Speech on the Budget by The Rt Hon John Redwood MP in the House of Commons

Mr. John Redwood (Wokingham): I have declared my interests in the register.I am glad that Government Members like the Budget. We are told that it isbilled as an honest Budget, because the present Chancellor for the firsttime openly confesses to raising taxes. Of course, Labour Members shouldhave liked all his previous Budgets too, because they have all been aboutraising tax after tax. More than £100 billion of extra taxation is beingraised this year compared with the starting point five years ago-that isabout £2,000 annually from every man, woman and child in the country. Thatis a colossal sum.

Quite a bit of that money has gone into public services, but the public areasking how so much money can be taken away from them to so little effect. Myconstituents ask why there are no more policemen on the beat-indeed, theythink that there are fewer now than there were five years ago. They ask whywaiting times and waiting lists for the local hospital are often moredifficult to negotiate and longer than they were five years ago, and whythere are not more beds open in the local hospital. In fact, there are fewerbeds open in the local hospital. My constituents ask why local schools findit difficult to recruit and retain teachers, and why teaching morale is solow. The problem is not only all the instructions and directives from theDepartment for Education and Skills, but one of money, especially in areassuch as mine.

The mystery that the British public want resolved is how so much money canbe taken off them in Budget after Budget to so little effect. During thisyear's lengthy Budget debate, we must explore whether any better resultsmight conceivably arise from the forthcoming big surge in spending than havearisen from the colossal increases in taxes and spending of the past fiveyears.

One reason why there has been so little benefit from so much increasedspending is the Government's choice of priorities. Had the money been spenton more nurses, doctors, teachers and policemen in my constituency andothers, we might have been a little happier; instead, thosedo not appear to be the priorities that apply when the Budget measuresannounced are implemented. We read the headline announcements of variousextra sums of money, but then we see the money being spent on other things.The health service has had to announce that there are now moreadministrators in the NHS than there are beds serving patients. In theeducation service, more circulars than ever before are being sent out by theDepartment for Education and Skills, but they do not appear to be resolvingproblems of teacher morale and pay in hotspots throughout the country.

Mr. Tom Harris (Glasgow, Cathcart): I am surprised to hear the right hon.Gentleman's commitment to raising taxes to spend on the health service. Doeshe remember writing that the NHS was

"a bureaucratic monster that cannot be tamed",

and that the principle of charging should be extended to"create a national health insurance scheme separate from the taxsystem."?

Are those still his views and are they accurately reflected within theshadow Cabinet?

Mr. Redwood: I am delighted to be reminded of some sensible remarks I madesome years ago. If he has been following the debate, the hon. Gentleman willknow that my current view and that of my right hon. and hon. Friends on theOpposition Front Bench is that we must review the whole question becausethere must be both a better way to spend the considerable sums of publicmoney now committed to the NHS, and a better way to channel in more moneyfrom outside.

We think that a great deal of private money can be brought into health carein general by backing choice and giving people more opportunities. We thinkthat health service money could be much better spent by devolving power andauthority to those in hospitals and doctors' surgeries who daily have tomake difficult decisions when dealing with patients than by spending so muchon the army of administrators, many of whom stand well back from the actionin the surgery or hospital ward. We therefore need reform. The reformsproposed by Her Majesty's Government will not be nearly big enough to dealwith the problem. Indeed, I would go further and say that, from what we haveheard today, the problem will be exacerbated.

Rob Marris (Wolverhampton, South-West): Will the right hon. Gentleman giveway?

Mr. Redwood: If I can make my point, I will give way. The problem will beexacerbated by the Chancellor's proposals, which may be fleshed out a littletomorrow by the Secretary of State for Health.

We are told that the main reform will be a new army of auditors ticking bitsof paper and inspecting forms to see whether every penny and every poundthat the doctor or nurse is spending is well spent. I dread to think whatthe health service will look like if, on top of the 200,000-oddadministrators we already have, and all the internal and external auditors,we have a beefed-up audit function, perhaps intervening day by day or hourby hour.

