To ask the Secretary of State for Employment what discussions he has held with trade unions relating to the rights of employees to trade union representation.

I have had a number of discussions with the Trades Union Congress at which the rights of employees to trade union representations have been raised.

The right of employees to establish and join organisations of their own choosing, including made unions, is one of the basic freedoms that are available to workers around the civilised world. Why do the Government continue to deny that basic freedom to their own workers at GCHQ? As January marks the 10th anniversary of the Government ban on trade unions there which was described at the time by the Tory Member for Hendon, North (Mr. Gorst) as the "nasty, thin wedge of fascism", is it not time that the Government got back to democratic basics by lifting the ban that has internationally isolated them in their anti-worker and anti-trade union bigotry?

As the hon. Gentleman knows, the workers at GCHQ can join a staff association. Conservative Members will take no lectures on the rights of trade union members from the party that supported the closed shop and that only a year ago voted against the right for members to join a trade union of their choice.

Does my hon. Friend agree that it is an absolute tragedy that 400 jobs have been lost at the Timex factory in Dundee? Does he agree that the left-wing extremists there seemed to be more interested in trade union rights than they were in the maintenance of jobs, and that those people who were involved should be thoroughly ashamed of their job-destroying tactics?

I agree that, unfortunately, the extremists in the trade union movement denied Dundee job opportunities at Timex, as before at Ford, and most people in the country and in Dundee would accept that inward investment depends on a good record of industrial relations. We have achieved that record thanks to the reforms that the Government brought forward, which were opposed by hon. Members opposite.

To ask the Secretary of State for Employment what proposals he has to ensure co-operation between regions of the European Union in the common effort to overcome unemployment; and if he will make a statement.

Europe will overcome its structural unemployment problem only by becoming competitive and removing unnecessary regulation and bureaucracy.

Is the Minister aware that some areas in eastern France have lower unemployment than difficult areas of Wales, Merseyside, north-east England and Scotland, yet have higher inducements for attracting employment despite having a better infrastructure and being nearer to the heart of the European Community? What mechanisms can his Department use to co-ordinate incentives to develop unemployment opportunities through the regions of Europe to ensure that there is not unfair competition against areas in Wales with higher unemployment, so that they get a fair crack of the whip?

I am surprised that the hon. Gentleman should cite France—a country which has a higher level of unemployment than Britain and where unemployment is rising—when Britain is leading the Community on unemployment and where unemployment is falling. It is falling in Britain because of the supply-side reforms introduced in the 1980s by the Government, which were opposed by all Opposition Members, including the hon. Gentleman. The way forward for Europe in terms of jobs is not through subsidy, but by becoming competitive and abandoning the kind of nonsense that is included in the social chapter.

Has my hon. Friend noted that it is important for all regions in this country and elsewhere in the Community to ensure that unit costs of production and labour do not outstrip those of our competitor countries? Since the beginning of the 1980s, unit costs of production in Europe have risen ahead of those in America and Japan, our big export markets. Can my hon. Friend ensure that the German Government continue to push in their presentation to the Commission their ideas, which are very similar to those advanced by my right hon. Friend the Secretary of State for Employment?

I agree that we need to make Europe competitive to tackle the problem of unemployment in Europe. My hon. Friend is right to emphasise Europe's poor record in creating jobs. The United Kingdom has been among the most successful countries in Europe in that regard. Over the past 20 years, 36 million new jobs have been created in the United States; only 8 million have been created in Europe, most of them in the public sector. The way to create extra jobs in Europe is to oppose the social chapter, and to make the European Commission understand that competitiveness depends on setting free enterprise free.

Bearing in mind that it is intended to cut the common agricultural policy by 50 per cent. over the next five years, can the Minister confirm that special attention will be given to rural areas such as Wales, where tens of thousands of jobs will be lost? Will he give an undertaking that schemes will be prepared to produce substitute employment where agricultural begins to show signs of collapse?

Is it not extraordinary that the hon. and learned Gentleman could not find time to say that unemployment had fallen by 17 per cent. in his constituency? Is it not extraordinary that he did not recognise that Wales benefits from considerable inward investment, as does the rest of the United Kingdom? It benefits from that investment because we have set aside the kind of policies that he would sign up to tomorrow, including the social chapter.

Can the Minister explain why Britain, which contains one third of the European Community's working children, is the only member state once again to opt out of an EC directive to protect 13 to 15-year-olds from working for more than 12 hours per week? Is he not ashamed that the only victory that he has secured is for rotten employers who continue to exploit the hidden army of child workers as cheap labour? For that lot,"back to basics" means back to kids up the chimney.

The Government took the position that they took because we thought it right for youngsters to have the chance to do paper rounds and Saturday jobs. I am sorry that the hon. Lady does not accept that. While she is talking about unscrupulous employers, she might look into the case of the Transport and General Workers Union, which sponsors her. According to The Mail on Sunday, workers at the seaside hotel owned by the Transport and General Workers Union are complaining that the TGWU gives them a deliberate eight-week break to circumvent employment legislation. Because their employment is interrupted in that way, they cannot be classified as full-time workers. The hon. Lady should look in her own backyard.

To ask the Secretary of State for Employment what assessment his Department has made of the effects on British industry of a statutory maximum 35-hour week.

It would be highly damaging to British competiveness and jobs.

Is my right hon. Friend aware that this afternoon he has confirmed my worst fears about the 35-hour working week? It would lead to a dramatic increase in the employment costs of British businesses, which in turn would have a major impact on our competitiveness throughout the world. Would not that mean thousands of British workers being thrown on the scrap heap of unemployment? What does my right hon. Friend think of any party leader who would sign up for that package?

A compulsory 35-hour week would mean passing legislation in the House of Commons that would prevent 14 million employees from working the hours that they now work and want to work. It would also impose costs of £20,000 million on British employers, as well as asking those 14 million employees to take a £20,000 million pay cut. It is the politics of despair, and I am shocked and surprised that the Opposition should sign up to such a damaging policy.

Is the Secretary of State aware of what is increasingly going on at the other end of the labour market? There is an increasing prevalence of zero hour contracts, which mean that an individual is given a contract of employment with zero hours to fulfil and is then expected to be on the end of a telephone, to be called in at the whim of the employer, not knowing from one day to the next how many hours they will be expected to work. What effect does the Secretary of State think that that will have on British industry?

I must tell the hon. Lady that, in the UK, there has not been a substantial increase in casual or temporary working. Those are the facts. [Interruption.] There has not been a substantial increase. The increase—[Interruption.] Listen to the facts. The increase has been only 6 per cent. The number of permanent jobs in the United Kingdom now exceeds 20 million. The hon. Lady will not succeed in trying to portray a different picture from the one that is reality: that a greater proportion of the working age population are in work in the United Kingdom than in most other countries in the rest of Europe; and that they do so at an average gross weekly wage of £316. That is because we are competitive and are winning new markets all the time.

Does my right hon. Friend agree that it is quite difficult enough already for British and other EC workers to compete with Pacific rim countries, without putting the added shackle of a ball and chain around the ankle of every British employee? Will he and our right hon. Friend the Prime Minister carry on spearheading the fight against this 1950s socialist mentality, typified by Mr. Delors and those on the Opposition Front Bench?

I could not agree more with my hon. Friend. It is positively ridiculous that, in this day and age, the Labour party and some socialists in the rest of the Community should believe that there is a definite parcel of work that can be divided between the available work force. We benefit in the UK because we have a flexible labour market. Why is it—as my hon. Friend has pointed out—that, in the UK, unemployment is falling, while in mainland Europe, in every country, unemployment is rising?

Will the Secretary of State accept my official copy of the European socialist manifesto, which makes it absolutely clear that any such changes in the working week will be imposed not by legislation but by agreement with the social partners? Is he not aware that, in companies in the Netherlands, Germany and France, where such 35-hour agreements have been agreed, they have led to increased productivity and an increased work force, without a reduction in pay? That is one reason why they have a higher level of pay and a lower level of unemployment than Britain.

Is it not true that, only last week, the Secretary of State himself refused to vote against the 48-hour week European directive, which means that it will be he who introduces legislation to reduce the working week? Will that be in his European Tory manifesto?

First, I welcome the hon. Member for Kingston upon Hull, East (Mr. Prescott) to the Front Bench. I also welcome the hon. Members for Cynon Valley (Mrs. Clwyd) and for Rother Valley (Mr. Barron) and also the hon. and learned Member for Montgomery (Mr. Carlile).

Answer the question.

I will. The trouble with the Opposition is that they do not know a compliment or tribute when it hits them in the face.

I have to say to the hon. Member for Kingston upon Hull, East that I know that he has been doing his job for only a short time, but I have spent some considerable time reading through the manifesto that was distributed at the press conference.

Here is the official one.

I know that the hon. Gentleman is trying to pretend that the French version is the more authoritative one, but I rely on the English version. Paragraph 32 says:

"These measures must include a substantial cut in working time to ensure a better division of the available work. Several approaches are possible: a working week of 35 hours or four days".

Already, the deputy leader of the Labour party in the European Parliament has said that the party will campaign on a 35-hour week. Either the document to which the Labour party signed up is not worth the paper that it is written on, or it is the most damaging document for the United Kingdom that I have ever seen. Instead of reducing unemployment, it will spread unemployment.

Is not the evidence clear that, where legislation of this type is imposed on a working population, higher levels of unemployment result? Is not the evidence also clear that Britain is winning respect from its European partners by stating the case clearly, negotiating firmly and not backing down until we get the deal that we want?

I agree with my hon. Friend. First, no country in Europe has a statutory 35-hour working week at present. Secondly, we are winning respect from our partners in Europe in seeking to contest any rigid regulatory measures which would only stiffen up the labour market and stop unemployment coming down. Thirdly, it is a fact that, in the United Kingdom, unemployment is coming down. It is down 137,000 so far this year, whereas on the mainland of Europe, it is rising in every country. My hon. Friend is right that people are listening more and more to the United Kingdom Government's message and the message of the Conservative and Christian Democratic parties, not the socialist message from the past.

To ask the Secretary of State for Employment what is his estimate of the number of jobs that would be lost as a result of the introduction of a 17.5 per cent. rating of value added tax on books and newspapers.

I am not prepared to speculate on matters still within the realm of hypothesis.

Is not that a most extraordinary and complacent reply? Is it not the case that the imposition of VAT on books and newspapers has been widely canvassed as an option in the Budget, and that it has been estimated by the printing industry that the measure would cost 20,000 jobs? Yet the Minister has not even bothered to estimate the consequences for employment.

How many other measures that may be announced this afternoon in the Budget have slipped through the Minister's fingers without any estimate of the consequences for unemployment? Why on earth do we have Ministers for employment if they will not do their job properly? Is there not one cut in public expenditure on which we can all agree—getting rid of Employment Ministers' salaries because they are not prepared to do the job they are paid for?

The job that I am paid to do is not to be led into using the Department's investigation resources by the mere speculation of the Opposition. Why does not the hon. Gentleman confine himself to some facts? Instead of spreading gloom and despondency, why does he not point out that unemployment in his constituency has fallen by 13 per cent. since January? [Interruption.] I shall believe that the Opposition really care about employment when they greet questions like that with cheers.

Does my hon. Friend agree that it is illogical for the working man to have to pay VAT on the boots and shoes that he needs to go to work, but not on The Sun, pornographic magazines or The Tatler? Does she also agree that the printing industry has benefited from our industrial relations legislation, which has enabled it to cut its costs, more than any other industry?

I suggest that my hon. Friend puts his question to the Chancellor of the Exchequer at an appropriate time.

To ask the Secretary of State for Employment if he will give figures for the total adult unemployment in Lewisham West on 1 January for each of the past five years; and if he will make a statement.

Since 1989, 3,747; 2,978; 3,966; 5,895 and 6,904 respectively.

Is the Secretary of State aware that those figures show that, for every marginal decline in the numbers of unemployed in my constituency and across London as a whole, there has been a far greater increase in the numbers out of work? Those numbers reveal not only the numbers out of work but the number of jobs that have been lost to London's economy since the Government took office. Almost half a million jobs have been lost to the London economy in the past 10 years.

When will the Secretary of State understand that the Government's two greatest failings are their economic policy and their inability to deal with that question? No synthetic anger towards those who point that out to him will obscure that fact; nor will his bogus enthusiasm for a recovery that has not touched London.

So far this year, there has been a fall in unemployment of 231. The Lewisham jobcentre has placed 2,745 people into jobs since October of last year. I am saddened that the hon. Gentleman has not paid tribute to the tremendous amount of work being done by the South Thames training and enterprise council in providing opportunities to the long-term unemployed. The hon. Gentleman has not mentioned that the Employment Service has placed 190,273 people into jobs in the past 12 months, up 13.6 per cent. on the year before.

To ask the Secretary of State for Employment when he last met representatives of London local authorities to discuss unemployment.

Although my right hon. Friend the Secretary of State has not had any consultations with the local authorities, nevertheless they are in close consultation with the training and enterprise councils. Any request for a meeting would be sympathetically considered.

The Minister has boasted that unemployment in Britain is lower than in Europe. Will she tell that to my constituents in the east end, where unemployment is about 20 per cent., 25 per cent. in some places and 60 per cent. for young black males? Will the Minister tell us the arrangements that are being made to ensure that east enders benefit from developments such as the Jubilee line and that they get the jobs created-unlike other developments, which have left us with a net loss of jobs?

The hon. Lady would benefit from a lesson from Martyn Lewis, which might give her constituents some other facts of equal relevance—for example, 13.6 per cent. more people put into work by jobcentres, from which her constituency has benefited; the advent of jobs, as she has admitted, from the Jubilee line, from Argos, from United Parcels and from Tesco-Metro. Why does not the hon. Lady bring hope to her constituents instead of always trying to depress young people who want to work and the long-term unemployed, all of whom our initiatives are helping? Why does she not welcome those initiatives and back her local TEC and local employment services? She should stop trying to spread gloom when there is obviously good news to be had.

Again referring to Martyn Lewis, should it not be remembered that there 20,000 manufacturing businesses in London, and that London creates almost 20 per cent. of our national wealth and contributes £8.5 billion more in taxation than it receives from the Exchequer? Will my hon. Friend continue to support measures that will enhance the potential of London as one of the nation's greatest assets?

Yes. In addition to that good news, there is the winning of city challenge and all the potential that that has, and the fact that the highest number of people since records began left the unemployment register for London and the south-east.

To ask the Secretary of State for Employment what representations he has received about the Queen's Speech in relation to his responsibilities; and if he will make a statement.

Several.

Is my right hon. Friend aware that unemployment in my constituency has fallen by 7 per cent. in the past year and by 34 per cent. in the past six years? Will he urge our European partners to follow our successful enterprise policies and not the job-destroying socialism of the Opposition?

I agree with my hon. Friend. What has been remarkable about this Question Time is that every time Conservatives have pointed out the extent to which unemployment has fallen in the constituency of an Opposition Member, that has been greeted with a round of booing from the Opposition. It is clear that good news is bad news for them and that is a sad reflection of the lack of any policy on their part. My hon. Friend is right. Employers are responding more quickly to the upturn in the economy because of the flexible labour market. Long may that continue.

What representations have been made concerning the fall in the number of unemployed disabled people? What steps are being taken to remove discrimination against them?

I agree with the hon. Gentleman that we need to focus and target more resources on the disabled among the unemployed, particularly those who are long-term unemployed. He will be aware that, earlier this year, I announced some proposals to enable those people to gain greater access to work. I am much obliged to the hon. Gentleman and to several colleagues on both sides of the House who have made representations to me concerning that scheme and the new dimension that it gives to extend the range of help to a wider number of disabled people. I am now considering those representations and I will make an announcement as soon as possible.

To ask the Secretary of State for Employment what recent discussion he has had with his EC counterparts about unemployment.

My right hon. Friend and I have regular meetings with our EC counterparts, at which we discuss unemployment.

Can the Minister confirm that Britain's unemployment rate is lower than that in France, Italy, Spain and across the European Community as a whole? Does that not show that we have nothing to learn from Mr. Delors about curing unemployment? They need to learn from us that deregulating the labour market is the best way to create more jobs rather than by piling new restrictions on.

I entirely agree with my hon. Friend. It is quite right to say that our unemployment rate is lower and also that our employment figures are higher than elsewhere in the Community. My hon. Friend is right to single out France and Spain, as they are the only two countries in the Community that have embraced the Labour party's minimum wage policy and they have paid the price in lost jobs.

Does the Minister ever predict to his ministerial counterparts in the Common Market when he expects the Government's economic policies to bring the level of unemployment down to what it was in 1979 at just over 1 million people?

If we were to take the hon. Gentleman's advice and embrace a minimum wage we would put 2 million extra people on the dole. If we were to take the Opposition's advice and embrace the social chapter, with all its nonsenses, we would put many more hundreds of thousands of people on the dole. The hon. Gentleman is in no position to lecture the Conservative party on jobs for the unemployed.

Will my hon. Friend continue to discuss with our European counterparts the voting basis for many of the measures that come from Europe? Will he particularly continue to challenge hard the use of the health and safety provisions, under majority voting, to introduce what is no more and no less than socialist legislation, such as the working time directive?

I agree with my hon. Friend about the importance of ensuring that we do not add to non-wage labour costs in Europe, because the price will be paid in other people's jobs. I can give my hon. Friend the assurance that he seeks about challenging the abuse of article 118A of the treaty of Rome. I should warn my hon. Friend, however, that if the Labour party were ever to get into power it would remove the necessity for unanimity on matters concerning the labour market and thereby expose many people in Britain to unemployment needlessly as we became less competitive.

To ask the Secretary of State for Employment what are the latest figures for unemployment.

I am grateful to the hon. Gentleman for asking that question. Last month, seasonally adjusted unemployment fell by 49,000 and now stands at 2,855,100, which is a fall this year of 137,000.

Now that the Government have admitted that they say one thing in private and another thing in public, is not it time that we had a little honesty about the unemployment figures? Why does not the Secretary of State admit that there are 500,000 women who do not register who should be added to the figures? There are another 500,000 young men and women who have been thrown on the scrapheap of slave labour schemes, and more than 100,000 miners and others on special schemes. In Bolsover, some of those people do not figure on the unemployment benefit records. Let us have some honesty all round. If the Secretary of State wants the money to get the unemployed back to work, why does not he tax the rich rather than adding VAT to fuel and power?

I am sad that the hon. Gentleman did not welcome the fall in unemployment of 137,000 this year. [HON. MEMBERS: "Answer."] I will answer the question by referring the hon. Gentleman to the speech made by the Leader of the Opposition at the CBI where, for the first time, the leader of the Labour party acknowledged that unemployment is now below 3 million.

It is not.

The hon. Gentleman may say that it is not, but the leader of his party says that it is. In this, I believe the hon. Gentleman's leader because he was expressing the truth. Our statistics show the truth and it is about time that the hon. Gentleman acknowledged that.

Does my right hon. Friend recall visiting my constituency 10 days ago when he was made aware of the importance of the hosiery and knitwear industries? Does he believe that the competitive position of the industries with the far east will be enhanced if further working hour restrictions are imposed by Europe?

