§ 8. Mr. John Townendasked the Chancellor of the Exchequer if he has had any further correspondence with political parties on proposals for increases in public expenditure.
§ Mr. MacGregorNo further correspondence, but I note a stream of pledge-laden documents from the Opposition in the past few weeks.
§ Mr. TownendDoes my right hon. Friend agree that paying for the election promises of the Opposition, which exceed £24 billion and increase every time a shadow Minister makes a further commitment, would necessitate such a large increase in taxation that the brain drain, which has been reversed in recent years, would soar and there would be a haemorrhage of brains and talent such as the country has never seen before, which would adversely affect our ability to compete abroad?
§ Mr. MacGregorThere is no doubt about that, coupled with the effects on industry of much higher interest rates, the effect on inward investment and the loss of overseas confidence in our policy as a result of the overall programme put forward by the Labour party.
I know that the hon. Member for Dagenham (Mr. Gould) is making some assessments of what Labour party policy should be on jobs and the poverty package, but it is clear that the Labour party is still highly committed to a large range of spending programmes in other directions.
§ Mr. WrigglesworthIs it because of the Government's anxieties about public expenditure that the exchange rate cover has been taken from loans from the European Investment Bank? Is the Minister aware that that has hit small and medium-sized businesses very hard and has meant the loss of thousands of jobs? Will the Treasury reintroduce exchange rate cover for those loans?
§ Mr. MacGregorI have no plans to do so, but that is certainly not because of anxieties about the levels of public expenditure. We believe that they should be prudent, and that is what we are pursuing. We believe in establishing priorities for extra expenditure, and that is what we have done. I think that the anxieties rest rather with the hon. Gentleman. It is clear from the latest Liberal/SDP document that the alliance is not prepared to cost any of its policies because it fears that, in the words of the right hon. Member for Plymouth, Devonport (Dr. Owen),
A ragbag of listed policies is not in itself likely to be attractive to the electorate".I think that the right hon Gentleman has learnt the dangers into which the Labour party got itself.
§ Mr. HindIn the light of the promises made by the Labour party to increase public spending in a year by £28 million, will my right hon. Friend tell the House what that would do to the rate of VAT?
§ Mr. MacGregorIf that were done on VAT alone, of course it would raise VAT to more than 41p in the pound. I note that one or two Opposition Members have said that we suggested fanciful VAT figures. I am sure that that is simply a smokescreen to cover up the levels of VAT or of income tax that would arise under the Labour party's policies.
§ Mr. Campbell-SavoursIs the Minister aware that since the Al Fayed brothers took over Harrods the Exchequer has lost £20 million a year in corporation tax? Is the right hon. Gentleman aware that Labour will change the law in many of these respects to ensure that companies pay their taxes? That is how we shall fund our public expenditure programme.
§ Mr. MacGregorI note what the hon. Gentleman says, but he will note that, as a result of the increased profitability of British industry and British companies generally, there is now a bigger yield from corporation tax. That is largely the result of the improved profitability of British industry, which would not occur under a Government pursuing the policies suggested by the Labour party.
§ Mr. Roger KingWill my right hon. Friend spare just one moment to consider the plight of many of the hapless politicians who may soon face the wrath of factory workers coming out of the factories, including in my constituency, with promises of skyjacking their taxes?
§ Mr. MacGregorI suspect that my hon. Friend is referring to the policies that the Labour party will put before the electorate at the election. Labour Members are trying to pretend that they would not put taxes up, but there can be no question that the kind of spending programme advocated by the Labour party could be met solely by increased borrowing—the money would have to come from substantially increased taxes as well. My hon. Friend is therefore entirely right.
§ Mr. GouldWill the Chief Secretary confirm that the material which he uses to describe what he calls "Labour's spending plans" is supplied by a political party—that is, by the political advisers employed by Conservative Central Office — and not by the Treasury, as is so often represented? Is the work on the increase and extension of VAT being done by those advisers or, on this occasion, by the Treasury?
§ Mr. MacGregorI can confirm that the material comes from a political party—the Labour party. It is documented in many of the spending pledges made by the Labour party over a period. I have constantly made it clear that I would take items off if the Labour party showed that it was no longer committed to them. In the past few weeks we have seen the following policy documents from the Labour party: "Investing in People", "Caring for People", "Towards a new Agriculture", "Jobs and the Environment", "For the Good of All", which deals with aid, and "Fresh Directions". Either the Labour party is still committed — I believe that it is — to its massive spending programmes, or it is undertaking a massive con on the electorate.