If she will make a statement on the humanitarian situation in Afghanistan. [46040]

The humanitarian situation in Afghanistan remains fragile. That is the consequence of 23 years of conflict and three years of drought, and the fact that some areas of the country are still inaccessible. The latest estimate by the United Nations and the Afghanistan Interim Administration is that approximately 9 million Afghans, including more than 1 million internally displaced people, will be in need of humanitarian assistance this year.

What extra resources have been made available for United Kingdom humanitarian aid following the earthquake in northern Afghanistan? Can the right hon. Lady tell the House anything about the role that British peacekeeping forces may have had or might have in distributing that?

The UK is providing £60 million this year in humanitarian aid and in starting to bolster the capacity of the Interim Administration. The question is not the availability of resources but reaching the people in greatest need. That is of course the nature of the crisis following an earthquake. The UK is famous for being able to move rapidly, and we deployed into the area in order to provide assistance and help. I am not aware of troops being involved, but I might not be right about that. Many people have lost their homes, and 800 people lost their lives. There is a big effort, in which we are involved, to provide help for those people who, on top of all the other suffering in Afghanistan, have now suffered the consequences of an earthquake.

What efforts are being made to destroy the poppy fields in Afghanistan? What attempts have been made to compensate the farmers by providing alternative crops?

The implication of my hon. Friend's question is right: there has been a lot of planting of poppy by people who are very poor and have no other means of making a living. Obviously, that engenders criminality and instability in Afghanistan, as well as the exporting of drugs that will endanger neighbouring countries and the rest of the world, including our country. A big effort is being made. The Interim Administration have declared that no poppies should be planted, but the job is both to eradicate the crop and to provide alternative livelihoods for the people. We have learned across the world that, otherwise, people continue planting, because they have no other chance to make a living. We are working very hard to try to provide them with that chance.

The Secretary of State will be aware of numerous schemes to repatriate Afghan refugees. Although we welcome their eventual return, I am sure she would agree that reports of insecurity in Afghanistan, and the lack of housing and of basic provision, seem to indicate that such schemes might be premature. Will she assure the House that repatriation with British aid money will happen only when it is in the best interests of refugees and not because of the political pressure of donors?

We had this argument about Kosovo. It is not for the hon. Lady, me or anyone else to tell Afghan refugees when it is best to go home. We should facilitate their choices, and we see very wise choices—[Interruption.] The mass of Afghan refugees are in neighbouring countries—probably about 4 million of them. Families usually send a young male home to see how things are, and some families then go home.

About 180,000 Afghans have decided to return. They deserve help to do so when they make the decision, and facilities and equipment to rebuild their houses. Some Afghans have moved out of the country; it depends on the area, the problems of drought, the earthquake and so on. We will back people's choices and empower them to decide when it is right for them to return home.

There have been many promises made by Governments, including our own, about the involvement of women in humanitarian aid, but Oxfam notes in its latest paper that

"planning, implementation, and evaluation meetings are attended primarily by men."

Will my right hon. Friend do everything she can to ensure that women become involved in those programmes? Will she pay particular attention in the delivery of those programmes to the special needs of the many widows in Afghanistan?

Yes, indeed; I can give my hon. Friend that undertaking. The situation is not as bad as Oxfam implies—if that is what it is saying. Girls across the country are returning to school, women are able to teach again and the Women's Ministry, for which my hon. Friend fought so hard, is up and running—although obviously it needs to be strengthened. Only 11 per cent. of the Loya Jirga that is about to established and to decide the future of the country will be women, but that is an unprecedentedly large proportion for Afghanistan.

The World Food Programme, which is providing food for work across the country, targets women as organisers of schemes because they are so reliable and close to people. Of course, Afghanistan has a long way to go, but women there are moving forward and I promise my hon. Friend that we shall do everything we can to back them.

Is the Secretary of State aware of reports that pledges made by foreign donors of some £1.8 billion to help Afghanistan with reconstruction have, in some cases, failed to materialise? As this is Budget day and the Chamber is so well attended, can she say whether the British pledge made in Tokyo has now been delivered, and what action she is taking to get the unpaid pledges matched with hard cash?

The UK is famous for delivering on its pledges and for delivering fast. Many other countries grandstand promises in the media, but the money does not come through. The other problem is that it is easier to promise money than to get it spent effectively in a failed state. The UK committed £200 million from my budget over five years, so that money has not all been disbursed yet. We have disbursed £60 million this year, and we are well on the way to disbursing all of it. That is above what we have promised for future years. The UK, as ever, acts fast and has fulfilled its commitments, but others are slower. We will of course work to try to ensure that all the money is disbursed as rapidly as possible.

What recent discussions she has had on improving access to primary education in developing countries. [46041]

One in five children in the world are not in school and 800 million adults are illiterate. The UN millennium assembly committed the world to get all children into primary education by 2015. On current trends, that target will be met in most of Asia, but not in Africa. We are working, through our own programme. UNESCO and the World Bank, to gear up the whole international effort to ensure that the target is met.

I am sure that the House will acknowledge my right hon. Friend's commitment to resolving that issue, but she will be aware that, on current trends, by 2015 some 75 million children will not be receiving basic education. Only 2 per cent. of the aid budget goes on education. Will my right hon. Friend therefore give a commitment that she will try to persuade the World Bank to address that financing gap in education? As it is clear that those countries that obtain debt relief then spend more on primary education, will she do all she can to encourage our international partners to give greater debt relief to those countries that have proper education plans in place?

I agree with the points that my hon. Friend makes. The point of the millennium targets is not to describe current trends but to increase the international effort. She is right to say that on current trends we will not meet the target, but it is achievable. The biggest problem is in Africa. Part of the problem concerns the commitment of the Governments of developing countries to primary education. In poor countries, elites are powerful and they tend to spend their budgets on education for the elite, not primary education for all. The international community cannot put that right except through international pressure.

My hon. Friend may be interested to learn that we spend 20 per cent. of our own budget on primary education. I shall attend the World Bank meeting this weekend at which this issue will be on the agenda. I assure her that we will make a greater effort.

The right hon. Lady will know that I have just returned from a visit to Sudan with the all-party group. [Interruption.]

Order. The House is far too noisy.

The Secretary of State will also know that two generations of children in southern Sudan have missed out almost completely on education because of the civil war there. In view of the fact that 80 per cent. of southern Sudan is at peace some or all of the time, will not she reconsider her Department's policy and start investing in the future of southern Sudan by providing primary education projects?

No, the hon. Lady and all who advocate that policy are wrong. It is to pretend that development can take place around an ongoing war that is killing millions, displacing people and destroying an economy. We are trying to improve the humanitarian effort, and that should include education for displaced children, but pretending that development can be promoted around a moving war is to belie the truth.

Sudan is a desperately poor country that can have peace. There is a real call for peace in that country, which became independent in 1956 and has been at war for all but 10 years since. I assure the hon. Lady that we will try to improve the humanitarian effort and the education that goes with it, but the way to provide education for all the children in southern Sudan is to bring the country to peace.

As another-Member who had the privilege of taking part in the visit of the all-party group to Sudan, I welcome my right hon. Friend's commitment to the peace process, which is alive but needs greater emphasis and greater effort. Hope will bear fruit. Is there not a place for education in a society where basic education might just help people engage further in civil society and in the development of a democratic society for the future, rather than being drawn into armed factions on either side?

Of course there is a place for education for all children in the world, and especially children who suffer as a consequence of war. The reality in Sudan, and especially southern Sudan, is that people have been displaced. They have lost their land; they have lost everything; they have lost their family members; children are not in touch. It is not the truth to pretend that we can organise sustainable educational systems without resolving the war.

As I have said, we should do everything that we can to ensure that displaced and refugee children have access to education. Pretending that there is peace or that more development round the war is possible is misguided. There is a chance of peace in Sudan, and I know that my hon. Friend agrees. We must try to grab the chance of peace, as well as improving the humanitarian effort in the meantime.

As the Secretary of State will know, the members of the Select Committee on International Development recently went to Ghana. I think that we were all extremely impressed by the commitment of the Government of Ghana, and of communities, families and teachers to ensuring that there is universal primary education in Ghana. Does the right hon. Lady agree that every penny that is spent on primary education in a country such as Ghana is money well spent? Sometimes we can all become rather depressed by the failures in the international community, but sometimes we should celebrate achievements.

The hon. Gentleman is right. All research shows that the most powerful development intervention that can be made in any poor country is ensuring that a generation of children are educated, especially girls. As such a generation grows up, it can transform the prospects of a society in terms of child survival, access to education, health care and incomes. With Ghana's previous Government, we worked hard to try to achieve a commitment to a universal primary education programme, and did not have much success. Under the new Government, these things are looking much more hopeful. I agree with the hon. Gentleman that that is important to celebrate.

What steps she is taking to build international consensus around the mechanisms and resources needed for the achievement of the millennium development goals. [46042]

We have worked hard since 1997 to get the international system focused on the systematic reduction of poverty. We now have unprecedented international consensus throughout the United Nations system, the International Monetary Fund, the World Bank and the regional development banks and the Organisation for Economic Co-operation and Development. It is focused on meeting our agreed targets of halving world poverty and improving education and health care for all. On present trends, we shall achieve the halving of world poverty target. That means a billion people lifting themselves out of poverty between 1995 and 2015. However, on present trends, Africa is set to become poorer. We are determined to do better, and we are working throughout the international system to that end.

Will my right hon. Friend join me in welcoming the joint statement issued last month by a group of British and Italian Members of Parliament in preparation for the next G8 summit and in support of the work that she and my right hon. Friend the Chancellor of the Exchequer are undertaking to double the international resources available for development world wide? Does she agree that it is now time for parliamentarians, non-governmental organisations, Church groups and other groups in civil society to double and redouble our efforts to build international consensus on development issues, so that we sustain and extend the international action that will be necessary to make globalisation work for the world's poor?

I agree with my hon. Friend. The greatest threat to future safety, stability and sustainability in the world is poverty. One in five of humanity are living in absolute poverty. Half of the whole of humanity lives on less than the equivalent of $2 a day income in the United States. We know how to make progress. With greater effort, we could speed up that progress. We need much more consensus in our political systems to the effect that that is a priority and not something for the charity box while mainstream politics is taking place.

We had a great gain at the UN Monterrey conference—an extra $12 billion a year from 2006 towards international development assistance. If we effectively targeted the $50 billion a year that we have now on the poor and on backing reformers, its value would increase by 50 per cent. We are making progress but we could do a lot more. It is a great priority on which I am strongly focused.

Will the right hon. Lady join the Opposition in welcoming the generosity of the United States of America in increasing its aid budget by $5 billion? Will she commit herself to putting continued pressure on her European counterparts to do the same?

I am afraid that the hon. Gentleman, who does try, does not seem to listen to the whole story. The US is the meanest donor by far among the OECD countries. In the run-up to the UN conference on financing for development, the European Union committed itself to an extra $20 billion by 2006 and an extra $7 billion a year thereafter. That had some leverage on President Bush.

In the preparations for the meeting, the US had said that aid is useless and capitalism is the answer. I notice a change in the atmospherics from the other side of the House—perhaps Opposition Members are waiting for later. Because President Bush had committed to President Fox of Mexico to go to the conference, and given the international atmosphere and the EU performance, he then committed to finding $5 billion a year extra from 2006. That is important, as it represents a reversal of the decline. I hope that it will be the precursor of more, so that the US pays its share of the international development effort, as I am sure it should.

Will my right hon. Friend tell the House what percentage of the Export Credits Guarantee Department's budget is spent on the export of arms?

I am sorry—I do not have the precise answer in front of me. The percentage is quite high. Speaking from memory, I think that it is approaching a third. I shall write to my hon. Friend.

The Secretary of State said that the African countries are getting poorer. One understands some of the problems, but is it not time there was an international consensus to tackle them more effectively than hitherto? The right hon. Lady speaks of some countries grandstanding; we already have an insight into the ways of the United States. Can she name the other countries that grandstand instead of coming to the aid of the underdeveloped countries?

May I correct the hon. Gentleman? I did not say that the United States grandstands; on aid, the US has not bothered to compete. However, there has been a change, and the US is at least joining and trying to make a commitment to increasing its aid. That is welcome. I agree with the hon. Gentleman that the prospects for Africa are very serious. At current rates of population growth and economic growth, the continent is set to become steadily poorer, yet 50 per cent. of its population is already abjectly poor.

One of the things that we must do to change the prospects of the continent is resolve some of the conflicts. We are living at a time when the conflicts in Sudan, Congo and Angola are all moving towards a resolution. If those three massively resource-rich countries could be brought to peace, it would transform the prospects of the continent. We have reformers on the continent: Uganda, Mozambique, Ghana and others are achieving the sort of economic growth and improved performance in health care and education that the whole continent needs. We must use the new partnership for African development to achieve that across the continent.

Given my right hon. Friend's strong commitment to the poorest African nations, does she agree that in order to reach the millennium development goals, the issue of debt must be tackled more deeply and more widely, even beyond the HIPC agreement? Will she and my right hon. Friend the Chancellor pursue that view in Washington at the important spring meeting of the International Monetary Fund next week?

I agree with my right hon. Friend. Twenty-six of the 40-odd heavily indebted poor countries have qualified for debt relief. That has leveraged major reform, better economic performance and better public services focused on the poor. However, because world commodity prices are still declining—coffee, cocoa and so on—and oil prices have been rising, many of those countries have not exited from their debt problem, as their earnings from exports have declined. Many of them need extra help. Many of the other countries that have not yet qualified—Sudan, Burma and the Democratic Republic of Congo among them—must be helped towards peace so that they can qualify for their debt relief, but we need more generosity because of the change in world commodity prices.

What discussions she has had with ministerial colleagues in the Department of Trade and Industry regarding the encouragement of sustainable development in developing countries by the Export Credits Guarantee Department. [46043]

My Department worked closely with the Department of Trade and Industry during the 2000 review of the ECGD. We supported the development of the ECGD's new set of business principles which make clear its commitment to sustainable development.

Does the Secretary of State agree that, if the ECGD can really take on board sustainable development, there is a huge opportunity for it to work with her Department in achieving real development in developing countries, such as the strategy set out for sustainable energy in the World Wide Fund for Nature's international paper? In particular, will she use her good offices to press the DTI to bring forward the ECGD strategy paper on sustainable development?

I agree very much with the hon. Gentleman, not just with regard to the ECGD but on international trade and business. The old ways of selfish, corrupt business that did not benefit poor countries and often got them into debt should be put behind us. They need trade and exports and loans so that they can invest in clean water, sanitation and proper energy sources, which will enable them to grow sustainably and improve the lives of their people. I hope that the reforms that are being put in place in the ECGD will make it a leading-edge player, showing that responsible, ethical business can be good for people who are employed in our own country and can promote development for the poorest people. A change is taking place and we need to ensure that it is taken forward.

When export credit guarantees go wrong, they eventually turn into debt and then to debt relief when they become part of this country's overseas development assistance; so will my right hon. Friend ensure in her discussions with the Department of Trade and Industry that when export credits are first issued to developing countries, the development consequences, including for the poor people in those countries, are considered in case they turn into debt and then into aid?

My hon. Friend is fundamentally right. Much of the debt that has been written off for all the heavily indebted poor countries—I think that it is about 50 per cent. across the world—involves our ECGD or equivalent departments in other countries, and that shows bad lending in the past, often with lots of corruption on both sides of the equation. As well as writing off debt to give countries a chance to go forward with proper economic reform and a better future, we must tighten up on our own export credits and the worldwide use of export credits. That effort is on, but it is difficult. There is a lot of resistance and any help that the House of Commons can give will be gratefully received.

What recent discussions she has had with leaders of sub-Saharan African countries regarding democracy in Zimbabwe. [46044]

Both my right hon. Friends the Secretary of State and the Foreign Secretary are in regular contact with a number of African leaders about the situation in Zimbabwe. The damaging impact on the economy, including severe food shortages, is profoundly worrying in a country where 75 per cent. of the population live in poverty and one in three adults are HIV positive. We continue to provide humanitarian aid.

Does the Minister accept that the election result in Zimbabwe poses serious questions to the viability of the New Partnership for Africa's Development? Is he proposing changes to the scheme in the light of that result? Will he also make it clear in any dealings that he has with leaders of sub-Saharan countries that silence in response to the election result is simply not an option, and that a failure to condemn absolutely the conduct and the result of the election will amount to complicity with Mugabe and his wicked ways?

The Southern African Development Community and the Commonwealth, the UK, the European Community and others have made clear their view that the election in Zimbabwe was neither free nor fair. I would not agree that the future credibility of the New Partnership for Africa's Development is under threat. It represents the best hope for the future of sub-Saharan Africa, and its most important element is the commitment of the leaders of sub-Saharan Africa to taking responsibility for dealing with the problems of the continent. We need to support them in that process because it offers the best way forward, not only for Zimbabwe but for the whole continent.

Does the Minister realise that hon. Members in all parts of the House have relatives and families in Zimbabwe? What is he doing to ensure that UK aid workers in particular are protected from Mugabe's thugs and that UK aid reaches those in need and does not go to Mugabe and his henchmen?

The most important thing is to ensure that we work through NGOs, Churches and others to make sure that the humanitarian aid that we are rightly continuing to give gets to the people who need it. When concerns are expressed about interference in the process, we must ensure that they are investigated thoroughly, just as they are being investigated by the World Food Programme in relation to two or three incidents. The people of Zimbabwe are not responsible for the Government they have, which is why they continue to rely on our support and we continue to give it.

If he will list his official engagements for Wednesday 17 April.

This morning, I had meetings with ministerial colleagues and others. In addition to my duties in the House, I will have further such meetings later today.

I welcome the Wanless report, which was published this morning, and the ensuing debate. Does my right hon. Friend agree that the best insurance policy for all citizens is a publicly funded NHS that is free at the point of use? Will he strive to maintain and build on the consensus that has existed since 1948 and which saw the NHS as a clear, enduring and practical expression of our values as a country? Does he accept that the Government have to demonstrate that change must be effected on the ground with results? Will he not be put off by the discordant voices that are trying to say that the NHS cannot or will not work? Is not the best thing that can be done for the country that the Leader of the Opposition—[Interruption.]

Order.

I am happy to say that I agree with all that. In fact, I probably agree with what my hon. Friend did not say as well as with what he did say.

As I am sure my hon. Friend understands, the foundation is a strong economy with low inflation, low interest rates and now the lowest unemployment of any major country in the world today. On that basis, we can invest in our public services like the national health service and make the changes that are necessary. The reason why it is important to make the investment in our health care system is that that is indeed the best insurance policy that people in this country can have.

Does the Prime Minister agree with the former Labour donor Lord Haskins, who said about the Department of Health's contract for smallpox vaccine:

"I see no reason why a tendering process for these vaccinations should not have been transparent from beginning to end"?

No, I do not agree with those comments. The contract was given entirely in accordance with the normal rules and in a proper way.

These comments follow the Prime Minister's comments yesterday that concerns about speed and protecting national security are the key and that containing this matter behind a secret wall is somehow important. Can he now explain why the United States was able to protect its own citizens and national security, hold an open procurement process and deploy is vaccine more quickly than we have in the UK?

Again, I do not agree. The advice was quite clear that, in line with national security, it was important that the details of the contract were not dealt with through public procurement. However, many companies were asked to tender, and the company that was chosen and recommended by officials was chosen entirely in accordance with the proper rules. This is just the latest smear from a Conservative party that has absolutely nothing whatever to say about the serious issues of the day.

Methinks the Prime Minister protests too much. Does he not understand that hiding behind national security, as he has again done today, simply fuels people's suspicions about his motives? Given that the head of PowderJect has given this Government their largest single donation since the election, should that not have set an alarm bell ringing in Downing street signalling that the procurement process needed to be even more open, not less open? So instead of sending his Cabinet Ministers out like sheep bleating about the sudden need to find state funding for political parties, is not the real solution that we need an open and transparent Government?

On the process, as the right hon. Gentleman knows, the permanent secretary to the Department was consulted, and he said that that was indeed the right thing to do for the country and its needs. However, in talking about openness and transparency in funding, let me remind the House that during 18 years of Conservative Government, we had no openness or transparency and nothing was said about funding. The only reason why these allegations can be made is because we have indeed published the names of those who donate to the Labour party.

Let us put the matter to the test. We as a Government, under the law that we introduced, have said exactly who has donated to the Labour party in our time in office. The right hon. Gentleman is now the leader of the Conservative party, so let him go back through the records of 18 years of Conservative Government and publish the names of the donors and the amounts donated, and the countries that they came from. He has that information in Conservative party central office. He wants openness and transparency, and this Government have given it. Let him stand at the Dispatch Box and pledge it for his party.

A new breast cancer unit, a new neurology department, a new cardiac centre and new wards at Nottingham City hospital have all been made possible by this Government's record investment in the NHS. Will my right hon. Friend recognise, however, that it is not buildings but staff who make the NHS? Will he look at the pay and conditions of porters, cleaners, nurses and doctors, and see what we can do about recruitment and retention problems in the NHS?

:What is obvious from any consideration of alternative systems around the world is that we have a capacity problem in the British health care system. We have insufficient doctors, consultants and nurses, and for that reason we are expanding numbers—including, for example, some 14,000 extra nurses in the past year alone. However, we also need to ensure that we open up greater training opportunities for doctors, consultants and nurses, and we are doing that in every area. I believe that it is right to say to people in this country that, if we want to improve our health care system, we have to pay for it. The fairest and best way of doing that is through the national health service, funded in the way we have described.

Can the Prime Minister explain why the Chancellor was able to announce in the pre-general election Budget tax reductions for next year of £3 billion, given that we have been told to expect tax increases in today's Budget? What went wrong in between?

What the Chancellor also did in the last comprehensive spending review was to announce the biggest sustained increases in health and education spending that we have had. Indeed, the reason why our education system is now among the top eight in the world is precisely because of the investment. As the British Medical Association and others have said, the reason why real improvements are now happening in the national health service is because of the extra investment.

No one believes that.

:The right hon. Gentleman says, "No one believes that," but I think that most people prefer to listen to those who work in the health service, rather than to a Conservative party that has a strategy of denigrating and running down the health service at every turn. However, we do of course need to sustain those improvements in this spending settlement, and that is precisely what we want to do.

I am sure that a lot of people in the country will agree with that last sentiment so far as the Conservatives are concerned. However, is it not a fact that, at the last election, the Liberal Democrats argued for honest and fair taxation and for more investment in the health service? We would welcome that, but does not the Prime Minister regret the fact that he did not have the courage to do the same?

It was clearly important to strengthen and stabilise the economy and to achieve the current strong economic situation, and, on that basis, to invest. I thought that the right hon. Gentleman might say that the Liberal Democrats would have invested more. In fact, in 1997 they asked for an extra £500 million for the health service, but in the last Parliament we put in £5 billion.

The trouble with the Liberal Democrats is that they are very good at making spending commitments but less good at controlling numbers. For example, they have recently asked for more money for personal care, teachers, doctors, nurses, police, dental services and more hospital beds. They asked for the abolition of prescription dental and sight charges, the scrapping of all tuition fees and the reintroduction of all student grants. They also asked that benefits be given to all students during the summer holidays and for an increase in housing benefit; the payment of no-fault compensation, compensation for Gulf war veterans, greater spending on debt aid relief, and the giving of greater subsidies to small and medium-sized farmers. [HON. MEMBERS: "More."] Of course they want more—they always want more—and that was just this month's spending commitments. If we are talking about integrity and honesty, to pretend that we can get that much spending out of that 1p of tax is not a very honest way of conducting matters.

The national minimum wage is one of our finest achievements so far. Does the Prime Minister agree with me as a fellow Christian socialist that currently low hourly rates are neither ethical nor egalitarian? Does he hope that today's Budget at last meets the nation's needs for progressive policies so that there is a radical redistribution?

I can agree that that is important. The minimum wage should be seen alongside other measures such as the working families tax credit, which not only increased people's pay dramatically but provided an incentive to work. There is a reason why we have managed to secure such low unemployment in this country—there are 1,250,000 more jobs—at the same time as introducing a minimum wage, which the Conservative party told us would destroy 1 million jobs. In addition, we did that on the basis of ensuring that we take measures to stimulate business and enterprise. It is the combination of those two achievements together that gives us the economic position that we have today.

My constituents learned this morning that the Prime Minister spent £28 million on an empty dome that is inaccessible to the public. Does he realise that they would have welcomed just a few of those millions being spent on the provision of national health service dentistry in Market Harborough, where there is none, and on the building of the new hospital, which was supposed to be completed by 2005 but, owing to NHS financial shortages, will not now be completed until well into the next decade?

I can certainly say that it is important that we make additional investments in the national health service. I hope, therefore, that he makes it absolutely clear later today that the Conservative party supports the additional sums for the national health service. What is beyond any doubt, however, is that the one group of people who simply cannot criticise health service spending in this country are those who, when in office, underfunded the national health service and do not support the extra investment now.

Will my right hon. Friend join me in congratulating the James Paget hospital, which serves my constituency, for more than meeting the targets for reducing waiting times for in-patients and out-patients? With record levels of investment going into that hospital, resulting in more beds, a new accident and emergency unit, new operating theatres and a new maternity unit, does not that show that the best and fairest way to fund the health service is through general taxation, not charges and private insurance, as favoured by the Conservatives?

I congratulate all those in my hon. Friend's constituency who have worked so hard in the health service to secure those improvements. However, the position that he describes is replicated in many constituencies up and down the country. Of course we still have a long way to go to make the improvements that we need in the national health service, but as the report by the NHS chief executive showed just a couple of weeks ago, substantial improvements are happening. We need to build on those. The investments over the past few years have yielded results, but they need to be deepened and strengthened until the national health service is once again what people want it to be—the pride of this country and the envy of the world.

