Finance Bill

HC Deb 16 July 1991 vol 195 cc233-73

Order for Third Reading read.

4.17 pm

The Financial Secretary to the Treasury (Mr. Francis Maude)

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

This is my first Finance Bill. Previously, the attractions of serving on the Finance Bill Committee seemed somewhat abstruse, but I knew that many hon. Members returned, their enthusiasm unabated, year after year to serve on it. Therefore, it was with some interest that I engaged in the exercise to see what was so entrancing. Now that I have joined that happy band, I have been initiated into all sorts of obscure and riveting mysteries such as stock lending, manufactured dividends and approved share option trusts. We have had an occasional insight into the Opposition's taxation policies, although the insight was generally provided by the Government rather than the Opposition. It has been a useful exercise.

Those of us who have seen the Bill through from the beginning to the end have, by and large, seen serious debate undertaken in a serious spirit. There have been disagreements on important matters, but that is inevitable. The debate has, however, been conducted in a spirit of good humour from both sides of the House. I now begin to see the attractions of these proceedings, which provoke so much devotion among their followers.

My hon. Friends the Economic Secretary and the Minister of State are veterans of Finance Bills, but for them, as for me, this is the first occasion on the Treasury Bench, and I pay a warm tribute to the hard work that they have put in, both upstairs in Committee and in the still watches of last night on Report.

The Bill has received a thorough consideration. We have not always accepted the arguments made for amendments, but that is hardly surprising. Frequently, we have accepted arguments and have responded constructively to many of the amendments. All these issues have been properly ventilated and explored in a useful exercise.

We have introduced several new clauses and amendments since Second Reading. A number of those were foreshadowed in the Budget statement, but were not ready for the original publication of the Bill. For example, clause 5 provides for a reduction in the rate of pool betting duties from 40 to 37½per cent. That follows proposals for a Foundation for Sport and the Arts, which was announced by the Pools Promoters Association. That subject was discussed, shortly before we pulled stumps last night, by my right hon. Friend the Chief Secretary to the Treasury and the right hon. Member for Birmingham, Small Heath (Mr. Howell). My memory of what took place at that hour is somewhat hazy, but I seem to remember that they were the protagonists in that discussion.

Clause 65 gives effect to the Budget announcement of a new relief from income and corporation tax to encourage business gifts of equipment to schools and other educational establishments. This is a practical measure intended to give help to business and to help education and business work in partnership.

Since Second Reading, the Bill has gained an entirely new part IV, dealing with stamp duty. Clauses 105 to 110 abolish a raft of minor stamp duties. Last year we announced our intention to abolish stamp duty on securities to coincide with the introduction of paperless trading and the TAURUS system. Part IV means that stamp duties will be abolished on all property except land and buildings. That continues the splendid tradition in recent years whereby in each Finance Bill the Government abolish at least one tax. We have exceeded expectations on this occasion by abolishing not one or two taxes but a multitude of stamp duties, and I am proud to be the begetter of that measure.

Mr. Christopher Gill (Ludlow)

Does not my hon. Friend think that there is something rather quaint about our tax system which has no fewer than 88 reliefs and allowances against the six main taxes which, in the current year, cost about £87 billion, while the six main taxes in themselves raised only £82 billion? To my simple mind, that shows that either all taxes are twice as high as they need be, or we have twice as many taxes as we truly need.

Mr. Maude

My hon. Friend makes a fair point. For the first time we have set out in the Red Book the effective value of the various tax reliefs so that exactly the sort of comparison that my hon. Friend has made can be made. That does not involve a judgment on whether it is right or wrong to have such tax reliefs, but it does at least enable there to be informed discussion on the relative merits. I make no secret of our view that, in general, it is better to reduce reliefs and reduce the rates of tax. [Interruption.] That is a general proposition. I do not know whether the hon. Member for Newcastle upon Tyne, East (Mr. Brown) agrees with it.

Mr. Nicholas Brown (Newcastle upon Tyne, East)

indicated assent.

Mr. Maude

That is splendid. We now have full consensus on the matter and that enables us to proceed with renewed confidence.

My hon. Friend is right to draw attention to that point and it is also right that every Chancellor of the Exchequer should have in his mind when he frames his Budget the balance between overall rates of taxation and the reliefs that are given against taxation.

Mr. Tony Favell (Stockport)

This is a good point at which to ask my hon. Friend about the framing of future Budgets. It was announced last week that, in future, budgetary plans for taxation and expenditure will be submitted to a European Commission star chamber. Can my hon. Friend say when that will be done? Will it be done before the Budget statement is made to the House? If there is a conflict between the House and the Commission, whose view will prevail?

Mr. Maude

I do not recognise from my hon. Friend's description the exact proposition to which he is referring. I am not aware of any intention by the Government to submit their processes to such a procedure. Perhaps my hon. Friend will elucidate.

Mr. Favell

The Daily Telegraph of 10 July said: Mr. Lamont, Chancellor, yesterday agreed to submit Budget plans for taxation and expenditure to an annual EC 'star chamber' of Finance Ministers responsible for bringing the 12 disparate national economies into line.

Mr. Maude

There is no proposition that we should submit what we put in our Budget for anyone's scrutiny before we present it to Parliament. That would be a wholly intolerable proposition. I reassure my hon. Friend that we have no intention of doing such a thing. It has been agreed that, after the event, we will send the Commission a version of our medium-term financial strategy, which is a broad part of the Red Book, to help the Commission in reaching a judgment on how convergence is progressing. However, I unequivocally assure the House that we have no intention of submitting our Budget, with all its detailed fiscal measures, for scrutiny other than by the House.

Mr. Denzil Davies (Llanelli)

Perhaps the Financial Secretary has not studied the draft treaty on European economic and monetary union, but one of its articles clearly states that the budget balances of all member states will have to be examined by the Commission which, after observing certain procedures, can then make recommendations regarding those budget balances. That represents a transfer of power over fiscal policy to the Commission, which will be empowered to make recommendations.

Mr. Maude

I am reluctant to disagree with the right hon. Gentleman, who is very knowledgeable in such matters. He referred accurately to the draft treaty, which is the previous presidency's working document. At this stage, not a single word of it is agreed. It is a working document, and, as I told the Treasury and Civil Service Select Committee a week or two ago, nothing is agreed until everything is agreed. Therefore, nothing in the draft treaty is taken as having the agreement of any member state.

Even if the draft treaty were agreed, it is a different proposition to suggest that a member state's overall budget balance should be subject to scrutiny and examination by institutions of the European Community after the event. If there is to be economic and monetary union—and I am not in a position to judge whether there will be—the convergence of budget deficits will be important. Everyone taking part in the negotiations agrees that monetary union could not be sustained if excessive budget deficits existed among member states.

Mr. Denzil Davies

The draft treaty makes reference to excessive budget deficits and, if the United Kingdom's deficit proved excessive, is it not the case that the Commission could consider that situation, make recommendations and, at the end of the day, bring a stop to that excessive deficit?

Mr. Maude

Such a provision may be contained in the draft treaty, but it is not agreed. It is agreed that if there were to be full currency union, it could not be sustained if excessive budget deficits existed among member states. We have argued consistently, as have other Community members, that the best sanction against excessive deficits is not binding limits and rigid, centrist, prescriptive rules but the market. Provided such a deficit is transparent, a member state would have considerable difficulty in financing it, so the market will provide its own remedy. That argument remains to be resolved. Some member states believe that binding limits and prescriptive centrist rules will be necessary, but we disagree. We will continue to discuss that aspect, but I assure the right hon. Gentleman and the House that the text of the draft treaty has not yet been agreed by the United Kingdom or by any other member state.

Clause 69 and schedule 15, which were added in Committee, extend the period over which companies can carry back trading losses and set them against profits from one year to three years. We believe that that will be particularly welcome to companies which, although fundamentally sound and with healthy profit records, are experiencing losses during the recession. That measure alone will be worth a quarter of a billion pounds to companies in 1992–93.

That brings me to the core of the Bill, which remains the same as it was on Second Reading. My right hon. Friend the Chancellor described his Budget as a Budget for business, and the Bill reflects that priority, easing the burden of taxation across the whole spectrum of industry.

Clause 23 cuts the main rate of corporation tax for 1990 from 35 to 34 per cent., reducing this year's tax bills by £380 million. Clause 15 halves the rating period for reclaiming VAT on bad debts, reducing it to one year. That means bad debt relief, which will give traders a cash flow boost of £340 million this year.

We are also providing help for next year, when the recovery will be under way. Clause 24, one of the shortest and simplest—but most splendid and significant—provisions in the Bill, sets the main rate of corporation tax for 1991 at 33 per cent. That gives the United Kingdom the lowest rate of corporation tax in the European Community, and among G7 countries. It means that, next year, companies will have an extra £83 million at their disposal to invest as they choose.

That was one of the issues on which the Government had an amicable but frank disagreement with Opposition Members. They wanted to give increased allowances to some forms of investment, which would, in our view, have taken investment choices out of the hands of business, where they belong. As we discovered when we examined the Opposition's amendment, it would have meant a higher rate of corporation tax overall—which was not heavily advertised by Opposition Members when the amendment was moved.

Mr. Nicholas Brown

The hon. Gentleman knows perfectly well that we cannot increase any taxation by means of the Finance Bill; we are prevented from doing so by the money resolution.

Mr. Maude

The House will have heard that explanation, and can decide for itself how much weight to attach to it.

The Bill also helps smaller businesses. Clause 25 raises the profits limit for the small companies rate, and for marginal relief, by 25 per cent. That will benefit 30,000 smaller companies, and means that the limits have been raised by 150 per cent. since 1988. Clause 68 allows unincorporated businesses to set any trading losses against capital gains of the same or the following year.

Those are the highlights of the business measures in the Bill. To them must be added a number of deregulatory measures, announced in the Budget, which do not require legislation—such as the raising of the VAT threshold to its highest-ever level in real terms and the introduction of quarterly payments of PAYE and national insurance contributions for some 600,000 small employers. Together, those measures fully justify my right hon. Friend's description of his Budget as a Budget for business.

Mr. James Wallace (Orkney and Shetland)

As I recall, the amount of relief that those measures would give businesses, in particular small businesses—according to the figures given at the time of the Budget—was exceeded by the amount that businesses would have to spend because of the Government's decision to impose a 10.9 per cent. uniform business rate increase in England and Wales. How does the Financial Secretary justify that extra imposition?

Mr. Maude

A great many taxes are—to use the technical phrase—buoyant: they increase their burden year by year to reflect inflation, with no need for positive Government decisions. Those taxes, which are levied on a percentage basis, have the effect to which the hon. Gentleman has referred, without the Government's making any positive decision.

It has always been understood, since the introduction of the uniform business rate, that it could not be increased by more than the rate of inflation. That is a much better deal for business than the deal offered by the old business rating system, under which businesses in some parts of the country were penalised by swingeing increases levied by hopelessly irresponsible councils with a malevolent approach to business. Some of our great cities have been devastated: swathes of land have been laid bare by councils that have levied such high rates that business has simply moved away. Businesses that suffered under such appalling regimes will have regarded last year's increase, which was limited to the rate of inflation, as relatively benign.

I have referred to the measures on business taxation and I should refer briefly to other measures, particularly on the themes of reform and fairness. Clauses 29 to 31 tackle different sorts of benefits in kind and, quite properly, they have generated a good deal of debate and careful examination. However, in all that debate, I do not think that anyone has sought to challenge the basic principle underlying our approach which is that, as far as possible, payments in benefits in kind should bear the same taxation as equivalent payments in cash. That is the only fair approach and I believe that it is widely accepted as the right approach.

Another matter of fairness is the taxation of non-resident trusts. Clauses 78 to 87 and schedules 16 to 18 are designed to counter avoidance of capital gains tax through the use of non-resident trusts. It is one of the technical areas in the Bill where the Government have benefited from helpful comments from some of the representative bodies. As a result of that, we introduced a number of amendments in Committee and on Report.

The Budget process is about deciding what the Government should spend and how they should raise the money to do it. That means that the Government have to cost every one of their proposals. They have to do so publicly and openly and then, openly and honestly, levy taxation to pay for that spending. The results are there for Parliament to scrutinise and for the public to judge. Curiously, the Opposition have been more reticent about their proposals. Nothing has been costed, nothing has been added up, but everything is a priority. So, as a service to the public, we costed the Opposition's proposals for them. We did so very modestly, with no fee charged and no exaggeration. We concluded that Labour's spending programme amounts to no less than an extra £35 billion—equivalent to an extra 15p—

Mr. Nicholas Brown

On a point of order, Mr. Deputy Speaker. What has Government speculation about Labour's public spending programme got to do with the Third Reading of the Finance Bill?

Mr. Deputy Speaker (Mr. Harold Walker)

The hon. Member for Newcastle upon Tyne, East (Mr. Brown) is quite right. I hope that the Minister will set a good example by sticking to the content of the Bill.

Mr. Maude

I was endeavouring—

Mr. James Arbuthnot (Wanstead and Woodford)

Further to that point of order, Mr. Deputy Speaker. Surely it is relevant to the rate of taxation that is to be applied by the Finance Bill. If the policies that were—

Mr. Deputy Speaker

Order. Our practice on Third Reading of any Bill is to confine the debate to the provisions in the Bill.

Mr. Maude

I am endeavouring to do that. I am endeavouring to give to the House an account of the deliberations in Committee when we spent a good deal of time discussing the standard rate of income tax. We had an interesting and illuminating debate on the clauses dealing with income tax which enabled us to draw attention to the fact that Labour's spending proposals would mean, unless they are wrongly costed, that there would be a 15p increase in income tax.