My hon. Friend is absolutely right. There is no doubt that the imposition of a statutory working week of 35 hours would prevent 14 million people in this country from working the hours that they want to work. Compulsory legislation of that type would undermine the competitiveness of key industries. That message came across to me loud and clear when I visited my hon. Friend's constituency.

To ask the Secretary of State for Employment what recent discussions he has had with the TUC on health and safety issues.

I have had several meetings with the TUC to discuss health and safety, the most recent of which was yesterday.

Is the Minister aware that since the Labour Government introduced the Health and Safety at Work etc. Act 1974 the numbers of people killed or seriously injured at work have been reduced dramatically? How will workers taking their own toilet rolls and towels to work help British industry and resolve its problems? Will the Minister tell the House whether the Government's proposals on the deregulation of health and safety comply with the EC directive?

The Government have no proposals to deregulate health and safety. The deregulation review is being carried out by the Health and Safety Commission, which was established by the Labour Government. I am astonished that the hon. Lady seeks to attack the commission in carrying out that review. The hon. Lady's point about workers bringing their own soap and toilet rolls to work is fatuous nonsense in which the Government will have no part.

Is my hon. Friend aware that his announcement that the Government deregulation proposals will have no impact on health and safety will be warmly welcomed by workers in my constituency? Is he aware that the biggest employers in rural areas are in tourism, hotels, restaurants and catering and that they want to see the Government's deregulation initiative put into practice?

I entirely agree with my hon. Friend. Deregulation is important to ensure that firms are able to comply to maintain the effective health and safety regimes which everyone wants. The review is being carried out by the Health and Safety Commission, on which the TUC is represented and is playing a part. The Department of Trade and Industry has also asked business to make an input.

Quite frankly, the commission told me that it would need a special van to send round all the regulations which apply to health and safety in the workplace. There must be room for pruning and it is a pity that Opposition Members are not prepared to play a constructive role. Instead, they seem to want to make cheap political capital out of the important matter of safety and the competitiveness of this country.

Will the Minister tell the House why the vital new regulations introduced, on common ground and without dissent, in the House earlier this year are not yet being enforced at all in industry?

I know that the hon. and learned Gentleman has taken a close interest in the conduct of industrial tribunals, and I assure him that those changes will be introduced as rapidly as possible. I assume that he wishes to focus on that aspect, but his question did not make that absolutely clear. If he cares to write to me I shall be happy to assure him.

Can my hon. Friend confirm that the United Kingdom has one of the best safety records in Europe, and that, by ensuring that our safety procedures are not overly bureaucratic and burdensome, we have succeeded both in saving lives and in saving people from injury, while at the same time keeping many significant employers in this country?

We have the best safety record not only in Europe but in the world, and my hon. Friend is right to say that that depends on conduct in the workplace. For Opposition Members to argue that we should retain rules such as the agricultural ladders regulations, which specify the distance between the rungs of a ladder and the grain of the wood to be used to make it, is fatuous and nonsensical. No one with the interests of safety at heart would seek to portray the regulations in the emotional way in which Opposition Members, even those on the Front Bench, have sought to do in the press and elsewhere.

Will the Minister tell us whether it is right and proper for his Department to allow the Department of Trade and Industry and the Ministry of Agriculture, Fisheries and Food to repeal health and safety legislation by means of statutory instruments such as those laid down in clause 52 of the soon-to-be-published deregulation and contracting out Bill? If he, like me, has confidence in the Health and Safety at Work etc. Act 1974, and in the Health and Safety Commission, why does he not let the commission, rather than the ideologues in the Department of Trade and Industry, repeal unwanted legislation?

The hon. Gentleman would do better not to spend his time ferreting around in dustbins; he would not then be misled, as he clearly has been. The draft in his possession does not represent what will eventually appear. The hon. Gentleman should know that the House decides on regulations, and says which of them should be repealed, not the Health and Safety Commission. The commission makes proposals about regulations, and that will continue. The review is being carried out by the commission, with trade union representatives involved. The hon. Gentleman would do better to spend his time talking to those people, rather than scurrying round the dustbins of Whitehall.

To ask the Secretary of State for Employment what assessment he has made of the impact upon employment in the United Kingdom of companies moving their manufacturing centres to sites in eastern Europe.

I agree with my hon. Friend that that is potentially serious, but provided that the United Kingdom remains competitive, it will not happen.

I am grateful to my right hon. Friend for his helpful, albeit brief, reply. Does he accept that our manufacturing industries are critical to the United Kingdom economy, and does he support the objectives of the all-party Manufacturing and Construction Industries Alliance launched in the House earlier this year, which believes in free but fair competition, and in constructive deregulation? Will he tell the House what measures and initiatives he will take to improve both education and training to ensure the continued competitiveness of British industry?

First, I strongly agree with what my hon. Friend says about the importance of manufacturing industry. Secondly, the deregulatory effects of the abolition of wages councils will enable manufacturing industry to be even more competitive. Thirdly, as my right hon. Friend the Secretary of State for Wales will confirm, the Government have focused heavily on manufacturing industry in Wales, where output is now 124 per cent. of what it was in 1979, and have done much to reinvigorate industry throughout Wales.

Is it not Government policy that we should compete successfully with eastern Europe and, for that matter, with the Pacific rim countries, by driving down wage levels and worsening terms and conditions in this country?

What I would say to the hon. Gentleman is that the take-home pay of the average worker in the United Kingdom is one of the highest in Europe, and the hon. Gentleman would do well to reflect on the reason for that. Of course, it is because our non-wage labour costs are much lower and much more competitive. Instead of focusing on the subject that he mentioned, he would do better to abdicate from the socialist charter, which the right hon. and learned Member for Monklands, East (Mr. Smith) has signed, to impose a compulsory 35-hour week and a compulsory four-day week, which would be grievously damaging to British industry. It is about time the Labour party dropped that sort of socialist nonsense.

To ask the Prime Minister if he will list his official engagements for Tuesday 30 November.

This morning, I had meetings with ministerial colleagues and others. In addition to my duties in the House, I shall be having further meetings later today.

Does my right hon. Friend agree that contacts have played an initial part in bringing about the process in the middle east and in bringing people together in South Africa; but contacts have always played an important part in bringing an end to violence? Hon. Members want my right hon. Friend to continue his courageous search to bring an end to bloodshed in Northern Ireland.

My right hon. and learned Friend and I welcome the strong support yesterday given by hon. Members on both sides of the House to the efforts to promote peace and political settlement in Northern Ireland. I believe that contacts can play a useful part, for the reasons set out yesterday by my right hon. and learned Friend. I hope that those contacts will have helped the IRA to understand that violence must stop before those who justify it can enter negotiations with the Government, and that the Government stand firmly by their public position. I regret very much that there has not yet been a permanent cessation of violence, as events in Northern Ireland over the past day have sadly demonstrated yet again. But if our present efforts do not succeed, we will not cease to explore opportunities for peace.

As a former Chief Secretary and Chancellor of the Exchequer, as well as Prime Minister for the past three years, does the Prime Minister accept responsibility for the £50 billion Budget deficit?

During the recession—[HON. MEMBERS: "Answer"] I shall answer in my own way. During the recession, the right hon. and learned Gentleman and his colleagues were keen to see us increase spending to protect people who are vulnerable. It was the protection of people who were vulnerable and the collapse of income during that period that increased the size of the borrowing requirement. What is presently odious about the right hon. and learned Gentleman is that his party objects now to spending reductions, having previously asked for spending increases. They complain about the size of the borrowing requirement, they complain about tax increases and they still promise extra expenditure.

I will not bandy cheap insults with the Prime Minister. The House will notice that he did not answer the question as to responsibility. If he seeks to blame it all on the world recession, can he explain why Britain's Budget deficit is significantly worse than that of Japan, the United States, Canada, Germany, France, Spain, Ireland, the Netherlands, Denmark and Portugal?

Perhaps the right hon. and learned Gentleman can explain why our inflation position is better than that of all those countries, why our unemployment position is better, why our exports position is better, why we have unemployment falling and they have unemployment growing, and why we have the largest growth rate in the European Community this year and projected next year. Perhaps the right hon. and learned Gentleman could reflect on that.

Perhaps the Prime Minister will reflect on why, if everything in the garden is growing as well as he suggests, we have a £50 billion deficit? Is not economic mismanagement the fundamental reason for that? And is not that the fundamental reason why, quite apart from anything the Chancellor does today, the British taxpayer faces a major tax hike next April?

I answered the right hon. and learned Gentleman's third question in my first answer. If he cares to look at it again, he will see that that is the case. Once again, he is trying to face both ways at the same time and attacks us both on the level of the deficit and the level of taxation. If he thinks that taxes are too high and the deficit is also too high, what spending would he cut? He cannot go on living in an Alice in Wonderland world where taxes fall, the deficit drops and spending rises effortlessly upwards. Whenever the right hon. and learned Gentleman speaks, the natural laws of economics are suspended.

To ask the Prime Minister if he will list his official engagements for Tuesday 30 November.

I refer my hon. Friend to the answer that I gave some moments ago.

Does my right hon. Friend accept that the most significant result of the survey of manufacturing industry published yesterday is that our consumer-led recovery is providing a significant and sustained boost to manufacturing industry right across the country?

I agree with my hon. Friend about that. Consumer demand is rising, manufacturing output is growing, retail sales are at record levels, exports are up, and car registrations are up, which is all good news for British manufacturing. Opposition Members who continually knock the record of British manufacturing should ask themselves how, if it is not doing well, British exports have risen so dramatically. We were certainly the first to go into recession, but we are also the first to be clearly out of recession and we are set to grow faster this year than almost any other European nation.

Should not those who hope for peace and wish the Prime Minister well in his pursuit of it in Northern Ireland nevertheless recognise that the events of the weekend, for whatever reason, have served to dent the trust of the Unionists, put the extremists centre stage and check the momentum of peace in Northern Ireland? Does the Prime Minister recognise the absolute urgency now of taking action to restore the momentum for peace by proposing, after discussion with the Irish Prime Minister, actions that will unite the majority on both sides?

The right hon. Gentleman, who made his own comments about the leaks over the weekend, might have been prudent to wait to hear what the Government had to say before he made those comments and to study the documents which the Government released to justify the position that they have taken, as those documents clearly do. I believe that when people in Northern Ireland have had a chance to study what was said, they will see that the Government have acted properly and done their duty throughout this whole affair.

If there had been a terrorist tragedy of some sort on a massive scale this week and it then became apparent that we had ignored the message that we received earlier this year, that would have been unforgivable, and I dread to think what the right hon. Gentleman would have said in those circumstances.

To ask the Prime Minister if he will list his official engagements for Tuesday 30 November.

I refer my hon. Friend to the answer that I gave some moments ago.

Bearing in mind that there is strong and firm support for the Home Secretary's recent proposals on law and order, particularly with regard to people on bail and remand—reforms which have been urged on the Government over a period of years by the Norwich crime prevention panel—will my right hon. Friend confirm that he will encourage business leaders and local councils in Norwich to support the panel's campaign to install security cameras in the city centre, leading to the deterrence of crime and more convictions, as sure as night follows day?

My hon. Friend is determined to make Norwich as famous as Basildon, and I suspect that he may succeed. I agree with him about closed circuit television and reject outright the views of those people who claim that it is in some way Big Brother. The public rightly want less crime, and closed circuit television has an important part to play in achieving that. My hon. Friend is right to say that there is strong support in the House and beyond for the anti-crime measures announced by my right hon. and learned Friend the Home Secretary. I hope that they will have the support of hon. Members across the House when they come before the House for consideration.

To ask the Prime Minister if he will list his official engagements for Tuesday 30 November.

I refer the hon. Member to the answer I gave some moments ago.

May I refer the Prime Minister to the channel of communication with the IRA that was revealed yesterday? Is the Prime Minister satisfied about the reliability and accuracy of that channel in view of the denials now issuing from Belfast about the February statement to which the Prime Minister referred earlier? Was the dialogue with the IRA in any way prompted by events in England? Were any messages sent on that channel of communication by or on behalf of any Minister other than the Secretary of State for Northern Ireland? Were they in any way related to recent events in England?

For the reasons that my right hon. and learned Friend set out yesterday, it is useful to continue to have a confidential channel of communication—which, as the hon. Gentleman knows, and his hon. Friends said yesterday, has been available for many years. Any private communications on our part will, on all occasions, be consistent with the Government's public position, as was the case with the documents published yesterday. On the reliability of the channel, experience has proved it to be extremely accurate and extremely reliable over many years. But the real test over time is action not words. We need to see what the final outcome is. The documents published yesterday set out a full record of the exchanges and I have no further exchanges to report to the House.

To ask the Prime Minister if he will list his official engagements for Tuesday 30 November.

I refer my hon. Friend to the answer I gave some moments ago.

Is my right hon. Friend aware that last month, not only was there a decrease in unemployment in my constituency of 7 per cent., but Brintons Carpets, my constituency's largest employer, has just announced a year-on-year increase in exports of 86 per cent? Is not that indicative of the huge improvement in competitiveness in British industry, and would not that improvement be severely damaged by the social chapter, the minimum wage and the European super-state, with which the Labour party increasingly seems to be obsessed?

I am pleased to hear the good news from my hon. Friend's constituency, and to hear that unemployment is falling there, as it is now in all parts of the country. It is true that while I have no doubt that the Opposition wish to create jobs, their policies would, in practice, destroy jobs. A minimum wage would destroy jobs, a 35-hour week would destroy jobs and levelling up business taxes would destroy jobs. People will notice that unemployment is falling here with our policies, but rising in other countries that follow the policies advocated by the Opposition.

Can the Prime Minister confirm that, in the three years that he has been in the job, 1,300,00 people have lost their jobs, 250,000 people have lost their homes and 150,000 businesses have gone bankrupt? As he continues to draw a full salary, can we assume that, whatever else is in the Chancellor's Budget, there will be no reference to performance-related pay?

I can confirm a lot to the hon. Gentleman. I can confirm that when I became Prime Minister inflation was 9.7 per cent. and is now at 1.4 per cent., interest rates were 14 per cent. and are now 5.5 per cent., unemployment was rising and is now falling, the economy has been in recession and is now growing, and 137,000 people have come off the unemployment register total this year. I can also confirm that last month alone nearly 500,000 people came off the register. The hon. Gentleman can name no other country in the western world currently in that position.

To ask the Prime Minister if he will list his official engagements for Tuesday 30 November.

I refer my hon. Friend to the answer I gave some moments ago.

Is my right hon. Friend aware of the concern in all parts of the House about too-easy access to pornography produced on computers? Does he join me in welcoming the announcement last week by the Home Secretary of measures to curb these activities, which can be so harmful, especially to children?

I am aware of the concern expressed by my hon. Friend, and I strongly share it. Parents feel particularly revolted by pornography involving children. The measures that my right hon. and learned Friend has announced will be included in the criminal justice Bill in this Session. They will make it quite clear to the pornographers that we are determined to defeat them, and we intend to crack down especially hard on the appalling trade in child pornography.

I congratulate the Chancellor on being the first holder of his office to introduce a unified Budget combining the traditional Budget and the public expenditure programme in one. In terms of the material to be covered, it was clearly a greater challenge than that posed to any of his predecessors, and he delivered it with his customary style. He may live to regret saying that he had public borrowing once and for all under control. After all, one of his predecessors as Chancellor, the Prime Minister, told us that there would be tax cuts year on year and that there would be no increases in VAT either upwards or in scope.

In another respect the Chancellor's Budget is unusual because many of the tax decisions that will hit people next April were taken in his predecessor's Budget last March. In 1993 there are two Budgets. As we heard again today, those Budgets are bad news for the taxpayer, they betray Conservative tax and spending pledges, and they are designed to make the British people pay the price of Conservative economic mismanagement.

I remind the House and the country that in March the former Chancellor primed a ticking tax time bomb which will explode in April. VAT on domestic fuel of 8 per cent. rising to 17.5 per cent., a hike in national insurance contributions, a cut in mortgage tax relief, and a real cut in personal tax allowances represent an additional £8.50 per week for a typical family from April.

What did we get today? We got more betrayals of Conservative election promises. I calculate that there are at least three new taxes on income because to freeze personal allowances, not for just one year but for two years in succession, is a devious way of increasing income tax. I calculate that that is another £1 a week extra tax for the basic rate taxpayer. The Government may not change the formal rate, but they wriggle in all sorts of ways to try to increase the income tax bill without the public detecting that they are putting it up.

I warn the Government that when people examine their pay slips in April next year and in the April after that they will see the true tax cost of the Conservatives. Similarly, cutting the married couple's allowance is another way of increasing income tax; and a third way, of course, is by a substantial cut in mortgage tax relief. Those are three ways in which income tax has been increased.

If that was not enough on the suffering people, there is to be a tax on holidays. I notice that it will not apply to executive aircraft because they are small enough to avoid it. I also noticed that the Conservative party is so out of touch with public opinion that Conservative Members cheered a Budget that increased taxes and cut public expenditure. For example, despite all the Chancellor's verbiage about who he would exempt, there is a new tax on car insurance and home insurance. It will be quite expensive because the premiums for both have soared following the boom in crime under this Government.

Those are more costs for ordinary and average families. They will have to pay more in income tax and the Government have paid no attention to the widespread cries that they should abandon their rise in VAT. There will be more taxes on income and a continuation of taxes on expenditure.

The Chancellor argues that he has met the problem of VAT by giving some compensation to pensioners, the disabled and others. At best, he has given them half the extra cost. He meets half of it, but the other half falls upon the poor. It is 50p followed by £1 the year after; and we are aware of the cost of VAT. That is not adequate compensation because there will still be an extra cost falling on everyone as a result of VAT. The Government have totally left out of account the millions of families who are not on any benefit and who struggle every week to make ends meet. They will have to meet the full blast of the vast increases without any Government assistance.

The Government should have thought about their election pledges and taken away the 8 per cent. value added tax in April and the 17.5 per cent. the year after. There is still an opportunity for Conservative Members to pay attention to opinion in their constituencies because we shall table amendments to the Finance Bill, and the vote on those will test whether they are prepared to stand by their election promises.

My stomach turned when I heard about public spending and, in particular, about the continued and vicious assault upon the welfare state. At a time of high unemployment, to cut the time for unemployment benefit from one year to six months is, to borrow a phrase from the Prime Minister, odious, odious in the extreme. As a result, fewer people will register for unemployment. We know that trick because it has been pulled often enough by the Government in the past. They will push more people into income support.

One reality of modern Britain is that a person who moves from unemployment benefit to income support and whose partner is working for 16 hours a week at whatever salary or wage will lose income support and will have no state entitlement. Conservative Members make all sorts of pious statements about how they care for the poor and the unemployed. No Government who cared for the unemployed would do this to them. The Government put such people in difficulty, but they ignore the huge loopholes in our tax system and all the people who did so well during the Tory years. Then to turn, in their search to raise money, to people on invalidity benefit by imposing tighter medical requirements and by subjecting it to taxation is absolutely disgusting.

Quite right. We will catch the fraudsters.

