulties such as the problem with long-term capital management that arose in 1998, and the Asian crisis of 2000. They attribute the success of our arrangements to the structural architecture that we have set up for both monetary and fiscal policy, and they have noted that the accompanying fiscal rules—the golden rule, or spending to invest, and the sustainable investment rule—are extremely important.
Some of the witnesses have noted, very perceptively, that the Government’s arrangements would not have succeeded without the accompanying welfare-to-work programmes, such as the new deal. Unemployment stood at 3 million 20 years ago—Labour has created 2 million extra jobs, and that growth in employment has given the Government an opportunity to achieve economic stability. If the mix that I have described had not been available, the pressures already in the system would have rendered it impossible to ensure the stability that has given us record low levels of inflation and interest rates in the past decade.
This is definitely the Prime Minister’s final Budget—at least, that is what I am told. However, both he and the Chancellor deserve congratulations on their commitment to maintaining the stability and confidence in our economy—something to which all the political parties are now signed up. In the early 1990s, the Prime Minister and the Chancellor committed the Labour party to that project, thus inspiring confidence in a system that the City, the business community and society as a whole have all accepted. The International Monetary Fund and the Organisation for Economic Co-operation and Development have analysed the British economy, and they have remarked on its stability. Indeed, the IMF recently said that Britain had the best growth levels in the G7.
Yesterday, Professor Charles Goodheart, an eminent former member of the MPC, told the Treasury Committee that the stability that Britain has achieved is remarkable. However, he warned that people might be taking it for granted, especially the young people who have grown up in the stable environment of the past 10 years. It is therefore important for all of us to work to ensure that confidence in the system and the credibility of the framework are maintained. That will be one of the many objectives of the Treasury Committee as it continues its inquiry into the MPC framework 10 years on.
I want to look at the Budget measures in the context of a number of themes that have emerged from the current and recent work of the Treasury Committee: for example, the prospects for economic growth in the medium term; the role of the fiscal rules, particularly in the next economic cycle; the prospects for public expenditure and the role of the comprehensive spending review; the importance of education expenditure—in particular the delivery of capital expenditure on education, which exercised the Committee at the pre-Budget report stage; the need for transparency in demonstrating the success of the Gershon efficiency programme across Government, about which we have a number of questions; and lastly the importance of environmental considerations and the economics of climate change in Treasury policy, both now and in the future.
The Budget painted an encouraging picture of economic growth and the Committee has noted the signs for business investment—the Chancellor’s announcement today that business investment will grow by 7 per cent. is encouraging. The Committee was puzzled about why it had not grown in the past, given the prosperity and stability that have been brought about, so the Chancellor’s announcement is welcome.
Unemployment is falling, and the Chancellor mentioned that 220,000 more people were in work this year, which is extremely important. We need to continue the welfare-to-work programmes, not least the initiatives that have been mentioned, so that people aged over 55, in particular, can go back to the work force. One of the trends of the past year or so is that there are more older people returning to work, so we need to encourage them. A while ago, I pointed out that although people aged over 65 who work do not need to pay national insurance contributions, their employers do. Why does not the Treasury give a further boost to encouraging older people to work by ensuring that employers do not need to pay insurance contributions if their employees do not pay them? That would be an encouraging sign.
From the Committee’s inquiry into the MPC, it has become clear that for the past decade economic conditions have been exceptionally favourable. Indeed, the Governor of the Bank of England, Mervyn King, has described that decade as the NICE decade—the non-inflationary, consistently expansionary decade. Will those conditions be maintained for the next 10 years? Yesterday, one of the witnesses at the Committee said that we would have to be prepared for the fact that the next 10 years might be less rosy. The Governor has compared the economy to a car on the road; it is not that the wheels will come off the car, but that the car will be travelling over a bumpier road. We all have an interest in ensuring that we are realistic about what will happen in the next 10 years.
The Chancellor’s economic stewardship has been exemplary, as was his foresight in establishing the MPC. Global factors have helped, too; for example, the tail wind of globalisation has been beneficial for growth in our economy, as more individuals have entered the country to join the labour force. Will that situation prevail? We need policies to ensure that it remains a success.
During the Committee’s deliberations, were Bank of England representatives asked why we in Britain have had to pay much more for our borrowing over the past 10 years than our Japanese, American and euroland competitors? Why have we not reduced our rates to the global average?
Witnesses have pointed out how favourable conditions are in the UK in terms of globalisation. The IMF has said that our growth is the fastest in the G7. In the Budget, the Chancellor showed how low our inflation is compared with America, France, Japan and Germany. We are doing well in that regard, as expert commentary tells us.
There are risks to the international economy. In the US, there are concerns about the sub-prime lending market, but comments I have received from individuals in the City do not lead me to consider that the sub-prime lending market presents the same problems in the UK. However, we have to focus on the social conditions in lending. In the last Parliament, the Committee was firm about looking at responsible lending and borrowing. We must be careful that people do not over-extend, especially if they do not have claimable assets. The sub-prime market is important for financial inclusion, so I am pleased with the Government’s response to our reports on that. I look forward to working with the Treasury on the 10-year programme for financial inclusion.
Threats from the rapid unwinding of global imbalances remain, as do risks from increased protectionism if the Doha round cannot be brought to a successful outcome. I attended a conference in Africa last week. Representatives from the developing world asked how fair trade really was when they had no access to the markets of richer countries. They pointed out that development aid was no use in the longer term if they did not have free trade. The Doha round is extremely important and I urge the Government to make more commitment to it.
The two fiscal rules—the golden rule and the sustainable investment rule—have played an important part in strengthening confidence in fiscal policy, and will also have a role in the next economic cycle. The Chancellor is to be congratulated on establishing the rules and the monetary policy framework. However, there have been comments that the fiscal policy framework is not as firm and transparent as the monetary policy framework. Changes to the dating of the economic cycle, even if justified by economic data, have not assisted with the understanding and interpretation of fiscal rules.
The right hon. Gentleman rightly raises issues about the golden rules. An additional point that our Committee has considered is whether the last year of one economic cycle should be treated as part of the first year of the next economic cycle. Today, we are not clearer about the Chancellor’s policy on that point, but does the right hon. Gentleman agree that it would be right to apply the test consistently, and just as in the past we have treated the last year of one cycle as the first year of the next, so we should in future?
