HC Deb 17 July 1990 vol 176 cc901-52

'After section 88C of the Taxes Act 1988 inserted by Section 66 above there shall be inserted the following section: 88D additional relief for overseas Government debt.

  1. (1) Where in relation to a debt to which section 88A(2) above applies, a company has included a provision in its accounts for any accounting period ending on or after 20th March 1990 which exceeds the aggregate amount which has a been deducted under section 74(j) above in relation to that debt for that and any previous accounting period, then it shall be entitled to additional relief under subsection (2) below subject to the clawback provided for by subsection (3) below.
  2. (2) The additional relief shall be a deduction from profits chargeable to corporation tax for that accounting period equal to the difference between the aggregate amount mentioned in subsection (1) above and the lesser of
    1. (a) the provision mentioned in subsection (1) above and
    2. (b) the maximum provision which would have been made in relation to the debt had the company followed the recommendations contained in the Bank of England's guidelines for overseas debt provisioning in force at the end of that accounting period;
    and for the purposes of subsection (1) above any relief given by virtue of this subsection shall be regarded as an amount deducted under section 74(j) above.
  3. (3) The additional relief granted by subsection (2) above shall be withdrawn to the extent that, at a date three years from the end of that accounting period the company has not made a relevant release of the debt; and an assessment made to give effect to this subsection (or subsection (5) below) may be made at any time up to six years after that date.
  4. (4) For the purpose of subsection (3) above, a relevant release means
    1. (a) a release of the debt in favour of the Creditor Overseas State Authority for no consideration, or
    2. (b) a disposal of the debt to the Overseas State Authority for a consideration equal to or less than its book value at the end of that accounting period, or
    3. (c) a disposal of the debt by the company under a development plan or an environmental protection plan approved by the Treasury;
    and the Treasury shall be empowered by this subsection to issue regulations demonstrating the criteria which it will use in deciding whether or not to approve under this subsection a development plan or environmental protection plan submitted to it for approval.
  5. (5) Nothing in subsections (1) to (4) above shall cause the aggregate profits charged to corportion tax of any person for the accounting period in question, and all previous accounting periods in relation to which he was chargeable to corporation tax, to exceed those which would have been so charged had this section never been enacted; and this section shall have no effect to the extent that it would otherwise cause such excess to be charged to corporation tax.".'.—[Mr. Boateng.]

Brought up, and read the First time.

Mr. Paul Boateng (Brent, South)

I beg to move, That the clause be read a Second time.

New clause 3 is a modest measure, made all the more so by the restrictions of the Ways and Means resolution. However, its principle is important. It is introduced against a backcloth of crisis because of growing poverty in the developing world. There is a debt crisis that threatens to make that poverty even worse, and that will impact adversely upon Britain's banking system.

One in every five of the world's population has less than a dollar a day on which to live. More than 1 billion people—about a third of the developing world's population—are living on less than $370—£206—a year. The problem of poverty has been ably and comprehensively recorded in a recent report on world development by the World bank. It studies the last decade, which it considers to be a lost decade because of the opportunities that presented themselves to deal with the problems of poverty, but which were not taken or were squandered. Even more than a lost decade, it was a decade of despair, especially for the children upon whom poverty impacts adversely as it reduces their opportunity to achieve even basic standards of education. It was a decade of despair for the farmers, especially the single crop and subsistence farmers who found the whole basis of their agricultural economy undermined. It was a decade of despair for the women of the third world whose backs have borne the greatest brunt of debt and poverty.

Against that backcloth, the measures are meagre. Nevertheless, they are important because it is vital that there is a reduction in debt and that we recognise the contribution that the commercial banking sector can make in that process. Commercial banks play a disproportionate role in the net transfer of resources. Debts to banks, including guarantee export credits, represent 40 to 45 per cent. of the total debt of the debt-burdened countries. In 1988, £28 billion of their £30 billion net transfer to creditors was on transactions with commercial banks. It is clear from those figures that a reduction in net transfers to commercial banks is critical if we are to alleviate the debt burden. Even with that reduction, there is unlikely to be any substantial gains in that area.

The new clause seeks to offer banks more relief than that proposed in the Bill. However, the relief would not be unconditional; it would not be just a handout. It would be clawed back if, within three years of the accounting period in which the relief is claimed, it had not been given by way of reduction in indebtedness—either through the sale, at a loss, of the debt to the debtor country, or a swap that had environmental or development gain. That must be done within three years or the relief is clawed back, with interest.

6.30 pm

This modest measure is an incentive to the commercial banks to take their obligations seriously. It is commercially desirable to the banks, but there is also a moral obligation on them. It is important that the banks see their responsibilities as a matter not simply of commerce but of common morality. The Opposition are bound to say—I do not think that they are entirely alone in this—that there was something distinctly unseemly about the paean of special pleading in the Grand Committee Room by several Conservative Members on behalf of the banks. They addressed us at great length about the hardships experienced by the banks. It was a bit rich that their cry should drown the cry of the dispossessed and the deserted of the world. Such pleas are a bit much from Conservative Members who come along with their carpetbags loaded with dosh while people in the developing world have to live on a dollar a day.

One in five people in the world has to live on a dollar a day—a shaming statistic, as hon. Members would agree. It should be possible to devise a programme of aid and assistance that is not limited to reducing indebtedness but is geared towards providing not just a safety net but a trampoline by which it will be possible for the developing world to bring itself up. The issue relates to the obligations not simply of aid donors but of aid recipients to ensure that the aid is not misused and abused. All too often over the past decade aid has been misplaced by us donors then misused by the regimes and Governments of the recipient countries. The poor have not had the advantages of development, and medium and long-term gains in those countries have not been made possible.

The new clause should not be seen as an end in itself; it is but a faltering step in the right direction. I wish to set it in the context of the Brady initiative. That initiative made a truly faltering start in addressing the issues, the magnitude of which we now fully understand. That faltering start was highlighted in the recent report by the Treasury and Civil Service Select Committee, which concluded that the Brady initiative will be partial in its effect; and in the case of those countries which have adopted a Brady package its impact will be modest. The Brady initiative is not likely to provide a solution to the problems of the middle income debtors as a whole. I do not think that any hon. Member could find fault with that conclusion. The United States Treasury Secretary, Mr. Brady, said that creditor Governments should consider how to reduce regulatory accounting or tax impediments to debt reduction where they exist. The new clause would reduce one such impediment and as such is commendable. We hope that the Government will find it in their heart to take it on board, and we commend it to them with that in mind.

The Brady initiative is weak in terms of its lack of ambition. It aims to reduce bank debts by some 20 per cent. The former vice-president of the World bank, David Knox, argued that we should try to cut the Latin American debt service to private creditors by 70 to 80 per cent. That shows the scale of the Brady initiative. A wider study group was chaired by the former managing director of the International Monetary Fund—not a body known in the developing world for its liberality or for its breadth of understanding of the impact of its strictures on debtor countries.

I am obliged to my hon. Friend the Member for Islington, South and Finsbury (Mr. Smith) for helping me to pronounce the name of that former managing director, Dr. Witteveen—they are very communautaire in Islington; the Dutch trips off the tongue. We in north-west London must learn from them. Dr. Witteveen correctly said that we should take 50 per cent. as a starting point for bank debt service reduction by highly indebted countries. I note that the Chief Secretary is waiting to demonstrate his linguistic ability. No doubt there are plenty of authorities upon whom he can rely.

The number of authorities that support the Government's approach on this issue is limited, if not non-existent. Who knows? Perhaps some can be dredged up from somewhere. Perhaps a family friend will help—but we must not trespass into family grief. We look forward to hearing what the Economic Secretary has to say because this is an issue that requires urgent solutions. There are no easy solutions, and we do not pretend that there are. This matter requires us to go beyond sentiment to strategy, but we require some strategy if we are to deal with the problems of indebtedness.

The "World Development Report" was clear about the importance of addressing the issue of debt in relation to poverty because it is a prerequisite and a precursor to a successful arrival at a position from which it is possible to address the issue of poverty in the developing world, to deal with the issue of debt and to relieve some of the burden that currently encumbers those countries. If the necessary domestic policies—which are recommended by the World bank—to maximise the best available resource of those countries, their labour, are linked to social policies and to welfare policies that are focused on the needs of those most in need in the countries in question, that in itself is a welcome development. I am sure that hon. Members will agree with the thinking of the World bank on this issue.

Before one is able to address those domestic concerns, the international context of indebtedness must be got right. That is the conclusion of the "World Development Report" and it is worth considering in full. The report concludes:

Many low-income countries—especially but not exclusively in Sub-Saharan Africa—find themselves with daunting debt and debt service burdens at a time when they need to invest more (in order to improve their long-term prospects) and, simultaneously, to increase the consumption of large numbers of people in poverty. Further efforts by the international community will be needed to reduce their debts and to increase concessional assistance to them. These efforts should be conditional on appropriate policy reform in the countries concerned. Aid and debt relief will be to no avail if appropriate policies are not in place. That report puts the issue of debt clearly in perspective. The new clause addresses that issue in a way that will effectively suspend the operation of new clause 88B and will reapply the old law, although only temporarily. If in the three years after relief has been granted the debt has not been released completely, sold at a loss to the creditor state or disposed of under an approved development plan or under an environmental protection plan, the additional relief is withdrawn and new clause 88B comes back into operation. That is secured by new clause 88D(3). Our proposal is more modest than we would want and the Ways and Means resolution weighed especially heavily on us in this respect. However, the new clause is a start and we have to begin somewhere. As a start, we commend it to the House.

Mr. James Wallace (Orkney and Shetland)

We welcome the new clause. The hon. Member for Brent, South (Mr. Boateng) did not make any great claims about how radical the effect of the new clause would be. However, it pushes the modest provision that the Government have introduced in the Bill a step further in the right direction. The hon. Member for Brent, South said that the new clause and the Government's proposal are consistent with the Brady initiative, although he is right to point out that, as the Select Committee on the Treasury and Civil Service concluded, the Brady initiative

will be partial in its effect; and in the case of those countries which have adopted a Brady package its impact will be modest. Given the scale of the debt crisis facing many developing countries, any package is to be welcomed inasmuch as it helps to relieve them of debt. However, we should be under no illusion about the amount that still needs to be done if the heavy burden of debt is to be removed and if, in removing it, we are to allow those countries the opportunity to go forward and to seek and undertake development with far greater confidence and ability.

6.45 pm

The hon. Member for Brent, South referred to the background against which the new clause is moved and to the need to relieve many nations of their debt. It is important that we remind ourselves of the scale and consequences of that debt. The debt crisis has ensured that over many years many of the debtor states have been denied the resources that they need to build sustained and sustainable economic growth. As a result, many of the basic services of food, shelter, health, education and employment have been denied to the people.

The hon. Gentleman made the valid point that much of the debt that has been incurred has not gone to relieve the burden of the plight of the poorest people in those countries. They have continued to suffer and the prospect of any relief of their suffering has been seriously hindered by an ever-growing debt problem.

"The State of the World's Children Report 1989" states that average incomes in Africa and Latin America have fallen by 10 per cent. to 25 per cent. in recent years, that health spending has been reduced by half, that education spending has been reduced by 25 per cent. in the 37 poorest nations and that in over half the 103 developing nations there has been a 20 per cent. drop in the number of children attending school in the six to 11-year-old age bracket. Those are startling figures and should bring home to us the nature of the problem and its human dimension. They should also encourage us to an even more dramatic response than we have had in the Bill or in the new clause.

It is also important to recognise, as we are now all environmentalists, the effect that debt burdens have had on the environment. That has resulted in the marginalisation of small farmers, which has been one of the causes of the slash-and-burn exploitation of forests and of other desperate and environmentally destructive survival strategies. Apart from the need to improve the lot of many of our fellow human beings, there is also an urgent need to take steps to remove the need for many people in these countries to take action that will be environmentally damaging.

The hon. Member for Brent, South did not make great claims for the new clause. However, much will depend on the Bank of England guideline. My reading of the new clause—I am subject to correction if I am wrong—is that if the guideline for a country does not increase by more than 15 per cent. over three years, nothing in the new clause would give any further relief above that already provided under clause 74. However, the incentive for packages to be implemented which is implicit in the new clause is welcome; the matter is not left to chance. A degree of urgency is instilled into the measures and that is especially welcome, as is the definition of what releasing a debt amounts to. That is helpful and widens the original definition.

This gives us an opportunity to ask whether the amendment is a big step forward. The answer is that it is not. I suspect that some of its deficiencies are a fact of life because there are things that Opposition parties are unable to do in the context of the Finance Bill. There are restrictions which prevent Opposition Front-Bench Members from taking steps which are as dramatic as they would like. It also gives us an opportunity to ask in which direction the Government wish to move in future Finance Bills to extend the provisions that they have introduced. Is this to be the sum and substance of their contribution towards encouraging banks to write off or sell back debt, or can we look forward to further initiatives in future Finance Bills, particularly if the measures introduced in this Bill are seen not to be sufficient? I should be interested to hear from the Economic Secretary what proposals he has to monitor the use made of the current clause and what further proposals he might have to extend it.

One way to improve the new clause and make it more effective would be to entitle banks to full relief on any level of provision and subject that to clawback. That may have been impossible for the Opposition to propose, but it would be much more effective in trying to achieve the objectives which I am sure that all hon. Members wish to achieve. The debate will have been worth while if the Treasury Bench will say that this is only a first step towards taking much more drastic and radical action to alleviate a global problem affecting our fellow citizens. Although the provisions are modest, they are to be welcomed.

Mr. Mike Watson (Glasgow, Central)

The scale of the debt problem relating to developing countries should not be underestimated. No one participating in this debate or in the Committee has underestimated the problem, but there are differences in the way people feel that it should be addressed. The World bank classifies 46 of the 111 countries reporting to it as "severely indebted". Those countries owed $675 billion out of a total developing country debt of about twice that figure. They are mostly to be found in the African continent, mainly in the sub-Saharan region. Relative to their exports and economic activity, the total debts of low-income debtors are even larger than those of the developing world's largest debtors such as Mexico and Brazil. Most of those countries have a debt service to export ratio of at least 25 per cent., which goes some way towards explaining the fact that many of the aid agencies viewed the 1980s as a decade of negative development for those countries.

For some countries, the debt repayment and the austerity measures designed to facilitate that repayment have had such serious economic consequences that social and political unrest has resulted. There have been riots in countries such as Algeria, Venezuela and Zambia, which are countries that we are supposed to be assisting. The austerity demanded by the so-called middle-income countries was no more effective. Brazil's external debt in 1973 was $9 billion. Between that time and 1985 Brazil paid $145 billion as debt service while a total of $121 entered the country as new loans. That means that in that period there was a net outflow of $24 billion, yet the total debt still rose to $95 billion by 1985. If that is an example of the developed world helping the developing world, one can forgive the average Brazilian for saying, "You can keep your money—if that is the way the International Monetary Fund and the World bank assist us, heaven help us if they ever try to undermine our economy."

Brazil is the sixth largest exporter of foodstuffs, yet 30 million of its people subsist on fewer than 1,600 calories a day—600 below what is regarded as the basic minimum by the World Health Organisation. There is no shortage of examples of other countries whose economies are in desperate straits and are being driven further into the mire by the avarice and heartlessness of the commercial banks throughout the developed world, including banks in this country.

Between 1982 and 1988 there was a net transfer of resources from debt-burdened countries to the banks of $144 billion. That is a disgrace and a dereliction of the duty by the developed countries to their less fortunate counterparts. The pendulum must begin to swing back towards the third world countries. Banks now have provisions worth in excess of 50 per cent. of their third world loans and can afford substantial debt reduction without incurring significant additional losses.

The Brady initiative of 1989, referred to by my hon. Friend the Member for Brent, South (Mr. Boateng), recognised that debt reduction is now essential. However, many banks still resist the temptation to reduce their debts. It is clear that neither Brady nor the 1980 Toronto agreement, under which western countries cancelled a third of debt servicing costs over 14 years—that was aimed at the more seriously indebted countries—eliminated the negative net transfer of resources to which I have referred.

World problems require world solutions. The Government could and should be doing more to encourage our banks to reduce or sell their debts to the developing countries. Clause 66 gives tax advantages to banks when a debt is sold back to the debtor country. That is welcome as far as it goes, but it does not go far enough. In Committee the then Financial Secretary rejected the arguments advanced by my hon. Friend the Member for Islington, South and Finsbury (Mr. Smith) relating to the widening of the scope of relief to cover environmental swaps. It is right that that issue should be the subject of further consideration now.

These arrangements are becoming a major feature of the method by which commercial banks and voluntary aid organisations use debt reduction to assist indebted countries. The bank donates its loan expenditure to a charity—the Midland bank did this with UNICEF in the Sudan two years ago—and the charity then arranges with the developing country to provide in local currency an equivalent amount which is then used for approved development products. That is a sensible method of addressing a debt burden which is often a millstone around the neck of developing countries. It turns such a problem into a positive advantage. It is relieved of the debt while guaranteeing funding of a project that enhances the quality of life for at least some of its people. Surely that must be welcomed.

The Government should recognise that and be prepared to offer tax incentives to British banks to encourage them to follow the example of the Midland bank. I am not so naive as to think that banks are in the business of philanthropy, but by using the corporation tax system they could be encouraged to sell back debts and become involved in meaningful debt disposal under a development or environmental protection plan.

