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Mr. Kevan Jones (North Durham): I am grateful to the hon. Gentleman for giving way. If I were a member of his Front-Bench team, I would be very worried about him. He congratulated the Chancellor on his first five Budgets, supported health care free at the point of delivery, and suggested that taxation on City investors should be higher than that on doctors—a radical suggestion. The hon. Gentleman is welcome to join us. Does he agree that extra money is needed for the health service, or is he saying that the health service that he wants, as we do, free at the point of delivery, is possible with the current amount of money available—yes or no?

Mr. Mitchell: On the first point, I can assure the hon. Gentleman that I would rather have my toenails pulled out without anaesthetic than cross the Floor to join him.

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On the second point, I am making a serious point. Given the enormous increase in taxpayers' money that is to be spent on the health service, and my lengthy comments about showing respect for the taxpayer, it is right to examine delivery mechanisms, and the Government have made a terrible—indeed, a catastrophic—mistake in the way in which they have gone about providing the extra money, without having first put the reforms in place. I reiterate that it must be right for a responsible Opposition to study carefully all the other mechanisms around the world before deciding which is the right one to put before the British people at the next election.

Mr. Laws: I am grateful to the hon. Gentleman for giving way a second time. He has honestly acknowledged that his party does not yet have proposals for funding the NHS. Is he seriously suggesting, as was suggested from his Front Bench, that no additional money should go into the NHS while we wait for the Conservative party to go round the world and find a better funding solution?

Mr. Mitchell: Those on my party's Front Bench have made it clear that additional money and resources will be needed for the health service. There is no question about that. The hon. Gentleman and his party will have to wait for the proposals to come before the British people and the House of Commons, but I can assure him that when they come, they will be well worth examining.

Before I leave the subject of health, I shall make two other points. First, if one examines the highly respected research conducted by the company Dr. Foster, one can see that there are such enormous differences in the quality of health in different parts of the country—sometimes as much as a 76 per cent. variation in the likelihood of results between one hospital and another—that one cannot ignore the argument that systemic change is required in the health service.

Earlier in the debate we heard about cancer survival rates in this country, which are below those of Turkey. That is why I particularly resent the accusations from Labour Members that the Conservative Opposition are wrong to examine in great detail and depth the lessons to be learned from overseas so that we can give all our citizens a better health service in the future.

The third part of the reasoned amendment deals with the effects of the Finance Bill and the Budget on business and competitiveness. We were told throughout the Budget speech that this was a Budget for enterprise. The word "enterprise" was used so often by the Chancellor that by the time he sat down we all knew that that was certainly not true. The Budget is a tax on jobs. No doubt that will be discussed in detail tomorrow, but the CBI and many others have learned a valuable lesson about the Government. The effect of the changes will be to remove incentives to employ. The CBI said recently that of all our major trading partners, only France has a higher burden of business costs imposed upon it.

The reasoned amendment mentions the "negative impact on competitiveness." You can say that again, Mr. Deputy Speaker. The UK has fallen from ninth in 1997 to 19th in the world competitiveness league. Before 1997, when the Conservative party was in government, UK productivity growth was faster than in the United States. Under the present Government it is slower. Our share of world exports has fallen by more than 10 per cent. since 1997, according

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to the International Monetary Fund. Last year business in Britain faced more than 4,000 new regulations. A business-friendly Budget this certainly is not.

Mr. Tom Harris: I thank the hon. Gentleman once again. I am enjoying his list of non-achievements on the part of the Government. Perhaps he would like to add, or perhaps he is not aware, that last year the British economy grew faster than any economy in the G7.

Mr. Mitchell: That adds nothing to my list. If the hon. Gentleman is disputing any of the five facts that I gave him, which demonstrate that under the present Government the performance of business in the UK and the difficulties faced by business in the UK are much worse under the Government whom he supports than under the Government of whom I was a part, perhaps he would like to challenge those figures. He cannot do so, which is why he remains seated.

The Finance Bill adds 500 pages to tax law. It is complex, meddlesome and burdensome to the taxpayer without giving value for money. It is hostile to business, bad for enterprise and destructive of competitiveness. It marks a sea change in the way in which the Chancellor will be perceived in the future, as compared with the way in which he was perceived in the past. I look forward to voting for the reasoned amendment tonight.