The hon. Gentleman is a good, hard-working member of the Committee and I value his presence. In our last report, we argued that the end of an economic cycle provides the ideal opportunity to review and clarify the operation of the rules. No doubt, when the Chancellor appears before the Committee a week on Thursday I shall be alert to the hon. Gentleman’s desire to ask a question at the appropriate time.
In the case of the golden rule, the Treasury Committee has questioned whether it could be more forward-looking, to reflect tensions between fiscal planning, which looks forward, and the dating of the economic cycle, which looks backward. The evidence we have received, not least from the Governor of the Bank of England, suggests that we should be more forward-looking.
The Committee has sought clarification from the Treasury of how it proposes to interpret the sustainable investment rule in the next economic cycle. Clarity on the issue will enhance credibility and strengthen the framework, and will help one and all in ensuring confidence in the whole system.
On the prospects for public expenditure and the role of the comprehensive spending review, my right hon. Friend the Chancellor announced a tight envelope for the CSR in his Budget. However, he can expect much attention from the Treasury Committee in the months leading up to the announcement of the comprehensive spending review, especially in regard to allocations to Departments, and understandably so.
It is important not to lose sight of the framework of public sector agreements and delivery agreements that are intended to underpin the spending settlements. Public service agreements have sought to link increased expenditure with programmes for reform and targets for improvement. Frameworks for reform and continuous improvement are all the more important in the context of a period when public spending is expected to fall as a proportion of gross national product.
When the Chief Secretary to the Treasury appeared before the Treasury Committee, he informed us of plans for fewer but better PSA targets. That is encouraging, but Parliament, and Select Committees in particular, should be involved in the formulation of those targets to see that they are clear, measurable and linked to the resources available. I ask the Government to work more closely with all Select Committees to ensure that that is the case, because insufficient work has been done in that area.
Along with the Chairman of the Public Accounts Committee, I am looking at the issue of financial reporting by the Treasury to Parliament. Financial reporting is complex; indeed, some would say that it is gobbledegook in many cases. If we cannot trace the money and we do not have that parliamentary accountability, confidence is reduced. The Treasury can expect further contact from me and the Liaison Committee on this issue in order to simplify the financial reporting to Parliament so that we can inform the House of where the money is and where it is going.
There is also the issue of the importance of education expenditure, and the delivery of capital expenditure in education in particular. The Chancellor made that very much the centrepiece of his Budget. The themes that I have just referred to demonstrate the challenges in education spending. The Chancellor is right to stress the centrality of education expenditure. An educated and skilled work force is important if we are going to respond to the global competitiveness agenda in front of us. But I suggest that extra resources are not enough. It is the responsibility of the whole Government, including the Treasury, to ensure that the money made available is spent to deliver the objectives.
At the last pre-Budget report hearing, the Chancellor appeared before the Treasury Committee. Members of the Committee, not least my hon. Friend the Member for Leeds, East (Mr. Mudie), questioned Treasury officials and Ministers thoroughly on what they do to ensure that the money allocated is spent. The answers received, particularly in the context of the ‘building schools for the future’ programme, were not always convincing.
I warn the Chancellor that when he comes before the Committee, that theme, in terms of education and new schools, will be raised. What about the money that is being allocated to those schools? When are they being built? When will they be completed? Those are simple questions and we wish to have the answers to them, particularly when the Chancellor comes before the Committee next week. More money for education is welcome, but attention needs to be paid to the capacity of schools, local authorities and Departments to deliver allocated spending, particularly in the context of capital programmes.
Mention has been made about money going to front-line services by means of efficiency savings in the Chancellor’s Budget statement. There is a need for transparency in demonstrating the success of the efficiency programme across Government. The Gershon efficiency programme is the most ambitious programme of its kind under any Government. The Chancellor today announced new figures on the progress being made, which is encouraging. However, the Treasury Committee has found it hard to match up the assertions of massive efficiency savings, achieved without reductions in service to the public, with the experience on the ground in areas such as Jobcentre Plus. Many of us in the Chamber have had representations from our constituents who work in the Jobcentre Plus area.
It is also hard to correlate reported efficiency savings in Departments such as the Home Office with other evidence on effectiveness and financial management. In the last pre-Budget report, it was mentioned that the Home Office has achieved 95 per cent. of its targets on efficiency savings. That was at the same time as the Home Secretary called it a Department that was not fit for purpose. That just does not add up and therefore there is more need for transparency and clarity. Challenging targets for efficiency savings in the years up to 2011 have already been set, but the Government need to attach priority not only to managing the new efficiency programme within government, but to ensuring that it is reported in ways that ensure parliamentary and public confidence in its delivery.
I come to the importance of environmental considerations and the economics of climate change in Treasury policy, now and in the future. The Chancellor is right to put environmental considerations at the forefront of the Budget. He is also right to stress the role of incentives, as well as taxation, in changing behaviour. The carrot-and-stick approach works more than anything. Taxation can be a blunt instrument in an environmental context. That is clearly true for aviation, where both current and proposed taxation instruments have been criticised. When representatives of the aviation industry appeared before the Committee during our inquiry into environmental taxation, they were not very clear or persuasive about what they were doing in this area. It is time for the industry to raise its game and to participate fully and constructively in the public debate, rather than heckling from the sidelines. After all, the industry is not in the emissions trading scheme in the European Union until 2011. It does not pay taxation on its fuel, unlike the ordinary motorist or businesses in the country. It has a window of opportunity between now and 2011, when it will go into the emissions trading scheme, to show its metal and to show what it is going to do in terms of the environment. I make a plea to the Government to ensure that there is a fair price for carbon in the emissions trading scheme. There will be a lot of lobbying going on in the next few years, but if we do not ensure a fair price for carbon in the emissions trading scheme, the merits of that scheme will be lost.
The right hon. Gentleman is making a good case about a responsible attitude to climate change and global warming, but does he share my deep concern about the dramatic loss of jobs in manufacturing, which can be impacted upon by taxes that are brought in, perhaps for a good reason, in respect of climate change? I refer, in particular, to the aggregate levy that the Chancellor is increasing. That will affect construction, and construction is part of manufacturing. The climate change levy also impacts on the costs of manufacturing, making us less competitive. Is not the right hon. Gentleman, who chairs the Treasury Committee with great distinction, concerned to ensure that we have a proper balance?
