Budget debate (fourth day): National Health Service

- Monday, 7th July 1997

 

Rt Hon Peter Lilley MP

The Chief Secretary to the Treasury (Mr. Alistair Darling): In the short time remaining before the end of the debate, I shall return to some of the points made by the right hon. Member for Wells (Mr. Heathcoat-Amory), but I start by reciprocating his good wishes and his welcome to me. I welcome him to his new role as shadow Chief Secretary. He was a Treasury Minister for much of the previous Parliament, but we cannot blame him for everything, as he resigned just over a year before the election because he could not support the right hon. and learned Member for Rushcliffe (Mr. Clarke). He is now reinstated on the Front Bench and is among friends, united in their scepticism. We shall never forget his treatise on the duty paid by ferry terminal tugs, which occupied us for several hours one evening when we considered the Finance Bill some two years ago.

 

The excellent maiden speeches that we have heard are a testament to the quality of the new intake. There have been a number of them, not just tonight but throughout the Budget debate. The speech of one Conservative Member, the hon. Member for Bury St. Edmunds (Mr. Ruffley)—I can certainly agree with him that that is a nice part of the world—was controversial, which is probably no bad thing nowadays. Another issue on which I agree with him is the need to promote thrift, although I warn him about the dangers of going on about the real instincts of the people. A man with a majority of just over 300 should be a bit more cautious.

 

My hon. Friend the Member for Bury, South (Mr. Lewis), whose constituency I visited on the first day of the election campaign—despite that, he won—spoke fluently about the problems faced by his constituents, especially the young people. My hon. Friend the Member for Dumfries (Mr. Brown) spoke extremely well. He knows a good deal about his constituency, and I think that the whole House will have appreciated the tribute that he paid to Sir Hector Monro, a very decent man whom all hon. Members will remember with much fondness.

 

My hon. Friend the Member for North-West Norfolk (Dr. Turner) spoke with considerable knowledge, and I am grateful for his support. He made some points about our rural transport policy, and I appreciate what he said. We presented proposals relating to fuel duty in the Budget, but other measures announced by the Government will benefit rural communities. We shall return to those at other times.

 

I did not hear the speech of my hon. Friend the Member for Selby (Mr. Grogan), but I understand that he, too, spoke well. I have driven through his constituency many times, and was always assured by the Labour party organisers that we had no chance there. It just shows how wrong they were. I note the point that my hon. Friend made about beer duty, especially with regard to his constituents in Tadcaster.

 

In a witty speech, my hon. Friend the Member for Oldham, East and Saddleworth (Mr. Woolas) spoke extremely well. It was interesting that he should claim Winston Churchill as a future member of new Labour; no doubt we shall debate that in the future. He also paid a warm tribute to our former colleague Bryan Davies, which I am sure all Labour Members greatly appreciated.

 

I shall return to some of the main points that have been raised during the Budget debate. First, however, it is worth reminding ourselves of the main strategy set out by my right hon. Friend the Chancellor at the beginning of that debate. As a new Labour Government, we have the objective of maintaining high and stable levels of growth and employment, so that we can achieve the higher living standards that we all want. It is simply not true that—as Opposition Members have claimed—poor people have lost out. In fact, in terms of proportion of income, poor people have gained far more from the Budget, not just because of the reduction in VAT on fuel and the new deal. It is a bit rich for Opposition Members, especially Conservative Members, to go on about poor people, given that if they had had their way, VAT on fuel would have risen to 17.5 per cent.

 

We want to promote economic stability. Some of the hardest decisions that we have had to make, on public spending and on other matters, have been driven by the recognition that we need that stability. We want to encourage long-term investment. We start from a difficult position. The nationalists ask themselves why people voted for the Labour party. People voted for us because we told the truth: we told them that hard decisions would have to be made and that there were no quick fixes. We have inherited low levels of investment, a history of boom and bust and a history of short-termism, and we have had to put public finances in proper order.

 

Let me now deal with one of the matters that have concerned many Opposition Members: our corporation tax proposals.

 

Mr. Peter Lilley (Hitchin and Harpenden): Will the right hon. Gentleman give way?

 

Mr. Darling: In a minute, by all means. The shadow Chancellor has not been present all day, but I shall give way to him nevertheless.

 

The House must bear in mind our central proposal to reduce corporation tax from 33 to 31 per cent., and corporation tax for small companies from 23 to 21 per cent. We have not heard a word about that from Opposition Members, but the fact is that we have reduced corporation tax, which will improve company performance. We have also reduced a distortion in the tax system, so that the system is neutral in regard to decisions on investment and distribution of profits. Opposition Members must ask themselves whether the Tories would reinstate the tax credit system if they were ever returned to power.

 

Mr. Lilley: rose—

 

Mr. Darling: I shall certainly give way to the shadow Chancellor. Perhaps he can tell us whether the Conservative party would reinstate that system if it was ever returned to power.

 

Mr. Lilley: If the Minister can explain to me how it is that taking £5 billion out of long-term investment through pension funds can encourage and increase investment, we shall be open to persuasion on that very question. The Financial Secretary said that the removal of that money would make no difference to investment funds. If that is so, why is it necessary to protect charities from the impact of the Chancellor's decision?

 

Mr. Darling: I note that the right hon. Gentleman did not answer the question. We should remind ourselves that it was the Conservative party which would have taken away tax relief from pension contributions. We shall return to more about that on Wednesday.

 

The right hon. Gentleman might think about the example of the United States, where many companies have grown faster than British companies and done much better than companies here. They have concentrated far more on the growth of capital value rather than having to respond to the constant pressure of paying out dividends, which can be so harmful.

 

We believe—it is an important point that Conservative Members must understand—that the tax system should not distort investment decisions. That is surely the right principle. We believe that we have taken the right decision for the long term.

 

Conservative Members should understand also that the value of a pension fund depends on the value of the stock market. It depends also on quality of investment and growth. When Conservative Members examine the predictions made by pension funds for the next 15 or 20 years, they should remember that, at the end of the day, the determining factor is the ability of companies and of the Government to create an environment in which investment is encouraged and companies grow.

 

It is worth bearing in mind also that the stock market has grown by about 5 per cent. since the general election. That tends to suggest that many people have a confidence in this Government that they did not have in the Tory Government.

 

The key to our proposals is a climate that will lead to more wealth creation, so that we can increase people's standard of living. It should be remembered that it was the Tories who reduced tax credits in 1983. The stated reason was to get money into the Exchequer because of the dire straits then facing the economy. They did not reduce corporation tax. Instead, they reduced tax credits to take money into the Exchequer.

 

The Conservatives should be extremely wary, given some of the predictions that we read in the newspapers. The right hon. Member for Cities of London and Westminster (Mr. Brooke), who arrived in the Chamber despite his mechanical difficulties, as yet undisclosed, told us that pension mis-selling was a hare in another field. It may be that to the right hon. Gentleman, but for the many who were mis-sold personal pensions, it is far from being a problem removed. For them, it is a very real problem. Some of those who persuaded people to opt out of occupational pensions are those who are making dire predictions about the effect of our policies. I urge everybody to take their predictions with a pinch of salt.

 

Conservative Members have asked about the plight of local authorities, but for 18 years we had a Conservative Government who clobbered local authorities. Suddenly, Conservatives are worried about pensions and the amount of public spending that is available to local authorities. They should bear it in mind, when considering the effects of the changes that we have made, that it is likely that they will have less impact on many local authority funds than early retirement costs.

 

 

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