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Mr. Kenneth Clarke: Despite the length of the Chancellor's answer, the question is perfectly clear. The question was whether, within two years, he would increase the departmental spending totals when the Labour party manifesto said that he would not. Is his answer no?

Mr. Brown: That is quite amazing. The shadow Chancellor fought the election on his spending proposals and now, to win the leadership of the Conservative party, he is saying that there should be more health service spending. That is the irresponsibility of opposition. He has said that there should be more health service spending, that interest rates should come down and that he would deliver lower inflation. Those are exactly the sort of promises that the Conservatives made in 1992. The Conservative party is out of power because it makes promises and does not deliver them.

Several hon. Members rose--

Mr. Brown: I am happy to spend the whole evening giving way to the different sections of the Conservative party. I shall first take an intervention from a supporter of the right hon. Member for Wokingham (Mr. Redwood) because that right hon. Gentleman said that he would bring the fun back into politics. That was his selling point in the election. I shall then give way to a supporter of the right hon. Member for Richmond, Yorks (Mr. Hague)--a man who is threatening to do for the electoral fortunes of the Conservative party in the United Kingdom what he succeeded in doing for the electoral fortunes of the Conservative party in Wales.

Mr. William Cash (Stone): Will the right hon. Gentleman accept that the real reason why we are in this mess with regard to our future in the European Union is that he and some Conservative Members agreed to the ceilings imposed by the Maastricht criteria which prevent the Government from increasing the totals of public expenditure? Will he go to Amsterdam and renegotiate the treaty to get rid of the impossible situation with regard to the exchange rate mechanism and the movement towards monetary union? Will he also repudiate and resist the requirements of the new draft treaty, which has just been published, with regard to operational expenditure in relation to home affairs, judicial affairs and the common foreign and security policy so that we will not be saddled with the expenses under those pillars?

Mr. Brown: The most significant point made by the hon. Gentleman was that the economy had been left in a mess. Furthermore, his comment reveals that the Conservative Members will continue operating in opposition as they operated in government: divided, indisciplined, and disagreeing among themselves, particularly over the issue of Europe. I suggest that he might have asked the shadow Chancellor those questions on Europe. He might ask for the benefit of the shadow Chancellor's views on Europe before casting his vote in the Conservative leadership election.

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The difference between the Conservative party and the Labour party is that Labour has been united in its position on Europe, whereas divisions on Europe are rife among those on the Opposition Front Bench. Those divisions will keep the Conservative party out of power for many years to come.

Mr. Cash: The Chancellor mentioned fun, but the only fun that we have had is watching him avoiding answering the questions that he should be answering. Perhaps he will answer one simple question. During the general election campaign, Labour made a single pledge on the health service--that waiting lists would be cut. If that is so, and given the Chancellor's commitment to departmental spending totals, which does he think is more important: that, in a year's time, waiting lists are not cut, or that spending levels in each Department remain exactly as set? Will he, please, tell us which one is more important?

Mr. Brown: The promise made in the manifesto--which I hope that the hon. Gentleman will read carefully--was that 100,000 extra patients will be treated, by cutting £100 million from national health service bureaucracy. I am pleased to say that my right hon. Friend the Secretary of State for Health has already established measures to achieve those important cuts in bureaucracy and administration. I would think more of the hon. Gentleman if, as waiting lists climbed under the previous Conservative Government--to 900,000, to 950,000, to 1 million and beyond--he had complained to that Government's Health Ministers--something that he never did.

Mr. Quentin Davies: The Chancellor really had better decide today whether he wants to make evasiveness the hallmark of his tenure as Chancellor. He has twice been asked a question by Opposition Members that relates directly to his responsibilities--whether, in the next two years, he intends to keep public sector spending totals to the levels in the Red Book, or whether he intends to set and rigidly maintain each departmental total. That is a precise question, it falls directly within his responsibilities, and he cannot evade it. Will he give the House an honest answer?

Mr. Brown: The hon. Gentleman has obviously not read Labour's manifesto. I am also surprised that he has been re-elected to the House. We said very clearly in our manifesto that we shall stick to the departmental ceilings, and I say it again. It is interesting that the shadow Chancellor is more concerned about the windfall tax and protecting the utilities. I am therefore grateful to the hon. Member for Grantham and Stamford for raising the issue of the health service. I also ask him which party is more likely to be capable of protecting the health service: the Conservative party, which imposed the internal market and started to ruin the NHS, or the Labour party, which created the NHS?

Four measures in the Queen's Speech affect Treasury responsibility, the first of which concerns work. One in five working-age households have no one earning a wage. The comparable figures are 11 per cent. in the United States, 15 per cent. in Germany and 16 per cent. in France. The figure that we have inherited in Britain is a shameful 19 per cent. How can the shadow Chancellor say that the UK unemployment record of the past 18 years should be

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used as a model for the future? We must face the fact that, in some inner-city areas, a third of young people are out of work. In some parts of inner London, 50 per cent. of young black men are unemployed, and, in some constituencies, 30 per cent. of households have no one earning a wage.

