House of Commons Hansard Debates for 26 Nov 1996 (pt 22)

8.47 pm

Mr. Peter Thurnham (Bolton, North-East): I felt some sympathy with the Chancellor of the Exchequer when he was called to the Chamber yesterday at a time when he obviously expected to be preparing for his Budget. I was not surprised when he let slip a remark referring to

"a country that is already struggling to cope with an excessive deficit."--[Official Report, 25 November 1996; Vol. 286, c. 30.]

We already knew that the national debt had doubled in six years, and we have learnt today how the national debt continues to rocket upwards. The country is not cutting its borrowing--far from it. Borrowing continues to increase at a frightening rate.

The figures for this year and next year come to a total of £45 billion of borrowing--two and a half times as much as the Chancellor projected in his 1994 Budget and £8 billion more than he projected in last year's Budget. I do not understand how he can honestly talk about

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reducing tax by a penny--and more than talk about it, do it--when our deficit continues to grow at such a rate. A Budget that cuts tax when deficits continue to increase at that rate--much faster than was projected two years ago or last year--is not honest.

We are all paying for it. We are all suffering because interest charges on borrowing are now reaching the prodigious figure of £26 billion per annum. That is a massive amount. If we were not paying it, we would have been able to have an honest Budget and have a tax reduction in that way, or to increase services in areas where they are hard pressed.

The Financial Secretary to the Treasury (Mr. Michael Jack): I could not allow the moment to pass when the hon. Gentleman spoke about the public sector borrowing requirement. Does he agree that in 1997-98 it is forecast to be 2½ per cent. of gross domestic product, dropping in the next two years to 1½ and ½ per cent., which illustrates that the Chancellor has the matter well and truly under control?

Mr. Thurnham: It is not possible to say that the Chancellor has the matter under control, when his projections were so far wrong. Two years ago he projected it at £18 billion, and it now comes out at £45.5 billion. That does not suggest that it is under control. He is now projecting a balance, but I do not believe that, as his earlier projections have not come true.

Mr. Mike O'Brien (North Warwickshire): Does the hon. Gentleman agree that the Chancellor's projections today must be considered as reliable as they have been in the past, which is not reliable at all?

Mr. Thurnham: Perhaps at one time people were prepared to give the Chancellor the benefit of the doubt, but that is running out with such massive borrowing figures.

Where will the blow fall? It is clear to me that the impact will be felt in local government, as the hon. Member for Hammersmith (Mr. Soley) said. There will be massive increases in council taxes; that is unavoidable. The Red Book shows the increase for the current year as the best part of £1 billion. There will be cuts in services, although households will pay an extra £1 a week.

In his speech the Chancellor made great play of increasing spending on education by £633 million or 3.6 per cent. Then he gave the game away with his comment that councils were reluctant to pass on education increases--they prefer to spend on other things. It is not a question of what councils prefer but of councils themselves reaching such decisions.

The figures show that there has been a considerable increase in the demand for and provision of community care services, again as the hon. Member for Hammersmith mentioned.

Spending on schools has gone down per pupil. In 1992 spending on each pupil was £2,988 in today's money. The latest figures for this year show it at £2,728. So there has been a fall in spending on education of £260 per pupil or some 8 per cent., even though that is said to be a priority for all the parties.

The figures prove that the expenditure is going elsewhere. As the hon. Member for Hammersmith rightly observed, the pressures are on community care. The

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figures show that there has been an increase of 6 or 8 per cent. in the demand for those services and the provision of home care and home help. This year local authorities are spending £570 million above the standard spending assessment. That shows that the provisions are not sufficient and local government is forced to find the money elsewhere to provide the bare minimum of services. This year only a 1 per cent. increase is allowed in the SSA, whereas the figures show that it should be much greater.

Next year the joint local authorities submission shows that an extra £665 million or 8.9 per cent. is needed to maintain a satisfactory level of personal social services. Yet the figures suggest that nothing like that sum will be forthcoming. We shall have to wait and see the figures in the local government statement tomorrow.