What does the Prime Minister have to say to the nine of my constituents who have had to leave Rothwell House care home in Leighton Buzzard because it cannot afford the new £30,000 lift required by the Care Standards Act 2000 when all the residents can use the existing stair lift quite happily?

What I would say to the hon. Gentleman is that that is precisely why extra investment is required in social care. [Interruption.] No, I am sorry, the answer to the problems of social care in this country is not to diminish the standards necessary to provide decent care. The answer is to keep those standards high, to improve them, and to put additional sums of money into social care, so I hope that the hon. Gentleman will be supporting what the Chancellor says today, rather than opposing it.

The Prime Minister will be aware that one of the main obstacles to furthering the middle east peace process is the widespread perception that when outrages such as Jenin happen, the western response seems to be muted, whereas there would be loud condemnation if they happened in any other country. What is he doing to dispel that perception and move the middle east peace process forward?

We have made it clear throughout that Israel should withdraw from the occupied territories. We have also made it clear, however, that the Palestinians should cease their acts of violence and terrorism. Both those things need to happen. Without repeating all the things that I said in the House last week, I say to my hon. Friend that I believe it is essential that we relaunch a genuine political process that binds not only the main two parties to the middle east peace process but the Arab world, the European Union and the wider international community. I hope that such a process can be relaunched soon, because it is the only way. Irrespective of all the things that are happening in the immediate term in Israel and in the Palestinian territories, it is absolutely obvious that without relaunching a proper political process, there is no prospect of bringing hope or peace to that region.

Will the Prime Minister tell the House by how much council tax has increased in Sedgefield this year?

The average council tax for people in Sedgefield is round about £740.

Council tax in Sedgefield is up by more than 13 per cent., which is six times the rate of inflation. Band D council tax in the Prime Minister's constituency is now the highest in the country. It is the very highest council tax that anybody is paying. As a council tax payer in Sedgefield, will the Prime Minister now tell us who he blames for this—the Labour council or the terrible Labour Government?

First, the right hon. Gentleman talks about band D in relation to Sedgefield. That is a rather typical Conservative thing to do, because only 6 per cent. of the properties in Sedgefield are in band D. If we take 100 per cent. of the properties there, the average council tax is well below many of the high council tax averages that we find in Conservative areas. If the right hon. Gentleman does not want councils to spend this money, perhaps he will tell us what services he wants them to cut.

That is rather typical of the Prime Minister. He did not really want to answer that question. Perhaps he has a vested interest. Simply put, both the Labour council and the Labour Government are to blame. The Labour Government are the ones who have increased the costs to councils, through the Chancellor of the Exchequer, and Labour councils cost people more across the board. In Labour council areas, band D council tax is at least £135 more than in Conservative council areas. [Interruption.] I do not know why the Liberal Democrats are looking so smug. It is at least £160 more in Liberal Democrat council areas. Does not that show that Labour councils, and their Liberal friends, cost more and deliver less?

No, it does not. I pointed out a moment ago that only 6 per cent. of Sedgefield properties are in band D. It is necessary for the right hon. Gentleman to concentrate on that 6 per cent., but perhaps I can concentrate on the other 94 per cent. The average council tax in Sedgefield is actually well below those of many Conservative authorities.

I return to the point that I made a moment ago. We have increased by 20 per cent. the real-terms spending for social services in Labour, Conservative and Liberal Democrat council areas, whereas it was cut during the last few years of the Conservative Government. If the right hon. Gentleman wants us to provide the extra services that his hon. Friends are calling for, surely he should support us in increasing the investment in social services and in the national health service. Of course, what he wants to do is complain about the council tax on the one hand, and complain about services being depleted on the other, yet he refuses to back the extra investment necessary to build those services up.

Although I of course welcome today's news that unemployment has fallen again, my right hon. Friend will be aware that manufacturing still faces problems as regards exchange rates in general and the euro exchange rate in particular. No matter what is done about productivity gains, efficiency gains and new understandings between management and unions, our exporting manufacturers still face a barrier that is sometimes difficult to surmount. Can my right hon. Friend tell me what the Government are doing to help manufacturing in those circumstances?

:First, it is important that we welcome the fall in unemployment, and I am grateful to my hon. Friend for doing so.

Manufacturing industry has been through a particularly difficult time for the reasons that he gives, although there are recent signs of some improvement. The most important thing for manufacturing industry and for the economy as a whole is stability and growth. It is precisely because of the way in which the Chancellor has managed the economy that we have ended up in a situation where this country has effectively weathered the potential economic downturn better than any other country of a similar size in the world. We now have the lowest inflation and the lowest interest rates that we have had for many, many decades. [Interruption.] Conservative Members are talking about recession. Under this Government we have had growth; under them we had the two worst recessions in living memory.

Given the Prime Minister's sudden but touching personal interest in the subject, will he tell the House realistically how long he thinks that Mr. David Beckham would have to wait for an operation on his foot under the national health service?

I must say to the hon. Gentleman that if anything indicates the state of the Conservative party today, it is that question.

The Prime Minister will be aware of the £6.5 billion upgrade of the west coast main line and is probably aware of a proposed £6.5 billion new route from Edinburgh to London. Will he ensure that there is fairness in the allocation of scarce resources in transport and therefore support the upgrading of the Crewe to Holyhead line, which is hopefully to be electrified, to ensure that we get the tourists, investors and freight that are so necessary to our north Wales economy?

I cannot give my hon. Friend all the commitments that he wants for that individual line, but certainly the additional investment in transport will mean that we can considerably upgrade our rail network in every part of the country. I am afraid that I shall have to delay for some time before being able to make any commitments on his particular line.

Were the six Parliamentary Private Secretaries who yesterday voted against Government education policy, and said that specialist schools should be forced to reduce the proportion of pupils that they can select on ability, right?

No, I believe that the position of the Government was right.

Last summer, one of my constituents lost her partner in a car crash. The Teachers' Pensions Agency is refusing to pay her a pension because although she lived with her partner for 10 years and they had children together, they were not married. Is my right hon. Friend aware that almost 90 per cent. of private sector pensions would pay out in those circumstances, but less than a third of public sector pensions do so? Will he put pressure on the trustees of our public sector pensions to rectify that clear injustice?

My hon. Friend raises a valuable and important point. I express my sympathy to his constituent for her loss.

The Government have made it clear that we are ready to extend benefits in the event of death to unmarried partners in any schemes where members wish that and are prepared to meet the cost. Obviously there is a limit to how much can be funded by the taxpayer, but we are trying to facilitate it within the circumstances of individual schemes.

Is the Prime Minister aware of the growing concern in Northern Ireland about the thought that prisoners—not prisoners, but terrorists on the run—might be returned under special conditions at a time when nothing is being done to restore the exiles who have been put out of the Province by the IRA?

Is he also aware of the great concern that although the president of Sinn Fein-IRA can hold a commemoration dinner and prepare a memorial for terrorists slain in the campaign, the British Government apparently expect soldiers' relatives to pay £100 for memorials for their soldiers who have been slain?

We will come forward with proposals about the so-called on-the-runs at the proper time. I have nothing further to add to what I said about that a moment ago. I understand the position of the relatives of those who lost their lives in the service of the RUC or the armed forces in Northern Ireland. They performed a brave and courageous service and we are well aware of our debt of gratitude to them.

I shall look into the specific point that the hon. Member for Belfast, South (Rev. Martin Smyth) made, but we have tried to make significant financial provision. I understand the sensitivity of the issue at this time in Northern Ireland and we will concern ourselves with all the matters that he raised.

Will the Prime Minister ensure through the action group on street crime that Operation Safer Streets continues not only for the rest of the year but with the same number of police officers? Figures that were published today show that has already succeeded in reducing street crime by 17 per cent. in Wandsworth in March compared with the same month last year and by 20 per cent. throughout the safer street boroughs. Will he include Wandsworth in the street crime initiative areas that are to pilot the new powers under section 130 of the Criminal Justice and Police Act 2001 to detain 12 to 16-year-olds who commit crimes when on bail?

I understand that Wandsworth is one of the 10 areas that have been chosen for the initiative. We want to ensure that street crime is comprehensively tackled because although crime overall has fallen, there has been an epidemic of street crime, often linked to mobile phones, by very young offenders. We are trying to ensure that we get the proper measures for the police and the courts to deal with it. My hon. Friend is right to say that we need to ensure that the investment is also there. Perhaps he will be patient about that.

Some Conservative Members would have the Prime Minister go to war with Iraq before the Chancellor can finish his Budget speech; some Labour Members would have Saddam Hussein round for tea and crumpets. What is the Prime Minister's thinking? Will there be a debate on a motion in the House before there is any conflict in Iraq?

I hope that that question did not take long to prepare. The hon. Gentleman is wrong to describe those who believe that Saddam Hussein presents a genuine threat as warmongers or those with hesitations as friends of Saddam Hussein. There is a serious issue to debate. We have made it clear why we believe that Saddam Hussein poses a threat and that weapons of mass destruction are a serious problem. However, I have also said many times that we will proceed carefully and deliberately, not precipitately, and that we will ensure that the House is properly consulted.

If the British people want better health services, they know that they will have to pay more through charges, private insurance or taxation. Does my right hon. Friend agree with the Wanless report that charges or private insurance would be more expensive for middle-class families than taxes, and would provide poorer services for them and for poor people who could not afford to pay charges or go private?

The report that was published this morning is not the only one. There is also the report from the King's Fund and the BMA report, which was published some time ago. All made it clear that they believed that if we accept the need for more resources for health care, the fairest and most efficient method is through the national health service. It is important that those who support alternative systems spell out their costs. The social insurance system of France and Germany, where there are enormous problems because of rising costs, and the American system, whereby people have to pay a large sum of money out of their own pockets and pay charges without getting the necessary health insurance in many cases, mean a heavy cost on the individual. We are not considering whether we should fund our health care system better; everyone accepts that we need to do that. We must consider the fairest and best method. We believe that it is through the national health service.

On jobs and manufacturing, does the Prime Minister know that Bright Steels, a specialist steel manufacturer in my constituency, recently made 60 workers redundant? That is a large proportion of a small firm's work force. It blames the recession in manufacturing and the proposed import tariffs by the United States on British steel. Does he understand that people in manufacturing in this country will judge the Chancellor's Budget on the support it gives the manufacturing base? Will he continue to press President Bush not to include specialist steels in the proposed import tariffs?

Of course I shall continue to make that case very strongly to President Bush. I also say to the hon. Gentleman that I sympathise very much with his constituents who have lost their jobs in being made redundant. However, the problems of manufacturing have been acute over the past number of years because of the very strength of the pound against the euro. What is important is to recognise that, for manufacturing industry and, indeed, all industry in this country, the single best thing we can do is never return to the days of boom and bust, where in the early 1990s—[Interruption.] Well, I am glad that Opposition Members shout at that, because it gives me an opportunity to remind the House of what it was like when they were in charge of the economy. We had interest rates of 15 per cent. for a year, interest rates of 10 per cent. for four years, millions of manufacturing jobs were lost and unemployment was over 3 million. Fortunately, with this new Labour Government, those days are long gone.

Before I call the Chancellor of the Exchequer, it may be for the convenience of hon. Members if I remind them that copies of the Budget resolutions will be available in the Vote Office at the end of the Chancellor's speech.

Five years ago, this Government's first Budget set out long-term objectives and far-reaching reforms to achieve economic stability and higher employment. And today I can report that, in the last year, Britain has experienced the lowest inflation and the lowest interest rates for 40 years; for the first time for half a century, unemployment in Britain is lower than in America, lower than in Japan and lower than in the rest of Europe; and in the year just ended, Britain had the highest growth of any of our major competitors.

And just as in 1997, we had the strength to set a course, not just for a year, but for a Parliament, so too in this Budget—the first of the Parliament—our task is to address, through reform, three major long-term challenges: the challenge of enterprise, with new incentives to raise investment and to reward entrepreneurship; the challenge of family prosperity for all, with a new child tax credit paid to mothers for all families with incomes up to £58,000; the challenge of renewing our public services, with, for a reformed NHS, a secure long-term financial foundation.

And with those whose priority is fairness recognising the need for enterprise, and those whose priority is enterprise accepting the need for fairness with strong public services, I believe that, just as Britain built in the last Parliament a national consensus for stability and employment, Britain can in this Parliament build a consensus that we should advance enterprise and fairness, and do so together.

I turn first to the economic outlook.

From growth in 2000 of 3½ per cent., the G7 economies as a whole grew by just I per cent. in 2001.

World trade, which grew by 12 per cent. in 2000, failed to grow at all in 2001. Manufacturing output fell across the world, falling by 3.6 per cent. in the G7 countries, 4.3 per cent. in America, 7.6 per cent. in Japan and in Britain by 2.3 per cent: it was a decline all round that started in the American information technology and electronics sector, mirrored in Britain by a 45 per cent. fall in semiconductors output and a 54 per cent. fall in telecommunications.

Last autumn, in the wake of 11 September, the world saw a fall in business confidence, declining markets and volatile oil prices—major and simultaneous challenges to the stability and continued growth of the British economy.

In the past, when the world faced a downturn, it was Britain that usually entered weaker and suffered longer with higher unemployment—successive Governments unable to sustain economic growth because they were constrained by already high inflation and high borrowing.

This time, however, from a platform of low inflation and fiscal discipline, both delivered through a new monetary and fiscal framework, we have been able to steer a steady course of stability. The Bank of England has been able to adjust policy at the right time and in the right way, last year cutting interest rates seven times. Supported by a fiscal policy, we have, despite the difficulties, been able to safeguard both stability and growth.

At the last Budget, we forecast that growth in 2001 would be within a range of 2¼ to 2¾ per cent., and we based our public finance projections on 2¼ per cent. I can tell the House that, while Germany grew by only 0.6 per cent., America by 1.2 per cent., the euro area by 1.5 per cent. and Japan contracted by 0.5 per cent., Britain grew by 2.2 per cent.

I have written today to the Governor of the Bank of England stating that, in 2002, we will continue to pursue a symmetrical inflation target of 2.5 per cent.—a target that, because it takes deflation as seriously as inflation, is not only pro-stability but also pro-growth. Monetary policy will continue to be backed by a sound and long-term approach to fiscal policy. Nothing that we do or propose in this Budget will undermine that platform of stability.

At the time of the pre-Budget report, we drew attention to the downside risks to world recovery, not just from the possibility of further terrorist incidents and instability in the oil price, which has since December ranged from $17 to $27 per barrel, but from the durability of the US recovery. I said then that, while it was important to remain vigilant, we were cautiously optimistic.

Increasingly, independent forecasters now expect the world economy to grow faster—the United States to grow by 2.6 per cent., the euro area by 1.3 per cent., Japan to contract by more than 1 per cent., but the G7 to grow by 1.6 per cent. overall. We hold to the cautious optimism of our forecast of November—that, while meeting our inflation target, Britain will achieve growth from 2 to 2½ per cent. this year, rising in 2003 to growth of 3 to 3½ per cent., with growth in 2004 from 2½ to 3 per cent.

Over the last few years, independent forecasters have revised upwards the trend rate of growth of the British economy, with the majority suggesting a range of 2.5 to 2.8 per cent. The International Monetary Fund's forecast is at the upper end of this range. The Treasury now estimates trend growth at 2¾ per cent. but, as before, we will continue to base our public finance forecasts on a more cautious assumption for economic growth-2½ per cent., which the National Audit Office has audited as "reasonable and cautious".

While the British economy has been stable, it can and must be stronger, its growth not only sustained but more balanced. In the last year, as world trade fell, consumer spending and public investment supported growth in the British economy. Now, as world trade turns around and industrial production rises, our forecasts show consumer spending returning closer to trend as we achieve more balanced growth.

We expect in 2002 world trade to grow by 2¼ per cent., and in 2003 by 8½ per cent. UK manufacturing output returned to growth in February and, while global risks remain, we expect further rises in the coming months. Business investment is expected to follow, with growth in investment rising in 2003 to between 5½ and 6¼ per cent.

I now turn to the public finances. Our fiscal rules are set not for a year or even two years, but for the entire economic cycle. And because from 1997 we tightened fiscal policy by 4.5 per cent. of national income, we have been able to reduce debt well below 40 per cent., not just in one year but across the economic cycle.

Thus, while the pre-Budget report showed that tax receipts were £7 billion less last year—and £10 billion less this year—than forecast because of the global economic downturn, the underlying state of our public finances remains strong.

In the year to last April, we repaid £37 billion of debt. In 1997, net debt was 44 per cent. of British national income. Last year, it was down to 30.4 per cent.—in contrast to 41 per cent. in the US, 53 per cent. in the euro area and nearly 60 per cent. in Japan.

As we approach the decisions of this Budget, Britain's debt has been reduced to the lowest level of national income in the G7 countries and the lowest of all our major European competitors. Debt interest payments were running at £29 billion a year when we came to power, with more money paid on debt interest than was spent on all our schools. I can now report that debt interest, which fell to £26 billion in 2000, fell again to £22 billion in 2001 and we expect it to fall again this year to £21 billion—just 2 per cent. of our national income.

So, just as we paid off more debt in one year than all previous Governments paid off in all the previous half century, so this year debt interest payments will take less of our national income than at any time in nearly a century—since the beginning of the first world war.

In the early 1990s, imprudent assumptions about debt and related mistakes in fiscal policy contributed to the boom and bust that did so much damage. So today I propose to reinforce our commitment to stability and sustainable public finances by committing, now and for the future, to publish figures for core debt, prudently adjusting debt for the effects of the economic cycle.

Our approach since 1997 also includes cautious assumptions about equity prices, oil prices, unemployment and VAT receipts. And while some have suggested that, having established a prudent approach in the last Parliament, we no longer need to plan on the same rigorous basis for this Parliament, I can tell the House that, in the coming spending review, we will maintain our cautious assumptions and meet our rules, even on the cautious case.

Indeed, today, we will do more than that.

In the interests of fiscal discipline, I will not only maintain our cautious rules and lock in the tight fiscal stance this year and over the next two years that we set out in the pre-Budget Report, but I will go further and implement—compared with the pre-Budget report—a small tightening of the fiscal stance over the next two years.

After all the measures that I will announce today, the current budget, which was £10.6 billion in surplus last year, is projected to be in surplus this year by £3 billion, and in future years by £7 billion, £9 billion, £7 billion and £9 billion.

Net public borrowing was £1.3 billion last financial year and is projected to be £11 billion this year and, in successive years, £13 billion, £13 billion, £17 billion and £18 billion, as we borrow to invest well within our sustainable investment rule—that debt be at or below 40 per cent. of national income over the cycle.

Debt, which was 30.4 per cent. of national income last year, is projected to be 30.2 per cent. this year, and, in the following financial years, 30.4 per cent., 30.4 per cent., 30.7 per cent. and 31 per cent.

All my budget and public spending decisions will be made within this framework of fiscal discipline.

By keeping a steady and firm hand on our public finances, and by keeping debt and debt interest payments low, we continue to free up more resources for our public services.

And after all the Budget measures that I will announce today, I am able to meet our fiscal rules even on the cautious case and set a new public spending envelope for the years up to 2006, while being able to release an extra £4 billion for public spending next year.

Precise allocations for departmental expenditure limits will be made in the forthcoming spending review, but as we make provision for increases in public spending, we will set three conditions. First, money must be matched with modernisation that will lead to results. Secondly, just as sustained economic growth demands responsibility in setting private sector pay, so a sustained commitment to better public services demands responsibility in setting public sector pay. And thirdly, at all times—now and in the future—we will never compromise our commitment to meet our fiscal rules and disciplines.

The monetary and fiscal figures that I am publishing today also show that we are well within the Maastricht criteria for the euro and, as the House knows, the Treasury is undertaking the preliminary and technical work necessary to allow our assessment of the economic tests.

Our first long-term challenge is, through higher productivity and investment and a stronger national consensus on the importance of enterprise, to build a more prosperous Britain.

Now, as we press ahead with the supply-side reforms to remove barriers to growth—the new competition policy, the new approach to physical planning policy, new rules for work permits, our education reforms—my focus in this Budget is on two further sets of measures that encourage higher levels of innovation and investment, and that help small and growing businesses.

Over recent years, British business investment levels have risen significantly, from just over 10 per cent. of national income to nearly 14 per cent.

And to encourage higher levels of investment we have, in past Budgets, cut corporation tax from 33p to 30p, the lowest in our history.

In this Budget—specifically to help British manufacturers invest in the technologies of the future—I have decided, following consultation, that we will legislate, for large companies, for a new volume-based research and development tax credit. That rate will be set at 25 per cent., and it is a £400 million boost to innovation and research in Britain and to modern manufacturing in our country.

To continue to build a modern corporation tax regime for British firms, operating as they are in a global economy, I will exempt companies from corporation tax on the gain from the sale of substantial shareholdings, benefiting businesses by £150 million a year. I will modernise the tax treatment of intellectual property, giving further long-term savings to business of £200 million a year.

The UK's current treatment of branch capital means that some profitable foreign companies operating in the UK pay little or no tax on their profits here. So from 1 January, at a revenue gain of £350 million in its first full financial year, I will bring the treatment of capital for UK branches of foreign companies into line with international practice by applying similar corporation tax rules as America, Germany, France and most other major countries.

Small businesses account for half the economy's output and for 55 per cent. of all jobs in the private sector—over 10 million jobs in all. And the small firms of today can be the big firms of the future.

We want to see a more enterprising Britain where, in every region, more small businesses are starting up and where you can work your way up a ladder of opportunity—from employment to self-employment, from micro-business to growing business—with Government on businesses' side, as firms hire for the first time, as they invest, as they seek equity, as they export and as they grow.

A sound economy and low inflation provide the stability that people need to start a new enterprise. This Budget seeks to build from this a culture of entrepreneurship in every community.

In 1997, we cut the small companies tax rate from 23p to 21p. And then in 1998 we cut it again to 20p, and introduced a starting rate of 10p.

I propose in this, the first Budget of the new Parliament, to go further. The small companies tax rate will be cut yet again—from 20p to 19p. And I propose to do this with immediate effect, for this tax year 2002–03.

And to send out the strongest signal about the importance that we attach to small businesses and the creation of wealth I propose to reduce the 10p starting rate of corporation tax—also with immediate effect—from lop to zero.

Small companies with taxable profits of less than £10,000 will pay no corporation tax.

With the starting rate of tax cut from 10p to zero and the small companies rate down from 23p in 1997 to 19p, this is now the most favourable corporation tax regime for small companies in any of the advanced industrial countries.

The Finance Bill will match this by legislating for a cut in capital gains tax, from this April, to 20 per cent. for business assets held for one year or more.

And for business assets held for more than two years, capital gains tax will be cut to 10 per cent.

In 1997, all transactions were subject to a 40p rate. From this year, three quarters of taxpayers with business assets will pay only a 10p rate, rewarding entrepreneurship and giving Britain overall a capital gains tax regime that is more favourable to enterprise than that of the United States.

Small firms have scarce resources and, having cut corporation and capital gains tax, I now propose to reform the administration of valued added tax for small businesses to abolish a set of regulations.

I start by removing, for thousands of small businesses, the burdensome requirement that has been in place since 1973 when VAT was introduced of having to record the VAT charged on each individual purchase and sale.

So, with immediate effect and for a total of half a million small businesses with turnovers of less than £100,000 a year, I am introducing a new flat-rate calculation for VAT payments. Rather than them filling in forms, we will introduce a flat-rate calculation that will save a typical small business hours of administration every year.

I can announce that, from next April, I plan to extend this scheme further to include almost half VAT-registered firms: in total 700,000 small firms with turnovers of up to £150,000 will be able to save time and form filling by making flat-rate VAT payments.

My second measure concerns automatic fines imposed by Customs and Excise. They are a source of grievance because they are often applied regardless of circumstances. So, for the same 700,000 small businesses, we will abolish automatic fines for late payment.

Thirdly, importers incur £175 million a year in unnecessary costs because they have to make up-front payment of VAT on goods imported into Britain even before they sell them to customers.

To cut those compliance costs and improve cash flow for businesses, I propose a new system—on the detail of which I will consult—under which we will allow approved companies to defer paying VAT on imports until they submit their VAT return.

Fourthly, automatic relief from VAT on bad debts is a persistent request from the small-business community, and until now no Government have responded. When a business has to account for VAT on a sale to another company but that company does not pay up, VAT recovery has proved difficult. It is costly, and it is time-consuming. I therefore propose a new rule for bad debt relief to give businesses an automatic entitlement to recover the VAT after six months.

Fifthly, I will offer small companies direct help with administration of their tax and payroll. The Carter report recognised the strong long-term case for small firms bringing their payroll systems online, and the equally strong case for cash help to enable them to do so. So we will set aside £40 million in the first year, and £110 million in the two subsequent years—£420 million in all—to give direct cash help to small firms going online, as we move in stages over the next eight years to universal e-filing.

Last month, we accepted the Competition Commission's recommendations for more competition in banking services—and, in the interim, for free banking services or interest paid on current accounts to small businesses—but we can do more to help not just the start-up firm but the hard-working family business, by creating a level playing field in every respect.

Thousands of employers are unable to recruit the skilled staff they need because training is so poor. Employees, employers and the Government must each accept their responsibilities, and we will finance pilot projects where, in return for Government's providing free access to training courses and support for wage costs, participating firms give staff time off to gain new skills. I can today respond to joint work by the CBI and the TUC by announcing an additional £30 million so that more small businesses in our country can now reach "investor in people" standards.

Small businesses are the motor for future growth everywhere, but nowhere more than in high unemployment areas where, starting in our schools curriculum, we must do more to ensure that an enterprise culture can flourish. By supporting new business activities for people and places that prosperity has so far passed by, we will advance enterprise and fairness together. So in 2,000 designated enterprise neighbourhoods we will supplement the small business tax cuts I have just announced with two further tax cuts.