That would not be a productive way of spending the money. I suspect that itcould even get in the way of patient care. The Government should learn toback off a little, to decentralise a bit, to start to trust some of thepeople who are running the service. If they do not trust the people runningthe service, they should get rid of them and appoint people whom they dotrust.

Mr. Gregory Barker (Bexhill and Battle): Has my right hon. Friend ever met anurse, doctor or consultant who said that what their hospital needed wasmore auditors?

Mr. Redwood: My hon. Friend makes a strong point. He is correct. Cuts aresometimes made at the end of the year, even under this Government, becausethey discover that their hospitals do not have enough money. The cuts alwaysseem to be in patient care. They never seem to be in paper clips, bits ofpaper and administration, which is perhaps where they should look.

Mr. Mark Hendrick (Preston): Does the right hon. Gentleman accept that theaudit process is necessary to establish whether we can get value for money?His party peddles the mythology that the health service and other servicesare getting worse. Is it not necessary to show the facts, instead of livingoff the anecdotes that he puts over?

Mr. Redwood: I have not been giving anecdotes but describing the day-by-dayexperience of my constituents as patients, or friends or relatives ofpatients, and, more importantly, the experience of the nurses and doctorswho work under great pressure at the local hospital and the local surgery,who tell me that the problem is a shortage of nurses, doctors and bedspaces, not a shortage of auditors, administrators, paper clips and bits ofpaper.

Of course, there needs to be audit. I had assumed after five years of aLabour Government that satisfactory audit arrangements were in place.Indeed, I thought that the Conservatives had left satisfactory auditarrangements in place. If they are not satisfactory, they should be revisedand changed, but I warn the Government against a massive expansion of theaudit function in the belief that that will automatically improve theservice on which the money is spent. The reason why money is being badlyspent is because the system is top-heavy. It still has too much bureaucracy,too many administrators-more than when the Conservatives left office byquite a large margin. The Government need to allow more local control by afew good managers in each locality.

Gareth Thomas (Clwyd, West): Can we take it therefore that the right hon.Gentleman now regrets the implementation of the internal market, which hisGovernment introduced, which was responsible for a huge mushrooming ofunnecessary government, and which this Government have abolished?

Mr. Redwood: I liked the idea of GP fundholding. One of the good thingsabout it was that we introduced it in a permissive way. We did not say toevery GP on day one, "You must be GP fundholders." We said, "If you wouldlike it, this is extra freedom you can use." We discovered after quietbeginnings, with an awful lot of opposition from Labour, that a lot of GPssigned up and found that it was extremely good for them and their patients.It is a great pity that many of the freedoms that GPs enjoyed have been taken away.They have been put under a much bigger bureaucracy in the new primary caretrusts that are emerging.

The hon. Gentleman should not hate choice so much. I want the NHS to offerfar more choice to the people who need to use it: we the taxpayers, thepatients or potential patients. It would make so much difference to the NHSif people had real choice about which doctor, surgery or consultant theywent to, when and where they could have their operation, and proper adviceand help about the range of options available.

Because the system is so short of medical and clinical capacity, and becauseit is so centrally driven by Ministers and their bureaucratic supporters, wedo not have that choice and freedom, which I am sure my right hon. Friendthe Leader of Opposition would love to extend to people. It may emerge inone form or another from the policy review that is under way in theConservative party.

One of the things that this country needs is a big injection of choice,enterprise and private capital into a range of public services. That can beeven better illustrated in transport than in health. This Government haveproposed a much delayed and over-inflated plan to invest-they call itinvestment, although a lot of it is spending and not true investment-£180billion over 10 years in the transport industries. They have of course leftout the main way of getting around the country-by motor vehicle-because thatis handled by the private sector and there will be massive investment inthat industry as people conclude that, given difficulties on parts of thetransport system in which there is much more public involvement or publicinvestment, the car is the best way to travel.

