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7.9 pm

Mr. John Swinney (North Tayside): The hon. Member for East Lothian (Mr. Home Robertson) said that his speech today was likely to be his last to the House of Commons, after a career of 23 or 24 years here. This is probably my last speech in the House of Commons as well and, like the hon. Gentleman, I shall concentrate on my work in the Scottish Parliament. I leave the House with perhaps not quite as much nostalgia as him, but I, too, look forward to my continued service in the Scottish Parliament.

The hon. Member for Bury St. Edmunds (Mr. Ruffley) made an interesting and lengthy contribution, in which he said that the Labour Government were deceivers on tax and spending. I think that I can agree with him on that point. The Government have successfully created a new

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art of spinning to their advantage an incredible quantity of financial information that amounts to little in terms of different news. I should like to concentrate on the Government's position on tax and spending, and on what they have said about the family.

In the pre-Budget report and elsewhere, the Budget has been trumpeted as a great deal for families. However, let us consider what families are experiencing. First, as a result of the Budget, families in Britain are still paying the highest fuel taxes in Europe. The Chancellor has not changed that at all. Obviously, any fuel duty reductions are welcome, but surely the amount that is levied can move in only one direction after the trend that it has followed under this Government and the previous, Conservative Government.

Secondly, some of the poorest families in North Tayside are paying the most extraordinary charge increases for certain local authority services. Under this Government, some of my constituents have seen their charges for water and sewerage services increase by 250 per cent. Indeed, they are rising almost as fast as the salaries of the chief executives of the water quangos over which the Government have presided, which rubs salt into people's wounds.

Thirdly, families in my constituency are paying in back-door taxation the equivalent of an extra 9p in income tax because of the various tax changes made over time by the Chancellor. The Government have kept their commitment not to increase the basic rate of income tax, but have used just about every other possible dodge in the book to get more money out of the ordinary, hard-working families that they were supposed to be supporting and helping. Instead of assisting such families, they have spent most time penalising them.

Fourthly, I suspect that many families voted for the Labour party on the basis that it would take action to relieve their poverty. When the Government took office in 1997, 30 per cent. of families in Scotland were living in poverty. After four years, we have arrived at a miraculous situation in which 30 per cent. of families are still living in poverty. In the light of that statistic, the Government have decided that it would be too embarrassing for words to calculate the level of poverty since 1997, so they are trying instead to deal with it from 1996. That shows a modest decline, but airbrushing 1997 out of the history books is not a short cut to achieving their objectives. A great number of people, whether they are in poverty or not, are left disheartened and dejected at the Government's lack of progress.

Fifthly, families are undoubtedly wrestling with a world that is now much more complex. The hon. Member for Bury St. Edmunds said a great deal about the complexity of the system. I do not dispute the fact that the Government are introducing beneficial measures regarding the working families tax credit and the children's tax credit, but I question the accessibility of the opportunities that they provide. I was struck by the Inland Revenue's confirmation that almost a million people who are eligible for the children's tax credit have not lodged an expression of interest in it. That comes on top of evidence that half a million pensioners have failed to apply for the minimum income guarantee and to work through the 40-page form that must be completed in order to make such an application.

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All those indications show that the Government's approach to redistribution involves obstacles that the Chancellor must surmount to ensure that all families who are in need have a proper opportunity to access the information and credits to which they are entitled. The system's complexity has excluded a number of people who desperately need the support that is available from the Government, not least through the measures recently announced, and it shows no signs of getting any simpler.

The Chancellor has made a great deal of honouring his manifesto commitment not to raise the basic rate of income tax. It would be churlish to dispute that commitment, but I calculate that 28 tax rises have been made under the current Chancellor--an analysis that is supported by the Library. I am sure that the Conservative party can justify its argument that there have been 45 rises, but the 28 rises of which I am aware are equivalent to the application to ordinary people in our society of a 9p increase in income tax. The total UK tax burden has increased from 36 per cent. of GDP in 1996-97 to an estimated 40 per cent. in 2000-01.

Those increases nail the Chancellor's repeated claim that he is a tax-cutting Chancellor. There is no doubt that he is a tax-increasing Chancellor. Any redistribution measure or evidence of a tax-cutting agenda in the Budget is more than outweighed by the fact that he has raised more than £23 billion in additional taxation by imposing the changes to which I have referred. Ironically, there is a direct equivalence between the £23 billion in tax rises and the £23 billion surplus announced in the Budget statement. The Chancellor has imposed the 28 tax rises through the back door, but they have resulted in even more tax increases for ordinary families. As I said, they include greater water charges in Scotland.

It comes as no surprise that a recent poll whose results were published in The Herald suggests that almost 60 per cent. of people in Scotland think that Labour has broken its tax promise. The public are now beginning to see through the propaganda, spin and representation of the same arguments. They can see that the tax burden has increased for ordinary people and that Labour cannot be trusted on tax.

Just as Labour cannot be trusted on tax, so it cannot be trusted on spending. I would rather listen to what real doctors say about public expenditure than to what spin doctors say about it. A recent British Medical Association survey showed that 80 per cent. of Scottish GPs believed that there had been a decline in hospital care since Labour took office. I was intrigued by the bullish way in which the Secretary of State for Health presented the Government's health record, as they cut real-terms expenditure on the health service in Scotland during their first year in office. As much as I criticise the Conservative party for its ghastly expenditure and public service record in Scotland, I must accept that even it did not make such a cut in all its 18 years in power.

