Budget Statement

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Mr. Martyn Jones (Clwyd, South): I am grateful to the hon. Gentleman for giving way to a non-economist. I have listened to all his whingeing about the Budget, but I was astonished that he should have joined us in the Lobby last night to vote for it. Will he say why?

Adam Price: The reasons are clear. [Interruption.] I shall deal with public services in a moment.

It is clear that the north-south divide continues to widen. In fact, the European Union's figures in the cohesion report show that the United Kingdom now has the highest level of disparity. The hon. Gentleman should be aware of that. The UK now has the highest inter-regional disparity in the EU, including Germany, which had to deal with the eastern Länder, and Italy, with the Mezzogiorno. The UK has a wider gap between rich and poor regions than other member states. It is scandalous.

We see also social inequality and widening health inequalities. I was struck by recent research conducted by Professor Townsend at Bristol university, which shows that premature mortality is much worse in Labour-voting constituencies under the present Government, whereas it had begun to improve under the Conservatives. That is scandalous, and I am sure that some outside Parliament will agree.

Ian Lucas: Will the hon. Gentleman give way?

Adam Price: No.

I would like to speak about public services. It was not an old Labour Budget. The Budgets of 1974–76 provided for a 5 per cent. increase public expenditure as a proportion of gross domestic product. In this Budget, we are talking about a 1 per cent. increase. It is welcome, but it is not on the same scale as under previous Labour Administrations.

Mr. Murphy: The hon. Gentleman has fallen into the same trap as his hon. Friends. The previous public spending included the enormous amount that was paid out in unemployment benefits.

Adam Price: That is only partially true. [Interruption.] They are not my figures: they are the figures of the Institute of Fiscal Studies, which was commissioned by the parliamentary Labour party for a pre-Budget briefing, so they must be right. However, we support the increase of 1 per cent., albeit it is belated and insufficient, because it is necessary. It is a

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shame that it has taken six Budgets to arrive at this point, when we have been making a consistent case for the past five years that extra resources were needed for public services.

Unfortunately, some of that extra money will be consumed by private finance initiatives. Tucked away in the Budget papers are figures showing a doubling of the impact of PFI schemes on public spending since last year. It is now expected to reach £25 billion by 2004–05, whereas last year's figure was £13 billion. In a sense, the Government are privatising the national debt. PFI schemes are expected to cost £35 billion by 2005–06. The cost to the Revenue is worrying in both the short and the long term. Research in the British Medical Journal shows that PFI hospitals have 35 per cent. fewer beds than those financed by traditional means.

Lembit Öpik: On this one, I certainly agree with the hon. Gentleman. Does he agree that the problem of public-private partnerships is not so much whether they can deliver services as the fact that it tends to cost the taxpayer more than keeping the services in the public sector?

Adam Price: I totally agree. It is a matter of efficiency. We are told that the mantra of new Labour is ''Do what works''—but PFI does not work. It costs more in both the long and the short term. The Scottish Executive may be moving rapidly away from that, and we would like similar policy decisions to emanate from Wales.

The Parliamentary Under-Secretary of State for Wales (Mr. Don Touhig): The hon. Gentleman says that PFI does not work. Would he pass that view on to the Plaid Cymru-run Caerphilly borough council, which was using PFI to build two new schools in the borough?

Adam Price: There is no choice available to local authorities. Unfortunately, PFI is the only game in town: as the Secretary of State has said, it is PFI or bust. We would hope that under new borrowing arrangements the local authorities will have other options in the near future.

Mr. Jon Owen Jones: Will the hon. Gentleman give way?

Adam Price: No. I want to make progress.

There seems to be something of a hole in some of the Chancellor's figures. He sets out the annual increase in health spending for the next five years but we are told only how he would raise the tax for three years. He has used that trick before. The fear is that unless the Government are prepared to come clean and admit that there might have to be further tax increases if there are to be improvements in the other areas of public service—the Institute of Fiscal Studies has suggested an annual increase of between £4 billion and £6 billion, possibly by the end of this Parliament, and certainly afterwards—the only assumption that we can make is that they will freeze the level of spending on those vital services. Education, the police and transport infrastructure, which have also been underfunded, will then be in the position that the health service is in now.

