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Mr. Edward Davey: Cyclically adjusted.

Mr. Webb: Cyclically adjusted, as my hon. Friend says. The Chancellor of the Exchequer does not expect every year to meet all the rules: he says that we will meet

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them over the cycle. The health service could be funded in precisely the same way. National insurance rates, if that were the hypothecated tax, could be set so that over the cycle the health service was funded in a predictable and stable way. In the good years it would raise more than was needed, in the bad years it would raise less, and when those figures were cyclically adjusted, as the Chancellor is so fond of doing, there would be no problem. That is not a fundamental objection to linking tax and spending.

The electorate do not trust the Government on tax because they failed to tell them at the election that they would need to raise taxes, and then went and did so yesterday. We need a method whereby the electorate know that they can trust politicians on tax. Politicians could bind themselves to spending every penny of a particular tax on a particular service and not siphon that money off. If the public were asked to pay more, they would know where the money was going. It would not need an Audit Commission report or anything else: they would know by statute.

The Chancellor said that he wanted a debate on how public services should be funded.

Mr. Adrian Bailey (West Bromwich, West): Will the hon. Gentleman give way?

Mr. Webb: No, because I am about to finish.

These ideas will be a way of reconnecting the public with taxation. The Government and the Liberal Democrats both want good tax-funded public services. We are united on that against the Conservative vision. The danger is that, if the Government blow it by raising taxes that they did not tell people about and do not spend them entirely on the things that people want, the public will not give a second chance to parties that believe in tax-funded public services and they may be seduced by the Conservative dogma.

In a spirit of constructive friendship, I say to the right hon. Gentlemen on the Government Front Bench that the Government should come clean on tax and link what they are spending with what they are raising, and then the public may trust them. By not telling people during the election what they intended to do and then putting taxes up yesterday, they betrayed the public.

4.8 pm

Mr. Eric Illsley (Barnsley, Central): I do not intend to follow the same route as the hon. Member for Northavon (Mr. Webb), except to say that I do not believe that the Government are dishonest or incompetent. We can debate hypothecated taxation, but the hon. Gentleman said himself that if we had hypothecated taxation, money could be spent year on year in a certain area to the detriment of other areas. As for whether the public knew that we were going to raise taxes to fund the national health service, up until yesterday the world and his dog knew that we would do that.

The hon. Member for Havant (Mr. Willetts) said that Labour is comfortable only when it raises taxes to spend money. That is not the case at all. Labour Members do not welcome tax increases. Like anyone else, we would rather the health service were funded, as it has been funded in the past five years of the Labour Government,

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through the good stewardship of the economy. The money has been available because of increased employment— 1 million people are back in work—and increased tax revenues. It would be much better to fund the health service in that way, but if it needs extra funding I am not afraid to say to my constituents, "Yes, taxes must increase to provide you with the national health service that you want." Over the past year or so, the public have made it clear exactly how they want their national health service to operate. They want more money put into the service. I am comfortable with the increase in taxes to fund the national health service.

As I have said, it is Labour's prudent management of the economy that has allowed considerable investment in our public services over the past few years without those tax increases. I shall not repeat the list that was given yesterday, but it included low interest rates, low inflation—the lowest for many years—and higher employment. I believe that only this week unemployment fell again.

I welcome the extra money for working families: increases in the working families tax credit, working tax credit and child tax credit. Those moves will greatly assist my constituents. The extension of the new deal is also welcome. Over the last few years my constituency has experienced high unemployment, but, although the level is still slightly higher than the national average, it has fallen recently as a direct consequence of the Government's policies.

I look forward to the pension credit that will be introduced next year. That too will help many of my constituents, especially those who qualify for pensions under the mineworkers pension scheme or who qualified for it prior to 1975, before it was index linked. A very small occupational pension has prevented such people from obtaining other benefits.

I welcome the tax concessions for small businesses. Because of our attempts to regenerate the Barnsley area over the past two years, we have had to seek assistance for such businesses—surprisingly enough. I am happy to say that my constituency contains some world-leading small businesses. I also welcome the reductions in beer duty for micro-brewers and local brewers. I should declare an interest as honorary adviser to the northern branch of the Licensed Victuallers Association. The move will help breweries in rural areas and rural pubs; one of the issues in such areas is the decline of the traditional country pub.

I am pleased to see that my right hon. Friend the Financial Secretary to the Treasury is present, as he is responsible for the climate change levy. I am glad that electricity produced from coal mine methane will be exempted from the levy. Only a few days ago, my right hon. Friend opened a plant in my constituency that converts methane leaking from old coal mines to electricity in order to power a local glass factory. I understand that next year such methane will be exploited on some 80 sites.

While I am on the subject of glass, let me say—I know my right hon. Friend will expect me to make this point—that the glass industry has been hit hard by the climate change levy, especially as a result of the exemption and rebate system that revolves around the integrated pollution prevention and control regulations. A company registered under the regulations will receive an 80 per cent. rebate.

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I understand that, to qualify, a company must melt glass. Some companies use a lot of electricity, but do not melt products in order to make glass. They may bend substances, for instance to make motor-car windscreens; some, such as Potters Ballotini in my constituency, use 100 per cent. recycled glass—coloured glass. That is an environmentally friendly operation in itself. Such companies, however, are subject to the full rate of the climate change levy.

Potters Ballotini must pay £160,000 per annum, in return for which it receives only £2,000 in national insurance rebate. It points out that because it uses 100 per cent. recycled materials, it should not be subject to a levy that is intended to make companies focus on being environmentally friendly and on emissions targets. I hope my right hon. Friend will look again at the way in which the IPPC regulations affect such companies. I have heard it said many times that the climate change levy is revenue-neutral, but it is not revenue-neutral for the companies paying £160,000 in order to receive £2,000.