I am concerned about the position of manufacturing. I would be concerned if there were adverse consequences in that respect, but the challenge for us there is to ensure greater efficiency. It is important to have that efficiency drive, added to the technological expertise in this country. The hon. Gentleman could make me wax on about manufacturing, but I do not want to detain the House. Spending a lot of time, as I do, speaking to people in the City and seeing some of the bonuses and wages that they get, and then going into the manufacturing sector and seeing small businesses that have two or three people who are struggling, but have dynamic, innovative technological programmes, I think that there needs to be a little rebalancing. However, I will not be tempted by his question. I will leave it at that. He raises an important and profound issue, and we should debate it. We cannot allow the manufacturing agenda to be lost. Although 70 per cent. of our GDP comes from the services area, there is an important role for manufacturing. I hope that he is satisfied with that answer for the moment, but I will ensure that I report back to him at some other time.
I referred to the aviation industry and climate change. I also mentioned earlier that I was at a conference in Cape Town last week with representatives from European and African nations, and one of the big issues was climate change. We cannot look at development policies without considering climate change and therefore I make a plea for the Department for International Development, the Treasury and others to ensure that climate change comes further up our agenda. In that respect, I welcome the £50 million that the Chancellor announced for the programme for 10 countries in central Africa to prevent the destruction of the largest rain forest in the world.
At Cape Town university last week, an expert on climate change told us that anything that we do to address climate change can influence the changes coming in the next 40 or 50 years. We must consider communications. The scientist graphically described being on the end of his mobile and warning people in Mozambique about tornados that were coming to their area. It will be extremely important for us to be prepared for the shocks and changes that climate change presents. We must step up our thinking about that aspect of climate change, and the Treasury Committee will take that forward when we report on the Stern review and the Treasury’s role in environmental policy.
The right hon. Gentleman mentioned Africa. He will know that there will be discussions at the G8 meeting in June about the commitment that the Government have already made to Africa in the form of £1.5 billion to help to fight HIV/AIDS. Will he join me in asking the Government to ensure that we stick to that commitment and try to persuade as many Governments as possible throughout the developed world to help fight the scourge of HIV/AIDS in Africa, which is clearly one of the problems that is holding back Africa’s development?
I agree entirely with the hon. Gentleman from both a humanitarian and an economic point of view. When we visit Africa, we see that the people dying of HIV/AIDS are those who are the most economically active. The long-term future of the continent is thus being threatened, so I am 100 per cent. behind the hon. Gentleman on the need to ensure that we keep that issue on the agenda.
The Treasury Committee has announced that it will conduct a couple of further inquiries. We will hold one on the transparency of financial markets and another on dormant accounts and an unclaimed assets scheme. The themes of the inquiry on the transparency of financial markets will be the private equity business, hedge funds and insider trading. The recent activity regarding the takeover of Boots and Sainsbury has generated public debate about the private equity industry. My office has been contacted by many people involved in that industry and others. It is important to put down the marker that the private equity industry does a good job in ensuring efficiency in business. However, the Committee will be examining the effectiveness of such takeover activity, especially for the companies that are taken over. We will consider whether those companies get positive returns.
The Chairman of the Treasury Committee is talking about a hugely important issue. While there might seem to be some advantage in UK companies being taken over, is the distinguished right hon. Gentleman aware of the amount of profit that is made by overseas companies that take over UK companies and that is then remitted overseas, rather than remaining in this country for the benefit of our United Kingdom economy? This is a critical issue; we are, indeed, selling our family silver.
As my hon. Friend points out, we get more than the amount that goes out. The hon. Member for Macclesfield (Sir Nicholas Winterton) alludes to an important matter, however. The Committee will also consider whether there is too much takeover activity and the benefits of such activity in the long term. Our inquiries will focus on the long-term interests of the country regarding economic performance.
If companies are taken over, what will be the arrangements for monitoring them? What is the incentive to monitor a company if the bulk of its ownership is made up of small shareholders? Private equity seems to be in the middle of publicly quoted companies and private companies. Many private companies in this country do not need to report on a quarterly basis and are doing a fantastic job. An example is JCB diggers. I hear that it does not receive advice from City accountants and investment managers about things that it should do be doing, but focuses on the quality of the product that it is selling. I would like to see more of that in our country—I am sure that the hon. Gentleman agrees.
I endorse the right hon. Gentleman’s robust support for the private equity and venture capital industry. Does he agree that one of the main concerns arises from the sheer level of debt involved and the complex debt instruments that could create the possibility of a collapse? Obviously, we hope that that will not happen. In many ways, those complex instruments—many people, even in the City, do not fully understand their implications—are at the heart of a possible longer-term problem.
The hon. Gentleman makes a relevant point. Although, we have a benign economic environment and low interest rates at the moment, the Committee will examine what could happen in the future. The debt and leverage that the hon. Gentleman mentions could have implications in an environment that was less benign.
I said that we would be examining hedge funds. The main issue is whether a systemic risk is involved, given that it is difficult to determine where the risk is. The Amaranth hedge fund went down and lost £6 billion, but that did not create a systemic shock in the financial environment, so perhaps the situation is robust and there is a spread of risk. However, I know that quite a number of people are worried about that spread of risk.
The Committee will also consider insider trading. When the Financial Services Authority examined the matter, it painted a fairly bleak picture. The FSA has not made great progress—it is difficult to do so—but we should consider it when we examine transparency.
My right hon. Friend might be aware that I have attempted to find out how many prosecutions have been brought. The FSA estimates that between 20 and 25 per cent. of takeovers and deals might be tainted by insider trading, yet there have been fewer than two dozen prosecutions. Does my right hon. Friend find that extraordinary, as I do?
Exactly. My hon. Friend outlines the situation cogently and cites a reason why we will examine the issue. A lot of concern about insider trading has been expressed to me from the City.