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There is an alternative, and that is to have an honest debate about taxation and public expenditure, and to reintroduce the progressive principle, as we and other parties have advocated. We have one of the lowest top rates of personal tax in the European Union. It is 62 per cent. in France, 55 per cent. in Germany and 51 per cent. in Italy. Even in the UK, we had a top rate of 60 per cent. until 1998, yet we are in a position in which incapacity benefit, for instance, is taxed at 50 per cent. for personal pension income above £85 a week. Can the Secretary of State tell me why disabled pensioners pay higher tax rates than millionaires? It makes no sense.

We are all aware that there are more determinants of health than spending. As well as poverty, there is housing, which the hon. Member for Cardiff, West mentioned. That is clearly an important factor in the health of our people over the long term. Simply investing more money in the health service, welcome, important and necessary as it is, will not address the long-term problems affecting the health of our people, so we need to look at a wider social policy agenda.

Mrs. Betty Williams (Conwy): Has the hon. Gentleman seen the most recent statistics on the health service in Wales? This is the record: local in-patient and day care activity up by 0.9 per cent., elective activity, including day cases, up by 1 per cent., emergency activity up by 0.9 per cent., total out-patient attendances up by 4.2 per cent. and new out-patient attendances up by 2.5 per cent. Even without the Budget statement, we are doing much better than we were five years ago.

Adam Price: Obviously, I welcome any improvement in the delivery of the health service. My point is that many of us would recognise that there is a far wider agenda, which has to do with levels of poverty and inequality in society. The Government have to grasp the nettle: welfare payments need to increase far more than they have done so far.

My fear is, and I hope that I will be proven wrong—[Interruption]. May I make this point? My fear is that in order to deliver higher levels of spending on health and possibly in other areas, the Government will have to keep social security payments, particularly benefit payments, down. Leaks from the Treasury to the Financial Times have suggested that one of the facts on which the figures are based is that in future it will have to pay out less, proportionately, on the basic state pension. That is a false economy in terms of the health of our people. We cannot provide the best health service in the world while undermining the social welfare that underlies the health of our people. Benefit rates must increase by 20 to 40 per cent. above the rate of increase in average wages if we are to undo the problems that appeared in the Thatcher years.

Julie Morgan: I accept that the agenda should go wider than sickness and that we should consider health in the wider sense. Does the hon. Gentleman not accept, however, that there has been a record huge increase since 1997 in provisions such as child benefit? That is a universal benefit, and it is universally taken up. We all agree that families with children are often

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among the poorest groups in society, but does he not accept that action is being taken on some of the issues that he raises?

Adam Price: I accept that, and I am aware of the hon. Lady's excellent work on behalf of children, for which she is well known. I shall not detain the Committee by getting into a detailed discussion of tax credits, but there are problems with the system's increasing complexity. Partisan politics aside, I am sure that she agrees that there are issues about take-up that need to be resolved. I am a great supporter of universalism, child benefit and restoring the link between the basic state pension and average earnings. She probably has some sympathy with that last point, which must be one of our key demands over the next few years.

Mr. Simon Thomas: My hon. Friend has touched on a central problem with the benefit system. As the hon. Lady said, there have been welcome increases in universal benefits, but at the same time the Government have increased their emphasis on means-tested benefits, and the minimum income guarantee is a key example. The Secretary of State said that 100,000 pensioners in Wales would gain under the minimum income guarantee, but he did not say how many people were ineligible. He does not have the figure, which is a disgrace, but the estimate is at least 45,000.

Adam Price: My hon. Friend makes an excellent point, and there are also issues with the stakeholder pension. The only long-term future lies with a return to the basic state pension as a universal benefit linked to average earnings.

It is a great shame that the Chancellor has frozen the winter fuel allowance for the next four years, which represents a real-terms cut. [Interruption.] If I may conclude, a key problem under this Government is the growing social and geographic inequality between the richest and the poorest, and between the United Kingdom's richer and poorer regions and nations.

Unfortunately, the Budget offered no succour to those of us who want to build a better future for our country—an ambition that is surely shared across this Room. We may disagree about some of the means, but there must be a bit more reality to the discussion. Inequality continues to grow under this Government.

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Prepared 24 April 2002