Previous SectionIndexHome Page

Mr. Milburn: It was £40 billion earlier.

Mr. Duncan: I was about to say that, based on what we have heard, £30 billion is an underestimate and I am perfectly happy to accept the hon. Gentleman's suggestion of £40 billion. It is quite clear that the Opposition's promises on tax amount to nothing. The key point is not just that our figures are right, or as the Opposition put it, may be right, but that most of those in the Opposition hope that our figures are right. If they were ever in government, however, they would demand that their tax commitments and spending demands were met in full.

I do not make demands for more spending in my constituency and I am happy to accept what the Government deem to be a fair standard spending assessment for local government. I must, however, take issue with the manner in which some of the pledged spending appears to have been apportioned because the county councils in the constituencies of some of my hon. Friends now have in their area unitary councils and they appear to have done their best to bring about a scorched earth policy for those unitary authorities that come into being next April. I make no demands for increased total spending, but I ask Ministers to look for equity in the way in which it is intended that the existing and proposed budget will be apportioned between the various parts of existing counties.

The councillors in the little county of Rutland are telling me, and I have yet to look at the figures in detail, that the amount apportioned to them appears to be less than it should be. The same applies to my borough council of Melton Mowbray. It is not a unitary authority, but its councillors feel that some cuts have been made. If I find that there has not been equity in the distribution of the funds, I hope that the Financial Secretary will allow me to take to him a delegation so that my councillors can argue their case.

Overall, I welcome the Budget. It continues our policy of growth and prosperity, which thankfully, given the measures we have put into place, will be for keeps.

8.24 pm

Mr. Ian Pearson (Dudley, West): This is a tax-raising Budget that hurts ordinary families. No amount of protestations from Conservative Members can disguise

2 Dec 1996 : Column 746

the plain fact that the Government will go into the next election as tax raisers, not tax cutters. A typical family will have paid more than £2,000 extra in tax since the 1992 election as a result of tax increases introduced since then. While the Chancellor has given basic rate tax cuts with one hand, he has taken money away with the other through higher insurance tax, higher airport tax, higher council taxes, cuts in profit-related pay, higher duties and higher charges for basic essentials.

The Budget means that the typical family is worse off, and does little or nothing to help the vast majority of people and businesses in the west midlands. In the west midlands, just one in two working people are in full-time employment according to Government statistics, and 914,000 of them have experienced a period of unemployment since the general election. Yet there is nothing in the Budget to fund the welfare-to-work programme. There is nothing in it to tackle the major manifest problem of the interaction of the social security system with the tax system.

In the west midlands, 24,000 people earn less than £1.50 an hour and 87,000 earn less than £2.50 an hour, yet there is nothing in the Budget to deal with the problems of poverty pay. The average house in the west midlands is still worth £6,000 less than when the right hon. Member for Huntingdon (Mr. Major) became Prime Minister in 1990. In the west midlands, 12,000 home owners are still trapped in negative equity despite the current fragile recovery in the housing market there. Yet today at least three building societies have put up their interest rates, while most respectable economic forecasters predict further rises in interest rates in the coming months, and there is nothing in the Budget to help our hard-pressed home owners.

There is also nothing in the Budget that will bridge the growing gap between the poor and the rich. Since 1979, the bottom tenth of the population has become 18 per cent. worse off in absolute terms, according to the Department of Social Security's own figures on households below average income. Figures from the Audit Commission show that the proportion of children growing up in families below the poverty line has trebled from one in 10 in 1979 to one in three. According to Equifax Europe's survey conducted in the middle of this year, 13.5 per cent. of households in my constituency have county court judgments against them, yet there is precious little in the Budget to help some of the poorest and most vulnerable sections of the community. They stand to lose out, as the ordinary man and woman in the street will lose out as a result of the Budget.