Mr. Deputy Speaker

Order. I hope that the Minister realises that if I allow him to discuss these matters, I have to allow other hon. Members to rebut his arguments. We would then start a debate not about Third Reading but about entirely different matters. I hope that the Minister will recognise what I have said and will observe it.

Mr. Maude

I submit myself fully to your ruling, Mr. Deputy Speaker, and accept entirely what you have said. The House might welcome the opportunity to allow Opposition Members to try to rebut what I have said, but I think that there will be sighs of relief from Opposition Members that they have been prevented from commenting on the costings.

Dr. John Marek (Wrexham)

rose—

Mr. Maude

I see that the hon. Member for Wrexham (Dr. Marek) is straining at the leash to leap to his feet and tell us in what particulars our costings of the Labour party's proposals are wrong.

Dr. Marek

I want to help the Financial Secretary. Clearly, it has escaped him that the clause to increase value added tax from 15 to 17.5 per cent. is contained in the Bill, so I invite him to discuss that. It would certainly not be out of order for us to know why the Government increased VAT.

Mr. Maude

I shall be glad to discuss that if the hon. Gentleman is keen to do so. We have already debated it and a further debate will not illuminate any dark secrets which have not been properly discussed.

Mr. Jonathan Sayeed (Bristol, East)

Will my hon. Friend give way?

Mr. Maude

I shall give way in a moment.

We increased VAT to raise £3.9 billion—if my recollection is correct—and to ensure that the books balanced when we reduced the headline figure of the community charge by £140 for every charge payer. It was an open policy which we have fully justified. We have had amusing debates about it and it is now on the statute book. It was especially interesting that when we announced that step in the Budget, the immediate response of the Leader of the Opposition was to huff and puff, to say that it was outrageous and monstrous and some such farrago of nonsense about how awful it was to tax children's sweets. A Labour Government introduced VAT 15 years ago—a fact which appeared to have escaped him at the time. However, when we had discussed the increase in VAT we waited with bated breath for the Opposition to vote against us and to try to vote down the outrageous measure to increase VAT from 15 to 17.5 per cent. on, among other things, children's sweets. But what did they do? They did nothing—one might almost say that they dithered. I am happy to renew the debate at this stage for the hon. Member for Wrexham, but I fancy that we shall have the better of the argument now as then.

Mr. Sayeed

May I ask my hon. Friend to deal with two matters? First, the Labour party did not vote against the change in the rate of VAT and, secondly, whatever promises Labour Governments have made prior to elections, every one of them has increased the basic rate of income tax.

Mr. Maude

On the first point, I confirm that my hon. Friend is right. The Labour party failed to oppose the measure to increase the standard rate of VAT. However, I must correct him on the second point, because there are two exceptions to his proposition. The Attlee Government of 1945–51 reduced income tax by 5 per cent. before increasing it again by 2½ per cent. thus making it 47½ per cent. The other exception involves the Ramsay MacDonald Government in 1924 who were in office for nine months and did not get round to increasing the rate. I am sure that they would have done so if they had had the chance, but, happily for the nation, they were routed out of office before they had the opportunity. However, my hon. Friend is right—in every other case Labour Governments have increased the standard rate of income tax.

Research discloses that in their manifestos to the British public Labour Governments oddly enough made no mention of such proposals. They were silent about them and, indeed, the impression given by the then leaders of the Labour party was that there would be no general increases in the rate of income tax. Indeed, the statements made by former leaders of the Labour party bear an uncanny resemblance to those made by the present leader: "There will be no increase in the basic rate of income tax, honest, guv. Nothing like that—we've never done that before. Not the sort of thing we do." However, they have done it every time.

We argue that under Labour's spending plans as they have been costed by us—and they have not been disputed by the Labour party—it is absolutely inevitable—[Interruption.] I issue a challenge to the hon. Member for Islington, South and Finsbury (Mr. Smith). Let him dispute our costings of his party's plans. Under Labour's spending plans, it is inevitable that any future Labour Government would increase the standard rate of income tax as previous Labour Governments have done.

Mr. Chris Smith (Islington, South and Finsbury)

I give the Financial Secretary a categorical assurance, as we have done consistently in the past few years, that the incoming Labour Government have no intention of raising the basic rate of income tax. While we are on the subject of the burden of taxation, will the Financial Secretary state what percentage of gross domestic product the tax burden represented in 1979 and what it will represent after the Bill is passed?

Mr. Maude

I shall answer that straightforwardly. The burden of taxation increased in the two years after this Government took office in 1979, because we had to pay off the massive burden of debt which the previous Labour Government had stored up for future taxpayers. When we talk about the burden of taxation it is important to bear it in mind that we are not talking only about the burden on today's taxpayers. When Governments run up debts, that places a burden on future taxpayers, so it is a question of when taxpayers have to pick up the bill. Under Labour Governments it is the future generations which have to pick up an ever bigger tax burden in order to pay off the debts of those profligate and incontinent Labour Governments.

Certainly, we increased the tax burden in our first two years in office in order to control the massive public debt placed on the country by the previous Labour Government. Since then, we have consistently and successfully reduced the tax burden.

Mr. Smith

The Financial Secretary is incorrect—the figures appear to have escaped him. When the Government came into office the tax burden as a share of GDP was 34.5 per cent. It is now 37.5 per cent. Of course, it went up dramatically in the first few years under the present Government—it stayed high and went up again in 1989–90 as a direct result of the introduction of the poll tax. If he examines the figures, the Financial Secretary will see that it rose towards the end of the 1980s as well as at the start.

Mr. Maude

By chance, I have the figures before me for greater accuracy and for the enlightenment of the House. It might be helpful if I read them.

In 1978–79 the tax burden as a percentage of GDP was 34¼ per cent. It then increased, and I freely confess that. We have made no bones about that and I can justify it in any circumstances. It went up in 1981–82 to 40 per cent. and that was to pay off the debt left by the previous Labour Government, a crippling burden of debt for which the hon. Gentleman should apologise rather than seek to pick an argument. From that high point in 1981–82 of 40 per cent., the burden of taxation has fallen. It has not fallen every year, and the hon. Gentleman was right to point out that in 1986–87 and 1987–88 it went up from 38¼ per cent. to 38½ per cent. Again, between 1989–90 and 1990–91—as forecast—it went up from 37½ per cent. to 37¾ per cent. That increase may be what the hon. Gentleman is calling in aid for his proposition, but it is timid support.

The clear trend is from a high point of 40 per cent. levied to pay off the burden of debt left by the Labour Government to 37¾ per cent. last year. We intend to continue that trend.

Mr. Wallace

For clarification, do those figures include local taxation or only national taxation? If they include local taxation, what impact does the poll tax have on them?

Mr. Maude

They include total taxation, including local authority revenue, if that helps the hon. Gentleman.

Mr. Sayeed

Does my hon. Friend agree that the real effects of a Labour Government are as follows: the dead go unburied, the rubbish goes uncollected, the sick go unattended, and the International Monetary Fund ends up running our economy?

Mr. Maude

Certainly. My hon. Friend is exactly right. If one wants to see what a Labour Government leads to, one should take a train trip to Liverpool. One then sees in microcosm on the streets of Liverpool memories of 1978–79, the winter of discontent. There was rule by the unions. The Labour party was absolutely in hock to the unions and did what it was told. There was obedience at every point. The British people will want to avoid that—

Mr. Deputy Speaker

rose—

Mr. Maude

You anticipate my next move, Mr. Deputy Speaker, which is to return to the Bill. It has put into effect my right hon. Friend's Budget, which was a Budget for business and a Budget which has been welcomed by business, which is valuable to business and which will set British business on the road to recovery, growth and prosperity in the 1990s in the same way that our Budgets in the early 1980s did for the rest of the 1980s. Having built a platform and a firm foundation of low inflation, we saw economic growth at levels that exceeded those of almost everywhere else in Europe. For the first time since the war, our rate of growth was faster than that of France and of Germany. That is what we shall see if we continue on this path in the 1990s.

The Finance Bill and the Budget are essential parts of our proposals and foundations. When the British people have the chance to choose between these economic and taxation policies and the profligacy and incompetence of the Labour party, they will unhesitatingly choose us.

4.51 pm

Mr. Nicholas Brown (Newcastle upon Tyne, East)

The Financial Secretary has a pretty crummy line in political knock-about, although it is of a slightly higher calibre than that of his immediate predecessor. His immediate predecessor was pretty savagely treated after last year's Finance Bill by being demoted to the post of Secretary of State for Trade and Industry. I forecast no such future for the present Financial Secretary or for the other junior members of the Treasury team.

It is fair to say that during the passage of the Bill, when we discussed the details of the measures rather than some of the broader and more contentious political matters which lay behind them, Treasury Ministers responded to the issues of detail with unfailing courtesy and with as high a degree of accuracy as one could expect from Ministers. We appreciate that.

The Bill has the authentic hallmark of the Government who produced it. This is probably the last Finance Bill Third Reading in which I shall speak from the Opposition Benches, so it may be right to treat the House to a metaphor. It is as if the Finance Bill were a little furry animal trapped and staring fixedly into the headlights of an oncoming lorry made up of Britain's economic problems. Blinking into the headlights, the Bill completely fails to respond to the problems. The context is this.

Lords Commissioner to the Treasury (Mr. Nicholas Baker)

It is an oxymoron.

Mr. Brown

I do not know about the oxy. The hon. Gentleman, being a Government Whip, probably has more experience of dealing with the rest than I have.

The economic context is that output is falling, the economy is contracting, investment is forecast by the Chancellor of the Exchequer to fall by 10 per cent. in 1991, and unemployment is rising, as it has done for the past 14 consecutive months. The Chancellor tells us that it is a price worth paying. He may believe that it is a price worth paying if someone else pays it. [Laughter.] Conservative Members may laugh cheerfully at that, which is generous of them. Unemployment is the price that they will have to pay for the way in which the Government have managed the economy.

We still have a trade deficit in spite of the recession. The previous Labour Government, to whom the Financial Secretary so derisively referred, managed to maintain, in spite of all the difficulties with oil pricing, a manufacturing surplus every year. Yet the Government have managed to turn that into a deficit and they look set to continue the deficit.

We still have high interest rates which have led to record business failures and to 44,000 homes being repossessed last year. The recession is suppressing inflation, but the underlying pressures are still there and are stoked up by public utilities' privatisation and the consequent price rises. The tax burden still falls unfairly on those of ordinary means rather than on those most able to bear their fair share.

As the juggernaut of economic problems steamrollers along the road, the little furry Finance Bill sits staring back at it.

Surely the most striking point is the dislocation between the measures in the Bill and the problems facing the British economy.

Mr. David Winnick (Walsall, North)

What help is given to those on ordinary incomes who have had a very modest decrease in direct taxation but who face the burden of ever-increasing price rises, certainly for essential services such as gas, water, electricity, fares and dental charges? Only last week someone who lives in my borough complained to me that, because he is on a modest income and cannot be exempted, he had to pay £140 for dental treatment. What help is being given to such people when they face tremendous increases which they cannot get out of?

Mr. Brown

There is nothing in the Finance Bill for people in the position that my hon. Friend has outlined. If anything, the Bill makes matters marginaly worse for them because there is a 2.5 per cent. increase in VAT. In indirect taxation, the burden falls on every citizen, regardless of his income, who has to purchase taxed products. Not only has the distribution of the tax system moved to place the burden on those least able to bear it, but the substantial increases in utility charges prior to privatisation have had a regressive effect. There is nothing in the Bill to help my hon. Friend's constituents.

We are confronted by the highest number of business failures on record—66 per cent. up on the equivalent half year last year. Every hon. Member has constituents who are affected by that, and the matter was discussed in the House yesterday. The Financial Secretary boasted about clauses 23 to 25, which introduce a concession on corporation tax. It is a modest counter-cyclical measure, but it is not much use to businesses which are in trouble because of the Government's high interest rate policy and which will have little charge to corporation tax to worry about. Indeed, the owners of those businesses might wish that they had.

As many Opposition Members have mentioned, there is rising unemployment. The Bill has nothing to say about that apart from clause 58, which says, "Let them build toll roads." If that is a public works programme to help to bring down unemployment, I can only say that it will not work.

Mr. Maude

rose—

Mr. Brown

On toll roads? I give way to the hon. Gentleman on that.

Mr. Maude

The hon. Gentleman seemed to be talking about unemployment. He could help the House a little bit by telling us about the latest version of the Labour party's view on the effect of the minimum wage proposition on unemployment. Does he accept the universal view of learned economic commentators that it must inevitably cause higher unemployment to a greater or lessser extent?

Mr. Brown

Clearly that point has nothing to do with Third Reading. It is tacky of the Government to suggest that to ensure a basic, decent standard of living—a rate of £3.40 an hour—is unjust and unreasonable. Our European partners can do it and the United States can do it, yet somehow we cannot. Instead of saying that he does not want his friends in the private sector to have to pay more money in wages, the Financial Secretary has the nerve to say to the House, "Oh, we are concerned about unemployment." The Conservative party is concerned about unemployment? Since when?

Mr. Maude

I note that the hon. Gentleman does not dissent from my proposition that a minimum wage would inevitably lose jobs and cause higher unemployment. That is the verdict of every learned commentator. Is it now the view of the Labour party?

Mr. Deputy Speaker

Order. I cannot find anything about the national minimum wage in the Bill. We ought not to discuss that. Let us not have another debate about it. Let us get back to the Finance Bill.