7.17 pm

Rob Marris (Wolverhampton, South-West): It is always a pleasure to follow the hon. Member for Sutton Coldfield (Mr. Mitchell)—I often follow him on the Select Committee. I salute his contribution. It is hard for Opposition Members, particularly Conservative Members, to say very much about the current economic situation and the Budget because the economic indicators are so strong. We have high growth, low inflation, low interest rates and high employment.

The hon. Member for Buckingham (Mr. Bercow), who is no longer in his place, mentioned the complexity of the Budget. He referred to the 1979 Budget—the first one presented by the incoming Conservative Government. The 1979 Budget was part of a process that led to 3 million unemployed, so short Budgets are not necessarily a good thing, as the hon. Gentleman suggested. I knew that I had many differences with him, and I have found another. He stood up in the House and said he hoped that he was still growing; I hope that I am not.

A measure of the difficulty in which the official Opposition find themselves is the wording of the amendment, which suggests that the Budget

Implicit in that phraseology is a recognition by the official Opposition, and rightly so, that we are a competitive economy and an attractive place in which to do business. We on the Labour Benches want to further that process.

I shall focus on productivity. When my right hon. Friend the Chief Secretary to the Treasury opened the debate, he mentioned that capital investment—business investment—had gone up from 10 per cent. of national income to 14 per cent. of national income. That is to be applauded because productivity rests, like a three-legged table—a three-legged table should not wobble, nor should

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productivity—on capital investment, on research and development and innovation and on labour force investment.

It is interesting to consider some of the statistics on productivity—I will not bore the House with many—to show that we have some way to go, but that we have also made considerable progress under this Government. The hon. Member for Sutton Coldfield mentioned the high burden of business taxation in France. According to the productivity figures for 2000, if the United Kingdom is taken as 100 on an index, France is at about 118, the United States is at about 139, Germany at about 105 and, interestingly, Japan is at about 98. Japan and the US are low-tax economies. France is a relatively high-tax economy, as is Germany. We are a low to middling-tax economy, so there is no direct link between taxation and productivity.

On our productivity gains, one of the publications issued with the Budget—"Trend Growth: Recent Developments and Prospects"—shows the trend in the United Kingdom's underlying productivity growth measured as output per hour. From quarter 2 of 1986 to 1997, the figure was 1.84. From 1997 to mid-1999, it was 1.55, so there was a fall when the Labour Government stuck to the out-going Conservative Government's spending limits. From mid-1999 to quarter 3 of 2001, the figure was 2.4, so there has been an increase in productivity under a Labour Government. That is extremely important, and we should make further progress, as the Budget will do.

I urge the Government to consider one difficulty with productivity with which we have not yet grappled. In the submission of the National Institute of Economic and Social Research to the Select Committee on the Treasury, the report of which was mentioned a great deal earlier, Mary O'Mahony refers to the difficulties of measuring public sector productivity. It is obviously particularly important to grapple with that difficulty, given that a huge amount of extra resources will go into the national health service. Although those resources are very welcome, we ought to be able to measure any growth in productivity in the public sector, particularly in the health service, so that we know whether we are getting the right bang for the buck from the increased moneys.

I welcome the reduction in the Budget in some of the red tape faced by small business. One of the major headaches for small business is, of course, VAT returns, and the Budget addresses that issue. That will help productivity in the small business sector. It is very difficult to tell whether the increase in employers' and employees' national insurance contributions to fund the change that we need in the health service will have a positive or a negative effect on productivity, but mention has been made of what the effect on employment may be. Of course, if labour is made more expensive in a capitalist economy, capital tends to be substituted for labour, which tends to increase productivity in that economy.

I particularly welcome the changes on research and development in clause 52 and schedule 12. We need more research and development to push forward this country's productivity. We have historically underperformed in that respect. The Finance Act 2000 included tax breaks for small and medium-sized enterprises. Those tax breaks are now coming on stream for larger enterprises. We should be clear how beneficial those changes could be. As I understand that clause and schedule, a large company, like

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a small or medium-sized enterprise, that invests in research and development will in effect get 125 per cent. of the money back. It will get the 100 per cent. write-off, plus a 25 per cent. premium, against its profits to encourage that activity.