In the pre-Budget report, I implemented the first stage of stamp-duty relief in 2,000 of our high-unemployment areas: the abolition of stamp duty on all home and business property transactions up to £150,000. Now, for commercial transactions, I will seek state aid approval to abolish this limit—and, therefore, stamp duty in these areas—altogether.

And from this month, to match our other measures to regenerate local high streets and urban estates—the 5 per cent. VAT that we have for residential conversions, the 100 per cent. first-year tax allowances for converting vacant space above shops into flats, and the accelerated 150 per cent. tax relief for cleaning up land that is contaminated—we will introduce a new community investment tax credit backed up by a community development venture capital fund that will provide an additional £40 million to invest in our most deprived areas.

There is also no necessary conflict between growing the economy and protecting the environment. There is a huge potential for British firms, small and large, to capture new world markets by investing in environmentally friendly technologies and creating new businesses and jobs as a result. We now propose a series of new incentives for businesses investing in energy efficiency. I can announce that, to boost the use of combined heat and power in all areas of the country, we will exempt all electricity produced by this technology from the climate change levy. Electricity generation from coal methane offers new employment opportunities as well as environmental gains, and this summer it will be exempted also.

I can now extend capital allowances for further investment in green technologies at an enhanced rate of 100 per cent. that will strengthen, not weaken, our economy as we meet our Kyoto targets and make Britain a leader in this vast new global market that is emerging for green technologies. To encourage more environmentally friendly fuels I will, from next year, introduce a fuel duty incentive for sulphur-free fuel. Having already cut fuel duty for projects on hydrogen, biogas and methanol, I am now inviting British business to come forward with further proposals for pilots that would encourage new fuels in our country, and which we would support with fuel duty cuts and exemptions.

I am also announcing a cut of £55 in the licence fee for the least polluting vans, cuts of £30 for the least polluting cars, and cuts of up to £35 for motor cycles. Hauliers from overseas should pay their fair share towards the cost of using our roads, and I propose to go ahead with a road user charge for lorries that is distance-based, with offsetting tax cuts for the UK haulage industry. The Financial Secretary will consult with the industry on the precise details of the scheme.

North sea oil is vital to Britain. For North sea oil, my aim is to deliver a tax regime that promotes long-term investment while giving a fair return to the British people, so the Finance Bill will legislate for two changes. To raise revenues, I will introduce a supplementary charge at a rate of 10 per cent. on North sea oil profits. At the same time, to support new investment, I will raise first year capital allowances from 25 per cent. to a full 100 per cent. and, subject to consultation, we will set a date for abolishing in its entirety the royalty on North sea oil, so we can create a stable long-term framework into the next Parliament for the next stage of the development of the North sea.

While in each Budget I have proposed the abolition of one tax, in this Budget—in addition to abolishing North sea royalties—I propose for consideration extending the successful betting and pools tax regime to bingo, to tax only the profits and not the players, so that I can abolish the tax paid by millions of bingo players in this country.

To encourage one group of small businesses, the nation's small breweries—often village pubs, some two centuries old—I have decided that the duty paid on their own beer will be halved. This is a cut equal to 14p off each pint, to be implemented for village pubs and small breweries by this summer—in time for the World cup. It will also be available in Scotland, Wales and Northern Ireland.

From 28 April, premium package coolers which contain spirits not wine will be taxed not as low-alcohol wines, but as they should always have been, at the same rate as spirits.

To ensure fairness for taxpayers and businesses, we will act to close tax loopholes and be vigilant against tax avoidance. I have decided to act, with immediate effect, on the avoidance of stamp duty on property, to put an end to three artificial schemes for VAT avoidance, and I am reviewing the complex rules on residence and domicile.

At the very core of creating a more enterprising and fairer Britain is our policy of moving people from welfare into work, and this morning's unemployment figures confirm that, since 1997, there are now 1.5 million more people in work in our country, giving Britain the best unemployment figures for 25 years. In the mid-1980s, 350,000 young people aged 18 to 24 had been unemployed for more than a year. Today, the figure is just 4,700.

Having weathered the world downturn of the last year, Britain is moving closer to our goal of full employment than for a generation. The Secretary of State for Work and Pensions and I are agreed that we must not relax, but accelerate our efforts in pursuit of that goal.

Starting two weeks from now, in six, and by December in 20, of Britain's high-unemployment areas, the introduction of the StepUp scheme will oblige the long-term unemployed to accept a guaranteed job which will offer, instead of the dole, secure waged employment. I can announce also that we will, in London and selected cities, match this new regime by introducing mandatory work preparation courses for the long-term unemployed.

Many who have come on to the unemployment register recently have a history of not being able to hold down jobs, so starting in pilot areas, unemployed people who are recurrently in and out of work will now come within the same rights and responsibilities of the new deal. In return for new obligations, there will be new opportunities to ensure that work will pay significantly more than benefits.

Building on the increase in the minimum wage from October, working families with children will now have a guaranteed minimum income of £237 a week, more than £6 an hour for a 35-hour week—£97 more than income support, and substantially more even when all benefits are taken into account.

Lone parents working 16 hours will be guaranteed £179 a week, as well as help with child care. Working full-time, they will be guaranteed £237 a week, making work pay £70 a week more than income support.

The Secretary of State for Work and Pensions will shortly announce the details of a national campaign jointly with employers, lone parent organisations and Jobcentre Plus to make single parents aware of the jobs on offer, the higher income now possible and the child care help available, backed up by a new mentoring scheme for lone parents. A single person with a disability moving into work of 35 hours will be guaranteed £194 a week, £22 a week more than today.

I want also to announce the details of the next reform to make work pay: to extend the benefits of the working families tax credit, currently received by 1.3 million families in this country, 450,000 more than received family credit.

For the first time, single persons and couples aged 25 or over without children will be eligible for in-work support that makes jobs pay. We know the problems that particularly those over 50 face not just in getting work but in the doubts they express about whether it is worth their while working. The working tax credit now tackles this problem. Couples with wages of less than £280 a week, or £14,000 a year, and single persons with wages of less than £200 a week, or £10,500 a year, stand to gain from the new credit.

For a couple with no children, full-time work will pay not just the minimum rate of £130 a week under the minimum wage but £53 more than that at £183 a week. For a single person, work will pay at least £154 a week. So, in return for the responsibility to take up the opportunities that are available, the working tax credit now fulfils our promise that we will make work pay.

I turn now to pensions. Last November, the Secretary of State for Work and Pensions and I set out the new financial measures to ensure pensioners have dignity in retirement. No matter what the rate of current inflation, the basic state pension will increase by at least £100 a year every year, and this year it is rising by even more than that: £3 a week for single pensioners, £4.80 for couples.

From next year, 5 million pensioners stand to gain in addition from the pension credit by on average £400 a year more per household: that is £8 a week extra. For the poorest single pensioner, extra help will guarantee a minimum income of £98.15 this year and at least £100 next year.

For pensioners who have occupational pensions, small earnings or savings and who pay tax, I am also able to do more with my announcements today. The age-related personal allowance will be raised in 2003–04 far faster than inflation. An elderly taxpayer will be able to set the first £6,610 of their income against tax, and the first £6,740 for those aged 75 or more. As a result of this rise in personal allowance, 170,000 pensioners will no longer be liable to pay income tax. As we maintain the free television licences for all pensioners aged 75 and over, the winter fuel allowance will be paid this year at £200 and in every year of this Parliament. With the minimum income guarantee, the new pension credit and the new pensioner tax allowances, the average pensioner household is now £1,150 better off even after inflation than in 1997.

Following this period when we have been so powerfully reminded of the enduring contribution of public service by our older generation, we are determined to give more opportunities for community service, especially among young people. Later this year, the Home Secretary and I will publish a joint discussion document on fiscal and other changes we can make to promote volunteering and community service.

Gift aid now provides a 28 per cent. addition to every donation by taxpayers to recognised charities, and that is designed to encourage more giving. I can announce that taxpayers will be able to carry back tax relief on their donations to the previous year and, from 2004, taxpayers filing a return will be able to direct the Inland Revenue, which will send any refund to a charity of the taxpayer's choice.

Amateur sports clubs are the mainstay of local sports in our country and they are the pride of every strong community. The Secretary of State for Culture, Media and Sport and I are determined to do all we can to support sport throughout the whole country, so, backdated to 1 April this year, there will be new tax reliefs, the details of which are published today, to enable amateur sports clubs to reduce tax bills to gain additional benefit from donations that are made by local supporters. To boost local sports further, we will match that tax relief with an extra £20 million for renovation and improvement of local sports club facilities.

This Budget is about building a Britain of greater enterprise and greater fairness, and nothing is more important to an enterprising, fairer Britain than that, through education and through support for the family, we invest in the potential of every single child in our country.

A family friendly tax and benefit system should be founded, as Beveridge wrote in his 1942 report, on the principles that nothing should be done to remove from parents the responsibility of maintaining their children, and that it is in the national interest to help all parents to discharge their responsibility properly. But for years there was no recognition in the tax system even of the existence of children or of the sheer costs of bringing them up, and our tax and benefit system had ceased to reflect our values.

This Budget applies the Beveridge principles to the realities and needs of modern family life. Today, many families rely on two incomes and most women work. Some of the greatest pressures that parents face were almost unknown to Beveridge's time: the loss of income because one parent ceases employment and is at home or works part-time after the birth of a child, and the costs of child care when the mother goes out to work.

A tax and benefit system that puts families first in the modern world would recognise not just the family as the bedrock of society and the rights and responsibilities of parents, but the very real pressures that parents face right up the income scale. It would materially help them balance the needs of work and family, and it would be generous enough to ensure for each child a good start in life.

To create a truly family friendly tax system, we must integrate tax and benefits. Instead of the old argument between those who favoured only universal benefits and those who supported narrow means-testing, our reform ensures one seamless system that supports all families through universal child benefit, recognises the costs of raising children that middle-income as well as lower-income families face, and gives most to those who need it most—those on the lowest incomes.

I have decided that, in line with universal child benefit, all of this support will be paid to the main carer, normally the mother—the best way to support families, to get money directly to the children and to tackle child poverty. To support that, I will make one of the biggest single investments in children and families since the welfare state was formed in the 1940s.

I propose £2.5 billion of extra support for families—a family tax cut that will help nearly 6 million families. As a result, the direct tax burden on a family on average earnings with two children will be below 20 per cent.—lower than it was in any previous year since 1979. I can now give the details.

Because the tax system should recognise all the everyday pressures on middle as well as lower-income families when bringing up children, the new child credit will be available right up the income scale for families with incomes of £58,000 or below, and for the first year of a child's life, families earning up to £66,000 will receive some help.

With our maternity reforms, including the rise in maternity benefits to £100 in April 2003 and the extension of maternity pay to 28 weeks, families will receive up to £2,000 extra to help cover the costs of the first year of a child's life. Because the test is now overall family income, the income of one-earner families is treated in the same way as two-earner families, and 90 per cent. of families will benefit from the new system.

In recognising the pressures on families, I have decided on additional help for child care as part of the new system. To deal with a particular grievance of parents who work irregular hours or have disabled children, I have decided that support for child care costs should include help with approved child care in one's own home. Under the new tax credit system, a family on £35,000 a year with two children could receive child care help of as much as £50 a week.

In return for that, we will also do everything to ensure parental responsibilities to children are met. Where there are lone parents under 18 who cannot live with their family, the policy is that, instead of independent tenancies, they will have supported housing that combines accommodation with counselling and help with child care. In the minority of cases where a parenting order has to be imposed, checks will be made to ensure that, as well as proper supervision, parents are meeting their children's basic practical needs. With these changes, I can now set a rate for the new child credit which, introduced in April next year, will give proper recognition of the costs of raising a child.

For all families with overall incomes of £50,000 or less, the child tax credit with child benefit will be £1,400 a year—or £26.50 a week—for the first child. This compares to just £11.05 in 1997. For those in the £50,000 to £58,000 range, minimum support is £800 a year, maximum support is £1,400.

Our changes will mean that, from next April, mothers who wish to leave work and be with their children at home, but have found it financially difficult to do so will now find it financially easier. For single-earner families, more help is now available and for those on incomes between £43,000 and £58,000 help is now available for the first time—an essential part of a more family friendly tax and benefit system.

And for 2 million of the poorest families in this country, child support—which was just £28 a week in 1997—will now be £54.25. That is for the first child, and it is a near doubling of support since then. Support for a two-child family will be £92.75. And because the child credit must ensure that the poorest families share in rising prosperity, our policy will be to raise these child rates at least in line with earnings for the rest of the Parliament.

As we pursue our goals, all families will receive more support for bringing up their children. Families who need it most will receive most help when it is most needed. This is a policy for fairness to families throughout our country.

I turn now to our public services. With debt and debt interest payments down, it has been possible, even with lower than expected corporate revenues, to maintain our three-year spending plans for hospitals, schools, transport and public services, and to respond to the challenges of foot and mouth in rural areas and, since 11 September, to meet the challenges at home and abroad while still meeting our fiscal rules and disciplines.

Since 11 September, we have made provision of £50 million for domestic security responsibilities and, over the last year, £950 million for defence. We will continue to meet our responsibilities internationally and to the armed services of this country. In the last year, an additional £120 million has been allocated for the work that the Secretary of State for International Development does in providing emergency aid.

This summer we will set spending plans for every Department until 2006 and, in the coming spending review, education will receive the priority to deliver further substantial improvements, not just in our schools but also in our universities and colleges. Having raised the share of education in our national income during the last Parliament, we are pledged to increase significantly the share of national income devoted to education over the course of this Parliament.

In advance of the announcements in the spending review, the Secretary of State for Education and Skills is announcing today that, for this year, additional payments for investment will be made direct to every school in the country and every head teacher. For a typical school, total direct payments to secondary head teachers will rise from £98,000 last year to £114,000 this year. And payments to a typical primary school will rise from £33,700 last year to £39,300 this year—money that can be spent on the school's priorities, by the school and by the head teacher and the staff themselves.

Overall levels of crime have fallen in the last five years, according to both the police recorded crime statistics and the British crime survey. But there is a serious problem with levels of street crime and associated offences of violence. No kind of crime, and no level of crime, is acceptable. And it is not acceptable that repeat offenders are continually bailed or, when convicted, not given appropriate sentences through lack of prison places and secure accommodation for juveniles.

For street crime, policing and counter-terrorism, £100 million more has been drawn down from the criminal justice reserve, and another £180 million on top of that is being allocated this year, including £110 million extra from the reserve.

I now turn to the NHS. The fundamental long-term choice that our generation must make is whether the national consensus that existed for the last half century for an NHS freely accessible to all is to be renewed for the years ahead. What we decide will not only determine the condition of our public services but define the character of our country.

The report by Derek Wanless states that the NHS needs, in support of reform and modernisation, a long-term sustainable financial framework, and it sets out the financial needs for the next two decades, starting with a five-year period of high and sustained growth and, once we have tackled decades of underinvestment, moving to lower rates of growth—4.4 to 5.6 per cent, then in the next five years 2.8 to 4 per cent., and then in the final five years 2.4 to 3.5 per cent. a year in real terms—for the three five-year periods after 2008.

The NHS 10-year reform plan proposed the local devolution of power and, in time, 75 per cent. of NHS budgets, to primary care trusts; new national standards for treating cancer, heart and other diseases; a modern system for evaluating new drugs; a commission for health improvement, reporting on performance; proposed new contracts for consultants, family doctors and an agenda for change for nurses and other staff; and in partnership with the private sector, 71 major hospital developments are either completed or are now being planned and built.

Reform and investment will bring booked appointments also for operations and are reducing maximum waiting times in stages from 18 months, then to 15, then to 12 and then six and three months. I said at the time of the pre-Budget report that the pre-condition of new resources was reform. And, in furtherance of the NHS plan, my right hon. Friend the Secretary of State for Health will announce tomorrow for England the following: new financial incentives for hospital performance; greater freedom for high-performing hospitals and trusts; powers and resources devolved to front-line staff in primary care trusts; reform of social services care for the elderly; and a series of measures increasing choice for patients.

In order to make sure that money invested yields the best results, for the first time in the history of the NHS the Health Secretary will enshrine in statute independent audit, independent inspection, and independent scrutiny of patient complaints—with a duty to account and report to the public on money spent and standards achieved.

In considering reforms I have also considered the hypothecation of revenues to the NHS. But I have concluded that it would make the public services subject to the ups and downs of the economic cycle and unpredictable changes in revenues. And it might achieve the opposite of what its supporters and the NHS needs: a sound long-term and sustainable stream of funding.

It is right, however, to show where money is spent and the results achieved. In future an annual report to Parliament, prepared by the new independent auditor, will account for the money allocated to the NHS, where it has been spent and what the results of the expenditure have been. This will be accompanied by local reports stating, for each local community, the link between money spent and results attained.

Everybody agrees—indeed, there is an all-party consensus—that in the years to come we, as a nation, will have to spend more on health care and the question is not whether we have to pay more but how we pay more. While we believe that the best provision is through general taxation, the alternatives are social insurance, private insurance, or charging where people would still pay but pay directly. There is no free way of increasing health service spending and the question for Britain today is whether a case has been made for moving to paying through social insurance, private insurance or charging.

The Budget and the review's documents published today contain very detailed information on alternative systems of financing: funding by private insurance where, in the case of the USA, family premiums average around £100 a week and are set to rise next year on average by £13 a week, and because of its cost it is a system that insures only some of the people for some of their care; funding by social insurance whose narrower base for contributions means—in France, for example—the typical employer pays £60 a week: and charging for clinical services which also means patients paying rising bills for individual operations and treatments—basing our health care system on medical charges would, in my view, mean the sick paying more for being sick.

There is another consideration as we look to the long term. With advanced technology and life-saving drugs, the cost of treating one individual falling ill can today run into tens of thousands, sometimes hundreds of thousands, of pounds. Because none of us knows when costs could overwhelm our family budgets—if we had to pay privately—we seek to pool risks and, more than ever, it is important to have health coverage with the minimum of ifs, buts and small print, and exclusions from that insurance.

So it is the Government's view not just that the NHS system of funding is the most equitable, but that a reformed NHS, by offering the most comprehensive insurance policy to meet the rising costs of medical advances, can give British people the greater security they want. Although meeting the challenges and costs of future health care does cost money, it is my hope that we can renew a shared national consensus around an NHS freely accessible at the point of need, paid for from taxation, not for its own sake but for the purpose of delivering for British people a better public service. It is therefore my duty to set out what we, as a nation, need to pay in tax to fund, for the long term, the health service that we want.

Since 1997, by cutting debt, unemployment and waste, I have transferred £7 billion a year to the NHS and public services and I can announce that, in the year 2002–03, I am able to transfer on top of that an additional £1 billion through cutting debt and unemployment.

Prudent management and economic stability and growth have also made it possible to spend an additional £5 billion more each year on the NHS. Rising costs of technology and rising expectations mean that, if we are to put the NHS on a sustainable foundation for the long term, we as a nation will need to invest more than that. I know that as Chancellor I have not just to assure the British people that everything has been done to ensure prudent finances, but to ensure proper value for money, and to show that any tax paid is linked to the benefits received, and that it is fair.

Having agreed NHS reforms, including a new audit system that will link the money paid to benefits received, and having also resolved after deliberation to exempt the elderly and vulnerable, I have decided that, for the year 2003–04, there will be a freeze of the non-pensioner income tax personal allowance and national insurance thresholds at £4,615.

From April next year, there will be an additional 1 per cent. national insurance contribution from employers, employees and the self-employed on all earnings above £4,615. All other national insurance and income tax allowances will be indexed in line with inflation. Save for this 1 per cent. contribution, the ceiling of £30,420 remains in place and will be indexed in line with inflation to £30,940. But I believe it is right that when everyone—employees and employers—benefits from the insurance provided by the national health service, everyone who can should make a fair contribution.

The two tax changes that I have announced will mean that a full-time earner on median income of £21,400 a year—£410 a week—will pay £3.70 a week: those on higher incomes will pay more, those on lower income less. Those on 150 per cent. of median income£32,100—will pay £5.75 a week. Those on 50 per cent. of median income—that is, £10,700—will pay £1.65 a week.

Employers will contribute a similar amount per employee. Families with children will pay less than that because of the introduction at a cost of £2.5 billion of the child tax credit. For single-earner families from £35,000 to £50,000, currently excluded from the maximum children's tax credit, the 1 per cent. on national insurance will be reduced, or more than eliminated, because they as families with children receive up to £10 a week extra. After taking national insurance increases into account, a single-earner family on £21,400 with two children will be £3.90 a week better off. Taking national insurance and the child tax credit together, half of Britain's families with children will be better off as a result of the tax and benefit changes in the Budget.

To budget effectively for our long-term spending plans, including our major commitments to the NHS, I have also to make major decisions about other taxes. I have to make this year's decision on duties on beer, spirits and wine: I have decided to freeze them. My decision on cigarettes is, for public health reasons, to go ahead with the annual inflation increase at a cost of 6p per packet of 20.

Today all estates below £242,000 are not subject to inheritance tax. From today I am exempting all estates below £250,000, and 96 per cent. of estates will pay no tax.

I have also to make a decision for this year for fuel duties. I said in the 2000 pre-Budget report that I would respond to rises in oil prices and, given the high and volatile oil price, I have decided to freeze fuel duties this year.

I have also to make a decision on licences for cars, vans and lorries, and I will freeze them too.

The overall effect of the tax and other decisions I have made today is to raise net revenues by £6.1 billion in 2003–04, £7.6 billion in 2004–05 and £8.3 billion in 2005–06.

I am now able to set the envelope for public spending commitments for the years to 2006. I propose to raise current public spending from £390 billion this year to £420 billion next year, to £444 billion in 2004–05 and £471 billion in 2005–06.

I propose to raise our historically low levels of net public investment, which were at only 0.6 per cent. of national income in 1997, to 2 per cent. by 2005–06.

Because of the modernisation programme we have agreed in health and social services, I am able to announce that resources will follow reform. Social services have been, for too long, a neglected part of the caring services, and to finance better care for the elderly and to reduce pressures on the NHS, I propose to raise the rate of real-terms growth of social services to 6 per cent. a year.

Details will be given tomorrow on this and other changes by the Secretary of State for Health. Separate announcements will come for Scotland, Wales and Northern Ireland.

In the last 20 years real-terms rises in UK health spending have averaged 3.6 per cent. a year. I propose to raise UK national health spending by twice as much every year, on average by 7.4 per cent. in real terms each year—an annual cash rise to the NHS of 10 per cent.

But to put our health service on a secure long-term and sustainable footing, and to give the NHS the long-term security it needs, I propose—within our rules—not just a three-year financial settlement but a five-year settlement.

With year-on-year rises, UK health spending will grow from this year from £65.4 billion to £72.1 billion, to £79.3 billion, to £87.2 billion, to £95.9 billion, and then to £105.6 billion in 2007–08—even after inflation, a 43 per cent. rise over five years, and, since 1997, a real-terms doubling in national health service spending.

With the scale of long-term reform to be advanced tomorrow by the Secretary of State for Health matching the scale of long-term investment agreed today, we now have the best chance in a generation to secure our NHS, not just for a year or two but for the long term.

UK health spending will rise from 6.7 per cent. of national income in 1997 and 7.7 per cent. this year to 8.7 per cent. by 2005–06 and to 9.4 per cent. by 2007–08—rises year on year well into the next Parliament.

I have always said that our prudence was for a purpose. Last year we invested £2,370 for the average household in the NHS. By 2007–08 we will be investing £4,060 per household—after inflation, a 48 per cent. real-terms increase.

We have made our choice. This is a Budget to make our NHS the best insurance policy in the world. The NHS is a British ideal, free at the point of need, for everyone, in every part of Britain. Fairness and enterprise together.

I commend this Budget to the House.

Under Standing Order No. 51, the first motion, entitled "Provisional Collection of Taxes", must be decided without debate.

May I begin by congratulating the Chancellor on delivering his Budget in his usual manner? As ever, what he omitted to tell the House is as instructive as his statement.

I must start by welcoming one announcement: his taking up of a Conservative proposal that he has rubbished over the past two years on a Brit disc for commercial transport. We are always willing to welcome a sinner that repenteth, even if it is at the eleventh hour.

However, there is a real issue here and things in the Red Book that he did not mention. First, this country is now running a deficit for the first time in four years. [Interruption.] Well, Labour Members have not read the Red Book; there is no question but that they do not know what they are talking about. The Chancellor did not mention that public investment dropped by El billion last year compared with his estimate at the time of the pre-Budget report. He promised a lot about manufacturing and said that it would return to growth, but he did not say that manufacturing output is forecast in the Red Book to contract this year—it states that

"manufacturing productivity has fallen back"

so those were empty comments from the Chancellor. Neither did he mention that, as the Red Book shows, Britain's export performance is falling behind yet again. Whereas in the Red Book world trade is set to grow by 2.25 per cent. this year, the Treasury figures show Britain's exports rising by only 1.75 per cent.

The Chancellor did not bother to tell us any of that. That is why we will have to look very carefully at his proposals for corporation and capital gains tax, and his new research and development credit.

Unlike the markets, the Chancellor's past record is a very good guide to his performance. This is the Chancellor who has turned small print into a fine art. Everyone on the Opposition Benches, and I hope, on the other side of the House, remembers his IR35 tax on the self-employed, which he never announced, and his abolition of the married couples allowance, in respect of which he failed to tell anyone that there would be a year when all married couples received no tax relief at all. It is amazing to hear him criticise the tax system for not recognising children, when he was the one who abolished the last such recognition in earlier Budgets. We will study this Red Book very carefully. [Interruption.] One thing we do know is that the Chancellor— [Interruption.]

