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Mr. Milburn: I agree with my hon. Friend. I am very aware of the pressures in Lancashire, which she has raised with me in the past. We have taken fully into account the problems and pressures that social services face not just in providing better elderly care services but in improving children's care services. I hope that there is an opportunity for social services to plan ahead with confidence for the medium term with a very generous settlement over three years that allows some of these problems to be addressed in a stage-by-stage way. I also hope that social services will recognise that the best way forward for children's care and elderly care is for the health service and social services to work more co-operatively together.

Mr. Richard Bacon (South Norfolk): Does the Secretary of State agree with Mr. Stuart Emslie, a risk control expert in his Department, that the NHS loses between 16 per cent. and 20 per cent. of its budget each year through fraud and mismanagement? If he does not agree, will he tell us the correct figure?

Mr. Milburn: No, because he did not say that. The figures that the Conservative party bandy about include the costs to the national health service of staff who are off sick. I know that the NHS is a good service, but not even we have been able to solve problems universally of staff sickness for all our staff.

Jonathan Shaw (Chatham and Aylesford): Although the chief inspector will be independently appointed, may I suggest to my right hon. Friend that one criterion for appointment might be not having been a chief inspector of any other public service?

I know of my right hon. Friend's commitment to mental health services. Waiting for treatment, either in hospital or in the community, can be debilitating for people with a mental illness and their families. Mental health is a

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primary problem in trying to resolve the issue of rough sleepers. Will my right hon. Friend make a commitment that the additional funding will be aimed at mental health services as well as all the other health services?

Mr. Milburn: It is very important that mental health services get their fare share of the additional resources. It is also very important, in my view, that we keep a clear eye on the key priorities for the national health service, not just to get waiting times down but to improve outcomes from cancer and coronary heart disease and to improve elderly care and mental health services. I say to my hon. Friend, in the spirit of friendship and also candour, that if we try to do everything at once, we will achieve nothing at all. It is very important that we keep focused on the issues that count.

Mr. Crispin Blunt (Reigate): Before the Secretary of State imposes this new level of audit and inspection, will he undertake to read last night's Reith lecture on the subject? Will he tell my constituents why they should have any confidence in his NHS plan when he has shown himself prepared to corrupt the administration of government, compromise the health care of my constituents and the welfare of health workers in my constituency in order to promote the political interests of the Labour party?

Mr. Milburn: Frankly, those comments are beneath even the hon. Gentleman.

Shona McIsaac (Cleethorpes): Is my right hon. Friend aware that many hundreds of cancer patients in Grimsby and Cleethorpes have to pay £5 to cross the Humber bridge to gain access to treatment in Hull hospitals? Will anything be done, using the extra funding, to make

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journeys to hospital much easier for those people? I am finding it hard to convince them that the NHS is based on need, not ability to pay.

Mr. Milburn: I was not aware of the problem that my hon. Friend raises. Again, such decisions are best taken locally rather than nationally. There will be scope, more freedom and, of course, extra resources, for local health services to decide what their priorities are. However, people in the health service must understand that the extra resources do not come easy; there are strings attached. Most importantly, the health service must understand that every penny of extra investment must be properly accounted for. I do not provide the extra investment, the taxpayers do, and they must have a good deal, just like patients.

Miss Julie Kirkbride (Bromsgrove): I could not agree more with the Secretary of State when he says that the NHS cannot be run by Whitehall. He will be aware of the significant staff recruitment problems that exist in parts of the country. Can he clarify what new flexibility he is prepared to give to foundation hospitals and whether those hospitals will be able to pay in accordance with local labour market conditions as opposed to being constrained by national wage bargaining?

Mr. Milburn: As far as the foundation hospitals and pay systems are concerned, I think that the hon. Lady is aware that we are negotiating with the various trade unions a new system of pay called "Agenda for Change" for the national health service. It will seek to combine a national framework of pay with local flexibility. Foundations hospitals will be able to use those local flexibilities to give appropriate rewards to NHS staff.

Mr. Deputy Speaker: Order. It is important that we move on to the next business. However, we will be returning to debate this subject on Tuesday of next week.

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Orders of the Day


Order read for resuming adjourned debate on Question [17 April].