Mr. Brown

I dissent strongly from the Financial Secretary's suggestion; the evidence from our European partners and from the United States of America is enough for me. But I shall not be drawn down that road—[Interruption.]—because you, Mr. Deputy Speaker, have asked me not to be. I shall respect the Chair, although Ministers find it difficult to do the same when it is not convenient for them.

Yesterday the Labour party forced a debate on banking supervision in the wake of the Bank of Credit and Commerce International scandal. The Bill has something to say on investor protection. Clause 46 makes a modest proposition, setting out what most people thought that the law already was on the tax treatment of moneys paid into an insurance company for an investor protection scheme. That is welcome, in its way, but the dislocation of scale between that measure and the Government's inactivity on BCCI reveals their almost pathological unwillingness to tackle any of the major problems facing our country.

It looks as though the recession will not be shallow or short lived—although I suspect that one or two other things round this place may be shallow and short lived. In Paris the Chancellor of the Exchequer said: Consumer spending led us into this recession"— I take that to be the Chancellor's final verdict on the 1988 Budget, which, as the then Financial Secretary, he did so much to implement— and I expect it to lead us out. As an encouragement to consumer spending, he then slapped an extra 2.5 per cent. on VAT.

The Prime Minister, too, has focused on encouraging consumer spending. I understand that under his citizens charter there will be real and serious trouble for banks whose cash dispensers run out of banknotes over the weekend. Oh yes, that will get consumer spending going.

Ironically, with the possible exception of the offshore trust reforms, the only measure of strategic significance in the Bill is the VAT increase. That was designed to get us out of the worst taxation fiasco in modern times.

The Financial Secretary spoke of the number of taxes that the Government had abolished, but we hear much less from Ministers about the tax that they invented and created—the poll tax. If it had not been for the poll tax and the subsequent political problems of the Conservative party, there would have been no need for the 2.5 per cent. increase in the rate of VAT.

Mr. Arbuthnot

I should be grateful if the hon. Gentleman would clear up a point of genuine confusion for me. He mentioned the offshore trust regime introduced in the Bill. He may remember speaking on clause 77, concerning the offshore trust regime, when he said: I repeat that we have no plans to increase capital gains tax. When I asked whether he intended to break the link between capital gains tax and income tax, he said: I think that the implications of what I have said are clear. The hon. Gentleman has correctly followed the point to its logical conclusion." [Official Report, 7 May 1991; Vol. 190, c. 683–84.] On the other hand, the hon. Member for Derby, South (Mrs. Beckett), in an interview published about two weeks ago in the Financial Times, said: In principle we would like to align the rate of capital gains tax with income tax, but the whole issue of capital gains tax is complex and still under review.

Mrs. Margaret Beckett (Derby, South)

I did not say that.

Mr. Arbuthnot

What is the hon. Gentleman's policy on capital gains tax and income tax? Does the Labour party have a policy?

Mr. Brown

Yes, we have. I believe that the hon. Gentleman quoted what the reporter said during the interview rather than what my hon. Friend said. The hon. Gentleman knows perfectly well that capital gains tax and income tax are not structured in the same way. Our specific proposals have been discussed in several debates, so I shall not go into the detail again. I can remember at least four Friday debates featuring the direct tax structures proposed by the Labour party, and I believe that the details are well understood, at least by every hon. Member attending this debate.

We have made it clear that the changes that we intend to make will be effected at a very early stage of the lifetime of the Labour Government. That is incompatible with trying to make parallel changes in the capital gains tax structure. I should firmly oppose that.

We have no specific proposals to increase capital gains tax. The hon. Gentleman has said before that an anomaly could be created, and of course he is correct. It would not be possible to bring the rates close together because of our proposed income tax banding structure. We could say that we would eradicate the anomaly over time or that we would live with it. I am giving the hon. Gentleman as honest an answer as I can: we shall live with the anomaly, knowing that in principle there may be an intellectual case against it. We shall have to live with it because of the different structures of the two taxes. My answer does not seem to delight the hon. Gentleman.

Mr. Arbuthnot

Will the hon. Gentleman confirm what I heard the hon. Member for Derby, South (Mrs. Beckett) say from a sedentary position—that she did not say the words that appeared in the Financial Times? If she says that she was misquoted, of course I accept that. It would be good to have that at least on the record.

Mrs. Beckett

I am delighted to do so.

Mr. Brown

The exchange has taken place and everybody seems happy. The hon. Gentleman has served on as many Finance Committees as I have, and I acknowledge and greatly respect his specialist interest in such matters.

I know that the taxation policies of the Labour party are fascinating to Conservative Members, because a number of them are paralleled in the Bill. I remember the Prime Minister, when he was Chancellor of the Exchequer, roundly denouncing us for planning to freeze the married couple's allowance. Yet the Financial Secretary is presiding over a Bill that does precisely that. The then Chancellor—now the Prime Minister—also denounced us for planning to abolish the higher rate of mortgage interest relief. Yet the Government have gone on to do exactly that.

It is a bit cheeky for the Conservative party to denounce us for our proposals and then, when they carry out those proposals, to say that they are justified and reasonable. I was much taken with the explanation that the Financial Secretary gave in Committee. He said that the difference was all about motivation. If the Labour party were doing those things, we would apparently be badly motivated, whereas when the Conservative party did the same things they were well motivated, so that made it all right. Perhaps it does; perhaps it does not. I must say to the Financial Secretary, in all kindness, that that was one of his more feeble arguments.

While we are talking about tax, we should probably draw a veil over the Government's pledge to reduce rates of direct taxation. Clause 21 takes up that point: it says that the rate of direct taxation will stay the same.

The Financial Secretary was good enough to refer to the Opposition's approach to the Bill. The approaches of the two major parties when in opposition have been somewhat different. The Labour party has taken the view that we should have our political arguments on the Floor of the House and that, within the bounds of the normal to and fro of political exchange, we should apply a more detailed and workmanlike scrutiny to the Bill in Committee. In Committee especially, we take our responsibilities as the official Opposition seriously, for the reason that there is no other forum in which these matters can be scrutinised in detail. I must say that I am not entirely sure that we are right to structure our debates as we do. I am not sure that it is right that there should be no other forum for scrutinising these matters, but that is the way in which we conduct our affairs at the moment, and so be it.

It is appropriate to thank the staff who worked for our Front-Bench team and those at the Labour party headquarters for all the help that they have given us in dealing with matters of detail and, in particular, to express the thanks of the Front-Bench team to Mr. Steve Tovey for his invaluable help. Our achievements are a credit to him, and any shortcomings are the fault of others.

Mr. Nicholas Baker

What achievements?

Mr. Brown

The Whip asks, "What achievements?" That is good of him, as I am about to list them. There are a number of matters of detail on which we feel that the Government—

Sir Nicholas Bonsor (Upminster)

Oh, really!

Mr. Brown

The hon. Gentleman seems to object to the fact that I am discussing the contents of the Bill on Third Reading. I remind him that we are not supposed to be discussing anything else. If he is irritated by it, his best bet is to go and get a drink outside the Chamber.

Sir Nicholas Bonsor

Having listened to the hon. Gentleman for quite long enough, I shall probably take his advice. Quite honestly, Mr. Deputy Speaker, the Third Reading of a Finance Bill is hardly the time for the hon. Gentleman to be reading out a list of names and telling us of his approbation for all those who work in Transport house, or whatever the Labour party's headquarters is now called. That has nothing to do with the Finance Bill.

Mr. Brown

The hon. Gentleman could not be more wrong; it has a substantial amount to do with the Finance Bill. The Government, for their part, have all the resources of the civil service behind them in bringing their policies —their version of those matters—to fruition. The Opposition have no such resources. I note that my counterpart on the foreign affairs team can obtain a briefing from the Foreign Office on a specific matter. If I try to obtain a briefing from the Inland Revenue, I am told that I cannot have direct access to the Government's professional advisers at the Revenue—not even on a matter that is not politically contentious—and that any advice that I require must come from the Financial Secretary. We do not regard the Financial Secretary—nice chap though he is, in many ways—as a neutral source.

Mr. Nicholas Baker

indicated dissent.

Mr. Brown

The Whip seems to be criticising my remarks. I thought at first that he was going to suggest that the Financial Secretary was not a neutral source, but he seems to be taking issue with some other point that I made, and no doubt, on that, he is more knowledgeable than me.

There has been a range of successes, and it is right that the Labour party should take some pride in them. Remember that we have no realistic chance of voting the Government down in the Finance Bill Committee because that Committee's composition reflects the composition of the House.

Mr. Chris Smith

We nearly did.

Mr. Brown

My hon. Friend reminds me that, on one occasion, we almost did. Usually, however, our only method of securing concessions from the Government is by reasoned argument. I suppose that it is some small tribute to those in charge of the Government's affairs that that succeeds on occasion—in fact, on quite a few occasions. The proposal in respect of bad debt relief for VAT and the reduction of the period from two years to one is exactly what we pressed for.

On offshore tax, my own stirring contributions to our debates on tax avoidance last year clearly shamed a rather recalcitrant Government into eventual action. I know that my hon. Friend the Member for Islington, South and Finsbury will take particular pleasure in the concessions made to members of the acting profession, both on agency fees and in respect of the concessions that followed this year. On the question of personal allowances, the concession of the Minister of State, Treasury, gained in response to what is now our new clause 30, is welcome, and we thank her for it.

On employee share schemes, last year we tabled a new clause containing what we felt was the innovative idea that a new selective executive share option scheme should not be allowed unless there was an all-employee scheme in place. The Chancellor of the Exchequer appears particularly to have liked that idea and this year the Government have introduced precisely such a proposal. On beneficial loans, my hon. Friend the Member for Islington, South and Finsbury, among many others, last year raised the anomaly of a tax charge arising where employees had mortgages at market rates from their employer. The tax treatment of that issue, which created the anomaly, has been addressed in the Bill.

On donations to charity, last year we said that a £5 million upper limit on gift aid payments was fatuous and that we should either have a realistic upper limit or none at all. This year, the limit has been abolished. I know that my hon. Friend the Member for Wrexham (Dr. Marek) was grateful for the concession that he received yesterday in respect of developers' self-supply. We even managed to get some drafting amendments, to schedule 12(3), accepted. Usually, our amendments are rejected on the ground that they would make the Bill worse.

Compare all that constructive and detailed—albeit perhaps not particularly exciting—stuff with the behaviour of the Conservative party when in the same position. I have been re-reading, as someone in my position should, a book by Lord Barnett called "Inside the Treasury" in which he discusses the way in which such matters were dealt with when the Labour party was in government. Discussing the hours spent in the Finance Bill Committee, Lord Barnett has this to say, on pages 55 and 56: During those long hours in committee, often from 4 pm to 8 am the following morning"— I should point out that the Conservative party could not have kept its Members there until 8 am the following day— I managed to keep my temper in the face of intense provocation from Opposition backbenchers like Graham Page, Nigel Lawson, Peter Rees, Ian Gow and Nicholas Ridley. They would go on and on, coming up with what they assumed to be hilariously funny examples of anomalies, such as the Capital Transfer Tax consequences of me being knocked down by a bus. Judging by the laughter of other Conservative Members, they clearly found this kind of stuff very funny. I could only feel grateful that I had missed out on public school debating societies. That allows us to contrast nicely the two different ways of dealing with these matters—the responsible, sensible, workmanlike approach of the Labour party, and the approach adopted by the Conservative party.

Mr. Wallace

The hon. Gentleman makes a clear contrast, but does he not think that the real contrast to be drawn is between a Parliament in which the Government have a majority of 100 and a Parliament of the kind to which he is no doubt referring, in which the Government have a small majority or no majority at all? And how does he see next year's Finance Bill shaping up?

Mr. Brown

I certainly hope to see next year's Finance Bill from the other side of the Chamber. As for the difference in the size of the parliamentary majority, the hon. Gentleman is quite right to point out that the Opposition are labouring under a disadvantage because there are substantially more Conservatives in this place than there are of us. Nevertheless, I think that we have handled the cards in our hand very well, and our achievements are made all the more remarkable by the fact. I must also thank the Back Benchers who served with us on the Standing Committee.

Mr. Tom Pendry (Stalybridge and Hyde)

I hope that my hon. Friend is not making a virtue out of what he has just outlined. As someone who was a Government Whip when we had a majority of only one, may I say that if this Government could not keep their troops in Committee until 8 am, some of us would like to know why we did not try to keep the Committee sitting through the early hours.

Mr. Brown

My hon. Friend's willingness to serve on next year's Finance Bill has been noted. The point that I was making is that we could have done that. We had a straight choice of tactics between filibustering in an ignorant and long-winded way—something that none of us would ever do—or, alternatively, having an informal day-to-day timetabling agreement with the Government to make measured and steady progress for which in return we would be able to subject each and every clause to detailed examination.

Mr. Favell

Will the hon. Gentleman give way?

Mr. Brown

I will give way if the hon. Gentleman wants to make a sensible comment.

Mr. Favell

I will make a very sensible intervention. I am sorry that I was not a member of this year's Finance Bill Committee and was unable to listen to the hon. Gentleman. However, is not the truth of the matter that the Opposition could not really oppose the Bill because it contains nothing but eminent good sense?

