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banner Friday, 10 March, 2000, 17:10 GMT
Roger Berry MP, Labour

The government can easily afford to increase public spending, says economist and backbench Labour MP for Kingswood Roger Berry:

"Budgets have a number of objectives. One purpose is to shift resources from one place to another and, of course, we all have different views about how this should be done.

"My priorities would be more resources to tackle pensioner poverty, and more investment in essential public services, particularly health, education and transport.

"When Labour came to office an increasing number of pensioners were living in poverty (one in four at the time of the election) and an increasing number were dependent on means-tested benefits.

"The government rightly pledged itself to tackle both of these problems.

"All pensioners were to share fairly in the increasing prosperity of the nation. The basic state pension was to be the foundation of pension provision and would be increased 'at least in line with inflation'.

Margaret Thatcher cut the link between pensions and earnings in the 1980s
"In this Budget the government should take the opportunity to increase the basic state pension by more than inflation, for the first time since Mrs Thatcher broke the link with earnings in 1980.

"The case is the more powerful this year because pensioners are to experience increases in council tax and rents that are way above inflation.

Uprate state pension to minimum income level

"Of course, I welcome the extensive measures the government has taken to help pensioners - the five-fold increase in the winter fuel payment to 100 per household, free TV licences for those over 75, free eye tests, VAT on fuel down to 5 per cent and the minimum income guarantee.

"But everyone knows that the basic state pension, worth just 66.75 a week, is inadequate and something should be done about it. Indeed, the government recognises that the pension is too low, which is why it has introduced the minimum income guarantee at 75 a week, linked to average earnings.

"Unfortunately, between 750,000 and 1m pensioners entitled to income support do not claim it; those whose modest income and/or savings means that they just fail to qualify for income support also lose out on council tax benefit and housing benefit; and this extension of means-testing penalises those who have scrimped and saved throughout their lives.

"I would therefore like to see the state pension uprated to the same level as the minimum income guarantee and then both increased in line with average earnings.

Much more spending to be done

"The 1998 spending review secured substantial increases in public spending in essential areas like health, education and transport. But there is much more yet to be done.

"The 21 billion for the NHS represents a real terms growth of 4.7% over 3 years, or 3.7% over the current parliament.

"These rates of growth are significantly better than the Tories achieved. However, given the government's laudable aspiration to reach the European Union average on health spending as a share of GDP, these rates of growth must be increased.

"The prime minister has said that the next CSR could deliver 'real-term rises in the health service of almost 5%'. The Institute for Fiscal Studies argues that we would have to do better than this to match the EU average by 2004-05.

"The 19bn cash increase in education spending extra over three years is a real terms average increase of 5.2% a year over the three years. It will bring the average real terms growth over this parliament to 3.2%, double that of the last Tory government.

Consensus on need for more investment

"Moreover, the manifesto promise to 'increase the share of national income spent on education over the course of this parliament' should be met, as it increases from 4.7% to 4.9%. Nevertheless, a budget commitment to continue to increase investment in education, given the obvious backlog would, again, be welcome.

"Finally, the desperate need for more investment in transport is universally recognised. The government's commitment to invest 80bn over 10 years is welcome. But, as both the CBI and the TUC say in their budget submissions, we need more investment now.

"Could the government afford to increase public spending? Yes it could. The fiscal position is very healthy with both the surplus on current budget and net borrowing 10bn better than forecast in last year's Budget.

"The government has always said that the savings from falling unemployment would be used to improve benefits and public services, and that borrowing can be justified to fund worthwhile investment. Now is a good time to do both."

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