In Committee the Financial Secretary gave what I and many of my hon. Friends felt was an unconvincing response on this issue. I hope that the Economic Secretary, who I am sure will soon become the Chief Secretary's successor, when he has had time to consider the matter further will feel it within his power to presage that appointment by appreciating the value of the provisions of the new clause and agreeing to add it to the Bill.

The Economic Secretary to the Treasury (Mr. Richard Ryder)

I am not surprised that this debate has ranged beyond the immediate tax provisions of new clause 3 Hon. Members have raised a number of important related points.

Mr. Campbell-Savours

That could not have happened; the occupant of the Chair would have intervened.

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Mr. Ryder

The hon. Gentleman says from a sedentary position that that could not have happened because the occupant of the Chair would have intervened. I think, Madam Deputy Speaker, that Opposition Members were illustrating their arguments by providing examples that were not directly concerned with the tax provisions of new clause 3. Certainly those of us who were here enjoyed the debate and learned a great deal from what hon. Members said.

On the United Kingdom's general strategy on third world debt, I cannot agree with those who argue that our approach is not working or that we are not making available sufficient resources. Our approach has been to give our support to an internationally agreed strategy which was reaffirmed by the G7 Heads of State at Houston earlier this month. The Government believe that the strategy that we and our international partners have adopted offers by far the best way forward.

Hon. Members have referred to the provision of official resources. These have been significantly increased and will be increased again when the International Monetary Fund quota increase comes into force. The United Kingdom is contributing significantly.

I accept that new clause 3, to which the hon. Member for Brent, South (Mr. Boateng) spoke, seeks to encourage debt reduction and debt forgiveness and that it is well intended. But clause 74—together with existing reliefs for charitable donations—already covers significant ground.

The relief proposals in the new clause could be very costly, and I shall refer to that in a moment. It depends on what exactly is meant by giving extra relief up to the maximum provision recommended by the Bank of England's guidelines, as those guidelines provide not a precise level for each country but only broad bands. If the proposal means that banks could claim relief up to the top of the band within which any particular country fell, the extra relief in 1991–92 could cost up to £350 million. That is partly because it would override the phasing arrangements on increases in provisions which we have introduced and partly because it would allow tax relief up to the top of the Bank of England's bands rather than—as under the procedures that we are introducing—to an intermediate point within them. That would completely undermine one of the main objectives of the Government's proposals which is to keep the costs to the Exchequer of doubtful sovereign debt within bounds.

The Opposition may feel that that money would be well spent if it went to reducing the debt of third world countries but, effectively, under their proposals, banks would get such loans whether or not they engaged in debt reduction. Under our proposals, they will get immediate relief for any loss on disposals of debt back to the borrower Government. The tax advantage to a bank that took part in a debt reduction scheme—over a bank that did not—would be just the same under our proposals as under the Opposition's proposals. The only difference would be that, under the new clause, there would have been a substantial interest-free loan by the Government to the banks.

Moreover, during the three-year period, banks would be discouraged from selling their debt on the secondary market. Any fall in sales as a result would hit those debtor countries that are able to buy back their debt, especially those that have acquired it unofficially on the secondary market.

Mr. Campbell-Savours

Before Ministers slip into producing mythical figures in this debate, as they did in the previous debate, may I ask the Economic Secretary this? He referred to a figure of up to £350 million. Will he give us the bottom-end figure?

Mr. Ryder

I am prepared to say that the relief would cost about £350 million and that if it cost less, it would not cost much less. We are talking about a significant sum. That much has been acknowledged throughout our proceedings on the Bill: we are dealing with very large sums. Some of my hon. Friends criticised my right hon. Friend the Chancellor for taking more than he should have done in his Budget on 20 March. No one is quarrelling about the fact that the sums that have been calculated and agreed among a wide variety of organisations are accurate, and those are the sums on which we have been working.

The Government have greatly improved the provisions for tax relief for company donations to charities. Banks that wish to assist development and environmental charities can take advantage of the provisions. I recognise that gifts in kind are not deductible, but it is possible for banks to arrange a transfer of money which will achieve the same effect and, provided that the amounts do not exceed the allowable limits, there will be tax relief. I am happy to repeat the assurance that my right hon. Friend the Secretary of State for Trade and Industry—I look forward to reading this in Hansard tomorrow—gave in Committee that if charitable relinquishment of debt starts to run up against the 3 per cent. limit of dividends paid in the year, we shall, of course re-examine the matter.

The resolution of international debt problems is inevitably a long-term matter. But we have come a long way since the crisis broke in 1982. It is significant that debt levels have stabilised. For the most heavily indebted middle-income countries—the so-called Baker 15—the total debt stock has fallen about 10 per cent. from its peak. It is also important to recognise that the systemic risk to the banking system has been averted. For example, the exposure of United States banks to least-developed countries has fallen from about 200 per cent. of their capital in 1982 to about 70 per cent. in 1988. For British banks, the figure has fallen from around 150 per cent. to 50 per cent. in the same period.

Let me refer to this country's record on debt strategy. I remind the House that we fully supported the strengthening of the debt strategy agreed by the IMF and World bank boards just over a year ago. The Brady plan, which has been referred to, has encouraged the process of debt reduction by the commercial banks. Progress has already been made. In particular, recent commercial bank agreements with Chile, Costa Rica, Mexico, Morocco, the Philippines and Venezuela involve significant debt and debt service reductions. A combination of debtor reform efforts and commercial bank debt reduction has helped improve confidence in debtor economies, perhaps most noticeably in Mexico where there has been some welcome return of flight capital.

Among middle-income countries, the bulk of whose debt is owed to the commercial banks, it is primarily for the debtors and their commercial creditors to resolve debt problems. I cannot accept that the taxpayer should be expected to bail out the banks. Among the poorest countries, whose debts are primarily to official creditors, Governments have a more prominent role. That is why the Government have paid a good deal of attention to the needs of such countries. The House will be familiar with what has been done. My right hon. Friend the Member for Blaby (Mr. Lawson), the previous Chancellor, launched an initiative which led to the adoption of Toronto terms, alluded to by the hon. Member for Glasgow, Central (Mr. Watson), at the June 1988 summit. This recognised the need for relief on official debts for the poorest countries in sub-Saharan Africa. I am sure that we are all pleased that the Paris club has been implementing this initiative and that already about 18 countries have benefited from concessional rescheduling covering over $5 billion of debt. Additionally, the United Kingdom has written off nearly £1 billion of old aid loans and all our new aid to low-income countries is provided on grant terms. Some 70 per cent. of our aid goes to the world's 50 poorest countries and the recent Houston summit encouraged the Paris club to review the implementation of the existing options that apply to the poorest countries. It is worth quoting from paragraph 55 of the Houston communiqué:

Significant progress has been made during the past year under the strengthened debt strategy, which has renewed the resolve in a number of debtor countries to continue economic reforms essential to future growth. Of course, private sector investment is also important, and in that regard the United Kingdom's record in the developing countries is of a high order. Only the United States and Japan are greater sources of foreign direct investment than we are. Nearly $10 billion of United Kingdom net direct investment went to developing countries between 1985 and 1988. Of course we try to encourage countries to remove restrictions on foreign direct investment, and many are now doing so.

The World bank has become increasingly environmentally sensitive in its project programme design, and the United Kingdom has encouraged and welcomed that development, playing a significant part in board discussions and initiating some time ago the desire for the World bank to become more environmentally sensitive. We are happy for commercial banks to engage in debt-for-nature swaps if they so choose. However, we think that official aid is better and more effectively used for directly financing environmental projects than for official participation in debt-for-nature swaps.

We must all be encouraged by the progress made in some countries with severe debt problems in getting to grips with a more market-oriented approach to economic policy-making. An example of that is the trade liberalisation in Mexico and Venezuela. Several countries, such as Brazil, Argentina and Mexico, are implementing privatisation programmes. As in eastern Europe, there has been a growing recognition of the failure of centrist policies and the dangers of excessive fiscal deficits. If the shift towards more market-oriented reforms can be sustained and extended, many of those countries will be more likely to achieve the growth objectives for which they have been searching. No one understands that better than the majority of the politicians now running debtor countries, many of whom come to London for talks.

The hon. Member for Glasgow, Central referred to Brazil. As it happens, Brazil's Finance Minister was in London yesterday, and it was clear from what she said that Brazil has made major strides towards becoming a more market-oriented economy along the lines that we have been discussing tonight.

7.15 pm
Mr. Nigel Forman (Carshalton and Wallington)

I apologise to the House if I have not been here for all the Economic Secretary's remarks. From his glancing reference to eastern Europe, I gather that he is concerned about the possibility that, now that there has been a change of regime in those countries and they are following more sensible market-led policies, they may be burdened with debt from the previous regime that ran their economies in an unsatisfactory way. Can the Minister offer any hope of a degree of "forgiveness" for the debts that countries such as Poland incurred under the previous regime?

Mr. Ryder

My hon. Friend knows that we are doing a great deal to help Poland, which is one of the most severely indebted countries in the world. Although I have not visited Poland, I think that my hon. Friend has, as have some of my ministerial colleagues, who came back and said that the Poles recognised that the advice with which we have been able to provide the Polish Government on market-oriented reforms and privatisation is as valuable as any economic advice that they have received.

As my hon. Friend knows, the International Monetary Fund has been exceptionally helpful to Poland. The British Government play a full part in the councils of the IMF and the World bank, and will continue to do so. If my hon. Friend reads the communiqué of the Houston summit of 11 July 1990, he will find that there is no such commitment to Poland along the lines that he suggested, but paragraph 36 says:

We commend the work done by the Commission of the European Communities on the coordination by the Group of 24 … of assistance to Poland and Hungary inaugurated at the Summit … which has made a significant contribution to helping these countries lay the foundation for self-sustaining growth based on market principles. We welcome the decision of the Group of 24 to enlarge the coordination of assistance to other emerging democracies in Central and Eastern Europe, including Yugoslavia. I understand why the Opposition have tabled the new clause, but I do not think that we can support it. It would be very costly—

Mr. Campbell-Savours

I do not think that the Minister replied to the important question asked by the hon. Member for Carshalton and Wallington (Mr. Forman). The hon. Member asked about debt forgiveness, and the Minister referred to the Houston agreement and what was decided there. Why does not he answer the question directly? Why is it impractical to write off a part of Poland's debt that was incurred under a Government whom some might regard as fascist?

Mr. Ryder

As the hon. Gentleman knows, Poland is not the only country in eastern Europe—although it is by far the worst affected—to have been misruled by a communist regime, to the extent that it owes money to other people. It is our aim to ensure that all the countries of eastern Europe are treated fairly and in the same way. It would not be right to select one country for special treatment. That much was recognised by other countries in the Community, and was acknowledged at the economic summit meeting in Houston only last week.

Mr. Watson

The Minister referred to the need for a market-led economy to assist countries with vast foreign debts. He mentioned Brazil, as I did earlier. Brazil is massively in debt: I am not aware that it has ever—certainly in recent times—been anything other than a market-led economy. However, that has not stopped it having a low standard of living for the vast majority of its people, and building up a massive debt. Does the Minister agree that as long as Brazil—the sixth largest food exporter in the world—has 30 million people surviving on 1,600 calories a day, it is not just a question of a market-led economy, but a question of the debt that it is obliged to service and live with like a millstone round the neck?

Mr. Ryder

I take the hon. Gentleman's views seriously. During my discussions with the Brazilian Minister of Finance only yesterday, she told me that the new policies being followed by the Brazilian Government along a market-oriented path were encouraging more foreign investment and helping to put that economy on to a surer footing than it had been on in the past. That is true of many other countries in Latin and South America, which are following precisely the same policies.

The new clause could prove costly; I have put the figure at £350 million. I do not think that it will give the banks any new incentive to forgive debt, but it would have an adverse effect on the operation of clause 74, which already increases the relative attraction of debt reduction schemes by not phasing losses made on disposals back to the original borrower. We have pointed out for some time the scope for voluntary commercial debt reduction. The Government welcome the growing menu of options for the banks and the progress made under the strengthened debt strategy. Clause 74 already provides an adequate incentive to take part in debt reduction schemes, and I do not think that there is any need for the new clause.

During his speech, the hon. Member for Brent, South referred to Dr. Witteveen, and he saw a broad smile cross my face. Perhaps he thought that I was smiling because he had mispronounced "Witteveen". I do not know how it is pronounced, but Dr. Witteveen is the distinguished person responsible for drawing up the IMF plan when the Labour Government went broke in the 1970s. The hon. Member for Brent, South spoke warmly about some remarks of Dr. Witteveen. I wonder whether the hon. Gentleman passed such kind remarks about Dr. Witteveen when he drew up the IMF agreement for Britain in 1976. I say that in a light spirit. I am sure that the hon. Gentleman—my favourite designer Jacobin from Brent—who has the last word in the debate, will explain that he supported Dr. Witteveen in 1976.

Mr. Bowen Wells (Hertford and Stortford)

Is not it true that the British system of taxation relief is more generous than that of any other country and that our banks have provided against third world debt more extensively and at greater speed certainly than the United States of America banks have been able under their legislative regime, and more quickly than those under European legislation? Therefore, it seems strange that the new clause should be advanced on this Finance Bill.

Mr. Ryder

There has been a great deal of criticism of British banks by some—not all—Opposition Members, and I am certainly more than happy to confirm what my hon. Friend says. In view of the argument that he has just deployed, I am surprised that British banks come in for the amount of criticism that they often get from some Opposition Members. It is a pity that that is so. Most British banks are extremely keen to help developing countries. After all, they have lent a lot of money to those countries and they want to do everything that they can to get it paid back. It would be against their better interests to do anything else.

I hope that the hon. Member for Brent, South will feel able to withdraw the motion. However, I do not expect that he will. This is my final word in the passage of the Bill. It has been great fun to speak opposite the Labour Front Bench team. I much look forward to the Third Reading speech of the hon. Member for Newcastle upon Tyne, East (Mr. Brown). I have heard his Third Reading speeches before. They are a turn that should not be missed. I hope that all my hon. Friends will rush into the Chamber when they see his name on the monitors.

Mr. Boateng

I should not want to be churlish after the valedicatory remarks of the Economic Secretary as we reach the end of the passage of the Bill. The Economic Secretary should be able—I am sure that he is—in relation to banks and their approach to third-world debt, to make a distinction between debt provision and debt relief. The act of provision is of no comfort to the developing world. The act of relief is of considerable comfort. We are seeking to encourage the banks to move from provision to relief. It is as simple as that. This modest new clause pushes, prods and encourages the banks along that route. Given the chance, several Opposition Members would prefer a little more stick and a little less carrot, but we recognise the strictures of the Ways and Means resolution.

As for the good Dr. Witteveen, I am now aware of the good doctor's somewhat chequered past, but it is a past in which he played a role in the economic history of our country. We have moved on. I do not envisage that his services will ever be required again by a Labour Government, and I do not intend to hold against him the fact that his services were required in the past. He is now a repository of considerable wisdom on the issue.

I commend to the current Economic Secretary more of what Dr. Witteveen had to say about the proposal, which we developed upon the basis of work done by Dr. Stephanie Griffiths-Jones of the institute of development studies at the University of Sussex. On her work and, therefore, the new clause, Dr. Witteveen said: Dr Griffiths-Jones has correctly pointed out that in most European countries provisions against country debt are tax deductible, so that no fiscal incentive remains for banks to actually reduce the debt of these countries. Her proposal to limit the tax deductibility to banks that participate in debt reduction plans seems quite reasonable to me. It seems a somewhat anomalous situation that in most European countries commercial banks have now built up provisions of more than 50% of their total country debt, which in many cases have been deducted from their taxable profits, while in the Brady Plan debt reductions of much smaller percentages are being proposed. That goes directly to the heart of the new clause and approves it in circumstances in which the current level of provision is such as to warrant a measure of this nature.

The four major United Kingdom banks—Lloyds, Midland, NatWest and Barclays—made provision of £4,290 million in the past financial year. That is 55 per cent. of their cumulative provision in recent years. Ultimately those provisions would attract—it goes precisely to the point that was made by the hon. Member for Hertford and Stortford (Mr. Wells)—£1,501 million in tax relief, which is roughly equivalent to one year's aid budget. Those figures are astronomic. The new clause would address the challenge that they present to convert some of that provision into relief for countries most desperately in need.

At times during the Economic Secretary's speech there was a degree of complacency about the Government's record on overseas aid and development. It was a particularly unhelpful degree of complacency. In real terms we are donating less now than we did under the previous Labour Government. Let me reiterate the pledge that has been made by the Opposition time and again. We shall move, as a matter of priority, towards fulfilling the United Nations' objective. We shall not rest until 0.7 per cent. of our gross national product is devoted to overseas aid and development. That is the United Nations' objective, and we readily embrace it. It is one which, once again, has been commended by the World bank in terms that are directly in opposition to the implications of the speech of the Economic Secretary when he suggested that all that was really required—no, perhaps that is not entirely fair to the hon. Gentleman, when he suggested that what was required was largely that the developing world should embrace the rigours of the market and have a shot or two of privatisation.