Mr. Brown

Actually, the Bill contains a substantial number of our proposals. We opposed the Bill in a reasoned and workmanlike way. Our only debate is between the relative merits of filibustering so causing a guillotine to be introduced which results in no debate on the rest of the Bill and taking the responsibility to probe everything carefully, including the schedules. We chose the second approach. That was the right thing to do and it has paid off. The hon. Member for Stockport (Mr. Favell) has not dissented from that. If he is still a Member next year, we will see whether he can serve on the Finance Bill Committee in opposition so that he can address the practicalities of the two different approaches. I am willing and able with my hon. Friends to have a go at handling whichever approach he decides to adopt.

I have served on the Committee of four Finance Bills under two distinguished and very able shadow Chief Secretaries to the Treasury. I have learnt a lot from them and it has been a privilege to serve under them. It has also been my privilege to serve with three good comrades—if it is not unfashionable to say that nowadays in the Labour party. I want to thank my hon. Friends the Members for Islington, South and Finsbury, for Wrexham and for Brent, South (Mr. Boateng) for their comradeship, support and their contributions to the Bill.

My hon. Friend the Member for Newcastle-under-Lyme (Mrs. Golding) has done so much to help my colleagues with their decision making. She has made an invaluable contribution to the Bill. Contrary to legend, she is quite a tender-hearted character. I know that she was worried about that little furry creature to which I referred in my metaphor at the beginning of our deliberations on the Bill. I referred to that little furry creature and the Government's response to the problems of the British economy and said that the little creature was about to be run over by a great juggernaut. I have some cheering news for my hon. Friend the Member for Newcastle-under-Lyme: there is a bandwagon behind that juggernaut, and that bandwagon is ours.

5.23 pm

Sir Giles Shaw (Pudsey)

I hesitate to intrude on the panegyric for fellow members of the Finance Bill Committee provided by the hon. Member for Newcastle upon Tyne, East (Mr. Brown). I am sorry that I was unable to serve on that Committee. It seems to have been a handsome combination. The dissenters did a good methodical job, and the Church of England—in the shape of my hon. Friend the Financial Secretary to the Treasury, who won most of the points most of the time—did a reasonably pragmatic job.

Serving on a Committee is extremely exciting. I first sat on a Committee in 1974, when I was on the Opposition Benches in the Committee considering the Prices Bill, which was master-minded by the then hon. Member for Hitchin who subsequently became Mrs. Shirley Williams. She tabled an amendment to clause 1 of that Bill, which dealt with foods liable to subsidy. She wanted to increase the rate of subsidy and thus raise public expenditure, something to which Labour Governments are very prone. Her amendment to clause 1 related to line 1 and read "after `butter,' insert `cheese'." In opposition at the time, we were led by my now right hon. Friend the Member for Southend, West (Mr. Channon). At the first sitting of the Prices Bill Committee, my then hon. Friend wanted to know whether the cheese to be subsidised would be Gorganzola from Italy, Camembert from France or Gouda from Holland. It took a little while to refine what Shirley Williams wanted to do. In fact, it was two and a half days before she provided a solution and added after "butter" insert cheese of the hard pressed Cheddar type. That is how we used to proceed in Committee and I do not think that things have changed a great deal.

I wish to refer now to the Third Reading of this Finance Bill and in particular to consider the provisions in relation to foreign earnings. They can be considered in two ways: first, in relation to individual earnings and, secondly, in respect of national earnings and benefits. With regard to national earnings, it is clear that the shipping industry plays a substantial role in the nation's earnings.

My hon. Friend the Financial Secretary to the Treasury is aware that that point has been a matter of considerable interest on the fringes of the Finance Bill. He would agree that, despite the enormous decline in the tonnage of British shipping, which now is one tenth of the tonnage which existed in 1980, the industry's earnings are still substantial and amount to around £4 billion—and that is apart from the insurance-related services which benefit the City of London and the balance of payments and amount to at least another £1 billion.

In the foreign earnings section, the Government sought to address certain aspects of the shipping issue. Clause 44 eases the tax burdens on those at sea with the merchant fleet or in other capacities. I thank my hon. Friend the Financial Secretary and the Government for making that significant concession. He will know that there is some anxiety in the industry that the provision may distort the pattern of employment between long-haul and short-haul vessels. However, the fact remains that the Government took a precise interest in the shipping industry by making that concession in clause 44.

Many of us are concerned that an industry which is sufficiently important to be considered by the Government in that way, and to be granted a concession where the Government thought that was justified, is still a hugely important national industry with a substantial reservoir of public support. The decline of that industry with a consequential loss of trade and prestige is causing considerable alarm on two grounds: first, because a huge national asset has been wasted through lack of nurture and, secondly, because with regard to the defence requirements, that element of shipping which is so vital when there are difficulties will not be there if—I hope that it will always be if rather than when—it is ever needed.

For that reason, my colleagues and I wanted to amend the Bill. My hon. Friend the Member for Wanstead and Woodford (Mr. Arbuthnot) moved an amendment in Committee, but it was negatived. That was bad luck and the issue was dropped—and correctly so—from our agenda today. However, the issue remains and it has already been given the importance which I suspect the Government are beginning to attach to it as a result of two developments.

The first development was that a working party was set up by the Treasury when my right hon. Friend the Prime Minister was Chancellor of the Exchequer, comprising five Departments of State. It examined the problem of where taxation or relief can be applied and all other problems associated with the maintenance of the British shipping capacity. Those five Departments included the Department of Trade and Industry, the Ministry of Defence, the Foreign and Commonwealth Office and the Department of Transport, as well as the Treasury, which was clearly given the lead.

It was interesting that in yesterday's debate on new clause 9, which was moved by my hon. Friend the Member for Dover (Mr. Shaw), my right hon. and learned Friend the Chief Secretary to the Treasury referred twice to this issue. He dealt with it first in column 98 of Hansard, but more importantly in column 99 when he referred twice to ministerial consideration of the matter. Referring to flagging out, he said: the report of a technical working party is being carefully studied. An important defence issue is being addressed by Ministers and in due course more can be said about it. In response to an intervention from the hon. Member for Newcastle upon Tyne, East, my right hon. and learned Friend then said: The matter is being considered and a statement will be made when a proper conclusion is reached. I cannot say whether that will be before the House rises but I wanted hon. Members to know that the defence issue, which is unrelated to these fiscal matters, has the serious attention of Ministers."—[Official Report, 15 July 1991; Vol. 195, c. 99.] The most important element of information that I culled from that rather slender saga was that the British shipping industry will be a sharp focus for Government attention.

Mr. Nicholas Brown

I absolutely and entirely agree with the hon. Gentleman. The Chief Secretary's remarks about ships being taken up from trade were not only interesting, but also important. We should like a statement from the Government on that matter, if not before we rise, soon after we return from the summer recess. Like the hon. Gentleman, I lay enormous stress on the importance of merchant shipping and merchant ship building and on the need to retain crews.

Sir Giles Shaw

I am grateful for the hon. Gentleman's intervention and his committed interest in shipping, which is a cross-party issue.

Following my right hon. and learned Friend the Chief Secretary's comments yesterday evening, I should like to ask my hon. Friend the Financial Secretary some questions. Will he now state unequivocally that the Government recognise that there is a problem in relation to the rapid decline in tonnage and in its availability for defence purposes? Does he recognise equally that, although tonnage is an issue, our seafarers, their training, trained capacity and availability are also an issue? He will recall the difficulty during the Falklands conflict when many of the foreign-trained crews sought to be relieved of their posts and to be replaced by British seafarers and seamen who were trained and available. Happily, that was resolved, but my hon. Friend must agree that it is not simply a question of tonnage and of the acceptability of certain types of ship for certain defence needs—it is equally a matter of having trained and available seafarers who can man those ships if they are ever taken out of trade and deployed by the Ministry of Defence.

Is there now a genuine commitment to consider that issue? If so, that would be a major step forward. The solution itself does not matter so much—there are many possible ways of dealing with this—but the fact that the issue is being seriously addressed is in itself a significant development.

Mr. John McFall (Dumbarton)

The hon. Gentleman may be interested to know that the Select Committee on Defence has also considered that point in relation to merchant shipping and that we have expressed our concern. In another place, Lord Fieldhouse, the Admiral of the Fleet, said in his maiden speech: The number of British-manned ships, sailing under the British flag and available for defence purposes, is now at a crucial level and may already be too few. We ignore this situation at our peril."—[Official Report, House of Lords, 12 June 1991; Vol. 529, c. 1105.] Does the hon. Gentleman agree that the Government should treat such comments with the seriousness that they deserve?

Sir Giles Shaw

I am grateful to the hon. Gentleman for drawing my attention to that. In 1988, the Select Committee on Defence stated: The availability of merchant shipping for defence purposes is governed by three key factors—the number of UK flagged ships, their accessibility when they are needed and the availability of a pool of British seafarers to man them. It concluded: There are grounds for concern on all three counts". That was the first point that I wanted to raise with my hon. Friend the Financial Secretary.

Secondly, if my right hon. and learned Friend the Chief Secretary was referring yesterday to the interdepartmental committee that has been set up to study shipping, and if that committee is to issue a report, it is important that such a report should be produced quickly. Will my hon. Friend confirm that that is the group that is reporting? If he can confirm that—I suspect that he can—will he consider consulting the interests that are involved prior to determining the Government's final view or policy on this matter? As he knows, the General Council of British Shipping. has had several close contacts with his good self and his colleagues on this matter, but where Ministry of Defence interests are also involved, it is important that there should be discussion with the industries involved prior to the Government firming up the proposal that they will lay before the House.

Thirdly, if my hon. Friend can confirm that those are the portents, I understand that the method by which the Government decide to act must be a matter for themselves. My hon. Friend was right to draw attention to the allowances issue. The corporation tax relief is spread right across the board and we must all welcome the moves in the general direction of reducing taxation on industries, whatever they may be.

I seek no special tax element for the industry, but I do seek a refined and clear answer to the problem that has bedevilled both the industry and those who seek to work within it. Somehow or other, the haemorrhaging must stop. It is vital that there is a transfusion—possibly only a small one—to help to maintain the health and capacity of the industry to deliver its best both in time of peace and, sadly, in time of war.

5.37 pm

Mr. Denzil Davies (Llanelli)

For years, there has been consensus in the House that something must be done to arrest the decline of the British merchant fleet. The hon. Member for Pudsey (Sir G. Shaw) has made his points in a debate which has shown that that consensus still lives. It is time for the Government to introduce measures to address a problem about which many of us feel strongly. Something must be done.

The Opposition can agree with some of the measures in the Finance Bill. We can agree, for example, with the removal of higher rate mortgage interest relief. We can also agree with the Government's attempts to bring coherence into the tax position of non-resident trusts. That is a difficult area. We can also agree with the taxation of benefits in kind, which is another difficult area, as some of my hon. Friends and I can remember from when we were in government.

My prime concern relates to clauses 23 to 25, which deal with corporation tax. Incidentally, however, before you took the Chair, Mr. Deputy Speaker, Mr. Speaker allowed the Financial Secretary to answer a few questions about economic and monetary union. Although I do not wish to pursue that now, I was grateful to the Financial Secretary for answering reasonably frankly. The Government are, however, deluding themselves if they think that they could keep control of fiscal and budgetary policy if we had a common currency and a European central bank with its bankers controlling monetary policy.

The very idea that national Governments and national Parliaments could have control over budgetary policy is wishful thinking. I hope that the Financial Secretary is right in believing that the Government would retain control, but I just cannot see it. The draft treaty on economic and monetary union has an intellectual coherence about it. Powers over monetary matters go to a European central bank. Powers over fiscal matters go, not entirely but to a considerable extent, to the Commission. However, those are matters which we can debate on other occasions.

I return to clauses 23 and 25. As I am a Back-Bench Member, I am not afraid to say that I would prefer a higher rate of corporation tax, with a greater range of allowances for plant and machinery and for manufacturing industry. That is the basis of my objection to clauses 23 and 25. In Committee on the Floor of the House we had a debate on an amendment on this matter. I was sorry to see that, after 12 years of Conservative Government, almost every Conservative Member who spoke still had little sympathy for manufacturing industry. Indeed, there was some hostility to the idea of giving manufacturing industry some assistance. The only exception was the hon. Member for Worcestershire, South (Mr. Spicer). He had to code his message somewhat because of the general dislike for manufacturing industry, but at least he showed his concern.

Mr. Gill

This is not a party political point. Does the right hon. Gentleman agree that often the greatest help that the House can give to industry is to resist the temptation to legislate as much as we do? Does he agree that a reduced flow of legislation would help British industry in many respects by enabling it to maintain a lower overhead, rather than increasing its overhead?

Mr. Davies

I agree with that. I have looked at the statutes passed by the House since 1980, virtually since the Government came to power. They get longer and more numerous as time progresses. This Finance Bill is much longer than some of the Finance Bills that the Labour Government introduced. I suppose that one of the penalties that we have had to pay in the past 12 years for a radical right-wing Government is considerably more legislation even than previous Labour and Conservative Governments introduced. I agree with the hon. Gentleman on that point, but my point is that I should prefer to see a higher rate of corporation tax and more allowances, yes for the shipping industry, but for manufacturing industry in general.

We had a debate yesterday on a new clause moved by the hon. Member for Dover (Mr. Shaw) about allowances in general. Although the wording could not be aimed specifically at shipping, the new clause was aimed at the shipping industry. Again, little sympathy was shown. I do not think that there are many factories in the shopping malls and leafy groves of Putney, so the Chief Secretary showed little sympathy. He trotted out Inland Revenue fears that some North Korean shipowner would clean up on all the allowances and disappear to Lichtenstein or some other such place. That was an easy excuse to trot out from the Treasury Bench.