Businesses in the west midlands have something to welcome in the Budget, but from talking to a number of business people, I have found that they are still far from satisfied. The west midlands competes head to head as a region with areas such as Baden-Wurttemberg in Germany and Emilia Romagna in Italy. Yet when we consider the European regional prosperity league and the figures produced by Eurostat, we see that while Baden-Wurttemberg is in ninth place and Emilia Romagna is in 11th place, the west midlands comes a lowly 56th--that is not good enough. In terms of regional gross domestic product per head, based on the latest figures available from Eurostat, our living standards are 40 per cent. lower than those of the two regions with which we compete directly. That gap has widened over the past 17 years.

2 Dec 1996 : Column 747

Dudley is twinned with Bremen in Germany--there are close and traditional links and many similarities between the two. The average income per head in Dudley is £11,234 per annum, compared with £19,056 in Bremen. People in Bremen earn, on average, 75 per cent. more than those in Dudley, its twin town. We are falling further and further behind in the European prosperity league. Unless there is a change of Government and attitude, we run the serious risk of raising the first generation of people in the west midlands who can expect to have a lower standard of living in future than their parents.

One reason why the gap in prosperity is widening and why Britain is falling further behind is the size of Britain's manufacturing industry. Size is important. In the west midlands, there has been a slight increase in GDP volume--from £11.88 billion to £12.44 billion between 1979 and 1996. After 17 years of Tory government, we have had, at best, a 2 per cent. increase in the volume of manufacturing business, at today's prices.

Nationally, the figures show that manufacturing in 1979 accounted for 30 per cent. of national output and employed more than 7 million people. By 1995, it had fallen to 20 per cent. and, according to the Office for National Statistics, employed only 4 million people. In the west midlands, employment in manufacturing has declined from more than 900,000 to just over 400,000. Productivity has increased, but at the expense of a44 per cent. cut in the work force.

It is easy to cut jobs and raise productivity; it is more difficult to raise output and bring in new business. That factor is recognised on both sides of the House, and the Minister should stop trying to quote figures on productivity and say something about what is happening in the real economy.

The best regional companies in the west midlands are some of the best to be found anywhere in the world. We are not afraid to shout about the performance of some of the world-class companies that exist in the region. But as the Government office for the west midlands admits in its most recent report "Competing to Win", the region has

The "head" of the west midlands companies is doing well--there are world-class companies. It is as if the west midlands economy was a dinosaur, with a small head, a long neck, an enormously long body and an incredibly huge tail--a Diplodocus. Much work needs to be done with the industrial base in the west midlands if it is ever to be able to move closer to Baden-Wurttemberg, Emilia Romagna and Bremen in terms of income per head.

Most of the Chancellor's economic advisers forecast that interest rates should be 7 per cent. now or by the middle of next year--an increase of 1 per cent. The interest futures market suggests that interest rates will rise substantially over the next few months, which will be incredibly bad news for west midlands businesses.

Members of the Confederation of British Industry see no sign that inflation is a worry; they see no need to dampen down demand in the west midlands economy. They report that input prices are down 2 per cent. on this time last year. With that background and with pressure on margins as a result of the appreciating pound, the CBI sees no grounds for interest rate rises. The CBI's members believe that interest rate rises will be crippling at a time

2 Dec 1996 : Column 748

when they are trying to get off the ground after what has been a fairly difficult 12-month trading period for any company exporting into western Europe.

A major problem is that interest rates and the needs of manufacturing companies in the west midlands are an a collision path. Once again, it looks as if manufacturing will be the loser. The Government look set--or might have to be dragged screaming--to raise interest rates to meet the overheating in London and the south-east, but they are not going to do anything for the west midlands, which has still to feel the benefits in terms of house prices or business volume increases.

The Budget does nothing to equip the British economy for the future. Tomorrow's company needs a well-educated and highly skilled work force, yet the United Kingdom has a lower proportion of young people entering full-time higher education than any other western European country except Turkey. We have half as many students in full-time education at 18 as Germany or France and one third of our adults have no qualifications to their name. In addition, 58 per cent. of those leaving education are qualified to a basic NVQ level 2. The corresponding figures for Germany and France are 78 per cent. and 66 per cent. respectively--those are the Government's own figures, from their skills audit. They show the scale of the task required if we are to become truly competitive.