7.30 pm

I am afraid that life is not as simple as that. We have learned in our own country that life is not as simple as that. Life is certainly not that simple in the developing world, which is precisely why the World bank's recent report made it clear that a two-pronged approach is now required. Yes, it should recognise the importance of restructuring the economies of the developing countries, but it should also recognise the importance of cushioning the shock of that restructuring with welfare plans that go hand in hand with that process. That makes sense. That is the pattern of development aid that the Opposition are promoting. We look to the Government to respond to the World bank's report. We pledge ourselves to a target of 0.7 per cent. of gross national product because we recognise that if that were done, in conjunction with the rest of the developed world, as the World bank has asked us to do we would together have increased the flow of assistance to $144 billion by the year 2000 from its current shameful level of $51 billion. To do less is not good enough.

The Opposition are not complacent and we therefore intend to push our new clause to a Division.

Question put, That the clause be read a Second time:—

The House divided: Ayes 189, Noes 244.

Division No. 298] [7.31 pm
Adams, Allen (Paisley N) Garrett, Ted (Wallsend)
Allen, Graham George, Bruce
Alton, David Godman, Dr Norman A.
Anderson, Donald Gordon, Mildred
Archer, Rt Hon Peter Graham, Thomas
Armstrong, Hilary Grant, Bernie (Tottenham)
Ashdown, Rt Hon Paddy Griffiths, Nigel (Edinburgh S)
Ashley, Rt Hon Jack Griffiths, Win (Bridgend)
Ashton, Joe Hardy, Peter
Barnes, Harry (Derbyshire NE) Harman, Ms Harriet
Barron, Kevin Hattersley, Rt Hon Roy
Beckett, Margaret Heal, Mrs Sylvia
Beith, A. J. Healey, Rt Hon Denis
Bell, Stuart Henderson, Doug
Benn, Rt Hon Tony Hinchliffe, David
Bennett, A. F. (D'nt'n & R'dish) Hogg, N. (C'nauld & Kilsyth)
Bermingham, Gerald Home Robertson, John
Bidwell, Sydney Hood, Jimmy
Boateng, Paul Howarth, George (Knowsley N)
Boyes, Roland Howell, Rt Hon D. (S'heath)
Bradley, Keith Howells, Geraint
Bray, Dr Jeremy Hoyle, Doug
Brown, Gordon (D'mline E) Hughes, John (Coventry NE)
Brown, Nicholas (Newcastle E) Hughes, Robert (Aberdeen N)
Bruce, Malcolm (Gordon) Hughes, Roy (Newport E)
Buckley, George J. Hughes, Simon (Southwark)
Caborn, Richard Jones, Barry (Alyn & Deeside)
Callaghan, Jim Jones, Ieuan (Ynys Môn)
Campbell, Menzies (Fife NE) Jones, Martyn (Clwyd S W)
Campbell, Ron (Blyth Valley) Lambie, David
Campbell-Savours, D. N. Lamond, James
Canavan, Dennis Leighton, Ron
Carlile, Alex (Mont'g) Litherland, Robert
Carr, Michael Livsey, Richard
Clark, Dr David (S Shields) McAllion, John
Clarke, Tom (Monklands W) McAvoy, Thomas
Clay, Bob McCartney, Ian
Clelland, David Macdonald, Calum A.
Clwyd, Mrs Ann McFall, John
Cohen, Harry McKay, Allen (Barnsley West)
Cook, Frank (Stockton N) McKelvey, William
Corbett, Robin McLeish, Henry
Cousins, Jim Maclennan, Robert
Crowther, Stan McNamara, Kevin
Cryer, Bob McWilliam, John
Cummings, John Madden, Max
Cunliffe, Lawrence Mahon, Mrs Alice
Cunningham, Dr John Marek, Dr John
Darling, Alistair Marshall, David (Shettleston)
Davies, Rt Hon Denzil (Llanelli) Marshall, Jim (Leicester S)
Davies, Ron (Caerphilly) Martin, Michael J. (Springburn)
Davis, Terry (B'ham Hodge H'l) Martlew, Eric
Dewar, Donald Maxton, John
Dixon, Don Meacher, Michael
Dobson, Frank Michael, Alun
Doran, Frank Michie, Bill (Sheffield Heeley)
Duffy, A. E. P. Mitchell, Austin (G't Grimsby)
Dunnachie, Jimmy Moonie, Dr Lewis
Dunwoody, Hon Mrs Gwyneth Morgan, Rhodri
Eadie, Alexander Morley, Elliot
Eastham, Ken Morris, Rt Hon A. (W'shawe)
Evans, John (St Helens N) Morris, Rt Hon J. (Aberavon)
Ewing, Harry (Falkirk E) Mullin, Chris
Ewing, Mrs Margaret (Moray) Murphy, Paul
Fatchett, Derek Nellist, Dave
Faulds, Andrew Oakes, Rt Hon Gordon
Field, Frank (Birkenhead) O'Brien, William
Fields, Terry (L'pool B G'n) Orme, Rt Hon Stanley
Fisher, Mark Parry, Robert
Flannery, Martin Patchett, Terry
Flynn, Paul Pendry, Tom
Foot, Rt Hon Michael Pike, Peter L.
Foster, Derek Powell, Ray (Ogmore)
Foulkes, George Primarolo, Dawn
Fyfe, Maria Quin, Ms Joyce
Galloway, George Radice, Giles
Garrett, John (Norwich South) Randall, Stuart
Redmond, Martin Taylor, Mrs Ann (Dewsbury)
Reid, Dr John Thomas, Dr Dafydd Elis
Richardson, Jo Turner, Dennis
Rogers, Allan Vaz, Keith
Rooker, Jeff Wallace, James
Ross, Ernie (Dundee W) Wareing, Robert N.
Ruddock, Joan Watson, Mike (Glasgow, C)
Sedgemore, Brian Welsh, Michael (Doncaster N)
Sheldon, Rt Hon Robert Wigley, Dafydd
Sillars, Jim Williams, Alan W. (Carm'then)
Skinner, Dennis Wilson, Brian
Smith, Andrew (Oxford E) Winnick, David
Smith, C. (Isl'ton & F'bury) Wise, Mrs Audrey
Smith, J. P. (Vale of Glam) Worthington, Tony
Snape, Peter Young, David (Bolton SE)
Soley, Clive
Spearing, Nigel Tellers for the Ayes:
Steinberg, Gerry Mr. Frank Haynes and
Stott, Roger Mrs. Llin Golding.
Straw, Jack
Alexander, Richard Dover, Den
Alison, Rt Hon Michael Dunn, Bob
Amos, Alan Durant, Tony
Arnold, Jacques (Gravesham) Eggar, Tim
Aspinwall, Jack Evans, David (Welwyn Hatf'd)
Atkins, Robert Evennett, David
Atkinson, David Fairbairn, Sir Nicholas
Baker, Rt Hon K. (Mole Valley) Fallon, Michael
Batiste, Spencer Farr, Sir John
Beaumont-Dark, Anthony Favell, Tony
Bellingham, Henry Field, Barry (Isle of Wight)
Bendall, Vivian Finsberg, Sir Geoffrey
Bennett, Nicholas (Pembroke) Fishburn, John Dudley
Bevan, David Gilroy Fookes, Dame Janet
Blackburn, Dr John G. Forman, Nigel
Blaker, Rt Hon Sir Peter Forth, Eric
Bonsor, Sir Nicholas Fowler, Rt Hon Sir Norman
Boscawen, Hon Robert Fox, Sir Marcus
Boswell, Tim Franks, Cecil
Bowden, A (Brighton K'pto'n) Freeman, Roger
Bowden, Gerald (Dulwich) French, Douglas
Bowis, John Fry, Peter
Boyson, Rt Hon Dr Sir Rhodes Gale, Roger
Braine, Rt Hon Sir Bernard Gardiner, George
Brandon-Bravo, Martin Garel-Jones, Tristan
Bright, Graham Gill, Christopher
Brown, Michael (Brigg & Cl't's) Glyn, Dr Sir Alan
Bruce, Ian (Dorset South) Goodlad, Alastair
Buchanan-Smith, Rt Hon Alick Goodson-Wickes, Dr Charles
Budgen, Nicholas Gorman, Mrs Teresa
Burt, Alistair Gow, Ian
Butcher, John Grant, Sir Anthony (CambsSW)
Butler, Chris Greenway, Harry (Ealing N)
Carlisle, John, (Luton N) Greenway, John (Ryedale)
Carlisle, Kenneth (Lincoln) Gregory, Conal
Carttiss, Michael Griffiths, Peter (Portsmouth N)
Channon, Rt Hon Paul Grist, Ian
Chapman, Sydney Ground, Patrick
Chope, Christopher Grylls, Michael
Clark, Hon Alan (Plym'th S'n) Hague, William
Clark, Dr Michael (Rochford) Hamilton, Neil (Tatton)
Clark, Sir W. (Croydon S) Hanley, Jeremy
Clarke, Rt Hon K. (Rushcliffe) Hannam, John
Colvin, Michael Hargreaves, Ken (Hyndburn)
Conway, Derek Harris, David
Coombs, Anthony (Wyre F'rest) Haselhurst, Alan
Couchman, James Hawkins, Christopher
Cran, James Hayes, Jerry
Critchley, Julian Hayhoe, Rt Hon Sir Barney
Currie, Mrs Edwina Hayward, Robert
Curry, David Heseltine, Rt Hon Michael
Davies, Q. (Stamf'd & Spald'g) Hicks, Mrs Maureen (Wolv' NE)
Davis, David (Boothferry) Hicks, Robert (Cornwall SE)
Day, Stephen Higgins, Rt Hon Terence L.
Devlin, Tim Hill, James
Dicks, Terry Hind, Kenneth
Dorrell, Stephen Hogg, Hon Douglas (Gr'th'm)
Douglas-Hamilton, Lord James Hordern, Sir Peter
Howard, Rt Hon Michael Ridsdale, Sir Julian
Howell, Rt Hon David (G'dford) Rifkind, Rt Hon Malcolm
Howell, Ralph (North Norfolk) Roberts, Sir Wyn (Conwy)
Hughes, Robert G. (Harrow W) Rossi, Sir Hugh
Hunter, Andrew Rost, Peter
Irvine, Michael Rowe, Andrew
Irving, Sir Charles Rumbold, Mrs Angela
Jack, Michael Ryder, Richard
Janman, Tim Shaw, Sir Giles (Pudsey)
Jessel, Toby Shaw, Sir Michael (Scarb')
Jones, Gwilym (Cardiff N) Shelton, Sir William
Jones, Robert B (Herts W) Shephard, Mrs G. (Norfolk SW)
Key, Robert Shepherd, Colin (Hereford)
Kilfedder, James Shepherd, Richard (Aldridge)
King, Roger (B'ham N'thfield) Sims, Roger
Kirkhope, Timothy Skeet, Sir Trevor
Knapman, Roger Smith, Tim (Beaconsfield)
Knight Greg (Derby North) Soames, Hon Nicholas
Knowles, Michael Speller, Tony
Knox, David Spicer, Sir Jim (Dorset W)
Lamont, Rt Hon Norman Spicer, Michael (S Worcs)
Lang, Ian Squire, Robin
Lawrence, Ivan Stanbrook, Ivor
Lee, John (Pendle) Stanley, Rt Hon Sir John
Leigh, Edward (Gainsbor'gh) Steen, Anthony
Lester, Jim (Broxtowe) Stern, Michael
Lightbown, David Stevens, Lewis
Lilley, Peter Stewart, Allan (Eastwood)
Lloyd, Sir Ian (Havant) Stewart, Andy (Sherwood)
Lloyd, Peter (Fareham) Stewart, Rt Hon Ian (Herts N)
Lord, Michael Stradling Thomas, Sir John
McCrindle, Sir Robert Sumberg, David
MacGregor, Rt Hon John Summerson, Hugo
MacKay, Andrew (E Berkshire) Taylor, Ian (Esher)
Maclean, David Taylor, Teddy (S'end E)
McLoughlin, Patrick Tebbit, Rt Hon Norman
McNair-Wilson, Sir Michael Temple-Morris, Peter
McNair-Wilson, Sir Patrick Thompson, D. (Calder Valley)
Madel, David Thompson, Patrick (Norwich N)
Major, Rt Hon John Thornton, Malcolm
Malins, Humfrey Townend, John (Bridlington)
Mans, Keith Tracey, Richard
Maples, John Tredinnick, David
Marland, Paul Twinn, Dr Ian
Marshall, John (Hendon S) Walden, George
Marshall, Sir Michael (Arundel) Walker, Bill (T'side North)
Martin, David (Portsmouth S) Ward, John
Mates, Michael Wardle, Charles (Bexhill)
Maude, Hon Francis Warren, Kenneth
Mawhinney, Dr Brian Watts, John
Maxwell-Hyslop, Robin Wells, Bowen
Mayhew, Rt Hon Sir Patrick Wheeler, Sir John
Miscampbell, Norman Whitney, Ray
Mitchell, Andrew (Gedling) Widdecombe, Ann
Monro, Sir Hector Wiggin, Jerry
Montgomery, Sir Fergus Wilkinson, John
Moss, Malcolm Wilshire, David
Mudd, David Winterton, Mrs Ann
Neale, Gerrard Winterton, Nicholas
Nicholls, Patrick Wood, Timothy
Parkinson, Rt Hon Cecil Woodcock, Dr. Mike
Patnick, Irvine Young, Sir George (Acton)
Peacock, Mrs Elizabeth
Raffan, Keith Tellers for the Noes:
Renton, Rt Hon Tim Mr. Tom Sackville and
Riddick, Graham Mr. John M. Taylor.

Question accordingly negatived.

Order for Third Reading read.

7.43 pm
Mr. Norman Lamont

I beg to move, That the Bill be now read the Third time.

The Bill has been less controversial than some of its illustrious predecessors. It has also been shorter. Nevertheless, it contains measures of substance, in particular on savings and for business. Debate on the Bill, both in Committee and on the Floor of the House, has been characterised by a spirit of co-operation and good will. I pay tribute to the work of my right hon. Friend who is now Secretary of State for Trade and Industry and to my hon. Friend the Economic Secretary for their skill and hard work in negotiating the Bill through Committee.

I am glad to say that the Bill has also benefited from several amendments tabled by both Conservative and Opposition Members. I am rather worried about the unity of the Opposition Front Bench team. When we debated ESOPs in Committee it was suggested that the doubts expressed by the hon. Member for Newcastle upon Tyne, East (Mr. Brown) about the need to have a majority of worker trustees or a minimum transfer to employees were a bid to join the Conservative party. It seems that the hon. Gentleman has taken up that suggestion. In The Daily Telegraph of 6 July I found a short piece headed "Tory candidate". It reads: Mr. Nick Brown, 37,"— I shall not comment on that— … has been selected as prospective Conservative parliamentary candidate for Derby South, held for Labour by Mrs. Margaret Beckett. I knew that the hon. Gentleman was after a Treasury job, but I did not know that he was after the hon. Lady's job.

Mrs. Beckett

I think that I should correct the record. The gentleman in question is not my hon. Friend but a gentleman who runs a debt collection firm in the city of Derby.

Mr. Lamont

I am very grateful for that clarification.

The eloquence and persistence of my hon. Friends, notably my hon. Friends the Members for Beaconsfield (Mr. Smith) and for Richmond and Barnes (Mr. Hanley), were instrumental in the introduction of the new clause on actors. I hope that by giving tax relief for agents' fees the clause has gone some way towards allaying the fear that schedule E treatment would impose an unreasonable tax on performers.

I am also grateful to the Opposition Front Bench for technical amendments on child care and charities and to the hon. Member for Berwick-upon-Tweed (Mr. Beith) for a helpful amendment on ESOPs.

The Government have also introduced several new clauses and amendments since the Bill was read a Second time. Clauses 25 to 27 give effect to the proposals announced in the Budget to introduce gift aid. For a long time charities have asked for tax relief for one-off gifts to supplement the considerable reliefs that we have already introduced. We were glad to have been able to make a further extension to the reliefs available. It was suggested that the £600 minimum limit was too low. But I am sure that hon. Members will appreciate that it is not practical to give tax relief for all small one-off gifts to charities. Of course, the payroll giving scheme already offers tax relief for regular giving of small sums. Clause 24 raises the annual limit a further 25 per cent. to £600.

The levy on trust port privatisations, provided under clauses 114 to 119, was debated extensively both on the Floor of the House when we discussed the Ways and Means resolution and in Committee when several hon. Members tabled amendments. The trust ports are owned by the state, not by the Government, and it must be for Parliament to decide who should benefit from the proceeds of sale. As we said in Committee, it is, of course, a matter of judgment what proportion should go the Exchequer. I explained in Committee that, in our view, a 50 per cent. levy on the proceeds of the sale both recognised the fair claim of the taxpayer and left plenty of money in the business and for the new shareholders. It will provide an appropriate return to the taxpayer for past investment in the ports while rewarding the considerable initiative of the port authorities in introducing private Bills and ensuring sufficient funds for new investment without giving the newly privatised ports a competitive advantage over their competitors.

