Budget Statement

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Mr. Greg Knight (East Yorkshire): Does the hon. Gentleman accept that the Conservative party are not alone in saying that money is not the whole answer to the problems in the NHS? For example, is he aware that the British Medical Association has made similar comments? The secretary of the BMA in Wales, Bob Broughton, also believes that money is not the only solution, and that extra cash could be better channelled into areas that make a difference. In his view, Wales is short of 100 GPs. It is not only the Conservatives who say that problems in the NHS are partly caused by poor management. On his earlier point—

The Chairman: Order. It is an intervention, not a speech.

Lembit Öpik: Thank you, Mr. Griffiths.

My response is straightforward. The right hon. Member for East Yorkshire (Mr. Knight) seems to be saying that the Conservative party is committed to restructuring. However, there is an irony, because several things that he appeared to condemning were changes introduced between 1979 and 1997. Conservative Members are perfectly entitled to change their position, but it would be helpful to

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know which of those policies they have explicitly abandoned, and with what they have been replaced.

I am not seeking an apology for those years, but there is a common perception that probably harmed the Conservatives in the general elections in 1997 and 2001—the Conservatives did a lot of damage to the health service with the changes that they made. To move forward, they should be clear about what they have abandoned from their previous strategic position.

The hon. Member for Ribble Valley said very little about where the money would come from. Once again—as we saw in Prime Minister's Questions today—when pushed on that point, the Conservatives do not seem able or willing to answer. In the radio interview that the hon. Member for Rhondda and I took part in, the Assembly Member speaking on behalf of the Conservatives actually suggested the American model as a good way forward. He implied that Medicare was preferable. The hon. Member for Rhondda made a forceful response by saying that few people in Wales would share that view, and I agree. They are in a bit of a mess, which they need to resolve.

Mr. Huw Edwards (Monmouth): Can the hon. Gentleman confirm that the Conservative Assembly Member who spoke on the radio was the Assembly Member for Monmouth?

Lembit Öpik: It was not my intention to give the individual free publicity, but it was the Assembly Member for Monmouth. We can provide copies of the tape to the hon. Gentleman for a reasonable fee—all money going to the health service, of course. Since I have now committed myself to trying to take a positive view of politics, I invite the Conservative party—

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

Lembit Öpik: I shall in a minute. I invite the Conservative party to accept my comments as constructive feedback and criticism, and as an open door for it to come up with creative solutions to improve the health service in Wales, which is what the hon. Member for Ribble Valley said he wanted, on a cross-party basis.

Mr. Knight: Why does the hon. Gentleman think that his solution will work? He talks about raising higher-rate tax, but is he aware that when Lord Lawson was Chancellor of the Exchequer and reduced higher-rate tax, the tax yield went up, not down?

Lembit Öpik: It is the judgment of the Liberal Democrats that a net return comparable to that from the national insurance change would be achieved by increasing tax. A certain amount of circumstantial evidence exists either way, and hon. Members can make their judgment about whom they agree with. I intuitively feel that a tax rise that puts a significant additional burden on the Secretary of State for Wales would not be regarded as unreasonable, given that the rest of us do not earn anything like £100,000 a year.

My hon. Friend the Member for Brecon and Radnorshire also rightly pointed out that if a pensioner earns more than £100,000, it is probably not unreasonable to expect them to pay a little more tax.

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With the extra money, we have an opportunity to make a difference to Welsh life and to the quality of health provision in Wales. I hope that we can support the Welsh Assembly in relevant ways that cut between Westminster and Cardiff to ensure that it gets the money, and that no weasel ways restrict that. Perhaps more importantly, we need to find creative ways of working together to achieve benefits in transport provision, health, education and so forth. In my judgment, the Liberal Democrat-led Government in Cardiff have been successful. [Hon. Members: ''Led?'']. At least morally.

Mr. Bryant: Will the hon. Gentleman be positive?

Lembit Öpik: I am being very positive about my party, thank you.

The Assembly shows that parties that work together towards outcomes, rather than party-hacking, can make a significant difference. The Budget gives us the opportunity to make a step-change improvement in the public services available in Wales. It would have been nice if that had happened five years ago, but it could not have occurred unless the Liberal Democrats had been swept to power in 1997—the chance for that will come again. In the meantime, it is good to see the Labour party accepting the early stages of a Liberal Democrat Budget. We can carry it on after 2006.

4.18 pm

Albert Owen (Ynys Môn): When the Chancellor gave his Budget statement last week, I was given special dispensation to be absent from the House so that I could attend the opening of a spring show by a manufacturing company in my constituency. In the past 15 to 20 years there have been few occasions on which a local company has been able to show confidence by holding such an event to sell its wares.

The company, Faun Municipal, is the second largest manufacturer of environmental waste trucks in the United Kingdom, and more than 50 per cent. of its work force is based in my constituency. My right hon. Friend the Secretary of State is right to quote the comments of the CBI in Wales about business confidence: that is exactly what the local business community told me, although that is not to discount the remaining problems of manufacturing, such as the strength of the pound, which several hon. Members have mentioned.

I have waited a long time for a Budget of this nature—a tax-and-spend Budget, not for the sake of it, but for the right reasons; a Budget that is progressive, fair and apt. I fully understand that in the first five years of the Labour Government there was a need to put the economy back on track and to lay strong foundations on which to build a fairer and more just society. I applaud the Chancellor's previous Budgets, which have aided my constituents greatly, particularly pensioners, low-income families and small businesses. The GMB union summed it up in its slogan about the Budget, ''Nice one Gordon! (Again)''.