Quite right, they say. That is the party which believes that when the Chancellor needs to raise money he should turn to the sick and the unemployed before he calls on anyone else. The Chancellor and the Conservative Government and their philosophy stand condemned by those two public expenditure measures.

But there are other matters. There is the sleight of hand in public expenditure. I have not had an opportunity to go into all the detail of the public expenditure programmes that have been produced, but, as a working rule, I suggest that those who study them should be very very careful about the figures because public expenditure is stated in cash terms, not in real terms.

The Government claim an extra £1.6 billion on health spending in 1994–95. After adjustment for price increases, that drops to £263 million. The Department of Health admits that 1.5 per cent. extra is needed each year to keep pace. After this adjustment there is a shortfall of £175 million and capital spending will fall by £144 million in real terms. Therefore, let us be careful about the Government's boasts.

Let us also be aware of what has happened, and what the Chancellor told us has happened, to public expenditure. There will be a cut in the money available to the Housing Corporation. These were the parts of his speech through which the Chancellor hurried. I noticed that he had a tendency to increase his rate of delivery when he came—[Interruption.] He increased his rate of delivery because of his embarrassment at what he was about to announce.

The Chancellor could have told us that he was cutting the Housing Corporation's budget by £300 million. Instead of cutting it, he should have released the accumulated capital receipts for local authorities in order to allow unemployed building workers to get to work and homes to be built for homeless people.

I suspect that there have been more cuts in training. Despite our recent experience with London Transport, £64 million is to be cut from its budget. It might have been more upright of the Chancellor to have given those figures in his speech rather than leaving them to be dug out. But we shall dig away and get all the truth about the Government's public expenditure programmes.

We heard—and people must take account of what the Chancellor says—that there will be cuts in public expenditure, not this year but next year and the next year and the next year. Everyone who works in the public sector, and those who depend for services upon public provision, will bear in mind that nothing else is coming their way but cut after cut after cut. The astonishing thing was that the Chancellor seemed quite proud of that.

What about the quality of life in Britain? The Chancellor talked about a modern, civilised society. The quality of life in Britain is maintained by public expenditure on our social welfare system and our economic infrastructure and on proper welfare benefits, which the Chancellor has done so much to undermine in the Budget today.

There will clearly be fierce debates about the Budget, and so there should be. I have already said that it will cost the average British family £8.50 per week in April. [Interruption.] That is no joking matter; it is serious for those families. I hope that those watching this debate on television notice that the Conservative party thinks that it is a matter for humour when we talk about the cost to the typical family being £8.50. That cost will now be at least £9 per week and probably more, and probably another £5.40 a week the following April. We have not just had tax increases and public expenditure cuts today; we have more tax increases and more public expenditure cuts to come.

There has been precious little in the Budget to revive British industry, to put us back on the path of sustained economic growth and to bring down unemployment. The Chancellor made little reference to that in his Budget. He had one basic objective and that was to reduce the deficit. But neither he nor his colleagues seem to understand that the deficit is the symptom, not the cause. The fundamental problems are the skills deficit, the investment deficit, the trade deficit and the jobs deficit. Raising taxes and cutting public expenditure, as the Chancellor has done, does nothing to tackle those. They will make some of them worse because they will threaten our economic recovery.

Above all, today we needed a Budget for jobs and for social justice. But, my goodness, we got neither of those. Instead, as I am afraid we have come to expect from the Conservative party, a party now well out of touch not only with the British people but with its own dwindling band of supporters, we had a Budget which was a blatant betrayal of election promises, a Budget which continues to pile taxes on the British people and to reduce the services available to them.

I pick just one example. When we complain about national insurance going up, the Government say, "Ah, but national insurance is not like income tax; it is there to pay for a contributory benefit." Well, here we have national insurance going up by 1 per cent. and the major contributory benefit, unemployment, going down. That is no better nor worse than a fraud on the British people. The Government ignore mass unemployment and economic weakness, the legacy of their period in office. This is not the Budget that Britain needs.

I congratulate my right hon. and learned Friend the Chancellor of the Exchequer on his first Budget speech. It was a well delivered speech. I was somewhat alarmed beforehand that, as this is a unified Budget, it might be a long speech, but it was commendably brief. My right hon. and learned Friend presented to us this afternoon an ingenious package, and he deserves the thanks of the House and country for the measures that he has introduced.

I welcome the fact that we now have a unified Budget. It was long overdue. It was always absurd to introduce public expenditure proposals in November and the tax-raising proposals later. I see that my right hon. and learned Friend wishes to leave the Chamber and I know that he has a meeting to go to, so I shall be pleased for him to do so.

I was saying that I welcome the unified Budget, bringing together as it does the public expenditure proposals and tax changes at one and the same time. It always seemed to me a strange way to go about things to have them brought in at different times, as has happened in the past.

The Leader of the Opposition made a commendably brief speech this afternoon. I can only imagine that its brevity was due to the fact that there was very little for him to go on about. He managed to work up a lot of synthetic indignation, but, fortunately, it was very concentrated.

I welcome the social security proposals in my right hon. and learned Friend's Budget. Obviously, we shall receive fuller details of those tomorrow when my right hon. Friend the Secretary of State for Social Security makes his statement, and when he has done so will be the right time to examine the proposals in greater detail.

I was pleased to hear my right hon. and learned Friend yet again give the firm commitment that the Conservative party has always given about the state retirement pension being fundamental to the protection of old people in Britain. It did not need repeating, but in recent months there have been rumours that the Government might attack the state retirement pension, so it was right that my right hon. and learned Friend should confirm the Government's intentions in that respect.

I was also pleased, as were most people, to hear about the introduction of the new child care allowance. We look forward to receiving full details, but I am sure that it will be welcomed by a large number of ladies throughout the country.

I was glad to hear the measures that my right hon. and learned Friend proposed to help those who will be affected by VAT on fuel. He fulfilled the pledge given by my right hon. Friend the Member for Kingston upon Thames (Mr. Lamont) earlier in the year to look after especially vulnerable people and went much further because he extended it to cover all state retirement pensioners and others in receipt of benefit.

I have always been in favour of the introduction of VAT on domestic fuel for environmental and economic reasons. It was especially ingenious of my right hon. Friend the Member for Kingston upon Thames to introduce that phased measure as a clear indication that the large public sector borrowing requirement would not continue indefinitely and at the same time ensuring that the PSBR would not be immediately reduced, which might have cut off the recovery that had only just started. The Government have fulfilled their promise to help those least well off, which I welcome.

Does the hon. Gentleman accept that the increase for a single, disabled person by 1995 will be £1 per week, and as many disabled persons have fuel bills of £12 to 15 per week, with 17.5 per cent. VAT on top, £1 a week will not go half way to bridging the gap?

I shall not become involved in detailed discussions with the hon. Gentleman about such matters having just heard of them; I prefer to examine them in greater detail. My right hon. and learned Friend said that vulnerable people would be covered, and I have no reason not to accept his word.

I am pleased that the Government have grasped the nettle on the issue of the equalisation of the pension age in a sensible and phased manner that will not come into force until 2010 and gives ladies plenty of time to become accustomed to the change.

I welcome the measures that my right hon. and learned Friend announced to help small firms. The VAT ceiling has risen considerably and, if I am correct, his measures will remove 75,000 small firms from paying VAT. When I first arrived in my constituency 23 and a half years ago, employment was predominantly in textiles, mining and agriculture. There has been a substantial reduction in the number of jobs—about 10,000—in those industries, but they have been replaced by a mushrooming of small firms. They need even more encouragement. Despite the loss of 10,000 jobs over 23 years, my constituency has the 15th lowest level of unemployment in a constituency in the UK, according to figures produced by the House of Commons Library. That shows the importance of small firms and their ability to provide employment opportunities.

I am pleased that there has been no general extension of VAT because, over past weeks, hon. Members have been inundated with correspondence from people who were concerned about the introduction of VAT on newspapers, periodicals, books, bus fares and food. It is a great relief to know that we can all reply by saying that those fears were unwarranted.

I welcome the announcement that there will be no increase in excise duty on beer and whisky, but I am not happy about the increase in petrol tax as I represent a large, rural constituency and the increase will cost some of my constituents more, although as country dwellers I think that we were expecting it.

A Budget should be about strengthening the economy and today's Budget was aimed at that. One of the most alarming features of the British economy over the past 23 years and the main reason for its weakness has been the performance of the manufacturing sector. In the 20 years from 1952 to 1972, manufacturing output rose by 88 per cent.; it rose by only 8 per cent. in the period from 1972 to 1992. Thus, while the average annual increase in manufacturing output between 1952 and 1972 was almost 4.5 per cent., between 1972 and 1992 the increase was less than half a per cent. a year.

International comparisons are not available for the whole of the earlier period, but in the 1960s, although the performance of British manufacturing industry left something to be desired, it compared reasonably favourably with the countries in the European Community. However, since 1972, it has compared unfavourably with those countries. While the average increase in manufacturing output in the UK has been less than half a per cent. during that period, it was 6 per cent. in Ireland, 4 per cent. in Portugal, 2 per cent. in Italy and 1.7 per cent. in Germany. That is not a satisfactory record for the UK and must be improved if the British economy is to achieve steady and secure growth and lower unemployment and enable us to pay our way in the world.

My right hon. and learned Friend has introduced a number of useful measures to help manufacturing industry, but most of them will have a marginal effect. If it is to prosper, manufacturing industry needs lower interest rates that fluctuate less, stable exchange rates, greater incentives for capital investment and the creation of a more favourable environment.

Far too many of my right hon. and learned Friend's predecessors as Chancellors of the Exchequer have given the impression that interest rates are the only means of controlling the economy, which has had unfortunate consequences. High interest rates impinge especially severely on manufacturing and place a heavy burden on those who borrow money to invest in new plant and machinery, but reward those who put their money in banks, building societies and other similar forms of savings. That is hardly the way to encourage increased investment and greater efficiency in the manufacturing sector.

Consequently, I welcome the falls in interest rates that have taken place over the past three years, including the cut in the past week, and I hope that there will be more of the same to come. In future, I hope that my right hon. and learned Friend will depend less on interest rates as a tool of economic management and will use the other weapons at his disposal. Lower and more stable interest rates would provide a solid foundation on which manufacturing industry could expand and prosper.

Stable exchange rates will also help the manufacturing sector. It is no coincidence that manufacturing output rose by so much more in the 20 years up to 1972, when we had reasonably stable exchange rates under the Bretton Woods agreement, than in the years since 1972, when we mainly had floating exchange rates. Floating exchange rates can cause trouble in the manufacturing sector because sudden, adverse movements can undermine years of hard work in building up confidence among customers.

To strengthen manufacturing, more generous capital allowances should be introduced on a permanent basis. The temporary changes that have been in force in the past year have been helpful—at least they should have been maintained. However, if we are serious about investment, as we must be, we should revert to the arrangements of the years up to the middle 1980s, when capital allowances were more generous. In addition, we need to create a better climate for manufacturing industry, but that goes far beyond the subject of the Budget and the management of the economy—a line that I do not wish to pursue tonight.

Let me emphasise again the importance of the manufacturing sector. It is the basis of our national wealth. It accounts for 60 per cent. of our exports: its export potential is very much greater than that of the service sector. It must therefore be the most important means of dealing with the deficit that causes me most concern—the deficit on the balance of payments. This cannot be allowed to go on indefinitely, and a strong, competitive manufacturing sector is the surest way of eliminating it.

In my view, my right hon. and learned Friend will be judged as Chancellor of the Exchequer on the improvement in manufacturing industry during his tenure of office. As a fellow midlands Member, I know that this is a cause that is very near to his heart to which he will devote great efforts in the years ahead.

The hon. Member for Staffordshire, Moorlands (Sir D. Knox) gave a more balanced view of the Chancellor's Budget than was evident from the Back-Bench cheering behind him. I never thought to hear so many Tory Back Benchers cheering so many tax rises so loudly; but then I reflected that every year in the Budget debate those behind the Chancellor rise and wave their Order Papers with enthusiasm—only to find that enthusiasm waning as each day goes by in the succeeding debate and as, each month, the implications are absorbed. This year will be no exception.

The Budget will do nothing to aid recovery. It will hold recovery back, through lack of investment and through the huge pile of new taxes and tax increases that it imposes. Ordinary people will be taxed to the hilt, with none of the investment in education or improvement in public services that might have provided some justification for fair and well chosen tax increases. The reduction in the public sector borrowing requirement that the Chancellor has forecast depends entirely on spending cuts to be achieved in future years. He has not yet managed to convince the Cabinet that actual spending cuts should be made; he has merely told his right hon. Friends that the global figure will assume that they will be made in future years. As for sorting out public borrowing once and for all, that simply is not a realistic statement: the Chancellor has not sorted out the Cabinet yet, and experience suggests that he will have some difficulty doing so. This is a soft-shoe shuffle with the figures, which will convince no one that the PSBR is on a clear, substantial downward trend.

What about unemployment benefit? The sickening message to those who lose their jobs in the future is that they will be denied six months of the unemployment benefit to which they believe that they have contributed, and the Government have told them time and again that they have contributed, under a contributory national insurance system. That contributory system has been blown apart by today's decision. Indeed, it is impossible to justify a 1p national insurance increase—which every national insurance payer, every taxpayer, will have to pay in April—when the contributory system is being destroyed. The Government say that they have to increase national insurance contributions to meet the demands on the fund, but what fund? The Government have made off with it—it is not there. Meanwhile, six months of unemployment benefit is being snatched from people who have worked and contributed on the assumption that they are entitled to it.

As for the taxes which now come on top of the previous Chancellor's Budget, this is "Son of Norman" with a vengeance. A whole new series has been added to the tax increases in the last Budget: the freezing of personal allowances, for instance, and the fixing of the married person's allowance at 15 per cent. That 15 per cent. is a new, mythical tax rate; it does not exist, but it is assumed that that is the level at which someone is granted a particular credit. The theory behind the 20p restriction was that there was a 20p tax band, into which we are told that increasingly large proportions of our income will eventually go. However, there is no 15p tax band, so there is no particular logic in attaching allowances to it.

Mortgage interest relief is to be restricted to 15 per cent. How many times did I hear Conservative speeches and read Conservative election literature telling the public, "Don't trust the Liberal Democrats: they might affect your mortgage interest tax relief at some future date"? The Government are cutting everyone's mortgage interest relief next April anyway, by restricting it to 20 per cent., and they intend to restrict it further, to 15 per cent., at a later date.

We proposed that the Government should make some use of the opportunity that had been provided and announce that they would remove mortgage interest tax relief from new mortgages at a date in the future—thereby exercising a good influence on the housing market when it needs it. These measures will not do that. People who were assured that they were voting for a Government who believed in mortgage tax relief, and who would go on providing it, have been duped.

Logically, mortgage interest tax relief is difficult to defend. It transfers money from not terribly well-off taxpayers to large mortgages held by better-off taxpayers. The difficulty lies in how that system can be changed. The logical way, surely, is to try to drive the system out without causing hardship to those who made their mortgage commitments on the assumption that they would continue to receive tax relief. Those are the very people whom the Government are targeting: the people who bought their houses and made their mortgage decisions taking mortgage interest relief into account—not those who have no reason to take it into account because they know in advance that it will not be available in the future.

The Government have raised taxes on petrol and diesel by approximately 13.5p per gallon—more than twice the rate by which petrol prices would be raised by the European carbon tax as currently proposed. There will be no compensation, and none of the relief for rural areas for which my party has argued. How many Conservatives said in their election speeches, "Don't vote for the Liberal Democrats: they might put up the cost of your petrol"? The Government are putting up petrol taxes by more than we ever dreamed of doing, and certainly by more than the European carbon tax would do. The Government really cannot accuse others of "bordering on hypocrisy" when they have increasingly implemented measures against which they have set their own face time and again.

There is also to be an airport tax, and a tax on insurance premiums. The Chancellor seems to have taken to heart the rather unkind description of him in Alan Clark's book as "that walking life insurance risk" as he has exempted life insurance premiums, but just about every other kind of insurance is to be the subject of a new tax.

There is no back door to the tax system that the last two Chancellors between them have not entered. Every possible back-door new tax, or way of freezing a tax allowance, has been found. They have found ways of making significant tax increases without achieving the purpose of increasing investment or increasing the overall fairness of the tax system.

Talking of fairness, let us consider what the Government are doing about VAT. They have been driven to work out a compensation package—driven by the indignation of people throughout the country about what they will have to pay. The package, however, certainly would not have won the Conservatives the Christchurch and Newbury by-elections, which were won so handsomely by my hon. Friends the Members for Christchurch (Mrs. Maddock) and for Newbury (Mr. Rendel), and it would certainly not have appeased those who took part in the many pensioners' rallies and other events in which ordinary people have expressed their concern.

The compensation will be 50 per cent., not the 90 per cent. that the average family is expected to experience by way of extra bills in the first year. Of course, average families and families with incomes well below the average will not receive any compensation. The Government have got the message that they must help not just pensioners on income support, but those above the income support level, because they are the new poor. So many Government measures have helped to turn pensioners with small savings into a new kind of poor. I am glad that the Government have started to get that message; but the people to whom I have referred will not be adequately compensated, and many more people will not be compensated at all.

We have had two Chancellors who have not made the tax system fairer, but have simply sought to extend it. The motto seems to be, "If it moves, tax it". What a battery—what an array—of taxes we have seen. On the provisions involving small business, I want to make an offer to the Government; I wish to be generous to them. In an interesting passage in his speech, the Chancellor said that businesses were troubled, as indeed they are—sorely troubled—by late payment of debt. Some of that late payment, incidentally, is made by Government Departments and other Government bodies. Much improvement could be achieved in that respect. The campaign waged by many small business organisations for statutory interest for late payment of debt has been recognised by the Government, who have issued a statement that Ministers will look at the matter again. I am very pleased to hear that, but looking at it is not enough.

Let me make my offer: I have gained second place in the ballot for private Members' Bills, and if the Government will assure me within the next few days—it must be done within that time because I shall have to announce the subject of my Bill—that they will not oppose a Bill to enforce payment of debts, I shall be prepared to introduce such a Bill. The Government will then have no problem fitting it into their legislative programme and no difficulty with having to push other Bills out of the programme. Their consultations will be speeded up, and their minds will be concentrated wonderfully. Not many Opposition Members have ever made so generous an offer, and I can see the warmth with which it has already been received by the Economic Secretary. I hope that he will be able to intervene in my speech, or consult during the afternoon and report later in the debate—perhaps tomorrow—that the Government will accept that offer, which is quite genuine.

If the Government agree that they will not oppose a Bill to enforce statutory late payment of debt, I will introduce that Bill and it can have the time allocated to me under the private Member's Bill procedure. I will, of course, consult the Government on the detailed terms of the Bill.

rose—

Say yes.

I was always advised to beware of Liberals bearing gifts. Unfortunately, I am unable to accept the right hon. Gentleman's offer this afternoon.

It is right and proper that the Government should consult on the various options that are open, and there are a number of options open, as the press release following the speech of my right hon. and learned Friend the Chancellor of the Exchequer this afternoon made clear. It is far better that industry generally should be consulted rather than that we should hasten to private Members' legislation on the matter.