I noted reports on the front page of today’s Financial Times about the Barclays-ABN Amro amalgamation, which throws up quite a bit of interest, especially from the point of view of the FSA. Barclays says that it will have its headquarters in Amsterdam and that it will have a Dutch person as its chief executive. Such a big merger across European frontiers will mean that negotiations about supervision will need to take place in both countries, although there will be supervision in each jurisdiction. Given the pivotal role that Barclays plays here and that it will play in Holland, there is a need for the Committee to discuss the matter with the FSA because such a path has not been travelled down too much previously.
The Financial Secretary has produced a consultation paper on unclaimed assets. The Treasury Committee went on an enjoyable but hard-working visit to Dublin—I think that the hon. Member for South-West Hertfordshire (Mr. Gauke) would agree—on which we worked from early morning until late at night and just fed ourselves in between. The Irish Government have passed legislation on dormant accounts, so the information that we discovered on our visit will help the legislative process as such a measure goes through here. There are two issues involved in dormant accounts, the first of which is reconciling individual savers with their accounts. The Irish Government put a 15-year limit on that, so if anyone comes back within 15 years, they can get their money straight away. Indeed, even if they come back after 15 years and have the relevant proof, they can get their money. Any measure will need to build people’s confidence that we are aiming to reconcile savers with their accounts.
The second issue is that if the accounts are not reconciled, they are given to an independent body that distributes the money for the sake of the community. I suggest to the Government that the Irish Government have undertaken that task very well, and there are many lessons to be learned there. I can also tell the Government that the amount that has resulted from that scheme is eight to 10 times the original estimate of the financial institutions in the Republic of Ireland. That is a lively issue, and the scheme could benefit communities in our country, as well as individuals. If the Government go about their business in that sensitive way, they will certainly have the support of the Treasury Committee. I can tell the Paymaster General that the Committee will ensure that it raises some very good issues for her to consider. I am sure that she, if not others, looks forward to coming back before our Committee, as she always does.
I thank you, Mr. Deputy Speaker, for the opportunity to comment on the Budget, which will be welcome to families, young people, and business. Businesses told me that they needed a simpler system, but more than anything they need a commitment to the long term. With the corporation tax reduction announced today and the reduction in personal income tax, business has that commitment. We have a long way to go on that particular agenda, but we have heard encouraging statements from the Chancellor today, and I end by congratulating him and the Prime Minister on the past 10 years of financial and economic stability.
I have said in the Register of Members’ Interests that I hold non-executive directorships, and I draw that to the attention of the House, but of course I am not speaking on behalf of those companies today. It is with pleasure that I welcome a measure that the Chancellor is taking: it is excellent that he is to increase asset sales and privatisations in forthcoming years. When I was able to persuade a previous Conservative Government that that was what we needed to do, it never occurred to me that, some years later, I would stand up in the House to welcome a Labour Chancellor’s acceptance of the wisdom of privatisation. It is often better to return assets, sometimes to the families from whom they originally came, because those families can look after them and the state can have the proceeds, which relieves some of the burden on the taxpayer. I give one cheer for that part of the Budget.
I had hoped, when I listened to the bravura performance at the end of the Chancellor’s Budget, that I could also welcome him to the ranks of the tax-cutters. As many hon. Members will know, I have often had a sneaking inkling that tax-cutting is a good idea, and have had a certain preference for it. However, it is not a cut in income tax that the Chancellor is offering today, but a con. It is a small tax rise on income. If Members look at page 208 of the Red Book, they will see that what the Chancellor gives by cutting the standard rate from 22p to 20p—naturally, I welcome that—he more than takes back by seizing the 10p band and removing it, and by raising the thresholds for national insurance. Commentators outside the House who are studying the detail will have to say that most people will be worse off, once they combine the changes to income tax and national insurance.
Obviously, there will be some complicated calculations, because the Chancellor is trying to prevent some of the poorest people from being worse off by tipping some money back in through the tax credit system. However, that will mean that every family will have to spend a lot of time poring over the figures—those who are rich enough will do so with their financial advisers—to see how great a reduction in available income they will have to absorb, and to find out whether there are offsets that might make them slightly better off.
My right hon. Friend is a good-natured man, as we well know. I entirely agree that many of the changes are regressive, notwithstanding the tax credit situation, but will he at least give some, if only very little, credit to the Chancellor for simplifying the tax system in a small way, after 10 years of ever more complication?
I am all heart, but I am not sure that I can go quite that far on this occasion, because although there may be simplification as a result of removing the 10p band, there is probably additional complication in the way in which the benefit system is trying partially to compensate those on lower incomes. What worries me most of all is the situation of those people who are doing well and are making a big contribution, such as senior teachers or junior head teachers, who are near or about to go above the threshold for 40 per cent. tax. Looking at the figures, I suspect that they could be particularly badly off. I think that it could be another Budget that taxes those who work hard and do not make claims on benefits, and those whose income is a bit above the level at which they get reasonable support from the complicated tax credit system.
The right hon. Gentleman kindly referred the House to table A1 on page 208 of the Red Book. My reading of those figures is that the Government give up slightly more revenue by moving from 22p to 20p than they gain by abolishing the 10 per cent. starting rate, and that is contrary to what I understood the right hon. Gentleman to say. Secondly, he has not referred to the gains, set out on page 208, for those at the lower end of the scale. For example, there are increases in age allowances and child tax credit, and the threshold of the working tax credit is to be raised. [Interruption.] No, he had not referred to those gains in terms of the overall gain at the end of the scale.
I mentioned all three things, because I am being scrupulously fair in representing what the Chancellor has put before the House in written form; he failed to present any of that in oral form, when the cameras were here and the spotlight was on. It is a disgrace that the Chancellor announces an income tax cut when it is a con trick, and when most people will be worse off in terms of income. I said that people on lower incomes would get some benefit from the changes in the benefit system. We cannot be sure from the general figures in the Red Book who will win and who will lose, but clearly some people will lose. The hon. Member for Wolverhampton, South-West (Rob Marris) is mischievous, because he has left out the very big increase in tax that will result from raising the threshold on national insurance. If he adds the increase in the threshold to the loss of the 10p band, he will see that that raises an extra £8.4 billion, but only £8 billion of that is given back by cutting the rate from 22p to 20p.
Does the right hon. Gentleman accept that because of the big increase in pensioners’ personal tax allowances, pensioners, particularly those who pay tax, will be better off, and will be taken out of tax altogether? Forget about the 10p rate—they will not pay any tax at all.