Those figures are the reason why my right hon. Friend the Secretary of State for Education and Employment and I decided to visit, as one of our first visits as Ministers, the Foyer project in London. We wanted to see at first hand how local authorities and business can together tackle the problems of youth unemployment and youth homelessness. We want to build on such partnerships.

We must solve the unemployment problem in an entirely new labour market. The days of jobs for life--when most workers were men, manual jobs were the norm and good wages were earned without qualifications, skills or experience--are gone. With a new employment policy, we shall be the first British Government to recognise and act upon the new realities.

We have embarked on several tasks. The first is to move the long-term and young unemployed from welfare into work. The second is to make work pay in the labour market, so that it is worth while to find a job and to stay in one. The third is to establish a skills ladder, so that people out of work can learn skills, those in work can improve skills, and those who are ambitious can advance in new careers, to their own benefit and to the benefit of the economy.

Mr. Edward Garnier (Harborough): Will the right hon. Gentleman give way?

Mr. Brown: I shall not give way again.

We believe that those goals, which are central to our programme, can be achieved only by fundamental reform of our approach to welfare, employment and education. The Government will offer young people who have been unemployed for more than six months four options for work or training. The options include an incentive for employers in businesses across the UK to bring the young and long-term unemployed into work, which will be a partnership with business to tackle youth unemployment. There will be four options, but not a fifth option--staying at home on full benefit, doing nothing.

For the most vulnerable in our society--the homeless, the jobless young--we shall introduce proposals to deal with their problems of homelessness, unemployment and social vulnerability. We want to ensure that accommodation for the homeless young is matched by opportunities for them to acquire skills and to work, so that they are once again included in society. [Interruption.]

I should have thought that Conservative Members, instead of talking among themselves, would be more sensitive to the needs of the unemployed, especially now that some of their best friends are unemployed. I should have thought that Conservative Members who ask about extending employment pilot projects to communities that have suffered unexpected redundancies--such as Enfield, Southgate, for example, or Finchley, or all of Scotland and Wales--would be more sensitive. Now they know the meaning of their statement that unemployment is a price worth paying.

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The second challenge of our welfare reform is to make work pay. Half the unemployed who find work become unemployed again within a year. Some of our lowest-paid workers face marginal tax rates of 80, 90 and, in some cases, 150 per cent. For every extra pound that they earn, they lose more than £1--in some cases £1.50--in tax and benefits. They are financially better off unemployed. An unskilled worker can work 40 hours a week instead of none, and, each week, will be pounds worse off. That absurdity must be tackled.

The current system keeps the poor unemployed and the unemployed poor. Willingness to work should never be financially penalised. Just as it is wrong that people at the top keep less because of penal marginal tax rates, it is iniquitous that those at the bottom, who cannot afford it, lose money because of penal marginal tax rates.

Such iniquities are why we want to take action. We shall deal with the benefit traps that lock thousands of men and women, many of whom have young families, into poverty. No longer should we have a Government who blame the unemployed for their poverty, and who simultaneously make those people even poorer if they work. That belief is why we have announced a comprehensive review of the tax and benefit system, to ensure that work can pay for all our citizens. We promised a review in our manifesto, and it will be chaired by Martin Taylor, chief executive of Barclays bank. He and I agree that we want to find a way in which to provide incentives for work, and to enable a change in the penal marginal rates of tax and benefit that hit working people.

Reform of the benefit system without implementation of a national minimum wage would be counter- productive. Without a minimum wage, Governments could waste billions of pounds subsidising employers who--in the sure knowledge that the taxpayer will bail them out--deliberately keep wages low. That is an additional, modern reason for a minimum wage. Only a minimum wage will provide the sure foundation for the tax and benefit reforms that we shall introduce to make work pay. Far from being a job-destroying measure, a minimum wage is an essential component of a constructive strategy to make work worth while and to create jobs.

The third element of our welfare reform is provision of a skills ladder. In 1945, the work force had a reasonable expectation of secure employment for a working life. In 1997, however, most people realise that a working life involves moving between jobs and acquiring new skills throughout that working life. The education legacy bequeathed by the previous Government must be judged against the challenges of the new economy.

In the number of teenagers in full-time education at 18, Britain, with Turkey, is at the bottom of the league of industrial countries. In the UK, 20 per cent. of young people leave school without essential literacy or numeracy skills. Half of the young unemployed do not have basic qualifications. Some 60 per cent. of the long-term unemployed are without skills. At a time when our economy relies more and more on education, there is a huge and growing deficit to make up with our competitors. With our initiatives on education, skills and training, millions of individuals will have new opportunities to participate in the challenges of a growing and changing economy.