Clause 30 and schedule 15, also introduced in Committee, provide for the abolition of composite rate tax from 1 April next year. The composite rate has been described as an abiding anomaly of the tax system. The hon. Member for Berwick-upon-Tweed has campaigned for a long time on this matter. It owed its existence to a long-running dispute between the Inland Revenue and the building societies in the latter half of the 19th century over whether and how tax should be collected from building society shareholders. CRT provided a compromise solution and came into effect in 1895. Sir Stafford Cripps proposed that it should be given a statutory basis in 1950, and this was effected in 1951 when Mr. Gaitskell was Chancellor.

Everyone would agree that the composite rate has had a good innings and, although its administrative advantages should not be underestimated, the rapid growth in depositors and a growing number of non-taxpayers, with the introduction of independent taxation, means that it is time for it to go. Removing CRT over such a short time scale has presented the Inland Revenue with a major programme of work. I should like to pay tribute to Revenue officials for their positive response and for the rapid progress they have already made in dismantling the composite rate system.

Abolition will benefit those savers who do not pay tax, a quarter of the population in all. Five million married women will gain, along with 4 million pensioners, 2½ million other adults, and 2½ million children.

The abolition of CRT will support and complement the other savings measures contained in the Bill. Clause 28 will ensure that TESSAs—tax-exempt special savings accounts—are available from banks and building societies from next January, offering savers the opportunity to invest up to £9,000 over five years, with interest entirely tax free if the capital is left undisturbed.

The beauty of TESSA is its simplicity and flexibility. We have had contractual savings schemes in the past, but they have always been considerably regulated, burdened by a plethora of rules and an interest rate determined by the Government. TESSA is different. The institutions will be free to offer competitive rates and savers will be able to take their interest in the way which suits them best—either in the form of a regular income, which will suit those retired, or rolling it up within the account, which the younger saver may prefer.

The advent of TESSA has received a wide welcome, even before the final details have been settled, and a number of banks and building societies have said that they will be participating. I believe TESSA will contribute towards encouraging the saving habit and that it will be the success it undoubtedly deserves to be.

The Bill does not, however, just benefit bank and building society depositors, important though they are. Savers through friendly societies will benefit from the 50 per cent. increase in the annual limit on premiums payable under tax-exempt life insurance policies.

Investors in equities will benefit from the abolition of stamp duty on shares, which gives Conservative Members particular pleasure. Stamp duty is an ancient tax dating back to 1714, the year of Queen Anne's death. I regret that it was introduced by a Tory Administration; and it has become increasingly anachronistic. It always seemed curious to me that, if one put one's money in a building society, one paid no tax, but if one put one's money into shares, one incurred an immediate loss on one's savings in the form of stamp duty. We have already halved this surcharge twice from the high level of 2 per cent. we inherited in 1979, but it is now time to take the final step. Abolition will help not only the direct investor in shares, but the tens of millions of people who save through the institutions, whether through pension funds, life assurance or unit trusts. It will also strengthen the competitive position of the City, which we all have in mind as we approach 1992.

The increase in personal equity plan limits and the ESOP measures included in the Bill will also widen share ownership. Clauses 31 to 40 will introduce capital gains tax deferral for sales of owners' shares to ESOP trusts, which have received support from Members in all parts of the House. The Committee debates this year and last on ESOPs were like a meeting of the ESOP appreciation society, with no one waxing more lyrical than the hon. Member for Newcastle upon Tyne, East. Roll-over relief for sales to ESOP trusts will provide a further impetus to that special form of employee share ownership.

Taken together, the measures I have described add up to a major package for savers and form the centrepiece of the Bill. In the medium term, they could play an important role in ensuring balance between savings and investment, which we discussed in earlier debates. Of course, in the short run there is no substitute for monetary policy.

There is more to the Bill, however, than savings. It contains important measures for business which may not have been headline-grabbing measures since they were targeted at the smaller, less glamorous company. The rise in the profits limit for the small companies' rate of corporation tax to £200,000 and £1 million represents a doubling in two years. That will reduce the tax burden for 20,000 companies.

The simplification of VAT registration rules will be of particular benefit to smaller companies replacing three complicated turnover tests, which required companies to assess an uncertain future, with one simple test based on turnover over the past 12 months.

We have also tackled what many considered unduly onerous provisions concerning VAT relief for bad debts. Under the current scheme, bad debt relief is available only in the event of formal insolvency. The provisions in the Bill replace that for an automatic relief for debts which have been outstanding for two years. These proposals will save business £150 million in a full year, and have been widely welcomed. Indeed, as seems to be the case with much of the Bill, the main criticism, if any, is that we are not going far enough.

We appreciate the concern that has been expressed by hon. Members and outside organisations. There has been some suggestion that the two-year period is still too long and that it should be reduced. Clearly any line is somewhat arbitrary. We settled on two years in the light of the concern that there might be scope for abuse within a shorter time period. The other major concern was that some companies will have to wait somewhat longer for relief. That is true, but it is a cash-flow loss since they will get the relief in due course. No company is a cash loser from the scheme.

The issue of the tax treatment of the doubtful sovereign debt provoked a lot of heated and lengthy debate, which I am sure was fruitful. The purpose of the provisions, which were again debated today, is to provide a more certain method of calculating the tax deduction that can be made for doubtful sovereign debt and to smooth out further increases in the cost of relief to the Exchequer while preserving the principles on which tax relief is based.

Another measure that has provoked a lot of debate is the benefit-in-kind exemption for workplace nurseries. A number of hon. Members, including the hon. Member for Berwick-upon-Tweed, argued for a broader relief. I believe that we have drawn the line correctly. In the past decade the dominant thrust of tax reform has been to widen the tax base. The more one does that, the lower one can set marginal rates. That remains our policy and we must not lose sight of that. It is a targeted relief, which is inexpensive. In removing the small existing obstacle, we have simplified the system and given a small push to employers to provide more nurseries.

This is the fourteenth Finance Bill introduced by the Government. It builds on our record of tax reform and includes a series of measures for savings and giving. It will also encourage wider share ownership and help business. I commend it to the House.

7.58 pm
Mr. Nicholas Brown (Newcastle upon Tyne, East)

First, I congratulate the Financial Secretary to the Treasury on his promotion. He carried the main burden of work for the Government, as the Financial Secretary always does, when steering the Finance Bill through Committee. I am sure that I am giving away no secrets when I say that many of my hon. Friends predicted a move for him.

I can understand the Prime Minister's thinking in this matter. She emerged beleaguered from her bunker, eyes glazed and fixed, staring at eastern Europe. Looking around her dwindling band of loyal, fanatical right-wing supporters she picked the most Teutonic-looking she could find, pinched him on the cheek and sent him off to his new post to hold out for as long as he could.

I am genuinely sorry that the Financial Secretary is leaving Treasury affairs and I offer him two helpful pieces of advice for his new job. First, be nice to the Germans. Secondly, and perhaps closer to home, look out for the Scots.

In our approach to the Bill, the members of the parliamentary Labour party have been conscious, as we were last year, of the views and advice of the Treasury and Civil Service Select Committee and the fact that the details of the Bill are not scrutinised in the other House. That places a heavy burden of responsibility on the shoulders of the Opposition, and I include in that the hon. Members for Berwick-upon-Tweed (Mr. Beith) and for Orkney and Shetland (Mr. Wallace). We tackled that burden in a thorough and carefully researched way.

The Chief Secretary referred to some of the changes that we managed to make to the Bill. It is important for the House to remember that the composition of the Committee reflects the composition of the House. It is therefore not possible for the parliamentary Labour party—although we tried hard—to get its way with amendments by force of votes. We have to persuade the Government of our case rather than outnumber their supporters. It reflects enormous credit on the work that my hon. Friends put in that we managed to achieve so many changes to the Bill. I will take the House through a few of them.

Clause 25, which relates to gift aid, is perhaps the most significant single example that I could cite. As originally drafted, that clause would have allowed any individual who made a qualifying gift aid donation to escape all higher rate tax for that year. Although the Government voted against our attempted reforms in Committee, they finally conceded on Report that they had made an error and accepted our amendment No. 41.

If that error had become known and used by the majority of higher rate taxpayers, it could have cost the British Exchequer a substantial sum, possibly as much as £4 billion, and potentially even more in the absence of retrospective correcting legislation. I believe that such correcting legislation would have been almost inevitable. When the Chief Secretary, in the run up to the next general election, tries to add up the Opposition's public expenditure programme and attempts to cram everything that we propose to do into year one and make it look as expensive as he can, I hope that he will have the decency to deduct from that vast and undoubtedly massively overstated total the money that we have saved the Inland Revenue with amendments of that sort.

When we discussed clauses 31 to 40—the provisions relating to ESOPS—there was a consensus in the Committee. ESOPS has its supporters on all sides. A number of drafting points arose, which were successfully addressed by the Opposition and the Government accepted our case. As originally drafted, those clauses would have allowed many substantial sales of shareholdings in companies with ESOPS to be carried out free of tax. That could have been achieved by selling the shares at full market value to ESOPS and investing the proceeds in assets on which, in practice, no chargeable gain would have arisen when they were sold. Private homes and BES shares were the two major examples.

We referred on the Floor of the House to the loophole in relation to private homes, and soon afterwards the Government tabled new clauses 14 and 15 to close it. The cost of that error, if uncorrected, may be difficult to assess because it would have required greater use to be made of statutory ESOPS, but it is clear that within a few years the abuse could have led to a substantial loss to the Revenue. It is right that the parliamentary Labour party should play its part in ensuring that such errors are corrected.

When we discussed TESSA and SAYE we found that, as originally drafted, the TESSA legislation would have stopped banks and building societies deducting for corporation tax purposes the interest paid on TESSA accounts. The Government accepted our point in Committee. Yesterday, on Report, the error was corrected. The Government also realised that the SAYE rules, on which the TESSA rules were based, must have been similarly flawed for the past 20 years or more. They introduced amendment No. 19, at least in part retrospectively, to correct the flaw.

Many other matters were successfully addressed by the Opposition. When we discussed gift aid we suggested that a de minimis limit should be set. The idea was rejected, reconsidered and finally implemented. That correction was made yesterday by Government amendments Nos. 11, 12 and 15. We also suggested that the word "payment" in the gift aid clauses was not wholly clear. In response to our representations on that, the Government clarified the Bill.

The Chief Secretary referred to the extensive debate that we had, in which the hon. Member for Beaconsfield (Mr. Smith) took part, about the tax treatment of actors. Our pressure, combined with pressure from Conservative Members, gained from the Government a concession that was introduced in new clause 7. Actors who may be following these matters should reflect that the parliamentary Labour party turned up in full strength to vote for a new clause to secure the concession. We would have voted for a new clause standing in the name of the hon. Member for Beaconsfield had we had the opportunity to do so and we tried to create such an opportunity by attempting to prevent the hon. Gentleman from withdrawing his proposal, but he did not feel able to stand by his guns. Had he done so and carried two or three of his hon. Friends with him, the concessions could have gone even further.

On the question of personal tax returns, there was unanimity in part on the points that we made in Committee because the views that my hon. Friends and I expressed were echoed by some Conservative Members. Those efforts gained from Government amendment No. 24. The point of our amendment was expressly to limit the inspector's power to ask for extra information to accompany individuals' tax returns. In other words, we limited it to information relevant to the individual's tax liability. Our purpose was to prevent fishing expeditions—a practice that we regard as undesirable—and a number of Conservative Members agreed with us on that.

We persuaded the Government to amend the clause dealing with child care. It would be wrong of me not to refer to a success that was achieved from the Opposition Back Benches. My hon. Friend the Member for Vauxhall (Miss Hoey), supported by hon. Members on both sides, pressed the Government to backdate the reduction in the rate of pool betting duty and this was agreed to by the Government.

The Bill as drafted was amended substantially in Committee and again yesterday on the Floor of the House. The main reason for so many changes being made was that the Bill was sloppier in its drafting this year than had been the case with Finance Bills in the previous two years. No clause exemplified that more than the clause dealing with waste disposal, which we discussed at length, the Opposition desiring not to allow to go through uncorrected that which ought to be corrected. As originally drafted, the clause was a disaster and would have been virtually unworkable. The suggested changes, recommended largely by the industry, were reflected in a huge number of amendments, many of them in identical terms, tabled by the Government, by the Opposition and by Conservative Back-Bench Members. It must be almost unprecedented for a Government to table seven amendments to one short clause of a Finance Bill in Committee to correct appalling drafting. A total of 35 amendments tabled to such a clause, of which 33 were designed to correct drafting errors, must be an all-time record.

I should like to place on record our thanks to the hon. Member for Staffordshire, South (Mr. Cormack) and to my hon. Friend the Member for Neath (Mr. Coleman), who chaired our proceedings in such a good-natured way and facilitated our discussions. I am sure that that view is shared by Conservative Members. I should also like to thank my hon. Friends who came on to the Finance Bill Committee and gave us such support. I hope that I do my hon. Friend the Member for Hackney, North and Stoke Newington (Ms. Abbott) no harm in expressing my thanks for her loyal support to those on the Labour Front Bench. I should also like to thank my hon. Friends the Members for Nottingham, North (Mr. Allen) and for Newcastle upon Tyne, Central (Mr. Cousins), who is my next door neighbour, for Vauxhall, for Makerfield (Mr. McCartney), for Halifax (Mrs. Mahon), for Carlisle (Mr. Martlew), and for Glasgow, Central (Mr. Watson), all of whom played their part in supporting us in our successes on the Bill, for which I am grateful.

I am saddened, as I know that we all are, not to have had the services of my hon. Friend the Member for Leeds, West (Mr. Battle), who acts as the usual channels for the Labour party—a duty that seems to have fallen on my shoulders by default on the part of everybody else who let me do it. I know that hon. Members on both sides will wish my hon. Friend a speedy recovery from his back injury.

I understand the restraints placed on Conservative Members during the course of the Bill, but I am surprised that Conservative Finance Bill Committee Members have not been taking part in today's debates on the Floor and did not take part in yesterday's debates. It is often said that Back Benchers on the Government side are wanted for their bodies, not their minds—an appalling prospect, but there it is—and that was nowhere more evident than during the discussion on clause 74. The largest rebellion on the Conservative side came in relation to that clause, which deals with the tax treatment of banks' sovereign debt. The division in the Committee was clear cut—Labour Members spoke for the third world, and Conservative Back Benchers spoke for the banks. Three of those Conservative Members, as two of them properly declared, have financial interests in banking. The banks involved are the Saudi International bank, Morgan Grenfell, a merchant bank, and the Standard Chartered bank.

Hon. Members will be asking who those Tories are. Like other Conservatives, they have certain characteristics that we can identify from the past and expect to find in future. It is easier and more pertinent to the present discussion to think of their less happy characteristics, such as the insensitivity to others' feelings which was most noticeable in their behaviour on clause 74 when dealing with the debts of overseas Governments, their obsession with themselves, their strong inclination to self-pity and their longing to be liked. Some even less flattering characteristics can be attributed to those Conservatives as an abiding part of their character—in alphabetical order, angst, aggressiveness, assertiveness, bullying, egotism, inferiority complex and sentimentality. Two further aspects may be cited as reasons for concern about those people. The first is their capacity for excess—they love to overdo things and kick over the traces, as I am sure that the Chief Secretary will recognise. Secondly, they have a tendency to overestimate their own strengths and capabilities, and so it came to pass when we voted. I am sure that the Government will be grateful to me for that penetrating analysis and I hope that it will help them with their management of future Finance Bills.

Before leaving the Conservative party's performance on the Bill, I must say a word about the performance of the Chief Secretary to the Treasury. As the House has discovered, this is the third Finance Bill on which I have served and I am probably the Chief Secretary's greatest fan, although certainly not his only one. I admire his rumbustious performances in Committee and his command of the detail. In Committee he showed us how the Financial Secretary's job used to be done when he had the job—taking in washing and carrying out duties for the Secretary of State for Transport—in the exciting debate that we had on the clauses relating to privatised docks.

The Chief Secretary brought back memories for me and for many of my hon. Friends who have served on such Committees before. He did the job well, with style and panache, but I hope that as the job is vacant he will not get it back: the Opposition have a different candidate for the post of Financial Secretary. Given that the Chief Secretary unaccountably ruled me out in his opening remarks, I think that the Opposition would vote for the Economic Secretary to get the job. Conservative Members will have to make up their own minds whether I am entirely sincere in putting forward for the post a person whose ability and decency in dealing with the Bill has won him genuine friends among the Opposition, or whether by recommending him I am seeking to destroy the chances of anyone competent getting the job in the hope that a less able person will be chosen instead. I leave the matter ambiguous so as to achieve the result that I want.

Mr. Norman Lamont

Who does the hon. Gentleman want for the leader of the Liberal party?

Mr. Brown

I will see about that next year.

We have scrutinised the Bill in some detail and we have had some successes. We have relied heavily on our advisers and I think that the Government recognise that we have been well served by the whole of our team of advisers this year. I know that my colleagues on the Front Bench and my parliamentary colleagues who served with me on the Bill would like me to put on record our particular thanks to Mr. Steve Tovey, who had acted as our principal adviser. The advice that we have received has been of a high calibre and Mr. Tovey's diligence, hard work and sheer professionalism mean that it is he and not we who should take the credit for our successes with the Bill. That credit rightly belongs to him, while the blame for the Bill's shortcomings rightly rests with the Government.