It is quite possible that some pensioners will be better off, but as the hon. Lady indicates, they will not all be better off. It is a complicated Budget. The Chancellor would clearly love to give some money back, because he knows that he is rightly being criticised for over-taxing everybody, but he does not have any money to give back, as he is spending so much in his other public budgets, and he is reluctant to bring those budgets under proper control.
I would like to put this Budget in the context of the past 10 years, because there is a “farewell” feeling to the Chancellor’s performance today; at least, it is farewell to one job. We were reassured to learn from him that he is not planning to combine being Prime Minister and Chancellor of the Exchequer—in name, at least. We will wait and see how it works out in practice. Pity the poor right hon. Lady or Gentleman who is Chancellor when he is Prime Minister. However, that is a story for another day.
If we look at the 10 years during which he has been Chancellor, we can see that he, like Gaul, has been divided into three parts. In the first part, from 1997 to about 2000, he was happily married to Prudence. I was upset to see him make such a big increase in tax on pension funds in that period; he began the damage that has characterised his 10 years. We now have much more enfeebled final salary pension schemes, and many people no longer have access to them. However, in fairness I confess that the rest of the Chancellor’s work from 1997 to 2000, while he was married to Prudence, was not too bad. He started to bring down deficits and he kept public expenditure under reasonable control. He did not increase the relatively attractive tax rates that he inherited from the outgoing Conservative Government, and the economy performed reasonably well during that period.
In the Chancellor’s second phase from 2000 to about the middle of 2006, we saw the tax-and-waste Chancellor, who tried to reassure all his Labour colleagues that he believed in tax and spend. He took a phenomenal personal interest in all the details of public spending in many of his colleagues’ Departments, which they did not always welcome, because he wished to associate himself with the Treasury’s largesse to different departmental budgets. So big was the tax and waste under the Chancellor that he did quite a lot of damage to what had been a fundamentally strong economic position. In those six years, Britain started to fall further and further behind our international competitors, whom we outshone in the last decade of the previous century. He introduced a large number of stealth taxes—those are the 99 tax increases to which my right hon. Friend the Leader of the Opposition sensibly referred. Britain fell down the competitiveness league tables, losing about 11 places. In particular, we fell down the tax competitiveness league table, because the Chancellor needed to keep tax rates up and find back-door ways of increasing the tax take from companies and individuals as he went about his task of tax and spend.
I am deeply concerned about fiscal drag and the indexation of tax allowances. Will my right hon. Friend indicate in his splendid speech just how much additional taxation the Chancellor has raised by failing to increase tax allowances in line with inflation, and tell us what the Chancellor has done this year, as it appears to be nothing?
My hon. Friend makes an extremely good point, which I endorse. Off the top of my head, I do not have the numbers about how much fiscal drag amounted to, but the overall totals were colossal, and we know that the average family pays £1,300 a year more in tax than they did when the process began. Quite a bit of that is the result of fiscal drag, but some is the result of policy decisions made by the Chancellor.
That period also illustrate that all clouds can have silver linings, because over the Conservative years, we had been driven deaf by Labour spokesmen and Labour Back Benchers telling us that there was very little wrong with Britain that a big increase in public spending would not put right. We also were led to believe that there was somehow something in us that made it impossible for us to shower enough money on public services, and if only Labour could take over from us, it would shower enough money on public services and all our problems would miraculously vanish. The Chancellor has conducted a bold and historic experiment—unfortunately, at the British taxpayer’s expense—but over the six years, he has proved conclusively that it was not Conservative parsimony that got in the way of really good public services. No one can now deny that huge sums of money have been tipped into health and education, and several other services, but nor can any fair-minded person deny that there are still real problems with those services, many of them reminiscent of the problems for which Labour used to criticise the outgoing Conservative Government in the 1990s. I hope that it is common ground across the House, at least between the Front-Bench teams, that tipping lots of extra money into those services without reform or change, and without asking for something for that money, is not the right way forward. We need to find preferably a consensus way of improving public services that absorbs less cash and delivers more for the money.
We now come to the third and probably final phase of his Chancellor’s tenure. There again he is trying to prove an extremely important Conservative adage for us, and I admire him for doing so. He now is trying to prove that there is indeed waste in the public accounts, and that it is possible for a Government to tease out that waste and redeploy the money more sensibly and profitably in the public services. He has not quite got to the point yet where he would like to share that with the taxpayer, but he has certainly got to the point where he would like to give the taxpayer better value for money. The Budget is built on the proposition that £26 billion a year by 2010—that money is currently spent wastefully and unnecessarily—can be spent more productively and sensibly by strengthening front-line services, primarily in health and education. I should be delighted if the Chancellor succeeded in doing that. I think that it is quite a modest ambition, given the scale of waste in the public sector, but I suspect that he will find it difficult to do so.
I felt that the Chancellor learned an important lesson when, in a previous Parliament, Conservatives were making the argument that we would run things better and take waste out of the public accounts. The Chancellor suddenly shifted from saying that that was impossible—that had always been his response in previous years—to saying that, yes, it was a very good idea and of course, he had thought of it first. He set up the Gershon review, which identified £22 billion a year of wasteful and unnecessary expenditure in the public accounts that the Government intended to tease out and redeploy. We now learn that Gershon underestimated a bit, and the Chancellor thinks that the sum could be at least £26 billion. We also know from the very good work of the Treasury Committee and others that the Chancellor is finding it difficult to secure all the £22 billion of the Gershon changes, but there is a simple way for him to do so, as he could strengthen his control over the public sector pay roll.
I was pleased that in the last quarter of 2006, the numbers on the public sector pay roll in aggregate fell by 22,000. That was the first time that we have seen a move in that direction after a big explosion of posts. Before Labour Members make their usual silly points, I think that we need all the nurses, doctors, teachers and police officers that we currently have, and we need to recruit more in the years ahead. The good news is that they are a tiny fraction of the huge public sector pay roll, and with efficiency and natural wastage—not by being nasty or sacking people—we could make big changes to the numbers that we need to employ across the public sector.