I am sorry that the Minister chose to intervene, because I think that he could have given the Government a little bit more of an opportunity. I hope that that is not the last word in the course of the next few days' debate. Clearly, that offer cannot remain open indefinitely. I am not prepared to introduce so valuable a Bill and simply see it blocked and defeated by the Government. That would be a waste of private Members' time, when there are many other issues contending for it.

I want to see such a Bill through. It would be very harsh on small businesses to have to wait another year for anything to happen, because small businesses are facing the difficulties now. I therefore urge the Minister to have expeditious consultations so that he or his colleagues can come back to me in the next two or three days to give a clear answer, bearing in mind that there will be time—between the day when private Members' Bills have to be announced and the proceedings on the Bill-for quite a lot of further consultations. I do not intend to press him further now, but I ask him to take it away and perhaps come back to me over the next few days.

I want to look briefly at some of the spending aspects of the Budget. I shall start with housing. There is nothing new in the way of housing investment. We could have used housing investment to tackle the housing crisis, the homelessness problem and get the building industry moving. The construction industry is showing none of the signs of recovery that are fleetingly apparent in some other parts of industry. It needs to be set to work and we need the homes. With its social housing problem, the Housing Corporation would have been an urgent priority for greater investment, not restricted investment.

Let me give another example of where the Government could have helped. It was announced this afternoon that the Ministry of Defence can sell housing stock to deal with its budget problems. In other words, it can use the receipts of asset sales—sales of houses—for new investment, or even current spending for all I know. Why cannot local authorities use exactly the same form of income—capital receipts in the public sector—to build more houses and renovate existing houses? Surely the doctrinal admission today that it is all right for the Ministry of Defence must mean that it is all right for the Department of the Environment and local authorities. I suspect that it does not mean that, but we should be told why. Local authorities could be adding to essential social housing.

As to transport, there is still not enough new investment. We were pleased to hear the announcement about the west coast main line, but that is a private sector investment project. I welcome the bringing in of more private sector investment, and I hope that there will be a great deal more of it, but we need more public sector investment in London Underground. People have had to be led out of tunnels in the dark because the system cannot keep going, so old and decrepit is its cabling. We need significant new public investment in London Underground if that job is to be dealt with.

The same applies in other parts of the public transport system. I noticed the press release in which the Secretary of State for the Environment—I do not know why it was him—referred to the fact that there were transport projects among the creation of public assets amounting to many billions of pounds over the next three years. When I looked at it more carefully, I discovered that, sure enough, the Minister had counted the Jubilee line yet again. The Jubilee line has been counted in every one of the past three ministerial statements about public expenditure. Every time it comes up, we have the Jubilee line. We have only just got the announcement that we can go ahead, so sure enough it is counted all over again. It is amazing what one can do with figures, but what one cannot do with figures is regenerate a public transport system that is desperate for real, new investment.

As for health, I do not believe that even the figures that we have address the colossal waste in the national health service which has arisen from the huge expansion of managers, management and administration in the health service. The Government knew from the start that they were devising a system riddled with contracts, purchasers, providers, buyers and a lot of people shuffling paper about. The whole NHS system depends on people shuffling paper about, so it employs people at the highest possible salaries to shuffle it about. There are huge increases in costs in the NHS. They have been generated not by new patient care, better equipment or new highly qualified staff carrying out medical procedures, but by more and more managers and administrators.

Let us look briefly at education. Hidden away in the education proposals are provisions which raid the capital budgets of local authority schools to give money to opted-out schools. Not satisfied with the situation in which so many schools—the vast majority—have decided that they do not want to opt out, the Government intend to raid their budgets to give more capital to opted-out schools. That is a disgraceful piece of bribery at the expense of the people who refused the bribe, and it is outrageous at a time when education investment is so badly needed.

The Chancellor made a comment about student grants and asked why the bus drivers of today should pay through their taxes to finance the lawyers of tomorrow. I have another question for him about student grants. Why should not the lawyers of today be paying through their taxes for the sons and daughters of today's bus drivers to get into higher education? That is the real question. Why should more and more people be disbarred from higher education through fear of high debts and the inadequacy of the grants system and the combined grant and loan system to provide a reasonable basis on which they can go through higher education?

Another departmental area with which I shall deal is the Home Office. The great element in the Home Office budget is building more prisons, not preventing more crimes. The more prisons are built, and the more people are put into them, the more crime one assumes has been committed. We are supposed to be stopping crime in the first place so that people are not mugged or injured and do not have grievous bodily harm inflicted on them. Simply having more people in prison does not solve that problem. It shows that the Home Office has not got its priorities right. The building of prisons is very good for my constituency as it is the biggest expanding industry that we have had in my constituency in modem times, and it plays a role in the local economy, but it is not a good crime prevention policy: it is a way of dealing with the consequences of not having prevented crimes and not an objective of policy in itself.

Various measures in the Budget are welcome, or appear to be at first sight—measures such as the enterprise investment scheme, if it works. Unfortunately, there is a trail littered with disappointment of schemes designed to encourage venture investment. I hope that the venture capital trust will not prove to be another of those. It is well worth the Government's effort to try to find new ways of matching available venture capital to businesses that could use it.

Other welcome measures are the pensioners bond—although we do not know enough about the terms to be sure—and the limited child care provision. Many more working women could benefit from other forms of help with child care—for example, tax relief. Many youngsters would benefit if they had access to nursery education. Those are useful measures and we shall consider them in more detail as the debate proceeds.

We have not seen in the Budget a solution to the really big deficits that we face. The public sector deficit is certainly not sorted out once and for all. It will not be sorted out until we get more people back to work and recovery is at a level that ensures that many people are paying taxes instead of receiving benefits. That would require measures that the Budget does not contain.

We have an investment deficit. We are living on the capital that was invested and built up by previous generations, and are not renewing it. The record of decline in our public sector net worth is appalling. The Budget does not solve that problem.

We have a terrible trade deficit, and I was alarmed to hear the Chancellor set such store by the growth in consumer spending. We cannot get out of our economic difficulties in the long term by relying on growth in consumer spending, because it invariably results in a worse trade deficit for this country. Even in the depths of recession we had a bad trade deficit, and we are still not addressing that issue.

We also have a fairness deficit. It has been built up over the years of the Conservative Government, with the benefits to top rate taxpayers and the pressure on lower income people, much augmented by the Budget that 'we had earlier in the year, and not offset sufficiently by the measures in this Budget. It is a fairness deficit which leads people to believe that taxation must be bad and wrong in principle because they are not taxed fairly.

There are justifiable reasons for taxation: there are things that Governments have to do. But taxation has to be fair and people have to see that it is doing the job which justifies levying it in the first place. The Government have added hugely to the tax burden and vastly to the tax system without doing the things which justify taxation in the first place. That is a mark of the Budget's failure.

The difficulty in following the right hon. Member for Berwick-upon-Tweed (Mr. Beith), or, indeed, any member of the Liberal party, is that one is faced with a lot of bits and pieces but no philosophy. So it is extremely difficult even to debate with the right hon. Gentleman. That contrasts sharply with the manner and content of my right hon. and learned Friend the Chancellor's Budget.

The objectives of the Budget were extremely well placed and well set out. They were to achieve sustained economic growth with low inflation and to do so by providing for a flourishing and growing private sector. One of the exciting things that he said was that the Government intended that public expenditure as a percentage of gross national product should be reduced over three years from the current level of 45 per cent. to 42.5 per cent.

Two particular points in my right hon. and learned Friend's speech are important in terms of the objectives that he stated. I agree with the right hon. Member for Berwick-upon-Tweed that economic growth must be central to achieving the Government's objectives. It lies at the very root of the ability to balance greater buoyancy in revenue with the focuses within expenditure which my right hon. and learned Friend identified. That must be particularly true of the objective of reducing ultimately to zero the public sector borrowing requirement and the present £50 billion deficit. The Budget must be measured and judged essentially by what it says about growth. Two particular points about growth have to be considered. The first is the extent to which focusing public expenditure and holding down direct tax rates is plausible and sustainable. Both as a matter of basic philosophy and as a matter of economic efficiency, low taxation is absolutely essential.

I was excited to hear my right hon. and learned Friend the Chancellor say that the Budget involved a long-term tax-cutting agenda. That must be right. In terms of basic philosophy such an agenda means a large private sector, which is the best insurance that we are likely to devise against overwhelming state control and even dictatorship. However, low taxation and a thriving private sector involve something much more immediate than that. Low taxation has to be the best way that Governments can devise of maximising economic endeavour and bringing out the most in the human spirit.

Without a good net wage there will not be incentives to work. Without a good net rate of return there will not be investment. It is as simple as that. Every society that has tried something different has failed. I suppose that the most clear and wonderful example of the failure of an economy while it was heavily taxed and allowed people virtually no net wage was China during the cultural revolution. Anyone who has read Madam Chang's book "Wild Swans" will remember the graphic descriptions of the effect on the economy of wiping out net take-home wages. The policy was reversed in the agricultural sector and more recently in the industrial sector. The spirit of people was lifted by giving them incentives. Net take-home pay rose as a result of work and productivity. As a result, the Chinese economy is being transformed.

It is not simply that high taxes are detrimental to human endeavour. High taxes have their own cumulative effect and create distortions which subsequently have to be put right. In passing, I hope that the new tax on airlines will not result one day in the Government having to compensate local authority airports which are screaming because the traffic is decreasing. My point is that any form of taxation creates distortions.

The question whether we can sustain a policy of low taxation is critical in determining one's approach to the Budget. I hope that the programme of focusing state assistance on those who really need it is firmly established and maintained. There is one area in which we can do more. When I was Minister for Housing I increasingly felt that we were not supporting people who really needed support as against those who did not need it so badly.

In the case of state housing, despite a good move towards privatisation by involvement of housing associations and private capital, £4 billion to £5 billion still goes into bricks and mortar rather than into direct assistance for people who need it. There is still scope for a greater switch in that policy so that rents are raised to a private sector level. The whole housing sector should effectively be privatised. Those who cannot afford to pay the market rents should be supported directly by housing benefit to a greater extent than now. In my ideal world, that would certainly include not only people on current state benefits but those on low incomes. There should be a much smoother tapering of the tax curve in that respect.

The second crucial determinant of the economic growth objectives that are central to the Budget and the question whether the Budget will succeed is the way in which the Government proceed with monetary policy. I was encouraged when I heard my right hon. and learned Friend say that monetary policy would be that which was appropriate to sustaining the objectives that he had set himself. That was a crucial statement. In recent memory it was not always the case that monetary policy was fixed by the need to sustain the domestic objectives of the British Government.

When we were in the European exchange rate mechanism—indeed before we entered it—exchange rate policy was more important than monetary policy appropriate to the domestic needs of the economy. Therefore, in the late 1980s, when it was appropriate for our economy to introduce policies that brought down inflation, we had the reverse. The Germans had low interest rates and it was thought appropriate to shadow the deutschmark. Therefore, we had low interest rates when we should have raised interest rates to contain inflation. By the early 1990s the reverse was the case. When we should have had low interest rates, we maintained high interest rates.

In this context I was somewhat more concerned about one of the Chancellor's asides, when he said that the economic recovery occurred well before we left the exchange rate mechanism. That argument is put about by people who think that it is quite proper for us to re-enter the ERM, as is the argument that the downturn problems of the British economy occurred before we went into the ERM. The latter argument is easily dealt with because we were then shadowing the deutschmark. The problems that emerged in the second half of the 1980s were related not specifically to our entry to the ERM but to the general policy of putting exchange rate management above interest rate management.

The Chancellor referred to the fact that things started to get better before we came out of the ERM. That is clearly the case because, at the beginning of 1992, we began to adopt interest rate and monetary policies—belatedly, by about 18 months, in my view—which started to bring down interest rates. That policy started to have its effect in the summer of 1992—before we came out of the ERM—but it finally clashed and conflicted with the policy of being in the ERM. The whole thing blew up and the first reaction was to put up interest rates to 20 or 25 per cent.—which was not sustainable for very long—and then we came out of the ERM.

The recent pronouncement by the CBI that it would like to get back into the ERM worries me. Sometimes the Government look as if they wish to get back into the ERM as part of their policy of moving towards a single European currency, which is a permanent ERM. If it were thought that that might be the policy, it would call into question the statement that the Chancellor made today that our monetary policy would be fixed according and appropriate to the needs of our own economy. I take great comfort from his saying that monetary policy is to be appropriate to sustainable economic growth without inflation; it all adds up to a single package—together with cutting taxes and focusing expenditure on those who really need it and on the functions that should properly be performed by the state.

Sustainable economic growth is central to that policy. If that is attainable, the Budget will be a magnificent Budget. It sets out its objectives of containing the Budget deficit, of controlling expenditure to what it should properly be and of progressively reducing taxation as a percentage of GDP.

With this caveat, if that is to be the policy—and it is certainly the policy on which we went to the country—I welcome the Budget. I hope that during the course of the debate the Government will remove, once and for all, any further conflict or doubt about the priorities of monetary policy.

The hon. Member for Worcestershire, South (Mr. Spicer) touched on the nub of the problem, that the Budget will be judged by whether it leads to major economic growth. I assume that the hon. Gentleman really meant that that in turn would help reduce unemployment, which is the basic problem. The premise is that a stringent monetary policy will eventually lead to economic growth, and that that will take care of our ills.

The weakness of that argument is that the Chancellor said today that one of the big difficulties—whatever the reasons—is that European economies are currently not doing very well. Approximately 68 per cent. of our trade is with Europe; the remainder is negotiated with the rest of the world. The reality is that we have to trade with Europe. If the European economic situation improves, ours will start to improve.

Unfortunately, that other 32 per cent. of trade centres around the nub of another problem, which is that the United States and its friends in the Pacific region are forming an economic unit. We must bear that in mind and ask the Chancellor and the Government what discussions they have had with the Americans, the Japanese and the Australians about developing markets in those areas. If we are not careful, the expansion that some hon. Members have been talking about could be threatened by the Pacific rim countries on the one hand and Europe on the other. We must be careful about what we say about our allies and partners in Europe and about our trading partners in the Pacific rim countries.

We should also look at who will bear the burden of the tax increases announced in the Budget. No one should shy away from the fact that they are tax increases, despite what the Government say. The people who will bear the burden are at the lower end of the earnings scale. No doubt Conservative Members will argue that they are trying to help pensioners with their problems with value added tax. That help will not be enough, however, and many pensioners will reduce the amount of heating that they use this winter in order to save on fuel bills.

One-parent families will also pay a heavy premium for the problems that the Government have created. There is nothing in the Budget to deal with the homeless.

Those who will be hardest hit account for 12 million people, and they have paid a terrible price for the policies of the Government over the past few years.

Conservative Members heard the Chancellor say that his long-term strategy was tax cuts. Some people would say that it is about time, because for the past 14 years the long-term strategy has been one of tax increases. What we have here is tax increases by stealth.

There is nothing being done about the industrial base of the country. There were no measures or initiatives in the Budget to help companies carry out research and development.

Most commentators agree that one of the problems for the industrial base is that we need to have the best trained young people for technical jobs. Does the hon. Member for Coventry, South-East (Mr. Cunningham) agree that the initiative on apprenticeships that has been announced will provide a credit system through youth training to produce a new raft of apprenticeships? That will be a big contribution to that area, and is something that the trade unions will welcome.

I do not think that the Chancellor spelt out the details of the apprentice training scheme. A wise man would ask to see the details, but it will still not produce the numbers of highly trained young people that the country needs to protect its industrial base. I am sure that the trade unions would agree with me because they have argued for many years about the need to provide the necessary number of quality apprenticeships. The Opposition will consider the scheme once we know about its exact details and the number of people involved.

The Chancellor of the Exchequer has announced that the social security budget will be reduced by £2.5 billion. That cut reveals the true nature of the Government's promise to assist old-age pensioners, who will be hurt by VAT increases and cuts in benefits in the next two years, the homeless and one-parent families.

I notice that the Government have not introduced any new initiative to pump more money into the ailing national health service. The Chancellor merely said that he hoped that the NHS would be more efficient. Depending on what definition of efficiency one chooses to take, however, that could mean that more jobs will be at risk and that redundancies will occur. It does not necessarily follow that that efficiency will increase in relation to patient care.

We also learnt that public sector workers will be subject to a wage freeze, except when there is improvement in efficiency, but once again, that depends on what is meant by the Government's use of the word "efficiency". It may mean that they will receive a small wage increase if they are prepared to sacrifice some jobs. I am certain, however, that their wages will not be increased this year or next year.

The standard spending assessment for local authorities will increase by a marginal 2.3 per cent. We are aware, however, that many local authorities are already wrestling with the problem of providing care in the community out of their limited resources. Those authorities also need extra resources to provide new housing.

The Chancellor also announced that the tax relief for home owners and first-time buyers will be frozen. I have no doubt that the relief offered will be reduced prior to the implementation of that announcement.

When one attempts to judge a Budget, one considers whether the sacrifices have been distributed fairly. Today's Budget has failed to do that. The onus has been placed, once again, on those who are caught in the poverty trap. The Government may say that they will assist one-parent families with childcare. They have failed to recognise that two-parent families also need assistance sometimes, because in our modern society those parents must, reluctantly, both work to make ends meet. This Budget should not be welcomed but greeted with great trepidation. It is difficult to analyse its full implications a mere one and a half hours after the Chancellor has delivered his speech, but I believe that my right hon. and learned Friend the Leader of the Opposition was right when he said that, in the coming months, the British people will become aware of the increased tax burden that has been placed on them. They will realise that it is due to the Government's mismanagement of the economy.

I have always been told that, if one wants to take over a company, it should be one at the bottom rather than at the top, because it is a foil to show off one's abilities. If I were the Chancellor, however, I would not be too keen to take over a company with a public sector borrowing requirement deficit of £50 billion, a balance of trade deficit in excess of £12 billion, and 3 million people unemployed. My right hon. and learned Friend has also had to try to find some magic to keep the recovery rolling. The only bright spot on the horizon, as far as I can see, is low inflation.

In the political and media debate before the Budget, I was disappointed to note that the problem that my right hon. and learned Friend faced was treated as a linear equation based on either increasing taxes or cutting expenditure. The commentators ignored one dimension that is known in the commercial world as "growing the business". I shall talk later about the need to produce more in the United Kingdom. I was obviously delighted, however, by the moves announced by my right hon. and learned Friend to promote smaller businesses, because they are the seed corn from which growth and expansion can come.

In the past, in times of a little local difficulty in our economy, interest rates have gone up, unemployment has gone up, but, at a crucial moment—it normally coincided with an election—down came the interest rates. That meant that growth increased, orders went up and we then did rather well, thank you very much.

That oftsen happened because we found that our major customers in the European Community or the United States had also enjoyed economic recovery. Their economic train began to chug uphill and we managed to hitch back on a few coaches further down. As a result, we were able to reduce our costs by between 10 and 15 per cent., and we did well. That gave a little boost to our economy and everything was all right until prices began to rise, inflation went up once again and we were forced, once again, on a down cycle.

This time, it is different. The core financial position of our customers in the European Community is well known, and we no longer enjoy any advantage offered by a potential upturn in its economy. The United States, however, appears to be coming out of its economic depression or down cycle.