To compound the matter, the Government starved public services during their first two years in office. Even at the end of the comprehensive spending review period, they will be spending less of the nation's wealth on public expenditure and services in Scotland than the Conservatives were at the end of their period in government. Public expenditure increased by 2.6 per cent. a year in real terms under the Conservatives. On average, it rose by 1.8 per cent. a year from 1979 until 1997. After the current Government came into office, however,

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expenditure rose by 1.2 per cent. a year from 1997-98 until 2000-01. I suspect that the current Parliament is unlikely to last for five years, but, if it does, the next such figure will be 1.9 per cent. That puts into context the Government's change in public expenditure.

I was struck by a written parliamentary answer given in the Scottish Parliament, which showed that when the Conservatives left office they were spending 1.8 per cent. of United Kingdom GDP on public expenditure in Scotland. In 2003-04, the figure will reach only 1.84 per cent. at the end of the comprehensive spending review period. That shows that the Government are not investing as much of the nation's wealth in public spending as has been invested in the past.

The Government say that new expenditure will result from the Budget, and that is true. By my calculations, an extra £200 million, spread over three years, will come to the Scottish Parliament in the block formula. However, we must bear in mind the fact that, although that £200 million will be welcome, the Scottish Executive managed to underspend their budget last year by £435 million. We must put the scale of the latest increase into some sort of perspective, in terms of the increases in expenditure that the Chancellor has announced.

The hon. Member for Halifax (Mrs. Mahon) described real life in her constituency to the hon. Member for Truro and St. Austell (Mr. Taylor) in terms of investment in public services. I am sure that she knows her constituency extremely well, but we all have such a constituency record and we are all aware of the limitations of public expenditure. I am certainly very concerned by what I see and hear, for example when I speak to representatives of the health authority in my constituency.

The health authority is wrestling with a £10 million deficit, which has to be eliminated before it can obtain any long-term investment for health services in the Tayside area. Countless schools in my constituency need refurbishment, and we are a long way down the priority list in terms of investment. We must keep our feet on the ground when we consider the Government's actions on public expenditure, because they are not making the quantum difference that they boasted would be the case.

The condition of the economy has been the subject of many bullish remarks by the Chancellor, and by the Secretary of State for Health when he opened this debate. Since the Government came into office, there have been four quarters of negative economic growth, in which the economy has not increased in size. The economy in Scotland is not doing as well as that of the rest of the United Kingdom, and the latest figures show that the rate of growth in the Scottish economy is 1.6 per cent., compared to 3.4 per cent. for the UK as a whole. For the sake of international comparison with some of our small, European counterparts, I can tell hon. Members that economic growth in Ireland is projected to be 8.7 per cent. in this financial year.

Manufacturing losses in Scotland have been enormous, and the latest statistics show that manufacturing exports are down. In a number of manufacturing sectors--for example, the drinks industry, paper manufacture, food, tobacco, mechanical engineering and textiles--export figures are down. Let us also, therefore, keep our feet on the ground when considering the economic performance about which the Government are so keen to boast.

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Obviously, almost everyone welcomes the decrease in unemployment. The International Labour Organisation employment trends, so frequently used by the Government as their favoured mechanism, suggest that 8.7 per cent. of the population of Scotland were unemployed in 1997, and that that figure is now 6.4 per cent. However, a much more dramatic decline has taken place in Ireland, where, according to the ILO, unemployment was 10.3 per cent. in 1997 and is now 4.3 per cent. We must, therefore, be aware of the scale of economic activity and economic progress that can be achieved in comparable circumstances.

The Chancellor has tried to present an image of a low-tax, high-spending Budget. However, he has delivered a high-tax, low-spending record, and that has led to under-performance in our economic base. It is essential for the Chancellor to recognise and accept the public mood on this issue. There is a need for much greater honesty and transparency in the tax system. People are beginning to tumble to the fact that they are paying more tax than they used to, and it is high time that the Chancellor demonstrated some transparency in the way he explains those issues to the public. The public now clearly understand that, although the promise of low direct income tax has been kept, they are paying high indirect taxes. The fuel crisis of last summer represented an explosion of people's anger that should act as a warning to the Chancellor. There is also a necessity for claims about public expenditure to be founded on reality, rather than on the extravagant claims that the Chancellor has set out.

The hon. Member for East Lothian advised the House earlier that, as part of maintaining the United Kingdom, it was essential that no one interfered with the funding formula that underpins the funding of the changes to public expenditure in the Scottish Parliament--the so-called Barnett formula--which the hon. Gentleman presented as a great formula.

The Barnett formula is often misunderstood. It is a converging formula, designed to bring per capita public expenditure in Scotland into line with per capita public expenditure in England. In certain identifiable areas of public expenditure, there is a difference. We must be clear that the formula is designed to reduce public expenditure in Scotland, and it is doing so. The gap between per capita public expenditure in Scotland and England is declining year by year because of the vigorous application of the Barnett formula.


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