The rot set in and the problems started when the right hon. Member for Blaby (Mr. Lawson) decided to reduce corporation tax from 52 to 35 per cent. and to do away with almost all the allowances—although not the writing down allowances—in respect of investment, mainly in manufacturing industry. Such allowances were an attempt to provide assistance to industries which have to buy large capital assets. The reduction in the rate of corporation tax did nothing to help those companies, but it was a great bonanza to companies that do not need large capital assets. Banks do not need large capital assets, apart from their premises. The retail industry and the service and financial industries do not need to purchase large capital assets, so they do not need that assistance. The decision of the right hon. Member for Blaby was a bonanza to them.

I should have preferred the benefits to be given to manufacturing industry. Perhaps as a by-product of that change, the right hon. Member for Blaby also increased the charge on capital gains. We have had a discussion in the Chamber about that matter already, and it was also discussed on Second Reading and in Committee, when the hon. Member for East Lindsey (Sir P. Tapsell) raised the point. I was surprised when the Government increased the tax on capital gains to 40 per cent. I never thought that I would see a Conservative Government increase capital gains tax to possibly the highest ever rate. I know that there are exemptions and that to some extent there is indexation. The tax on capital gains, as opposed to income gains dressed up as capital, is the highest that has ever been introduced in Britain. We now have a charge of 40 per cent. on capital gains and a top rate of tax on income gains, if I may describe it in that way, of 40 per cent.

In an earlier intervention, the hon. Member for Wanstead and Woodford (Mr. Arbuthnot) implied that the Labour party was wrong to propose to keep the rate of tax on capital gains lower than the top rate on income gains when we get into government. However, there always used to be a rule that one did not tax the tree at the same rate as the fruit. If a Labour Government did that, I can imagine the pompous, pedantic speeches that would be made from the Conservative Opposition Benches, the equally pompous editorials in The Times, The Independent and The Guardian and the lectures that we would be given about trees and fruit and not inflicting taxation on the tree. Adam Smith must have said something about that, too.

Yet we have not heard a whimper from anyone that the tree is to be taxed to the same extent as the fruit. Perhaps the editors of The Independent, The Times and the Financial Times were too busy enjoying the fruit of 40 per cent. taxation on their income to worry about 40 per cent. taxation on the tree. I find it strange. I remember a royal commission years ago in Canada on the taxation of income and capital. I forget its exact title. It concluded in the 1960s with the elegant expression: "A buck is a buck is a buck." One taxes a dollar as a dollar. Whether that dollar is a tree dollar or a fruit dollar, it makes no difference. That report was sat upon. It was considered to be impractical and wrong.

I find it strange that a capitalist party is prepared to tax capital at the same level as income. My right hon. and hon. Friends intend to increase the top rates of income tax when we get into government to 50 per cent., 57 per cent. or whatever it will be after the national insurance surcharge. So, following the pattern of the Government's legislation, why should not we increase capital gains tax to 57 per cent., too? The Government have conceded the argument that, subject to allowances, one taxes capital gains at the same rate as income, for which of course there are also allowances. That is an extraordinary, almost Leninist, proposition from the Conservative Government, who have operated over the years in a way which would have brought joy to the heart of Lenin.

Mr. Peter Hain (Neath)

Of Stalin.

Mr. Davies

I did not like to say Stalin. I will confine it to Lenin.

I do not believe that the right hon. Member for Blaby made the changes in corporation tax out of malice towards manufacturing industry. The changes are repeated in this Finance Bill, too. However, those changes accorded with the indifference or outright hostility to manufacturing industry which, as an Opposition Member, I have witnessed in the Tory Government. The right hon. Member for Blaby reduced corporation tax because he believed in a level playing field in terms of allowances. It is a perfectly respectable view that there should be no allowances. The cost of allowances and deductions was mentioned earlier. It is a respectable view that we have no allowances, no exemptions and we reduce the rates of tax. But that is a Utopian view because life is not like that. The Finance Acts and income tax codes do not operate in that way. Governments of all persuasions have used financial legislation for purposes of social engineering.

Certainly the present Government have done that. They cannot argue for a level playing field because they have used one Finance Act after another to try to convert society—frankly, society cannot be converted by the use of Finance Bills, or taxation in general, although some politicians take the opposite view—to their own ideological beliefs.

The Financial Secretary more or less admitted that no Government can eliminate all allowances and deductions. So the priority, in corporation tax terms, should be manufacturing industry, not because we believe in dark satanic mills and regard banks as terrible places. As I endeavoured to explain yesterday, the products of dark satanic mills will buy food, whereas the products of banks will not, at the end of the day, across the exchanges, buy anything. That is the difference in terms of national interest between manufacturing industry and all the other parts of the economy.

Unfortunately, the British establishment, whether the civil service establishment in Whitehall or the financial establishment in the City, does not care or want to know about manufacturing industry. To operate properly, manufacturing industry demands certain technical qualifications and knowledge. The British establishment does not want to acquire those skills to enable it to take an interest in and run manufacturing industry.

History, politics, philosophy and economics, cultural studies and the rest are nicer and easier occupations to follow. One can make witty speeches at the Oxford or Cambridge Unions as a result of taking those subjects. It is more difficult, on the other hand, if one takes technical subjects, and the British establishment does not want to know.

Allied to that is the fact that, as Napoleon said, the English—I should say British; I do not want to be accused of being racist—are a nation of shopkeepers. We are involved with buying and selling and cash flow, with money coming in and going out. That is the problem that Labour Members will have to face when we take the reins of government, because there will be pressures on us also not to give to manufacturing industry the priority that it needs.

That priority might mean—I mention it as part of the whole picture—putting up the rates of corporation tax on banks, financial services and stockbrokers and giving, out of that extra revenue, the sort of allowances that should be given to manufacturing industry. We will not be able to run away from that. Not only will it have to happen, but the British public will want it to happen or we shall never bridge the gap in our trade with Europe and the rest of the world. Reform of the corporation tax system will have to occur again. The Conservatives cannot do it, because their heart is not in it. We shall have to do it when we take office.

5.53 pm

Mr. Quentin Davies (Stamford and Spalding)

This is an excellent Finance Bill and I was honoured to be asked to serve on the Standing Committee which considered it. It was a particularly constructive and businesslike Committee this year and I am pleased that the Labour party Front Bench decided to play it in a constructive fashion. Even the hon. Member for Wrexham (Dr. Marek) was on his best behaviour this year and took a constructive part in our proceedings. As a result, we have a piece of legislation of which we can be proud.

I shall deal with two points. The first is that, as the Financial Secretary said, it is a Finance Bill for business. That theme runs right through it and no other course could have been taken in the present economic situation. The reduction in corporation tax rates and changes in the administration of VAT all occur in that vein.

Particularly important and welcome—because it brings tremendous relief to many businesses—has been the introduction of the three-year loss carry-back provisions. Loss carry-backs and carry-forwards are more than merely an emergency measure for business in a recession. They are a sensible measure to incorporate into our taxes legislation because they reflect the true cyclical nature of all business. Business should pay tax on its profits over the cycle. Cycles for different sectors are different and the business cycle is not of the same duration or depth each time it comes round. It is reasonable that business should now have the possibility of averaging over a period, which certain professions—authors, for instance—have enjoyed for many years.

It is a good measure and, like most good measures, one can only say of it in retrospect by way of criticism that it might have been introduced earlier. It is an imaginative move forward and I hope that it will be a permanent feature of our taxes Acts. As I pointed out in Committee, however, it is regrettable that the possibility of carrying back losses for three years has been confined by the terms of the Bill to incorporated businesses. Persons trading as principals, or unincorporated businesses in general, will not benefit from that excellent provision.

I cannot see any reason, in equity or in economics, for discriminating against persons trading as principals and people running unincorporated businesses. The reverse should be the case, since if they are unincorporated, they are bearing the full risks of the business. The logical converse is that their customers, creditors, employers and stakeholders generally are better protected—therefore, society is better protected—by virtue of the greater risks that they carry. I hope that the Government will think further along that promising line and extend the concession to unincorporated businesses.

In that sense, I put a parliamentary question recently to the Financial Secretary about the cost of extending the concession to all businesses. We have heard this afternoon that the cost for incorporated businesses will be about £250 million in a full year. I gather from the written answer that I received that the cost of extending it to all businesses would be about 10 per cent. of that figure, so there appears to be little reason on revenue grounds to resist such a sensible and desirable move.

My second point is about fiscal harmonisation in the Community, to which the Financial Secretary referred and about which we had an intervention from the right hon. Gentleman who shares my surname, the Member for Llanelli (Mr. Davies). Compulsory fiscal harmonisation—agreement within the context of a new treaty or otherwise—to place legislative restraints on the spending programmes of individual member states seems neither necessary nor desirable. As it is not necessary, it should not— under the principle of subsidiarity, which I hope will also be included in any treaty—be desirable either.

It is not necessary because the ability of any Government to spend (this has been true of all Governments at all times) is a function of two simple variables—the ability of that Government to tax and to borrow. If we go forward, as I trust we shall, to monetary union and a single currency, with a single market representing an integrated market in which there are no capital controls or limitations on the free movement of labour, the ability of Governments to tax in practice will be constrained within a reasonable margin. If one member state taxes individuals or businesses disproportionately, those individuals or businesses will migrate. People may not migrate for 5 per cent. but they will migrate for 20 per cent. One never knows exactly where the margin lies, but Governments must be wary about overstepping it.

Therefore, in practice there will be constraint on individual member state's powers to tax, but if we have a single currency there will also be a natural constraint on individual member state's ability to borrow. By definition, they will no longer be in a position to monetise their deficits—a game that so many member states of the European Community and other countries have been playing for far too long, to the detriment of the interests of their populations. If we have a single currency, they will have to borrow in a single currency that they do not control. The markets will be well aware of that and of the fact that those countries will have to pay back any borrowings in real value. If a Government overborrow and their ability to pay back in that real value becomes dubious, the price of their bonds or other instruments on the market will immediately be marked down, the yield will increase and the interest rate at which that Government can borrow in future will become correspondingly greater. Again, a natural constraint will choke off individual member state's possibilities to borrow unduly.

Mr. Favell

As always, I have listened to my hon. Friend's argument with great interest. If he has his way with regard to a single currency, will the Budget process through which we have just gone still be necessary?

Mr. Davies

I am sorry that my hon. Friend has not paid strict attention to my remarks. I said that, within a prospective monetary union and in the context of a single currency, it will be neither necessary nor desirable to impose any legislative or constitutional constraints on the ability of member states to conduct their budgets as they see fit. I said that it will not be necessary because there will be natural market constraints on Governments' ability to tax or borrow. I hope that my hon. Friend will agree that if it is not necessary to impose constraints on Governments within the Community, it is undesirable that such constraints be imposed. That is the principle of subsidiarity, which is not merely a theological device that has evolved within the Community but should be a principle of the workings of any democracy. Governments should not intervene and liberty should not be constrained more than is necessary to conserve a society's minimum collective purposes.

I think that my point has been effectively made and I am pleased to have had the opportunity, thanks to the intervention of my hon. Friend the Member for Stockport (Mr. Favell), to emphasise certain aspects of it. European Community member states should agree, before we reach economic and monetary union, that it is desirable to enforce some fiscal discipline on ourselves. In practice, that would not change the fiscal stance of the British Government because we have set an exceedingly fine example in the past 12 years. We have run consistent fiscal surpluses throughout the boom. Naturally, through the automatic working of the stabilisers in a recession we find ourselves with a fiscal deficit. However, it is a modest one—not merely by international standards but by previous standards in this country under a Labour Government. If we preach the values of fiscal probity and rigour, it is essentially to ensure that other EC member states do not, through irresponsible fiscal policies, destabilise the process of bringing about more convergence. I foresee no constraint on us in that context.

A red herring often pressed on us by our colleagues in the Community is the suggestion that a new treaty should provide for specific rules as to the fiscal policies to be adopted by member states. I hope that I have shown that that is neither necessary nor desirable. Indeed, I believe that it is exceedingly undesirable.

6.5 pm

Mr. James Wallace (Orkney and Shetland)

The past two speeches have been thoughtful contributions to the debate, not least with regard to the detailed items relating to taxation. They underline the fact that the Finance Bill has two functions. The first relates to the Government's broad economic policy, which is often expressed through measures in the Finance Bill, and the second is the annual review of the different measures required to improve the taxation system, which is often not controversial but merely concerns matters of detail.

Could not we order our procedure differently? The Opposition try to do as good a job as possible to examine the minutiae of the proposals. However, in cases such as the separate taxation of women it might benefit the House, and, one hopes, the country, if in the period leading up to the Budget—perhaps from October to the beginning of the new year—the Government were to introduce the proposals on the taxation measures that they hope to incorporate in the Budget. They could then be discussed in advance and wider consultation could be carried out. Thoughtful contributions, such as that put forward by the right hon. Member for Llanelli (Mr. Davies) on the nature of corporation tax, could then be made more deliberatively. In that way we could try to improve the process of government without necessarily taking anything away from the cut and thrust and the general drift of the Government's economic policy.

I regret that, although we are debating the Third Reading of the Finance Bill, neither the end of the recession nor even the first signs of an upturn in the economy seem any closer than they were when the Budget was delivered in March or when the Finance Bill received its Second Reading at the end of April. The Financial Secretary appeared on "TV-am" recently and suggested that the economy may show signs of an upturn in December. I accept that that is the second half of the year—[Interruption.] Perhaps the Financial Secretary will tell the House when he expects an upturn in the economy to start to show.