The current circumstances have kept prices down and that gives us, for the first time in many years, the chance to build a stable rescovery. My right hon. and learned Friend has performed a superb balancing act between keeping the fragile recovery going—it is fragile because no one should try to make out that things are booming in the marketplace—and making careful decisions to reduce the PSBR and our indebtedness.

The balance of trade deficit is another matter, and I do not believe that it has been given sufficient attention in the Budget. It is extremely worrying that the recovery has begun with such a large trade deficit, because that could make the recovery short-lived. The Institute of Fiscal Studies has pointed out in its "Green Budget" that benign neglect of the current account deficit could sow the seeds of the next recession. If that deficit continues unchecked, either the United Kingdom's competitiveness—that means volume production—must be boosted or growth cut. That would mean an increase in interest rates. The first option is surely more preferable to the second.

There must be a marked shift towards investment that will result in exports and import substitution. My concern—it is not the first time I have raised it in the House—is that the financial institutions are biased against manufacturing investment. Short-termism seems to rule supreme. That has led to a reduction in the investment we need. Investment against the gross domestic product is at its lowest level for some 30 years. That investment is considerably lower than that made by some of our industrial competitors in the world marketplace.

Within Government, an element of schizophrenia seems to be apparent. We laud the car industry because, at last, we have become a net exporter of vehicles. We no longer import more cars than we export. At the same time, however, we seem to have missed out on some of the opportunities offered by the huge investments that have been made by Toyota, Nissan, Honda and Peugeot, which have helped to produce that beneficial change in our exports.

In the short term rather than in the long term, we must focus our minds on providing more investment. I am talking not about blanket investment, but about specific focused investments. For example, we have fewer computerised machine tools per thousand head of population than any country in the industrialised world. In this country, the figure was around 0.9 per thousand. In western Germany—before it was combined with East Germany—the figure was 2.3. I learned a long time ago that I do not care how broad your back is or how big your shovel is, Mr. Deputy Speaker, but you will never beat a man who is driving a JCB if you want to dig a trench. We must compete in the modern world.

One needs a big garden as well.

I accept what my hon. Friend says.

Nevertheless, we must have investment in computerisation if we are to compete. I welcomed the increase in capital allowances in the last autumn statement, but I felt that the state of British business at that time was that companies had turned their attention away from investment towards short-term survival. After the restoration of corporate viability, companies are more capable of coming forward with investment plans than for some time. I could produce figure after figure to support that point.

I return to the announcements about small businesses, which are some of the more positive and welcome aspects of the Chancellor's speech. My right hon. and learned Friend correctly identified three areas of difficulty—the burdens of regulation, external finance and cash flow. The measures which he announced went a long way to help in all three areas. Moving up the level for exemption against VAT to £45,000 will help many small businesses, and removing the cost of the audit has been asked for by small companies for years.

The message I would send to small businesses is that that must not be used as an excuse not to have proper financial accounting. I have been talking to three of the major clearing banks in this country, and all three came up with the same figure. The banks said that, of small businesses with a turnover of between £250,000 and £1.5 million, only 8 to 10 per cent. carry out monthly profit and loss accounts. As someone with a little knowledge of business, I find it staggering that anybody can try to run a company without knowing every month how it is doing. That is absolutely beyond comprehension.

The Chancellor has moved to allow people to reinvest and put moneys into other companies when they have decided to sell up or move away from their original activity. The raising of that level to £750,000 shows a realistic recognition of the amounts of money needed to be put into industries and businesses today to make them survive.

I will now mention the replacement of the business expansion scheme. The scheme was introduced to give finance to businesses, and, with the benefits to investors, went some way to compensate for the risks in small firm investment. However, as with most fiscal measures during that time, the scheme has lost much of that original aim.

The extension of the BES to rented housing accommodation in 1988 provided a vehicle for relatively low-risk, high-return investment. That was well away from the original aim of the BES. Therefore, I welcome what my right hon. and learned Friend has done with the enterprise investment scheme, and particularly with the block on property.

We must put money into ideas which will produce things for this country, and not just into the bricks and mortar. We must have the basis for growth and development. While the building is a part of that, if we do not put money into machinery and ideas we will fail against our foreign competitors. The idea of the creation of a venture capital trust is bold and imaginative. I would love to see the details before I make any final judgment, but the idea behind it is superb, and if it will encourage investment in smaller businesses, it is to be welcomed.

The payment of debt has been mentioned time and time again. Small companies are worried that their major customer is not paying them on time, and the major customer can use that situation cynically to its advantage. The small company can do nothing about it. If it criticises its main customer or takes action against it, the small company loses, possibly for ever. My right hon. and learned Friend's remarks about the charging of interest and other measures is to be welcomed.

When Ministers assess how to bring that into law, they must ensure that there is as little possible activity as is required by the small business. Otherwise, the business would have to initiate the action, and could lose that customer—the very reason why small businesses do not take action under the existing legislation. The proposal is marvellous, but it must protect the small business man who may be ripped off by a larger company.

With the exception that I have mentioned of the moves to tackle the balance of trade, I think that my right hon. and learned Friend the Chancellor has succeeded magnificently in the difficult balancing act of reducing the PSBR and keeping the recovery rolling. On that, he is to be congratulated.

It is with some diffidence that I rise to speak so soon after the Chancellor has sat down. Clearly, I have not had an opportunity to read the lorry-loads of paper which go along with a Budget. I do not have the advantage, as did the Chancellor, of having a glass of amber-coloured liquid in front of me to refresh myself. No doubt the Chancellor was just enjoying a quiet celebration of St. Andrew's day.

After the media flurry about the cost of cigarettes and wine has subsided, the question which people in Scotland, in Wales, in London and particularly in my constituency will ask is, "What will this Budget do about mass unemployment?"

After one has stripped away the gimmicks and the flourishes, we have been presented with yet another Conservative Budget which fails to make bringing down unemployment a priority. Instead of making that the centrepiece of their strategy, we have boasts. One of the Treasury handouts which I have had time to read claims—immodestly, I believe—that the Budget completes the job of sorting out public finances.

The Chancellor himself said—again immodestly, with echoes of Mr. Toad—that the Budget would "sort out" the public sector borrowing requirement "once and for all". I put it to those on the Treasury Bench that those boasts will come back to haunt them. It is not clear from the Chancellor's speech that there are enough concrete measures in the Budget which will deal with the burden of the PSBR.

Unemployment is an issue which haunts every family in the land. Every estimate suggests that this country will still have 2.5 million people unemployed at the end of the century. Who could forget those posters at the time of the 1979 general election featuring the long queues of unemployed people? The posters said that Labour was not working. Who could forget the Tories wringing their hands about unemployment figures of 1 million at the end of the 1970s? Yet we will see out the century with levels of unemployment more than double those which the Government inherited, thanks to more than 14 years of Tory economic mismanagement.

Sadly, my constituency has the sixth highest level of unemployment in the country, with the present rate being 23.2 per cent. More sadly, that is an under-estimate. I know for a fact that women workers and young workers have opted out of the job market altogether, and that they do not register.

The figures for Hackney, North, in common with the figures from all over the country, have undoubtedly been presentationally massaged by more than 30 changes over the lifetime of the Government in the statistical methods of collecting the unemployment figures. If I were a Minister, I should not be so quick to rush on to television to talk about unemployment figures coming down. Any set of figures can come down if they are tinkered with 30 times in 10 years. Hackney, like many other parts of the country, is not following the overall trend and, sadly, unemployment continues to rise. Even when, by jiggery-pokery, the Government fiddle the figures to bring the overall number down, the national picture shows that more than one third of the unemployed people whom even the Government are prepared to admit exist—that is, more than a million people—are long-term unemployed. It also shows that there are 750,000 unemployed young people.

It is worth reminding the Government of the real cost of unemployment, because they seem to forget it. There is a financial cost, in that we spend £350 million on benefits. When the Government talk about public spending, and about taking money away from the disabled to deal with the public sector borrowing requirement, do they understand what the real basis of our spiralling PSBR is? It is the cost of maintaining the unemployed.

The Government sometimes seem to get the argument back to front. They seem to think that the way to cut the PSBR is to cut the money we give the unemployed, whereas the only long-term decent method of cutting the PSBR is to cut the number of people who are unemployed. For as long as I have been in Parliament, the Government have refused to face that issue.

There is also a social cost to unemployment. Nobody believes that one can entirely dissociate the issue of rising crime from that of mass unemployment. No one suggests for a second that, simply because someone has no job, he will go out and commit a crime, but the correlation between areas of high unemployment and areas of rising crime are too obvious to miss.

It is odious—to use one of the Prime Minister's new words—to see the Home Secretary strutting around talking about how he will build more prisons, put more young people in jail for longer and make prison conditions tougher. It is odious to see him playing the law and order card ruthlessly, when he knows that, if one group of people bears the responsibility for rising crime and the mass unemployment that underpins it, it is the Government.

Unemployment also has a cost in terms of the quality of people's lives. Fear of unemployment affects every community in the country. Perhaps during the 1980s people in London and the south-east said, "Unemployment may be affecting coal mining areas, Scotland, Wales and the north-east, but at least we are experiencing a boom." But in the past 18 months, the chickens of Tory policy have come home to roost in the Tory heartland of the commuter belt, of London and of the south-east.

In the London borough elections next spring, the Government will pay a price for the extent to which unemployment has affected London, the south-east and the rest of the commuter belt, as it did not in the roaring Thatcher years during the 1980s.

I believe that no single factor acts to depress the housing market and growth more than the fear of unemployment, yet in the Budget, as in a whole series of Budgets, the Government refuse to make fighting unemployment a priority. Instead, we get gimcrack, gimmicky schemes that take up much time and space in press releases and give the Government something to say, but which do little about unemployment.

Let those of us who were in the Chamber in March cast our minds back to the schemes announced by the dear departed right hon. Member for Kingston upon Thames (Mr. Lamont), which were supposed to reduce unemployment. The right hon. Gentleman was so desperate to have something in his Budget that seemed as if it referred to the unemployed that he dragged in schemes that were really matters for the Department of Employment.

The educational allowance scheme was trumpeted in March. What has happened to the 60,000 places that were promised? Ministers tell me that, so far, only 5,000 people are participating. In the March Budget, we also heard about the new community action programme, and were told that 20,000 places would be handed out. What has happened so far? Only 1,200 people are participating. What has happened to the pilot schemes for the long-term unemployed, about which we heard so much in March? They are only just up and running.

The presentation of those schemes and their value was limited. Shoehorning them into the Budget statement was extremely cynical. The seriousness of the Government's commitment to the unemployed is restricted entirely to window dressing schemes which, six months after the dear departed former Chancellor announced them, are hardly up and running.

This year we have been told about more schemes and more window dressing. There is to be a two-week restart course, and even "extended" community action—although even the places promised in March have not been filled. There are to be higher levels of skills training, career development loans, the job finders grant, and job finders workshops. There is to be caseloading—whatever that means.

Those schemes, like the schemes announced in March, like last year's schemes and the schemes before that, are mere window dressing. They achieve little in terms of affecting long-term unemployment; they are simply a public relations device so that the Government can be seen to be doing something for the unemployed, whereas the reality is that the long-term trend, especially for people who have been unemployed for more than a year, and in relation to the structural unemployment in communities such as mine, the long-term trend continues to rise.

Let us not waste any more time on the schemes that have been exposed as the merest cynical window dressing. What is the Government's real answer to unemployment? They must have given it some thought; I do not want to suggest that they have given the matter no thought. To find the Government's real answer to the problem of unemployment that is haunting every family in the country, we must pluck out a phrase from the Chancellor's speech. The right hon. and learned Gentleman talked about the importance of a flexible and deregulated labour market.

What does that phrase mean? The Economic Secretary to the Treasury and the Government Whip are laughing; they know what it means, and they are fortunate indeed that it does not apply to them. It means a low-skill, low-wage labour market with no security and no job protection. In recent weeks, we have seen the Secretary of State for Employment, that well-known Christian Democrat, fighting off the other 11 European states' modest efforts to offer a level of protection to low-paid workers.

As we approach the year 2000, the Government present the British people with the notion of the British economy competing with Japan, Germany and the economies of the Pacific rim on the basis not of training or skill but of a low-skill, low-wage, insecure, unprotected labour market. That is how they want to get people—or, at least, some people—back to work, at the very bottom of the employment pyramid.

If what the hon. Lady says is true, why does 40 per cent. of the inward investment in the EC arrive in this country?

Precisely for the reason that I have explained. I am grateful to the hon. Gentleman for his intervention; it is precisely because what I am saying is true that we get the inward investment.

Labour costs in Britain are lower. Car workers in Britain cost 40 per cent. of what car workers in west Germany cost. I have never spoken to the hon. Gentleman before, and I do not know his background, but does he really believe that this country has any long-term prospect of competing with Germany, Japan and the Pacific rim on the basis of low wages and low skills? That idea does not present any long-term prospects for this country. The hon. Gentleman should go back to his constituents and tell them, "I have seen the future, and it is a future of low wages, short contracts and unprotected employment." They will thank the hon. Gentleman for that by lowering his majority.

I do not want to be entirely unfair to the Chancellor. There is one thing in the Budget for which I would like to give one cheer—the announcement of the child care allowance—although I have yet to see the details of it. I am a cynic. I dare say that, when those who will benefit from the allowance cut it up, they will have lost money in all sorts of other ways in terms of the value added tax on fuel and so on.

However, the principle of the allowance—it is an important one, and I welcome it—is that the way to get single parents off benefits and into the job market is to offer them some help with child care. But the way in which the allowance is worked out in practice is an entirely different matter.

The Chancellor began his statement by boasting about how he had solved the public sector borrowing requirement once and for all. That cannot be true. That claim places far too much weight on spending cuts which have yet to be specified. The proof of the pudding of the Budget statement will be in the eating. The balance of getting public spending under control relies too heavily on public spending cuts. We will have to see those spending cuts, and we will have to see whether the Government can get them through the House.

High unemployment is a tragedy not simply for those who are unemployed but for the young people leaving school with no prospect of ever getting a job, and skilled men in their 40s and 50s who are being made redundant and know that they will never work again.

Unemployment is not simply a tragedy for those who are enduring it. It is also a tragedy and a serious matter for the economy of this country, because growth and a sustained upturn will never be achieved unless the human capital of this country is maximised. However, that human capital is not maximised by condemning millions of people to long-term unemployment. For many years to come, we will pay the price economically and socially for the mass unemployment of the Thatcher years.

I listened with great interest to the Chancellor's presentation. He must be congratulated on the bravura and flourish with which he made his speech. Nonetheless, when all the fanfares have died down, I am waiting, the people of Hackney are waiting and the people of Britain are waiting for a Government who will finally, after 14 long years, put a return to full employment on the top of the political agenda.

One of the problems that Tory Members always face in dealing with Labour Members' speeches is that, when we ask them how on earth they would get from here to Edinburgh, they always say, "If I were going to Edinburgh, I would not start from here". The difficulty is that Labour Members are genuinely reluctant to face the main strategic problems of the Chancellor and his predecessors. Indeed, if Labour Members had been lucky enough to win the general election, they would have faced the same problems.

My right hon. and learned Friend the Chancellor presented a Budget which is not the Budget that he would have chosen to present in a perfect world. However, he has to deal with the real world and real circumstances and, as one would expect, he has done so with characteristic courage and integrity. We are fortunate that the Chancellor and, indeed, the Cabinet—I am proud to include Cabinet members and their collective responsibility—faced up to many of the problems which they immediately faced and introduced a package which is creative and is genuinely designed to address many of the short-term difficulties. But it also lays the basis for the longer term and for much more sustainable achievements in our economic fortunes.

I look forward to the day one year hence when my right hon. and learned Friend, as a result of what he has been able to do this afternoon, will be able to present a second Budget which builds on today's Budget and which is smore in keeping with the sort of Budget that it would have been his ambition to deliver in a more perfect world. The hon. Member for Hackney, North and Stoke Newington (Ms Abbott) laid down the yardstick by which she would judge the Budget—what it does for unemployment in this country. I respect the impulses that led her to argue and analyse exactly as she has done.

When I came to the House more than a decade ago, I had the highest level of constituency unemployment. That is no longer the case, or anything like the case. At that time, we had structural unemployment in Corby and east Northamptonshire which meant that, whatever the national unemployment level, unemployment in that area was always significantly higher than the national average. Today, we have reached the point at which unemployment in the area is fairly consistent at 1 per cent. to 1.5 per cent. below the national average. Of course, it is still too high, but I draw comfort from the fact that unemployment has fallen by 6 per cent. in the past year. The way in which I judge the Budget is that more of my constituents are likely to find work next year than has been the case in the past year.

I agreed with my hon. Friend the Member for Worcestershire, South (Mr Spicer) when he emphasised the question whether the Budget would assist in delivering higher sustainable growth in the future than has been the case recently. I think that it will do so. More of my constituents will get jobs as a result of that sustainable growth, and they will benefit correspondingly from it.

Matters that are important to my constituents and those of all hon. Members lie substantially beyond my right hon. and learned Friend's power. Above all else, it is absolutely essential for the sustained revival of economic activity in this country that we have sustained growth in world trade. In the past 250 years of British economic history, there has been no period when the British economy has prospered against a background of decline in world trade. If we are to prosper, it is absolutely essential that there is a robust recovery in world trade because so much of our economic activity is involved in international trade. However, one cannot be too sanguine that that is about to happen.

Resolution of the problem of the general agreement on tariffs and trade is of considerable importance to this country and should never be overlooked. I welcome the measures introduced by my right hon. and learned Friend which will encourage trade with countries in the Pacific rim and with Asia. Of course, European markets are likely to remain the most important markets in the foreseeable future, but there is no doubt whatever that the expanding markets in the world which offer opportunities for our business men, merchants and entrepreneurs are in Asia as well as in Europe. The message needs to go out loudly and clearly that, if businesses wish to prosper, they must prosper not only here but abroad. By "abroad", I mean not only western Europe but the burgeoning dynamic markets in the east.

I welcome many of the measures announced by my right hon. and learned Friend. I strongly support his announcements on local authority expenditure for next year. Even a 2.3 per cent. increase in the money that local authorities can spend next year on this year's planned target—not their actual expenditure—is still on the generous side. Since May last year, a number of large spending authorities have been on a financial binge, and wish to continue that binge. That has been happening in Northamptonshire, and it simply must stop.

I welcome the fact that my right hon. and learned Friend underlined the Government's willingness to use their capping powers to ensure that spending targets for local authorities are not undermined by local authorities that feel that they are entitled to go on a spending binge, spending not only council taxpayers' money but Government taxpayers' money.

The controls exercised by the House of Commons over how centrally collected taxes are spent by local authorities are hopelessly inadequate. A much closer interest needs to be taken in how local authorities spend their money, 50 per cent. of which often comes not from what they raise locally but from what the Treasury gives them. That Cinderella area of public expenditure has been overlooked for far too long.

A scandalous report has been issued in Birmingham saying that taxpayers' money allocated for education through Treasury payments to the city of Birmingham has not been spent on education as most parents, governors and teachers in Birmingham schools would have wished, but has been used to develop exhibition facilities and goodness knows what else. As a result, we now learn that Birmingham has some of the worst academic results of any education authority in the country.