I am interested in what the right hon. Gentleman is saying. When he was in government, he could not untie that particular knot, in the sense that there are 80,000 more nurses and 20,000 more doctors than there were then. Does he agree with the public spending that brought about the advance in those numbers, or does he think that there should be cuts, which would damage that complement? Those increases did not take place under his Government, but they are in evidence now. How does he unscramble that?
I wish that the hon. Gentleman would try to listen to what I am saying. Of course, I welcome the extra teachers, nurses and doctors who have been hired on the Government’s watch. It is not the first time that that has happened. A lot of extra teachers, nurses and doctors were hired on the Conservative watch, too. It is called growth, getting richer and living in a more civilised country. I hope that Governments of all persuasions will carry on doing that, just as the Conservatives did, although Labour has always denied it, and just as Labour is doing, and we always welcome it.
The hon. Lady is being absurd. Of course, we have always welcomed the extra teachers, nurses and doctors, but we have not always approved of all the extra money, because a small fraction of that has been spent on those people, and a huge amount has gone on incredibly wasteful and unnecessary spending, such as the huge, badly handled NHS computer scheme, which is absorbing much more money than the extra nurses are absorbing, the identity cards scheme and all the other things that we would strip out and cancel when we come to office. We want to concentrate expenditure on the good things in the public services in which we believe.
We applaud the work that nurses do, but does my right hon. Friend agree that they have been met with a gross insult from the Government with the staggered pay increase that they have been given this year? When those increases are grouped together, they total 1.9 per cent. When inflation is running just below 5 per cent. that means that nurses will take a pay cut of more than £500 in any given year.
Nurses will certainly not be amused by the Budget, because they will not receive the tax cut that they might have heard about on the headlines when the Chancellor first read out that piece at the end of his speech.
We have a Chancellor who, in his early phase, taught us rightly that it is best to be married to prudence, as the economy does rather better. He has now demonstrated that just tipping lots of money into public services without targeting it on the things and people who matter is not a good idea, and he wisely says that there is a huge amount of waste on his watch that must be squeezed out. If he and his immediate successor cannot do so, it is a task that we will welcome because it will make our job so much easier because we will inherit all that waste on which we need not carry on spending.
I am grateful to the right hon. Gentleman for his generosity. He is making an interesting speech, but my experience of being in business, and of observing it, is different from his. If a business expands, the initial step is often to hire more labour. As the expansion beds in and stabilises, there is a substitution of capital for labour, because new work organisations are developed because there is increased output—a Henry Ford motor car assembly line is a classic example—which is part of the cycle through which the Chancellor and the Government have gone. We have had the expansion, we have fuelled part of it by investment in buildings and hardware, and part of it by investment in people, and we are now moving to the next phase, where we will substitute some capital for labour for a more efficient operation. There is no contradiction in that.
The business would not have survived if it had been run in the way that the Chancellor has run some of the public departments in this country. There is no way that modern businesses can go out and recruit people whom they do not need for the main function. When they are blessed with a rising work load, they recruit fewer people than proportionate to the increase in work load because they have to increase their productivity every year. A manufacturing company usually has to take price cuts because it is in an extremely competitive market, with India and China doing phenomenally well.
We have a public service which, until a few months ago, believed that any amount of money could be cascaded in and that it could hire anybody it liked. Often the people hired were management consultants, PR consultants, middle managers, administrators, form fillers—people who were needed to deal with the huge panoply of controls, requests for figures and interventions that come from the very overcentralised Treasury. I will not repeat the words of Lord Turnbull, as I am sure the Chancellor would be hurt if I did, but there is clearly a lot of centralisation in the Treasury and one can see why some people get the impression that they do about the style of management. It is that which has wasted so much of the money and got in the way of the professionals in the health service and the education service doing their job more successfully, and it has got in the way of the money getting to the places that it needs to reach.
I hope that in the next phase of the Chancellor’s odyssey he will also learn, as my right hon. Friend the Leader of the Opposition so sensibly outlined, that the Conservative policy of sharing the proceeds of growth is the right policy. When the Chancellor realises that his con trick on income tax is not quite what people wanted—they want a real tax cut, not just a cosmetic tax cut—he will see that he and his successor must reduce the tax burden on hard-working families and on businesses. He will see that the only possible course of action is sharing the proceeds of growth.
We want to share the proceeds of growth because, yes, we will need some extra money for more nurses, doctors, teachers and police people as the economy grows. As we get richer, so we need to meet the sensible demand for public service. But yes, we need to squeeze out the inefficiencies, and we need to leave some money over as the economy grows so that we can cut tax rates. Indeed, one of the advantages of cutting tax rates to a more competitive level internationally is that then the whole cake will probably grow rather more quickly.
One of the big failures on the Chancellor’s watch is that our business tax rates have become so much less competitive than they were when he started, and we are paying a high price for that. Over the period of the Chancellor’s stewardship of our economic affairs, the Republic of Ireland has grown by a stunning 76 per cent., whereas the United Kingdom has grown by 27 per cent.
No, of course not. If the hon. Lady studies the facts, she will see that Ireland was growing very strongly before it entered the euro. Nor was it huge quantities of European cash, which is the other bogus explanation that people sometimes come up with. Ireland was a bigger beneficiary in its years of slower growth, and most of that money went into the agricultural sector, which has not led the Irish economic recovery. The Irish economy has been buoyed up by the great success of very low corporation tax rate, so large numbers of businesses have gone there and set up there, clustered around the larger companies. That shows that lower tax rates work and generate a much bigger cake. Ireland is not skimping her public services. She can afford to have a lower percentage of total incomes taken in tax because she is now richer. People are better off in Ireland, on average.
One of the advantages of the Select Committee’s excellent trip to Ireland was that we looked at some of the economic facts, which are not as the right hon. Gentleman says. Ireland started off as a basket-case and has improved from a low base. Its level of indirect taxes has increased, which this country would not stand. Ireland considers that its spending on the health service is in crisis and that it needs to be transformed. The right hon. Gentleman’s facts are not accurate.
The crisis in the health service in this country is every bit as big as the one to which the hon. Lady refers, or probably bigger. She is rather unpleasant about the Republic of Ireland, saying it was a basket-case. My remarks pointed out that it had grown strongly for a long time, so by definition it started from a lower level of output and average incomes than we enjoyed, and it has overtaken us. It has overtaken us consistently, year in, year out, for 10 years, on the Chancellor’s watch. The hon. Ladies have not come up with any reason why that should be, because the true reason is that Ireland and its Finance Minister got it right and made the environment attractive to business, and the Chancellor got it wrong and did not make it attractive enough to business.