Order. It is customary that the Leader of the Opposition's reply to the Budget statement is heard with the same respectful silence as that which is given to the Chancellor.

After today's Budget, they are scared stiff about what will be reported in tomorrow's papers.

One thing that we learned from the Chancellor today is that he has already broken one major election promise by putting up national insurance, which is a tax on income. He has previously said:

"National insurance is a tax on ordinary families."

Only 10 months ago, during the election, he and the Prime Minister assured the country that they were not going to raise national insurance. [Interruption.] Oh yes they did. At the last election, he denied as smears the charge that he would raise national insurance, but today he has raised £6 billion a year by adding 1 per cent. to national insurance for every employee and employer in Britain. This Government said that they would not raise income taxes at all—they do not like being reminded of that, but it is the truth—but everyone knows that this is a tax on income. The Chancellor has added a penny in the pound to income tax, and he has broken his promise to the British people.

The Chancellor also claims today to have reduced corporation tax, but in fact his increase in national insurance contributions for employers is equivalent to a rise of 3 per cent. in corporation tax. That dwarfs everything else that he has previously done. Now, someone on average earnings will be £15 worse off every month, a nurse-consultant earning £34,000 will be £24 worse off every month, and a police inspector earning £37,000 will be £27 worse off every month. So much for the Chancellor's great help for all those employed in the public services who are trying hard. Frankly, after this no one will ever believe another word that he says.

To listen to the Chancellor, one would think that this is the first time he has ever raised taxes. In fact, he has spent the past five years and six Budgets raising taxes, yet all the time public services are getting worse. He has simply opened people's wallets, while closing his own mind to change and reform. British people and British businesses are already paying £100 billion more a year in tax than they were in 1997, when Labour took over. Each of his first five Budgets raised taxes, save one. That was—surprise, surprise—the Budget before the last election. I wonder why?

Every man, woman and child in this country is paying £1,600 more in tax since the Chancellor delivered his first Budget. He thought nothing of taxing pension savings by £25 billion, and he has hobbled British business with £6 billion a year in extra taxes. Of course, the Labour party does not like hearing about the extra tax on pension savings because it is opposed to savings on pensions and always has been.

Today's measures for business are very small compensation. They are like taking £10 from someone's wallet, giving a pound back and saying, "You should be grateful." Grateful for what? What do people have to show for all these tax increases? The Chancellor says that he needs to tax more and to spend more to make public services better, but violent crime and street crime are reaching epidemic proportions. Teacher vacancies doubled last year and truancy is rising. The trains have descended into chaos. Welfare bills are increasing faster than money is going into schools and hospitals, and they will continue to do so even after today. Perhaps the Prime Minister does not remember his promise to cut the bills of social failure to pay for rises in health and education spending. He has not cut them.

All that is bad enough, but the saddest and most acute failure is the state of our national health service. In the past five years, the Chancellor has increased NHS spending by almost a third, so where has all the money gone? Waiting lists are rising, accident and emergency waits have grown longer and hospital beds are blocked because care home beds have been lost. Regardless of what he announced today, in terms of that loss the real problem is, as we have heard, the extra regulation that he has imposed on care homes.

The odds of surviving cancer in Britain are among the worst in Europe. Worst of all, the Government's failure is forcing patients to go to other countries for treatment. Their health service is letting people down, especially the elderly and the vulnerable.

Last year, as a result of the Chancellor's mismanagement, 250,000 patients had to pay for their operations out of their own pockets. More people than ever before have had to do that under this Government. People should not have to use their life savings—[Interruption.] No, they should not have to use their life savings to save their own lives, regardless of what the Chancellor says. We had hoped for a little humility and, better still, a more imaginative approach to the problems of the NHS, but today his Budget missed that opportunity.

All the right hon. Gentleman is offering is more of the same—more talk, more tax—but that will not save the NHS from failure. He failed to recognise that although Scotland spends as much as Australia and Holland on health and that Wales and Northern Ireland spend as much as France, the treatment of patients here is far worse. Waiting times are increasing and all the Chancellor can suggest is more tax and no change.

Britain is further away from the ideals of the NHS than at any other time in the history of the health service. The NHS should, as we all agree, offer people the best treatment, regardless of their ability to pay. The Chancellor's NHS, however, does not do that. It is a two-tier service, and more people pay for their treatment than ever before.

No other advanced country runs its health service the way we do. If the Chancellor had bothered to visit some other countries, he might have seen that for himself. Germany has no national waiting list and Danish patients have a legal right to treatment within four weeks of seeing their general practitioner. The Chancellor cannot be bothered to go to such countries; we have, and he should read what we have written about the matter.

Britain needs to spend more on the health service, but it is not enough to spend money to keep the NHS running the way it is today. By raising all the money that it will ever need simply from higher and higher taxes will not give this country the standard it has a right to expect. The NHS needs change as much as it needs money. All the people who work in the health service know that and they have told the Chancellor that. The public know that and the Conservative party knows that. The only person who does not know that is the Chancellor.

The right hon. Gentleman has closed his mind to the idea that he could learn anything from those beyond the channel tunnel. He commissioned Derek Wanless—oh yes, the Wanless report—to conduct a study of future health care and the financing of health plans, but he had already told him what to say. The Chancellor has finally seen fit to publish that report today, on precisely the same day that he announces his conclusions. He said, "We must have a national debate on the NHS." Apparently, that opened at 9.30 this morning and closed at 3.30 this afternoon. Perhaps he can tell us whether that debate extended as far as 10 Downing street, which I doubt; or did it exist only in the mirror of his home at 11 Downing street?

There is no third way, only one way—the Chancellor's way—and today we know what that amounts to: more talk, more taxes and more failure. He not only refuses to take lessons from abroad about how to make public services better, but refuses to acknowledge that competitor nations are lowering their taxes at a time when he is raising ours. That is why Budget day is the only day on which Labour MPs really smile, because it lets them do the only thing they enjoy—raising taxes.

Some people will like the Chancellor's Budget, but they are all sitting on the Labour Benches. We can see them loving every minute of it. Countless millions of British people will end up paying for it by using public services that are getting worse and by paying higher taxes. He is planning to spend public money faster than the nation can earn it over the next four years. The fact is that not only has he raised taxes in his first five Budgets and again today, but now taxes will go up next year, the year after that and the year after that. The truth is simple: the sun goes down, the tide goes out, and Labour raises taxes. British people deserve much better. They deserve better than the increase of nearly £300 in council tax that the Chancellor has imposed on them. They deserve far better than his proposals, which add up to more talk, more tax and more failure.

The Chancellor's record speaks more eloquently than his rhetoric ever can. We always know where we are with one of his Budgets. He never listens and he never learns. He centralises everything. Civil servants, administrators and public service workers know that the way to get on is to follow orders from Whitehall rather than to trust their own judgment. That is why they are demoralised and leaving in droves. That is why so much of the money that has been taken in tax over the past five years never gets to where it is meant to go. That is why billions of pounds are wasted and left unspent each year. Through his public service agreements, the Chancellor tries to be the head teacher of every school, the manager of every hospital and the desk sergeant in every police station.

Through his complicated tax credits, the Chancellor wants to tell every family how to live their lives. More complication is proposed today. Many children will not get any of his tax credit because of the complicated forms that he insists on making them fill out. That is a further waste of their time.

The Chancellor thinks that life would be so much better if we all lived our lives like he does. That is why his whole agenda of reform begins and ends at his office. As early as March 1998 he promised:

"Investment and reform go hand in hand."—[Official Report, 17 March 1998; Vol. 308. c. 1097.]

But he did not reform; he centralised. In March 2000, he said that

"more resources must mean more reform and modernisation".

There is no reform, only centralisation. At the time of his pre-Budget report last November, he said:

"There will not be one penny more until we get changes to let us make reforms."

And today we have had his great soundbite "enterprise and fairness". But no one believes him any more. No one will ever believe him, because saying the words does not make them true.

The Chancellor has centralised our services and closed his mind to all ideas except his own. He will not let anybody else try a different formula or idea. "Investment and reform" has just become old-style tax and spend once more, and, one way or another, everyone in the country will pay the price. They are paying for more talk, more tax and more failure. Even after his announcements today, the corporate tax burden on British business—something that he did not want to tell us about—is among the highest of our industrial competitors, which threatens jobs.

More complicated tax structures are putting up taxes at the very moment when other countries in Europe are reducing theirs. Over the last five years, Britain's ability to compete in the world has slumped, as we will find in the Red Book. What the Chancellor did not say is that our productivity growth used to be faster than that of the United States; now it is slower. Five years after Labour came to power, the USA is overtaking us again.

UK businesses groan under more and more regulations, to the point at which some spend as much as one and a half working days each week filling in forms. What the Chancellor also did not tell us—among myriad other things—is that our share of world exports has fallen. Not only has our balance of trade been in deficit every month for the last four years, but it has actually been widening in 2001.

Over the past five years, this Chancellor has also punished people as they try to prepare for their retirement. He did not want to tell us too much about what he has done, but Conservative Members thought he had a cheek to talk today about occupational pensions, when he is the one who raided them with a tax of £5 billion a year. More than a third of our largest companies have closed their final salary schemes to new members, thanks to the measures that he introduced.

The stakeholder pension is also a mess. Only one in 10 of those whom the Chancellor targeted has taken it up. Millions will therefore be disappointed that he has failed to abolish the annuities rule. They will have absolutely no flexibility in retirement and they will be punished twice.

The Chancellor also failed to inform us that the Red Book shows that family income put aside for savings has collapsed since 1997 from 9.5 per cent. to a projected 3.75 per cent. in 2002. Savings are collapsing and people's futures are being destroyed by a Chancellor who does not care. Next year, two out of every five families in Britain will depend on means-tested benefits.

More talk and more tax will not prepare this country for the challenges that lie ahead. Today people are more worried about their prospects for retirement than they have ever been before.

The Chancellor would have us believe that raising taxes is the same as reforming public services. If that is so, why have the Government both raised taxes and reduced the quality of our public services? Our taxes continue to rise, and he is undoing the things on which business success is built. The money to pay for quality public services depends on successful business. Not only will his course of action not work, but it is ultimately self-defeating. In his hands, "investment and reform" has become Labour-speak for old-style tax and spend.

So what is new Labour for? When the history of this Government is written, the dominant theme will be the unprecedented opportunities that they wasted. They had it all: the best economic legacy ever left by a predecessor; massive Commons majorities; the trust of the British people; the promise of reform; and a mandate for change. Yet in the space of five years and six Budgets, they have frittered it all away.

If the Chancellor had listened to the people, if he had visited other countries and if he had opened his mind to change, as we have, this could have been a very different Budget—one that offered genuine hope to the millions who rely on the NHS and need it to improve. Instead, his closed mind and refusal to change have condemned the British people to second-class public services. They deserve better.

I begin by congratulating the Chancellor—[Interruption.]

Order. Perhaps the right hon. Gentleman would like to pause for a moment. Will right hon. and hon. Members who are leaving the Chamber please do so quickly and quietly?

I begin by congratulating the Chancellor on his characteristically lucid and commendably brisk presentation of his Budget statement, in contrast to the speech that we just heard. I say unequivocally on behalf of Liberal Democrat Members that there is a great deal in the Budget to welcome, and that we should say so. There is a clarity about its proposals. I was not sure where, if anywhere, the clarity lay in relation to the Conservative party's positioning on these matters.

As we said during Prime Minister's Question Time earlier, we have long argued for increased investment in the health service and in public services generally. It would therefore be churlish not to welcome the progress that has been made. The Chancellor is investing in services that urgently need it; that is a genuine breakthrough. However, we can point out that the Liberal Democrats made the case for that approach in two general election campaigns. We made honest and transparent tax proposals—contrary to the Prime Minister's teasing earlier.

Many authoritative voices in the country, leaving aside those that are party political, say that if some of the investment had been raised honestly since 1997, and the funding had been going in for five years, some of the problems that the Chancellor mentioned today would have been ameliorated much earlier.

Let us be truthful. Of course, the increase in funding for the health service will be welcome, but for many patients it is up to five years too late. Five years of sustained investment would have been better than two years of spin and double and treble counting, following two to three years of sticking to Conservative spending constraints.

The Chancellor said that there was "no free way" of investing in the health service. That reminded me of a phrase that many Liberal Democrat candidates used every hour of the day, every day of the week during the general election campaign last year: "You can't get something for nothing."

Although we welcome the convert to the cause, I have searched in vain for Labour party proposals in the general election campaign for the taxation increases. I examined the Labour manifesto, but no. I watched the launch of the Labour manifesto. [HON. MEMBERS: "No."] I watched the television interviews with the Prime Minister and the Chancellor. [HON. MEMBERS: "No."] I looked at the election rallies. [HON. MEMBERS: "No."] I watched the Labour party election broadcasts. [HON. MEMBERS: "No."] I looked at the morning press conferences. [HON. MEMBERS: "No."] By Jove, they kept it quiet.

The debate on funding for the health service cannot end with the Chancellor's statement this afternoon. He has expressed his professional and intellectual misgivings about specific earmarked taxation for the health service. I believe that that debate should be revisited across the party political spectrum. We cannot take this afternoon's statement as the last word on the matter. I hope that the Conservative party will also embrace the debate, although judging by Conservative Members' current utterances, they seem psychologically incapable of making such a worthwhile contribution to a big national debate.

If we assume that the money will at last go to the health service, what should the priorities be? We need to examine the detail of the statement of the Secretary of State for Health, but the priorities should be set by doctors and nurses. The Chancellor has made a welcome suggestion that he will ensure that the money and the decision making reach local level. Given the Administration's five-year track record, that will take a shift in the culture and mindset of those in and around Whitehall, both elected politicians and their much-vaunted political advisers. We will keep a close eye on that. We need more power locally and more devolution of budgets to go with it.

The response of the leader of the Conservative party was deeply ironic. We got to know each other when the right hon. Gentleman was first elected and we spent many a long night debating the Maastricht treaty. Now he suggests that the Government should go round continental Europe to appreciate how well things are done there. If it had been left to him at the time of the Maastricht process, we would not even be part of the European Union, never mind learning anything from it. We need resources, and the training and recruitment for the doctors and nurses whom we urgently need should start now.

On the social services side of the equation, we also need urgent priority to be given to the haemorrhaging in the residential care homes sector. There is not a Member of any party who cannot cite chapter and verse the problems locally: the lack of funding locally; the insufficient provision locally; and the accompanying human misery for families. Dealing with those problems must be an absolute policy priority.

On health, there is the preventive agenda. I wrote down what the leader of the Conservatives said and, again, they seem to be arguing that there is no point in spending all this money because it will fail. Theirs is a calculated agenda for failure for the national health service, despite the extra funding, and the right hon. Gentleman cites Scotland in that respect. He and I are both Scots. I am not always the best advertisement in lifestyle terms, but we must both acknowledge that the structures of health care delivery in Scotland are not the only providers of discouraging indices—the lifestyle of many Scots cannot be divorced from those. Although we can blame the Chancellor for many things, we cannot necessarily blame him for that reality, as he well knows. [Interruption.] All right, we have been too generous. If in doubt, blame the Chancellor. The Prime Minister does it all the time.

There was one crucial issue on which the Chancellor chose not to dwell. He made only a teasing reference to the euro, rather than displaying leadership on it. As he well knows, the Liberal Democrats have long argued that it is high time we set a proper timetable for getting this country, post-referendum, into the single European currency. The reason why we must do so is precisely that to which the Chancellor and, indeed, the Conservative leader referred—the weakness of the manufacturing base caused by the strength of the pound.

One day we have got to win a referendum, but if we at least lay down clear guidelines and a timetable, that in itself, with the Government expressing an aspiration, would do much to reduce the value of sterling in the interim and stop the haemorrhaging of jobs right across the manufacturing sector.

We are very disappointed with the failure to show leadership and the conflicting smoke signals that the Chancellor and the Prime Minister all too often give out on that issue, but the Conservatives cannot with any intellectual or political rigour decry the decline in our manufacturing base while saying that they will positively deny the people a referendum and not join the euro at all. On that basis and policy prescription, the Conservatives cannot offer anything approaching a solution to the problems that have so badly afflicted the manufacturing sector.

There are modest, but what appear to be welcome, changes for the small business sector, although the burden of bureaucracy on so many of our small businesses remains excessive. Once we have studied in more detail the proposals put before us by the Chancellor, we must see whether more can be done to advance the argument still further in the interests of the small business community.

The Chancellor referred to pensions. Many of those who are expert in the field agree that his credits, his innovations and his developments Budget by Budget have produced a fiendishly complicated system. He has added to that complication again today, although the support that he is suggesting may in itself be welcome. Many pensioners find that, because of the sheer complexity, they do not access or take up the help that could otherwise be at their disposal. We shall have to look with great care at what has been suggested this afternoon, because it seems to add further complication to the system.

Had the Chancellor announced, for most pensioners, an extra £5 on the basic pension for the over-75s and an extra £10 for those over 80, that would have been fairer, more effective and less complicated. It would have done more to help those most in need, particularly at the higher end of the age spectrum.

This would have been a really good Budget five years ago. That does not stop it being, in many respects, a welcome Budget now, but the Government have lost a lot of credibility and opportunity in the intervening five years. There have been too many broken promises, too many misleading targets, too much double or treble counting and too much spin, and not enough delivery and investment where the public really wanted it.

Let us welcome what we have so far. This is an extremely significant moment in the history of the last five years of British politics, because we now have a clear recognition by the Government that there should be a more transparent, honest and fairly funded approach to tax policy so that people can see that their priorities are being served as a result. A clear ideological divide has now opened up in British politics between the Government and the Liberal Democrats on one side, and the incoherence of the Conservatives on the other. If there is one issue on which we find ourselves in agreement across the Floor of the House, it is this. The Chancellor talks about Beveridge. It was a Liberal set of ideas, principles and values, which a Labour Government proceeded to implement, that gave us the basis of the welfare state and the health service. We are seeing something similar happening with some of the Chancellor's announcements today. Those of us who do not have the in-built advantages enjoyed by both the other parties in this place and outside it—some of us who were none the less willing, over several elections, to tell the story as we saw it—are right today to claim some of the credit for the progress now being achieved.

May I start by congratulating the Chancellor on a truly remarkable Budget? His announcements on the national health service, although widely trailed, are none the less breathtaking in their scope and vision. Talk of opportunities wasted is a travesty of the truth. In what must have been the dullest and most inept response to a Budget made in this place for many years, the Leader of the Opposition never really got to grips with the detail, generality and politics of this extremely important Budget.

The Chancellor and the Government deserve our congratulations on their management of macro-economic policy. It is the best report that the House has heard in many years, particularly given the downturn in world trade that has been with us for a considerable time. The Chancellor referred to the difficulties, particularly in the high-tech sector in the United States, which then thread their way through the world.

Inflation is the lowest that we can recall; interest rates are now converging—my hon. Friend the Member for Bolsover (Mr. Skinner) will not be pleased to hear—with European rates; unemployment is now becoming manageable and making a serious contribution, in that we no longer have to meet considerable unemployment benefits; growth is outstripping that of the G7 generally; and we have stability that has not been matched for a long time.

The Chancellor tells us that growth in the G7 was 1 per cent. World trade has been down and manufacturing worldwide is down, and that is the background to the remarkable figures that the Chancellor has presented to us today. On his predictions of 2.25 per cent. to 2.75 per cent. growth, he reports 2.2 per cent. actual growth, against the doom and gloom in all the financial papers.

Does my hon. Friend agree that it was simplistic in the extreme for the leader of the Liberal Democrats to link the undoubted difficulties of the manufacturing sector to the value of the pound when the great proportion of its problems have been caused by worldwide recession?

My hon. Friend may know my position on the question of the euro, and I shall not fall for that silly little trap that he has set for me.

Let me continue in the same vein. The predictions of the financial press, which was filled with doom and gloom, have been exceeded. The Chancellor has been pessimistic and cautious in his predictions, but, none the less, to report actual growth of 2.2 per cent. in this circumstance is truly remarkable. The current forecast for the G7 is 1.6 per cent., and, for the UK, 2.5 per cent., which, again, is cautious. Given the most recent figures from America, where hope of a recovery is rising—with a genuine baseline from which to work and to develop the American economy, notwithstanding its disgraceful decision to increase and raise tariff barriers against steel products—there seems a real possibility that the American economy will pick up. Just as it is true that if America sneezes the world catches a cold, equally, if America is feeling well, the rest of us feel a darned sight better, too. That seems to give real hope.

The return of growth to the manufacturing sector is a most important signal. As someone representing a west midlands seat, I witnessed and was part of the horror of the 1980s, when, in a very short time, 400,000 manufacturing jobs were lost. It has been an increasing worry that, under my party's Government and their policies, which have been more sensitive to manufacturing than those pursued by the early Conservative Government in the 1980s, the manufacturing sector has still been haemorrhaging jobs. It is therefore welcome to see a sign that manufacturing is returning to growth. It must be said that everything that we hope for in public services is clearly predicated on improving our performance in terms of what we can export abroad and how we pay our way. An improving manufacturing output—I mean output, not just productivity—is at the root of being able to finance the improvements that we desperately want.

Many of the fiscal results that the Chancellor was telling us were well trailed and well understood, but they are worth repeating to congratulate the Chancellor on his performance. Debt has been reduced massively. Tax receipts are down at the same time, unfortunately, but an underlying strength in our economy has meant that we have continued to deal effectively with the mountain of debt with which this country has been burdened for many years.

In fact, £21 billion of debt has been repaid, bringing the proportion down from 44 per cent. to 31 per cent. of national income. Interest payments are down to £22 billion and, as my right hon. Friend the Chancellor said, that leaves room for improvement in our public services without the need for corresponding increases in taxation. A surplus is predicted, not a deficit, and debt as a percentage of total national income is expected to remain stable. That is worth noting. The Chancellor has presented a set of figures that, in the present circumstances of world trade and economic conditions, amounts to a truly remarkable report.

I turn now to supply-side measures. I have a continuing concern about education. There is no doubt that investment has gone into education, and that our primary schools have improved, according to the measures that were set for them. However, my concern is that we place too much emphasis on the training element of school life, at the expense of education.

It remains my belief that our first and most important duty to the generation of young people in our charge is to ensure that their education—in the English language and in literature, in the sciences and mathematics—is first class. What my right hon. Friend the Chancellor has announced today in respect of instilling more enterprise in schools' ideas needs careful thought, especially with regard to delivery. Teachers already complain—rightly, and with some justification—that there is little room left in the curriculum for yet more new measures, especially when those measures do not directly improve our young people's educational standards. That is especially important in connection with the generation now in secondary schools.

My right hon. Friend the Chancellor stated that 55 per cent. of all jobs—10 million jobs in total—are now in the small and medium-sized enterprise sector. Corporation tax is to be reduced by 1 per cent., and that is a very welcome measure.

Last week, I met a number of clothing manufacturers in my constituency of Wolverhampton. They accept that useful measures have been taken, but they complain that the requirements on employers to implement social legislation are a considerable burden. They claim that meeting those requirements takes them away from producing economically and efficiently, and they are looking for a reduction in that administrative burden.

However, I believe that my right hon. Friend the Chancellor has met those complaints, at least in part, with the new measures that he has announced, and especially with the changes in respect of VAT. The VAT regime has been a nightmare for small companies, especially for those without administrative back up. In such cases, the employer—usually the owner of the company—has to deal with all the administration of tax and VAT, and often has to burn the midnight oil to get the returns in on time.

People in that situation will be pleased that the charges for late returns are to be dropped, but the simplification of the VAT regime will be widely welcomed by small companies. My right hon. Friend is to be congratulated on his response to the problems experienced by many small companies.

The new tax credits available for investment in research and development by large companies are clearly to be welcomed. There is no question in my mind but that the beginning of the end for British manufacturing was evident in the 1960s and 1970s—and certainly in the 1980s—when investment in research and development and blue-skies research plummeted.

Our universities were stripped of any incentive to carry on with the vital work of research and development. As a result, there were fewer of the inventions that need to be made before innovations and developed products can be brought to market. In the absence of new ideas, British industry as a whole was failing to compete. As investment in research fell away, we became unable—except in a very few instances—to claim that we had world-class companies.

That is now starting to change. The British have always been good at innovation—at invention, rather. I should not have got those two words mixed up, should I? The British have been very good at invention, but have failed to bring their products to market. Now, however, we are seeing the process involved in innovation more clearly, which will enable us to compete on a much stronger basis in world markets.

It worries me that the British share of export markets is falling, however slightly it may be falling. Imports must be paid for by exports. We can fill a gap with national wealth for a time, but ultimately imports must be balanced by exports, and exporting must be the nation's forte.

I want to say something about the health service in particular. It is surely right that it is receiving record investment, and also right that the Chancellor recognises that attracting and retaining staff is a critical—if not the most critical—element of a good strong health service.

I have experience of my own health authority, and I served on health boards and other such bodies in various capacities for nearly 30 years. I believe that, given the pace of change demanded by health service workers, targets must be set with current working practices very much in mind. People need a period of calm, a period of stability, a period during which they can deal with the enormous changes that we have asked them to make over the past few years. That will help them to settle into a better routine, and to understand their jobs better. It will help us to retain vital staff, and will ultimately attract more people into the health professions.

I hope that the same message, about the provision of time in which people can settle down, will be conveyed to those in education, particularly further education. Good lecturers are leaving because the rate of change, and the amount of intervention in teaching practices, has become more than they can cope with. They feel that they are failing their students by having to deal with so much administration rather than dealing directly with teaching. I think that we are now learning the lessons—we must, if we are to improve our public services.

I applaud the Chancellor's decision to deal with stamp duty. I congratulate him on opting for what I consider to be a far better way of flattening and cooling the hottest parts of the property market than a general increase in interest rates, which would hurt those on the first and second rungs of the housing ladder. I also welcome the lowering of small firms' corporation tax to zero for the first 10,000 of profit, which will be very helpful.