I welcome the fact that that proposal will cover qualifying bodies, such as Wolverhampton university in my constituency. Those bodies will be able to carry out research for larger enterprises, which will be able to claim that tax break. That will encourage large enterprises not only to carry out research and development in-house, but to farm it out to appropriate qualifying bodies, whether they be universities, charities or whatever.

I hope that some of those productivity gains and the advances in research and development will encourage business in this country to invest in two areas where we have been missing the boat. I have told the House about them before, and I think that I did so when I spoke on Budget day. The first area is the design and build of medical equipment, and the second is the design and build of pollution control equipment. We in the west midlands could well do with playing our part in those markets, which are growing in this country and abroad.

I have a minor request to make of the Minister. I am not an accountant but a non-practising solicitor, as my entry in the Register of Members' Interests shows, so I should like to know more about what happens when a company spends money on research and development and claims for staffing costs and consumable stores. I traced that provision back from the Bill to the Finance Act 2000, which introduced that research and development tax break for small and medium-sized enterprises. One of the schedules to that Act simply states:

I was stumped by that and did no further research, so I hope that the Minister can enlighten me at some point about what that means. That request is not frivolous; it is intended to shed light on what can be claimed against that tax break. I do not know whether a claim could be made for a spectrometer. Would a spectrometer count as a consumable store, or as capital goods?

I should also like to make some remarks about another issue that is central to productivity: the skills of our work force. We need the skills to carry out the research and development to which I refer. We need skills to boost productivity—I read out some figures earlier. As hon. Members on both sides of the House will agree, we need to move to a high-wage, high-skill economy.

We need to develop skills to address the skills shortages that have developed for two reasons. First, the Conservative Government neglected to invest sufficiently in skills training. Secondly, although unemployment has dropped to a relatively low level under the Labour Government in the past five years, there are pockets of skills shortages throughout the country, especially in the south-east.

I am pleased that the Budget and the ancillary documents refer to pilot schemes under which, initially in six areas of the country, small employers will be paid to send their workers on training courses. Paragraph 3.34 of

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"Developing Workforce Skills: Piloting a New Approach"—one of the documents released with the Budget statement—states:

That time off will be used for training.

I wholeheartedly support that push to encourage skills training; it is a part of the Budget that has been under-remarked upon. Lower-skilled workers tend not only to earn less but to be less productive. Paragraph 1.10 of that document states:

That would be a massive productivity gain for our economy. We hope to push forward on that with the Government target of getting 50 per cent. of that age cohort into university by 2010. That should have huge gains for future productivity, directly and indirectly.

I welcome the sector skills councils that are being set up throughout the country to increase skills training and productivity. Box 2.1 of the document from which I have just quoted says that they

Ancillary to that, I welcome the Employment Bill now going through the House and on whose Standing Committee I served, under which trade union learning representatives will be given time off, paid for by their employers. That is a step towards encouraging a learning culture, which, in due course, will have increasingly beneficial effects on productivity in our economy as well as enriching the lives of the people who undergo that education and training.

I should like the Government to consider the sort of tax break for training that they have given for research and development—the 25 per cent. premium in addition to writing off 100 per cent. of training costs against taxation. Effectively, there would be the same 125 per cent. regime for training in certain circumstances that this Budget introduces for research and development in large companies and which there has been for the past two years for small and medium-sized enterprises.

I finish with a quote from the Treasury Committee's report, which has already been used by my hon. Friend the Member for Dumbarton (Mr. McFall). When the Government are criticised about targets, it is salutary to remember that we need real measures and to keep on top of them. The hon. Member for Sutton Coldfield mentioned that indirectly in terms of the health service. Paragraph 21 states:

If, like me, one has a great desire to increase productivity in order to catch up with the United States, to continue pulling ahead of some of our EU competitors and to catch up with France, and so on, we need to be able to tell which measures are working and which are not.

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