Budget Resolutions and Economic Situation

House of Commons

Peter Luff (Mid-Worcestershire) (Con): It is a pleasure to follow the right hon. Member for North Tyneside (Mr. Byers), just as I followed him around India a few weeks ago. I found rather more in his speech than I expected with which to agree, although I did not think much of his opening remarks. He knows as well as I do that the stability we now enjoy is a product of the hard-won supply-side reforms of the 1980s and the economic policies of the early 1990s, and that the pensions crisis of which he rightly spoke is entirely the making of the present Government.
I want to discuss two themes that are central to the Budget, education and international competitiveness. They are linked by the key theme of the skills that we need to make the United Kingdom fit for purpose in the 21st century. I will not succeed in saying all that I hoped to say in 10 minutes, but I have been helped by two excellent speeches—by the hon. Member for Brent, East (Sarah Teather), who spoke of the skills issues that face our country, and my hon. Friend the Member for North Essex (Mr. Jenkin), who spoke of the challenges of globalisation and the response that we should make.

I wish to make three key points, the first of which is local. Worcestershire schools suffer monstrous discrimination, and the Budget does nothing to change that. The second is national. As the hon. Member for Brent, East said, the Chancellor was right to emphasise the importance of skills and education, but I doubt that his approach is radical enough to rise to the challenge. The third is international, and relates to what was said by my hon. Friend the Member for North Essex. The country has not yet woken up to the challenge of globalisation and, I fear, is sleepwalking complacently towards mediocrity.

My conclusion is that the Budget does some sensible things and many foolish ones, such as introducing retrospection in inheritance tax rules and causing massive inconvenience by bringing forward the date for completion of income tax self-assessment forms. It simply does not match the scale of what is happening in the wider world: as I have said, it is a Budget for mediocrity, not excellence. It is a Budget of councils, reviews, consultations and even national debates, but not of the action that we need in order to take on the world.

Why is that? The Chancellor fails the test of the greatness to which he aspires because he is a compulsive meddler. He also thinks that he knows how to spend our money better than we do. His dogmatic insistence that the growing levels of public spending—or investment, as he mischievously describes it to make it sound even more virtuous—are compatible with our country's international competitiveness is simply wrong. We should be sharing the proceeds of growth between increased spending on public services and tax reductions, as my right hon. Friend the Leader of the Opposition rightly proposes.

I am afraid that, for all his fine phrases, the Chancellor is not a big-picture man. He is a micro-manager, and micro-management often makes life very difficult for business. It sometimes brings disaster in its wake for enterprising companies. Let us look at what the Chancellor has done to Evesham Technology in my constituency. There is a long letter on his desk—I hoped to quote it at length, but I have not enough time—from the finance director. In his persuasive letter, he says that the home computing initiative
"relies on this exemption"
—from income tax—
"launched a mere 27 months ago in a blaze of publicity by Patricia Hewitt."
It has gone.
"It took from January until June 2004 for the model"
—for delivery of the system—
"to take shape with the creation of HCI compliant documentation, marketing materials, web sites, order entry portals etc and the first real revenues . . . did not start flowing until July 2004.
In May 2005, due to the changes in the Consumer Credit Act, the documentation had to be redrafted and further legal costs incurred."

The scheme was successful, however, so Evesham Technology
"invested over £100,000 in new printing equipment . . . £50,000 in display equipment"
to demonstrate it, but both investments are worthless today.
The tragedy is that the company was
"in the final stages of implementing a new manufacturing line to assemble LCD monitors in the UK. That investment and the jobs it would have created is now extremely unlikely to happen."

The Chancellor's micro-management is to blame—constant, endless tinkering with the tax system, instead of the stability that we crave.

My other local point relates to education. I am a reasonable man and I freely admit that school spending has risen sharply under this Government. Capital investment is higher that it was in 1997—owing, of course, to the golden economic inheritance of this Government. I hope that they would have provided a Conservative Government with the same ability to increase expenditure on education. I welcome what has happened, but I do not welcome the way in which Worcestershire pupils are being left behind in spending per pupil. I complained about that under Conservative Governments in the past, but it has become worse under this Government. In 1997, the cash gap between funding per pupil in Worcestershire and the national average was £150; now, it is more than £400, and it is a whopping £840 in the case of neighbouring Birmingham.

Given that the new Secretary of State for Education and Skills was educated in Worcestershire and that the Minister for Schools is a Worcestershire MP, I thought that things might get better, but I was wrong. Their plan for the next two years is for Worcestershire again to have below-average increases in funding per pupil, thereby making a difficult situation worse. What is more, if I have read the Red Book correctly, propositions for the distribution of funding as listed in paragraph 6.58 mean that local education authorities that already get high funding levels will get still higher ones.

I have wondered why that should be so. Why should this discrimination against my county continue? I thought that perhaps those in London just did not understand the scale of urban and rural deprivation in my county. Perhaps they view it as some rural paradise where affluent upper-middle-class parents send their children to fine private schools and live in large mansions and farmhouses, far from the gritty reality of urban Britain. Perhaps they do not understand the level of poverty and deprivation in Redditch, Worcester, Wyre Forest and, yes, in my constituency of Mid-Worcestershire. How else can we explain the bewildering paradox whereby we are considered too rich to get a decent amount of cash for our kids, and too poor to qualify for the area cost adjustment?