8.18 pm
Mr. Ian Gow (Eastbourne)

We have just listened to a most agreeable speech from the hon. Member for Newcastle upon Tyne, East (Mr. Brown). This has so far been a most agreeable debate. It will be a matter of deep regret to you, Mr. Deputy Speaker, as it is to me, that we were not members of the Standing Committee. I have not served on the Standing Committee of the Finance Bill since the right hon. Member for Ashton-under-Lyne (Mr. Sheldon) was Financial Secretary to the Treasury. Then we had agreeable Standing Committees on the Finance Bill and the right hon. Gentleman, who, characteristically, is in his place, made a deep impression on the Standing Committee, as did my right hon. Friend the former Financial Secretary on this Standing Committee.

We are coming to the end of the annual ritual of the Finance Bill. It starts on Budget day when the Red Book is published. In less than two hours, this Finance Bill will have completed its journey through the House. An agreeable ritual accompanies the Finance Bill, and it is clear that the good will in Standing Committee has been extended to the Third Reading debate.

I shall address my remarks to only one aspect of the Finance Bill. My right hon. Friend the Chancellor has made it clear again and again that the overriding objective of the Government is to defeat inflation. Let us note how the military metaphors always apply to inflation. One may wonder what the Finance Bill has to do with defeating inflation. It has nothing whatever to do with the Government's monetary policy, but it has a great deal to do with their fiscal policy.

In each of the past three years there has been a substantial public sector debt repayment, and I warmly welcome that. The first of those three years was the first time there had been a repayment of debt since Lord Jenkins of Hillhead was Chancellor of the Exchequer. His achievement gave rise to admiration among many of my right hon. and hon. Friends. It fell to my right hon. Friend the Member for Blaby (Mr. Lawson) to fashion the first of three successive Budgets which repaid debt—a policy greatly to be admired and one continued in this Finance Bill.

The Finance Bill provides for a statement, made on 20 March, of public sector debt repayment for this financial year of a further £7 billion. I thought at the time that that target was not high enough. The excise duties should have been increased further than they were. Although less than four months have elapsed since my right hon. Friend presented his Budget to the House, the truth is that the estimate that he then made of public sector debt repayment for this financial year has already proved to have been too optimistic. That is not just my view; the Treasury also believes that there is a real likelihood that the public sector debt repayment outturn for this financial year will be less than the Chancellor forecast on 20 March.

Mr. Graham Allen (Nottingham, North)

Will the hon. Gentleman concede that the Treasury is borrowing money at the moment and that although there may be a net repayment by the end of the year it may prove to be small; and that there could even be net public sector borrowing by the end of the financial year?

Mr. Gow

As the forecast by my right hon. Friend less than four months ago appears to have been too optimistic about the size of the public sector debt repayment, and as Treasury forecasts made by people, however eminent, have turned out in the past to be dramatically different—[Laughter.] I see that I carry the House with me. I hope that I am carrying Treasury Ministers with me. I am asserting the plain truth, acknowledged in the Red Book. Treasury forecasting is about as accurate as some of the weather forecasting that we receive—it is wildly out.

The Red Book is littered with commitments to defeat inflation. For hon. Members who may think that I am exaggerating, I offer paragraph 1:

The objectives of the Government's economic policy are to defeat inflation. Paragraph 2 states:

The central objective of the Medium Term Financial Strategy is the defeat of inflation. My right hon. Friend the former Financial Secretary then goes on to list the evils that flow from inflation, and I could not have put them better myself. I am pleased that the Economic Secretary is in his place; he is the architect of our monetary policy. I am glad that he has shown his characteristic courtesy by coming in, but in any case this is what the Financial Secretary said: Inflation damages the economy by increasing uncertainty, discouraging investment and reducing profitability. The social effects of inflation are no less destructive. Inflation redistributes income and wealth arbitrarily and capriciously. I agree. One might have hoped, in view of that powerful and accurate analysis of the evils that flow from inflation, that the policy would have been more effective than it has been.

I hope that my right hon. Friend the Chief Secretary will be given leave to address the House again because I want to remind him, and the Economic Secretary, and the Lord Commissioner, who also has some responsibility for these matters, of what our party said in its previous two election manifestos—

Mrs. Beckett

What about the next one?

Mr. Gow

It is not yet fashioned. It will be interesting to see whether the same commitments made in 1983 and 1987 are repeated in 1992. The hon. Lady and I will be watching for that with the keenest anticipation.

I do not want to go back too far, but it is fair to go back to 1983, when we said: In the next Parliament, we shall endeavour to bring inflation lower still. Our ultimate goal should be a society with stable prices. In 1987 the manifesto said: The Conservative Government will continue to put the conquest"— note the military metaphor— of inflation as our first objective. We will not be content until we have stable prices with inflation eradicated altogether. If my hon. Friend the Economic Secretary would like to intervene, I shall give way to him—but I see that he would not. So he does not quarrel with those words, upon which he and I fought the last election.

Another matter which appears in the Red Book is the exchange rate mechanism. On page 22, the following words appear: Tight monetary and fiscal policies will be maintained … The Government sees membership of the Exchange Rate Mechanism … once its conditions have been met, as complementary to the MTFS policy framework. If we join the exchange rate mechanism and by doing so we agree to use our best endeavours to keep sterling within a certain narrow range as compared, in effect, with the deutschmark—although my hon. Friend the Minister will say that it is compared with a basket of currencies—and if sterling appreciates so that it is in danger of going above the higher parameter that has been set, and if my right hon. Friends are then obliged to abate interest rates, what will happen to inflation 18 months to two years later? That is the drama with which the Treasury will be faced if we join the ERM, because the Government have said that they want to abolish fixed exchange rates and move to a floating exchange rate, and that is what we have done—apart from the period when my right hon. Friend the former Chancellor was shadowing the deutschmark. Apart from that, we have said that we want a floating exchange rate. The moment that we join the exchange rate mechanism we shall go back to precisely that policy which hitherto the Conservative party has rejected.

No doubt there are advantages in joining the exchange rate mechanism, but I advise caution on the part of the Treasury and the Lord Commissioner, who studies these matters with great care.

I shall vote with enthusiasm for the Third Reading of the Bill, although I think that the Government's fiscal stance is not tight enough. We could have borne down heavily upon inflation because the key elements in defeating it are tight monetary policy and a tight fiscal stance. The Bill should provide for higher excise duties, especially because the Chancellor's estimate of £7 billion for the public sector debt repayment is likely to be less.

I hope that the Treasury will reaffirm our commitment to persevere with the policy of abating inflation until that evil is finally removed from our economy, which in recent years has shown that it is peculiarly resistant to our attempts to defeat inflation.

8.30 pm
Mr. Beith

The hon. Member for Eastbourne (Mr. Gow), with whom I do not always agree, spoke about inflation and the role of fiscal policy in dealing with it. He is right that when we are in the exchange rate mechanism, which the Government intend to join, interest rates will not be readily available as a tool of economic management for other purposes. It follows that what the hon. Gentleman said about the Bill will be even more relevant to future Chancellors as they consider what part the level of taxation should play in controlling demand in the economy.

Like the hon. Gentleman, I think that the Government were mistaken in their assumptions about the necessary level of taxation this year. Future Governments who say that there will be no increase in taxation, or that it will continue to fall until income tax is 20p in the pound, will be ignoring the position in the exchange rate mechanism. They may seek their objective by taxes other than income tax, such as excise duties or VAT, but there are certain dangers in that course. Fiscal policy will become more, not less, important when we are members of the ERM.

The hon. Member for Eastbourne talked about the military metaphors that are applied to inflation. At the end of his speech he unwisely slipped into non-military terminology—the rather soft, peace corps terminology that the Government have started to use about inflation—when he talked about "bearing down" upon inflation. It is possible to bear down on something which is still going up and which will continue to go up. That conjures up the picture of a person throwing himself over the fuselage of a well-fuelled ascending aircraft in the vain hope that he can arrest its ascent by his weight. There is no sign that the process of bearing down is stopping inflation from rising. We are a long way from stable prices and zero inflation.

The other member countries of the ERM, and the Federal Republic of Germany in particular, are nearer to stable prices and the achievement of zero inflation. What do they have in addition to fiscal policy and the other mechanisms that we might seek to use? They use all sorts of measures to which the hon. Member for Eastbourne and the former Secretary of State for Trade and Industry are most hostile, such as a central bank with autonomous responsibility for price stability. I cannot understand why Conservative Members who care deeply about inflation do not recognise the success of the mechanisms that they are so prone to criticise.

Several hon. Members have privately said to me that the Bill is boring. That in itself is not a criticism, because it is not the purpose of legislation to provide entertainment for legislators. If some of the exciting Bills this Session had not gone through the world would be a better place and Britain would be a better country. The poll tax Bill provided plenty of excitement, but now it is all misery for our constituents. Being boring is not in itself a bad feature of legislation. It is possible for legislation to be worthy as well as boring—as is this Bill in some respects.

The Bill proposes tax-exempt saving schemes and the abolition of composite rate taxation, about which the Chief Secretary was kind enough to say that I have campaigned for a long time. If he had started on that road a year ago he would not have had the awkward transitional year of independent taxation before composite rate taxation is abolished. In that year it is in people's interest, and especially in the interests of married women, to take offshore bank and building society accounts because the composite rate taxation scheme is not yet in place. It seems much more sensible to proceed more quickly to the removal of composite rate taxation. Nevertheless, I welcome this long overdue tax reform and I am pleased that it is in the Bill.

I welcome the use of tax changes in the Budget to improve safety at football grounds. We would have liked the Government to go further and bring an end to the removal by the Exchequer of so much money each year from amateur sport. Some Labour Members supported us in the Lobby yesterday. I am not sure of the precise number, but we were not supported by all those Labour Members who were present. That was disappointing.

I welcome the proposals on third world debt, although they are but a small part of what needs to be done. We need much more official debt cancellation and there is obviously a need for the measures that we discussed earlier to increase the incentive on banks to write off or sell private sector debt.

I also welcome the proposals on employee share ownership and I hope that the useful improved tax incentives will make the system more attractive. It is striking that the statutory basis for employee share ownership still has so many features that make it an unpopular means to the desirable extension of employee share ownership.

The Government's proposals on workplace nurseries created a ripple of excitement when they were first announced. However, they make a paltry contribution to child care. By themselves the proposals are not logical. The Chief Secretary keeps saying that help is targeted, but it is not. The measure will assist that limited number of women who work in industries and factories that have workplace nurseries. There is nothing well targeted about it and it will not help any especially deserving group of women. I am glad that there is to be tax relief, but I should like to see it much more widely extended by the sort of voucher tax relief that I proposed yesterday and in earlier debates on the Bill and which Labour did not support. That would attract money from employers to child care more effectively than the workplace nursery proposal could ever do. That is for the obvious reason that workplace nurseries are simply not appropriate for large sections of the retail trade, for the whole of small business and for many industries.

The Government are quite wrong in their approach to the port levy. They have introduced what they say is a 50 per cent. tax on the privatisation ports. However, most people in the industry say that in practice the tax will be much larger, partly because it is combined with other tax liabilities and partly because it is assessed at market value. If ports seek to place their shares in local communities or in local institutions to keep the money in their own regions rather than seeing it all go to the Exchequer, they will be taxed as though they had not done so. That will discourage ports with a sense of responsibility to their areas from taking the privatisation route. At the moment only two ports are going through the process. If there had been only one perhaps the Finance Bill would have been ruled as hybrid. That would have made an interesting change to our proceedings.

The Chief Secretary has said that if other ports seek privatisation through the private Bill procedure and manage to devise schemes which ensure that more resources are available for the port and the improvement of the infrastructure in the area round the port, he will introduce retrospective legislation to make sure that those ports pay the full 50 per cent. That is an unusual undertaking by the Government. It is a deliberate disincentive to the devising of schemes by which resources that have been largely contributed by local communities and through local effort and enterprise could be retained in those areas.

The Chief Secretary said that a 50 per cent. or greater levy was a reasonable rate of return on the Government's investment in the ports—[Interruption.] He said that, and I wrote it down. Frankly, if the Government were offering any savings instrument that created a return of 1,000 per cent. or more which—will be the Government's return on their investment in the ports—there would be queues outside every post office in the land to buy such remarkable savings certificates. The Government are obtaining a nice rake-off because they think that there is money that no one appears officially to own. That money would be better used improving the roads and the rail services to the ports and in freeing those who have to live round the ports from environmental and other pressures created by the expansion of those ports.

There are omissions from the Bill. There is little on environmental aspects other than further measures on the taxation of cars as a benefit. However, it is still more tax-efficient to buy a married woman a car than to provide her with child care facilities. That is a strange sort of level playing field—a phrase that the Government are so fond of using—but I recognise that the Government have gone some way along that road, although they need to go further. A great deal more could have been done, such as tax incentives for catalytic converters, reform of the vehicle excise duty, help for industries involved in recycling, incentives for recycling, and so on. Instead, the Government are sitting around awaiting proposals from the Secretary of State for the Environment that will come at a time when they cannot be introduced until, at the earliest, next year's Finance Bill.

The Committee proceeded in the most cordial atmosphere, and I am sure that it would have co-operated if the Government had seized the opportunity to introduce new clauses to deal with the appalling circumstances presented by the poll tax. If the Government had suggested major changes that would have brought immediate relief this year and paved the way for getting rid of the tax next year, I am sure that the Opposition would have co-operated to ensure that such clauses were passed quickly into law. The Bill could have tackled other issues, such as the integration of income tax and the national insurance system and the reform of capital taxation. However, those will have to wait for another day.

The Finance Bill has been a sideshow to the economic divisions within the Government. While we were debating the details of taxation, the Chancellor was not gracing our proceedings. Even the Chief Secretary must, at times, have been distracted by the arguments within the Government about whether and when we should join the exchange rate mechanism, European monetary union and what the Governor of the Bank of England said about how he views the role of the Bank of England. All that culminated, in the closing stages of the Bill, in the promotion of the Financial Secretary to Secretary of State for Trade and Industry. He kindly stayed in his Treasury post to complete the Bill. I do not know whether he has been paid two salaries for the three days that he has performed his two roles. His departure symbolises the chaos within the Government over the most fundamental features of economic policy and which made the whole of the Finance Bill look like a minor sideshow.

8.44 pm
Mr. Jeremy Hanley (Richmond and Barnes)

The hon. Member for Berwick-upon-Tweed (Mr. Beith) said that the Committee had proceeded in a cordial atmosphere. All who served on it would agree that, in the main, there was a cordial atmosphere. Indeed, as my hon. Friend the Member for Eastbourne (Mr. Gow) said, the Budget was a most impressive start to that procedure. It must have been an extremely difficult task for a new Chancellor, at a difficult time, to introduce exactly the right Budget that was needed by the nation. There is little doubt that the general impression given not only by the Chancellor but by the economic pundits was that it was a skilful Budget, clearly and cleverly presented.

I am pleased that the Committee generally continued in that atmosphere. However, it is strange that the Opposition claimed that Conservative Members were only Lobby fodder, subservient to their masters, yet on the one occasion that there was a major debate involving Conservative Members they complained, as though only Opposition Members had the right to speak. I note that my hon. Friend the Member for Cannock and Burntwood (Mr. Howarth) is present, and he was one of those who spoke at extreme length on that occasion.

The Finance Bill was delicately steered through the Committee by the Government team. My right hon. Friend the Chief Secretary was extremely well served by my right hon. Friend the Member for St. Albans (Mr. Lilley), now the Secretary of State for Trade and Industry. He showed the most marvellous lightness of touch through some of the long hours of debate. If Conservative Members had been as subservient as was suggested by the Opposition, it might be thought that the Government Whip had had an easy time. In fact, he had the most difficult and delicate task in keeping order when discussing certain matters in which Conservative Members had either an expert or a particular interest. I assure him that he has kept his friends on the Committee, and the compromises accepted by the Government were most welcome.

The Opposition Front-Bench spokesmen were noted for, more than anything, their breadth of knowledge and of selection of individuals. It was one of the largest Front-Bench teams of any Committee. They are a most attractive bunch of people—

Mr. Ian Taylor (Esher)

That is not how I would describe them.

Mr. Hanley

I think that their variety was attractive. In the main, the Opposition Front-Bench spokesmen were well humoured and there was only one occasion on which we sat until 2 am. The hon. Member for Wrexham (Dr. Marek) served his party's interests well. He is respected on both sides of the House. However, one man's brief introduction is another man's filibuster. After he had spoken for many hours, Conservative Members had the feeling that it was just the beginning of a much longer speech. The Opposition were almost cheating in employing him on their team because he could always be called upon to give a speech that Conservative Members would take a fortnight to prepare and at least a week to deliver.

Mr. Ian Taylor

Does my hon. Friend recall those vivid moments, which lasted for some six hours, when just one amendment from me provoked three and a half hours of debate? That shows the reticence and the skill of Conservative Members in taking three or four minutes to propose an amendment. It also shows the flowery language of Opposition Members.

Mr. Hanley

I suggest that my hon. Friend watches his back as he walks home tonight. Many of us had forgotten that it was his fault that the debate lasted for so long that evening. I am amazed at his honesty. I was wondering who the swine was. That might be unparliamentary language, Mr. Deputy Speaker, but had you been there on that occasion I am sure that you would share my vocabulary. My hon. Friend was brief in introducing his measure, just as many of us were because we had to get through the business.