The Budget will place increasing pressures on education and social services in Dudley metropolitan borough, which includes the constituency that I represent. The capping rules will allow Dudley council to increase spending by only 1.5 per cent. at a time when general inflation is 3.2 per cent. and there is an increasing demand for local services. It is estimated that there is a funding gap of between £10 million and £12 million in Dudley metropolitan borough. That comes on top of the £25 million cuts in the past four years. Dudley is, and traditionally has been, an efficient and low-spending authority. Its services have already been cut to the bone. It delegates more than 97 per cent. of its local education authority budget directly to schools--one of the highest figures in the country. Yet school governors face the prospect of having no money for school books for the third year running and of having to make teachers redundant.

Although there has been a national 3.4 per cent. increase in education standard spending assessments, Dudley's is up by only 3.1 per cent. It has been calculated that simply to maintain existing funding levels in real terms--to cope with the growing population in the borough of Dudley as well as retail price inflation--would require an increase of 5 per cent. That could be achieved only by massive cuts in services, which is totally unsatisfactory.

My best guess is that Dudley's council tax payers are likely to face a high single-digit council tax increase in the coming financial year, which can be laid directly at the Government's door. Make no mistake, Dudley's parents are not convinced and will not be convinced that any increase in council tax and the problems of education in the Dudley borough are the local authority's fault. One of the benefits of local management of schools is that it has led to greater knowledge about funding systems among local people, and the blame is now being pinned on those responsible--the Government.

2 Dec 1996 : Column 749

We needed a Budget that equipped Britain for the future--a Budget for stability that was prudent and created a platform for a sustainable economy. We needed a Budget for investment, to tackle the investment and technology gap between ourselves--both in the west midlands and nationally--and our competitors. We did not get it. We needed a Budget that helped people to move from welfare to work by shifting resources from welfare to education. We did not get it. We needed a Budget for fairness--a Budget whose priority was to cut tax on VAT on fuel, not to increase inheritance tax allowance. We did not get it.

Instead, we have a Budget that closes tax loopholes a year too late. The Government should have closed the loophole on special dividends and share buy-backs in last year's Budget. I estimate that the cost of not doing so is almost the equivalent of 1p off the basic rate of income tax. The Government were incredibly negligent in not announcing that decision until--conveniently enough--the week of this year's Conservative party conference. People in the business press and elsewhere had been urging them to close that loophole sooner, yet they prevaricated and did nothing until it was far too late.

We have a Budget that inks in savings before they are achieved, which is completely imprudent--I understand that the hon. Member for Beaconsfield (Mr. Smith) is an accountant, so he should be the first to recognise that. "Spend to save" projects savings of £6.7 billion over a four-year period, yet nowhere do the Government explain how those savings will be achieved. They have also changed the accounting treatment by, for the first time, forecasting unemployment figures in a deliberate attempt to massage the public sector borrowing requirement down by cutting spending on the social security budget.

The Government are as guilty of creative accountancy as the French Government, who--rightly in my opinion--were lambasted by our Government for manipulating their figures for the partial privatisation of France Telecom. The Government are doing the same in trying to reduce the PSBR by £1 billion by privatising the student loan book, raising an additional £700,000 through selling off defence personnel married quarters, and raising about £2 billion in privatisation proceeds. Coincidentally, the figures are very similar--£4 billion from the privatisation of France Telecom and £4 billion from the Government's funding wheezes.

This is not an honest Budget that helps ordinary working people and ordinary families. It is an unfair Budget that favours the few, not the many. It does not strengthen the economy or equip Britain with the skills and investment that we need for the future. The Tories have broken their promises on taxes and spending. In a few weeks, they will learn again how the people of Dudley feel about a Government who break their promises.

Next Section

IndexHome Page