Let me now say something about the working families tax credit, and the general principle of tax credits for those in work. I was among the sternest critics of the 1970–74 Heath Government when they introduced family income supplement. I felt that, in general, it would he seen as a substitute for low pay and would encourage employers to keep workers on low pay, knowing that the state would step in and act as a wage payer. I am still concerned about our system of tax credits. Employers are tending to rely on state intervention to make up wages that should really be paid for by efficient, effective, economic working—smart working, rather than old-fashioned working. The advent of the minimum wage and this week's welcome increase have taken the edge off my reservations, but having nailed our colours to the mast of tax credits, which are generally welcome, we should keep our eye on them.

Overall, this is as good a Budget as the House and I have heard for many years, and my right hon. Friend the Chancellor deserves congratulations from us all.

I have declared my interests in the register.

I am glad that Government Members like the Budget. We are told that it is billed as an honest Budget, because the present Chancellor for the first time openly confesses to raising taxes. Of course, Labour Members should have liked all his previous Budgets too, because they have all been about raising tax after tax. More than £100 billion of extra taxation is being raised this year compared with the starting point five years ago—that is about £2,000 annually from every man, woman and child in the country. That is a colossal sum.

Quite a bit of that money has gone into public services, but the public are asking how so much money can be taken away from them to so little effect. My constituents ask why there are no more policemen on the beat—indeed, they think that there are fewer now than there were five years ago. They ask why waiting times and waiting lists for the local hospital are often more difficult to negotiate and longer than they were five years ago, and why there are not more beds open in the local hospital. In fact, there are fewer beds open in the local hospital. My constituents ask why local schools find it difficult to recruit and retain teachers, and why teaching morale is so low. The problem is not only all the instructions and directives from the Department for Education and Skills, but one of money, especially in areas such as mine.

The mystery that the British public want resolved is how so much money can be taken off them in Budget after Budget to so little effect. During this year's lengthy Budget debate, we must explore whether any better results might conceivably arise from the forthcoming big surge in spending than have arisen from the colossal increases in taxes and spending of the past five years.

One reason why there has been so little benefit from so much increased spending is the Government's choice of priorities. Had the money been spent on more nurses, doctors, teachers and policemen in my constituency and others, we might have been a little happier; instead, those do not appear to be the priorities that apply when the Budget measures announced are implemented. We read the headline announcements of various extra sums of money, but then we see the money being spent on other things.

The health service has had to announce that there are now more administrators in the NHS than there are beds serving patients. In the education service, more circulars than ever before are being sent out by the Department for Education and Skills, but they do not appear to be resolving problems of teacher morale and pay in hotspots throughout the country.

I am surprised to hear the right hon. Gentleman's commitment to raising taxes to spend on the health service. Does he remember writing that the NHS was

"a bureaucratic monster that cannot be tamed",

and that the principle of charging should be extended to

"create a national health insurance scheme separate from the tax system."?

Are those still his views and are they accurately reflected within the shadow Cabinet?

I am delighted to be reminded of some sensible remarks I made some years ago. If he has been following the debate, the hon. Gentleman will know that my current view and that of my right hon. and hon. Friends on the Opposition Front Bench is that we must review the whole question because there must be both a better way to spend the considerable sums of public money now committed to the NHS, and a better way to channel in more money from outside.

We think that a great deal of private money can be brought into health care in general by backing choice and giving people more opportunities. We think that health service money could be much better spent by devolving power and authority to those in hospitals and doctors' surgeries who daily have to make difficult decisions when dealing with patients than by spending so much on the army of administrators, many of whom stand well back from the action in the surgery or hospital ward. We therefore need reform. The reforms proposed by Her Majesty's Government will not be nearly big enough to deal with the problem. Indeed, I would go further and say that, from what we have heard today, the problem will be exacerbated.

Will the right hon. Gentleman give way?

If I can make my point, I will give way. The problem will be exacerbated by the Chancellor's proposals, which may be fleshed out a little tomorrow by the Secretary of State for Health.

We are told that the main reform will be a new army of auditors ticking bits of paper and inspecting forms to see whether every penny and every pound that the doctor or nurse is spending is well spent. I dread to think what the health service will look like if, on top of the 200,000-odd administrators we already have, and all the internal and external auditors, we have a beefed-up audit function, perhaps intervening day by day or hour by hour.

That would not be a productive way of spending the money. I suspect that it could even get in the way of patient care. The Government should learn to back off a little, to decentralise a bit, to start to trust some of the people who are running the service. If they do not trust the people running the service, they should get rid of them and appoint people whom they do trust.

Has my right hon. Friend ever met a nurse, doctor or consultant who said that what their hospital needed was more auditors?

My hon. Friend makes a strong point. He is correct. Cuts are sometimes made at the end of the year, even under this Government, because they discover that their hospitals do not have enough money. The cuts always seem to be in patient care. They never seem to be in paper clips, bits of paper and administration, which is perhaps where they should look.

Does the right hon. Gentleman accept that the audit process is necessary to establish whether we can get value for money? His party peddles the mythology that the health service and other services are getting worse. Is it not necessary to show the facts, instead of living off the anecdotes that he puts over?

I have not been giving anecdotes but describing the day-by-day experience of my constituents as patients, or friends or relatives of patients, and, more importantly, the experience of the nurses and doctors who work under great pressure at the local hospital and the local surgery, who tell me that the problem is a shortage of nurses, doctors and bed spaces, not a shortage of auditors, administrators, paper clips and bits of paper.

Of course, there needs to be audit. I had assumed after five years of a Labour Government that satisfactory audit arrangements were in place. Indeed, I thought that the Conservatives had left satisfactory audit arrangements in place. If they are not satisfactory, they should be revised and changed, but I warn the Government against a massive expansion of the audit function in the belief that that will automatically improve the service on which the money is spent. The reason why money is being badly spent is because the system is top-heavy. It still has too much bureaucracy, too many administrators—more than when the Conservatives left office by quite a large margin. The Government need to allow more local control by a few good managers in each locality.

Can we take it therefore that the right hon. Gentleman now regrets the implementation of the internal market, which his Government introduced, which was responsible for a huge mushrooming of unnecessary government, and which this Government have abolished?

I liked the idea of GP fundholding. One of the good things about it was that we introduced it in a permissive way. We did not say to every GP on day one, "You must be GP fundholders." We said, "If you would like it, this is extra freedom you can use." We discovered after quiet beginnings, with an awful lot of opposition from Labour, that a lot of GPs signed up and found that it was extremely good for them and their patients. It is a great pity that many of the freedoms that GPs enjoyed have been taken away. They have been put under a much bigger bureaucracy in the new primary care trusts that are emerging.

The hon. Gentleman should not hate choice so much. I want the NHS to offer far more choice to the people who need to use it: we the taxpayers, the patients or potential patients. It would make so much difference to the NHS if people had real choice about which doctor, surgery or consultant they went to, when and where they could have their operation, and proper advice and help about the range of options available.

Because the system is so short of medical and clinical capacity, and because it is so centrally driven by Ministers and their bureaucratic supporters, we do not have that choice and freedom, which I am sure my right hon. Friend the Leader of the Opposition would love to extend to people. It may emerge in one form or another from the policy review that is under way in the Conservative party.

One of the things that this country needs is a big injection of choice, enterprise and private capital into a range of public services. That can be even better illustrated in transport than in health. This Government have proposed a much delayed and over-inflated plan to invest—they call it investment, although a lot of it is spending and not true investment—£180 billion over 10 years in the transport industries. They have of course left out the main way of getting around the country—by motor vehicle—because that is handled by the private sector and there will be massive investment in that industry as people conclude that, given difficulties on parts of the transport system in which there is much more public involvement or public investment, the car is the best way to travel.

Within that £180 billion, the Government are aiming only for some £55 billion of private capital. That is a tiny sum compared with, say, the £180 billion that the British public are likely to spend on new cars alone over the same period. It is a poverty of expectations, but probably realistic, or even a little optimistic, given the way in which the Government are handling the transport industries.

Insisting on putting the main rail-owning company into administration will put people off producing private investment for the rail industry. Insisting on going through four or five years of rows with the Mayor of London and terribly convoluted studies on how we might get private capital into the tube, and coming up in the end with a scheme that lumbers the taxpayer with enormous risks while raising only about £4 billion of private capital, will make it a struggle even to get £55 billion of private capital over 10 years for all the transport industries.

If the Government were prepared to be a little more open and to secure proper private involvement, with some choice and freedom, in the railway and tube system, we could secure many more billions of pounds of capital investment without the same requirement on the taxpayer—estimated in the 10-year plan at more than £120 billion, and likely to spiral well above that given the way in which the Government bungle their handling of the transport industries.

The Government's public spending plans have already been gravely damaged by putting Railtrack into administration. A few hundred million pounds would probably have got the Government through the financing problem that Railtrack brought to their attention, but they decided to put that profitable company into administration. As a result, we have a bill for several billion pounds, and we still have not got to the end of the matter, as we do not know when Railtrack will come out of administration.

This Budget should have addressed that central problem, but we know that the Chancellor is at loggerheads with the Transport Secretary. He must be deeply embarrassed by the damage that the Transport Secretary has done to relationships with the private sector, the City of London and the people who are likely to produce the investment. We know that the Chancellor has had to keep quiet about that massive area of public-private investment, which is crucial to our country's future. Given how his colleague the Transport Secretary has handled the transport industries, the Chancellor has had to be pessimistic about how much strain the private sector can take.

I urge the Government to put that right and to revisit all their transport plans with a view to aiming for, say, £100 billion of private investment. That is a perfectly realistic target if all the main companies involved are in the private sector, and they are seen to be fairly regulated—not over-regulated—and to have some support and sympathy from a Government who realise that private companies are the best way to get the trains on the move again, the tube sorted out and the transport industries operating much more smoothly.

It is noticeable that where an industry is largely unencumbered by Government ownership or specific Government involvement—the private motor vehicle industry, the vans, cars and lorries—there is massive investment. No one has to debate in this place how we would make good the investment shortfall in that industry. We do not have day-long debates on how we can deal with lorry, car or van shortages for local enterprises. Yet owing to regulation—and, now, public ownership of the main Railtrack enterprise—we must debate how to deal with the shortage of freight wagons and track for them to run on.

The Government should understand the history of the railways. All capital for the rail network in the 19th century was raised in the private markets. The rail industry expanded massively throughout the 19th century, and into the 20th century, on the back of private capital. As soon as it faced serious opposition from the motor vehicle, the Government took it under regulatory control and subsequently nationalised it, and then it was all downhill to the point when it was privatised. There was a massive slide in its use and share of the market, and there have been great difficulties in financing and investing in it. As soon as it was privatised, the trends reversed. We saw a 25 per cent. growth in passenger usage and a. 30 per cent. increase in freight. We saw the beginnings of a big investment revival and then the Government, out of pig-headed ideology, decided that that was not allowed. They now have a big black hole in the middle of their Budget plans.

The Budget should address the central point that if we want, as we surely do, much more investment in health, transport and several other areas where the public sector dominates or has a big influence, we need to relax the controls more. We need to be more inviting to the private sector and allow it to play a bigger part. The difference in health spending between this country and other advanced countries is far more marked in the amount of private money spent than in the amount of public money spent.

I am the first to defend the proposition that if people are ill and need free care, that is their right under the pledge of the NHS. They, or other people, pay enough in tax, and I would not wish to take that right away from anybody. If people need care, it should be available free at the point of use. However, why stop people using their own money if they want different types of care to be made available and why not give them some encouragement for that? The Labour party is immensely hostile to the idea that people might wish to spend more of their own money in that way, and to any scheme that might promote or encourage that, albeit at a considerably lower cost to the taxpayer than if those people required all their care to be provided by a completely publicly financed system.

The right hon. Gentleman sets great store by the need to increase private investment in the NHS. Can he not welcome, in a bipartisan spirit, the huge increase that the Chancellor has announced for the NHS in the next five years, which represents a 100 per cent. increase since 1997? Surely his party would welcome that. Will he take this opportunity to commit his party to matching that increase?

I do not welcome sums of money: I welcome results. If, in three or four years' time, there are no waiting lists in my constituency, the local hospital has many more beds and the nurses and doctors tell me that they have a more realistic work load, I am a big enough man to acknowledge that improvement. I might take the precaution of doing so the day after the election rather than the day before, because I am also a politician, but I would not mislead anyone about it. If that is delivered, everyone in my party would feel great about it, but my worry is that it will not happen. We have had five years of promises and it is always jam tomorrow. All we actually get is a traffic jam, not the benefits of better health services or transport.

I will wait. I will welcome results, but not the spending of huge sums of money in itself. I certainly do not welcome the tax increases that it necessitates. If all the money goes on auditors and paper clips, I will not welcome it at all, and the Government have some serious questions to answer about where the money will go and how quickly they can spend the money wisely by recruiting the nurses and doctors and building the bed spaces and wards that are so clearly needed in many parts of the country.

The big issue in the Budget is tax, tax and tax. After five years of huge tax increases, we get the whopper tax increase. It is the tax increase that is so big that not even this Chancellor thinks that he can get away with it without telling people. It is the first tax increase that he has not attempted to introduce by stealth.

The Chancellor's record on tax increases shows that he began by deciding to tax savings, prudence and old age. He put a massive tax increase on pension funds. When we objected to that, we were told by the Chancellor and the Prime Minister that because the stock market was rising, it would not hurt anybody and nobody would notice it. The stock market was making magic money and the Chancellor wanted to take a bit, while leaving people mysteriously better off. In the past two years, the stock market's performance has been very bad, and people's pension funds have fallen in value year by year. The Chancellor did not apologise or say that his argument no longer applied so he was going to take the tax off the pension funds—even if he could not go so far as to rebate the money that he should not have taken in the first place.

That cruel tax on old age, prudence and savings is now doing real damage to people's pension prospects. The Labour party gets angry because companies are closing down final salary schemes, but they are too expensive and do not have enough money left in them. One of the biggest culprits is the robber Chancellor who has taken quite a bit of the money out.

The next big tax from the Chancellor was the huge telecom windfall tax, from the so-called auction of licences, which was another tax that was meant to go unnoticed and inflict no pain on anyone. It cost £22 billion for the mobile phone companies to stay in business. The auction was cleverly designed and I give full credit to the Chancellor and his advisers, who worked out a perfect system under which not enough licences were on offer so the phone companies had to make crazy bids. Of course, disaster followed. The Chancellor now refers to the collapse in the telecom and high-tech industries, but he does not say sorry. He does not admit that taking £22 billion out of the industry had a had impact.

The spectrum that was sold is a finite resource. It was not a form of taxation. A finite resource has to be sold, not given away for free. The state of high-tech and telecom companies is a reflection of America sneezing and industries across the developed world catching a cold, not the sale of the spectrum to British telecom companies.

The hon. Gentleman does not understand the magnitude of the sum of £22 billion. It was a prosperous leading industry, but that is a colossal sum of money. The German Government followed the British example and took another £28 billion, making £50 billion of tax. It was a tax. The companies were using the airways free of charge, but the Government saw an easy opportunity to raise some money. Now, of course, the Government do not want to admit that they were part of the cause of the collapse of that industry. I do not claim that the Government were the sole cause, but the hon. Gentleman must concede that taking £22 billion out of the industry had a serious impact. It dried up the cash flows and meant that the companies had to keep prices higher. They could not pay wages, recruit extra staff or expand the networks as quickly as they would have liked. That was the Chancellor's second tax that did a lot of damage.

The right hon. Gentleman is giving away his whole argument. He argues in favour of more private intervention in the health market, but then he says that when auctions were used as a largely market-driven answer to how to allocate a scarce resource—the spectrum—that somehow became a tax. He is confused.

I am not confused. The spectrum was available freely until the Labour Government designed a system that was bound to lead to a supertax, because of the bidding rules and the number of licences on offer. If the Government had offered a realistic number of licences, the prices paid in the auction would have been more sensible and affordable. The Chancellor had no understanding of how much damage such a colossal price would do even to a relatively successful industry, which the telecom industry had been until that point.

I come to the Chancellor's third tax. He decided that it would be a good idea, under the cover of greenery, to impose far more taxes on motorists, especially on fuel. He brought the haulage industry to its knees, major bankruptcies were threatened and some haulage companies even decided to give up on Britain and set up on the continent where the tax regimes were more benign. The damage that tax caused got through to the Chancellor, because it led to a mass protest, and—up to a point—he apologised and announced that he would make some reductions in duty after all. He has continued that apology in the Budget by announcing that there will be no immediate further increase in the tax.

I am glad that the Chancellor has learned from that case, but why does he now think it a good idea to impose a tax on jobs? He has tried everything else. He has wrecked the pension funds and the motorists.

Has the right hon. Gentleman spotted that yet again the Chancellor is talking the right talk about charging foreign lorries to use our roads? But page 125 of the Red Book shows that such charging will not happen for several years to come. The promise has been made since the protests.

The hon. Gentleman is right. The right hon. Gentleman, as a high-taxing Chancellor, could have put equal or higher taxes on foreign competition. He did not even do that to help the domestic haulage industry, which made the protests even more intense.

The Chancellor has tried to wreck several industries. He has been successful in helping to do enormous damage to telecoms, to haulage and to people's savings for pensions. Now, he has decided to tax jobs. That is especially disappointing because he made his reputation in Opposition in campaigning against every job loss that was ever announced under a Conservative Government. Now that we have him in power, he seems to ignore the thousands of redundancies that take place week by week in manufacturing industry under his stewardship of the economy. He is taking the incredible risk of placing an even greater burden upon employers and employees by raising the cost of employment.

I am sure that there are quite a few successful and prosperous parts of the economy that will be able to pay the bill. They will not enjoy paying it but they will manage. However, there will be a serious impact on marginal parts of the economy. The most likely area to be badly damaged is relatively labour intensive and often quite low-wage parts of the economy in manufacturing. That is the area that is most at risk already from all the other Government policies of high tax and high regulation and the current exchange rate. It will now face an additional imposition from the Chancellor. For a Chancellor who has always rightly said that he wants more jobs, more enterprise and more prosperity, it is a great pity that he has now decided to raise so much money in the form of a tax on jobs and enterprise.

There are some clever ideas in the Budget to produce modest relief at the margins for business in response to business lobbying. I agree with these ideas and I am pleased that the Chancellor has introduced them. However, they are swamped by the massive tax on jobs. It is no good for the business community if it receives little pieces of relief here, there and everywhere if it has to pay for them three or four times over because of a massive tax on jobs, which I fear we have.

Has my right hon. Friend noticed that the Red Book, after boasting of the recovery in employment, forecasts that the improvement will not continue?

That is a valuable point. I hope that the forecast is wrong, but it is wise of the Chancellor to be cautious. He is placing a considerable imposition upon jobs and job generation.

What would have been a better Budget? It would have been one that recognised the huge contribution that private investment and private money could make to our public services. It would be one that mended fences with the private sector, especially in transport, rather than preserving them in their broken form. It would have been a Budget that contained some humility about what had been achieved so far with large increases in taxation and spending, and one that contained more careful thinking about how we might secure the real improvements that we need in a crucial area such as health.

The Chancellor has gone ahead with the eye-catching headlines on large sums without thinking about how he can find nurses, doctors and other important care workers who so obviously need to be recruited. As a result, we may see more of the same—that is tax and waste—that has characterised the Government's first five years.

I do not recognise anything that the right hon. Member for Wokingham (Mr. Redwood) was talking about. I have been in this place since 1987, and I was on the Opposition Benches when the right hon. Gentleman was a member of the Cabinet. We then had 3 million unemployed; inflation was in double digits and we had what have been referred to as three booms and busts. They were deep economic troughs. That is the history of the right hon. Gentleman when he was a practitioner in government. He is a clever man, but there is a meanness of spirit in every political utterance that he makes. He offered not one good comment on anything that the Government have done— [Interruption.] Apart from that, he is fine—there is always some good in everyone.

Let us consider what the Government have achieved. We have the lowest unemployment for more than 20 years; since 1997, an extra 1.5 million have been in employment. We have the lowest rate of inflation for 20 or 30 years. For the first time, we are paying back more of our debt than any other British Government since the second world war, as my right hon. Friend the Chancellor of the Exchequer said. There must be something good about what the Government have done. I would like the right hon. Member for Wokingham to intervene to say that a teeny little thing that the Government have done is good; he refuses to do so.

The hon. Gentleman did not listen to my speech. I said that I thought that some business tax reliefs were welcome, but that it was a great pity that business had to pay for them several times over.

That is a right hand and a left hand answer. It seems that there were some good things but they were taken away quickly. Let us pass on that issue.

I judge the Budget on four themes. The first is economic stability, the second is fairness, the third is strengthening public services and the fourth is our presence on the international stage.

Let us take economic stability first. We have that stability because we learned lessons from the past decades. I have mentioned the Tory record in the 1980s and 1990s. Labour Governments had records in the 1960s and 1970s. It could be said that we had jam straight away with Labour Governments, but bread and water for the ensuing few years.

My right hon. Friend the Chancellor said in 1997 that that approach would have to be changed. His brave act, against all the odds, was to give the Bank of England independence. Monetary issues have been taken away from politicians and placed with economists. As Chairman of the Treasury Select Committee, I know that Sir Eddie George and his colleagues on the Monetary Policy Committee are accountable to the Chancellor and Parliament through our Committee. That is much healthier than having monthly meetings between a Chancellor and a Governor of the Bank of England.

There is independence for the Bank of England, and a symmetrical inflation target has been set, which has been a guiding principle in the economy. The MPC has met that target consistently since 1997.

I was in Brussels yesterday for a meeting of the European Parliament's chairpersons' budget committee. We are not in the eurozone, but our monetary and fiscal policy framework is delivering towards the stability and growth pact that the EU is setting down. It is striking that we have low and stable inflation compared with many other European countries. We have the fastest growth in the G8. If we go into Europe, after a referendum, we will be well placed; I shall not go into that debate in more detail.

The MPC is well placed to respond quickly to risks to the symmetrical inflation target. We have a sound model with the Bank of England, which I would not like to see jeopardised. We must be careful in the run-up to the referendum in Europe to ensure that the lessons that we have learned in the United Kingdom are taken on board by the rest of Europe.

My right hon. Friend the Chancellor of the Exchequer has adhered to his fiscal policy. Indeed, he announced today a tightening of that policy by a few billion pounds. The code for fiscal stability has ensured that. In the next few months, the Treasury Select Committee will undertake an inquiry into Europe and fiscal policy to evaluate the lessons that can be learned from the monetary and fiscal framework that was established in 1997, and how that can be affected by our entry, or otherwise, into Europe.

There are five characteristics of fiscal stability: transparency, stability, responsibility, fairness and efficiency. These serve us well in the medium and long term. They ensure that spending and tax impact fairly. That is a big issue, especially when it crosses generations. Currently, we have a pensions problem. The problem is not unique to the United Kingdom. Germany, Italy and other countries have enormous problems in that regard. It is important to treat today's pensioners fairly, but we must also treat tomorrow's adults and pensioners fairly. There is an inter-generational aspect to the problem. The framework established by the Chancellor contains a long-term element and will serve present and future generations well.

We must recognise that a large savings gap exists. Various figures have been bandied about and the sum of £27 billion has been mentioned. That means that each individual should be saving an extra 9 to 18 per cent. for his or her pension provision. As a Government, we have a responsibility to ensure that people do that. I am a little concerned about stakeholder pensions. Although the Government say that there has been a good take-up, employers are responsible for making the scheme available to employees, not for ensuring that pensions are taken up, so there are a number of empty schemes, as they are called.

The hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood), as Chairman of the Select Committee on Work and Pensions, knows much more about the matter than I do, but I recognise that it is a major issue. I would suggest to the Chancellor that if the voluntary method is not working, he should consider the compulsory route. I see the hon. Member for Roxburgh and Berwickshire indicating his approval.

On economic stability, it is important that we stand by the fiscal rules laid down by the Chancellor. The golden rule is to borrow only to invest over the economic cycle. The second rule is to ensure sustainable investment and make sure that our net debt is well below 40 per cent. over the economic cycle. I am pleased to see today that the Chancellor has fulfilled that.

The second element that I mentioned was fairness. I noted the Chancellor's remarks that he would review the rules for residents and domiciles, and I am a little disappointed. There are glaring examples of individuals who live in the country but pay no British tax. That conflicts directly with the fairness agenda of the Labour party. I ask the Chancellor to examine the issue carefully. Last week The Guardian highlighted the case of an individual worth billions upon billions of pounds, yet there were little or no net tax receipts to the Inland Revenue. It would be helpful if the Chancellor's review were speeded up.

I am pleased by the Chancellor's approach to small businesses. As he said, they are responsible for 50 per cent. of output, and we must assist the nurturing of small businesses. In my constituency, when I was elected in 1987, there were a number of large firms. Those were the norm in the 1950s and 1960s. Now, most large firms have departed and the future is for small firms. Particularly in disadvantaged areas, such as mine, it is important that the maximum help is given to small businesses. I welcome the Chancellor's measures on VAT, corporation tax and research and development.

On research and development, the tax credit announced a few weeks ago for large firms is extremely welcome. We experience a phenomenon known as the branch economy, where we have inward investment and companies coming in, but the brain of the company is located elsewhere. A research and development tax credit could help to ensure the stability of such companies in particular areas and the long-term affiliation with those areas.

Reducing red tape and compliance costs for small businesses and exempting some from stamp duty must be welcomed. Competitiveness was mentioned by the Chancellor in passing. The Competition Commission's report on banks was published a few weeks ago. Small businesses feel greatly disadvantaged in that regard. In the next few weeks my Committee will be inviting the banks to tell us what they have done post-Cruickshank to ensure that small businesses get a fair deal. I would say that to date a level playing field has not been established and an awful lot of work remains to be done.