My suspicions were confirmed in a dramatic way by a presentation only two weeks ago by Dugald Sanderman, joint head of school and LEA funding to the F40 group of local authorities. He chose to illustrate their funding needs through a picture of a large house in leafy Evesham—ironically, it is, I think, lived in by a Labour supporter—set against a background of tower blocks. In another picture, taken from a marketing brochure for the market towns of Worcestershire, the lovely sights of my constituency, which I invite every Member to come and see, are set against a bleak urban landscape. It took me just a few seconds on the internet this morning to find a house in Birmingham that would have served just as well as a counterbalance to that urban shot. It has six bedrooms, four bathrooms, four reception rooms, a reception hall with library, a gallery landing with seating area and a heated swimming pool, and is selling for £1.4 million.

That was the most dishonest presentation of the reasons for education funding distribution that I have ever seen. Dr. Goebbels would have been proud of it, and Dugald Sanderman should hang his head in shame for making such misleading presentations. It was of course Goebbels who said that if one tells a lie big enough and keeps repeating it, people will eventually come to believe it. I will not let this lie gain any ground. It must be squashed. We need a fairer deal and I hope that it will be forthcoming.

The hon. Member for Brent, East spoke well on national skills and I share her concern. I shall restrict my remarks to one simple point. Lord Leitch said at the time of his interim report:

"The scale of the challenge is daunting. Delivering current plans will be difficult. Even then, it will not be enough to supply the skills that employers, employees and our nation need in order to advance. The UK must become world class on skills—for all of our sakes."

Mr. Love: One great concern about skills training is where the funding will come from for a major expansion. If we look at who funds, and who benefits from, skills training, we see that employers are at the top of the agenda. Does the hon. Gentleman support the view that employers must make a greater contribution to skills training?

Peter Luff: I have come to the reluctant conclusion that co-funding of many aspects of our education system will become the norm, so the hon. Gentleman makes an important point. I do, however, favour a radical reform of the higher education and further education sectors—I hoped to have time to explain it tonight, but sadly, it is denied me—that would achieve both savings and better outcomes.

On international competitiveness, as I hinted, the Trade and Industry Committee recently visited India and examined trade and investment relations between our two countries, which are simply not good enough. Despite our strong historical link with India, we are losing ground. We will produce a report on this issue in May. India is but one of two large economies and a whole host of smaller ones that are lifting themselves out of poverty and on to the world economic stage. Our children will grow up in a world with three economic superpowers: the USA, China and India. Europe, never mind the UK, will be in fourth place at best.

Britain faces many urgent challenges if it is to address that threat, but if we are to maintain the prosperity that we are in danger of taking for granted, we need to do five things. We have talked about them endlessly, and the sheer repetition and tedium of doing so means that we might lose sight of their urgency. We have discussed the skills base, and our creaking infrastructure is taken for granted as being a problem; our regulatory burden, however, is not. The Chancellor keeps talking about his intentions—he did it again in this Budget. In its audit of the Chancellor's previous nine Budgets, the London chamber of commerce says that he pledged to cut red tape on 25 separate occasions, but that over the same period 27,569 new laws have been passed, averaging 9,216 pages of regulation a year.

Mr. Byers: I want, if I may, to take the hon. Gentleman back to the subject of India, about which I thought he was going to speak for slightly longer. Does he agree that there is great merit in UK universities establishing business schools that focus on India? We lack such schools, and the Indian high commissioner is a great advocate of such an approach. I should be interested to know whether the hon. Gentleman, as Chairman of the Trade and Industry Committee, feels that there is merit in that idea.

Peter Luff: I am most grateful to the right hon. Gentleman for that intervention and I am happy to agree with him yet again. We will be taking an additional evidence session from the higher education sector after Easter to explore precisely that point and others. We believe that that is one of the major missed tricks in our relationship with India in terms of offering India services, bringing Indian students to the UK and the whole gamut of such issues. The Government have been timid in their approach and a lot more could be done. For example, given that Indian students who come to Scotland can stay for two years and earn money to pay for their fees, why is it that they cannot stay in England at all? True, the right to stay is being extended to one year; however, why is there one immigration law for Scotland and another for England? Such issues need to be addressed to ensure that links between India and the UK are improved dramatically. I entirely agree with the right hon. Member for North Tyneside in that regard. I wanted to say a lot more about the HE sector, but time is against me.

The other issues that we need to address in facing the challenges presented by India and China include productivity, research and development, innovation and taxation. My hon. Friend the Member for North Essex was right to talk about taxation. This Budget marks the doubling in size since 1997 of the published tax code—from some 4,500 pages to approximately 9,000. Of course, that is on top of the growing burden of business taxation. The thresholds for corporation tax are unchanged; they have not even been uprated for inflation. Fiscal drag, one of the Chancellor's favourite stealth taxes, will increase the overall cost of doing business in the UK—at precisely the time when our major competitors are cutting their tax burdens.

So our skills are too low, our infrastructure is inadequate, our regulatory burden is too high, our productivity is inadequate and our taxes are excessive. One can see why the view that China and India compete with us only on price and that they are in some sense stealing our manufacturing jobs—or our call centre jobs—is a dangerous one for us to cling to. The challenge is far more profound than that. For example, twice as many engineering graduates leave Indian institutions of higher education every year as are employed in total in the Indian call centre sector. That is a real challenge that we have to face up to.

I hoped to say more about what I see as a declining work ethic in this country, welfare dependency, a client state, a lack of international enterprise and a failure of imagination on the part of our HE sector in respect of India, China and other economies, but there is not time. I summarise my views by quoting Jonathan Guthrie, who wrote the following in the Financial Times on 23 March:
"The Chancellor billed the Budget as a blow struck in the UK's battle to compete with such economic parvenus as China and India. But his rhetoric was undermined by a lack of measures to achieve this goal. Instead, Mr. Brown waffled on about loft insulation. The thought that British workers are increasingly snug during the winter cannot be causing too much panic among the tycoons of Shenzhen and Bangalore."

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