I begin by congratulating my hon. Friend the Member for East Yorkshire (Mr. Townend) on what he described as his swan song. It was a typically robust contribution, full of Yorkshire common sense, and one of a long series of such contributions that he has made to Budget debates.
The hon. Member for Corby (Mr. Hope) referred to urban regeneration in the context of his constituency. He will recall that, following British Steel's disappointing decision, the Conservative Administration of the 1980s established an enterprise zone in Corby. That initiative helped the community to come to terms with the loss of jobs and to rebuild itself.
I recall visiting Corby at the time and finding that almost every square foot of the enterprise zone had been taken up. There had been a substantial move towards rebuilding the town, so I hope that the hon. Gentleman will not attribute to the Conservative party any hostility to urban regeneration--nor any hostility to the problems that confront towns such as Corby.
The Budget contains measures that I, too, can welcome, although I shall not be as effusive as the hon. Member for Corby. I am afraid that I cannot bring myself to say that the increases in current expenditure on health and education should be called investment, but the extra money is welcome, and it is a further dividend of some nine years of sustainable growth.
In passing, however, I note that although extra money has been given to the NHS, there is no extra money for social services. That replicates a pattern evident over the past few years, yet the fortunes of the two services are increasingly intertwined. Much of the pressure on the NHS arises from problems backing up from social services. Bed blocking is the best example of that, but it is by no means the only one. I hope that discussions may take place between health trusts and social services at a local level, and that some of the extra NHS money may be nudged sideways towards social services. That would be in the interests of joined-up government.
The Chancellor of the Exchequer has clearly decided to spend more money on the family, and I welcome the decision to rebalance the tax burden more in favour of those confronted with the costs of bringing up children. I also welcome many of the other initiatives in the Budget--those on research and development and help for small businesses, as well as some of the VAT changes.
The Chancellor enjoys referring to the deficit of £28 billion inherited by this Government. The Red Book calls it structural, but I happen to think that it was cyclical. I have two remarks to make in passing. First, whatever the level of the deficit in 1997, it would have been a lot higher had the previous Conservative Government listened to the Labour party in the previous Parliament. The then Opposition objected to decisions to increase the revenue at the same time as they urged us to spend more, so it ill-behoves this Labour Government to criticise the level of the deficit that they inherited.
Secondly, and more importantly, my right hon. Friend the Member for Fylde (Mr. Jack) was correct to say that the previous Government had taken decisions designed to eliminate the deficit within three years. That turned out to be the case--the deficit was eliminated within that period.
I should be letting my constituents down if I did not say that farmers are very disappointed with the Budget--a point that has been made by others. Abolishing vehicle excise duty on tractors is an inadequate response to what is happening in agriculture. An important sector of the economy is on its knees: if the Chancellor can help the betting industry, it is perverse that he cannot help farmers. I hope that the Chancellor has not ruled out some transitional help for agriculture as it recovers from the crisis afflicting it at present.
May I mention in passing the Government's failure after nearly four years to identify the way forward for the London underground? I am no longer a London Member of Parliament, but my commuting constituents use the underground and I feel that it is verging on negligent that there is still no clear strategy and no agreed financial regime to deal with it. During those four years, the costs of catching up have risen. In addition to promoting social and economic reforms on the macro scale, it is legitimate to expect a Chancellor to deal with those bread-and-butter issues in the capital.
I have four brief points to make. First, I found paragraph 3.71 the most disappointing in the Red Book. It reads:
"Reducing red tape in the public sector is an important factor in creating a productive work environment."
In itself, that is a serious understatement, but what is the solution? We are told:
"The Government has a team analysing, assessing and actively reducing red tape and bureaucracy on frontline public sector staff. Projects include work on reducing the burdens faced by General Practitioners, head-teachers, the police and local authorities."
That is hardly the sound of the cavalry coming over the hill.
There is a real problem. I was talking to a policeman in my constituency a few days ago. He said that before he makes an arrest he now consciously pauses because of the number of forms that he will have to fill in and the length of time he will be off the pitch. He asserted, and I believe him, that that problem has got worse, and it is the same right across the public sector.
It is bad enough being a Member of Parliament and having to open all the unsolicited mail that we get from the Department for Education and Employment, but imagine what it must be like if one is a teacher. I have no confidence that this Administration will tackle the problem of red tape in the public sector. Indeed, much of the Chancellor's reform agenda will make it worse. There is no sense of urgency or timetable in paragraph 3.71. There are no targets in that section of the document.