I hope that the Opposition will not blame me for picking out one hon. Member, but I particularly enjoyed the maiden performances on the Labour Front Bench by the hon. Member for Brent, South (Mr. Boateng), who worked hard on what was clearly a most unfamiliar brief. We must welcome also the hon. Member for Newcastle upon Tyne, East (Mr. Brown), whose Geordie twang rang regularly round the Committee Room with great good humour.

I should like to refer to some of the milestones in the Bill. It is consistent with the Government's policy that we should create an economy in which individuals have a greater choice over the use of most of their income. They should choose how to spend their money and should be guided in spending it responsibly. There are two ends to that. First, we should not encourage people to borrow money. I believe that the current interest rate policy, although unfortunate and difficult for many, is necessary. Secondly, we should encourage people to give if they have a surplus. There is no doubt that the growing spirit of charitable giving, which is welcome, has been well rewarded by the Government.

The move to increase payroll giving from £480 to £600 a year is extremely constructive. It is disgraceful that Members of Parliament who so regularly castigate the Government for not giving enough to charity, for whatever cause they espouse, set a miserable example. Hon. Members will say that Members of Parliament must meet many expenses out of their meagre incomes—[Interruption.] There are no flies on me—well, there is one near me at present. There are 650 Members of Parliament who receive a regular salary for their work in the House. Fewer than 50 make deductions under the payroll giving scheme. It is not difficult to make such deductions. If Members of Parliament made deductions, they would benefit many charities of their choice, and there is a rich variety to which they could give. They could take advantage of the taxation savings by giving and they would set an example to people outside. Payroll giving is one of the most hopeful aspects of recent Budgets, but hon. Members should set an example.

Gift aid is hopeful for charities. In The Independent on 21 March, after the Budget, the Charities Aid Foundation said that the Budget was "a major breakthrough" and "a charities bonanza". It is a charities bonanza only if people take up the inspiration that the Government have given and if they give. That gift aid amounts to £600 or more up to a total of £5 million per donor. I hope that a new spirit of giving will result from the Government's contribution to the taxation system. I welcome the extension with respect to corporation tax.

This is a savings Budget, not just a giving Budget. Surely savings must be the main focus for it. The tax-exempt special savings accounts are a good way of encouraging people to save money in the medium term. An even better measure was the announcement that composite rate tax would go. There is always something miserable about a taxation system that is so inflexible that it makes those who should not under any normal system pay tax have to suffer a deduction. The fact that children who saved their pocket money and elderly people who saved a few pence and pounds suffered by saving safely was a miserable part of our previous taxation system. It has taken a Government of vision and generosity to get rid of composite rate tax so that those on low incomes and those with small savings can make the most of their deposits. The Government's move came as a surprise to the House, but it was totally consistent with the Budget's savings angle.

Personal equity plans have not always been a tremendous success because of the downturn in the market, with Black Monday just two short years ago.

Mr. Tim Smith (Beaconsfield)

My hon. Friend speaks from personal experience.

Mr. Hanley

I speak from personal experience. It is one thing to have tax-free income and tax-free gains, but it can be a disadvantage to find that one has losses against which one cannot claim. No one ever said that investments always go up. Personal equity plans are a sensible way of saving money. They help to introduce the stock exchange and its ways to the smaller saver and to spread risk. I believe that this is an extremely good scheme. I know of the personal interest of my right hon. Friend the Chief Secretary in the creation of PEPs, and I pay him full credit for that.

The annual limit on investment in qualifying unit and investment trusts will be increased from £2,400 to £3,000 and the limit for non-qualifying unit and investment trusts will be increased from £750 to £900. That is sensible and will help to reduce the risk in these investments. PEPs are not for everyone—there is no doubt about that. That is why the abolition of composite rate tax is such a wise move.

I disagree with some parts of the Budget. The threshold for inheritance tax has been increased in line with statutory indexation from £118,000 to £128,000. Most people who think of inheritance tax believe that it is right to tax wealth when a person dies. There is, however, one item which does not make one say that a family is wealthy but which on a death may give rise to a high payment of inheritance tax—the family home—[Interruption.] I wonder whether the fly has now departed.

Mr. Boateng

No, it is going towards the hon. Gentleman.

Mr. Hanley

As I am talking about inheritance tax, this may be relevant. What happens to a family which has lived in a home for some time and in which the children may be of adult age but not earning? It is a great tragedy that, as a result of the death of the second parent, the family should have to sell the family home. The value of homes now is often higher than £128,000, which is the maximum for inheritance tax. I know that there are ways of giving the house inter vivos, but an exemption should be introduced to allow children, while remaining in a home, to be exempt from the payment of inheritance tax, not only by paying by instalments, but by being wholly exempt for at least a time.

I regret the taxation of actors. We are, of course, talking not about actors in general, as so many hon. Members seem to think, but about the taxation of new actors in the theatre only. I am talking not about people who act in films or on television, or those who have been acting for more than the past three years. The Bill affects the newest and lowest paid in the lowest-paid part of the profession. I regret the introduction of this tax, although I understand the general trend in the Inland Revenue for calculating schedule E rather than schedule D in certain cases. I sympathise with the feeling of my right hon. Friend the Economic Secretary that such a tax had to be introduced this year and I am pleased that a genuine and major concession was introduced thanks to the new clause tabled by my hon. Friend the Member for Beaconsfield (Mr. Smith), supported by many colleagues.

It is typical of their approach to the Bill that the Government listened carefully to the arguments for many of the new clauses and amendments. I tabled a number of amendments, some of them on behalf of the Institute of Chartered Accountants in England and Wales. There was no blanket rejection of any amendment. The vast majority of them were picked up by the Government, considered carefully and sometimes reintroduced in words that were more acceptable.

The Government gave way on a number of Opposition amendments and accepted the Opposition's suggestions. I pay tribute to the research that has been afforded to the Labour party. Many of the Opposition's amendments were non-political. Let us be fair: they were technical amendments and showed the depth of the research available to the Labour party. It is only right that Conservative Members should pay tribute where errors have been corrected and where a Bill has basically been improved by work, from wherever that work has been funded or from whatever source it has been derived.

The blind person's allowance will double to £1,080 at an annual cost of only about £2 million. That may seem a small amount, but it is a large improvement for people who deserve even more generous treatment. I am grateful for that.

We have had the final confirmation of the introduction of separate taxation for women. That is a milestone in the history of taxation. The fact that married women can now have total privacy in taxation affairs is very important. It is the only decent step for a Government to take and the fact that it has been introduced and carried through by this Government is a matter of pride to me. The independent taxation of women represents the removal of one of the last shackles on women. A married man, for example, was entitled to receive a tax rebate on money that had been paid by his wife through her PAYE if she had made an overpayment of tax, and there was nothing in law to make the husband pay that money back to her. That is how we treat chattels. It is only right that the party that first created a woman as its leader—[Laughter.]—that first created a woman as its leader and first gave a woman the opportunity to be Prime Minister was the first to give women true independence in taxation affairs. That is a great tribute to this party and to this Government.

9.2 pm

Mr. Harry Cohen (Leyton)

It was a great revelation to hear that the Conservatives created women.

Mr. John Home Robertson (East Lothian)

Just one.

Mr. Cohen

Yes, just one.

Mr. Home Robertson

And they got it wrong.

Mr. Cohen

Yes, they got it wrong in that instance.

I am sorry that I cannot join in the camaraderie which has pervaded this debate. One of the main reasons is that I was not a member of the Committee on the Bill—which has certain benefits—although I pay tribute to my hon. Friends and to Conservative Members who were. I know that they carry out an arduous chore. The other reason why I cannot join the general camaraderie is the nature of the Bill itself. There is almost nothing in the Bill that is relevant to our main economic problems. There is a lack of investment in the future, despite the continuing North sea oil boom—about £83 billion over the past 11 years. There is a lack of skills training, a continuing rundown of our welfare state and national health service, and growing public squalor in transport, education and environment. The Bill does nothing to address those problems and is a consequence of a peculiarly poor Budget.

The Chief Secretary mentioned wider share ownership. There are more individual share owners but there is a greater concentration of shares within the major companies—a greater concentration of power in fewer hands. It is significant that the Chief Secretary did not talk about wider home ownership. The Bill does nothing to help hard-pressed mortgage payers. The list of headings in the Bill does not even mention the subject despite the rising number of arrears and repossessions. The Government's interest rates policy has caused the problem. That has been the main Government club with which they have bashed the economic crisis caused by the consumer credit boom which was let loose as an election bribe. The £20[...]billion per annum balance of payments deficit is a consequence of the rundown of manufacturing investment.

As I said, the Government's high interest rates policy has been their club to bash the economic crisis. However, they are bashing new mortgage payers. There has been a rapid rise in interest rates—about 50 per cent. over the past 18 months. They have increased from about 10 per cent. to about 15.5 per cent. The Government claim to favour private home ownership and encourage people, particularly the young, to take out mortgages. They then leave them trapped by the rapidly rising mortgage rate. For example, in London, the average mortgage has increased by about £250 a month. That has contributed to inflation. I have seen a recent table showing that inflation in London increased by 14.9 per cent. from April 1989 to April 1990 and that was before the poll tax. That is 50 per cent. higher than the national average inflation rate. Increases in transport fares have been one contributory factor, but mortgage rates were the main factor. The Government are taking no action.

On Tuesday I introduced my Mortgage Assistance Bill but it received no response from the Government. That is why I am raising the issue again. This is an opportunity for the Government to respond. My Bill would have provided some options other than repossession for hard-pressed mortgage payers in the form of part ownership and shared ownership. It showed that something can be done witout too great a cost. There would have been some capital cost involved, but, in exchange, there would have been revenue income and considerable savings from not having to deal with so much homelessness.

The Treasury is to blame. High interest rates is the Treasury's policy and there is nothing in the Finance Bill—the main fiscal and economic policy of the year—to mitigate the problems that policy has caused.

The Budget was in March and it has been in Committee since then. We have had two days on the Floor of the House, yesterday and today. We have heard nothing—not a word—from the Government, who keep insisting that mortgage interest rates are not a problem. They have kept them off the agenda and turned a blind eye. When will they do something about the problem? When will they stop being complacent and take responsibility for the effects of their policy?

9.10 pm
Mr. John Bowis (Battersea)

I served on the Finance Bill Committee for the first time this year—unlike other hon. Members who have spoken, most of whom seem to be aficianados of many years' standing—but I can vouch for the fact that it is a civilised Committee on which to serve.

Mr. Brian Sedgemore (Hackney, South and Shoreditch)

Surely not.

Mr. Bowis

It is a civilised Committee and the atmosphere is contributed to by hon. Members of all parties and by the Chairmen of the Committee, to whom I join hon. Members in paying tribute.

Mr. Sedgemore


Mr. Bowis

Does the hon. Gentleman wish to intervene?

Mr. Sedgemore

I remember serving on four Finance Bill Committees one year. It was the year in which there was an emergency every three months and we used to sit through the night. Our sittings were bitter, nasty, unpleasant occasions. What is all this syrup that I keep hearing about?

Mr. Bowis

I, too, remember the days when the right hon. Member for Leeds, East (Mr. Healey) was Chancellor of the Exchequer. Nowadays we have more cross-party agreement on the wisdom of the measures introduced by the Chancellor of the Exchequer to enable Britain to progress from the position in which the hon. Gentleman rightly confesses that his party left it.

We had in the Committee a mixture of common sense and imagination, as well as a degree of technical detail. I have often admired my colleagues' ability to grasp and to enlighten us on such detail. As has been pointed out, we have had the bankers' drafts in some of our debates. I am glad to see my hon. Friend the Member for Cannock and Burntwood (Mr. Howarth) here—no doubt to complete the speeches that he made in Committee one evening, which served only to convince me that I was wise to by-pass banking as a career. But I jest. It was a good Committee which supported a good Finance Bill based on a good Budget.

The hon. Member for Leyton (Mr. Cohen) referred to home ownership, and I welcome his conversion to that cause. No doubt he will soon be coming across to support the party that created woman in its image. I am sure that the hon. Gentleman would accept that, as my hon. Friend the Member for Eastbourne (Mr. Gow) said, the best gift that we can give to homeowners is to get inflation under control. That is what the Conservative party's policy is all about and that is the background against which this year's Finance Bill should be seen.

Others have said before now that there are many mothers and fathers of inflation—not least, excessive pay demands and spending beyond one's means—but no one has accused savings of contributing to inflation. That is why the savings element in the Finance Bill has been so important. My hon. Friends have rightly paid tribute to the Bill's contribution towards encouraging savings. That is especially true of TESSAs and the announcement about the end of composite rate tax as well as the disappearance of stamp duty on shares. To coin a well-worn phrase, we are beginning to move towards a level playing field in savings, which many of us have supported. We welcome the move towards level playing fields, specifically the level playing fields of the football clubs and the health—in every sense—and safety of our football grounds. It is an imaginative and unexpected step that the Chancellor has taken: it is all very well for hon. Members to say now that they would have liked him to go further, but I welcome what he has done.

One item that I especially welcomed was the continued downward pressure on the company car perk—not that the Government are opposed to cars, to motorists or to all perks, but in constituencies such as mine we feel that more people should be using public transport to get to work. When we are trying to ensure that we have a good public transport infrastructure, it makes good sense to discourage people from using company cars.

The Bill also contributes to health. At last we have taken a step back up the tax ladder for tobacco products and, to a lesser extent, alcoholic products. That must be right. It is a great pity that in the last few Budgets it has been missed out. Those who support Parents Against Tobacco and other such organisations believe that ultimately the only way to deter young people from starting to smoke is to do so through prices. I hope that Treasury Ministers will continue that process in future years. I repeat the plea that I made in Committee for the committee that advises on the retail prices index to examine seriously the possibility of taking those items out of the index so that they are not seen as an inflationary item.

I welcome one item that is not in the Budget. The Government have wisely kept the structures and extent of value added tax as they are. I welcome the fact that they did not bow to some of the pressures from across the channel to impose VAT on the written word—books and magazines. It is wise of the Government to resist that, especially at a time when we are seeking to encourage education through the Education Reform Act 1988 and the national curriculum.

Like my hon. Friend the Member for Richmond and Barnes (Mr. Hanley), I warmly welcome the concession that was made for actors. I declared an interest in Committee as an unpaid director of an actors' touring company, the London Actors Theatre Company. I see at first hand young actors struggling to enter the profession and often living in scruffy surroundings such as mobile homes, cars and vans. They are the people who will be helped by the Government's concession, which will at least enable them to set off against tax the fees of their agents who will ultimately enable them, if they have the ability, to make their way in the profession. It is churlish of the Opposition to be critical of that measure, or of the welcome that the Conservative party has given to it. It is a genuine step forward for the acting profession, and especially for young actors.

I must also express my gratitude for the steps forward that have been taken for those with disabilities, especially the blind. It is parallel to a decision made elsewhere on deaf students, which is also to be welcomed. Although that may not have been included in the Bill, I am sure that my right hon. Friend the Chief Secretary authorised the expenditure. As we create wealth in this country, we should bear the vulnerable in mind. We need to create that wealth and to spend it where appropriate, and it is certainly appropriate to spend it on people with disabilities.

I welcome the Bill. It is a Bill for savings, for sport, for the environment, for health, for education, for charity, for arts, and for disability, but it will work only if we get the background of our policy against inflation right—and that will work through our interest rate policy. We are creating wealth. As we create wealth and reduce tax rates so that the tax take rises, we shall have money to spend. Through measures such as the Bill, we shall encourage people to save and to invest, and we shall enable service Departments to spend on areas of need, some of which I have highlighted. This is a wise Bill by a wise Government as part of a wide strategy to promote the well-being of our economy and our people.

9.20 pm
Mr. Christopher Gill (Ludlow)

My hon. Friend the Member for Eastbourne (Mr. Gow) alluded to the fact that the process that was set in motion on 20 March will soon be brought to a conclusion. Perhaps this is an appropriate time to look towards the deliberations that will soon be set in motion for the next Budget. I should like to help future members of the Standing Committee by suggesting how their deliberations could be made simpler.

I draw the attention of my right hon. Friend the Chief Secretary to the Treasury to table 1.2 on page 6 of the Red Book, which was published in March. He will see that, according to the latest estimate for 1989–90, receipts by the Inland Revenue from the six main taxes—income tax, corporation tax, petroleum revenue tax, capital gains tax, inheritance tax and stamp duty—will total £76.4 billion. That figure is somewhat exceeded by the total figure given in appendix F of Command Paper 1021 for the comparable year, when no fewer than 88 reliefs and allowances against those six same Inland Revenue taxes cost £80.3 billion. In other words, reliefs and allowances exceed the amount of receipts by £4 billion.

I do not think that that is a party political point, but it is one to which my right hon. Friend could usefully turn his attention. That position exists because all politicians love to say to the electorate, "We shall give you so much against this and so much against that." Of course, we are sometimes in danger of losing sight of the fact that neither this place nor the Government have any money of their own to give away, save that which they took from the taxpayer in the first place. To counteract that, I must commend to my right hon. Friend the continuation of the shift of the burden of taxation from a direct to an indirect basis.

Mr. Tim Smith

My hon. Friend will agree that the allowances to which he referred are mainly made up by personal tax allowances, tax relief on mortgage interest and tax relief for pension schemes. I have much sympathy with his view that we should broaden the tax base and cut allowances. Which of those should we tackle first?