It is wrong that a large authority like Birmingham can receive money from my constituents who believe that it will be spent on education and then discover that it is being spent on something else. That is happening in countless local authorities, including some in Northamptonshire. I hope that the Government will be firm in making it plain to all local authorities that the 2.3 per cent. allowance on this year's planned spending rise is the limit and that capping powers will be used to ensure that it is held.

I welcome the increased contribution to the national health service. All our constituents not only want that but need it. The increased expenditure on education will also be important. I was astonished at what the right hon. Member for Berwick-upon-Tweed (Mr. Beith) said about grant-maintained schools. It is right and appropriate that the Government should seek to make available more and more money to the grant-maintained sector, knowing that it is usually better spent than any money given to local education authorities.

I have many grant-maintained schools in my constituency, most of which have become grant maintained not least because of decades of neglect by the local education authority in Northamptonshire, whether it has been under Labour or Conservative control. They welcome their increased freedom to manage their schools and assets in a much more sensible and practical way. I hope that when the allocation of money to the grant-maintained sector is broken up, the Secretary of State will not overlook the important claims of many junior and infant schools that are now becoming grant maintained for capital allocations over and above those given to the secondary school sector. I hope that successive Budgets will ensure a progressive flow of funds into that sector and that the Opposition will get the message that grant-maintained schools are popular. Not a single grant-maintained school has had reason to regret going grant maintained. I have considerable experience of that sector and know that most of them richly welcome the opportunities given to them.

I very much welcome the schemes for expanding the unquoted companies sector. It is an important measure. Small businesses have taken a serious beating during the past four or five years and everything that can be done to encourage the revival of small businesses should be welcomed, and I welcome the raft of measures put forward by my right hon. and learned Friend. What he said about the late payment of debt is also important, but I wish to underline a good point made by the right hon. Member for Berwick-upon-Tweed. Some of the worst payers in this country are Government Departments. Some of my constituents who work for Government Departments complain week after week about every imaginable excuse made by Government Departments about why they should not pay their bills. The matter will not be taken seriously unless and until the Government are prepared greatly to improve the financial discipline that they exercise and ensure that small businesses in particular receive priority payment rather than endless excuses about why money cannot be paid.

I welcome the schemes to give people an incentive to get back to work. What is needed is a much greater emphasis to encourage people to work. This afternoon some useful steps were taken, most of which have been called for by the Opposition, although the specific detail may not have been what the Opposition Whip, the hon. Member for Wolverhampton, South-East (Mr. Turner), wanted.

The House knows that I am among those who are totally opposed to the extension of the VAT base. I am as angry today as I have been at any stage in the past six or seven months that my right hon. Friend the Member for Kingston upon Thames (Mr. Lamont) should have made such a proposal. I welcome the fact that the Chancellor has decided not to go further in extending the VAT base. Any idea that the VAT base can now be extended at the standard rate of 17.5 per cent. is utterly impossible. During the past few months there has been much agitation in the country and the House among my right. hon. and hon. Friends—

Will my hon. Friend give way?

Will my hon. Friend allow me to persist in what I have to say before he intervenes?

There has been much agitation about the amount of compensation that will be allowed. I pay tribute to my right hon. and learned Friend the Chancellor for introducing a package of proposals for compensation which is much more generous than anybody in the House expected and certainly more generous than I expected. At no stage during the past few months have I advocated a compensatory package because I should have preferred VAT not to be levied on heating and cooking. However, I pay tribute to all my right. hon. and hon. Friends who have persistently and vigilantly brought home to my right hon. and learned Friend and other members of the Government the fact that the proposal was not sustainable without handsome and generous compensation.

It is usually estimated that VAT at 8 per cent. would cost an average household 85p a week and, at 17.5 per cent., approximately £2. Although it must be said that, on those figures for an average household—many households are not average—there is not total compensation, there is all but total compensation for those who receive it.

I welcome the fact that compensation has been extended to all pensioners. One of the matters that made me so angry about what was done in the Budget in March was that my right hon. Friend the Member for Kingston upon Thames did not seem to appreciate that those just above the benefit level, many of whom had seen a decline in the income from their investments because of the decline in interest rates, would be the worst affected by the introduction of VAT in that way.

My right hon. and learned Friend has gone almost as far as anybody could ask to compensate pensioners, including those above the social security thresholds, for the introduction of the tax. That is not to say that all those who deserve it will receive compensation. Of course, there will be individuals who will fall outside the package—that is one reason why I have never regarded a compensation package as the best answer to the problem.

There will also be deserving organisations, frequently charities, that will be hard hit by the introduction of the tax. As the House has heard me say on many occasions, organisationswhich raise money in modest circumstances will find the extra tax a heavy burden to bear on top of the many other fiscal burdens of recent years.

It would be wrong of me, in again registering my hostility and anger at the extension of VAT to heating and cooking, not to recognise that my right hon. and learned Friend the Chancellor has introduced a remarkable package that will go a long way towards dealing with immediate difficulties. I hope that my right hon. Friend the Secretary of State for the Environment will ensure that the extra energy conservation measures that have been announced will be directed to houses inhabited by local authority tenants and old houses in the private sector, in which heating costs are above average.

We have talked throughout about average heating costs. We should recognise that, although there may be one or two that meet the average, homes will digress substantially from the average. I have seen Graham Gooch score many runs as a batsman at the crease, and he has an average of 44.61, but I have never seen him score that number of runs and I doubt whether anybody else has.

The announcement will go a long way towards meeting the legitimate complaints about the matter of so many people. Although I am unable to award my right hon. and learned Friend the Chancellor the highest accolade, as I would have wished, I am prepared to pay handsome tribute to his Budget. It will be recognised throughout the country as a great help.

The Budget is one of the meatiest that has been presented to the House. It may turn out to be one of the most important Budgets that has been introduced at this stage in our national and economic history. My right hon. and learned Friend the Chancellor deserves the congratulations of the House for his courage and integrity in introducing the proposals. I look forward to supporting him and his Budget proposals in the Division Lobby.

When the Government drew up the slogan "back to basics", they gave us a couple of opportunities. The Opposition can use it to judge the Government's lack of aspiration for the country. It also gives us a good handle and measure by which to judge the policies that they introduce in the House, including the Budget. When we use the slogan "back to basics" to judge the Budget and the tax system that is to be introduced, we should ask two questions. First, are they fair and is the overall system in which they will operate fair? Secondly, do they tackle the real issues that face the country?

I was astonished that Conservative Members cheered the Chancellor of the Exchequer when he sat down. There will be a £6 billion increase in the tax burden, to be slid in over a three-year period. If one takes out the concessions to business in the personal sector, there will be a £7 billion increase in the tax burden. It will be slid in over a three-year period, but nonetheless there will be a £7 billion tax hike. That increase follows the increases in VAT and in national insurance contributions that were announced in the spring Budget. Those are the policies of a Government who at the last election promised decreases in tax year on year.

A lot has been said about the compensation that will be applied to the introduction of VAT on fuel. I was confused by what the Chancellor of the Exchequer said on the matter, and I am not still clear about it. He announced some figures that would apply to individuals, and I did not think that those figures were generous or would cover the total cost—

Oh.

The hon. Gentleman is a clever chap—he can read the bundle of papers before other hon. Members make a speech. I have not read the whole bundle. The figures are hidden somewhere in the papers, but I have not read them yet, because I have been listening to the debate.

The Chancellor gave us some figures that I did not think amounted to full compensation. He then gave an overall figure for the cost of the measure—£1.25 billion. If that figure is correct, he has almost fully compensated some groups of people for the VAT.

I am still confused about that, and perhaps when he sums up the Minister will clear up the issue. If the second figure is correct, it sends a clear message: that, having heard about the threatened imposition of VAT on fuel, pensioners organised themselves and "frit" the daylights out of some Conservative Members. If they are to be almost fully compensated, as the second figure would suggest, that is the reason. If that is so, perhaps the pensioners have something to teach other people who will suffer as a result of VAT. Families will be on the receiving end of that appalling increase, even if the pensioners will not.

Is it not right that my right hon. Friend the Member for Kingston upon Thames (Mr. Lamont) stated as long ago as the spring Budget that help would be given to those in need? Has not the Labour party used its fertile imagination to whip up fears among pensioners, the poor and the weak in society over the past six months?

I seem to recall that, week on week, Conservative Members were reluctant to respond to questions asked, particularly by the Labour Front-Bench team, about whether or not people would be fully compensated. Conservative Members were not prepared to answer that question during the two by-elections at which the subject was an important issue.

If the Government have now decided to give compensation, and the hon. Member for Vale of Glamorgan (Mr. Sweeney) wants to suggest that they made that decision a long time ago and the fears were all a figment of people's imagination, one wonders why the Conservatives suffered such pains during the two by-elections, and have continued to do so during the past few months.

People should recognise that, if the Government have been obliged fully to compensate one group of people, they have done so as a result of the pressure brought to bear. Even if that is so, the compensation will not solve the problems for many other people. As the hon. Member for Corby (Mr. Powell) said, there is no such thing as the average household. There will be no such thing as the average fuel bill.

People with decent houses and decent insulation, with double glazing and good heating systems—in short, the better heeled—will do all right. But people living in poorer accommodation, with less efficient heating systems, in no fines council houses and the like, will find, even if in general there has been full compensation, that they are pounds out of pocket.

Another worrying issue is that the fuel bill money has now been included in pensions, so it will be steadily eroded as time goes by. The Government have been adept at cutting by stealth. Since they came to power, the basic state pension has become worth less compared with average earnings. I have no doubt that the Government will try to claw back the compensation package as soon as they can.

Is not the hon. Gentleman's point about energy efficiency dealt with by the expansion of the home energy efficiency scheme, which already helps 200,000 poorer households and which in future will be doubled? I do not know whether the hon. Gentleman saw a recent announcement in answer to a question that I tabled to the effect that in future householders will not have to make any contribution to the scheme. That is a genuine help for all pensioners and poorer families.

Given the number of deaths in the winter from hypothermia, the scheme will need a tremendous expansion. Let us hope that that takes place—

It is doubling.

Talk of percentage figures in these terms will not be much help. Let us hope that people get the assistance they need.

I come back to the £6 billion tax increases—£7 billion when we discount the reductions offered to the business sector. On whom will the burden fall? I have no doubt that the measures chosen will fall on the middle-earning and lower-earning people of this country, just as they have done time and again before under the Conservative Government. In the 1987 and 1988 Budgets, billions of pounds were dished out to top earners, £2 billion in a single Budget—that of 1988. The balance of tax paid has shifted away from the better-off and towards those on average and below average earnings.

The Government try to tell us that they are a Government of low taxation, but between 1979 and 1991–92, the burden of taxation on an average family rose from 35.2 per cent. to 36.7 per cent. Meanwhile, the burden on the top tenth of the population decreased considerably, while for the bottom tenth it rose considerably. If we— discount the Chancellor's sleights of hand in this Budget, we will find that it means yet another shift away from the top, down to the middle and bottom end of the scale.

I was told that last year's Budget was neutral, as it impinged across the social scale. I said that it was not; I was assured repeatedly that it was. Now research has shown clearly that that Budget was not neutral at all. It imposed a 3 per cent. increase in taxes on bottom earners, a 1.5 per cent. increase on top earners, and a 2 per cent. increase on the average person. So the Government's claims were patently untrue. Those on lower and average earnings paid for those on higher earnings.

Will the hon. Gentleman acknowledge the contents of a leading article in The Sunday Times of 7 November, which clearly stated in great detail that the percentage of income tax revenue paid by top earners has risen in almost every year in the past 15 years, and that top income earners are paying a far larger proportion of income tax revenue than they did before rates were cut?

People can do wonderful things with statistics, if they choose their words carefully. I note that the hon. Gentleman talked about income tax, not tax. We are talking about a period when these top earners lined their pockets to such a tremendous extent that it is only to be expected that they paid a couple of pounds more in income tax.

But the burden of taxation has irrefutably moved down from top earners to the middle and bottom earners, if we take into account the whole basket of taxation. I can take the hon. Gentleman through the figures afterwards if he wants to challenge that. I am astonished that he should attempt to deny it. Surely he knows deep down that what I say is true—indeed, his reaction to what I am saying seems to show that.

The other problem is whether, in view of the fundamental economic problems that face our country, the Chancellor has done anything to put the economy right. Despite £110 billion of North sea oil revenues during the Government's period in office, in this last recession, 900,000 manufacturing jobs have been lost. The manufacturing sector now provides only one fifth of our income—it was one third when the Government came to power. We have the lowest growth rate of GDP and output of any Organisation for Economic Co-operation and Development country apart from Canada.

This problem needs solving. The Government have implemented some of the measures asked for by the CBI and by business. There are some small forms of encouragement for business in the Budget, but the Government have refused to give the necessary capital allowances on first year investments asked for by the CBI and the Engineering Employers Federation. If there is to be proper investment in manufacturing industry, it is essential to provide such incentives, yet the Government have failed to do so.

There have been announcements of cuts in housing and in infrastructure investment. The west coast main line work has been announced. The hon. Member for Corby (Mr. Powell) said that Opposition Members always say, "If you want to go to Edinburgh, don't start from here." It is a good job that we do not travel to Edinburgh by the west coast main line, because we would never get there.

I make a prediction: this is the last day of November 1993, and I have watched the Government announce infrastructure proposals again and again, but they actually take place after the 10th or 12th time they have been announced. There is thus half a chance, given the Government's record, of getting some investment for the line in about a decade.

What about the fast rail link? The privatisation proposals will deprive the rail system of investment. The Government are effectively ensuring that no one else will invest until we have sorted out the mess. We are also cutting the roads programme. Our manufacturers have to exist on the edge of Europe, and they have to have access to its markets. To solve our economic problems, we must have a good infrastructure and transport links, but the Budget does little to bring those things about.

Cuts in housing will be inevitable. Every evening when we leave this place, people shout at us and try to sell us copies of The Big Issue. Housing is a big issue for those who are affected by the lack of it, but it is not one of the Government's political priorities, because they have effectively announced further housing cuts. That will ensure the continuation of homelessness, which, if anything, will be exacerbated.

There are 7,000 unemployed people in my constituency, and 20,000 people are out of work in Coventry. In the Foleshill ward in my constituency, unemployment is 37.7 per cent. Nothing in the Budget will significantly reduce that complete and absolute waste of human resources or cure the social problems that inevitably flow from it. That is a tragedy.

When we ignore the sleight of hand and look at the figures, we see that, over three years, the Chancellor will slide in a huge tax increase. He proposes real and significant cuts in public expenditure which he has not yet detailed. He spoke about having settled the public sector deficit, but he has not detailed or sorted out those cuts.

The Budget will not tackle our problems. It builds on the sins of the spring Budget. The betrayal of election promises has been furthered by thisBudget, and the failure to settle our underlying economic needs is a betrayal of our national interests.

My right hon. and learned Friend the Chancellor performed not only the difficult task of delivering the Budget while surrounded by many people advising him on what or what not to say, but coped with the extra burden of the public expenditure round. I congratulate him on doing that with such style and elegance. It must have seemed a fearsome hill to climb but I understand the Government's desire to move the two areas together. I am slightly concerned that we may not have given ourselves enough time before setting the Budget to see some of the implications of our spending round. However, I am sure that our skilled Front-Bench Treasury team will have considered that.

The Budget must be examined in the context of consistent Conservative policy, the aims of which are security, self-reliance, enterprise, personal responsibility, securing sound public finances, low inflation and sustained economic growth. I was glad to hear the Chancellor stress again low inflation and sustained economic growth. Those themes were clear throughout his speech.

The Chancellor has inherited lower inflation, lower interest rates and falling unemployment, but he has also inherited a PSBR of £50 billion. He has had to perform a delicate balancing act because he must nurture economic growth, which is still delicate, while bearing down on the excessive PSBR. As Conservatives know, failure to control the PSBR will ultimately lead to higher taxation of the wealth-creating sector and, of course, that will lead to the problems that existed under the Labour Government in the 1970s.

The backdrop to all the arguments about taxation and expenditure is that the Chancellor has already been passed from the March Budget some £10.3 billion of tax increases, of which £6.7 billion are due to come into play in April. My right hon. and learned Friend deserves great credit for bearing that in mind throughout his speech. He knows that any great increase in taxation would damage the rather delicate economic growth.

The fact that the economy is becoming stronger has much to do with the fact that we have left the ERM. I do not wish to enter into discussion about whether growth occurred before or after we departed from the ERM, but my view is that growth was greatly assisted by departure. It will not surprise hon. Members to know that I am against exchange rate mechanisms. Events from the time of the gold standard through Bretton Woods into the ERM have demonstrated that such mechanisms end in tears. Government policy post our departure from the ERM has been carefully monitored and gauged, and the Government are to be congratulated on sticking to their original aim of retaining domestic monetary figures as the main focus

This morning's issue of The Financial Times said that we did not really need to worry too much about money in circulation because M0 was showing a growth of some .5.3 per cent. M0 is a bad gauge of money in circulation. A better one is M4, and we should be worried that M4 is still not at the level at which it should be at this stage in the cycle. It could be higher, and in that context it is worth bearing in mind the potential for further cuts in interest rates.

I unreservedly welcome the Chancellor's announcement of the reduction in the PSBR of £5.5 billion in 1994-95, rising to £7 billion in 1995-96 and £10.5 billion in 1996-97. Those are significant reductions on which I congratulate my right hon. and learned Friend. I welcome the fact that income tax allowances are unchanged. Many people were worried about that. I understand the reason for imposing duty on air passengers, which will be £5 within the European Community and £10 for journeys to other areas. Most hon. Members will welcome that because it brings us into line with many other countries, as those who travel will know.

I am slightly concerned about the 3 per cent. levy on insurance premiums because it sends the wrong message to the insurance industry. We are trying to get that private sector industry more involved in providing schemes for people. Perhaps the Government will think further on that in the coming year.

I am also a little concerned about our approach to the married couple's allowance. I know that it is in line with previous changes to the tax policy, but in view of our concern about single parents we should remember that such an allowance could have been retained at a slightly higher level.

I welcome all the business aspects of the Budget. The change in the VAT threshold to £45,000 is an excellent move. I welcome the 1 per cent. reduction in national insurance for those earning under £200 a week and a commitment to extending the 20p band of income tax. I was pleased to see a reform of the requirement for the audit of small businesses. That will remove a great burden from many small businesses in my area which say that the requirement has been excessive. I unreservedly welcome the increased export credits. Those will be well received by some larger companies which rely greatly on exports.

The most important part of the Budget speech was the part that dealt with VAT on fuel. All hon. Members should welcome that announcement.

My right hon. and learned Friend has put together a generous package, more generous than I expected and probably more generous than many Opposition Members anticipated. It may seem like a small gesture but £2.5 billion over three years starting in 1994 before VAT comes in will mean a lot. Income-related benefits will be up by 3.9 per cent. in 1994 and will mean about £4.3 per week for a couple with two children on income support. I am surprised that I have not heard more of a welcome for that from the Opposition today.