Mr. Maude

I knew of nothing and have seen nothing that is at odds with our forecast at the time of the Budget that the upturn would start in the second half of the year. I was merely pointing out, principally for the benefit of the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley), who seemed unclear about it, that the second half of the year runs from July to December.

Mr. Wallace

I am grateful for that clarification. I share the Financial Secretary's view that there seemed to be a lack of recognition from the Labour Front Bench about how long the second half of the year lasted. However, the Financial Secretary has not said any more about when the Government expect signs of the upturn to be obvious within the second half of the year.

Dr. Marek

I urge the hon. Gentleman to be a little cautious about what the Financial Secretary said, because there will be confusion between what may be a slight recovery from the recession and what will no doubt be a pre-Christmas boom.

Mr. Wallace

I am sure that Opposition Members will be quick to spot the difference and bring it to the attention of a wary electorate. I suspect that any boom may not be a pre-Christmas boom but a pre-November boom, if we are to believe the reports in The Independent earlier this week.

The great fear must be that the recession is so deep that even an upturn in the economy will not mitigate some of the damaging effects that have already been mentioned, including the number of companies that have gone into liquidation and the increasing unemployment rate. The unemployment figures for June will be announced later this week, and the great fear must be that the trend that we have seen during recent months will continue and unemployment will rise above 2.5 million. We have the fastest growing unemployment rate in Europe and unless measures are taken to curb that increase, there could be 3 million unemployed by the turn of the year.

When considering those figures, one might look for a series of measures designed to curb, or at least tackle, the increase in unemployment, but the Finance Bill offers little scope for that. The Financial Secretary knows that he cannot intervene in my speech to ask about the minimum wage, because the Liberal Democrats share the Government's analysis that a statutory minimum wage would lead to job losses.

There is consensus on both sides of the House, barring Ministers perhaps, that one of the most necessary responses to an increase in unemployment is the need to invest more in training. The Finance Bill contains clause 32 which, I do not dispute, gives some welcome relief for vocational training, but the estimated cost of £40 million is a drop in the ocean compared to what is required.

Since the Budget, there has been some success in reducing the inflation rate, but it was disappointing that the June figure showed no change on the May figure. Indeed, the underlying rate of inflation—which was 6.9 per cent. in June—showed an increase in the underlying rate for May. Therefore, even judged by the Government's own yardstick of the underlying figure of inflation—which last year, when the present Prime Minister was Chancellor of the Exchequer, seemed to be the favoured figure—signs show the reverse of what the Government would wish for.

Many businesses face problems because interest rates are still relatively high. That put particular pressures on small businesses, a large number of which, regrettably, will not be around to take advantage of lower interest rates, if and when they come.

The Financial Secretary said that this was intended to be a Budget for business. We welcome some of the measures for small businesses, such as the improvements in bad debt relief on value added tax and the increase of the VAT threshold. I certainly accept that the Budget contains measures that are to be welcomed by the business community. However, when I asked the Financial Secretary how he justified the increased burden on the business community of the 10.9 per cent. increase in the uniform business rate, he sought to give the impression that a degree of inevitability was involved. He accepted that the inflation rate, at 10.9 per cent., was the highest by which the Government could increase the uniform business rate. He seemed to think that businesses were, in some respects, welcoming what the Government had done. While 10.9 per cent. might be better than the business community might have feared under some local authorities—that issue is open to widespread debate—representations made to me and I am sure to many hon. Members show that the 10.9 per cent increase in uniform business rate is not welcomed by the business community. That was the highest level by which the Government could increase that rate. They knew that the increase was due to take place on 1 April. If they had had any confidence in their projection for the inflation rate, they should have known that the increase would be substantially in excess of the inflation rate in April, which it was. The uniform business rate increase was a burden on business and continues to be so. That must be set on the scales against such reliefs as the Finance Bill brings to the business community.

We welcome the fact that the Government decided to restrict mortgage tax relief to the basic rate, which the Liberal Democrats had advocated for some time. That measure will remove a hardy annual from Finance Bill debates. We also welcome extending employee share schemes and profit-related pay, and national insurance contributions on company cars.

The hon. Member for Eltham (Mr. Bottomley) is not present, so perhaps I can whisper my following suggestion quietly before he arrives, so that he is not tempted to make another speech. It is regrettable that the Government have sought, yet again, to introduce retrospective and double taxation in relation to building societies in clause 52.

The principal political measure in the Budget was the increase of 2.5 per cent. in VAT to try to get the Government out of the difficulties that the poll tax had created. On Second Reading, the Chief Secretary to the Treasury said that that was a reasonable thing to do in the circumstances. He spoke as though fate had conspired to produce circumstances in which the Government were driven, against their will, to increase VAT by 2.5 per cent., with all the resultant consequences for the cost of living. However, the circumstances were not acts of fate, but the acts of the Government, who put the poll tax on the statute book. They recognised the immense difficulties that they found themselves in as a result, and had to take desperate measures to try to get themselves off that hook.

The 2.5 per cent. increase will not be forgotten. I have since had my poll tax bill from Orkney Islands council—it is all of £2 as a result of the £140 rebate. However, it is easy to ignore the fact that we have a further £55 water charge, for which those least able to pay do not receive a rebate. There is less scope for local authorities to exercise their own discretion. As the convenor of Shetland Islands council said, "How the hell do you exercise political discretion on 93p for the poll tax?" One may well repeat that question.

It has been reported recently that the £140 reduction in poll tax will not be passed on in respect of those people who do not pay the tax. That seems to be a further burden on those who pay the tax. I think that it was expected that if we had to pay the extra 2.5 per cent. VAT, there would be £140 for every poll tax payer. It seems that the Government are making things worse for those who honestly pay the poll tax, by not passing on the extra money. Will the Financial Secretary to the Treasury confirm that?

Although the Finance Bill is good in parts and undertakes some of the measures that the Liberal Democrats have advocated for a number of years, it has two fundamental flaws. First, it imposes an additional VAT tax to try to get the Government off the hook of their own creation. I am sure that the Financial Secretary to the Treasury would be the first to admit that the Liberal Democrats had the guts to put their votes where their voices were and vote against the increase. Secondly, the Finance Bill fails miserably to address the fundamental economic problems facing this country, where we have a recession with no light at the end of the tunnel and unemployment set to increase beyond 2.25 million. The Finance Bill offers no hope to those afflicted by the recession and unemployment.

6.18 pm

Mr. Christopher Gill (Ludlow)

The Third Reading debate of the Finance Bill is always good natured. I am sure that the House is grateful to those who have worked hard and long to bring the Bill to our attention.

The hallmarks of the Conservative Government since 1979 have been, among other factors, that we have had but one Budget in each of those years. That is of inestimable assistance to people who run businesses and have budgets to meet, and is a far cry from those days when there were two or more Budgets a year under a Labour Administration.

The Government have sought to establish sound money, and risk unpopularity as a result. They have repaid debt and have a record of both abolishing and reducing taxes. All these things are entirely desirable and beneficial, and are in stark contrast to what happened under the previous Labour Administration and to what we know would happen if the Labour party were ever to form another Administration. A few moments ago, we heard the right hon. Member for Llanelli (Mr. Davies) advocating an increase in corporation tax.

In an intervention, I said that our tax regime means that we have no fewer than 88 reliefs and allowances against the six main Inland Revenue taxes, and that these cost the Exchequer £86.7 billion in 1990–91 while those six taxes raised £82.9 billion. In other words, they raised £4 billion less than the reliefs and allowances.

In every society, one has spendthrifts, savers, speculators, the cautious, the rash, the honest, the dishonest. There is a great hazard in treating everybody alike because it is not only illogical but unrealistic. Having so many reliefs and allowances against our taxes distorts the natural and legitimate spending decisions that individuals make. We bribe taxpayers with their own money to make decisions that reflect the priorities of the politicians. We do not have a neutral tax regime.

There are essentially four choices for disposal of after-tax income. An individual may choose to put his money into bricks and mortar, to buy a pension, to save or to spend. The incentives to invest in bricks and mortar are mortgage interest relief, capital gains tax relief, and the knowledge that bricks and mortar have an unparalleled track record of being a good investment, quite apart from the utilitarian nature of the investment. All these meant that such a disposal became a priority for many people, causing the economy to overheat.

Mr. Eric Martlew (Carlisle)

Is the hon. Gentleman advocating that we should do away with mortgage tax relief?

Mr. Gill

I am advocating that the Treasury should have a long hard look at all the reliefs and allowances so that we can get nearer to a neutral tax regime. That would mean that individuals making spending decisions would not be faced with incentives for one form of disposition of income as against another. Whether we choose to spend or save, to invest in stocks or shares or in bricks and mortar, there should be no tax advantage to influence our decision.

Pensions also have a tax advantage. That gives our financial institutions an enormous amount of power, and has been instrumental in the demise of the individual shareholder. Many hon. Members may care to speculate this week about the effect of that on various goings-on in the City. Getting rid of the individual shareholder has led to massive block voting power in the hands of institutions, with the result that some of the checks and balances that would previously have existed at shareholders' meetings no longer occur because there is not the raft of private shareholders that we previously had.

Millions of people will today spend their day working for insurance companies or building societies. That brings me to my next topic—savings. Savings are not as popular as spending. Savings out of earnings are generally taxed twice and savers are shy about saving because of the effects of inflation. The decision to spend is also affected by inflation. We live in a materialistic age where people want to spend. That is not to deny the fact that the modern economy depends on consumption.

Before the increase of VAT to 17.5 per cent. in the Budget, taxes on production—that is, broadly speaking, pay-as-you-earn, national insurance, business rates and corporation tax—accounted for 70 per cent. of the Inland Revenue's income. Taxes on consumption—bearing in mind that we live in an age that is trying to conserve natural resources and is conscious of the finite extent of those resources—brought in only 30 per cent. of revenue income. Therefore, I invite my hon. Friend the Financial Secretary to look again at whether we have got right the balance between those taxes that impinge on production, which is so important to the economy, and those which impinge on consumption.

We need fewer and lower taxes, but above all we need a neutral tax regime such as that which I have set out. We have to balance spending decisions between spending on consumables or saving, and to balance spending on consumption and on production. We must never forget that individual spending decisions are preferable to Government decisions, and that manufacturing industry, contrary to what many people are telling us today, is without a shadow of doubt the engine of our economy. It is important to our economy, because it creates wealth.

I commend the Bill to the House and congratulate Ministers on introducing a Budget which did its best to reflect the needs of all sections of society. My plea is that we do all that we can in future Budgets to look after the wealth-creating sector and to make sure that spending decisions remain with the individual rather than drifting to the centre.

6.27 pm

Mr. Tom Pendry (Stalybridge and Hyde)

Like the hon. Member for Pudsey (Sir G. Shaw), I was not a member of this cosy club. I am not sure that the Committee examining the Finance Bill should be as cosy as has been made out. I have heard talk about gentlemanly actions and about how civil and good natured people were. This Finance Bill has done devastating things to people and should be opposed vigorously. I am sure that it was in Committee, and I am sure that its proceedings were not as cosy as has been suggested by Conservative Members.

Hon. Members will not be surprised when I mention one shambles in the Finance Bill—which is strewn with shambolic actions by the Government—the Foundation for Sport and the Arts, which I referred to earlier. In the early hours of this morning, my right hon. Friend the Member for Birmingham, Small Heath (Mr. Howell) said that he thought that that was the first time that the foundation had been discussed. The Financial Secretary to the Treasury knows only too well that that is not the case. I raised the subject in the Budget debate on 20 March, in the debate an Second Reading of the Finance Bill on 30 April, and in an Adjournment debate on 23 May.

I am sure that many hon. Members have noticed that the Budget had two facets—one of panic and one of fear. That has continued throughout the proceedings on the Finance Bill. The way in which the Government have set about cobbling together proposals proves that Ministers have been struck down by another affliction—financial illiteracy.

Watching a variety of Ministers make contradictory claims about the amount of money that will be provided by the foundation has been a little like watching a magician's card trick. Ministers have been intent on plucking figures out of the air, and have refused to tell even their own colleagues how the last figure was arrived at. Very often, the figures have been doubled by the next Minister who has spoken. That might be an acceptable way in which to treat Tory Members, but it is no way to treat the millions of sports men and women and the millions of people who are involved in the arts in Britain.

The chief culprit for making suspect claims is our old friend the Minister for Sport. On 23 April at a press conference in the Queen Elizabeth II conference centre he said that the foundation would generate £75 million per year. When I asked him to justify that, he said in a parliamentary written answer on 29 April that that sum would be produced from increased pools betting take-up. I am sure that the Financial Secretary viewed that claim with astonishment because, to be fair, the Treasury has always said that the foundation will produce £60 million. That claim was repeated by a Minister in the early hours of this morning. When I pointed out the Minister for Sport's claim to the Financial Secretary during the debate on the Finance Bill on 30 April he refuted my remarks and said that the Minister for Sport would be surprised. So surprised was he that he repeated the claim on 23 May. It is extraordinary that Ministers still cannot agree on a common figure for the resources that will be generated for the foundation by the Bill.