Within that £180 billion, the Government are aiming only for some £55billion of private capital. That is a tiny sum compared with, say, the £180billion that the British public are likely to spend on new cars alone overthe same period. It is a poverty of expectations, but probably realistic, oreven a little optimistic, given the way in which the Government are handlingthe transport industries.

Insisting on putting the main rail-owning company into administration willput people off producing private investment for the rail industry. Insistingon going through four or five years of rows with the Mayor of London andterribly convoluted studies on how we might get private capital into thetube, and coming up in the end with a scheme that lumbers the taxpayer withenormous risks while raising only about £4 billion of private capital, willmake it a struggle even to get £55 billion of private capital over 10 yearsfor all the transport industries.

If the Government were prepared to be a little more open and to secureproper private involvement, with some choice and freedom, in the railway andtube system, we could secure many more billions of pounds of capitalinvestment without the same requirement on the taxpayer-estimated in the10-year plan at more than £120 billion, and likely to spiral well above thatgiven the way in which the Government bungle their handling of the transportindustries.

The Government's public spending plans have already been gravely damaged byputting Railtrack into administration. A few hundred million pounds wouldprobably have got the Government through the financing problem thatRailtrack brought to their attention, but theydecided to put that profitable company into administration. As a result, wehave a bill for several billion pounds, and we still have not got to the endof the matter, as we do not know when Railtrack will come out ofadministration.

This Budget should have addressed that central problem, but we know that theChancellor is at loggerheads with the Transport Secretary. He must be deeplyembarrassed by the damage that the Transport Secretary has done torelationships with the private sector, the City of London and the people whoare likely to produce the investment. We know that the Chancellor has had tokeep quiet about that massive area of public-private investment, which iscrucial to our country's future. Given how his colleague the TransportSecretary has handled the transport industries, the Chancellor has had to bepessimistic about how much strain the private sector can take.

I urge the Government to put that right and to revisit all their transportplans with a view to aiming for, say, £100 billion of private investment.That is a perfectly realistic target if all the main companies involved arein the private sector, and they are seen to be fairly regulated-notover-regulated-and to have some support and sympathy from a Government whorealise that private companies are the best way to get the trains on themove again, the tube sorted out and the transport industries operating muchmore smoothly.

It is noticeable that where an industry is largely unencumbered byGovernment ownership or specific Government involvement-the private motorvehicle industry, the vans, cars and lorries-there is massive investment. Noone has to debate in this place how we would make good the investmentshortfall in that industry. We do not have day-long debates on how we candeal with lorry, car or van shortages for local enterprises. Yet owing toregulation-and, now, public ownership of the main Railtrack enterprise-wemust debate how to deal with the shortage of freight wagons and track forthem to run on.

The Government should understand the history of the railways. All capitalfor the rail network in the 19th century was raised in the private markets.The rail industry expanded massively throughout the 19th century, and intothe 20th century, on the back of private capital. As soon as it facedserious opposition from the motor vehicle, the Government took it underregulatory control and subsequently nationalised it, and then it was alldownhill to the point when it was privatised. There was a massive slide inits use and share of the market, and there have been great difficulties infinancing and investing in it. As soon as it was privatised, the trendsreversed. We saw a 25 per cent. growth in passenger usage and a 30 per cent.increase in freight. We saw the beginnings of a big investment revival andthen the Government, out of pig-headed ideology, decided that that was notallowed. They now have a big black hole in the middle of their Budget plans.

The Budget should address the central point that if we want, as we surelydo, much more investment in health, transport and several other areas wherethe public sector dominates or has a big influence, we need to relax thecontrols more. We need to be more inviting to the private sector and allowit to play a bigger part. The difference in health spending between thiscountry and other advanced countries is far more marked in the amount ofprivate money spent than in the amount of public money spent.