Competition and productivity go hand in hand. The productivity targets that we have set since 1997 have in many cases not been realised. Productivity levels in our country are still disappointing compared with the rest of Europe and especially compared with America. A study of productivity undertaken by McKinsey in America concluded that the driving force for improved productivity was competition. We can learn from that. We must support small businesses through the Competition Commission's proposals. I and my Committee will be doing that.

In accordance with the fairness agenda, we must support families and build a fairer society. I agreed with the Chancellor 100 per cent. when he spoke of the importance of making work pay. The measures introduced by the Chancellor—the child tax credit, the child allowances and the working tax credits for those with and without children—are extremely important. The more people that we get to work, the better for the individuals, communities and society. From April 2003 the working tax credit will guarantee a minimum income of £183 a week for a single-earner couple without children working full-time on the minimum wage, and £237 a week for a family with one earner working full-time on the minimum wage. That is a big increase which is very much to be welcomed.

There has been some criticism from outside bodies, not least the Institute for Fiscal Studies, that tax credits are a disincentive to savings. I hope that the Chancellor will look into the matter. As long as he is providing satisfactory levels of minimum income, some people may not consider it necessary to save. The Government should consider whether their measures create a barrier to savings.

The third issue of the Budget is the strengthening of the public services. The Chancellor and the Prime Minister recognise that a debate on the subject is needed. A number of hon. Members to whom I have spoken since the Chancellor announced his Budget called his statement very brave. In this Budget, what you see is what you get. The Chancellor said explicitly that if we want a good health service, we must pay for it.

It has been paid for, but it has got worse.

The reason why the health service and other public services are not as good as they should be is that we have had decades and decades of underfunding. The present Chancellor is brave enough to recognise that and say that if we are to have high-quality public services, we must pay for them.

The right hon. Member for Wokingham, like his colleagues, said that he did not agree with the way that the Chancellor was going, but together with most people in this country, I do not know where the Conservative party is going. I have been on platform after platform with Conservatives, from shadow Secretaries of State down, and what do they tell me? They are studying the matter. We are not studying it. We are implementing a new proposal. The extra £4 billion to be provided this year will be very welcome.

My guiding principle is that if we want a health service, we must have one that is for all of the people all of the time. From what I can gather, the Conservatives are looking at other forms, which will be for some of the people some of the time, or for some of the people all of the time, but never for all of the people all of the time. I stick by the maxim that the NHS should be for all of the people all of the time. The Government will be able to challenge all the other proposals that have been put forward and win the ensuing debate, and that is important.

Let me reflect on the figures announced by the Chancellor today. There is to be a 7.4 per cent. average annual real-terms growth in UK NHS spending for five years, putting the NHS on a sustainable long-term financial footing, and a rise in NHS cash spending per household from £2,370 in 2001–02 to £4,060 in 2007–08, a 48 per cent. real-terms increase and a doubling for every household. Who in this Chamber would not welcome that?

The hon. Gentleman makes a serious and sensible speech, with much of which I agree, but we must be careful not to increase people's expectations of the spend. The increases are welcome, but the King's Fund has been at pains to say that if politicians are going around rightly saying that the money is coming, the expectations will increase faster than the rate at which the money comes, and there is a problem about that.

I always agree with my friend and that really worries me. I shall not fall out with him now, because I agree once again. My next point was that the resources that we are putting in must ensure delivery on the ground. At the last election, many people voted for a Labour Government on condition that we would get things right. We said that we had had four years, it had been tough, but we had the proposals in place, and we asked for another term to get it right.

My hon. Friend said that the Conservatives would not tell him their plans for the health service. Perhaps I can enlighten him, because the shadow Secretary of State for Health has talked about a four-phase plan, the first phase of which is to break the link between the NHS and health care, and the second phase of which is to convince the people that the NHS will not work and cannot work, and will eventually result in self-pay by NHS patients.

I was coming on to that.

The hon. Member for Roxburgh and Berwickshire referred to the King's Fund. It stated that the NHS has been overwhelmed with well-meaning policy directives, investment targets and structural changes. In many ways that has been the problem. I agree with the hon. Gentleman. First, because of departmental underspends we must find the knack of teaching the civil service how to spend money, and, secondly, we must aim for decentralisation, so that there is no central command. The hon. Gentleman is right and I welcome the Chancellor's announcement today, but it will be a big job to get things right during the next four or five years.

Does the hon. Gentleman not see that for people to have to pay £4,000 instead of £2,300 is not an inviting prospect? They want to know what they will have for the money, not how much extra they will have to pay. For example, can he tell us when people in my constituency will not have to wait for a hip replacement operation when they need one? That would be interesting to know.

I have never been to the right hon. Gentleman's constituency, but I am happy to acknowledge that there has been a problem with waiting lists. However, the Chancellor acknowledges the problems and is putting in place a structure whereby huge changes can be effected. That is the reality of the situation. I well remember the manifold problems under the right hon. Gentleman's Government. The internal market was a disaster and it took the Labour Government their first four years to correct that. The debate in the NHS will go on and will reverberate over the next few years.

As my hon. Friend the Member for Glasgow, Cathcart (Mr. Harris) said, the shadow Secretary of State for Health has four themes and the big issue behind them is to convince people that the NHS cannot and will not work. What a cynical ploy. That adds up to playing about with people's lives. That will not work and we must counter that argument head on. I am delighted that the right hon. Member for Ross, Skye and Inverness, West (Mr. Kennedy) and his colleagues will join us in doing that.

I come now to the international stage and the important work of the Chancellor and the Secretary of State for International Development. I applaud the Chancellor's Marshall plan speech in Ottawa and his proposal that the international community should provide an extra £50 billion a year. I also applaud the 2015 targets that were agreed. Already, in Uganda, the Government have doubled primary school enrolment and cut class sizes.

However, in other areas we have not been so successful and we must engage in the great debate in the IMF and the World Bank about the future of aid and development. The Treasury Committee was in Washington in January when we met representatives of the IMF and the World Bank. The United States proposes that we give countries grants not loans. Development agency representatives spoke to us on that subject, but we should not get hung up on the issue of loans as opposed to grants. In many ways I agree with the United States that we must have effective change on the ground, but the plan on which we should concentrate is developing a long-term approach to investment in developing countries. That is the big issue to which the Chancellor and the Secretary of State for International Development should turn their minds.

I see one of my colleagues on the Treasury Committee in the Chamber and we have expressed concerns about the effectiveness of the IMF and the World Bank. In the next few months, we will have the opportunity of questioning Horst KÖhler, the managing director of the IMF, on that issue. However, we must remember that those institutions combined have annual expenditure of more than $30 billion. We have a seat at that table and it is important that we should put our point of view across.

One of the big surprises for me in the past four or five years has been how much interest ordinary people have in the subject of writing off international debt. In my constituency I communicate reasonably regularly with about 2,000 people who have written to me on the subject and want to be kept informed. That is a cross-party issue. The work of the Select Committee on International Development and others on that has been good and I look forward to continuing that work with them.

However, the big issue facing the Chancellor and the Secretary of State for International Development is trade. We should be considering using trade as a force for poverty reduction. The rich countries spend $1 billion every day on agriculture subsidies and the resulting surpluses are dumped on world markets, undermining the livelihoods of millions of small farmers in poor countries. When developing countries export to rich countries they face tariff barriers four times higher than those encountered by rich countries.

Those barriers cost the poorer countries $100 billion a year—twice as much as they receive in aid. We are giving with one hand and viciously taking away with the other. The rules of the World Trade Organisation on intellectual property, investment and services which protect the interests of rich countries must be looked at again and I ask the Chancellor to take that matter up when he meets his colleagues in the international forum. Most of us who have travelled abroad in the poorer countries realise that many of them have one commodity that keeps them going, but that the international community has failed to address the problem of low and unstable commodity prices that have consigned millions of people to poverty. For example, coffee prices have fallen by 70 per cent. since 1997, costing exporters in developing countries $8 billion in lost foreign exchange earnings. We must tackle trade if we are to bring everyone into the global economy.

I shall finish on that issue. It is always said that we have a global economy, but I contend that we do not, as half the people in the world are excluded. Half of them live on less than $2 a day, and a quarter cannot have a glass of clean water. Every minute, a woman dies during childbirth in developing countries. That is the reality that we face. If we are to tackle the issue of globalisation and bring people into the global economy, we must start with the other half of the world population.

We must also recognise that globalisation and terrorism are linked. As ex-president Bill Clinton said in his Dimbleby lecture last year, we can look forward to our children growing up and growing old—say, to 90 years of age—but we do not want them to grow up behind barbed wire. Globalisation has taken the walls down, which means that there will be less security if we do not collectively pursue proper policies. That is our big responsibility, which is why I welcome the Chancellor's statement and urge him to maintain a stable economy, give us high-quality public services, provide fairness to families and increase employment in this country. I urge him to ensure that our voice on the international stage is recognised and that we as a country do a lot for the other half who are not included in the globalisation process.

I listened with interest to the speech of the hon. Member for Dumbarton (Mr. McFall). At first, I struggled to find anything with which I agreed, but as he got going I started to find common cause on one or two points.

I agreed especially with what the hon. Gentleman said about the Washington institutions, both of which are in a mess. The World Bank is in a dreadful mess, with a huge bureaucracy out of the control of the shareholders, or even senior staff. That is why, as he knows, I believe that there is scope for an Anglo-American parliamentary initiative. Congress knows better than us what a mess those institutions are in and has been looking for allies for a long time to secure fundamental reform, to cut out waste and to ensure that the institutions use more effectively the huge resources that are available to them. I have suggested an initiative in which two committees of the respective Parliaments come together and issue joint proposals. The involvement of America and Britain, possibly with allies from continental Europe, would make a dramatic impact in an area in which there is now great popular interest, not merely among the balaclava-clad brigade but among much more reasonable people who are trying to think how best to deploy resources in the institutions. So there is something on which I can agree with the hon. Gentleman.

The hon. Gentleman asked whether my right hon. Friend the Member for Wokingham (Mr. Redwood) could find anything in the Budget with which he agreed. I can certainly find some things with which I agree, although on the whole, for reasons about which hon. Members will hear in a moment, I think that the Budget is very concerning. I support the reduced small company corporation tax rate; the ending of automatic fines for late payment of VAT and the ending of the requirement for small businesses to write down every VAT transaction in order to reclaim; VAT relief on bad debts; and the backdating of tax relief on charitable giving. I also support the direct payments that are being made to schools, although I am not sure whether the Government have thought through the long-term implications of bypassing local education authorities and increasing such sums—an approach that betokens a profound transformation of the way we fund education. We need to think through the structures more carefully. Incidentally, I welcomed some years ago the granting of independence to the Bank of England. Indeed, I would have liked the Chancellor to go further in those reforms.

So, there are some things that the Chancellor has done with which I agree, but I do not think this is a good Budget, although it could become a crucial Budget in the political landscape of Britain. I want to explain why in the remainder of my speech.

Budgets should ultimately be about improving and sustaining the long-term economic performance of the country. Everything should be subordinate to that end, even when we are firefighting in an economic crisis. Distributive aims, including getting money to the poor, are not an alternative policy, because if long-term economic performance is not sustained, there will be no money to distribute.

The background against which all Labour Budgets have so far been announced is the crucial fact that after 19 Conservative Budgets, Britain had been turned from a basket-case economy into one of the leading economies of the world. Every step that the Conservatives took on that road was opposed by Labour. It opposed tax reduction and reform, privatisation, almost all deregulation and the removal of most protection in the economy. The whole lot was opposed. By the early 1990s, even when Britain was in a severe recession, caused partly by a global cyclical downturn and partly by policy mistakes, the British people wanted to stick with those policies and voted the Tories back; they voted to stick with the new economic consensus.

The 1992 shadow Budget was Labour's last great effort to challenge that market-based consensus and get back to tax and spend. It did not succeed in breaking the consensus, but broke itself. That shadow Budget, with its commitment to tax and especially to national insurance contribution rises—not that dissimilar to the Budget proposals announced today—was the main reason why Labour was defeated so decisively in the subsequent election, which took place a few weeks after its announcement. It was at that moment that new Labour was conceived in the minds of the current Chancellor and Prime Minister.

What happened at that time was very different, as there was a proposal to lift the ceiling on national insurance. The hon. Gentleman will know from today's statement that that ceiling has not been lifted.

The Chancellor has raised national insurance contributions, and several rises in NICs have been introduced by Labour in its other Budgets. Is the hon. Gentleman saying now that he has found another way to raise a bit of money from national insurance contributions and that that is all right? Is he implying that if he had made such proposals in 1992, they would have looked any better to the electorate? I very much doubt it. The fact is that it was those commitments to rises in national insurance contributions that broke Labour in 1992 and led to the creation of new Labour.

The hon. Gentleman talks about the political and economic situation in 1992. Does he think that it is better to tax and spend or to do what happened between 1992 and 1997, when the national debt doubled: flog off the family silver, borrow lots of money and spend?

Those comments will lead me into a digression, but I shall try to deal with the hon. Gentleman's point. He suggested that the Conservatives got out of their difficulties in 1992 merely by racking up debt. In fact, they took very tough decisions to bring order back into the public finances in extremely difficult circumstances. As I said, those circumstances were created not only by the global economic downswing—other countries had similar problems—but by policy mistakes, mainly in monetary policy. I agreed that those mistakes were made.

The hon. Gentleman is wrong about the overall debt record; indeed, the Chancellor uses sleight of hand whenever he makes such points. In fact, if he looks at the figures for 1980–1995—they do not vary much from those for 1979–1997—he will see that Britain was the only country of any significance that succeeded in reducing its debt as a proportion of GDP. Every other country experienced a sharp increase in debt as a proportion of GDP: Canada, France, Germany, Italy, the United States, Sweden, Spain, the Netherlands—the lot. One way or another, all were hit by the same kind of crisis, and all racked up debt. Contrary to the impression that the Chancellor gives, we were the only country that coped successfully without racking up debt. Of course, he has been able to reduce debt because the economy is sufficiently strong to enable tax revenues to pour in. Combined with the windfall to which my right hon. Friend the Member for Wokingham referred, that has allowed him to bring down the debt burden.

Will the hon. Gentleman give way?

If the hon. Gentleman will forgive me, I shall not prolong this part of the debate. Otherwise, I will not get around to making the speech that I want to make.

As I was saying, Labour was defeated in 1992 because it said that it would tamper with national insurance contributions. It was elected in 1997 after committing itself to adopting the new economic consensus lock, stock and barrel—even to the extent of accepting Conservative spending plans Department by Department. Until it did so, the country was simply not prepared to trust it with power. The big question now, which will reverberate for the rest of this Parliament, is the extent to which this Budget breaks with that consensus.

Beyond the Chancellor's customary rhetorical fog, I detect that not new Labour but the whole Labour party—including the "borrow, tax and spend" Labour party of yesteryear—is behind this Budget. Perhaps I might illustrate the point with a few words on each of those elements.

On borrowing, the figures might not look too bad, but careful inspection of the Red Book shows that off-balance sheet finance is growing every year. As page 229 shows, if off-balance sheet finance already made is added to planned off-balance sheet finance, we arrive at a figure of £44 billion. According to old accounting principles, in the 1980s and 1990s such expenditure would have scored in the year in which it was incurred. The private finance initiative and public-private partnership are creating huge bills for taxpayers to pay in years to come. Of course, that off-balance sheet finance would have been in the bottom line for borrowing. Borrowing is understated in the Red Book.

In any case, borrowing should be all right at this point in the cycle. In fact, it is not that bad, but even so borrowing of £25 billion is proposed over the next two years, and the situation is certainly worse than the figures suggest. Exactly how bad it is I cannot tell, and I do not think that anybody can be sure. I doubt whether anyone in the House—even the Economic Secretary—really has a grip on the numbers in the Red Book. Even as someone who at one time tried to help draft parts of a Red Book, I find it incomprehensible. Changes to definitions of the accounts are mesmerising, and it is impossible to work out what is going on without a degree in Balls-Brown economics.

To ensure clarity, we desperately need to sort out these numbers. We need a fiscal policy committee, independent of the Government, akin to a small version of the congressional budget office. Such a committee, for which I have called for a long time, needs only a dozen people or fewer. Their job should be to draw up truly independent and authoritative accounts, to vet the Government's accounts, to create agreed definitions and to scrutinise the forecast in depth.

Does my hon. Friend think that we should adjourn each year's Budget debate for a couple of days, to enable us to study the Red Book? Trying to have a public debate is ludicrous when the Government obscure so much bad news by hiding it away in the Red Book.

Parliamentary scrutiny of the Budget is in need of wider reform, and my hon. Friend's idea, which has much to commend it, should perhaps form part of that reform. In the 48 hours after a Budget, the Treasury Committee should engage actively and intensively with it and produce a report in language that parliamentarians can understand, so that they can judge the Budget for themselves. Unfortunately, that is not the way that things are done. I am not even sure that an instant response should be made to a chancellorial statement, which should be treated as a statement. In fact, it is not a statement, even though it is described as such. People should be able to cross-examine the Chancellor on the spot and we should then have a 48-hour delay, after which the debate should begin. I do not feel that strongly about the matter, however, and many might say that that would be a shocking innovation for a process that has been going for some time.

The Government and the Chancellor claim that they are vetting the numbers to which I was referring: after all, they are giving them to the National Audit Office. However, that is little more than baloney. The NAO itself put it on record that it takes little more than a cursory look at the assumptions. It said that, in total, it spends £20,000 on the job. 'When I asked the Bundesbank what it spends to vet assumptions in the German Government's accounts, it said that the resource cost amounts to between £1 million and £2 million. Of course, huge resources are spent on vetting draft American budgets by the congressional budget office. So we should remember that, in saying today that the NAO has concluded that the audited assumptions are reasonable and cautious, the Chancellor said virtually nothing at all.

So much for borrowing and the bottom line, but what of tax and spend? Here, evidence of a change in policy seems overwhelming, with a move away from the previous five Budgets and the economic consensus of the 1980s and 1990s, and towards an earlier position. Taxes are up by 2.5 per cent. of GDP, excluding questionable items such as the working families tax credit, which should be reclassified. Page 216 of the Red Book seems to suggest, at least, that the Government are going to concede ground on how it should be classified. Over the equivalent period in the last two cycles, the Conservative Government managed to reduce the tax burden. Of course, reducing the tax burden is partly a cyclical phenomenon: the Labour Government are putting it up by 2.5 per cent. during an upswing, but we managed to get it down. That is a significant change; in statistical terms, it is quite dramatic.

Will the hon. Gentleman give way?

If the hon. Gentleman will forgive me, I shall make a little more progress. Perhaps he can intervene a little later.

Five years ago, people thought that, under Labour, taxes and the tax burden might at least be stable. They did not hope for tax cuts, but they thought they would not get tax rises. That was when they were listening to new Labour. The Prime Minister told us time and again that he had no plans to raise taxes.

A little over three and a half years ago—just before a Labour party conference—he suggested in an interview that he wanted to get taxes down, not up. That was definitely new Labour speaking, but I do not think that new Labour was speaking today.

Before 1997, the whole of Labour's policy—of which the Chancellor and the Prime Minister were key architects—involved shedding the electoral millstone of a commitment to high taxation and spending. In the Chancellor's earlier Budgets, when taxes came they came by stealth, as my right hon. Friend the Member for Wokingham pointed out. However, this budget is brazen about tax rises. That is certainly not new Labour speaking, but old Labour.

Spending has risen very sharply under Labour—from £341 billion in cash terms to a projected £470 billion in 2005–06. That is a huge increase of £130 billion. Spending is rising so fast that the Government cannot get rid of the money, hence the underspend. Even where it is being spent, much is being wasted in so many areas.

Let me give an example. What happened to the £280 million spent on cancer care in the so-called NHS cancer plan? We have a Select Committee report on that. In evidence to the Committee, Professor McVie said:

"I think there is still some mystery about where some of the money is and whether the cheque got lost in the post or whether it has been absorbed like creosote into the fence post of the administration of the health service".

He went on:

"I would have thought that seven-eighths of the resource has not yet got out there".

The problem is that it is the same story in many other aspects of public spending. Much attention is paid to getting out announcements on increases in spending, but little care is given to thinking how best to deploy and use that money.

When the Conservatives increased NHS spending by 6 per cent. in real terms for several years—something that is often forgotten—they allied those increases to radical changes in the structure of the NHS. As a result, there were huge productivity gains, measurable in output terms and available as public statistics. I am prepared to wager that we will see little in the way of productivity gains over the next few years from the new spending increases. I am sure that if we keep a constant series going—I would not mind betting that the Government are trying to find a way to end that series—we will still see a fall in productivity.

So far I have talked about financial policy—getting monetary and fiscal policy right. However, the supply side is at the heart of improving economic performance, and new Labour has never taken on board that part of what is required to make an economy successful.

I question the premise of the hon. Gentleman's argument about breaking the consensus. I put it to him that the Conservatives cut spending dramatically, leaving the Labour Government to inherit an under-resourced and under-invested health system. The Conservative party now seems to agree that we need to increase spending on health, but thinks that the money needs to come from people's pockets in a different way. That is what the debate is now about. If the hon. Gentleman wants to go back to the 1990s, we can talk about boom and bust and the 22 tax rises. Let us instead move the debate on and discuss how to rebuild and reinvest in our NHS.

The hon. Gentleman attempts to make an honourable intervention, but he does not know many of the facts. The NHS saw a real-terms increase of 3.2 per cent. a year on average throughout the time of Conservative government. Health spending grew faster than the increase in gross domestic product for the same period, which was nearly 2.8 per cent. In other words, the NHS absorbed a steadily increasing share of GDP throughout an 18-year period, which is a long time. The hon. Gentleman is wrong about what went on.

The question before us is whether Labour has learned the lesson that increased taxation can easily and dramatically reduce economic performance. That is the heart of the matter. Has it learned that spending alone does not solve problems? Like spending in a business, it is the quality of the investment that counts. That is what determines whether extra spending is translated into better and more services.

Let me return to supply-side reform—I have been slowed down by intelligent distractions from various quarters. Supply-side reform is at the heart of improved economic performance and Labour has never had its heart in that. The plain fact is that the economy is being clogged up with intervention and subsidy everywhere. Over the past five years, subsidies have come from all quarters. There have been subsidies for the coal industry, the airbus, the car industry, for films and much else. There has been a massive increase in regulations on the utilities, financial services and employment bureaux. There is a new body of regulations for everything.

The public sector has been given the same treatment. Hon. Members only have to go to their local schools and ask about the increase in regulations to know that. Indeed, the same story is given by those who run primary schools. I was going to spare the House an anecdote about a school in my constituency, but I am beginning to enjoy myself. A school with an experienced headmaster got no fewer than six questionnaires, each of which he said would take him several hours to complete. They were sent by central Government via the local education authority and came with a note saying, "Congratulations. You've been chosen at random to help us find out more about how to improve the education system." He was sick of filling in forms and worked out that it would take him many man hours to complete them, so he pinned them together and wrote back saying, "Congratulations. You have been chosen at random to receive these unanswered. What I want to do is get on with some teaching." I have every sympathy with him.

The structure of the tax system is crucial to an efficient economy. A huge number of distortions has been put into the system. The hard work of nearly 20 years of simplifying the tax system has been put into reverse. Hon. Members should not take my word for it—the British Chambers of Commerce said a while ago about capital gains tax:

"The CGT system is now so complex as to be almost unworkable. Many businesses say they and their accountants are just unable to work out their CGT liabilities."

That is not a satisfactory state of affairs, but so it goes on. It is the interference with, and distortion of, the millions of micro-economic decisions throughout the economy that will ultimately reduce the economic performance in this country. That is what is so pernicious.

On tax above all else the Chancellor has explicitly abandoned the crucial plank of something to which the public thought Labour was committed. They thought that Labour had learned its lessons on tax and they believed the Prime Minister when he said that he had no intention of increasing taxes. Today, however, the Chancellor made it clear that he is prepared to raise tax, and by large amounts.

New Labour came into existence out of the decision by the Chancellor and the Prime Minister in opposition to abandon tax and spend, but the Chancellor has now put up national insurance contributions, the very tax commitment that sank them exactly 10 years ago. It is almost 10 years to the day since Labour's 1992 election defeat.

It looks as if the Chancellor may have taken the word "new" out of new Labour. It is for that reason above all others that the Budget could come to be seen as a turning point in British politics. This day may come to be perceived as the one when Labour broke with the consensus of the 1980s and the 1990s. It may be the day when new Labour returned again to being just the Labour party.

The Chancellor referred to the three main challenges that he was aiming to address in the Budget. The first was boosting enterprise, the second was securing family prosperity and the third was improving public services. The enterprise objective was rightly set first. It is, after all, the foundation for achieving progress on the others, and it is on that aspect that I shall focus my comments.

We have spent much time on the Treasury Committee and elsewhere considering the productivity challenge that the British economy faces, and my hon. Friend the Member for Dumbarton (Mr. McFall), who chairs the Committee, mentioned that in his contribution. There certainly is a challenge for our country in terms of the productivity gap. There is also something of a paradox because many of the things that need to be in place to secure a productive economy are already in place in the British economy. We have, for example, a high level of employment. Indeed, that has risen even further since 1997 and now stands at an historic high.

We have a relatively flexible labour market, which is another important precondition for productivity. Our economy is very successful at attracting inward investment—indeed, it is the most attractive centre for such investment in the whole of the European Union. All those important preconditions for productivity are present—they have improved further since 1997—yet there is still a productivity gap between our economy and those of our major competitors.

