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Budget Resolutions and Economic Situation

I suggest to the House that this is an interesting Budget, if only because there is a dispute about whether it is a tax-cutting Budget. The Secretary of State for Education and Skills, who opened the debate, certainly found it difficult to justify the Chancellor’s claim that it is indeed a tax-cutting Budget. Most independent economists believe that there is nothing in the Budget to correct the fact that tax freedom day—the day British taxpayers stop earning money for the Government and start to keep the money themselves—has gone from 25 May in 1997 to 2 June last year. All the evidence suggests that small business taxation has increased as well. Let us assume for a moment that the Chancellor is right, and that this is a tax-cutting Budget, although most of us doubt that. The Budget is interesting, because we have been told for the past year that we cannot share the proceeds of growth. The Chancellor has confirmed in the Budget that we can do so—we can increase public expenditure but, at the same time, if we believe him, we can have a tax-cutting Budget. Let us at least hope that that has moved on the debate about sharing the proceeds of growth on, and that we do not hear any more nonsense from the Government on the issue. In the past 10 years, the Government have taxed too much and thrown money at unreformed public services, which has not resulted in the improvements that we all desire. There is little doubt that the growth in public expenditure as a proportion of gross domestic product has increased—up from 37 per cent. in 1999-2000 to an estimated 42 or 42.5 per cent. this year. Extra money for public services is good in principle—I do not think that anyone would disagree with that—but not enough of those resources have reached the doctors, nurses, soldiers and police on the front line. Too much of the extra money has been soaked up without improving productivity, and Ministers cannot dispute that the cost of inflation in the public sector is running at twice the rate in the private sector. We have heard about the good progress by the NHS. Let us not be churlish about it—in 10 years, there have been improvements, just as there were improvements in the previous 10 years. However, I would contend that, given the amount of money that has gone into the NHS, we have not seen the improvements that we should have seen. That is confirmed by statistics that clearly show that three quarters of the NHS spending increases have been spent on cost pressures, rather than on improving front-line services. As a result, productivity in the NHS has fallen by up to 1.5 per cent. in each year since 1997. Labour Members might question those figures but the Chancellor himself, I am led to believe, has similarly been questioning why productivity has fallen in the NHS and has held meetings at No. 11 to discuss the matter. That proves that there is an acknowledgement, even in the Government, that productivity improvements have not been forthcoming, and that that is a concern, given the amount of money that has been put into the NHS.