I am the first to defend the proposition that if people are ill and needfree care, that is their right under the pledge of the NHS. They, or otherpeople, pay enough in tax, and I would not wish to take that right away fromanybody. If people need care, it should be available free at the point ofuse. However, why stop people using their own money if they want differenttypes of care to be made available and why not give them some encouragementfor that? The Labour party is immensely hostile to the idea that peoplemight wish to spend more of their own money in that way, and to any schemethat might promote or encourage that, albeit at a considerably lower cost tothe taxpayer than if those people required all their care to be provided bya completely publicly financed system.

Mr. Tom Harris: The right hon. Gentleman sets great store by the need toincrease private investment in the NHS. Can he not welcome, in a bipartisanspirit, the huge increase that the Chancellor has announced for the NHS inthe next five years, which represents a 100 per cent. increase since 1997?Surely his party would welcome that. Will he take this opportunity to commithis party to matching that increase?

Mr. Redwood: I do not welcome sums of money: I welcome results. If, in threeor four years' time, there are no waiting lists in my constituency, thelocal hospital has many more beds and the nurses and doctors tell me thatthey have a more realistic work load, I am a big enough man to acknowledgethat improvement. I might take the precaution of doing so the day after theelection rather than the day before, because I am also a politician, but Iwould not mislead anyone about it. If that is delivered, everyone in myparty would feel great about it, but my worry is that it will not happen. Wehave had five years of promises and it is always jam tomorrow. All weactually get is a traffic jam, not the benefits of better health services ortransport.

I will wait. I will welcome results, but not the spending of huge sums ofmoney in itself. I certainly do not welcome the tax increases that itnecessitates. If all the money goes on auditors and paper clips, I will notwelcome it at all, and the Government have some serious questions to answerabout where the money will go and how quickly they can spend the moneywisely by recruiting the nurses and doctors and building the bed spaces andwards that are so clearly needed in many parts of the country.

The big issue in the Budget is tax, tax and tax. After five years of hugetax increases, we get the whopper tax increase. It is the tax increase thatis so big that not even this Chancellor thinks that he can get away with itwithout telling people. It is the first tax increase that he has notattempted to introduce by stealth.

The Chancellor's record on tax increases shows that he began by deciding totax savings, prudence and old age. He put a massive tax increase on pensionfunds. When we objected to that, we were told by the Chancellor and thePrime Minister that because the stock market was rising, it would not hurtanybody and nobody would notice it. The stock market was making magic moneyand the Chancellor wanted to take a bit, while leaving people mysteriouslybetter off. In the past two years, the stock market's performance has been very bad, and people's pension funds havefallen in value year by year. The Chancellor did not apologise or say thathis argument no longer applied so he was going to take the tax off thepension funds-even if he could not go so far as to rebate the money that heshould not have taken in the first place.

That cruel tax on old age, prudence and savings is now doing real damage topeople's pension prospects. The Labour party gets angry because companiesare closing down final salary schemes, but they are too expensive and do nothave enough money left in them. One of the biggest culprits is the robberChancellor who has taken quite a bit of the money out.

The next big tax from the Chancellor was the huge telecom windfall tax, fromthe so-called auction of licences, which was another tax that was meant togo unnoticed and inflict no pain on anyone. It cost £22 billion for themobile phone companies to stay in business. The auction was cleverlydesigned and I give full credit to the Chancellor and his advisers, whoworked out a perfect system under which not enough licences were on offer sothe phone companies had to make crazy bids. Of course, disaster followed.The Chancellor now refers to the collapse in the telecom and high-techindustries, but he does not say sorry. He does not admit that taking £22billion out of the industry had a bad impact.

Mr. Hendrick: The spectrum that was sold is a finite resource. It was not aform of taxation. A finite resource has to be sold, not given away for free.The state of high-tech and telecom companies is a reflection of Americasneezing and industries across the developed world catching a cold, not thesale of the spectrum to British telecom companies.