Mr. Gill

My hon. Friend asked me a direct question. Being a fairly blunt hon. Member, I tell him that the allowance that should be addressed is mortgage interest relief. I am convinced that, far from helping the overall longer-term position of people who want to get their feet on the first rung of the housing ladder, the effect of mortgage interest relief has been to accelerate the price of houses. Bricks and mortar are an attractive proposition to anybody, not least because of the substantial allowances also given under the capital gains tax regulations, which again are an accelerator in persuading and encouraging people to invest in bricks and mortar, thereby making bricks and mortar far and away the most attractive investment as against traditional savings, investing in stocks and shares or other means of disposing of one's income.

In answer to a parliamentary question earlier this year, I was told that 70 per cent. of the Exchequer's revenue came from taxes which, broadly speaking, were raised upon production and that the balance—30 per cent.—emanated from taxes which, broadly speaking, were placed on consumption. As a nation, we should look towards reversing that equation. Initially, we should seek to equalise it. That shift of emphasis would have several significant advantages. First, if we were to tax consumption more than production, we should be making a valuable contribution towards conserving the world's finite resources. My hon. Friend the Member for Eastbourne said that he regretted that we had not been harder in increasing duties in the Budget. By increasing duties on those resources which are finite, we would be very much in tune with the spirit of the age, which is towards conservation and the ecology.

Another benefit from continuing the shift towards indirect taxation and away from direct taxation would be to stimulate investment still further. That is important to us as an industrial nation. We need to invest as much as we possibly can.

A further advantage of a move towards indirect taxation and away from direct taxation would be to encourage spontaneous saving. Although I warmly welcome the introduction of tax-exempt special savings accounts in this Finance Bill, it would be preferable to create a situation in which a man's or a woman's disposable income had outlets that stood on all fours. In other words, the decision to save and to invest to buy a home, or to take out a pension scheme, would stand on all fours equally.

If we reduced direct taxation—at the same time it would be necessary to increase indirect taxation—it would be an enormous psychological fillip to all wage and salary earners who, let us face it, like to take home as much of the fruits of their labour as possible.

Finally, in my catalogue of the benefits of shifting the burden of taxation, much more importance would be given to that old fashioned word "thrift". I am sure that many hon. Members would welcome that.

This is a good Finance Bill. I welcome it, especially for the help that it gives to companies, to savers and to the environment. Like my hon. Friend the Member for Eastbourne, I shall vote for its Third Reading with enthusiasm.

9.27 pm
Mr. Brian Sedgemore (Hackney, South and Shoreditch)

I rise to speak only briefly because I know that many other hon. Members wish to participate. I wish to speak against the Finance Bill for three reasons.

First, the Bill does nothing to bring down inflation. Indeed, it shows that the Conservative party is the party of high and continuing inflation. A few years ago, inflation blipped at 3 per cent. Since then, the Government have embarked on a course which has debauched the currency, debased the coinage and depreciated the pound in everyone's pocket. Inflation is now exactly 9.8 per cent. higher than the Government's objective of zero inflation—a lamentable performance by any standards. Let there be no doubt about the fact that the Government are depreciating the pound in our pockets. The Labour party will be the Government of low inflation—[Interruption.] I shall come to the technical economic reasons for that in a moment.

Secondly, the Budget leaves the Conservative party as the party of high and continuing taxation. We have had the argument before. I see the Red Book on the Bench beside the Minister. If he cares to open it and look at the relevant tables, he will find that taxation as a proportion of gross domestic product is higher under the present Government than ever it was under a Labour Government. If he looks into the far distant future and all the figures for the years ahead—I await the jeers of Conservative Members, but they too should read the Red Book—for 1991, 1992 and 1993, taxation will still be higher under the Conservative Government's own plans as a percentage of GDP than it ever was under a Labour Government. It is our money, as the Prime Minister says, that the Conservative Government for ever take away. That is a scandal, so let us hear no more about the Conservative party being the party of low taxation. The Labour party is the party of low taxation.

Mr. Normant Lamont

Why has the party of low taxation voted against all the tax cuts that we have introduced? Why did the shadow Chancellor of the Exchequer say that he did not expect that a Labour Government could reduce the tax burden?

Mr. Sedgemore

I could come to the global plans if I had more time. I could set out the macro—[HON. MEMBERS: "Answer the question."] I did not serve on the Committee. I did not discuss the reasons for the various amendments. If the Minister wants me to set out a macro-economic policy to provide lower taxation and set it against the background of how much we can and cannot borrow, I shall do so, but I fear that no other hon. Member would have the chance to speak before 10 o'clock.

The third reason why I oppose the Finance Bill is that it contains nothing to suggest that the Government have a coherent exchange rate policy. I remember a couple of years ago when we shadowed the deutschmark. The pound rose to DM3.25. That was a disaster, and it started a recession which was part of the lunacy of the previous Chancellor of the Exchequer, from whom we have had apologies for that. The Minister has said that he, too, was partly to blame. The Governor of the Bank of England has also said that he was partly to blame. From then on, we saw a rapid depreciation of the pound. I should call it a devaluation, but I understand that if the market and not the Government causes it, it is called depreciation.

Then the pound fell to about DM2.8. Now the policy is in reverse. The Government systematically leak that we are about to join the exchange rate mechanism, so the pound is rising. It has risen to DM2.9 and it looks as though it may rise to DM3. What is this swings and roundabouts policy? The pound goes up to DM3.25, down to DM2.8 and back up to DM3. It is beginning to look as though the Government will join the ERM with an exchange rate of DM3 at the lower end. That is a deflationary policy. We shall enter the ERM throwing people out of work and losing economic growth. That is an absolute scandal.

I am sure that the Minister has read the report of the debate that I initiated in the House a few weeks ago. I suggested that a proper exchange rate at which the pound should enter the ERM would be DM2.6 in the middle of the band. I understand that the former Prime Minister, the right hon. Member for Old Bexley and Sidcup (Mr. Heath), who usually sits below the Gangway, has said that there should be a huge devaluation. He talked about DM2.4. It certainly cannot be DM3. If that happens, I forecast with absolute certainty and confidence that either there will be a grave recession in Britain or within 12 months the Government will return to a policy of devaluation.

On the grounds that the Government have a silly inflationary policy, a silly high taxation policy and a lunatic exchange rate policy, we should all oppose the Government in the Lobby tonight.

9.33 pm
Mr. Tim Smith (Beaconsfield)

After that rather tiresome tirade from the hon. Member for Hackney, South and Shoreditch (Mr. Sedgemore), which had more to do with a modern version of "Through the Looking Glass" than anything else, I shall return to the Finance Bill.

My hon. Friend the Member for Eastbourne (Mr. Gow) said that, as we dealt with the Third Reading, we were approaching the end of the annual ritual which had started on Budget day. In fact, it starts much earlier than that because, soon, someone senior in the Inland Revenue will send out an internal memorandum asking members of staff to put forward suggestions for next year's Finance Bill. When my right hon. Friend the Chief Secretary has completed his difficult task of sorting out next year's public spending round, he will, in November, turn his attention to next year's Finance Bill. It is right to pay tribute to the work done by the Inland Revenue on the Finance Bill throughout the year and to my right hon. and hon. Friends on the Front Bench. A great deal of work goes into preparing the Finance Bill before the Budget sees the light of day.

When the Finance Bill was published it had 107 clauses, 16 schedules and ran to 156 pages. I was rather encouraged by that because, a few weeks previously, I had raised on the Adjournment the subject of tax simplification when I complained about the size of recent Finance Bills. This year's Bill is one of the smallest for some years, but since its publication it has, unfortunately, grown to 132 clauses, 19 schedules and 189 pages. I am sorry to say that, as a result of my efforts, we even added another clause yesterday on entertainers' expenses.

I do not for one moment suggest that the Government are entirely responsible for all the growth in tax legislation, but we should hold an inquiry into simplifying that legislation. Given its complicated nature, the time has now come to consider that. Complaints were rightly made in Committee about one of the schedules which was almost unintelligible.

I agree with my hon. Friend the Member for Ludlow (Mr. Gill) that we should be sceptical about introducing new tax reliefs because we should try all the time to broaden the tax base. I am glad that the number of new tax reliefs in the Bill is relatively insignificant. We should be aware that one man's tax relief is another man's tax increase. We should always be sceptical about introducing new reliefs.

The provisions that have been introduced in VAT will be of enormous help and will result in a much fairer system for VAT traders, especially because of the new arrangements for registration and bad debts. Previously I suggested that Customs and Excise had not done enough to publicise cash accounting to VAT traders and I was glad to discover that a note was included in the VAT returns sent out recently to VAT traders to draw to their attention that if they notified Customs and Excise they could switch to cash accounting, which could be to their benefit.

I also welcome the provisions for charities, to which my hon. Friends have already drawn attention. The increase in allowances for payroll giving from £480 to £600 and the important changes made to encourage donations by individuals and companies are welcome. It is sometimes said that by introducing a new tax relief the Government suggest to people what they believe to be the right thing to do. Mortgage interest relief, for example, is designed to encourage owner-occupation. After all the changes that the Government have introduced in relation to charities no one need be in any doubt about what the Government hope to achieve. They should achieve their goal as a result of the substantial increases in charitable giving. In the past 10 years there have been similar substantial increases, but, by any standards, the changes introduced in the Bill are major and should greatly benefit charities.

I also welcome the changes designed to encourage further personal savings and the fact that TESSAs are designed to encourage those with the smallest amount to save. The abolition of composite rate tax will also help those people. Personal equity plans have been improved and I hope that my right hon. and hon. Friends will listen to some recent pleas to allow individuals to operate their own personal equity plan rather than having to go through a plan manager. If one truly believes in individual direct ownership of equities, that option should be available.

I also greatly welcome the increase in the premiums allowable for tax-exempt policies to friendly societies from £100 to £150 a year. That may not sound very much, but the policies are designed for the benefit of small savers—friendly societies have always helped such savers. In the next Session I hope that the Treasury will introduce a friendly societies Bill based upon the Green Paper that it published recently.

Clause 80 is also welcome because, in future, it will be possible for institutional investors to deal on the London International Financial Futures Exchange without fear of being taxed. That should lead to a large increase in business and ensure that LIFFE retains its predominant position as the leading market in Europe for futures and options.

Another change which will ensure that London remains an attractive place in which to do business is the abolition of stamp duty, which will ultimately benefit individuals whether their investments are made directly or through the institutions. I also welcome the undertaking that I received in Committee on the question of stamp duty on secondary market sovereign debt. I am glad that a new clause will be introduced next year to ensure that not just that business is done in London but the paperwork is done in London. At present, the business is done in London but all the paperwork is done in New York because of the fear that stamp duty may apply.

I welcome the change in the taxation of actors and the new clause. that was agreed to yesterday. As I explained then, it is a satisfactory compromise, although we shall want to keep an eye on how it works out.

Any Budget is a package, and this one has been an attractive package. Reference has been made to the groups to which it has been attractive. The House should support the Bill with enthusiasm.

9.41 pm
Mr. Gerald Howarth (Cannock and Burntwood)

My hon. Friends have alluded to the cordial atmosphere that prevailed in Committee. It was broken on only one occasion, when I committed the folly of imagining that it was an occasion when a Back Bencher could address himself to some of the issues. Accordingly, I delivered myself of what I would describe not as a speech of extreme length but as one of modest length. I welcome this opportunity to carry on where I left off, but I shall not seize the opportunity, although I remain sceptical about the Government's view of clause 66, dealing with the restriction of tax relief on bad and doubtful sovereign risk debt.

For the benefit of the hon. Member for Newcastle upon Tyne, East (Mr. Brown), who was uncertain about the matter, and for the avoidance of doubt, I declare my interest as a consultant and a former employee of Standard Chartered bank. I hope that that will prevent him from having any more sleepless nights—as occurred on at least one occasion in Committee—on my account. Having been bitten once, I stayed away from the Committee for a while, and I shall not delay the House unduly today.

My hon. Friends have paid tribute to the Chancellor for the skilful way in which he introduced the Budget. It has not been an easy backdrop against which to introduce his first Budget, but he has managed in the circumstances to produce some attractive, innovative and interesting features which have appealed to hon. Members in all parts of the House.

The United Kingdom economy simply will not lie down. I see that in my constituency, in the manufacturing heartland of Britain, where there are companies manufacturing, among other things, sports boats, garden slides, and so on. Most of them tell me that they cannot push the stuff out of their doors fast enough. The economy is not in recession, and that in some ways is making the Chancellor's task more difficult. All that is needed to get the British economy going again is an indication that interest rates are just tipping downwards. That will lead to a burst of entrepreneurial enthusiasm—it is building up in the British economy—which will get things under way again.

Many features of the Budget have been welcomed by my hon. Friends, and I will not add to what they have said. It is only fair to say, however, that the Chancellor dealt with the question of capital limits, and the generous increase—from £8,000 to £16,000—has been widely welcomed, particularly by elderly people who put money aside during their working lives.

In terms of basic rate tax, it was a mark-time Budget. Over the years, we have achieved a steady reduction in the basic rate of taxation—not by great leaps and bounds, but by steady progress towards the present rates. I hope that my right hon. Friends will be able to resume the onward and downward march of taxation in the coming year.

If the hon. Member for Hackney, South and Shoreditch (Mr. Sedgemore) wishes to pretend that the Labour party is the party of low taxation, he will have to do something about his spending policies and those of his hon. Friends, who wish to burden the British taxpayer with a vast increase in taxation that will be unsustainable by the British people. My hon. Friends warmly welcome the conversion of at least one Opposition Member to the idea of low taxation. It shows that Conservative Members have been able to penetrate the thick skulls of at least some Opposition Members.

I wish to add my voice to those who have welcomed the abolition of stamp duty on share transactions. I should like there to be a system in this country such as that in Hong Kong, where one can look in the banks and see shares being traded in the window. I should like our banks to offer a similar facility in the United Kingdom so that we can have an easy share dealing operation here.

I am sorry that my amendment dealing with value added tax on gold was not accepted by the Government. It would have greatly benefited the United Kingdom and the gold bullion trade and our Britannia coin if we had been able to zero-rate gold coins. Some 18 months after VAT on gold coins was introduced in 1982, sales of those coins in the United Kingdom declined virtually to nil, and London has lost business to other financial centres, which is unfortunate. I appreciate the arguments that have been advanced by my hon. Friends in the Treasury, but I should like the Britannia coin to be tax free once more, so that something called the ecu and produced by the Belgians does not become more popular than the Britannia coin. An excellent advertisement in the 25 June edition of The House Magazine headed "Rule Britannia" demonstrated beyond peradventure why we should zero-rate our own excellent Britannia coin. With that message, I warmly endorse the Bill.

9.47 pm
Mr. Ian Taylor

One of the great annual pleasures of Parliament is membership of the Finance Bill Committee. The highlight of that—which you, Mr. Speaker, will unfortunately be unable to share—is to take part in a Committee sitting opposite the Hale and Pace of the Labour party, the hon. Members for Islington, South and Finsbury (Mr. Smith) and for Newcastle upon Tyne, East (Mr. Brown). Year after year they come up with chirpy common sense. One of them has a good deal of Newcastle meat—or should I say, muscle—and the other often goes into flights of poetry and academic resonance, and remembers the massive tome—the 24 pages of Cornford in Microcosmographica Academica—in which he and I share a devout interest. It is the longest book that I have ever read and is, certainly, one that the hon. Member for Islington, South and Finsbury reads every night.

The highlights of the Finance Bill Committee are those evenings when, as the twilight descends on us, we know that we have some amusement ahead of us when the hon. Member for Newcastle upon Tyne, East still has another amendment to propose. I do not want to cause any problems for my two hon. Friends—I shall call them that and break tradition on this one occasion. They are so good in Finance Bill Committees that they should continue to lead for the Opposition for many more years to come. I am sure that the electorate will endorse that at the next general election.

There is absolutely no doubt that the Bill has been part of a consistent strategy pursued by the Government. It is important to pay tribute to the ministerial team, particularly the Chief Secretary, who has combined, often behind the scenes, muscle and guidance to the Committee.

I must also mention the former Financial Secretary, whose performance in Committee obviously destined him for his subsequent stardom. The Economic Secretary took us through some highly technical points. There was no question but that they composed a formidable team, well capable of standing up to the Opposition spokesmen and their colleagues who are not present now.

I am particularly pleased about the main thrust of the Government's policy—their attempt to enable the enterprise society to create wealth, which gives this country more revenues which can be used to help those most in need. There are many elements in that process, and not all of them have to be done by the Government. Several hon. Members have referred to a range of policies designed to assist charitable giving. Too often we neglect the importance of the personal link between the donor of charitable aid and the voluntary organisation to which it is given. That often represents a personal commitment not only of a financial kind but to service to the community.

The Government are right to be proud of their record over several years of assisting charities. The largest 200 charities have doubled their income in recent years, and the Charities Aid Foundation and many other such bodies were delighted with the latest Budget initiatives. Perhaps this area of policy distinguishes us from Opposition Members, who still have a hankering for the state to do all the work. The voluntary organisations are important and we show our belief in their work by ensuring that people are helped and encouraged to give to charities, to covenant and to give as they earn. I am sorry that more hon. Members do not appear to take advantage of this last method of helping charities.