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All young people between 16 and 18 should be in education or training, whether part time or full time. We shall also make lifelong learning a reality with our proposals--which we want to advance as quickly as possible--for a new university of industry that will bring learning to the home, the workplace and the community. Our individual learning accounts will create the possibility of an improved partnership between individuals who want to learn and employers who want to improve skills. We shall replace the ineffective youth training scheme with two equally valid routes after the age of 16. There will be a college and schools-based route and a work-based apprenticeship and training route. On top of that, our welfare-to-work programme offers work and education opportunities to the young and long-term unemployed. For those reasons, we shall impose the windfall tax on the utilities. If anyone is in any doubt about its necessity, let me make it clear that it is necessary so that we can take action against the inequities that have been bequeathed to us.

The welfare reforms are an essential component of the growth strategy for our country, which needs a medium-term growth strategy. We have world-class firms, but not enough. In many areas we have modern capacity, but there is not enough of it. I want to nurture enterprise and potential productivity so that the good idea in innovation and research becomes the good product and eventually the good export. That is why we must identify and remove the barriers to growth and productivity. The new Minister with responsibility for European competitiveness will be involved in the completion of the single market. The public-private initiative will be given a new boost after the report by Malcolm Bates, formerly the deputy head of GEC.

Those higher levels of long-term investment can be delivered only from a platform of monetary and fiscal stability. Our aim must be never to return to the instability that characterised the Conservative stop-go economics of the past 18 years, causing so much harm to home owners and industry and blighting economic progress.

In order to meet our rules for borrowing, the Budget will establish a sound and long-term basis of public finance, and the foundation for that is honesty. That is why we have invited the head of the National Audit Office, the Comptroller and Auditor General, who is responsible to the House, to comment on some of the key assumptions and conventions that lie behind spending and borrowing estimates so that a truly independent assessment of the state of finances can be made. Before my first Budget, a report incorporating the National Audit Office's views will be published. I envisage that future Budgets will also have a continuing role for the National Audit Office in auditing the prospects for public finances through forecasting.

We have opened the books not only to provide the information that the country has a right to know, but because it is time to rebuild the public's trust about the uses of public money. From next year, we shall publish a Green Paper several months before the Budget containing all the information that the public need.

Together with that honesty in public finance, the Government offer another important change: clarity rather than division in our approach to Europe. When the shadow Chancellor introduced the debate, he talked about everything related to Europe except the issue that divides the Conservative party so completely: the single currency.

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In their first week, the Government took positive steps in Europe to protect British interests. The Commission has now stated that it will not proceed with its objection to a cut in VAT on fuel.

The Government will fight for Britain's interests in Europe; we are also clear that there is no future for Britain outside Europe. I know that the shadow Chancellor agrees with me on that. He could not have been clearer in his letter to Conservative Members of Parliament. He said:

He even compared the directions in which the other five candidates wanted to go to the policies of Newt Gingrich. Conservative Members would be well advised to listen to what the shadow Chancellor said on "The Frost Programme" on Sunday 4 May. He said:

    "If the party is led by a Europhile, he is not going to persuade the Eurosceptics to agree with him. If the party is led by a Eurosceptic, he is not going to persuade a Europhile to take a Whip on the big issues. It is a kind of cancer at the heart of the party. Some people are quite obsessed by it. They are quite incapable of agreeing about it at the moment."

That was characteristically frank and an admission that, whoever wins the leadership election--whether a Europhile or a Eurosceptic--he will be unable to unite the Conservative party. Whatever happens, he will be faced with continuous division: a Conservative party that is incapable of being led and a country that would be ungovernable were that party ever to come back to power. Only a Labour Government can pursue our interests in Europe. The Conservative party has a lot of sorting out to do.

Not since 1945 have the British people stated so clearly the need for a change of direction. The last time the British people put their trust in the Labour party with such a powerful national mandate, we created the national health service, a new education service, the welfare state and full employment for a generation. Now, in 1997, as we embark on our task of national renewal, we are conscious of the trust placed in us by the British people--the responsibilities that are imposed upon us and the will of the British people for sensible change.

People voted for us because we were back again as the party of the people and this, the people's Government, will keep their promises. We shall keep our promises to build a stronger and more dynamic economy and to build a united society that deals with the real problems of unemployment, poverty and social division that the Conservative party ignored for too long. Most importantly, we shall restore trust between the people and their Government and restore people's trust in the power of Government to address the concerns that we must face together.

After 18 years, the people of this country now have a Government who are on their side. We have the people's mandate and, in government with the policies that I have suggested today, it is our determination--indeed, our task--to fulfil the people's mandate.

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