The important question for us to address in this Budget, as in all Budgets, is what we are going to do to help to close that productivity gap and so boost the prosperity of our economy. The first essential element to have in place is economic stability. Without that, any amount of measures targeted specifically at increasing productivity simply will not do the trick. Economic stability is crucial to business confidence, critical to secure investment and important to secure enterprise.

The fundamentals for economic stability are clearly in place. We put a key one in place when we came into office by giving the Bank of England its operational independence. That has delivered low, stable interest rates, which play a crucial role in delivering a stable economy.

The hon. Gentleman spoke of a paradox. Does not the real paradox involve wanting to stimulate enterprise in the way that he describes—he mentioned inward investment—while at the same time wanting to interfere and to regulate? I shall give him one example, which was also mentioned by my hon. Friend the Member for Chichester (Mr. Tyrie): the ever more complex tax system. Does the hon. Gentleman believe that the tax system for small and medium-sized enterprise in this country will be simpler or more complicated as a result of this Budget?

The performance of the small and medium-sized business sector speaks for itself, and answers the hon. Gentleman's question. Shortly, I shall cite some surveys that show exactly how the small and medium-sized enterprise sector is performing in our economy, compared to the economies of our main competitors. Those surveys paint a very encouraging picture of the British economy. That simply would not be so if the hon. Gentleman's accusation that the sector was overburdened with regulations were true. I will return to that point shortly.

Prior to being elected, I was the manager of a small business in Wiltshire. I know that the 2,000 small businesses in my constituency will be delighted with the changes in VAT in the Budget. The flat rate for VAT for businesses whose turnover is currently less than £100,000—extending to 750,000 in April—is tremendous news for our small businesses.

My hon. Friend is right. That proposal will be widely welcomed. As a point of contrast, and to pick up the point made by the hon. Member for South Holland and The Deepings (Mr. Hayes), we could have a debate about the scale of regulation in particular areas, but it all pales into insignificance when we recall the cost to businesses of the 15 per cent. interest rates that they had to endure when the Conservatives were in government.

I appreciate the experience of the hon. Member for South Dorset (Jim Knight) in these matters. I was the director of what became a medium-sized business—clearly it was a more successful company than that of the hon. Gentleman—so I have some experience of these matters as well. Speaking of things paling into insignificance, the changes announced today that were positive for small and medium-sized enterprises are greatly outweighed by the increased national insurance contributions that employers in that sector will have to pay as a result of the Budget.

I do not think that the hon. Gentleman is reflecting sufficiently on the reasons for the national insurance contributions being increased. Is he really saying that there is no return whatever for any business—small, medium or large—from a greatly improved national health service? There most certainly is, and it is perfectly right and proper that businesses can contribute to that just as much as individuals can.

I was in the process of listing the fundamentals that need to be in place to tackle the productivity agenda, and I mentioned monetary policy. Interestingly, there is now very little argument in the House about the positive contribution that has resulted from introducing the independence of the Bank of England, although there was at the time of its introduction. Fiscal discipline has also played a key part, and continues to do so. This has been reinforced by the measures announced by my right hon. Friend the Chancellor today. Low rates of business tax also play an important part, and a combination of all these factors has resulted in an end to the boom and bust cycle. That cycle did more harm to business stability than anything else.

The British economy has now had nearly 10 years without a single quarter showing negative growth. We need to go an awfully long way back into history to find circumstances such as these. The Chancellor's forecasts announced today suggest at least another four years of these economic conditions. This is a platform of stability that British business has not enjoyed for a generation.

rose—

rose—

The right hon. Member for Wokingham (Mr. Redwood) stood first, so I shall give way to him.

Does the hon. Gentleman see the irony of Labour Members urging the private sector to greater productivity when it is their Government's policy to ensure that there is a massive decline in the political classes by saying that MPs cannot do the job and that we need all sorts of other elected people all round the country to do part of the job for us? Does he also see that lower productivity—or lower output per person—is sometimes desirable, because it is the Government's policy to have much shorter working hours for doctors, which will naturally lead to much lower productivity in the health service, rather than producing better working conditions?

I would willingly take any point that the right hon. Gentleman made on productivity if his party had had a record, when in office, of being able to turn the magic key on productivity. In all of its 18 years, however, it did not. The right hon. Gentleman should have a little more patience with our measures, and show more understanding of what is resulting from our efforts, given that lamentable record.

rose—

Because the hon. Gentleman serves on the Treasury Committee, I will give way to him, then I want to make some headway.

I am grateful to the hon. Gentleman. He said that we had now had 10 years of steady upswing. Does he not therefore concede that the foundations for what he has described as the end of the boom and bust cycle must have been laid some time during the early 1990s or earlier?

No, that does not follow. Many of the other factors that were present at the end of the first four or five years of growth, in 1997 when his Government left office, were threatening the continuation of that growth. Rising inflation and the very high level of debt alone suggested that that growth might well have come to an end unless important measures were implemented, such as those that we introduced when we came into office. There is therefore an error in the hon. Gentleman's logic.

The conditions that I have outlined were necessary to secure an increase in productivity, but they were not in themselves sufficient. It is therefore right that we should do more to promote enterprise, to improve the skill base of the economy and to promote investment and innovation. I was pleased to hear that my right hon. Friend had something to say about all those important areas in his statement. The Budget needs to be judged in part—probably in substantial part—on the basis of the contribution that it makes to those objectives.

I understand, because of the obvious concentration on it, that most of the debate about the Budget may well revolve around the national health service. That is entirely understandable. In acknowledging that, I would like to point out that we should not overlook the question of productivity in relation to the NHS. Productivity is just as important there as it is in other parts of the economy. I would encourage Members to read the section of the Wanless report that debates the issue of productivity in the national health service—it is paragraph 5.31, if Members want to have a look at it. It shows the impact of achieving our health service objectives in terms of getting the productivity question right.

Wanless has as his central case a projection that health spending will rise to 11.1 per cent. of gross domestic product by 2022. He points out, however, that if health service productivity is 1 per cent. per annum worse than his forecast, spending would have to rise to 13.1 per cent. of GDP in 2022 to achieve the same health service output.

Conversely, if productivity in the health service is 1 per cent. per annum better than his central case, the same health service output will be achieved with spending having to rise only to 9.4 per cent. of GDP. In other words, over a 20-year period a 1 per cent. fluctuation up or down in productivity inside that important public service amounts to a 3.7 per cent. of GDP differential—at today's prices, £35 billion, all resting on getting the productivity equation right inside the NHS. If that is true of the NHS, one can imagine how true it is of the whole economy, including the private sector. Small alterations and improvements in productivity performance can have a huge impact on the economy's overall performance. It is therefore right to make enterprise the first priority and to do what we can to promote it.

Small companies are very important in this context. There are about 5,000 in my constituency alone, and nationally they contribute about 45 per cent. of total output. The number of small businesses has grown every year over the past five years, and there are now 40,000 more than in 1997. The Government have already taken several measures to help small businesses, including the reductions in small business corporation tax introduced in recent years, the shortening of the capital gains tax asset taper and the introduction of the Small Business Service.

In 2000, when the Economist Intelligence Unit surveyed the 60 largest economies in the world to assess how good they were as a place to do business, the United Kingdom economy came second. Another survey by the Fraser Institute ranks the UK second overall in terms of business freedoms. I urge Conservative Members, who are fond of raising concerns about so-called over-regulation, to ponder the conclusions of those surveys. The Fraser Institute puts the UK economy third out of the world's 22 largest in terms of its use of markets and first in terms of property rights. All those factors are vital in delivering improved productivity. Such findings belie the charges that are made with monotonous regularity about an over-regulated business sector.

Given that those are important targets to aim for, my right hon. Friend's Budget contains some very welcome measures, including the extension of the research and development tax credit, further exemptions on capital gains tax, intellectual property recognition, further reductions in corporation tax, especially targeted at the small business sector—the basic rate goes down from 20 per cent. to 19 per cent. and the starting rate goes down all the way to zero—the simplification of VAT and help with payroll. All those measures will he warmly welcomed by small businesses in my constituency and throughout the country.

To make further progress on productivity, it is vital to do something about the skill base in the economy. It is a knowledge-driven economy; increasingly, the ability of people in work to perform effectively is the determinant in improving productivity.

I welcome the further announcements on education investment, which is a capital investment in tomorrow's economy. We have made good progress in primary and secondary schools on literacy, numeracy and increased standards, but a big challenge remains as regards the existing work force. The report by the Organisation for Economic Co-operation and Development reminds us that the UK has a higher proportion of low-skilled workers than any of our major competitors. Reskilling those currently in work plays an important part in developing the skill base that we should not overlook. I therefore welcome the measures to increase the scope for learning provision for employees by giving financial support to employers who release members of staff to take up training opportunities. It will be interesting to see the outcome of the employer training pilots in different parts of the country. They could make a significant contribution to increasing the skill base in the economy.

The whole question of investment is crucially linked to meeting the productivity challenge. The UK has a history of under-investment, although that is improving. In 1997, investment as a share of gross domestic product was 17.2 per cent. It is now about 19 per cent., so it is moving in the right direction, but it must go further if we are to meet the productivity challenge. Much has already been done to help to stimulate investment, including the research and development credits for small business—now extended—the planning reforms, which were particularly welcome in areas in need of regeneration, the stamp duty exemptions and the single pot funding for the regional development agencies that was introduced earlier this month.

It is important to deal with the innovation gap. A paper by the Institute for Fiscal Studies largely attributes the UK's productivity gap to the greater levels of innovation secured by our competitors. Promoting research and innovation is vital to meeting the productivity challenge. I was pleased to hear my right hon. Friend announce additional investment in universities and colleges, because they are often crucial centres for securing innovation, which flows out into industry and is taken up and turned into investment, in turn boosting productivity. It is therefore vital for the Government to invest in the research base in our universities.

I sound a note of warning to the Treasury about that, and I shall listen with care when the detailed announcement is made. How evenly spread will the additional money be? There has been a tendency to concentrate additional investment for university research on the top 20 or so universities, which, although they are the top universities for academic attainment, are not always the most appropriately placed geographically for spinning off innovation into industry. I enter a plea for colleges and universities in the west midlands, many of which—including Coventry university and, in my constituency, Warwickshire college—have developed strong links with the automotive industry. They have a considerable record on innovation that has been picked up by that industry and used to help it to promote its products and win markets, to the benefit of the whole economy. Nevertheless, they, and others like them, find that their research funding is declining. I hope that that process can be reversed. Will the Minister take that on board and talk to his colleagues about how the welcome increase in overall funding for innovation will be spread around? We will get a better return on it if it is directed towards educational centres that have already established proven, close links with manufacturing industry in particular.

Of course, higher taxes were announced in today's Budget—higher levels of national insurance to fund the national health service—but set against that is the contribution made by the sound fundamentals of the economy, which play a much more significant part than the increase in one tax. Total spending on the NHS, which is currently £65 billion a year, is scheduled to rise to £105 billion by 2007. A rise of that scale would be nowhere near possible if we had not put in place the sound fundamentals of the economy. Most of that additional investment is delivered by the strong performance of the economy, not by the one particular tax increase that was announced today. It is only possible and can only continue if we go on putting the enterprise objective first.

The Budget does that. It helps us to meet the productivity challenge and thereby to deliver greater fairness. Enterprise and fairness have gone hand in hand under previous Labour Budgets since 1997. Together they have taken a further step forwards today, and that should be broadly welcomed.

I have entered my various interests in the Register of Members' Interests. I suspect that the Budget will be remembered as the bingo Budget; the Chancellor probably hopes that it will mean, "No. 10, Tony's den." However, it will require more than fiddling around with bingo prizes and reducing tax on beer in time for the World cup to persuade the country that the Chancellor has its best interests at heart.

Let us consider the Chancellor's intentions for small brewers. They are a classic example of giving the impression of helping a specific sector on Budget day when the small print shows that it is not being helped. The Hook Norton brewery is based in my constituency. It is an excellent, small, independent family brewery. I predict that the Budget proposals for brewers will not help it at all.

I suspect that the Chancellor told his policy advisers to go away and think the unthinkable for the Budget. Indeed, for many small and medium-sized businesses, the Budget is unthinkable not least because of the substantial extra tax burdens that they will have to bear. I shall examine with interest the unemployment figures in the constituencies of Labour Members who spoke in the debate. It will be interesting to watch unemployment increase there year after year through the impact of the burdens on business.

The problem is not so much what the Chancellor does as what he persistently fails to do. He said repeatedly that he supported an enterprise economy. I was struck by recent statements from the Treasury and Downing street. Last month, in an interview with the Financial Times, the Chancellor claimed that he would act

"by encouraging people not just to make the most of their opportunities in education and employment but helping start businesses and being on the side of people as they strive to become self-employed or create a business".

To whom was the Chancellor referring? I am afraid that his affirmation does not chime with the experience of most business people in north Oxfordshire. Indeed, they are struggling with mounting piles of red tape and ever more detailed micro-regulation of their companies.

I recently conducted a survey of every small and medium-sized business in my constituency. Almost all businesses complained to me about the excessive amounts of red tape that they have to tackle. Almost all believed that their businesses would be better off without the Treasury's burdensome intrusiveness. I commend to hon. Members three comments by business men in the Cherwell valley.

A well known international food manufacturer and an important local employer commented that

"red tape impacts on every employee. Approximately 5 to 10 per cent. of work time is spent on red tape."

No wonder our competitiveness is falling behind that of other countries in the European Union and elsewhere.

Another employer finds the forest of bureaucracy so daunting that he asserted:

"If I tried to understand all the legislation it would take all my time. I therefore ignore it all and run my business in a professional, fair and honest way and hope that we work within the law".

How can the Chancellor claim after today's Budget that the Government are encouraging enterprise? The comments of another director of a small business in my constituency show the stranglehold and constraint of red tape. He said:

"at least two thirds of my time is wasted dealing with this. Without it I could be a much bigger company, generating significantly more taxable revenue".

Surely that is the sort of entrepreneur that the Government claim they are out to encourage: a good, caring employer.

I have cited the comments of employers from the Cherwell valley and north Oxfordshire, one of the most successful economic areas in the United Kingdom. If employers and businesses in my constituency are experiencing such difficulties, what must it be like in other parts of the country where there are greater problems for industry?

Notwithstanding the simplification of VAT forms for small businesses that the Chancellor announced, a massive void gapes between the fact of running businesses under the Government and the fantasy of the Chancellor's wild claims of help for employers.

Although I welcome the incentives that the Chancellor announced for employers who allow employees time off for training, they will sound hollow to many employers and people involved in training when they reflect on the experience of individual learning accounts. We have been here before, and not long ago. Individual learning accounts were scrapped because they were so successful and the Treasury discovered that they were costing more than they thought.

Will the hon. Gentleman give way?

No. I want to make progress and many hon. Members wish to speak.

The Chancellor presents a load of gimmicks, which resemble baubles on a Christmas tree. He hopes that they will appear attractive, but also that they will not be used or that they will prove so complicated that no one will work out how to use them a few days after the Budget statement. I suspect that they are intended to look good only in one of those little boxes in a newspaper. Like the hon. Member for Warwick and Leamington (Mr. Plaskitt), they give the impression that the Government are doing something. The hon. Gentleman's local newspaper will be able to say that the Government are doing something for Warwick university. It is not clear what they will do for universities, but that will not matter in a week because the right Budget headline and soundbite have been obtained.

One has only to glance at the latest growth rates for the UK to realise how sorely stimulus for business is needed. I understand that when the Chancellor took over at the Treasury, overall growth in the UK was, at 3 per cent., second only to that of America. It was twice that of the eurozone's slightly dismal 1.5 per cent. It has now fallen by a significant 0.5 per cent. The UK has failed to keep up with America and the average growth of prosperous Organisation for Economic Co-operation and Development countries. We have even been overtaken by that notorious shire horse of an economy, France.

The gulf that has grown between financial services and the manufacturing sector is especially worrying for businesses in north Oxfordshire and elsewhere in the country. Financial services have prospered better under the Chancellor's Budgets than manufacturing, but neither has prospered much.

Little in today's Budget will alter the decline in manufacturing industry. That is especially worrying for all businesses in the Cherwell valley and elsewhere for two reasons. First, it proves what they already know: not all parts of the UK economy have been doing well. Despite the Chancellor's mantra of no more boom and bust, there has been bust in manufacturing.

The Government produce their Red Book only on the day of the Budget. It is a pity that we do not have time to study it for longer. However, those who have had the opportunity to give it the most cursory glance know that the Government's Budget forecast makes it clear that even they expect manufacturing output to continue to contract and exports to continue to fall. We are a global trading nation; we have traditionally exported more per head of population than any other country in the world with the recent exception of Japan. If UK exports continue to decline, that is bad news for employment and all our constituencies, but especially for marginal seats represented by Labour Members. Those hon. Members may find that their seats become more marginal as a consequence of the Budget, which does not contain significant initiatives to redress the decline properly.

The second and more significant reason for manufacturing industry's poor performance under the Chancellor is that manufacturing businesses have too often borne the brunt of the Treasury's increasing burden of tax and bureaucracy.

May I give a simple example? One of the larger employers in my constituency is General Foods, which makes Maxwell House coffee. Over the years, it has probably invested millions of pounds in making its plant energy efficient. Notwithstanding that, it is still hit by the climate change levy, which is simply a tax on business and competitiveness.

We must read the small print, but the Chancellor announced that there will be help for those who invest in energy efficiency equipment. However, he must know that most major energy users have already invested substantially in such equipment. The policy sounds good, but take-up will be minimal because businesses such as General Foods have already invested in energy efficiency. Again, the contribution to their competitiveness is meaningless.

A recent Sunday Business article points out that legislation relating simply to taxation runs to more than 6,000 printed pages, and I sense that the north Oxfordshire business community is deeply concerned that financial services will suffer under the same burden of bureaucracy as manufacturing. I ask the House to consider a letter from a financial services director, which responds to my pre-Budget survey by saying that

"the entire financial services industry is about to suffer further regulation … this action is going to cause massive upheaval, with vast sums of money being wasted for regulation's sake. This action will inevitably cause more confusion for the consumer … at a time when the Government is meant to be encouraging free trade and the expansion of small businesses, this legislation is totally contradictory."

Again, the difference between the fact of running a business and Government fantasy is striking.

Independent forecasters such as the Institute for Fiscal Studies have said that productivity is down, investment is down and competitiveness is down. Thus, consider three other concerns of the Cherwell valley business community: corporation tax and capital gains tax, petrol tax, and stamp duty and national insurance contributions. I shall deal briefly with them, as they were dealt with by the Chancellor.

Candidly, corporation tax and capital gains tax have not recovered from the decisions taken by the Chancellor in previous Budgets, and clearly businesses needed a significant cut in both in this Budget. On the face of it, employers got that, but we see that it is not all that it seems if we look more closely. I am particularly concerned that the tapered system for capital gains tax introduced by the Treasury, rather than encouraging enterprise as intended, has stifled it with yet another convoluted and complicated tax system. So, while I welcome today's capital gains tax cut, the complicated resource-sapping system remains.

On corporation tax, advance corporation tax is perhaps the most recent concern, as the Government ended the tax credit system in a previous Budget. Clearly, the effect is "profound", as the Financial Times observed:

"For a start, the hit to pension funds will be serious … those with personal or deferred contribution pensions will have to accept lower pensions or contribute more".

The Budget has not adequately addressed employers' pension problems, and I shall return to what I believe is a genuinely straightforward part solution to that serious difficulty. It strikes me that the issue of tax on business is becoming one of lack of balance.

The Chancellor also said that he is doing something for research and development. Again, we must read the small print closely. On research and development tax relief and an approach by Treasury advisers, I ask the House to consider the fact that one company—a significant investor in research and development—said that

"the sad and almost tragic reality is … none had realised the financial implications … and realised that 17 per cent. of the credit would go to one company and 60 per cent. to the top ten".

Had the advisers done so,

"they may almost certainly have given a different response".

In a few weeks or perhaps months, it will be interesting to see who has benefited from what the Chancellor said today about research and development benefits. Interestingly, he referred to larger companies, but I suspect that they do not need assistance. Often, fledgling, growing companies need research and development tax help.

On petrol tax, the Chancellor's approach is cynical. The Budget freezes fuel duty, but we know that the Exchequer will maintain revenues from the tax because of rising oil prices. The plain fact is that petrol tax is disproportionate to that in eurozone countries, so it is perhaps no surprise that our growth is declining compared with theirs.

Stamp duty, which the Chancellor has removed in deprived areas, is effectively a mobility tax. Constituencies such as mine are desperately trying to attract key people to work in the public services—nurses, police officers and teachers—but stamp duty is simply a further tax that deters them from moving to such areas, where house prices are high. Therefore, the tax that must be paid on buying a house is also high, so it is perverse of the Chancellor to remove stamp duty from economic black spots. He should consider reducing or removing stamp duty in areas such as mine, because those who want to come and work in key sectors of the economy are finding that very difficult.

Does the hon. Gentleman accept that reducing stamp duty in constituencies such as his would increase house price inflation and make moving there even more difficult?

No, not at all. Stamp duty is simply a tax on mobility. It deters people from moving and is, in many ways, ludicrous and anachronistic. Frankly, if I were an officer in Thames Valley police wanting to move to Banbury or a nurse wanting to move to Oxford to work at the John Radcliffe, I would not be particularly happy that people in some parts of the country are being let off stamp duty while I would have to pay a hefty sum. As days go by, Labour Members will begin to regret the inclusion of such divisive measures in the Budget.

Does not the hon. Gentleman recognise that in constituencies such as North Durham, where it is difficult to get certain sites developed, abolishing stamp duty will allow development that would not otherwise take place? Therefore, abolition will help to regenerate the economy of such areas.

For a number of years, I was a Minister at the Department of the Environment, and I had responsibility for the construction industry for four years. I am bound to say that I cannot recall a single occasion on which someone in the construction industry said to me, "We are not going to develop areas such as Durham, the north-east and elsewhere unless you remove or reduce stamp duty." That just did not happen.

It was widely predicted and widely trailed that national insurance contributions would rise. We now know that they will rise by at least 1 per cent. —a tax hike. It is difficult to calculate by how much tax will increase as a consequence of the Budget, so we must look to page 14 of the Red Book. Through some swift maths, my rough and ready calculation is that the tax burden will increase by £8 billion in the financial year 2004–05 alone. That will not come out of thin air; it will be a burden of taxation on individuals and businesses.

Will the hon. Gentleman give way?

Yes, but for the last time.

If the hon. Gentleman is concerned about the tax burden, has he also noted on page 218 of the Red Book a table showing total current receipts to the Government at 40.1 per cent. of GDP this year, but at 40.2 per cent. in 2004–05?

As one of my hon. Friends said earlier in the debate, the only time the Labour party is really happy is on Budget day, because it can put taxes up. The hon. Gentleman clearly does not appreciate that taxes have to he paid for by someone—by businesses and individuals. Perhaps tomorrow he will appreciate that an £8 billion tax hike in a single year must be paid for, and will come out of the pockets of individuals and businesses in his constituency and in mine.

That leads me to the second comment by the Prime Minister that I found striking in the build-up to the Budget, when he asserted that we could not have world-class schools and hospitals unless we were prepared to pay for them. I suspect that over the next year we shall find that the real problem of the Budget is that the delayed and disfigured tax hikes will not provide a clear and delineable view of which taxes are spent where and when on public services, even with an annual report to Parliament. It will take some time for that money to get through to public services. People will expect public services to improve and I am sure that next winter I shall still be receiving as many letters from constituents in Banbury, Bicester and the villages of north Oxfordshire expressing concerns about cancelled operations, waiting lists and inefficiencies in the NHS. Those problems are not the fault of NHS staff, but next year people will feel even more frustrated because they will be paying more in tax but still not getting a better service.

Today's Budget raises taxation substantially, and much of the burden of that taxation will fall on businesses. Such taxes make businesses less competitive and less able to create jobs. No wonder the Prime Minister was so keen, at Prime Minister's questions, to trumpet the fall in unemployment. He knows—indeed, the Red Book tells us—that the Government now expect unemployment to increase. Never in the history of this country has the state taking more, taxing more, spending substantially more and controlling more led to greater individual and collective wealth and happiness.

I agree with my hon. Friend the Member for Chichester (Mr. Tyrie): the Budget is a turning point that—let me return to my earlier analogy of a bingo Budget—in due course will mean that No. 10 is longer Tony's den.

I welcome the Budget. As the Chancellor said, it has been drawn up in an environment of the lowest inflation and interest rates that this country has seen for 40 years. For families and home owners in my constituency, in Preston, Walton-le-Dale and Bamber Bridge, it is a tremendous boost.

Unemployment in this country is lower than in the rest of Europe, Japan and the United States. While there have been some job losses in manufacturing in my constituency, those jobs are being replaced by new jobs, and millions of pounds are flowing into it.

The Budget has shown that Labour is the party of enterprise. I am the first Labour Member in Lancashire to be an honorary vice-president of the central and west Lancashire chamber of commerce. I am as proud of that as I am to be a member of the GMB trade union. Labour is also the party of fairness, and today's Budget is one for the public services. Millions of people throughout the country will benefit as we generate an economy that brings prosperity to the country as a whole.

The decision to give the Bank of England independence on interest rates was bold and courageous. As the Chancellor said, since then, there have been seven cuts in interest rates. Let us contrast that bold move with the recent statement by the right hon. Member for Wokingham (Mr. Redwood), who said:

"We think it was a big mistake. We opposed it at the time. We said no good would come of it."

The facts speak for themselves: interest rates are at their lowest for many years.

Many people believed that the events of 11 September and the war against terrorism would cause a great deal of economic instability, not only in the United States but throughout the developed and developing world. What we have seen since then is a testament to the management of our economy by my right hon. Friend the Chancellor. Worries about future growth and stability have already all but disappeared. The world economy will grow, but stewardship of our economy has shown that it will grow more in the UK than elsewhere. In the past year, we have seen growth of 2 to 2.5 per cent. and we expect growth of 3 to 3.5 per cent. next year and 2 to 2.5 per cent. the following year. Those healthy low-inflation growth rates are consistent with a stable economy.

