---

Budget Resolutions and Economic Situation

The hon. Lady knows the answer to that question already. The point that I am trying to make, which I suggest she is ignoring, is that the NHS should be to the benefit of patients, not just to the benefit of the staff. There is team work involved. However, the bottom line is, yes, there should have been salary increases, but productivity has fallen in the NHS. If the hon. Lady wants an example, we need only look at NHS waiting times. Yes, the longer waits have been eliminated, but that has created a bulge in the middle, to the extent that despite the amount being spent on the NHS having more than doubled, average waiting times have fallen by only five days over the past 10 years. These are not statistics spun out of central office but hospital episode statistics produced independently, and they confirm that average waiting times have dropped from 78 days to 73 days over the past 10 years. Perhaps more worryingly, median waiting times have increased from 5.7 weeks in 1997 to 7.3 weeks last year. Clearly, once the layers of Government spin have been peeled away, the extra money has not delivered the improvements that we all hoped to see, and which should have been delivered, given the amount of money that has been put into the NHS. Let me put to rest the argument that is continually rolled out at the Dispatch Box that because we have seen such a good decline in cancer mortality rates, that is living proof, so to speak, that all that money is having a beneficial impact. That decline has occurred over the past 10 years, but it continues the decline in the preceding 10 years. In other words, it has made no significant improvement to the long-term decline in cancer mortality rates that has been evident for the past 20 to 25 years. That argument needs to be challenged time and again. The statistics are available for everyone to see. If we look at the mortality rate for cancer among people under 75, we see that the proportion dying from cancer fell by 12.5 per cent. in the seven years after 1997. The comparable fall in the seven years before 1997 was 12.6 per cent., so all the extra money that has been put in has not made a discernible difference to the long-term trend in declining mortality rates. Let me turn to taxation in general. It is evident that the Government simply do not accept the case for lower taxes. We have had 11 Budgets in which, broadly speaking, the tax take by the Government has gradually increased. Only 10 years ago, the UK’s tax burden was close to the Organisation for Economic Co-operation and Development average of about 39 per cent. of gross domestic product. Since then, while across the rest of the OECD the burden has fallen to an estimated 38 per cent., in Britain it is forecast to rise to 42.5 per cent.—its highest since 1986. The Government seem to take the view that public services should be micromanaged and that they know how best to spend people’s money—that is why the tax take has gone up so much. There is a strong case—indeed, almost a moral case—for lower taxation. Evidence the world over has shown that where Governments reduce the tax burden on their countries, over the medium and longer term that increases the prosperity—the growth rate—more than making up for the short-term shortfall in receipts through the initial tax cut. Hon. Members, especially my hon. Friends, must not be afraid to make the case in this House for lower taxes. Tax cuts create a bigger economic cake from which the Government can take their honest share and help the less fortunate in society. I am sure that we all want to achieve those ends, but it is a question of how we do it. I suggest that the best way of creating increased prosperity—the bigger economic cake—is to lower taxes. As I said, there is evidence across the world for that, but to find it we need only look across the Irish sea. Throughout the 1990s, liberalisation of the corporation tax laws in Ireland created a huge economic dividend that cannot be ignored. There we have a concrete example of a country making a determined cut in its tax rates and increasing prosperity over the medium to longer term. Real national income per head rose from less than 65 per cent. of the EU average at the beginning of the decade to rough parity by the end of it—a phenomenal achievement. During that period, unemployment tumbled from a high of 17 per cent. to about 4 per cent. The Irish Republic massively increased its share of inward investment from the EU and from US companies, while the UK’s share remained about the same. This is not just wishful thinking—there is concrete evidence to suggest that cutting taxes can create that bigger economic cake over the medium to longer term for the benefit of the whole of society, especially its more vulnerable elements. At the moment, we have a British Government who are going the other way. In the past 10 years, they have marched in the wrong direction against the trend of lower taxation that has been evident across much of Europe as a whole. There is no shortage of statistics in this regard, and I suppose that one can always bend an argument to one’s own way of thinking by choosing the right ones. Nevertheless, the bottom line is that if we are to reach a relatively independent assessment of the tax burden on individuals in this country, a good and objective measure is tax freedom day—the day each year on which the average British taxpayer stops working for the Government and starts working for himself. Back in 1964, tax freedom day fell on St. George’s day, 23 April. In 1997, it had reached 25 May. Last year, it was 2 June, and our forecast suggests that by next year it could be as late as 3 or 4 June. Perhaps most worrying of all is the increasing burden of corporation tax. I accept that there has been a 2 per cent. cut in the main headline rate, but I am fearful of the effect that the Budget will have on small businesses. There is little doubt—and there can be little disagreement—that the tax take from small businesses under this Budget has increased. The increase from 19 per cent. to 22 per cent. by 2010 for small businesses gives the lie to the Chancellor’s claim that this is a Budget for enterprise and prosperity. The importance of small businesses to the UK economy should not be underestimated. More than 4 million small businesses make up over 99 per cent. of all enterprises in the UK. The Small Business Service has estimated that small businesses provide 47 per cent.—nearly half—of UK non-government employment, and 38 per cent. of the UK’s turnover. Meanwhile, research by the Federation of Small Businesses shows that small firms created a phenomenal number of jobs—550,000 or over half a million—in the second half of the 1990s, compared with just 200,000 jobs created by large companies. These people are not fat cats or multinational businesses. Mostly, they are entrepreneurs who have an idea and are willing to risk their own money to get it off the ground. Small businesses are often the lifeblood of our local communities and high streets in constituencies up and down the country. Over time, many of them grow and contribute even more to the economy. Were the Chancellor really determined to encourage prosperity and enterprise in this country, he would not target tax increases on small businesses. He has claimed that the £50,000 capital allowance will result in many small businesses paying less tax, but we simply do not know whether that will be true. Many small businesses will not be able to take up that allowance, particularly in the service sector, which has done so much for the economy in the past. Many economists are still crunching the numbers, but the early indications are that netting off the introduction of a capital allowance will still mean that the Treasury takes hundreds of millions of pounds away from small businesses and into the Exchequer. Nor should we forget the effect of bureaucracy. Allowances and credits might be good for business but they also generate more bureaucracy for firms. It is far simpler to give companies a cut in the tax that they pay, and let them make their own decisions about investments in research and development. According to the Federation of Small Businesses, the average small business already spends about 28 hours a week filling in forms for the Government. The Budget will add to that while increasing the burden of direct taxation. When I am out and about in my constituency, I am told by entrepreneurs that that is a growing problem, and that they have to spend a disproportionate amount of time filling in forms rather than concentrating on running their businesses. That bugbear has just been increased further by the Budget. All parties might claim to be the party of small business, but the important thing to entrepreneurs is hard cash. It is easy to talk about cutting bureaucracy, but hard to do something about it. Entrepreneurs are fed up of hearing both main parties simply talking about cutting bureaucracy; they want hard evidence that the Government are serious about helping small businesses. Small businesses are fed up to the back teeth of the Government claiming to be the party of small business but failing to deliver and only increasing the tax burden. I would like to hear a promise of tax cuts for small businesses. My back-of-an-envelope calculations suggest that if a Government promised a 1 per cent. cut in small business corporation tax for each year of a term, by the end of the five-year term a 5p cut in small business corporation tax would cost the Exchequer only about £1.2 billion. In the great scheme of things, that is not a lot of money, but it would create such good will for the Government of the day. This was a disappointing Budget. Whether or not it is tax-cutting is disputable: only time will tell. What we do know is that too much money is going into unreformed public services, and that small businesses will suffer as a result of the Budget. That will be to the long-term detriment of this country.