Motion made, and Question proposed,

(1) That it is expedient to amend the law with respect to the National Debt and the public revenue and to make further provision in connection with finance.
(2) Subject to paragraph (3) below, this Resolution does not extend to the making of any amendment with respect to value added tax so as to provide—
(a) for zero-rating or exempting a supply, acquisition or importation;
(b) for refunding an amount of tax;
(c) for any relief, other than a relief that—
(i) so far as it is applicable to goods, applies to goods of every description, and
(ii) so far as it is applicable to services, applies to services of every description.
(3) Paragraph (2) above does not exclude the making of amendments with respect to value added tax providing for relief on the acquisition from another member State of any goods in relation to which, if they were imported from a place outside the member States, relief would be given by an order under section 37 of the Value Added Tax Act 1994.—[Mr. Gordon Brown.]

Question again proposed.

Budget Resolutions and Economic Situation

2.19 pm

Mr. David Willetts (Havant): May I begin by declaring the interests that appear in the Register of Members' Interests?

Yesterday's Budget was the first since the Government's general election victory only 10 months ago. Pundits were critical of the quality of that campaign, but something clear and important was at the centre of the political debate. Time and again, Ministers and Labour politicians were asked what would happen when the end of their planning period for public expenditure, 2003–04, was reached. It was suggested that there would have to be either a reduction in the rate of growth of public spending, or a further round of tax increases if the Government carried on increasing public spending.

Time and again, the Chancellor and the Prime Minister went out of their way to deny that there would need to be further tax increases in the middle of the Government's second term to finance a further increase in public spending. For example, the Prime Minister was interviewed by Jeremy Paxman on "Newsnight" about the guarantee not to abolish the national insurance ceiling. Paxman said:

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The Prime Minister replied, "They shouldn't". That was on 22 May 2001, less than a year ago. In the same campaign, the Prime Minister wrote in the Daily Express:

Yesterday, however, in the first Budget since those election promises were made, the Chancellor came to the House and broke the assurances that he and other Labour party members gave during the election campaign. The Chancellor took the first opportunity that arose, in his first Budget after the election, to trample on the promises that he had made to help get himself elected.

There was no apology, nor any humility. In fact, Labour Back-Bench Members cheered the tax increases even more loudly than they had cheered the promises made to secure their election in the first place.

Even more shocking than the cynicism with which those pledges were broken is the scale of the increase in the tax take. In the final year of the Conservative Government, the tax take was approximately £270 billion. Next year, it will be £407 billion. At the end of the Chancellor's planning period, it will be £520 billion. That is an enormous increase in the total amount of tax taken over the lifetimes of the two Labour Governments since 1997. We are entitled to ask—as we will throughout the debate—how the taxes are being increased, who will bear the burden, and what will be given by the Government in return.

At the heart of the tax increases announced yesterday is the dramatic rise in national insurance contributions. For employees and employers, the combined rate will be a very heavy 23.8 per cent. However, the Chancellor was up to his old tricks yesterday. He referred to the national insurance increases, and to a set of measures designed to help the environment and provide specific assistance for business. We have examined the way in which he presented the changes.

I entirely support the Government's aim of helping the environment. The Chancellor yesterday produced a set of measures to that end, and chapter 7 of the Red Book is entitled "Protecting the Environment". The measures add up to slightly less than £100 million. Some of the measures in the table to which the Chancellor referred in his Budget are marked with an asterisk, showing that their cost is "negligible".

The Chancellor gave his attention to environmental measures with a combined impact of less than £100 million, and devoted fewer words to the proposed rise in national increase insurance contributions, worth £7.5 billion. Those proposals include the abolition, in practice, of the upper earnings limit. The Chancellor will now collect additional national insurance contributions at the rate of 1 per cent. from people's total income, including any income above the old upper earnings limit.

National insurance now has a very odd structure, and one that no rational person would be able to defend. There are personal allowances, and rates for employers of 12.8 per cent. and for employees of 11 per cent. The latter rate has now been raised by 1 per cent., but what is to stop the Chancellor raising that figure again, by 1.5 per cent. or 2 per cent., in the future? The right hon. Gentleman has created a new revenue raiser that he will be able to use whenever he wants to raise taxes still higher.

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I hope that the Secretary of State for Work and Pensions or the Chancellor will assure the House that the extra 1 per cent. added to employees' national insurance contributions will not be raised again in the future. If no such assurance is given, we will know what the Chancellor's future stealth tax is going to be. Whatever promises he makes on value added tax or personal income tax, the Chancellor will be able to return to that extra 1 per cent. on employees' national insurance contributions. Gradually—and it may take a few years—he will achieve what John Smith tried to do 10 years ago. The upper earnings limit will be abolished. Over time, the full rate of national insurance contributions will apply to the total of employees' incomes. This is the start of the process.

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