As another member of the Treasury Committee who was on the trip to Dublin, I can tell my right hon. Friend that we were informed about how growth was very high in the early 1990s, long before Ireland joined the euro, and that public expenditure as a proportion of GDP has been substantially lower in Ireland than in the UK.
I am grateful to my hon. Friend. To some extent I feel that I am the father of that great expedition to Ireland, because it was my questions in the House about why Ireland had grown so much faster that triggered much of the interest, and the enthusiasm of the Scottish nationalists for the subject.
All hon. Members need to remember that the backdrop to the change in economic performance in the Republic of Ireland is the very strong model of social partnership, whereby multi-annual programmes are agreed between Government, business and unions. I know that some hon. Members would not be comfortable with that model, but it has provided the spine of economic growth, development and discipline in the Irish Republic. Also, it needs to be remembered that in this period of remarkable growth, the public sector in the Republic of Ireland grew by a third, so the growth was achieved not by attacking the public sector, but by properly investing in the public sector and delivering effectively alongside a growing private sector.
How many times do I have to explain? I and my colleagues would like our public sector to have more money and more people of the right sort to provide a better service. We are arguing about the speed at which that can be achieved and how it can be best achieved. It is best achieved if the private sector is growing more rapidly than it is growing in Britain under the present Chancellor of the Exchequer.
As to the hon. Gentleman’s account of why businesses have gone to Ireland, I have spoken to a number of businesses over the years, as I do in my job as an MP and with my interest in economic competitiveness, and I must say to him that no business man who has been thinking of going to Ireland or who has gone to Ireland has ever said to me, “I must go there because of their social partnership model.”
It is the social partnership model that has underpinned economic policy, creating consistent and stable economic policy for a decade and a half. Without the social partnership model, the Irish Republic would not have achieved or sustained its growth record.
I do not think the hon. Gentleman was any better the second time. Perhaps it was the sample that I happened to meet, but the business men all said to me that the attraction of Ireland was the lower tax rate. I do not know whether the hon. Gentleman knows how business people make their forecasts and make their decisions about where to invest. They usually work out what they think will be the revenue line, then put in what they think will be the cost line, and strike something called a profit. They then look at how much the Government will take of the profit and what remains at the end. If more remains at the end in one country rather than another, they are tempted to come to that country. That has worked well for Ireland.
The right hon. Gentleman should realise that the social partnership framework agreements set discipline in tax rates, agreed the tax framework, and provided for wage restraint, so Government were able to negotiate that with business, trade unions and other social interests on a multi-annual basis. That provided the environment that has attracted businesses into Ireland.
The policy came from thinkers around the world who pointed out to Governments that that always works. The Irish Government had the common sense to do it, but the British Government have not yet had the common sense to implement it properly.
That brings me to the corporation tax rate in the United Kingdom. I am pleased that the Chancellor understands that there is a problem out there. Britain was one of the lowest tax countries in 1997. The Chancellor would say that he has already brought the headline rate of corporation tax down on his watch. That is true, but he must realise that it is a very fast moving and competitive world out there. While he has been bringing it down a little, many of our great competitors and friendly nations in the world beyond us have cut their rates much more quickly, so we have gone from being relatively good value to being relatively expensive.
In the global supermarket for the location of business and investment that we now live in, that means that Britain is losing out. Investments no longer come to Britain because the tax regime is not attractive. A lot of manufacturing is exiting Britain and a lot of new manufacturing investment is going elsewhere. We find a country such as the Netherlands, with quite high costs in other ways and the same EU regulations, winning rather well against us because it has a much more competitive tax regime. Shell has decided to amalgamate its headquarters in the Netherlands to save on taxes, which will be a tax loss to the Treasury. We see discussion in the press about Barclays possibly moving its head office overseas after its merger. Of course, its domestic operations will still be taxed in Britain, but that will be another tax loss.
At some point the Treasury has to take this more seriously than the Chancellor has done so far. If he wishes to preserve the tax takes that he has, he needs a competitive tax rate. There is no choice. It is absurd that so many Members have this wooden approach that says: “If we cut the tax rate, we will lose this much revenue, we cannot afford to lose that revenue, so we will keep the tax rate up.” The truth is that if our tax rates are kept at a fixed level and the rest of the world cuts, we will lose revenue because we are not responding. The other wonderful truth is that if we are bold enough to cut tax rates so that they are sufficiently competitive, we may shortly experience a big increase in revenue because we benefit and the less competitive tax jurisdictions do not.
The Chancellor told us that he is cutting the corporation tax headline rate from 30p to 28p in the pound. One cheer for that—it is very good news, because the headline rate is what people look at. The not so good news on the same page of the Red Book is that that is more than paid for by the money that he is clawing back by cancelling some of the credits and offsets allowed against the 30 per cent. rate. That will make Britain a bit more attractive for certain kinds of companies that do not benefit from the reliefs that he is removing or reducing, but other companies will be worse off, so it exacerbates rather than eases the problem. One cheer for the lower rate and one cheer for the companies that will benefit, but the Treasury should understand that it has not solved its problem, because many companies will still be worse off. The overall result is to take a little bit more from the companies sector, and a lot more in the case of some areas and some companies.
The Chancellor’s record is often defended around one central proposition. We are told that his act of genius was to make the Bank of England independent when he came into office 10 years ago and that everything else has flowed from that excellent decision. My colleagues and I are very happy to have an independent Bank of England, but we do not believe that it has been as independent as the Chancellor has advertised. Nobody can get away from the fact that at a crucial time just before the last election the Chancellor wrote a very important letter to the Monetary Policy Committee of the Bank of England saying that he wished to change the basis on which its targets and instructions rested, and he shifted it from the retail prices index to the consumer prices index. He well knew at the time that the CPI was going up much more slowly than the RPI, so he must have done that knowing that it would keep interest rates lower than would otherwise have been the case. That was very convenient ahead of a general election. Unfortunately, there has been a price for that, because after the general election, with interest rates kept down, we discovered that inflationary pressures had built up. Because of its new CPI target, the Bank of England’s committee has probably had to raise rates by more than would have been the case without the political intervention.