I welcome the massive additional spending on the national health service, to which many have referred. I am pleased that the National Assembly or the Welsh

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Executive have decided to introduce that money in stages, to provide year-on-year increases until 2007–08. That five-year programme of investment in our national health service is unique and it will have a profound effect on all our constituencies in Wales.

I have no doubt that I will have the opportunity in the House to talk about the NHS and the reforms that need to go with that investment, so today I will concentrate on the implications of the Chancellor's Budget statement and its provision for pensioners and families in Wales. Before doing so, I will touch on education and the spending that the Chancellor announced in that respect. I refer to the direct payments of £714,000 to typical secondary schools, and the spending on primary schools. Although that is a devolved matter, it would be unfair if head teachers and governors of typical secondary schools in Wales were not to have the additional £15,000 grant, or the equivalent grant of £5,500 to primary schools.

I am in favour of Welsh solutions to Welsh issues, but I believe that Welsh schools will be short-changed if the money goes to the local education authority and teachers do not get those direct grants. I hope that the Secretary of State will take that up with the First Minister and the Welsh Executive. I believe that our schools deserve the maximum that is on offer from the Chancellor, because equipment costs the same in Wales and every penny in schools' budgets counts.

In each Budget since 1997, families have been central to the Chancellor's plans. We have seen the introduction of the working families tax credit, a record increase in universal child benefit—now worth £15.75 for the first child—and the raising of tax thresholds to assist the lower paid and help people into work. As a welfare adviser prior to entering Parliament, I saw the immediate effect that that assistance had on low-income families in my area. However, while the intent and the effect were immediate, the system was, and remains, complex. It is complex for recipients, employers who administer the credit, benefit agencies, local authorities and welfare advisers—and, I confess, quite complex for Members of Parliament who have to deal with it in their surgeries. That is why I welcome the Chancellor's merging of the tax credits for families and the introduction of a more seamless benefit for families.

Not only has the system been complex in the past, but it has penalised single-income families. The new means test will be based on parents' joint income, rather than the income of the highest earner. That is fairer, simpler and, I believe, more rewarding.

Hywel Williams (Caernarfon): Does the hon. Gentleman recognise that extending the tax credit system means that more families will be drawn into the complications to which he has already referred?

Albert Owen: I was trying to explain that the Chancellor is dealing with that by merging the systems into one seamless tax credit. I will come on to pensions a little later.

As I said, the cash will be paid to the main carer, who is usually, but not always, the mother, as my hon.

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Friend the Member for Cardiff, North (Julie Morgan) said this morning. The cash will offer a major boost to the incomes of the many families in my constituency whose income is less than £50,000 a year. The new child tax credit will give them up to £1,400, which is equivalent to £26.50 a week and therefore a quite significant credit to those families. It tapers down to about £800 for households with incomes of up to £58,000, of which there are not many in my constituency.

The new benefit will offset any increase in national insurance that those families will face due to the 1 per cent. increase. Although the new tax credit will be easier to access in theory, an awareness campaign is needed—the hon. Member for Caernarfon (Hywel Williams) mentioned that. We need greater awareness to enable the tax credit's intended recipients to get their entitlement. Currently, only 72 per cent. of eligible families have applied for the working families tax credit, which is not satisfactory.

The benefit measures announced in the Budget will ensure that in Wales more than 50 per cent. of families with children will be better off, and those with below-average earnings of less than £21,000 will be considerably better off. That will benefit areas such as mine, which is a low-pay area. On average, direct tax on families has gone down to its lowest level for many decades. The Child Poverty Action Group has given a broad welcome to the ongoing commitment to increase tax benefits and tax credits.

There is also good news for low-paid childless couples aged over 25 in Wales. The working tax credit guarantees a couple in full-time work a weekly income of £183, and guarantees take-home pay of £154 for single people. The package of benefits reflects the decision, which I welcome, to help families with the costs of registered child carers working in their homes. That is a victory for parents who work, and it opens up the way to employing nannies, who are in many ways like family members and grandparents, to help with child care duties.

Talking of grandparents, pensioners are major beneficiaries of the Budget. In the pre-Budget report, the Chancellor announced that the £200 winter fuel allowance will be paid each and every year, and he rightly honoured that pledge in the Budget. It was wrong of the hon. Member for East Carmarthen and Dinefwr to say that it is a cut. In the run-up to the general election, Plaid Cymru was telling me that it was a one-off gimmick. It is not. It has real meaning for those who receive it. That tax-free grant will be welcome in every household. It is not a gimmick.

As a result of the success of the national health service, people are living longer. The Chancellor's announcement of an increase in thresholds for people aged over 75 will bring many pensioners out of tax altogether. I also welcome the pension credit, which has given the average pensioner household a saving of about £1,500 since 1997. Charities such as Age Concern and Help the Aged have welcomed it, too. Details of the additional cash for social services have, again, not been announced, but when they are, I hope that we will find that it helps with community care and care homes.

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The tax credits for pensioners introduced by the Chancellor are complex. In future, I hope that he will look for an all-embracing, seamless way in which to get tax credits in one payment. He has done that with the working families tax credit, and that is the way forward. As Age Concern has said, without a single payment, there is a danger that the Government, rather than pensioners, will end up in credit. It is the responsibility of each and every one of us to work with charities and the benefit agencies to heighten awareness of the credit and ensure that pensioners get their full entitlement. It is a responsibility of Members of Parliament to heighten awareness in their surgeries.

I welcome the additional resources for public services, and the Chancellor was right to put that on national insurance contributions as opposed to the 1p income tax increase on offer from other parties. Pensioners on very low incomes would have been penalised had the increase been on income tax. I have worked with people caught in the poverty trap: had there been a 1p income tax increase, they would have lost out.

 
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Prepared 24 April 2002