The release of entrepreneurial skills into the economy is the secret of this Government's success in transforming our country. We have created a vast new area of enterprise for many people in this country—that of small businesses. Despite high interest rates, there is a net growth in the number of small businesses of more than 1,000 a week. That says much for what we have achieved, and this Bill has contributed to small businesses' growth by simplyfing tax levels for them and giving them more encouragement. Many people throughout the country will be grateful for that; it underlines what the Government are trying to do—to enable people to have greater control over their own lives in the commercial and other sectors.

I pause to pay tribute to the Under-Secretary of State for Trade and Industry who has recently made several speeches in the City about the need for wider share ownership. The ownership of property is important to everyone, which is why, under successive Governments, the tax system has encouraged people to buy their own homes. It may be argued that that is a distorting element in the economy, but behind it lies a justifiable social desire to see people invest in houses, which gives them confidence, stability and a role in society. I believe that we should extend that principle to ownership of shares in the companies for which people work. I know that I am not alone in this. The Government have done some work in this area, and I pay tribute to Opposition Members for their work on it in Committee and elsewhere; and to Liberal Members, who have had a long-term interest in it.

It is vital that people be given this interest, because, apart from living in a property, the most important other aspect of their lives is the work that they do, usually but not exclusively in a corporate organisation. A stake in the success of such a company brings with it more than the mere ownership of shares: it gives people a share in any increase in the company's capital—without destroying someone else's wealth to give them that capital. That is the beauty of shareholding. When the value of a company increases, everybody's stake in it rises in value and that gets away from the redistribution that was so often typified by Opposition policies. That is a constructive and worthwhile way to help people and give them the confidence that comes with an increasing amount of capital.

Secretaries in many of the companies that started share ownership schemes now have a capital stake in them that they could never have had before. Such a stake has given employees at all levels a better belief in the capitalist system and its importance and has also given them capital that they could not otherwise have expected.

The Bill encourages employee share ownership because it contains roll-over relief on capital gains tax for sales of shares by owners of a private company to an employee ownership trust. Hon. Members will agree that in previous Budgets the Government rightly made significant gestures to the employee share ownership movement. However, there was still not a level playing field and that was a disincentive for owners of private companies to sell to an employee trust. If they took the other route and sold for shares in a publicly quoted company, they could obtain roll-over relief. The issue caused considerable concern more than a year ago, and I pay tribute to the Chief Secretary for forcing through the regulations for roll-over relief. I hope that that will encourage many more advisers, practitioners and companies to make employee share ownership one of the dominant themes of the 1990s in the way that the pensions movement dominated previous decades.

Pensions are a diversified portfolio of mainly shares and are therefore immune from the risks that can arise from owning shares in the company in which one works. I should like to see employee share ownership operate alongside pensions because there is a direct relationship between effort in a company and the benefit that flows from that effort. In many cases there is opportunity for capital leverage. Roll-over relief is one of the major achievements of the Bill, and I hope that the Government will now take it further.

We have several successes on which to build, the most recent being the Companies Act 1989, and previous Finance Acts introduced important measures. We must ensure that any Government Department that is contemplating a share issue should have a significant element of employee share ownership, preferably in an employee share ownership trust. It should not just sell a few shares and offer no continuing structure.

The Bill had a successful ride in Committee and was well steered. It is a key part of the Government's overall policy on the economy. We want to see as many people as possible participating in Britain's increasing wealth. The Bill achieves that, and I urge hon. Members to vote for its Third Reading.

Question put, That the Bill be now read the Third time:—

The House divided: Ayes 258, Noes 207.

Divison No. 299] [9.59 pm
Alexander, Richard Emery, Sir Peter
Alison, Rt Hon Michael Evans, David (Welwyn Hatf'd)
Amos, Alan Evennett, David
Arnold, Jacques (Gravesham) Fairbairn, Sir Nicholas
Arnold, Sir Thomas Fallon, Michael
Aspinwall, Jack Favell, Tony
Atkins, Robert Fenner, Dame Peggy
Atkinson, David Field, Barry (Isle of Wight)
Baker, Rt Hon K. (Mole Valley) Finsberg, Sir Geoffrey
Batiste, Spencer Fishburn, John Dudley
Beaumont-Dark, Anthony Fookes, Dame Janet
Bellingham, Henry Forman, Nigel
Bennett, Nicholas (Pembroke) Forsyth, Michael (Stirling)
Benyon, W. Forth, Eric
Bevan, David Gilroy Fowler, Rt Hon Sir Norman
Blackburn, Dr John G. Fox, Sir Marcus
Blaker, Rt Hon Sir Peter Franks, Cecil
Body, Sir Richard Freeman, Roger
Bonsor, Sir Nicholas French, Douglas
Boscawen, Hon Robert Fry, Peter
Boswell, Tim Gale, Roger
Bowden, A (Brighton K'pto'n) Gardiner, George
Bowden, Gerald (Dulwich) Garel-Jones, Tristan
Bowis, John Gill, Christopher
Boyson, Rt Hon Dr Sir Rhodes Glyn, Dr Sir Alan
Braine, Rt Hon Sir Bernard Goodlad, Alastair
Brandon-Bravo, Martin Goodson-Wickes, Dr Charles
Bright, Graham Gorman, Mrs Teresa
Brooke, Rt Hon Peter Gow, Ian
Brown, Michael (Brigg & Cl't's) Grant, Sir Anthony (CambsSW)
Bruce, Ian (Dorset South) Greenway, Harry (Ealing N)
Buchanan-Smith, Rt Hon Alick Greenway, John (Ryedale)
Buck, Sir Antony Gregory, Conal
Budgen, Nicholas Griffiths, Peter (Portsmouth N)
Burns, Simon Grist, Ian
Burt, Alistair Grylls, Michael
Butcher, John Hague, William
Butler, Chris Hamilton, Hon Archie (Epsom)
Butterfill, John Hamilton, Neil (Tatton)
Carlisle, John, (Luton N) Hampson, Dr Keith
Carlisle, Kenneth (Lincoln) Hannam, John
Carrington, Matthew Hargreaves, Ken (Hyndburn)
Carttiss, Michael Harris, David
Cash, William Haselhurst, Alan
Chapman, Sydney Hawkins, Christopher
Chope, Christopher Hayes, Jerry
Clark, Dr Michael (Rochford) Hayhoe, Rt Hon Sir Barney
Clark, Sir W. (Croydon S) Hayward, Robert
Clarke, Rt Hon K. (Rushcliffe) Heathcoat-Amory, David
Conway, Derek Hicks, Robert (Cornwall SE)
Coombs, Anthony (Wyre F'rest) Higgins, Rt Hon Terence L.
Couchman, James Hill, James
Cran, James Hind, Kenneth
Critchley, Julian Hogg, Hon Douglas (Gr'th'm)
Currie, Mrs Edwina Hordern, Sir Peter
Curry, David Howard, Rt Hon Michael
Davies, Q. (Stamf'd & Spald'g) Howarth, G. (Cannock & B'wd)
Davis, David (Boothferry) Howell, Rt Hon David (G'dford)
Day, Stephen Howell, Ralph (North Norfolk)
Devlin, Tim Hughes, Robert G. (Harrow W)
Dickens, Geoffrey Hunter, Andrew
Dicks, Terry Irvine, Michael
Dorrell, Stephen Irving, Sir Charles
Douglas-Hamilton, Lord James Jack, Michael
Dover, Den Janman, Tim
Dunn, Bob Jessel, Toby
Durant, Tony Johnson Smith, Sir Geoffrey
Eggar, Tim Jones, Gwilym (Cardiff N)
Jones, Robert B (Herts W) Shaw, David (Dover)
Jopling, Rt Hon Michael Shaw, Sir Giles (Pudsey)
Key, Robert Shaw, Sir Michael (Scarb')
Kilfedder, James Shelton, Sir William
King, Roger (B'ham N'thfield) Shephard, Mrs G. (Norfolk SW)
Knapman, Roger Shepherd, Colin (Hereford)
Knight, Greg (Derby North) Shepherd, Richard (Aldridge)
Knowles, Michael Sims, Roger
Knox, David Skeet, Sir Trevor
Lamont, Rt Hon Norman Smith, Tim (Beaconsfield)
Lang, Ian Soames, Hon Nicholas
Lawrence, Ivan Speller, Tony
Lee, John (Pendle) Spicer, Sir Jim (Dorset W)
Leigh, Edward (Gainsbor'gh) Spicer, Michael (S Worcs)
Lester, Jim (Broxtowe) Squire, Robin
Lightbown, David Stanbrook, Ivor
Lilley, Peter Stanley, Rt Hon Sir John
Lloyd, Sir Ian (Havant) Steen, Anthony
Lloyd, Peter (Fareham) Stern, Michael
Lord, Michael Stevens, Lewis
McCrindle, Robert Stewart, Allan (Eastwood)
Macfarlane, Sir Neil Stewart, Andy (Sherwood)
MacGregor, Rt Hon John Stewart, Rt Hon Ian (Herts N)
MacKay, Andrew (E Berkshire) Stradling Thomas, Sir John
Maclean, David Sumberg, David
McLoughlin, Patrick Summerson, Hugo
McNair-Wilson, Sir Patrick Taylor, Ian (Esher)
Madel, David Taylor, John M (Solihull)
Major, Rt Hon John Taylor, Teddy (S'end E)
Malins, Humfrey Tebbit, Rt Hon Norman
Mans, Keith Temple-Morris, Peter
Maples, John Thompson, D. (Calder Valley)
Marland, Paul Thompson, Patrick (Norwich N)
Marshall, John (Hendon S) Thorne, Neil
Marshall, Sir Michael (Arundel) Thornton, Malcolm
Martin, David (Portsmouth S) Townend, John (Bridlington)
Mates, Michael Tracey, Richard
Maude, Hon Francis Tredinnick, David
Mawhinney, Dr Brian Twinn, Dr Ian
Maxwell-Hyslop, Robin Walden, George
Mayhew, Rt Hon Sir Patrick Walker, Bill (T'side North)
Meyer, Sir Anthony Waller, Gary
Miscampbell, Norman Ward, John
Mitchell, Andrew (Gedling) Wardle, Charles (Bexhill)
Monro, Sir Hector Warren, Kenneth
Montgomery, Sir Fergus Watts, John
Moss, Malcolm Wells, Bowen
Mudd, David Wheeler, Sir John
Nelson, Anthony Whitney, Ray
Nicholls, Patrick Widdecombe, Ann
Nicholson, David (Taunton) Wiggin, Jerry
Parkinson, Rt Hon Cecil Wilkinson, John
Patnick, Irvine Wilshire, David
Raffan, Keith Winterton, Mrs Ann
Renton, Rt Hon Tim Winterton, Nicholas
Riddick, Graham Wood, Timothy
Ridsdale, Sir Julian Woodcock, Dr. Mike
Rifkind, Rt Hon Malcolm Young, Sir George (Acton)
Roberts, Sir Wyn (Conwy) Younger, Rt Hon George
Rossi, Sir Hugh
Rowe, Andrew Tellers for the Ayes:
Rumbold, Mrs Angela Mr. Tom Sackville and
Ryder, Richard Mr. Nicholas Baker.
Allen, Graham Blunkett, David
Archer, Rt Hon Peter Boateng, Paul
Armstrong, Hilary Boyes, Roland
Ashdown, Rt Hon Paddy Bradley, Keith
Ashley, Rt Hon Jack Bray, Dr Jeremy
Ashton, Joe Brown, Gordon (D'mline E)
Barnes, Harry (Derbyshire NE) Brown, Nicholas (Newcastle E)
Barron, Kevin Brown, Ron (Edinburgh Leith)
Beckett, Margaret Bruce, Malcolm (Gordon)
Beith, A. J. Buckley, George J.
Bell, Stuart Caborn, Richard
Benn, Rt Hon Tony Callaghan, Jim
Bennett, A. F. (D'nt'n & R'dish) Campbell, Menzies (Fife NE)
Bermingham, Gerald Campbell, Ron (Blyth Valley)
Bidwell, Sydney Campbell-Savours, D. N.
Canavan, Dennis Lamond, James
Carlile, Alex (Mont'g) Leighton, Ron
Carr, Michael Litherland, Robert
Clark, Dr David (S Shields) Livsey, Richard
Clarke, Tom (Monklands W) Lloyd, Tony (Stretford)
Clelland, David McAllion, John
Clwyd, Mrs Ann McAvoy, Thomas
Cohen, Harry McCartney, Ian
Cook, Frank (Stockton N) Macdonald, Calum A.
Corbett, Robin McFall, John
Cousins, Jim McKelvey, William
Crowther, Stan McLeish, Henry
Cryer, Bob Maclennan, Robert
Cummings, John McNamara, Kevin
Cunliffe, Lawrence McWilliam, John
Cunningham, Dr John Madden, Max
Dalyell, Tam Mahon, Mrs Alice
Darling, Alistair Marek, Dr John
Davies, Rt Hon Denzil (Llanelli) Marshall, David (Shettleston)
Davies, Ron (Caerphilly) Marshall, Jim (Leicester S)
Davis, Terry (B'ham Hodge H'l) Martin, Michael J. (Springburn)
Dewar, Donald Martlew, Eric
Dixon, Don Maxton, John
Dobson, Frank Meacher, Michael
Doran, Frank Meale, Alan
Duffy, A. E. P. Michael, Alun
Dunnachie, Jimmy Michie, Bill (Sheffield Heeley)
Dunwoody, Hon Mrs Gwyneth Michie, Mrs Ray (Arg'l & Bute)
Eadie, Alexander Mitchell, Austin (G't Grimsby)
Eastham, Ken Moonie, Dr Lewis
Evans, John (St Helens N) Morgan, Rhodri
Ewing, Harry (Falkirk E) Morley, Elliot
Ewing, Mrs Margaret (Moray) Morris, Rt Hon A. (W'shawe)
Fatchett, Derek Morris, Rt Hon J. (Aberavon)
Faulds, Andrew Mullin, Chris
Field, Frank (Birkenhead) Murphy, Paul
Fields, Terry (L'pool B G'n) Nellist, Dave
Fisher, Mark Oakes, Rt Hon Gordon
Flannery, Martin O'Brien, William
Flynn, Paul O'Neill, Martin
Foot, Rt Hon Michael Orme, Rt Hon Stanley
Foster, Derek Parry, Robert
Foulkes, George Patchett, Terry
Fraser, John Pendry, Tom
Fyfe, Maria Pike, Peter L.
Galloway, George Powell, Ray (Ogmore)
Garrett, John (Norwich South) Prescott, John
Garrett, Ted (Wallsend) Primarolo, Dawn
George, Bruce Quin, Ms Joyce
Gilbert, Rt Hon Dr John Radice, Giles
Godman, Dr Norman A. Randall, Stuart
Golding, Mrs Llin Redmond, Martin
Gordon, Mildred Rees, Rt Hon Merlyn
Gould, Bryan Reid, Dr John
Graham, Thomas Richardson, Jo
Grant, Bernie (Tottenham) Robinson, Geoffrey
Griffiths, Nigel (Edinburgh S) Rogers, Allan
Griffiths, Win (Bridgend) Rooker, Jeff
Hardy, Peter Ross, Ernie (Dundee W)
Harman, Ms Harriet Rowlands, Ted
Hattersley, Rt Hon Roy Ruddock, Joan
Heal, Mrs Sylvia Salmond, Alex
Henderson, Doug Sedgemore, Brian
Hinchliffe, David Sheerman, Barry
Hogg, N. (C'nauld & Kilsyth) Sheldon, Rt Hon Robert
Home Robertson, John Shore, Rt Hon Peter
Hood, Jimmy Short, Clare
Howarth, George (Knowsley N) Skinner, Dennis
Howell, Rt Hon D. (S'heath) Smith, Andrew (Oxford E)
Howells, Geraint Smith, C. (Isl'ton & F'bury)
Hoyle, Doug Smith, J. P. (Vale of Glam)
Hughes, John (Coventry NE) Snape, Peter
Hughes, Robert (Aberdeen N) Soley, Clive
Hughes, Roy (Newport E) Spearing, Nigel
Hughes, Simon (Southwark) Steel, Rt Hon Sir David
Jones, Barry (Alyn & Deeside) Steinberg, Gerry
Jones, Ieuan (Ynys Môn) Stott, Roger
Jones, Martyn (Clwyd S W) Strang, Gavin
Kirkwood, Archy Straw, Jack
Lambie, David Taylor, Mrs Ann (Dewsbury)
Taylor, Matthew (Truro) Welsh, Andrew (Angus E)
Thomas, Dr Dafydd Elis Welsh, Michael (Doncaster N)
Turner, Dennis Wigley, Dafydd
Wallace, James Williams, Rt Hon Alan
Wardell, Gareth (Gower) Williams, Alan W. (Carm'then)
Wareing, Robert N. Wilson, Brian
Watson, Mike (Glasgow, C) Winnick, David
Wise, Mrs Audrey Tellers for the Noes:
Worthington, Tony Mr. Frank Haynes and
Young, David (Bolton SE) Mr. Allen MacKay.

Question accordingly agreed to.

Bill read the Third time, and passed.

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