It is already known that there will be substantial demands. The growth in the number of elderly means that there must be increased spending of 1 per cent. Cost shunting from health authorities will be over £100 million. The capital disregard figure which has been changed previously will be over £30 million. Inflation will lead to calls for an additional £200 million.

What will happen? It is clear that some of the most vulnerable people in our society will suffer. The elderly will be faced with even tighter eligibility criteria if they want to go into a residential home. Cruel decisions will have to be made. Increasing demands for intensive care in health authorities are being shunted into residential care, although that is not always appropriate. The disabled will suffer; there will be increased charges for home help services, and false economies if that leads to more people going into hospital than would otherwise have been the case.

With regard to children's services, as the hon. Member for Hammersmith said, there is a need for co-ordinated preventive services. False economies will lead to increased law and order budgets later. The voluntary sector will suffer and organisations such as Home Start in my constituency, which does an excellent job helping under-five-year-olds, are vulnerable if there are intense pressures on local government spending.

Far from an increase in spending on education, the number of teachers will be cut and class sizes will rise. Elderly people will be left to die alone and neglected in their homes because of insufficient funding for local authorities. We shall look keenly at tomorrow's figures, but in the present circumstances I do not see that there will be sufficient funding for the most vulnerable in our society. On that basis I do not see how the Chancellor of the Exchequer could say that this was an honest Budget. It is not; it is a dishonest Budget.

8.55 pm

Dr. Lynne Jones (Birmingham, Selly Oak): The Chancellor's Budget has been almost entirely as predicted. No wonder the Daily Mirror decided that there was no great scoop in publishing the leaked documents that it had obtained.

The Chancellor knew that very few people were clamouring for tax cuts. Business people do not want tax cuts; they want investment. According to a recent survey, even quite well-off members of the public see the need

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for increased spending on welfare benefits and public services. The Chancellor had to respond to the clamour on his Back Benches for tax cuts of some kind. The 1p cut in the standard rate was widely predicted.

This is not an honest or even a prudent Budget. It does nothing to address major concerns about growing inequalities, the fracturing of our society and the breakdown in the fabric of our public services. People want more investment in health, education and law and order, but when we examine the figures we will probably find that the Chancellor's promises turn out to be almost entirely illusory.

When the Chancellor quotes the number of additional police officers, I notice that he always refers to "additional constables", not to an increase in the overall police establishment. The Government have used that trick before. Last year's increase in education spending was entirely illusory. As usual, they gave with one hand and took away with the other. That summarises their approach. The tax cuts will be paid for through increases in council and other taxes.

I do not want to be entirely churlish. I welcome the Chancellor's air quality package, as he called it, the trend towards green taxes, and the slight reduction in taxes on employment through the employers national insurance contribution.

It is widely recognised that now is not the appropriate time to cut taxes, because of concern about the public sector borrowing requirement. Although the Chancellor predicts that we shall break even by 2000, why should we believe him? The amalgamation of independent forecasts predicts a deficit of about 2 per cent. of gross domestic product in 2000.

As we have seen in the past 17 years, the more the Government talk about cutting taxes and reducing borrowing, the more they increase them. Borrowing has exceeded Government estimates at the last election by £40 billion, and it is £25 billion more than was predicted in the 1995 summer economic forecast. As hon. Members have said, why should we believe the Chancellor's predictions now?

We must examine the nature of the PSBR. Government spending and borrowing has increased, largely because of high levels of unemployment and a lack of investment in this country. One of the few budgets that is set to increase in real terms is the social security budget. We are not seeing the reduction in welfare spending and the increase in tax revenues that should flow from the decline in the claimant count about which the Government proudly boast.

The unemployment figures are down because people are becoming economically inactive and moving from one type of benefit to another, or are starting training schemes. Analysis shows that 80 per cent. of those who undertake Government training schemes are back on the dole within 12 months.

The Chancellor seemed rather perplexed about the shortfall in tax revenues--he does not seem able to predict why tax revenues have not increased as forecast. Perhaps one explanation is the nature of the jobs created in our economy in the past 12 months--most of which were part-time and low-paid. One has only to look at the difference between the tax revenues generated by those types of jobs and those generated by full-time jobs with average male pay rates to see why revenues are down.

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