As someone with my eye firmly on the conditions for joining the euro—I look forward to a referendum in this country—I am pleased to see that debt is now considerably less than 40 per cent. of GDP. Given that debt stands at 30.4 per cent. of GDP and that the Government have repaid some £37 billion of debt, we are in a tremendous position and will be the envy of many of our European partners. I was struck by the concern of the hon. Member for Banbury (Tony Baldry) about exports. I share that concern but believe that if we joined the euro, we would win considerably more exports and see an even greater recovery in manufacturing.

The Chancellor announced £4 billion extra in public expenditure. That will help Preston, which is a new, proud city that is central to the provision of public services for the whole of Lancashire. Its first-class hospital will benefit from increased NHS funding, and it has some first-class schools and an excellent police force. Preston is looking to the future. However, that money will need to be matched with expenditure on modernisation and reform. Despite the good provision of services in Preston and the rest of Lancashire, there is no room for complacency. We must have modernisation and reform to make those services even better, and I look forward to seeing that in my constituency.

Business investment has increased from 10 per cent. of GDP to 12 per cent. That shows business confidence, and confidence in the Government's handling of the economy. Corporation tax has gone down from 33 to 30 per cent. Research and development tax credits will bring some £400 million extra to our R and D companies. As a former scientist and engineer, I recognise the importance of R and D to the development of new products, trade and economic growth. My constituency has people employed in aerospace, nuclear power, software and computing, and the country's eighth largest university, which spends millions on research and development. The proposal is very welcome.

My constituency also has many small businesses, and their tax rate has gone from 23 per cent. down to 21 per cent., 21 per cent. down to 20 per cent., and, now, down to 19 per cent. As the Chancellor mentioned, the starting rate is now not 10 per cent. but 0 per cent. Capital gains tax has also been cut. I am sure that small firms in Preston, Walton-le-Dale and Bamber Bridge will all welcome that.

I was surprised to hear comments from Opposition Members about red tape when, today, the Chancellor has again made proposals for simplifying VAT that will benefit all businesses. The flat rate will not just be for companies with turnovers of less than £100,000 but for those with turnovers of less than £150,000. The flat-rate system will greatly reduce the amount of form filling, and the deferred VAT payments will significantly reduce the complexity of making VAT claims. Firms are to be encouraged to go online—e-finance, which is known in Lancashire as "ee ba gum" finance—to which I am sure firms in my constituency look forward. The introduction of 2,000 identified enterprise areas, which will receive 0 per cent. stamp duty status, will be a tremendous boost. There are still many areas up and down this country, which were and still are industrial areas, that need investment.

I also welcome credits for firms developing green technologies. The university of Central Lancashire has done excellent work in that area, and I am sure that firms around Lancashire will do a great deal in it in future. Beer duty will be halved for small breweries; although there is no small brewery in my constituency, I shall still have a celebratory drink in the Strangers Bar afterwards.

The working families minimum income guarantee for full-time workers will be increased to £237, which is £70 more per week than income support. That is a tremendous change. We are now looking forward, for the first time, to a three-figure state pension for a single person, which will be a tremendous psychological and financial boost to pensioners up and down this country. For those with occupational pensions, personal allowances will be raised, and we look forward to tax credits for future pensioners, too. The Chancellor has provided £2.5 billion for families—Labour is now firmly the party for the family.

On public services, huge direct payment increases will go to every school. That will be good for schools in my constituency such as Moor Nook primary school, which I visited a few weeks ago. I was shown photographs by the head teacher of what it looked like six years ago, and, seeing it now, it has undergone a total transformation. Schools such as Corpus Christi high school will also benefit, as ambitious construction work is being carried out there.

I was surprised to hear from Conservative Members that they do not agree that there should be a consensus on the national health service. That consensus has existed since the war, and the Conservative party agreed to it, at least until the election of Mrs. Thatcher. That national consensus will come back—people want investment, reform and a five-year programme of high growth. The criticism that too much of the NHS is centralised is immediately defused by the fact that 75 per cent. of budgets will go to primary care trusts, which, as everyone must accept, is decentralisation.

The financial incentives, the reform of care for the elderly and the money going to primary care trusts are important. The independent audit and scrutiny of the performance of the health service is also important, for two reasons. First, as I said in an intervention, we need to make sure that we get value for money in the health service. Secondly, it will debunk all the myths thrown out by the Conservative party, which wants to denigrate the services provided in this country and the people who work in them and to leave an impression that things are far worse than they really are.

I welcome the hon. Gentleman's comments on long-term care for the elderly. Which part of what the Chancellor has said to date in relation to looking after the elderly in the long term does he most welcome?

As I shall say in a moment, there will be a 6 per cent. increase for social services. As county councils and unitary authorities up and down the country administer social services budgets, that money can be spent on those services, as it can on other things.

An annual report on how much is spent, where it is spent and what is achieved is an excellent part of the Chancellor's proposals. As I said, the Conservative party does not want that, as it prefers the myths and anecdotes that we have heard today rather than the facts from an independent audit body.

We have heard a great deal about the increase in national insurance contributions, which has been referred to as if, in some way, it is income tax. It is not income tax. National insurance is what the name implies—insurance. Many companies up and down the country are happy to pay for private health insurance for their workers. The Chancellor has made it plain that the money that is raised in this way will be invested not in private health but in public health and public health provision. I am surprised that that should be presented as anything other than what it is. If we remember why national insurance was originally introduced, it was to pay for pensions, health and benefits. Let us not forget that or try to present the increase as something that it is not.

There will be a freeze on beer, wine and spirits, a freeze on fuel duties, a freeze on vehicle licences and, as I said, 6 per cent. extra for social services. UK health will benefit from a 7.4 per cent. increase each year, and my health authority—North West Lancashire—will welcome that, despite its recent statement that the 10 per cent. increase in its budget was still insufficient, even though that increase is five times higher than inflation. I believe that the doubling of expenditure since 1997 over the next five years will turn the Royal Preston hospital into, if not the top hospital, one of the top 10 hospitals in the north-west of England. I look forward to that investment.

This is a Budget for enterprise and for fairness, for investment and for reform. It will be a huge boost for the people in my constituency, and I commend it.

Apropos of the comments of the hon. Member for Preston (Mr. Hendrick), I have every reason to feel protective towards national insurance, as I represent the seat once held by David Lloyd George. I find it difficult, however, to distinguish between national insurance and income tax, as, I am sure, do many other hon. Members.

The Chancellor has often reaffirmed the Government's commitment to ending child poverty—in the pre-Budget statement and in the publication, "Tackling Child Poverty", issued in December last year. He is right to do so again today because poverty blights so many lives, particularly in my constituency. Many people suffer from poor health in Wales, for example, specifically because they are poor.

The Chancellor highlighted the child and working tax credits, and I want to concentrate briefly on the principles of those tax credits. My colleagues in Plaid Cymru and the Scottish National party will consider other issues in the debates over the next few days. The Government emphasise the need to make work pay, and they emphasise that there should be a seamless system. Again, the emphasis is on work, but my party and others are worried about the impact of tax credits in areas of high unemployment, such as my own, where the work is not available, and in rural areas with small populations and scant public transport. In such areas, the costs of owning a car are highly significant.

The Red Book shows that a fund of £5 million will be established to help with travel costs. I have some reservations about that, as my area suffers from severe out-migration by people who otherwise would be economically active and contributing to the local economy. I am afraid that I may be hearing an echo of the phrase "on yer bike".

The working tax credit will guarantee a higher income from work than from benefits, and it is targeted according to income. It is not means-tested in the conventional sense, but there are inevitable concerns about the disincentives to take-up. I am sure that the House would be interested to know the projected percentage take-up of the tax credits, for example in comparison with the take-up of universal benefits, which is very high.

The House will also note that people under 25 are again excluded from the tax credit system. That is yet another example of how age discrimination is becoming entrenched.

We in Plaid Cymru remain uneasy about the lower wage subsidy implicit in tax credits. That possibility will now affect all workers, including those without children. We fear that credit levels will become the ceiling for wage rates, rather than their floor. We in the north Wales travel-to-work areas have some experience of that. The results of the little noticed top-up experiments introduced by the previous Conservative Government do not convince people familiar with them that the new system will be much better.

Child tax credits will be paid to the carer, typically to the mother. That is very much to be welcomed. However, the emphasis on payments to the first child risks masking the costs arising from other children, especially as they grow older. It should be remembered that those costs are recognised in support levels. The House will note too that universal child benefit levels again hardly rated a mention today.

The extension of tax credits to students and student nurses is to be welcomed. As a university lecturer, I have experience of the real hardships faced by some students on low income. Also, uprating benefits with earnings is a principle that could be commended in respect of other benefits.

A significant feature of the child tax credits regime is the recognition of the costs of child care. However, we in Plaid Cymru have serious concerns about the lack of child care in some areas, especially in rural areas. Often, they are areas of high unemployment, or of high underemployment.

Child care is not available extensively in Wales, and to some extent the solution to that problem is a matter for the National Assembly for Wales. We have a national child care strategy, and I hope that my colleagues in the Assembly will take the matter up. I hope too that the Labour party will produce some joined-up government in Westminster and Cardiff, so that people will be able to take up work because proper child care is available.

I note with interest that the child care element will now cover those approved to provide child care in people's homes. The important word in this connection is "approved": what does it mean? The payments in the past have been called, pejoratively, "grannies' wages" or "nannies' wages". We will see how approval is worked out, but I note that the Department for Education and Skills is to consult shortly on the regulation scheme. Let us hope that the scheme fits in with patterns of family care in rural areas such as my constituency.

A change in income could affect the maximum credits available. I see that an increase in income of up to £2,500 will be ignored. However, when income falls, will claimants be required to contact the Revenue? People dealing with the difficulties and sometimes chaos caused by income change will have to decide to reapply. We know that the Revenue will be there to help, but I am not casting aspersions when I say that ordinary men and women facing the chaos and difficulties of income change will not, as a first instinct, reach for the telephone to call the Revenue.

Underpayments will be remedied immediately, but what about overpayments? Document No. 10 accompanying the Red Book states:

"The Inland Revenue's approach to dealing with overpayments will be set out in a code of practice, which will be published in draft for wider consultation later this year."

Why later this year and not now? People should be told.

Given the variations in income due to seasonal factors that affect agricultural areas such as my own, where there might not be much employment available in the hard winter months, does the new system of tax credits fit the real world of work better than the working families tax credit? I have my doubts.

Further ominous words about a fall in income appear in the document dealing with tax credits, which states that people who take a fall in income will be able to reapply. However, taking a fall in income to stay in work sounds rather like pricing oneself into a job. Many people have bitter recollections of what that means.

May I be the first this evening to welcome the reduction in the taper on tax credits to 37p in the pound? However, the level is still too high to provide the soft entry into well-paid work that has worked so successfully in countries such as Ireland. There is concern about the effect of the taper when it is combined with the respective tapers for housing benefits and for council tax.

We in Plaid Cymru welcome the extension of the new deal and the introduction of personal mentors, but we hope that the system will not be oppressive, especially in areas of high unemployment. However much people in those areas are mentored, the jobs are not available.

The tax credit system emphasises targeting, but there is the risk that targets will be missed. That compares with the high degree of success that universal benefits achieve in terms of reaching targets. Child benefit is very much the ghost at this particular feast. Targeting individual families also draws attention away from the value of universally available public services, especially in connection with those services—such as the provision of free school meals—that are significant for poorer families.

Finally, I note that the BBC is reporting that the Government underspent last year to the tune of £11 billion. I regret that that underspend extends to the poorer, deprived areas of Wales, which cannot afford it.

I welcome this Budget. Ending poverty and improving public services in this country calls for bold action. Before 1979, there was a measure of consensus between the parties. That consensus was broken by a Conservative Government, who argued that wealth should trickle down to the poor. That dishonest cant hit the real impact of that Government's tax and benefit changes. The very poor faced tax increases—which included VAT being whacked up to 17.5 per cent—and falling incomes, while the very rich enjoyed almost unbelievable benefits.

In their first term, the Conservatives' single-minded dedication to shadowing the money supply needlessly pushed unemployment beyond 3 million and devastated British manufacturing, particularly in the west midlands, which I am proud to represent. In their second term they massacred the housing budget, cutting it nearly in half. They removed rent controls, and trapped hundreds of thousands of council tenants on housing benefit—they could not take jobs because they would not be able to pay the new higher rents. In their third term, that Government froze child benefit again. They also introduced the poll tax, the most regressive tax in the history of the United Kingdom.

During the 13 years between 1979 and 1992, the incomes of the bottom 10 per cent. in our society fell by 17 per cent. in real terms, not just in relation to the incomes of the rest of society. Between 1992 and 1997, the national debt doubled.

Many of our constituencies contain disadvantaged estates, but they did not appear magically, whether in 1997 or in 2001. Those estates fell into poverty in the 1980s and 1990s, when many people—particularly in my area in the west midlands—were thrown out of their jobs by the Conservative party's monetary policy. That was a direct result of the unnecessary viciousness of the party's economic and housing policies—policies from which the poor on those estates suffered for 20 years.

So what is the situation now, five years into a Labour Government? I have to say that it is very hard for the official Opposition. We have magnificent figures on inflation, which is at its lowest for about 40 years. We have magnificent figures on interest rates, also at their lowest for about 40 years. Unemployment has come tumbling down, and is now lower than it is in the United States and Japan—and, as the Chancellor said in his statement, lower than the European Union average. As he pointed out, in the past year growth in the United Kingdom has been faster than that in any other G7 country. The national debt has come tumbling down as well.

Does the hon. Gentleman accept that those excellent statistics obtained in large measure at the time of the 1997 election?

No. It is not possible to say, as I have just said, that we have the lowest inflation for 40 years and then to say that it was just as low in 1997. That is clearly not the case. If the hon. Gentleman is trying to suggest, as some of his colleagues have, that the figures are simply the result of some golden legacy from the Conservative Government, I will gladly deal with that point.

While the hon. Gentleman is conducting his tour of the history of the latter half of the 20th century, may I ask him why Britain was considered to be the sick man of Europe in 1979, and 15 years later was attracting record inward investment?

I did not set out to conduct a tour of the second half of the 20th century, as the hon. Gentleman well knows, and I shall continue with what I am saying.

In 1997, the national debt was 44 per cent. of gross domestic product. It is now less than 31 per cent. of GDP, and is projected to remain so until about 2007. That will mean a tremendous change in the legacy that we shall leave to our children and grandchildren, and to future generations.

I shall leave it to others to talk, as some already have, of the measures to assist families and pensioners. Let me say something about the measures—which I support—to help the environment. I am thinking of changes in vehicle excise duty for motor cycles and vans, measures to promote cleaner vans, the freezing of vehicle excise duty for buses, and new rates for low-carbon cars. The most efficient cars will attract £100 a year less in vehicle excise duty than the least efficient, which is a great step forward.

Further support for business will be provided by exemption from the climate change levy for electricity generated by good-quality combined heat and power stations, and from coal mine methane. We should do more to encourage such moves, which are beneficial to our environment. The same applies to the fuel duty differential that will apply to sulphur-free petrol and diesel from next year.

Manufacturing industry is dear to my heart, as I represent Wolverhampton, an industrial town—or city, as I should say now—in the west midlands. I welcome the changes in corporation tax, especially those affecting small business. They represent a major step forward, as I hope Opposition Members will be big enough to accept. I refer to the cut from 20 to 19 per cent., and the cut in the initial rate from 10 per cent. to zero.

I particularly welcome the £400 million for research and development that has been announced as a result, partly, of representations made by a joint—I stress the word "joint"—CBI-TUC productivity working group. Research and development has been lacking in this country, although it has started to pick up recently. I also welcome the £30 million provided for small firms to attain "investor in people" status. A community such as mine, where GDP per capita is about 82 per cent. of the national average, must welcome the community investment tax credit and the launch of the £40 million community development venture fund in May. They will be of real help to my constituency, which still suffers from the history of the Tory years.

Conservative Members bang on about regulations, and the way in which business is tied up in regulations. They have done it again today. I sympathise, but when I have asked them what regulations they would get rid of—as I have done here, and in the Standing Committee considering the Employment Bill—I have received no answers. The hon. Member for Banbury (Tony Baldry) mentioned the climate change levy, but it is not a regulation. It is a tax, and one that I support.

I hope that in future Budgets the Chancellor will provide more help for research and development. I would like him not just to assist the development of the green technology which, as he said, represents a growing world market, but to encourage the development of medical equipment technology. That too represents a growing world market. Moreover, it is not price-sensitive. We in the west midlands could do very well in that regard, given our history of innovation, working with metals, research, and building machinery. That is high-tech stuff.

I was disappointed by the lack of any announced increase in finance for education and, in particular, the further education sector. Wolverhampton college is partly in my constituency. Nor was there any announcement of the abolition of higher education student tuition fees. Wolverhampton university is the fifth largest university in the country; it is even larger than the one mentioned by my hon. Friend the Member for Preston (Mr. Hendrick). It needs such action so that it can continue its great work in tackling social disadvantage. It has the best intake figures in the country in that context. That is, indeed, a Government priority, and I wish that there had been more announcements about HE funding in the Budget. Such funding would push us, as other measures in the Budget will, towards the high-wage, high-skill economy that I hope all Members want. I hope that the measures I have mentioned will feature in next year's Budget.

Sadly, there was no announcement that we would move substantially nearer to fulfilling the United Nations target for international aid to constitute 0.7 per cent. of GDP. During the past five years of the present Government, we have seen big increases. I hope that they will continue, but I wish we could move closer to that target.

As for the reply given by the right hon. Member for Chingford and Woodford Green (Mr. Duncan Smith), perhaps he has been reading The Guardian. The paper said this morning that the Budget was to do with how much it would cost to fix Britain's creaking public services. I do not accept that proposition—I do not accept that our public services are creaking. I do not accept what was said by the Leader of the Opposition and some of his hon. Friends, who suggested that public services were getting worse all the time. "More talk, more taxes and more failure", the right hon. Gentleman said. That might describe the Government he served as a Back Bencher, the Government who were in power from 1979 and so on, but I do not accept that the paradigm exists now.

I do not think all public services are getting worse. Of course we need to improve them, but they are not getting worse. When I travel around my constituency, I see things improving. Naturally I would like them to improve more, but they are already improving visibly. School roofs are not leaking as they used to in 1997, for instance, and we have a new accident and emergency department for children. A £44 million cardiac centre is to come on-stream, as is a £13 million state-of-the-art radiology centre. Some of those changes are still in the pipeline, and others have already happened. I do not accept that public services are getting worse—the official Opposition are completely wrong about that.

The Leader of the Opposition is wrong to say that the Labour party was opposed to savings for pensioners. Labour in government has introduced the pension credit to reward thrifty pensioners and to encourage future pensioners to save. The right hon. Gentleman said that investment and reform is old-style tax and spend, but it will not surprise the House to hear that I do not accept that; nor do I accept the pejorative use of the phrase "tax and spend". How on earth are a responsible Government to spend unless they tax? The answer lies in part in the fact that the national debt doubled between 1992 and 1997. Conservative Governments before 1992 had flogged a lot of the family silver, so that was no longer an option; instead, the Conservative Government bumped up the national debt and spent. They refused to behave responsibly and increase taxes, as the Labour Government and this Budget have done.

Taxes will increase slightly, and I support that. Page 218 of the Red Book shows that, on an accruals basis, the proportion of GDP accounted for by current taxation receipts in the tax year just started is 38.7 per cent.; in the years following it will be 39.9 per cent., 40.2 per cent. and 40.4 per cent.; and in 2006–07 it will be 40.5 per cent. In that five-year period, taxes will rise by about 2 per cent. In the same period, NHS spending is projected to increase 43 per cent. in real terms—a 43 per cent. increase off a 2.5 per cent. overall increase in the tax take. That is responsible service delivery. The key issue facing us all is delivery of public services, and the Government are taking great steps. Of course more could be done—that is always true—but we are moving in the right direction. Consideration is being given to management issues, whether in the health service or education, or even transport.

I do not accept the Leader of the Opposition's assertion that the corporation tax burden in this country is among the highest in the group containing us and our competitors. Let me cite some figures from the Trades Union Congress brief, which itself quotes figures from other sources. The CBI business submission in respect of the budget talks of "taxes affecting business behaviour". The briefing gives figures for various countries: France 15 per cent., Netherlands 9.5 per cent., Germany 9.4 per cent., United Kingdom 8.9 per cent., and the United States 7.5 per cent. The figure for the UK is only 1.4 per cent. higher than that for the US, and we get better public services.

Looking at the figures for the share of corporate income tax and employer social security in GDP, we see that the UK is way down the list of OECD countries. In 1999, the Czech Republic topped the list with a figure of 15.1 per cent. The figure for the UK was 7.3 per cent., and a host of our European Union competitors appeared above us in the list, with higher shares. The figure for the United States, which Conservative Members will no doubt want to know, is 5.9 per cent.

In the list of top corporate tax rates in the OECD, the UK figure is 31 per cent., but that is only the top rate. We have learned today that the starting rate is to fall to zero—it was 10 per cent. —and the rate for small businesses is to fall from 20 to 19 per cent. Let us compare our top rate with that of other countries. The top rate in Germany—one of our major competitors—is 54 per cent. In both Canada and Japan—fellow G7 countries—it is 46 per cent. We are way down the table with a rate of 31 per cent.

The figures for employer social security contributions are found in a table from the US Bureau of Labour Statistics. The UK figure is 13 per cent., less than half the figure for France, which tops the table at 32 per cent. The figure for Belgium is 30 per cent.. The United States figure is 21 per cent. The Office for National Statistics Economic Trends figures on international profitability—that is, the rate of return—are 12 per cent. for the UK, 17 per cent. for Finland, 8.4 per cent. for Canada, 3.6 per cent. for Germany, and 9.2 per cent. for the United States.

ONS figures on UK corporate profit records for five or 10-year periods from 1965 onwards show a figure of 12. 3 per cent. for all companies for the period 1997 to 2001, whereas for the period 1965 to 1971 it was 11.6 per cent.; for 1972 to 1981, 8.3 per cent.; for 1982 to 1991, 11.3 per cent; and for 1992 to 2001, 11.9 per cent. Under the Labour Government, that figure has increased to 12.3 per cent. I repeat: I do not accept the Leader of the Opposition's assertion about the UK corporate tax burden. It is simply not true.

The truth is that despite their investigations, research, travels abroad and other endeavours, the official Opposition do not like the NHS and they do not like Government spending. That is why they use "tax and spend" as a pejorative expression. They would prefer either to borrow money on the sly and let future generations pay, or not to have the services at all. As the shadow Chancellor, the right hon. and learned Member for Folkestone and Hythe (Mr. Howard), said on 7 October, slightly more than six months ago:

"The lower we can get public spending as a proportion of GDP the better."

The Labour party does not accept that principle. The official Opposition do. They have lost two elections on the back of it, and we will win the next general election as well on that division between us.

It is interesting that—merely in passing—the Chancellor mentioned that the economy was well within the Maastricht criteria. Given the importance that many Labour Members attach to the potential for this country's joining the euro, he could have dealt with the subject rather more thoroughly. After all, the decision has been taken in principle; it merely awaits an assessment based on the tests. I could understand the Government's sensitivity if they had bucked a decision in principle—if such a decision had yet to be taken; but given that the decision has already been taken and it is merely a question of assessing economic convergence, I expected the Chancellor to take the opportunity to discuss the convergence criteria in greater depth.

The Chancellor mentioned in passing one or two statistics. For example, he said that the growth rate in the eurozone was 1.5 per cent., whereas our own growth rate was much better at 2.2 per cent. That begs important questions about the rate of convergence. It would have been interesting to hear the Chancellor's assessment of whether it is suitable for our economy to enjoy a growth rate so much greater than that of the eurozone that we anticipate joining and with which we anticipate sharing an interest rate. It begs the question what differential effect an interest rate suited to an economy with 1.5 per cent. growth would have on an economy with 2.2 per cent. growth. I suggest that it would make us much poorer. I would have welcomed the Government's assessment, but the Chancellor bucked the opportunity.

With great flourish and rhetoric, the Chancellor advertised his decisions on corporation tax on small businesses, but there is a trick: for small businesses to benefit from a reduction in corporation tax and from a new corporation tax regime, they have to be making a profit. That is the difficulty facing many of our small businesses. The critical factor is not the tax they pay on their profits, but whether they are able to make a profit as a consequence of the regulatory environment in which they exist. The key thing that the Chancellor and those on the Treasury Bench can do in determining the profitability of small businesses is to alleviate the regulatory regime; it is not to change the corporation tax rate.

I take one example. One industry has been literally decimated by regulation: the intermediate care industry, or residential nursing homes. In the past four years, we have lost 10 per cent. of capacity—10 per cent. of the beds. From my experience in my constituency, that has arisen as a consequence of the stifling regulation that has been imposed on the industry, and the determination by the Secretary of State for Health to control that industry from the centre.

When he set up the NHS, Bevan said that he wanted to hear a bedpan in a provincial hospital drop in his office in Whitehall—such was his determination to control his new creation from the centre. It has taken until this Secretary of State to deliver that centralised control. What business can it be of the Secretary of State to determine the widths of the doorways of a residential home in Milford on Sea? What business of his can it be to impose a regulatory regime that determines the number of baths and the size of the rooms? These regulations are not important to me. They are measurements that are easy to make but by and large they do not measure the important things that determine the quality of care in a home. However, if those regulations were important to those on the Treasury Bench—

Will the hon. Gentleman give way?