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Mr. John Hayes (South Holland and The Deepings): I am grateful to the right hon. Gentleman for giving way. Does he find it equally impressive that according to Government figures, the number of registered child minders is falling? He expects people to move from welfare to work, but how does he expect them to find the necessary child care to allow them to do so?

Mr. Sheldon: In the Budget, the Chancellor has given encouragement to those very schemes.

In my constituency, the work was always there--just along the road or alleyway--and the cost of earning a living hardly existed. There were grandmothers and aunts to look after the children, transport costs did not arise, as people walked to work, and income tax was for the better-off only. Now we have the expense of travelling to work, the cost of eating away from home and the need to dress more suitably for work. All those large expenditures must be paid for from taxed income and they act as an disincentive.

Fundamental changes have been necessary for a long time. Ideally, one would wish the costs of transport to be tax deductible, but I know the problems associated with that. The child care provision is a recognition of some of those work-related expenditures. In London, of course, we have the London weighting allowance, but many of the Londoner's expenses are now being faced in other cities around the country, without any comparable allowance. I believe that more should be done to meet the Chancellor's objective of making work pay and reducing the barriers to full employment. These matters need to be considered further.

I come to a little hobby-horse of mine, concerning hypothecation. As anyone who has worked at the Treasury knows, one must always agree with the Treasury line on hypothecation. To earmark an expenditure is to lose the ability to decide on priorities. That is the argument against it, and it is compelling. Not only that, but the amount of tax collected may not accord with future expenditure plans. For some years, however, I have been pursuing a case for hypothecation--for earmarking some money from taxation for particular purposes. The one case which, to me, satisfies the rare condition that might justify its introduction is expenditure on the health service. I am glad that my right hon. Friend the Secretary of State for Health is present.

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It is clear to me that the cost of the NHS will rise ever faster than the rate of inflation or even growth in the economy. That is because the population is ageing. As needs are met, health needs become a, or perhaps the, major area of increasing expenditure. The time is coming when we shall need to think more about private medicine, which I do not favour, or a special NHS tax.

Anyone who has served in the Treasury has a visceral feeling about hypothecation. The road fund licence still casts its shadow 70 years later. One important weakness of hypothecation is that it does not take account of changing patterns of priorities in expenditure, but, as I said, one certain aspect of the health service is that demand will increase into the indefinite future. People may be more willing to accept an NHS tax if they can see the consequences of that expenditure, whereas other taxes just disappear in the vast generality of public expenditure. The time has surely come to explore sensibly the possibility of introducing such a tax.

I welcome the decision to ensure free entry to museums--a matter that is dear to my heart. It is necessary to retain the enthusiasm shown in the millennium year, which was wonderful for our museums and galleries, and free entry should help to achieve that.

People such as me usually make a number of critical comments, but I believe that this Budget could be the best on which I have had the privilege of speaking in the House and I wish my right hon. Friend the Chancellor well.

5.10 pm

Mr. Matthew Taylor (Truro and St. Austell): The Conservatives have placed throughout the country a series of posters telling people that they have paid for the taxes, but asking where the doctors, nurses and police officers are. The posters are correct in both respects, and an understanding of why they are correct--the way in which the Government have pursued their economic strategy in this Parliament, and so the fundamental weakness in the Conservative party's decision to place the call for tax cuts at the forefront of its campaign--is the key to understanding the Budget,

Taxes have been raised to cover a deficit that the Government inherited from the Conservatives: almost pound for pound, that is where the taxes have gone. It was money that the Conservative Government, including the shadow Chancellor, were spending but not receiving in income. As everybody knows, spending in excess of income means going bust sooner or later. That is precisely what happened over and over again when the Conservative party was in office.

Taxes have risen, but spending has not; indeed, under the current Government, it has been falling as a proportion of national wealth. That is why the Conservative party is in such a dilemma when it tries to offer any coherent explanation of where it will find the money for tax cuts, and why the current Government have been delivering less spending than the previous one.