We can see the cost of those interventions—I am sure that there have been more than one—in that over the 10 years of an independent central bank people in Britain have had to pay more to borrow money, on average, than people in the United States of America, which has grown more quickly, in Japan, which in the early part of the period grew hardly at all but has now been growing quite respectably, or in euroland, where performances have been very patchy but where, on average, growth has been slower than in the United Kingdom. It is worrying that we have had to pay a premium over American rates when America has performed so much better. That should tell us not necessarily that an independent central bank is wrong but that our bank was perhaps not independent enough. It suggests that, because the Chancellor’s fiscal policy was pulling in the opposite direction to the direction in which monetary policy had to go, the MPC had to put up interest rates more than it would have done. Because the Chancellor was not following prudence between 2000 and 2006, there was a price for all of us in higher borrowing costs—not only in mortgages for those trying to buy a house in very expensive Britain, but for those borrowing money to run successful businesses.
Over the past 10 years we have seen a big let-down on productivity. When the Chancellor came into office, he told us more or less to judge him by productivity and said that he could take a number of measures that would boost productivity. The irony is that in the area where he had most control—the public sector, where he had riches beyond most people’s dreams that he could have used to buy improvements in productivity—there has been a collapse in productivity. So bad is the position that the Government have asked for changes in the figures and have withheld a proper series of figures from us. There appears to have been no productivity growth in the public sector at all. It beggars belief that someone can perform that badly when they had so much money to spend on new technology, new people and new skills, which should have enabled things to be done in a much better way.
Is my right hon. Friend aware that if the productivity growth under the last Conservative Government in the 1990s had been continued in the NHS through the term of this Government we would today have no waiting lists for any operations at all? [Laughter.]
My hon. Friend makes an extremely powerful point. Labour Members laugh, but this is their watch and it is their job to explain to the public how it is that productivity has bombed so badly when so much money and time has been spent on trying to get things right. It does not augur well.
Does the right hon. Gentleman accept that it is easy to show high productivity growth when there is the collapse in wages that happened in the public sector, particularly in relation to the compulsory competitive tendering regime, during the last stages of the Conservative Government? Of course there was higher productivity because pay rates were decimated.
The level of productivity has nothing to do with pay rates. I am interested in output in relation to the number of people employed. If the hon. Lady wishes to have wage-related productivity, I deny her premise. There was no collapse in wage rates in the public services in the later years of the Conservative Government.
I have allowed the hon. Lady to intervene many times and she is trying my patience. She has made several foolish points, and I do not think that the House wants to hear another one.
The Chancellor has fallen behind very badly on productivity. His micromanagement from the centre has not helped British companies to become more productive and it has got in the way of the public sector.
When the Chancellor was in opposition, he used to think that a good night out was spending time poring over the balance of payments figures. He would come rushing into the House the next day if he found some bad balance of payments figures, put them to Ministers, and personally blame them for the imbalance between exports and imports. Since he took over as Chancellor, we have had enormous balance of payments deficits—I think that he has set new records—and we are not told anything about them at all. Again, they did not get a mention today; all the figures that he chose to highlight were ones that he thought were favourable. The House should remember that there is quite a price to pay for the de-industrialisation of Britain that has continued under this Government, with 1 million manufacturing jobs lost on their watch. The price is there in the visible trade balance, where there is an awful lot of red ink. We import a great deal of the products that we need from elsewhere in the world because we are not making them in Britain. Meanwhile, 5.3 million people of working age sit on benefits. I know that the Chancellor wants to do something about that, but it is getting a bit late—when is he going to do it? He should be much angrier about those 5.3 million people and find some way of getting them back into legitimate employment so that we can start to fill in some of the holes in the balance of payments.
My conclusion on the Chancellor’s 10 years is this: there has been no major disaster, and for that we are very grateful. The inheritance was strong and good. For the first three years he did not do too much damage to it apart from the huge mistake over pension funds. For the next five years, he proved beyond doubt that just spending huge sums of money does not sort out the public services sufficiently. At the same time, it damages Britain’s ability to compete, in turn damaging our ability to employ those 5.3 million people who do not have jobs and our ability to raise our living standards as quickly as America, Ireland or the other success stories around the world.
This Chancellor has put Britain at the bottom of the pack of English-speaking countries—the pack to which the Chancellor never refers—though from time to time he has put us at the top of the European pack. That has not been very difficult, as Europe has gone through a dreadful time with the wrong model, showing once again that the high-tax, high-waste, high-spend approach does not produce a happy country or even good public services.
This Budget is based on a central con on the income tax proposition. Most people will feel very let down when they read their newspapers tomorrow and see that they are not better off in the way that the Chancellor was perhaps trying to hint with his famous announcement at the end of his speech.
When it comes to the corporate sector, the Government should not run away with the idea that they have done enough. They have acknowledged the problem and will have helped some companies a little, but we need a considerably better tax package if we are to stop more Shells and Barclays either going abroad or thinking of going abroad, or if we are to bring more large companies into Britain, saying, as they do with respect to Ireland, that this is the place where they wish to come.
If Labour Members believe that we also need a social compact in order to attract them, I look forward to their setting out the details so that we can debate them. I think that most of them already know in their hearts that what will bring the punters in from around the world and from the global marketplace is a much more competitive tax system. Unfortunately, this Budget does not deliver it.
It is normal on these occasions for me to follow the Chancellor’s Budget statement and fill in the conventional gaps that I feel he has overlooked. I pay tribute to the Chancellor’s specific section on the environment and green taxation and to the efforts of the Conservative party and its leader in moving the issue up the political agenda. I should like to take this opportunity to present the green Budget that I think Parliament should have been offered.
Before I do so, however, I would like to preface my speech with a couple of fairly conventional remarks. The House should put on hold the points that the right hon. Member for Wokingham (Mr. Redwood) made in his speech and use as a point of reference the IMF report that is due to come out this week, which I understand will say that the UK is the fastest and strongest growing economy within the G7. In the context of that strength we should have the courage to make much more profound changes in the nature and shape of our economy. We should not pretend that we would be asked to make those changes—I will take the House through them later—from a position of weakness.