Mr. Redwood: The hon. Gentleman does not understand the magnitude of the sumof £22 billion. It was a prosperous leading industry, but that is a colossalsum of money. The German Government followed the British example and tookanother £28 billion, making £50 billion of tax. It was a tax. The companieswere using the airways free of charge, but the Government saw an easyopportunity to raise some money. Now, of course, the Government do not wantto admit that they were part of the cause of the collapse of that industry.I do not claim that the Government were the sole cause, but the hon.Gentleman must concede that taking £22 billion out of the industry had aserious impact. It dried up the cash flows and meant that the companies hadto keep prices higher. They could not pay wages, recruit extra staff orexpand the networks as quickly as they would have liked. That was theChancellor's second tax that did a lot of damage.

Mr. Chris Bryant (Rhondda): The right hon. Gentleman is giving away hiswhole argument. He argues in favour of more private intervention in thehealth market, but then he says that when auctions were used as a largelymarket-driven answer to how to allocate a scarce resource-the spectrum-thatsomehow became a tax. He is confused.

Mr. Redwood: I am not confused. The spectrum was available freely until theLabour Government designed a system that was bound to lead to a supertax,because of the bidding rules and the number of licences on offer. If theGovernment had offered a realistic number oflicences, the prices paid in the auction would have been more sensible andaffordable. The Chancellor had no understanding of how much damage such acolossal price would do even to a relatively successful industry, which thetelecom industry had been until that point.

I come to the Chancellor's third tax. He decided that it would be a goodidea, under the cover of greenery, to impose far more taxes on motorists,especially on fuel. He brought the haulage industry to its knees, majorbankruptcies were threatened and some haulage companies even decided to giveup on Britain and set up on the continent where the tax regimes were morebenign. The damage that tax caused got through to the Chancellor, because itled to a mass protest, and-up to a point-he apologised and announced that hewould make some reductions in duty after all. He has continued that apologyin the Budget by announcing that there will be no immediate further increasein the tax.

I am glad that the Chancellor has learned from that case, but why does henow think it a good idea to impose a tax on jobs? He has tried everythingelse. He has wrecked the pension funds and the motorists.

Sir Robert Smith (West Aberdeenshire and Kincardine): Has the right hon.Gentleman spotted that yet again the Chancellor is talking the right talkabout charging foreign lorries to use our roads? But page 125 of the RedBook shows that such charging will not happen for several years to come. Thepromise has been made since the protests.

Mr. Redwood: The hon. Gentleman is right. The right hon. Gentleman, as ahigh-taxing Chancellor, could have put equal or higher taxes on foreigncompetition. He did not even do that to help the domestic haulage industry,which made the protests even more intense.

The Chancellor has tried to wreck several industries. He has been successfulin helping to do enormous damage to telecoms, to haulage and to people'ssavings for pensions. Now, he has decided to tax jobs. That is especiallydisappointing because he made his reputation in Opposition in campaigningagainst every job loss that was ever announced under a ConservativeGovernment. Now that we have him in power, he seems to ignore the thousandsof redundancies that take place week by week in manufacturing industry underhis stewardship of the economy. He is taking the incredible risk of placingan even greater burden upon employers and employees by raising the cost ofemployment.

I am sure that there are quite a few successful and prosperous parts of theeconomy that will be able to pay the bill. They will not enjoy paying it butthey will manage. However, there will be a serious impact on marginal partsof the economy. The most likely area to be badly damaged is relativelylabour intensive and often quite low-wage parts of the economy inmanufacturing. That is the area that is most at risk already from all theother Government policies of high tax and high regulation and the currentexchange rate. It will now face an additional imposition from theChancellor. For a Chancellor who has always rightly said that he wants morejobs, more enterprise and more prosperity, it is a great pity that he hasnow decided to raise so much money in the form of a tax on jobs andenterprise.

There are some clever ideas in the Budget to produce modest relief at themargins for business in response to business lobbying. I agree with theseideas and I am pleased that the Chancellor has introduced them. However, they are swampedby the massive tax on jobs. It is no good for the business community if itreceives little pieces of relief here, there and everywhere if it has to payfor them three or four times over because of a massive tax on jobs, which Ifear we have.