Looking through the great tome of information that is available, I am interested to see the areas that my right hon. and learned Friend has covered for people not on income-related benefit. For example, a single pensioner not on income-related benefits in April 1994 will see his benefit increase from £56.10 to £57.60—£1.50 per week. In April 1995 that will rise by a further 50p a week and in April 1996 by 30p a week.

I was particularly interested to see that a pensioner couple, again not on income-related benefit, will see their benefits increased from £89.80 to £92.10. In April 1995 that will rise by 70p per week and in April 1996 by 45p per week.

Given the circumstances, that is generous, and my right hon. and learned Friend is to be applauded for that. I was somewhat concerned about where he would get the money for all that, but the fact that he has allowed himself to go beyond income support is a significant move.

I come now to the spending side of my right hon. and learned Friend's announcements. I am particularly interested to see that the original targets set for public spending are to be reduced. That will send just the right message to the financial markets—that the Government are determined to reduce the PSBR and will do something about it.

The public at large are quite within their rights to ask why, when those running businesses have had to cut their staff and seek to save money in a number of areas, the public sector has continued throughout the recession to take on an ever-growing number of new employees.

I recently made some quick calculations to discover the difference in the number of public sector employees in 1979 compared with 1993. After removing all the companies that have been privatised and the agencies that have left the public sector, there was a significant increase in the public sector of more than 500,000 employees, and that at a time when the private sector has had to reduce its number of employees. Therefore, more needs to be done in this area. It is significant that market testing has been extended, but can it not be applied and extended even further?

I note today that under the spending pledges there are real increases for the Department for Education, the Department of Health and the Home Office. But that should not stop them examining carefully again and again whether they need quite so many people to administer their funds. It is important for them to ensure that the public understand that they too will be examining their budgets in the way that any private company would.

I have one small concern with regard to the defence budget. We did not hear much about that today, but the defence budget has been significantly reduced, due largely to changing international circumstances, and it continues to be reduced. I am anxious that the Government should not treat the defence budget as a milch cow, just because it appears to be the easiest to reduce. We must take into account our international commitments and the way in which we structure our forces. Therefore, I urge my right hon. and hon. Friends to reassess carefully the pressure under which they put the defence budget and to ensure that the cuts do not affect our ability to carry out our duties.

I was interested to hear what the Opposition had to say on the tax changes in the Budget, particularly with regard to loopholes. My right hon. and learned Friend spoke about the need to continue to close loopholes and there is nothing new about that. Every responsible Government of any persuasion talks about closing loopholes. There is no such thing as a taxation system that is free from loopholes and there never will be because as soon as one set of loopholes is closed another is found. The biggest question is whether the cost of the exercise outweighs the saving.

The Opposition talk of taxing businesses by increasing corporation tax by some £20 billion. That is not a loophole; it is an increased tax. They talk of a tax on foreign companies. That is not a loophole, but those companies will be driven out of the country by such a tax. Then they talk about a wonderful windfall tax on utilities, telling us that that was some sort of loophole, but forgetting that some £30 billion is being invested by the water companies to clean up the system. The Opposition intend to close that down as a loophole. What kind of a loophole is that? That is not responsible opposition. That is essentially trying to find money that the Government have not touched, but there is none. Those are not loopholes.

Watching the hon. Member for Dunfermline, East (Mr. Brown) during the past few weeks I have been reminded of that wonderful character Zaphod Beeblebrox in "The Hitch Hiker's Guide to the Galaxy", the strange two-headed figure who wanders around carrying on a perpetual argument with himself, each head putting forward another angle of the argument. On BBC Radio 4 on 17 January, on borrowing, one of the heads of the hon. Member for Dunfermline, East said:

"I am not talking about increasing current borrowing."

Meanwhile, when asked whether he would seek an increase in the PSBR, the hon. Gentleman's other head said:

"I would be prepared to contemplate that."

On 18 August, on spending, one head said:

"Mr. Major and Mr. Clarke are spending much of their energy saying that Labour has massive spending debts£there are none."

However, the other head then said:

"The public sector must now become the engine of growth."

Both heads say something different, facing different directions. One head was also busy talking about a pledge to full employment—a wonderful open-ended commitment.

The two heads went on to argue withach other over taxation. One head said:

"If you cut taxation—and I hope that we will be able to do so".

But with his other head, when asked whether he believed in a 50 per cent. tax rate, the hon. Gentleman replied:

"if the Chancellor, to raise money to do things, raised the top level from 40 to 50 per cent. we would not oppose it."

It really is a case of both heads talking in different directions. This socialist Beeblebrox, at one and the same time, on the right and the left of the Labour party, seems to design his speeches to suit his audience.

The Government are now a natural partner for the reforming Government of the 1980s. The great reforms were then to the supply side, now we are looking carefully at the welfare state and a variety of other issues. It is not surprising that unemployment has started to turn down so early in the cycle. That has much to do with the reforms of the 1980s.

However, I was particularly pleased to see that the Government have turned their attention to reforming the concept of the welfare state, something which is long overdue. My right hon. and learned Friend, in line with other of my right hon. Friends, clearly recognises that failure to do that will hamper our desire to reduce the burden on the wealth-creating sector.

Now is the time to look at the Government's role and the division of the two areas—on one side, raising revenue and expenditure and on the other, the delivery of service. It is time to transfer as many services as possible to the private sector which can provide many of them, such as insurance, far better.

I am glad that some of today's changes bear a great similarity to suggestions made recently by my right hon. Friend the Secretary of State for Social Security. Some of the announcements fall well within the areas about which he spoke two or three days ago. The social security budget has increased by some 75 per cent. in real terms since 1979 and now accounts for one third of spending. When my right hon. and learned Friend talked about a real increase of 3 per cent., there were guffaws as some hon. Members said that it was something to do with unemployment. It has nothing to do with unemployment. That 3 per cent. takes into account unemployment and is a real year-on-year increase.

The new medical test to attack the abuse of benefit from 1995 should reduce some of the costs. I also note that many doctors have asked for such a measure because they feel under great stress, with their individual knowledge of the patient, having to decide whether or not somebody is eligible. That reform will save money and be well received by the medical profession.

The new job seeker's allowance, which will be integrated with and replace unemployment benefit and income support in 1996, is much in line with the single, means-tested proposal put forward by myself and others in August in a pamphlet, "Who Benefits?". It would be much more simple to administer and a more simple system for those who need the money and need to understand how much money they would receive. I am glad to see that we have begun our journey along that road and welcome it unreservedly.

The change in statutory sick pay is helpful because it is high time that large employers took more of the burden. If they do, there is every chance that they will take a greater interest and concern in the health of their employees and their infrastructure and general employment conditions so as not to end up with long-term sickness among their employees. It is an excellent move to force the larger employers, especially, into that area.

The equalisation of the state pension age at 65—again a change that we proposed in August—is welcome, but the Government should look again at increasing it, in due course, to 67 because the average age is rising.

I welcome the major structural changes that were announced in social security. They will open the door to much of the private sector. In providing services, we should certainly now encourage pension companies to be involved in the provision of pensions and I hope that my right hon. and learned Friend will consider it in the following year as an area that would help us to save money and increase the benefit to those who need to receive the money at that point.

I believe that my right hon. and learned Friend's speech was welcomed unreservedly on this side of the House. He has announced major changes in social security and taxation and his VAT package is generous, perhaps more than many would have expected, and he should be congratulated for finding room within the strictures of the PSBR. It is a good Budget, outlining a good spending programme and I look forward to the reduction in the PSBR and to Britain continuing with low inflation and growth over the next few years.

In some ways, it is difficult to speak some two hours after the Chancellor has sat down, but in others ways it is easy because both his diagnosis and prescription for the economy are utterly predictable and utterly wrong. In the diagnosis section at the beginning of his speech, the Chancellor could have mentioned at least five facts, if he had any degree of honesty or humility£perhaps strange concepts in connection with a Conservative Chancellor.

First, he could have pointed out that we have recently come out of the worst recession of any major, industrial country in the past 25 years, according to the Organisation for Economic Co-operation and Development. Secondly, he could have said that, given that, it would have been utterly amazing if there had not been some slight improvement over the past few months. What has been surprising is that the recovery has been so slight, given the devaluation and consequent cuts in interest rates that the Government did everything they could to avoid.

As the Chancellor said, we have growth this year of 1.75 per cent.—a level that Professor Wynne Godley called a growth recession. Thirdly, he should have pointed out our historically low levels of investment—14.4 per cent. of gross domestic product is 25 per cent. below the levels of our major European competitors and the lowest level of investment in Britain since the 1950s. Fourthly, the Chancellor should have pointed out that we also have historically low levels of public expenditure. Even in the depths of public expenditure cuts in the early 1980s, the Government pitched public expenditure at 47.5 per cent. of GDP. Now it is 45.5 per cent. of GDP. If we consider elements of that spending, we find far worse figures. Public capital spending is now only 1.5 per cent. 9f GDP, whereas it was 9 per cent. under the Labour Government. Even the percentage spent on the welfare state—which the Tories keep telling us is too high—is lower than in any other European country apart from Portugal.

The fifth and most crucial point that the Chancellor could have and should have cited in his opening statement is that the main reason for the PSBR problem is not the amount that we spend on the welfare state or public expenditure or capital expenditure, but because of the recession and because of the resulting unemployment that costs us so much money. That is the problem that he should have been addressing in his Budget, yet he failed.

We should have had a Budget for jobs and for investment. Perhaps the Chancellor was too carried away by his own rhetoric to give us such a Budget. His rhetoric boasted of the way in which unemployment is coming down in Britain, while it is rising everywhere else, so he says, and boasting of the jobs created in the 1980s. He should remember that since the beginning of the decade, we have lost more than 2 million jobs, while the claimant count in the same period has risen by 1.4 million. That shows that the claimant unemployment figures are not the best test of how our economy is doing for jobs. There are lots of hidden unemployed—people who do not go straight on to the claimant count. While unemployment is improving marginally in terms of claimant figures, the reality on the ground is that people are not getting new jobs and today's Budget should have been targeted in that area. I would have liked the Chancellor to say that he and the Government had had a change of heart and that from now on they were to make the creation of jobs the first objective of economic policy. Of course, there is no hope of that from the Government.

The section of the Chancellor's speech about jobs was almost unbelievable to Opposition Members. First, he mentioned a new job seeker's benefit as if that was somehow to do with creating jobs. We know that it is rather about cutting unemployment benefit. People have paid for that benefit through national insurance contributions and to receive it for six months instead of 12 means that some claimants will move on to claim income support and some, if they have a partner in work, on no matter how low a wage, will go from unemployed benefit to no income at all. That was his first job creation measure.

There was one announcement in the Budget that I thought was good news, although I want to make some detailed comments—a child care allowance for families on family credit. That is a tribute to the strength of the campaigns that were waged over the summer. I wrote to the Prime Minister about that matter in June and received the most dismissive reply imaginable, saying that such an allowance was a crazy, unnecessary idea and in no way was to be implemented. I am pleased that there has been a change of heart.

However, there are certain problems with the allowance as announced. First, those who work fewer than 16 hours a week and therefore claim income support should also have child care support. Secondly, I feel that those whose income takes them just above family credit levels should receive some kind of child care support. Connected with all of that is the whole question of the supply of child care. Whatever help is given, if only private child care costing £70 a week is involved, it will still be too expensive for low-income parents to use. The Chancellor should have announced a national child care strategy to tackle the problem of supply as well as helping people with the cost. Opposition Members believe that that is crucial to the welfare of millions of women who want to work, and also to the good of the economy as a whole. Although I welcome that measure on child care, I think that it should be the beginning of something far more.

Child care does not, in itself, create jobs for people eligible for family credit, who may now be more willing to look for jobs because they are receiving help with child care. Its expansion must be accompanied by an economic policy that creates jobs—which is precisely what we hoped for, but were not given, in today's Budget statement. Certain obvious steps could have been taken to create jobs.

First, a boost for house building would have been an obvious way of increasing jobs and meeting a clear need. Last week, in a Scottish survey, Shelter stated that 45,000 Scottish households had reported themselves homeless to their local authorities last year. That, of course, does not reveal the total extent of homelessness last year. There is a crying need for a house-building programme; instead, the Budget statement announced a cut of £300 million for the English Housing Corporation. I have not yet seen the Scottish figures, and I do not know whether they are available, but I suspect that a similar cut is planned. The policy is going in exactly the wrong direction: we need to put money into house building, both to solve a social problem and to get the construction industry moving again, returning building workers to employment.

The Budget made some gestures to infrastructure, but they consisted of far too little, far too late. Infrastructure investment by the public sector is a very effective way of returning demand to the economy and returning people to work; it is also a very effective way of improving the efficiency of the economy. The provisions in the Budget are derisory and inadequate.

Most fundamental of all is the need for help for manufacturing industry. One of the most significant omissions from the Chancellor's statement was his failure to refer to the balance of payments deficit, which now stands at a level which is unprecedented in the current stage of an economic cycle—£17.5 billion. We need manufacturing for jobs; we also need it to deal with that problem. If that problem is not dealt with, any growth that we achieve as a result of the Budget—or, rather, not because of but in spite of the Budget—will soon run into the constraints of the balance of payments deficit. Unfortunately, it seems that the Government will never address the problems of manufacturing investment. Simple measures involving capital allowances could he introduced, but I also believe that the Government should take a more direct role to get the sector moving.

Instead of using the opportunity presented by the Budget to create jobs, the Conservatives have used that opportunity to carry out an agenda that they want to carry out in any event, irrespective of the state of public finances. I refer to the particularly right-wing agenda that involves reducing public expenditure, attacking the welfare state and putting up taxes on low-income families. I have not had time to examine all the details of the public expenditure proposals, but I remember the Chancellor saying that the total would fall by £15 billion over the next three years, and that within the next four or five years it would fall from its present 45.5 per cent. proportion of gross domestic product—which, as I have said, is historically low—to 42.5 per cent. That is bad news for jobs, because public investment is necessary to create them; it is bad news for the welfare state; and it is bad news for our public services.

Let us consider certain specific groups. First, the Chancellor highlighted pensioners, who he said were given a good deal by the Budget. Let us remember what kind of increase is in store for them. Before the Budget, it was to be barely £1 a week for a single pensioner next year: that appalling amount was announced a few weeks ago. The reason was the official rate of inflation at the time—which, of course, bore no relation to the actual cost of items that pensioners must pay for.

Today, we heard that those pensioners would receive a measure of compensation for the imposition of VAT on fuel—not full compensation; it is probably about half what they will have to pay. I have not had time to examine the details. We should have heard an announcement that no VAT would be imposed on fuel: instead, we were told of an inadequate compensation package. Beyond the pensioners' immediate problem lies the distant objective of pension equalisation at the age of 65. Although that does not concern today's pensioners, it will concern younger people. The Government missed the opportunity to equalise pension ages at 60, which should and could be the policy of any Government who believe that they can deliver economic growth. The present Government, of course, have no confidence in their ability to do that, which is why they must resort to public expenditure cuts and unfair tax increases.

The second group I want to mention are those currently receiving invalidity benefit. One of the most shameful aspects of the Budget is the fact that they are being targeted to pay for the mistakes and the economic incompetence of the present Government. We are told that thousands who should not receive invalidity benefit are receiving it. I can tell the House that constituents of mine have recently been taken off it. I am not a doctor, but I can see that those people are not well, and are not fit for work. The Budget proposal is a disgraceful attack on them. Once again, the Government seemed to think that the Government can get away with their actions, as long as they change the name of the benefit involved. They imagine that, if they call it "incapacity benefit", no one will notice. Opposition Members notice, however, and thousands of people in my constituency and throughout the country will notice as well.

The largest group, however, is composed of the millions of ordinary taxpayers who will suffer as a result of the Budget. The Government would like us to forget that many taxes—amounting to £8.50 a week—are already in the pipeline. In that sense, the Chancellor is indebted to his predecessor. Not satisfied with that, however, the present Chancellor has announced the freezing of tax allowances, and various other tax changes that will take the weekly tax increase for an ordinary family to beyond £10 a week after next April—and that from a party that claims to be a party of low taxation, and boasted about it at the last general election. The British people will never trust the Tory party again on taxation, and today's Budget will remind them of that fundamental fact.

We should also remember all the other people who will suffer as a result of the imposition of VAT on fuel, apart from pensioners. Those people did not get much mention in the Chancellor's statement. Some slight help will be provided for those on income support, but it will be in no way adequate to deal with the costs that they will face. Let us remember the state of the houses in which some of the people who will have to pay VAT on fuel will have to live. I remember someone on low pay who came to my surgery recently. She said that, because of the dampness of her house, she had to spend £25 a week on heating. Yet we are told by the Government that she will have to pay more. Because she is on low pay, she will not get one penny to help her with her increased heating bills.

For a moment, I shall give some respite to the Conservative party, although, obviously, my main fire is directed at it. I shall refer to another party with which we must contend in Scotland—the Scottish National party. I must point out this disgraceful leaflet that I was handed in Leith last Saturday. In opposing VAT on fuel, the nationalists contrasted Scotland's chill with southern comfort. It is a highly offensive leaflet, and it gives some idea of the nationalist poison of the SNP that we in Scotland have to put up with.

The concern of the SNP for the poor and the low paid does not seem to extend beyond the Scottish border. It forgets the millions of people who live in poverty in England in constituencies such as that of my hon. Friend the Member for Hackney, North and Stoke Newington (Ms Abbott) who are by no means living in southern comfort.

In expressing our opposition to VAT on fuel, let us make it clear that the Opposition do not want VAT on fuel for anybody in the United Kingdom and that we still demand that it is scrapped. We shall continue to campaign for the scrapping of VAT on fuel in the expectation that we shall be successful.

If the worst comes to the worst and VAT is imposed next April, some Opposition Members will continue to campaign to ensure that the EC is challenged and that VAT is taken off fuel when a Labour Government return.

The main thrust of the Budget should have been to create jobs. If jobs are created, the problems of the deficit will go away. But I have to agree that, to create jobs in the short term, we must have public investment, and therefore public expenditure. As the Conservative party always wants to know how the Opposition will raise the money, I shall conclude by saying something about that.

I emphasise that the key to dealing with the budget deficit is to deal with the problem of unemployment. The taxation measures to which I shall refer are not the heart of our budget argument. Jobs will create more income tax and will mean less expenditure on unemployment benefit. That will solve the deficit problem, but in the short term we need expenditure on public investment.

I fully support, as would all Opposition Members, the proposals of my hon. Friend the Member for Dunfermline, East (Mr. Brown) on tax loopholes. I shall refer in particular to the way corporation tax is being evaded, because the previous Chancellor referred to the problem of corporation tax evasion the day before he got the sack. It is not just an idea from the Opposition. There is a problem of corporation tax evasion.

I suggest also that there is a problem with the level of corporation tax, because we are way below the EC average. If corporation tax were increased to 40 per cent., that would bring in £4.5 billion. That has to be combined with a generous system of capital allowances, which the Conservative party will not accept. At the moment, the system of corporation tax encourages high dividend payments and discourages investment. We could put up corporation tax if we had generous capital allowances. That would be in line with the policy of creating jobs through investment.

