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Mr. Baron: Will the hon. Gentleman give way?

Mr. Simon: No, I will not because, fortunately, when I tried to intervene on the much more experienced and knowledgeable hon. Member for Bury St. Edmunds (Mr. Ruffley), he explained to me that there is no time on these occasions to take interventions. The hon. Member for Billericay (Mr. Baron) is not as experienced. A more experienced Tory showed me the way earlier. I can only take my lead from those who have been in this House longer and who doubtless know much more than I do.

We already have one of the very lowest business taxation environments in Europe. Both key rates of corporation tax have been cut. In addition—

Mr. Baron: Will the hon. Gentleman give way?

Mr. Simon: No, I have just explained that I am not going to.

In addition, as has been extraordinarily resolutely ignored by Conservative Members, the business community in this country pays a massively lower contribution to the health care of its employees than business communities in comparable countries such as France, Germany and the United States. The hon. Member for Maldon and East Chelmsford (Mr. Whittingdale) refused to address that when hon. Members pressed him, and that is because there is no answer to it. Conservatives' arguments are special pleading, illiterate, self-interested and absurd.

Mr. Baron: What about German unemployment?

Mr. Simon: That does not bear any response. [Interruption.] German unemployment is two and a half times that in the UK—and that is supposed to be a problem for Labour Members? I think not.

To continue with the specifics, as a former VAT-registered small business, I am perfectly well aware how naturally resentful many small business people are at being the unpaid and entirely unthanked collection agents for Her Majesty's Customs and Excise. There is no doubt that it is thankless and irritating. Ministers might do well to consider the point, which is rarely raised but has often occurred to me. In that context, a Budget that lifts 700,000 small businesses out of the VAT environment can only be welcome and positive.

I shall not go on at great length about all the other pro-business measures in the Budget, because others have done so and will do so. Suffice it to say that, as well as the things that I have mentioned, there are a volume-based research and development tax credit, an extra £30 million for training and development, a community investment tax credit, a community development venture fund, changes to the limits on non-residential stamp duty,

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implementation of recommendations on e-filing, reform of the business incubation fund, and so on. Those are just the tightly defined, enterprise-specific elements of the innovations in this Budget alone.

The notion that we have had other than a business- friendly Budget from a business-friendly Government is nonsensical. The bottom line is that the best economic indicators for generations are the best thing for business in this country. That is what it really comes down to. They make far more difference than anything else, and are proof of a business-friendly Government. If we were not business-friendly, we would not be able to deliver such economic success. Economic success, as one would have thought Conservative Members might realise, derives from business.

7.29 pm

Mr. David Laws (Yeovil): I am grateful for the opportunity to participate in this important debate. Like my hon. Friend the Member for Twickenham (Dr. Cable), I welcome the main thrust of the Budget to increase investment in the national health service. Indeed, that can be no surprise because my party has campaigned for that for many years. The Red Book is entitled "The strength to make long-term decisions", and our only regret is that the Government did not have the strength and purpose to make these decisions earlier in their time in office.

Although I want to concentrate on NHS reform, I have two other issues to raise. The first relates to the Government's borrowing targets and projections. The second concerns the increasing tendency to complicate the tax system. The Chancellor said that he is trying to build in an additional measure of prudence in his projections for the public finances. As a consequence, he has raised his projection for the surplus that he will have for the next few years. However, when we consider the reasons for the increase in surplus on a current balance basis, we see that it is largely a result not of a fundamental improvement in the projection for the economy, but simply of the fact that the Government have decided unilaterally to revise up their forecast of the projected growth of the economy over the next few years. That development can hardly be described as prudent, especially in the light of their failure to make progress on their agenda to improve productivity. Although the National Audit Office has loyally done its usual job of rubber-stamping the changes in the assumptions in the Budget, it noted that the change to the growth forecast was less prudent than the previous projections.

We also notice that in spite of the fact that the European Union criticised the Government in January for their Budget projections—in particular, for projecting that they would borrow to fund their overall position during the next few years—they have moved further from achieving a balance. Specifically, they have increased the borrowing figures in 2005–06 and 2006–07 from £13 billion, which was set in the pre-Budget report, to £17 billion or £18 billion. The Chancellor still has work to do to persuade his colleagues in the EU that the growth and stability pact needs fundamental reform. There is no doubt that the Government are a considerable way from meeting the requirements of the pact. Indeed, they are moving in the wrong direction.