However, if the Financial Secretary thinks that the Minister for Sport has made extraordinary claims, he should consider the figures given in The Guardian on 21 June by the Minister for the Arts. He said that the foundation will provide £1 million a week to sport and £500,000 a week to the arts. The Financial Secretary, with his recently acquired knowledge of financial statistics, might confirm that 52 times £1.5 million is not £60 million, nor £75 million, but £78 million. The Minister should advise his colleagues to read the figures contained in a parliamentary written answer to me on 12 July, at column 527, from the Minister of State, Treasury, who said that in order to provide funds to the foundation of £75 million, the pools betting turnover would need to increase from £766,000 to £1 billion—an increase of 30.5 per cent. in one year. The Minister's answer also shows that pools betting duty increased by only 28 per cent. during the past four years and has never increased by more than 8.9 per cent. in any one year in the past decade, which all goes to show that Ministers do not have a clue what will be provided by the foundation.

I do not have time to develop these points, because others wish to speak. Therefore, I do not wish to say more than that the foundation has been a shambles from the beginning. I hope that when the Financial Secretary replies he will come clean. At least he is listening to my remarks tonight; he usually gets them second hand from the Minister of State and, as I have said before, I do not think that he can read her handwriting. Is the figure £60 million, £75 million or £78 million? Who will the trustees be? Will the Minister for the Arts have an observer on the foundation? Yesterday I was told that he would not, but in the early hours of the morning I was told that he would. Throughout, the Government have been in a mess over the foundation and we all know why.

The foundation was concocted a few days before the Budget in order to stop a national lottery coming on the scene and, as a result, the Government have run into trouble. Why do not the Government put up their hands and admit that they are in a mess and say that they will look again at the whole question of how coherently to fund sport and the arts in Britain? They should not be pushed along this road by a pressure group which has bounced them into the scheme. Privately they admit that they have been bounced into it. They should come clean and say so, so that we can have a meaningful debate about how to fund these important areas of our life.

6.33 pm

Mr. Ian Bruce (South Dorset)

This is an excellent Finance Bill. I well understand why Mr. Speaker was unable to select the two amendments that I tabled to clause 30 dealing with mobile phones, a subject which was discussed at great length in Committee. We should remember that we tax simply to raise revenue and, as a reforming Conservative Government, to level playing fields for the raising of revenue.

The tax on mobile phones is a tax too far and a rather unfortunate joke within the Budget speech which has backfired because it does not do what it was intended to do—raise revenue and maintain a level playing field. The £200 basic charge, which at the standard rate would be a £50 tax on an individual, or £80 at the higher rate—under a Labour Government it would be at least £100 at the higher rate—is a tax on enterprise which we should not be imposing. It could well reduce tax revenue, because I understand that there has been a reduction in the number of people ordering such phones and that many are now passing them back to their employers.

Technically, the private use of any business phone is taxable, but practically that does not occur. Anyone who has a phone on his desk in an office uses it for a certain number of private calls. The Government say that a mobile phone is different because the user is out of the office and cannot be supervised so closely. That is nonsense because a single phone, dedicated to an individual, locked up in a person's car can be used only by that person. With a switchboard with multiple extensions one cannot work out who is using a particular phone. That nonsense is further exacerbated because in the clause, which extends to two pages, the Government have decided to exclude the telepoint phone which allows calls to be made outside the office but not received.

We are attempting to stifle enterprise. People who are willing to be available 24 hours a day seven days a week and do not want to spend a lot of time working out which are private calls and which are not will be taxed. Moreover, it is ridiculous that the person who is using the phone as a perk, making many free calls without being charged the tax, will be getting away with murder by having a small charge.

Clause 30 will not raise any additional tax revenue. In practice, we will find that is does not do what it is supposed to do. The playing field is being tilted away from high technology, the mobile phone and all the developments of the next decade in mobile telephony, and that is a wrongheaded move. I hope that the Minister will look at that again.

Finally, non-incorporated businesses should have a carry-back for tax. There is no justification for a corner newsagent not being able to reclaim his tax while W. H. Smith, if it has a run of bad years, can do so. Those are two blots on an excellent Bill and I hope that they will be taken on board in future Bills.

6.37 pm

Mr. Peter Hain (Neath)

This has been my first experience of the Finance Bill. Much to the amazement of some of my more experienced colleagues, I volunteered to serve on the Committee. I was struck by the Government's barefaced cheek in bringing forward a Bill of such staggering irrelevance and complacency given the general economic situation. It is a Bill of bits and bobs with no strategy. When it started off, the revenue heart of the Bill was the VAT increase—a panic measure. It was born not out of any desire to achieve an optimal level of VAT, but out of the desire to bail the Government out of the mess that they found themselves in on the poll tax. As a result, the poor have been hit the hardest and the noose has been further tightened around the necks of small businesses which have been suffering so badly during the past 10 years.

Similarly, the tax changes that have been introduced could have addressed the poverty trap problem which continues to inflict great damage on many of my constituents. Some of them supplement their retirement pensions with tiny private pensions from their life's work down the mines. A pension increase is given to them with one hand, but tax is taken from them with the other. The Government could have addressed that anomaly, but they did not do so. The Budget is full of missed opportunities.

Clause 27 sets the level at which tax relief can be claimed on mortgages. That welcome change is one which Labour has advocated for many years. But instead of switching that money to providing additional relief to hard-pressed first-time buyers—many of whom cannot afford to buy a home even in today's depressed property market—the Government directed it at making extra provision for higher rate tax payers. Therefore, those mortgage payers who would have lost out under the change in the level of relief saw it equalised under the tax change. They are the same group of people who have benefited dramatically over the years from the Government's tax cuts for the rich.

The Government also failed to address the crisis in training that they have perpetuated and intensified. Clause 32 of the Finance Bill will have little effect on west Wales, where the number of training weeks has been cut by 21 per cent., or by 43,200 places, over the past year.

I refer to the many other business measures, such as the capital relief given to companies engaged in the construction of toll roads, without any thought to a clear strategy. In Committee, I asked the Financial Secretary how much money that measure will cost the Exchequer, but he did not know. There is a need in my constituency to construct the missing link in the A465, but the Government cannot entertain that scheme because they are giving a little tax relief here and there, without even knowing how much it will cost.

The hon. Member for South Dorset (Mr. Bruce) rightly referred to the gimmick tax on mobile phone usage. That petty measure will hit small businesses the hardest, but it will generate hardly any additional revenue, if any at all. In May, a month after the Chancellor's announcement, there was the first fall in the United Kingdom cellular phone sector, of 460 subscribers, after a six-year period of uninterrupted growth. That proposal is technologically illiterate and petty in tax terms.

The Finance Bill presents a package of irrelevant measures while the economy continues to go down the plug hole. Welsh businesses are closing at the alarming rate of seven every working day. In the first half of 1991, a total of 880 businesses in Wales went under—an increase of 77.1 per cent. over last year.

Today, Lord King of British Airways announced a further loss of 1,000 to 2,000 direct jobs as a consequence of British Airways being restricted to its core businesses. The Secretary of State for Transport has behaved with monumental incompetence, echoing again the Government's failure to address the real needs of industry and the economy. That is particularly true of the south Wales economy, which, despite the public relations noises made by the Secretary of State for Wales, has suffered one shock after another.

The Bill's failure to address the central issues of our society and economy is evidenced by the continuing and relentless rise in unemployment, with the number of jobless in Wales reaching 100,000 for the first time in many years. Industry is at its wit's end. It views the Government with absolute contempt because of their failure to address the deep-seated problems of the British economy. The Bill reflects the Government's incompetence. While Government Ministers sit in their ivory towers devising tiny clauses for the Finance Bill, the economy is falling down around their ears.

6.44 pm

Dr. John Marek (Wrexham)

It is nice to have an open-ended debate, but, although we can continue this Third Reading of the Finance Bill as long as we like, the Chairman of Ways and Means has put down private business for 7 o'clock, so I will do my best to make sure that the debate can finish by then.

I particularly enjoyed the speech of my hon. Friend the Member for Neath (Mr. Hain), who summed up the Opposition's attitude to the Bill, which tinkers with, but does nothing for, the economy, which only goes from bad to worse. Telling points were made also by my right hon. Friend the Member for Llanelli (Mr. Davies), in respect of capital investment, and by my hon. Friend the Member for Stalybridge and Hyde (Mr. Pendry), who spoke about funding of sports and the arts.

I share the view expressed by some hon. Members that the Finance Bill should be attacked in Committee in a co-operative way, but also in a way that reveals to the public what is wrong with its provisions. Very often, those two objectives cannot be met. The Bill contains many technical clauses, but also several—such as that which increases value added tax from 15 to 17.5 per cent.—whose impact can immediately be understood by everyone. There may be an argument for reassessing the way in which the House considers future Finance Bills, so that the Opposition of the day could have their objections carefully considered by the Government and their advisers, while the technicalities were allowed to progress with cross-party co-operation. That would allow important decisions affecting the public to be fought in the traditional way, across the Floor of the House—and I would not dare to suggest from this Dispatch Box any improvements to that system.

The Financial Secretary said that this is a Budget for business, and called in aid the lowering of corporation tax and the availability of VAT relief on bad debts after one year instead of two. There is not much for business in those two measures. They will help a little—one must not be churlish—but they are incapable of bringing much improvement to the economy and to industry as a whole.

The Government's growth record is abysmal. From 1979 to 1991, Britain's economy grew by only 1.5 per cent., despite the benefit of £100 billion of North sea oil. The Government are fond of comparing their performance with that of past Labour Administrations. From 1974 to 1979, the economy grew by 2 per cent., and under the Labour Government of 1964 to 1970, Britain enjoyed an average growth rate of 2.8 per cent. The Government's record of growth and of helping industry is not good—and I am being very moderate in that choice of words. Between 1979 and 1991, the United Kingdom was sixth from the bottom of the growth league among the 24 OECD countries.

From the time of the industrial revolution until 1982, we had a surplus in manufacturing trade. In 1982 we went into the red, and have remained in the red ever since. Manufacturing output has hardly grown since 1979, when the present Administration took office. Between then and 1991, it grew less than in any other OECD country.

Although welcome, the limited alleviation of the problems of corporation tax and bad debts will do nothing to lift us from the abyss that we have had to endure under the present Government. They have taken us from one bad recession, in 1980–81, through an unsustainable consumer boom and into another bad recession in 1990–91. Those were the two worst recessions since the great recession of the 1930s. The Bill does not address the problems of our economy; it merely increases indirect taxation.

The VAT increase—from 15 to 17.5 per cent.—was not introduced for any noble reason, such as a desire to make trains and buses run on time, to improve the roads or to reduce environmental pollution. As we heard from the Financial Secretary's own lips this afternoon, the Government simply wanted to reduce poll tax payments. The poll tax problem was entirely of the Government's making. They can provide no excuse: they brought the problem on themselves by insisting on the original charges and, in an attempt to escape the consequences, they have now inflicted the VAT increase on everyone in the country.

Under the present Administration, people have had to bear higher rates of taxation than I can remember. The Financial Secretary has conveniently forgotten that, under the last Labour Government, VAT was running at 8 per cent. It rose to 15 per cent. very soon after the right hon. Member for Finchley (Mrs. Thatcher) took office in 1979, despite earlier denials that any such increase would take place.

The Financial Secretary has also forgotten that national insurance contributions rose by some 2.5 per cent. at that time. It was news to him this afternoon—his civil servants showed him the relevant table—that taxation, as a proportion of gross domestic product, rose by quite a bit in 1979. Later, it fell, but it has since risen again. The Financial Secretary did not say that initially, but I give him credit for getting it right in the end. Having shot up in 1979, taxation, as a proportion of GDP, has remained 3 or 4 per cent. higher than it was under Labour in the 1970s.

There is no prospect of a fall in that high percentage rate; certainly the Bill will do nothing to bring it down. The only solution available to the British people is to get rid of the Government at the next general election—and, as the opinion polls show, that is exactly what will happen when the Government finally muster enough nerve to go to the country and test their policies before the public. Meanwhile, they have produced a Finance Bill which merely tinkers with an economy that is in dire need of repair.

6.55 pm

Mr. Maude

The hon. Member for Wrexham (Dr. Marek) ended his speech on a brave and defiant note, and I do not begrudge him that—he is entitled to his little show of defiance in the face of opinion polls which are crumbling before his very eyes. Nevertheless, I set little store by those polls, for there is only one poll that matters—the one in which the British people give their verdict, and I am prepared to abide by that verdict as I am confident that it will be in our favour.

This has been a useful and, by and large, temperate and moderate debate. Our Finance Bill debates express very powerfully what the House of Commons is about. They illustrate its role in scrutinising public expenditure and legislating for the levying of taxation. We should take that role seriously, and I believe that we have done so.

My hon. Friend the Member for Pudsey (Sir G. Shaw) mentioned the problems of the merchant shipping fleet, and suggested steps that the Government might take. As he probably knows, my right hon. Friend the Chief Secretary referred to those problems briefly in yesterday's debate. My hon. Friend requested me to state unequivocally that the decline in tonnage was a problem. He also said—and I cannot entirely accept this—that it did not much matter what the solution was. In my view, it does matter. We must not simply say, "Here is a problem—something must be done; this is something—let us do it." We must ensure that any solution that we produce is a real solution to a real problem.

Let me reassure my hon. Friend that the Government take the matter very seriously. We fully recognise the contribution made by our merchant shipping fleet in times of conflict. We and our NATO partners keep the position under regular review and—as my right hon. and learned Friend the Chief Secretary said yesterday—we are currently engaged in an up-to-date study of our shipping requirements and the options for meeting them. As my hon. Friend seemed to accept, this is a complex subject. It is far from simple either to divine those requirements or to decide how they can best be affordably met.

We are confident that the taxation route is not the right one, and that has, I believe, been generally accepted by the House. I assure hon. Members, however, that we shall not hesitate to act—and, if necessary, to spend—if we consider that such action is justified by our defence requirements.