The Budget illustrates that process well. As the Conservative shadow Chancellor pointed out, it delivers even lower spending than the Government planned only a year ago in their original spending plans. The Chancellor says that growth is rising from 3.4 per cent. to 3.7 per cent., but unfortunately that is typical sleight of hand. It is possible only because he has failed to spend money that

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he previously announced. Such an approach is typical of the Government, who announce big spending figures that are not delivered, as we can see when we consider them in detail.

Indeed, our common sense tells us that they are not delivered. If we visit schools, we see that most children suffer from larger class sizes; if we wait for a hospital appointment, we suffer from longer waiting lists even to see a consultant; and when we wonder what has happened to the police, we realise that they are not there because their numbers have fallen. Again and again, the Government say that they are spending more, but although they might have planned to do so, they are not.

Mrs. Alice Mahon (Halifax): Will the hon. Gentleman give way?

Mr. Taylor: I shall do so in a moment. By developing my argument a little more, I may help to answer the hon. Lady's question.

It is not just that the Government have failed to spend the money. Often, their claims on spending bear no relation to reality. Immediately after the Chancellor's statement, briefings were given by Government and Labour party representatives who said that the Budget balances the Government's priorities of cutting tax and investing in health and education. They said that it was so balanced that it meant £2 billion for health and education and £2 billion for tax cuts. When we stripped away the figures, we found that that meant £2 billion over three years on health and education, but more than £13 billion on tax cuts. In other words, there is no such balance at all. In a mud-wrestling contest with the Conservative party, the Government are spending six times as much on cutting taxes than on health and education. That is why we do not see the police officers, the teachers, the doctors and the nurses.

Mrs. Mahon: I should like to invite the hon. Gentleman to my constituency, where we have a new hospital, an increase in police numbers and class sizes are going down. Money has been earmarked for a new secondary school and the other schools, which had fallen into disrepair over the previous 18 years, are looking pretty good. Why would my constituency be so different from the hon. Gentleman's?

Mr. Taylor: I do not know the hon. Lady's constituency as well as she does, but I know that the Government's own figures show that there are fewer police, that there are more children in larger classes and that waiting times to see a consultant have increased massively under this Government. The figures also show that Labour will fail to meet most of the pledges that appeared on its general election pledge card.

People know what has been happening. The simple fact is that the Government will deliver lower spending, as a proportion of national wealth, than was delivered in 15 of the Conservatives 18 years in government. People see the results.

Mr. John Swinney (North Tayside): May I reinforce the hon. Gentleman's arguments by highlighting the fact that, according to parliamentary answers that I have seen, even at the end of the comprehensive spending review,

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public expenditure in Scotland--despite all the much- vaunted largesse--will still not reach the proportion of national wealth that it had reached when the Conservatives left office? Does the hon. Gentleman agree with me on that point?

Mr. Taylor: I agree with the hon. Gentleman. Moreover, that is true across the whole country, not just in Scotland.

The Labour party has come up with a defence. My arguments, although they undermine the Conservative case, also go a long way towards undermining the Labour case. Labour's defence is, "Ah! Strip out the savings we have made on reduced unemployment and reduced national debt, and you will see that we have been able to reduce spending overall, and yet spend more where it matters in those areas of the public services." However, leaving aside social security and debt, the Government have still spent less over this Parliament on important public services such as health, education and pensions than the Conservatives did.

During most of this Parliament, total spending--leaving aside social security and debt payments--will have been lower than in any previous year for which we have comparable records, going back to 1955. People know that that is the case, because they know that, on the ground, they are not getting the doctors and nurses who could help to cut waiting lists, and they are not getting reductions in class sizes. That devastates the Conservative case, but it also shows that the Labour Government exaggerate their record.

We now come to another excuse. The Government say that spending by some Departments has gone down, but that they are making the investment where it matters, on their priorities of health, pensions and education. However, we now know the Government's record. The Budget delivers the definitive position on which Labour will now enter the general election--assuming, as we all do, that it will be called within the next couple of months, if not the next couple of weeks.