Secondly, although the Budget speech had at its heart the theme of sustainability, the strategy is unsustainable. Hon. Members may have heard the Chancellor on the "Today" programme this morning saying that public expenditure was planned to grow at 3.7 per cent. According to paragraph 2.37 of the Red Book, trend growth in output is only 2.5 per cent. In the short term, one can do that, but one cannot go on doing it. In the medium term, one either has to change the policy on borrowing--the Chancellor may have locked himself out of that option--increase taxation or switch off the public expenditure tap.
The Chancellor has rather ingeniously glossed over that matter in paragraph 2.61, with a sentence that some wordsmith in the Treasury must have spent some time crafting:
"The average surplus since 1999-2000, which on the Government's provisional judgement is the start of the current cycle, also stays positive, remaining above 1 per cent. over the next five years."
In other words, one defines the cycle as beginning in the years with a huge unexpected surplus; one averages it over the next five years; and one declares it to be above 1 per cent. That leaves unanswered the question of what one does at the end of the five years, once one has used up one's credit.
My third point is on another structural issue that arises out of the Budget, to which the answer is less than clear. The Government want to bring together the tax and benefit systems. Paragraph 5.53 of the Red Book is a good example of what they want to do. It states:
"The Pension Credit and associated changes represent a further step in the Government's programme of bringing the tax and benefit systems closer together"--
a worthy aim. We would all like to simplify the interface between the citizen and the state, preferably by having one dialogue with one Government Department instead of one with the Revenue and another with the Department of Social Security. Integration has been a gleam in every Chancellor's eye for the past 30 years, although progress has been faltering since the abolition of child tax allowances and family allowances in 1970 and the introduction of child benefits. Now, even part of that simplification is being unpicked.
I found it surprising that there was no attempt in this Budget to align the tax and national insurance systems, which many see as a pre-condition for such integration.
The Budget speech and the documents that I have looked at are silent on some key questions. The tax system takes as its unit of assessment the individual taxpayer, and has done so for more than 10 years, since separate assessment for husband and wife was introduced. The benefit system takes as its unit of assessment the family--broadly defined; a single mother will find that the resources of the live-in boyfriend are taken into account if she claims benefit. The tax system looks at income over a year, whereas the benefit system takes a series of snapshots to assess need when an application is made. Some benefits are contributory and some are means-tested.
The section in the Red Book on the pension credit is silent on how integration will work. What is the unit of assessment to be? Is it to be the individual pensioner or the pensioner couple? Significantly, the example is of a single pensioner, not of a married couple. However, we know about the anomalies that can arise when the two systems are hastily knocked together, because they have recently arisen in connection with the children's tax credit. As other contributors to the debate have pointed out, if a father and mother both work and earn £32,000, they can claim the full amount of the credit--£520. However, if one of them earns more than £40,700, no credit is payable. There is no logic in that; it actually encourages both parents to go out to work. Nowhere in the Red Book or in the debate could I find the answer to this question: what are the ground rules that will apply when we try to merge two completely separate regimes in the case of the pensioner credit?
Many differences between the parties have arisen during the debate--the traditional one being the argument on tax and spend. However, there is a more significant difference: the Chancellor wants to use the tax system for what might loosely be called social engineering. He wants to target particular groups and design a tailor-made regime for them. That entails forms, rules and means-testing--more contact between citizen and state. Against that background, it is surprising that, on page 93, the right hon. Gentleman describes means-testing as "intrusive", since what he is actually planning is a massive extension of means-testing.
That is one approach. The alternative, which I favour, is simply to take people out of the tax system--or, if they stay in it, to reduce the burden of tax and then take supply-side measures to allow the market to work better. I have some doubts as to the efficacy of the Chancellor's micromanagement of the economy, based especially on what happened with the new deal. It is clear that what is planned is a huge new and much resented burden on employers and a massive extension of bureaucracy.
What about the citizen? The jury is still out as to which is the best approach in the eyes of the average citizen. The further the Government go down the road they have chosen, the more the public will prefer the simplicity and clarity of the approach proposed by my right hon. and hon. Friends, and the more they will reject the complex, Kafka-esque structure of interrelated benefits that are being introduced by the Labour Administration. The debate will move from the traditional themes--who will spend more and who will tax more--to the question of which party has the best approach towards the interface between the citizen and the state. I infinitely prefer the policies that my hon. Friends propose.