A second way in which money could be raised, and which would be infinitely preferable to the offensive attacks on the poor through VAT on fuel and invalidity benefit cuts, would be to raise the top rate of taxation. If the top rate for those earning more than £50,000—I shall put it no lower than that—were increased to 60 per cent., that would bring in £4 billion a year, which is more than would be brought in from VAT on fuel.

Who with any conscience can possibly say that it is better to impose VAT on home heating than to impose a top-rate tax increase for those earning more than £50,000? There are not only arguments for that in terms of social justice. There are also strong economic arguments for that, because one of the problems that we have in this country is the extremes in income between poor and rich, which makes the balance of payments problem worse because rich people tend to buy more imported items. Secondly, it tends to make the boom-bust cycle far more extreme than in other countries. There are strong economic arguments as well as strong moral arguments for increasing the top rate of taxation.

I am not totally against VAT increases. The problem that the Government have is that they impose it on the wrong thing. I suggest that, before the next Budget, they look at other ways in which they can raise VAT. I suggest, for example, VAT on private school fees—I suggest a rate of 30 per cent. I suggest a VAT rate of 30 per cent. on people who take out private health insurance. Why do we not have VAT on luxury items, which can be paid by people who can afford them? Those thoughts are totally alien to the Government, who want to help people at that end of the income scale and penalise and punish those at the other end.

There are two other ways in which money can be raised. First, I am told that a long-term objective for defence cuts was accepted by no fewer than 72 per cent. in a recent survey of top Scottish directors of industry. It was not mentioned much in the Budget today, but there is a wide spectrum of opinion across right and left which recognises that military expenditure must be cut.

That is an ongoing source of money that can be used to boost manufacturing investment in this country. The Labour party has policies for a defence diversification agency and cuts in military spending could finance the work of that agency in boosting investment and jobs, particularly in manufacturing, because the key thing about defence workers is that they are highly skilled and must be kept in manufacturing employment.

Even to reduce our level of defence expenditure to the French level would release £8 billion. I do not suggest that it is done in one go. If it was reduced to German levels it would release £13 billion. That is a matter that, in the remaining years of the decade, must be addressed and accepted, because it is a very large source of revenue for investment in our economy.

Finally, I shall mention borrowing. I believe that if the measures that I have suggested were introduced, we would not need to increase borrowing. However, if in the short term we had to increase borrowing for investment, that would not worry me, because we know that through public investment we can decrease borrowing in the long term.

The problem with the Conservative party is that it has no strategy to deal with the underlying cause of the public sector borrowing problem, which is the low levels of investment and the high levels of unemployment. The Conservatives have no strategy for that. They are using the excuse of the deficit to whittle away at the welfare state and impose unfair taxes.

At the end of the Chancellor's speech, I noticed that Tory Members behind him were very impressed. That gave the game away. What we had from the Chancellor today was not a Budget for jobs, quite clearly. It was not a Budget for the poor, quite obviously, and we do not expect that from the Conservative party. What we had from the Chancellor today was a Budget for winning the next election. [Interruption.]

Order. I hope that the House will not make so much noise that I cannot hear the hon. Gentleman.

What we had from the Chancellor of the Exchequer—I will say it again because it is a long time since I got the first bit in—was a Budget to win the next election. But the election that the Chancellor had in mind was his own election to become leader of the Conservative party. The Budget today was designed to impress and please the right wing of the Conservative party. The Order Papers being waved at the end of the Budget speech made that clear.

The Chancellor may win the election to be leader of the Conservative party, but it is crystal clear that he and his party have no hope of winning the real election. The Conservative party will never be trusted again, not only because of its broken promises on taxation but because after 14 years the people of this country know that the Conservative party is the party of economic incompetence. Any people who want to deny that would need to be referred to a psychiatrist, although they would have great difficulty in finding one on the NHS.

In these days when we are used to listening to a pasteurised, shrink-wrapped Labour party, it was good to hear the hon. Member for Edinburgh, Leith (Mr. Chisholm) showing that the real Labour party still exists, although it is usually kept more carefully hidden.

It was particularly interesting to hear the hon. Gentleman call for a Budget for jobs. We have a background of low inflation, low interest rates and—in case he has not noticed—steadily falling unemployment. The latest monthly fall in unemployment is the largest for four and a half years; almost half a million people left unemployment in October, which is the highest monthly total ever, and long-term unemployment fell by 10,000 between July and October this year. Against that background, I warmly welcome the Budget introduced by my right hon. and learned Friend the Chancellor. He has recognised the main needs of the British economy.

First, my right hon. and learned Friend has recognised that it is essential to keep inflation down. Secondly, he has recognised the need to reduce the public sector borrowing requirement. If he had failed to grasp that nettle today, we would have won no plaudits from Conservative Members. The last thing we want is to go back to the days of the 1970s, when the fastest growing area of public expenditure was not health, education or social services but servicing the national debt.

The third priority which my right hon. and learned Friend has rightly stressed is the need to reduce the percentage of the gross domestic product which is spent in the public sector. I am pleased that he has set a target for that. I hope that, when we have got public spending down to 42 per cent., we shall press on and get it down well below 40 per cent.

Fourthly, my right hon. and learned Friend has recognised the need to encourage the private sector. It is from the wealth created by the private sector that all the things that we value in our society are financed—such as road building, housing, help for small businesses in general and small companies in particular. I was particularly pleased to hear reference to the possibility of introducing a statutory interest charge on overdue debts. I have been pressing for that for the past two years. It would be a valuable measure and would help small businesses, which are all too often made to wait for months for payment from large customers which enjoy an effective monopoly.

I was also pleased that my right hon. and learned Friend took the opportunity to maintain low direct taxes and to reduce tax relief on mortgages. That would certainly not have been a popular measure if it had been introduced before we left the exchange rate mechanism, when interest rates were extremely high. However, now that interest rates have fallen, there is a good opportunity to reduce the discrimination in favour of house purchasing as a way of spending one's money.

I was worried when my right hon. and learned Friend said that the recovery began before white Wednesday—the day on which Britain was forced to leave the ERM. I hope that that does not mean that my right hon. and learned Friend is contemplating a return to the ERM. It is clear that the recovery got into gear after we left the ERM, when we saw a dramatic fall in interest rates and the simultaneous establishment of a system in which our exports were more competitive.

I now turn to VAT on domestic fuel. I represent the Vale of Glamorgan, a highly marginal constituency, which the Labour party chose to target. It played on the fears of the poor and the old in my constituency by pretending that my right hon. Friend the previous Chancellor did not mean what he said when he said that help would be given to those most in need. The generosity of the package that has been revealed today fully vindicates what has been Conservative policy for the past six months.

Does the hon. Gentleman believe—I am one of his constituents—that he would have won the seat if he had told the families in the Vale of Glamorgan that, in the first two Budgets after the Conservative Government were returned, they would increase taxes by £16 a week for the average family?

I am pleased to have the hon. Gentleman as a constituent. I trust that he voted for me. I am sure that, at the time of the general election, he was no more aware than I of what would be in this Budget or the last Budget. The Government stated in the run-up to the election that there were no plans then to raise rates of VAT. I am sure that that was correct at the time. Certainly, VAT was not raised at that time.

I have met many constituents who have responded to the Labour campaign of vilification in my constituency against the Conservative party in general and me in particular. They were naturally worried to read the press releases issued by the Labour party, which said that the wicked Conservative Government would not help them to meet their fuel bills.

Like other Conservative Members, I have been pleasantly surprised by the generosity of the package which has been introduced. It provides help for all pensioners. That shows that the Government have gone further than they needed to. Obviously, there are pensioners who do not need help to pay their VAT on fuel. [Interruption.]

Order. It would be better without the running commentary, particularly if certain hon. Members wish to speak.

It is difficult to target help to meet all those cases of need. I am sure that my right hon. and learned Friend the Chancellor was aware of the needs of those people whose incomes are just above the level for income support, and wanted to make sure that he caught them in his safety net. It is because of that difficulty that I welcome the decision to help all pensioners, in addition to giving much-needed help to those people on income support and other income-related benefits.

I am glad that the lies put out by Labour supporters in my constituency have been laid to rest. I look forward to meeting constituents in my forthcoming surgeries and reporting to them on the excellent package that has been introduced today.

Today the Chancellor has snubbed Wales. A typical family in Wales will be £10 a week worse off—paying higher income tax, higher value added tax, higher national insurance and higher mortgages as tax relief is cut—in addition to paying higher charges for home and car insurance, and even for holidays.

The VAT compensation measures announced by the Chancellor are a sham. The Budget is a vindictive assault on the disabled, the poor, the unemployed and pensioners, particularly women pensioners, who will have to wait an extra five years to receive their retirement pension in future.

The Budget will do nothing to reverse the long-term industrial and structural decline of the Welsh economy. We have had 14 years of Thatcherite and Majorite miracles, during which living standards have declined, and will decline for the coming generation. That decline will reverse the trend of hundreds of years in which, with a few peaks and troughs, people have been progressively better off. Under the Government, Wales has become a poor relation. It has the lowest GDP per head, the lowest earnings and the highest economically inactive totals.

The south Wales valleys have suffered even more. As a valley community, Neath is virtually at the bottom of the pile of worldly goods and associated wealth, as a survey for HTV's "Wales this Week" recently showed. Professors Wilkinson and Morris of the Cardiff business school have shown that, whether we measure car ownership or consumer white goods, central heating or cavity insulation, or sickness or social class:

"The Valleys are getting poorer. There is no sign that the valleys initiative has had any real effect."

That conclusion was endorsed by official Welsh Office figures released last week, much to the embarrassment of the Secretary of State for Wales.

What has the Chancellor done for a community such as Neath that is already struggling and where regular well-paid and skilled jobs, especially for men, have disappeared, to be replaced by part-time skivvy work for poverty wages? He has kicked Neath in the teeth with his steel-capped Hush Puppies.

The Chancellor is not reversing the long-term decline in training. In Wales, the Budget for training has been reduced by 16 per cent., £27.8 million. The Secretary of State for Unemployment—I am sorry, for Employment; it was a Freudian slip—in a manner redolent of his office when he was Secretary of State for Wales, has indulged in a typical public relations exercise this afternoon. He has produced a Mickey Mouse scheme, with no new money to address the massive skills gap in Wales and the United Kingdom.

The Government should invest money in quality training, and in jobs for the 2,400 in Neath who are officially out of work. To that total must be added another 11,000 men and women, who are not on the official unemployment register but appear in the Department of Employment's economically inactive category, which I regard as the unofficial measure of unemployment.

As to VAT on fuel, our "no-nonsense" Chancellor, as he has called himself, has bottled out. As a result, it will cost the poor, the old and the disabled among my constituents an extra £5 a week in the cold winter months. The 50p a week that is being offered to those people is an insult. It will go nowhere near addressing their plight and the problems of trying to make ends meet after such an extra imposition.

The nearly poor that the Government have identified will get absolutely nothing out of the Budget, unless they happen to be pensioners. What will happen to the others, and those who are just above the benefit level, perhaps with a small miner's or widow's pension that takes them just above the welfare net? The hon. Member for Vale of Glamorgan (Mr Sweeney) seems totally ignorant of the plight of those people, who will face this VAT increase with great fear.

Far from being totally ignorant, I made it clear in my speech, had the hon. Gentleman been listening, that all pensioners will receive help with their fuel bills, and those who are just above the threshold for income support will be among those who will be helped.

The hon. Gentleman has clearly not understood his own speech. He has not understood my point. I spoke specifically about the nearly poor who are not pensioners. There are thousands of them in my constituency—and probably in the hon. Gentleman's constituency and millions across the country—who will not get any compensation at all when they too have to bear the VAT increases on fuel and heating, which could cost an extra £5 a week in the bitterly cold winter months.

In place of the Chancellor's Budget, I would commend to the Chancellor and the Secretary of State for Wales my own Labour Budget for Neath, which would give the people of Neath and Wales prosperity and hope instead of the miserly offerings of this afternoon. It rests on fair taxation and recognises that public investment is the way to sustained growth and lasting employment. Most importantly, it is a Budget that would restore dignity to those in our community who were asked not only to make sacrifices 50 years or so ago in their youth but, quite unfairly, are being made to pay again for the Government's mistakes and the systematic way that the Government piles tax increases and cuts in public services on those least able to protect themselves.

What we heard from the Chancellor this afternoon could be a matter of life or death for many of the 16,000 pensioners in Neath. Many of them are already living below the breadline; some 18 per cent. of them live in households without central heating; more than 7,000 of them suffer from long-term illnesses; and many cannot currently pay their bills, let alone when VAT is put on their coal, gas and electricity. The valley villages of Seven Sisters, Banwen, Crynant, Cwmllynfell and Rhifawr, for example, have no access to the cheapest fuel—gas. Those villages have a huge concentration of older people, all of whom are worried that the Chancellor will inflict further hardship on their lives. These fears will be proved right.

Mr Lock and 23 other residents of Canolfan and Seven Sisters took the trouble to write to me, voicing their concerns about the consequences of VAT on fuel. Their fears have not been allayed this afternoon. Others, like Mr and Mrs Lewis, are living out their 80s in great hardship, with no mains gas and an enormous works project needed to bring their home up to present-day fitness standards. They live in a draughty place and, because they can ill afford expensive energy conservation measures, they resort to the most basic of energy conservation measures, doing without any heating or fuel. The Budget will do nothing to assist them. The measures announced this afternoon are a drop in the ocean and will go nowhere near addressing the needs of pensioners such as Mr and Mrs Lewis, who are in desperate straits.

Will the hon. Gentleman give way?

No. I have given way already.

Neither Mr. nor Mrs. Lewis is in great physical shape—30-odd years as a miner in Blaenant colliery made sure of that in Mr. Lewis's case. If they turn off their heat in windy and damp Seven Sisters, it will make them ill. This will have dramatic consequences on the already hard-pressed local health services.

Last year in Wales there were 1,672 "excess winter deaths"—the official Government term for the worrying national trend of higher than average mortality rates in winter. Last year, there were twice as many deaths in the United Kingdom, 34,711, as in other cold countries such as Canada or those of Scandinavia.

Those deaths are caused not just by the weather, but by a failure to invest in proper home insulation and proper protection for some of the most vulnerable in our society. A substantial body of opinion, which includes the Oxford academic Brenda Boardman, is convinced that the causes of those deaths is linked to fuel poverty.

The Budget will do nothing to address that problem; in fact it makes it a great deal worse. It does nothing to help the 5,500 people in Neath who are on invalidity benefit; instead it will make their plight worse. The Budget will do nothing to help the 11,000 or more who are on income support. We have heard much in recent weeks from the Thatcherite right about benefit scroungers.

While the official snoopers chase people on benefit who do what is known in the valleys as "a hobble"—a bit of gardening or labouring in a desperate effort to make ends meet—and recover £558 million, tax loopholes will lose the Inland Revenue ten times as much, a massive £10 billion in the next two years. The Chancellor has only nibbled at the edges of the massive problem posed by those loopholes.

The Budget will do nothing to help those on poverty wages in my constituency. Figures just released in the 1993 new earnings survey reveal that Wales has the lowest pay rates of any region in Great Britain at £281.20 a week for full-time work. That represents a fall from 98 per cent. of the United Kingdom average in 1979 to just 89.2 per cent. in 1992. In Neath many adults work for £1.80 an hour or less. How can they possibly survive on such wages? The Chancellor seems to be totally indifferent to their plight.

The Chancellor should have introduced three immediate steps to ease the unfair burden that has been placed on my constituents. First, he could have introduced an alternative VAT strategy. My hon. Friend the Member for Edinburgh, Leith (Mr. Chisholm) has already referred to some of the detail of that strategy.

Instead of dumping the load imposed by VAT on the likes of Mr. and Mrs. Lewis, it would be possible to extend VAT to private education and private health schemes. That would raise as much as £600 million and £300 million respectively. There is also some scope or putting VAT on financial and insurance services which, if properly targeted on share issues and other company-related transactions, and not on homes and possessions, could raise between £1 billion and £3.3 billion.

Secondly, there is an emerging consensus in Britain that the well-off are undertaxed. They represent some of the beneficiaries of the £10 billion derived from the tax loopholes that were identified by the shadow Chancellor, my hon. Friend the Member for Dunfermline, East (Mr. Brown).

Following the personal tax cuts of the 1987 and 1988 Budgets, the very rich have benefited to the tune of £8 billion a year—nearly three times the amount that VAT on fuel and heating will bring to the Treasury in a full year. If one levelled out to the European average in the top irate band of 55 per cent., that would raise as much as £6 billion for the Exchequer. That is the sort of target at which the Government should aim.

Thirdly, the Budget should have introduced phased relief of capital receipts for council housing. Neath and Lliw valley boroughs have £2.89 million of accumulated housing capital receipts which the Government have banned them from spending. If those receipts were released tomorrow, more than 50 local houses could be built. That would create not only badly needed new homes but even more badly needed jobs in my constituency.

The official unemployment figures do not take into account the economically inactive population, which is a special concern to valley constituencies such as Neath. According to the official figures, unemployment in my constituency stands at just over 10 per cent. If one adds to that the economically inactive, people of working age, below pensionable age, who for one reason or another have been forced off the unemployment register—after the Chancellor's Budget announcement they will be forced off the register six months earlier—or those forced into early retirement following a pit closure, the unemployment figure jumps by a further 30 per cent.

Neath is the 12th worst district of 459 districts in the United Kingdom in terms of its economically inactive total. When one looks at the plight of the south Wales valleys, it is not surprising to discover that, of those 459 districts, eight of the top 10 are valley constituencies. One in three adult men are now unemployed in Neath, if one takes into account the official unemployment figure and the official figure for the number of economically inactive. That makes a total of 6,000 adult men. The Chancellor has betrayed all of them.

The economically inactive total will rise as a result of the Budget because the unemployed will be pushed off the unemployment register after six months, while those in work who are sick or long-term disabled will find it increasingly difficult to maintain their jobs as their employers seek to push them out of their work forces in order to be released from the extra obligations that the Chancellor has imposed on employers.

The Budget does nothing for industry. Many of those who are unemployed in my constituency were previously in the local manufacturing sector—the hub of the local economy. That sector has been savaged by the Conservative Government. For example, between 1989 and 1991, manufacturing employment in Neath collapsed by a half. There is no sign that the Government are doing anything to provide an upturn for the people of Neath.

The Budget is designed to ingratiate the Chancellor with his own Back Benchers. It is not a Budget for an area such as Neath, which has enormous economic potential, enterprising business men and women and a traditionally skilled work force. Neath is crying out for a Budget that will invest in jobs, skills and infrastructure. We have not had that Budget today, and we will not get it tomorrow unless we have a Labour Government.

We have heard the same old tune from the Opposition. They cry that the Budget does nothing for industry. I am sure that it has set the climate for a further reduction in interest rates, which represents one of the best ways in which the Government can help industry.

I do not believe that the hon. Member for Neath (Mr. Hain) is a great contributor to the industrial scene. I am not sure what he did to help industry before he was elected, but, judging from his comments, I cannot see that he has any understanding of industry.