As I have said, I welcome the extra funds for the NHS and the five-year stabilisation plan. As I said after the statement by the Secretary of State for Health, however, my constituency and others are in a bizarre position: NHS funding appears to be decreasing when examined against target funding for the health authorities involved. It is a question of distribution.

Last year my authority received 98.5 per cent. of the funding target; at the end of the current year, it will have received 97 per cent. of that target. Although more money is going into my health authority and the NHS in general, the amount provided for its core functions appears to be falling. That 3 per cent. shortfall equates to some £6 million, which the health authority simply could not find. In fact, its budget was rejected by Trent regional health authority on two occasions because it simply could not find a way of disguising a £6 million shortfall, or making any further efficiencies to reduce the amount. It had already taken £1.5 million out of the budget through efficiencies.

Mr. Peter Viggers (Gosport): The hon. Gentleman has put his finger on an important point. Ministers consistently tell us that NHS spending is increasing. In my area, the Portsmouth and South East Hampshire trust has been called on to make 2 per cent. efficiency savings in consecutive years. It says that its budget is way below what it needs. I am talking about the sixth largest hospital trust in the country, which received no stars in a recent survey. The hon. Gentleman has identified the difference between the Government's claims and reality.

Mr. Illsley: I entirely understand the hon. Gentleman's point. Similar points were made following the statement by my right hon. Friend the Secretary of State for Health.

I readily admit that the amount being spent on the health service is increasing, but the manner of its distribution, and the fact that it is sometimes attached to initiatives, tends to move it away from the core. That is one of the main problems in my area. Initiatives have been imposed on the health authority—the other day the pro-chancellor of Hull university described the syndrome as "initiative-itis"—to which the money is tied. It is tied to an initiative and to a target. That tends to move the money away, because part of the health service

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concentrates on achieving the target. Meanwhile, another part of the service may receive less money and experience neglect.

My area is desperately short of general practitioners. Apart from, I think, Sunderland, it has the fewest in the country. We had a training surgery providing initiatives with the aim of recruiting and training more GPs, but the funds had to be withdrawn because the health authority had to concentrate on other initiatives and targets imposed by the Department of Health.

We have experienced shortfalls year on year. It is not just under the present Government that my health authority has been underfunded. More than a year ago, inappropriate prescribing by GPs led to a shortfall of about £1 million. Perversely, this year—because we have addressed the issue—we have more problems because prescribing is very good. GPs are now prescribing according to the Department's instructions in terms of best practice. That has increased the cost of prescribing and left us with a £2 million shortfall, as part of the overall £6 million.

We would appreciate some targeting of funding for the health service. The new independent audit and review must assess each health authority to determine which are providing value for money, but doing so on a shoestring because they are underfunded, and which are being wasteful. We must ensure that there is a balance of the scarce resources.

My local health authority has the worst rates of lung cancer, heart attack and stroke in the Trent region, which covers most of south Yorkshire and north Derbyshire, and probably among the worst in the whole country. We have among the lowest rates of heart attack survival and the highest of morbidity. A recent Commission for Health Improvement survey of Barnsley district general hospital came out with the bald statement that anyone aged between 35 and 75 admitted to that hospital suffering from a heart attack had a 50 per cent. higher chance of dying than in any other hospital in the country. That alone tells me that our funding problems must be tackled.

We hope that the NHS audit will solve the problem. I have yet to get an answer to a question that I have been asking for many years. We are 3 per cent. short of our target, but no one can tell me why my local health authority, which probably has among the highest need in the country, continues to be underfunded. When they consider the whole idea of the distribution of funds for the national health service, I hope that the Government will revisit the targets and sort out those problems.

I am also concerned about other public services, and especially those delivered through local government. A few years ago, we were promised a review of standard spending assessments, but that appears unlikely to occur according to the time scale set out last year. We were looking for a vast improvement in the mechanisms for local government funding, reflecting need rather than proceeding on the current formulaic basis.

My local authority has been underfunded ever since 1990, when poll tax capping was introduced. This is the area in which the public come face to face with the delivery of services, and they often find that the service that they expect cannot be provided because of lack of funding.

Our education funding has improved dramatically, with grants now given directly to schools to improve facilities, and I very much welcome the new school building

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programme. I am happy to say that the rate of staying on at school post 16 has improved in my constituency, as has our performance at GCSE, which has traditionally been poor. However, the services known as the "other services block", such as street cleaning and environmental services, have suffered over the past few years as the Government have, quite rightly, targeted education. I hope that they will look again at the funding of local government.

Housing, and the lack of money being made available to local authorities to meet the demands of repairs and other services, continues to be a problem. The Government have set out their policies on council housing clearly: sell it off to other landlords, form arm's-length management companies or simply maintain the status quo. Tenants in my area voted against sell-offs and the Government will not allow the local authority to construct an arm's-length company, because its rating in housing management is only two stars rather than three, so we are left with the status quo and council tenants cannot get repairs or improvements to their properties because the funding is not available. I hope that the Government will do something about that in the near future.

This is the point at which I usually say something about excise duties, but as none of them was increased yesterday there is very little to say. Let me repeat yet again, however, that cigarette smuggling remains a problem. It is a huge industry—a black economy—in my constituency. I agree that cigarette prices need to be increased for health and social policy reasons, but that tends to increase smuggling in areas such as mine.

I warmly welcome the Budget and the fact that the Chancellor has grasped the nettle and taken the right decision on the future funding of the national health service. I fully support him on that and look forward to a much improved NHS in my constituency.

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