I support a reconfiguration of the growth and stability pact. It is wrong that it should limit our room for manoeuvre on fiscal policy, especially when we have a

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strong budgetary position. The Government need to address that problem with our European partners if they are not to be cautioned yet again for their projections over the next few years.

The Chancellor is increasingly obsessed with complicating the tax system. He claimed once again that he was abolishing a tax in the Budget and referred to measures to reform betting duty. However, the thrust of the rest of the Government's tax policy since 1997 has been geared towards complicating, rather than simplifying, the tax system. It is easy for hon. Members to welcome each individual measure that the Government introduce to increase the number of allowances and reliefs in the tax system. For example, it is tempting to welcome the vaccines tax credit, the research and development tax credit, the small brewers tax reliefs, the film tax reliefs and the additional corporate gains tax loopholes that have been introduced over the years. What we perhaps fail to recognise when we welcome each of those measures is the way in which they not only make the tax system more complicated, but require higher levels of other taxes to fund them.

When we consider what has happened this year to one of the Chancellor's favourite wheezes, we see how such measures can go disastrously wrong. In 1997, the Government introduced tax reliefs for the British film industry, supposedly at a cost of £50 million a year. In 2001, further changes were made to that tax relief that were forecast to cost an extra £50 million. The annual cost of the measure is now forecast to be £360 million, an extraordinary increase since it was conceived, and the Chancellor expects us to give him credit for introducing measures to rein in the effects of that tax relief by reducing it by £295 million in the year ahead. I would prefer it if the Chancellor did not introduce greater reliefs and allowances, but concentrated his resources instead on taking people on the lowest incomes out of tax all together. I hope that that will be part of his agenda for future Budgets.

The Liberal Democrats welcome the Government's measures on the NHS. When Conservative Members talk about the failure of the NHS and the perceived inability of investment to make a difference, they should remember that the major problem for the Government in the last Parliament was that they stuck to the spending plans set by the Conservatives. There was little increase in NHS expenditure for the first two years and what there was was swamped entirely by the costs of increased pay, technology and dealing with an ageing population. Those are regular cost increases and it is clear that the NHS needs money that covers more than inflation for it just to stay as it is.

We have yet to try a properly funded health service. However, I would rather the investment announced by the Government than the policy described by the hon. Member for Billericay (Mr. Baron). He said that the Government were irresponsible to put money into the NHS. In the absence of a serious policy from the Conservative party either to reform or to invest in the NHS, my constituents would consider it far more irresponsible to stick with the existing funding of the NHS. Although many people have to wait excessively long times to receive treatment, and in some cases die before they get it, we cannot wait for the Conservative party to come up with a policy.

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The Government should be conscious, however, that in giving an impression prior to the general election that they did not need to increase taxes and in attempting in the Budget statement to find mechanisms for raising revenue that do not involve breaching their promises on income tax, they have damaged their reputation with the electorate, who believe that promises on taxation have been broken. They have also been forced to introduce a mechanism—the increase in national insurance contributions—that is far less sensible than an increase in income tax. A day after the Budget, the editor of The Idler magazine—one of the people who the Secretary of State said praised the increase in national insurance contributions—commented that the move to tax employment rather than income was


It is odd, as my hon. Friend the Member for Twickenham said, that the Government are determined to tax employment rather than income. The newspapers over the weekend reported some of the effects that that will have on those very rich people who will not pay the national insurance contributions and will, as a consequence, be better off when they should be making a bigger contribution through income tax.

Parliament should continue to debate the NHS and its funding. The Government should pay more attention to some of the measures included in a document issued by the Treasury. Although it did not receive much attention on Budget day, it compares various forms of health funding worldwide. We should consider measures such as social insurance when we think about how we fund the NHS beyond the current injection of finance. However, I infinitely prefer the concrete measures set out in the Budget to improve the NHS to the policy vacuum in the Conservative party.


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