Iain Duncan Smith – 2002 Speech at the London Chamber of Commerce

Below is the text of the speech made by Iain Duncan Smith, the then Leader of the Conservative Party, at the London Chamber of Commerce on 18 April 2002.

It is a great pleasure to be with you at your President’s lunch today and I am extremely grateful to you for your kind invitation.

I’m looking forward to what is usually described as a full and frank discussion about the Budget in a few moments, but first I would like to set out where I think things stand.

Today’s newspapers are full of headlines about Gordon Brown punishing small businesses and their workers to pump more money into public services.

But none of this is new.

The Chancellor spent his first five Budgets raising taxes by stealth. He piled on £6 billion a year in extra taxes and another £5 billion a year in regulation.

What we saw yesterday was simply the final stripping away of the veneer of New Labour and a return to old-style tax and spend in spades.

With his increase in National Insurance contributions he broke cover.

The CBI estimates that the cost of doing business has gone up by £2.5 billion after yesterday.

The Federation of Small Business said that small firms will face a £2 billion bill to cover his National Insurance hike, and called the Chancellor’s Budget ‘a sickener’.

The British Chambers of Commerce said that Business Competitiveness had taken a step backwards.

The fact is the increase in Employers’ National Insurance contributions is purely and simply a tax on jobs.

And with people on average earnings having to pay an extra £214 pounds a year in tax from their income, it will also influence pay negotiations going forwards.

These things dwarf the eye-catching measures made by the Chancellor such as the reduction in the small companies corporation tax rate, the simplification of VAT and his research and development credit.

Overall his measures amount to an effective increase in Corporation Tax of 3%, except that they will bite on all firms no matter how profitable they are, no matter how small they are.

They will hit labour-intensive industries such as those in the service sector particularly hard.

And that includes those public services like health, education and the police that he says he is seeking to improve with his tax increases.

The NHS is Europe’s largest employer. Well over half its total costs are staff costs.

How much of yesterday’s NHS funding increases announced by the Chancellor yesterday will be eaten up by NICs increases for employers?

And what of the employees? A senior nurse will now be more than £300 a year worse off as a result of yesterday’s tax changes.

Will senior nurses not want a pay increase to compensate for the extra tax they are having to pay?

The total cost could be a billion pounds.

No wonder Tony Blair and Gordon Brown got a warmer reception than they were hoping for from an irate nurse when they went to the Chelsea & Westminster Hospital this morning.

She was right to say the Chancellor he had scored ‘an own goal’ by raising National Insurance on poorly-paid NHS staff.

And that is not the only own goal he has scored.

The Chancellor’s budget speaks volumes about his attitude to small businesses, many of them already struggling to survive under the burden of regulations he has imposed.

None more so than care homes – a crucial part of how we care for the vulnerable in our society.

Care homes have been closing all over the country as a result of the costs the Government has imposed on them.

They are labour-intensive businesses: around 80 per cent of their costs are labour costs.

The smallest care homes now operate on profit margins of less than 5 per cent.

Raising employers’ NICs by 1 per cent will reduce their profits by almost a fifth.

More and more care home owners will find that they can earn a better living by investing their money in a building society rather than by providing care for the elderly.

As the Chief Executive of the Registered Nursing Home Association said today:

‘For those care home owners who are already teetering on the brink, this tax increase on wages could be the final straw. Many care home owners could say “I’ve had enough”‘.

What kind of message is that to send to small businesses?

What kind of message is that for the Chancellor to send to the elderly?

But all of this is merely a down payment on future tax rises.

Now the Chancellor has turned on the tap, he will find it very hard to turn it off again.

His current increases in public spending only take us up to the next Election. Whatever he says at that Election he would ultimately need to raise taxes again, perhaps by as much as £6 billion a year during the next Parliament.

And not all of this would even go on schools and hospitals. Over the past five years welfare bills have increased faster than the money into health and education.

But at least the British people will know next time that he will tax, tax and tax again.

At the last Election, just ten months ago, Gordon Brown who once called National Insurance ‘a tax on ordinary families’ rejected claims he would jack up NICs as ‘smears that I utterly repudiate’.

After yesterday, no-one will ever believe a word they say again.

The tough medicine he dispensed yesterday is only part of a repeat prescription.

But will it work? The Chancellor has firmly closed his mind to any meaningful reform of the Health Service and has decided instead to try and spend his way to decent healthcare in this country.

In that sense it is a real gamble. We should never forget that in his first five years he had already increased real resources going into the NHS by one-third.

Consider the results of that approach.

Waiting lists are rising again.

Accident and Emergency waits have got longer.

The odds of surviving cancer in this country are among the worst in Europe.

Hospital beds are blocked and care home beds are being closed.

The NHS has to send patients abroad to be treated.

And last year a quarter of a million people paid for their own operations out of their own pockets, a record.

I heard Gordon Brown this morning on television and radio saying the NHS was the best health insurance scheme in the world.

To be honest I don’t think French patients, German patients or Swedish patients lie in their beds wishing they were British. Quite the reverse in fact.

Under the Chancellor’s plan, by 2007/8 the NHS as a whole will be spending roughly what a country like France spends today. But Wales and Northern Ireland already spend that now and their treatment of patients is worse.

At the end of the day it isn’t simply about money, it is about changing the way that money is spent.

Yes, we need to spend more money on health, but we also need to learn lessons from those countries who deliver healthcare to their people than we do.

I challenged Tony Blair on this point at Prime Minister’s Question Time before Christmas.

I asked him whether once we matched the European average on health spending we could look forward to European standards of health care. He said yes.

So today I issue this challenge to the Chancellor, if he matches European spending on health will he get rid of waiting lists as they have in Germany?

Will he give patients a legal right to treatment within four weeks of seeing their GP as they have in Denmark?

Will patients be able to go to the doctor and the hospital of their choice as they do in Stockholm?

Will Gordon Brown come with me as I visit Italy and Spain in the weeks to come to see what Britain can learn from the way they run health care there?

For in the end that is how yesterday’s Budget will ultimately be judged.

On whether it deliver things to people in Britain – especially our elderly and our vulnerable – that the citizens of other countries take for granted.

I think the Chancellor’s past record is a guide to his future performance.

He has closed his mind to genuine reform.

He is about to spend a lot of money on a system which is outdated, overly-centralised and incapable of using that money properly.

1970s methods used on a 1940s institution will not deliver 21st century standards.

In the process he will damage our competitiveness and make things more difficult for hardworking families.