During this Parliament, the Government will have cut the share of national wealth going to education, the NHS and pensioners. That share will be lower than in the last year of the previous Conservative Government, even if calculated right to the end of this Parliament. Even after the end of three years of comprehensive spending review investment, Labour will still be spending less, as a proportion of national wealth--even if we believe the figures--than the previous Conservative Government on their No. 1 priority: "education, education, education". Spending has not been committed to that priority, and that is why there has been such a lack of delivery on the ground.

Labour Members know that there is a problem. They hear about it every day from the people who voted them in to deliver improvements in vital public services. The Conservative party, which has nothing to offer but cuts, also knows that there is a problem, because its advertisements all around the country ask, "Where are the doctors?", "Where are the nurses?", and "Where are the police officers?" Quite right too, so why are the Conservatives offering cuts? Indeed, why has the Chancellor prioritised cuts in his Budget?

The figures are appalling, even if we believe Labour's spending plans, which we should not, because year after year after year the Government failed to deliver even the

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spending plans that they announced. It is unusual for any Government to fail to deliver their spending plans. Perhaps that is understandable on capital investment, which is not always easy to achieve, but to fail to deliver revenue spending is remarkable.

A major reason for that failure is the Government's squeeze on wages. In particular, they have squeezed the salaries and wages of police officers, teachers and health professionals, for whom increases are below private sector levels. The Government have allowed themselves to reach the stage at which they cannot even recruit staff to fill posts that they are funding, so bad is Labour's record.

The Government have a final excuse: it does not matter if the share of national wealth going to the NHS, schools and pensioners is going down because the economy is growing, which allows them, as the Conservative party argues, to cut taxes and deliver the improvements that are needed. Those improvements may not be made in line with growth in the economy as a whole and those sectors may get a lower share, but, they argue, they will get a share of a bigger cake that is therefore bigger in its own right. That, of course, assumes that there is no need for growth in the public sector to reflect growth in the wider economy. That can be delivered only by holding down incomes--most of all, those of pensioners.

There are more pensioners than ever before, but we deliver less money to them. That, of course, can be achieved only by giving them lower pensions. Which pensioners do least well out of the Government? It is the 500,000 who are entitled to the minimum income guarantee, but do not claim it because they cannot or because they will not lose their dignity to do so. They expected the pension to deliver them a decent income, but Labour has entirely neglected them.

The issue goes wider than the basic pension. Income for pensioners as a whole has fallen as a share of national wealth, which is why they have not shared in the benefits of the growth in the wider economy, despite the promise in Labour's election manifesto. That is true in health and education, too. In health, there is more technology and more people need care. We know that, simply to stand still, the health service needs funding growth that exceeds, let alone matches, growth in the wider economy. Under Labour, the share has fallen. If schools are to attract the staff they need, salaries must reflect growth in the wider economy.

Private sector salaries have risen by more than 15 per cent. under the Government, but the salaries of teachers, nurses and doctors have risen by just over 10 per cent. and those of police officers by only just over 6 per cent. They have all fallen steadily behind, but the Government act as though they are surprised that they cannot recruit people to work in those vital public services.

For years, doctors, nurses, teachers and police went into their professions even though they knew that they would be paid less than in the private sector. They believed in what they were doing, but there is a limit to how far people will go. We all meet teachers, doctors and nurses who are leaving their professions--qualified, but not practising; dedicated to the health service or to public education, but unable to afford to continue to work for them. We know that that is true because measure after measure announced today by the Secretary of State for

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Health admitted the problem. He targeted small sums to try to buy people back when they really need a decent salary increase.

The real growth argument is entirely bogus. Any Government who cut the share that goes to those great services cut the great services themselves, as Labour pointed out over and over again in opposition. We have heard the line before from Baroness Thatcher. Her Government kept stating the figures--more money, more money--but the truth was that those services were falling behind those in the rest of the economy. This Government knew that then and, in their hearts, they know it now. Day by day, they hear about it on the doorsteps and see it in schools and hospitals.


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