Sir Giles Shaw

Will my hon. Friend consult the industry as the results of the working party's review become known?

Mr. Maude

We have remained in close touch with the shipping industry, which has been at pains to keep in touch not only with us but with a number of right hon. and hon. Members on both sides of the House. I make no complaint about that; it is right that we should understand the problems.

The hon. Member for Stalybridge and Hyde (Mr. Pendry) talked about the sports and arts trust, and urged me to come clean. Let me reassure him, too. My right hon. and learned Friend the Chief Secretary came clean yesterday at about 1.30 in the morning, and I think that when the hon. Gentleman studies Hansard he will find his points well met.

This is a good Finance Bill and I have no difficulty in commending it wholeheartedly to the House.

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

The House divided: Ayes 305, Noes 219.

Division Number 213]	[6.59 pm
AYES
Adley, Robert	Bright, Graham
Aitken, Jonathan	Brown, Michael (Brigg & Cl't's)
Allason, Rupert	Browne, John (Winchester)
Amess, David	Buck, Sir Antony
Amos, Alan	Budgen, Nicholas
Arbuthnot, James	Burns, Simon
Arnold, Jacques (Gravesham)	Burt, Alistair
Arnold, Sir Thomas	Butler, Chris
Ashby, David	Butterfill, John
Aspinwall, Jack	Carlisle, Kenneth (Lincoln)
Atkins, Robert	Carrington, Matthew
Atkinson, David	Cartwright, John
Baker, Rt Hon K. (Mole Valley)	Cash, William
Baker, Nicholas (Dorset N)	Channon, Rt Hon Paul
Baldry, Tony	Chapman, Sydney
Batiste, Spencer	Chope, Christopher
Beaumont-Dark, Anthony	Churchill, Mr
Bellingham, Henry	Clark, Rt Hon Alan (Plymouth)
Bendall, Vivian	Clark, Dr Michael (Rochford)
Bennett, Nicholas (Pembroke)	Clark, Rt Hon Sir William
Benyon, W.	Colvin, Michael
Bevan, David Gilroy	Conway, Derek
Biffen, Rt Hon John	Coombs, Anthony (Wyre F'rest)
Blaker, Rt Hon Sir Peter	Coombs, Simon (Swindon)
Body, Sir Richard	Cope, Rt Hon Sir John
Bonsor, Sir Nicholas	Couchman, James
Boscawen, Hon Robert	Cran, James
Boswell, Tim	Currie, Mrs Edwina
Bottomley, Peter	Curry, David
Bottomley, Mrs Virginia	Davies, Q. (Stamf'd & Spald'g)
Bowden, A. (Brighton K'pto'n)	Davis, David (Boothferry)
Bowden, Gerald (Dulwich)	Day, Stephen
Bowis, John	Devlin, Tim
Boyson, Rt Hon Dr Sir Rhodes	Dickens, Geoffrey
Brandon-Bravo, Martin	Dicks, Terry

Dorrell, Stephen	Jones, Gwilym (Cardiff N)
Douglas-Hamilton, Lord James	Kellett-Bowman, Dame Elaine
Dover, Den	King, Roger (B'ham N'thfield)
Durant, Sir Anthony	King, Rt Hon Tom (Bridgwater)
Dykes, Hugh	Kirkhope, Timothy
Emery, Sir Peter	Knapman, Roger
Evans, David (Welwyn Hatf'd)	Knight, Greg (Derby North)
Evennett, David	Knight, Dame Jill (Edgbaston)
Fairbairn, Sir Nicholas	Knowles, Michael
Fallon, Michael	Lang, Rt Hon Ian
Farr, Sir John	Latham, Michael
Favell, Tony	Lawrence, Ivan
Fenner, Dame Peggy	Lawson, Rt Hon Nigel
Field, Barry (Isle of Wight)	Lee, John (Pendle)
Finsberg, Sir Geoffrey	Lennox-Boyd, Hon Mark
Fishburn, John Dudley	Lester, Jim (Broxtowe)
Fookes, Dame Janet	Lilley, Rt Hon Peter
Forman, Nigel	Lloyd, Sir Ian (Havant)
Forth, Eric	Lloyd, Peter (Fareham)
Fox, Sir Marcus	Lord, Michael
Franks, Cecil	Luce, Rt Hon Sir Richard
Freeman, Roger	Lyell, Rt Hon Sir Nicholas
French, Douglas	McCrindle, Sir Robert
Fry, Peter	MacKay, Andrew (E Berkshire)
Gale, Roger	Maclean, David
Gardiner, Sir George	McLoughlin, Patrick
Garel-Jones, Tristan	McNair-Wilson, Sir Michael
Gill, Christopher	McNair-Wilson, Sir Patrick
Gilmour, Rt Hon Sir Ian	Madel, David
Glyn, Dr Sir Alan	Malins, Humfrey
Goodhart, Sir Philip	Mans, Keith
Goodlad, Alastair	Marland, Paul
Goodson-Wickes, Dr Charles	Marlow, Tony
Gorman, Mrs Teresa	Marshall, John (Hendon S)
Gorst, John	Marshall, Sir Michael (Arundel)
Grant, Sir Anthony (CambsSW)	Martin, David (Portsmouth S)
Greenway, Harry (Ealing N)	Mates, Michael
Greenway, John (Ryedale)	Maude, Hon Francis
Gregory, Conal	Mawhinney, Dr Brian
Griffiths, Sir Eldon (Bury St E')	Maxwell-Hyslop, Robin
Griffiths, Peter (Portsmouth N)	Mayhew, Rt Hon Sir Patrick
Grist, Ian	Mellor, Rt Hon David
Ground, Patrick	Meyer, Sir Anthony
Grylls, Michael	Mills, Iain
Hague, William	Miscampbell, Norman
Hamilton, Rt Hon Archie	Mitchell, Andrew (Gedling)
Hamilton, Neil (Tatton)	Mitchell, Sir David
Hampson, Dr Keith	Moate, Roger
Hannam, John	Montgomery, Sir Fergus
Hargreaves, A. (B'ham H'll Gr')	Moore, Rt Hon John
Hargreaves, Ken (Hyndburn)	Morris, M (N'hampton S)
Harris, David	Morrison, Sir Charles
Haselhurst, Alan	Morrison, Rt Hon Sir Peter
Hawkins, Christopher	Moss, Malcolm
Hayes, Jerry	Mudd, David
Hayhoe, Rt Hon Sir Barney	Neale, Sir Gerrard
Heathcoat-Amory, David	Nelson, Anthony
Heseltine, Rt Hon Michael	Neubert, Sir Michael
Hicks, Mrs Maureen (Wolv' NE)	Newton, Rt Hon Tony
Hicks, Robert (Cornwall SE)	Nicholls, Patrick
Higgins, Rt Hon Terence L.	Nicholson, David (Taunton)
Hill, James	Nicholson, Emma (Devon West)
Hind, Kenneth	Norris, Steve
Hordern, Sir Peter	Onslow, Rt Hon Cranley
Howard, Rt Hon Michael	Oppenheim, Phillip
Howarth, Alan (Strat'd-on-A)	Owen, Rt Hon Dr David
Howarth, G. (Cannock & B'wd)	Page, Richard
Howe, Rt Hon Sir Geoffrey	Paice, James
Howell, Rt Hon David (G'dford)	Patnick, Irvine
Howell, Ralph (North Norfolk)	Patten, Rt Hon Chris (Bath)
Hughes, Robert G. (Harrow W)	Patten, Rt Hon John
Hunt, Rt Hon David	Pattie, Rt Hon Sir Geoffrey
Hunt, Sir John (Ravensbourne)	Pawsey, James
Irvine, Michael	Peacock, Mrs Elizabeth
Irving, Sir Charles	Porter, Barry (Wirral S)
Jack, Michael	Porter, David (Waveney)
Jackson, Robert	Portillo, Michael
Janman, Tim	Powell, William (Corby)
Jessel, Toby	Price, Sir David
Johnson Smith, Sir Geoffrey	Raffan, Keith

Rathbone, Tim	Temple-Morris, Peter
Redwood, John	Thompson, Patrick (Norwich N)
Rhodes James, Sir Robert	Thorne, Neil
Riddick, Graham	Thornton, Malcolm
Ridley, Rt Hon Nicholas	Thurnham, Peter
Ridsdale, Sir Julian	Townend, John (Bridlington)
Rifkind, Rt Hon Malcolm	Townsend, Cyril D. (B'heath)
Roberts, Rt Hon Sir Wyn	Tracey, Richard
Roe, Mrs Marion	Tredinnick, David
Rost, Peter	Trippier, David
Rowe, Andrew	Twinn, Dr Ian
Rumbold, Rt Hon Mrs Angela	Vaughan, Sir Gerard
Ryder, Rt Hon Richard	Viggers, Peter
Sackville, Hon Tom	Wakeham, Rt Hon John
Sainsbury, Hon Tim	Waldegrave, Rt Hon William
Sayeed, Jonathan	Walden, George
Scott, Rt Hon Nicholas	Walker, Bill (T'side North)
Shaw, David (Dover)	Waller, Gary
Shaw, Sir Giles (Pudsey)	Walters, Sir Dennis
Shephard, Mrs G. (Norfolk SW)	Ward, John
Shepherd, Colin (Hereford)	Wardle, Charles (Bexhill)
Shepherd, Richard (Aldridge)	Warren, Kenneth
Sims, Roger	Watts, John
Smith, Tim (Beaconsfield)	Wells, Bowen
Speller, Tony	Wheeler, Sir John
Spicer, Sir Jim (Dorset W)	Whitney, Ray
Spicer, Michael (S Worcs)	Widdecombe, Ann
Squire, Robin	Wiggin, Jerry
Stanbrook, Ivor	Wilkinson, John
Stanley, Rt Hon Sir John	Wilshire, David
Steen, Anthony	Winterton, Mrs Ann
Stern, Michael	Winterton, Nicholas
Stevens, Lewis	Wolfson, Mark
Stewart, Allan (Eastwood)	Wood, Timothy
Stewart, Andy (Sherwood)	Yeo, Tim
Sumberg, David
Summerson, Hugo	Tellers for the Ayes:
Tapsell, Sir Peter	Mr. David Lightbown and Mr. John M. Taylor.
Taylor, Ian (Esher)
Taylor, Sir Teddy

NOES
Abbott, Ms Diane	Clelland, David
Adams, Mrs Irene (Paisley, N.)	Clwyd, Mrs Ann
Alton, David	Cohen, Harry
Anderson, Donald	Cook, Frank (Stockton N)
Archer, Rt Hon Peter	Cook, Robin (Livingston)
Ashdown, Rt Hon Paddy	Corbett, Robin
Ashley, Rt Hon Jack	Corbyn, Jeremy
Ashton, Joe	Cousins, Jim
Banks, Tony (Newham NW)	Cox, Tom
Barnes, Harry (Derbyshire NE)	Crowther, Stan
Barron, Kevin	Cryer, Bob
Battle, John	Cummings, John
Beckett, Margaret	Cunliffe, Lawrence
Bell, Stuart	Darling, Alistair
Benn, Rt Hon Tony	Davies, Rt Hon Denzil (Llanelli)
Bennett, A. F. (D'nt'n & R'dish)	Davies, Ron (Caerphilly)
Benton, Joseph	Davis, Terry (B'ham Hodge H'l)
Bermingham, Gerald	Dewar, Donald
Blair, Tony	Dixon, Don
Boateng, Paul	Dobson, Frank
Boyes, Roland	Doran, Frank
Bradley, Keith	Douglas, Dick
Bray, Dr Jeremy	Duffy, Sir A. E. P.
Brown, Gordon (D'mline E)	Dunnachie, Jimmy
Brown, Nicholas (Newcastle E)	Eadie, Alexander
Brown, Ron (Edinburgh Leith)	Eastham, Ken
Bruce, Malcolm (Gordon)	Edwards, Huw
Buckley, George J.	Evans, John (St Helens N)
Caborn, Richard	Ewing, Harry (Falkirk E)
Callaghan, Jim	Ewing, Mrs Margaret (Moray)
Campbell, Menzies (Fife NE)	Fatchett, Derek
Campbell, Ron (Blyth Valley)	Faulds, Andrew
Campbell-Savours, D. N.	Fearn, Ronald
Canavan, Dennis	Field, Frank (Birkenhead)
Carr, Michael	Fisher, Mark
Clark, Dr David (S Shields)	Flannery, Martin
Clarke, Tom (Monklands W)	Flynn, Paul
Clay, Bob	Foot, Rt Hon Michael

Foster, Derek	Michael, Alun
Foulkes, George	Michie, Bill (Sheffield Heeley)
Fraser, John	Michie, Mrs Ray (Arg'l & Bute)
Fyfe, Maria	Mitchell, Austin (G't Grimsby)
Galbraith, Sam	Morgan, Rhodri
Galloway, George	Morley, Elliot
Garrett, Ted (Wallsend)	Morris, Rt Hon A. (W'shawe)
George, Bruce	Morris, Rt Hon J. (Aberavon)
Gilbert, Rt Hon Dr John	Mowlam, Marjorie
Godman, Dr Norman A.	Mullin, Chris
Golding, Mrs Llin	Murphy, Paul
Gordon, Mildred	Nellist, Dave
Gould, Bryan	Oakes, Rt Hon Gordon
Graham, Thomas	O'Brien, William
Grant, Bernie (Tottenham)	O'Hara, Edward
Griffiths, Nigel (Edinburgh S)	O'Neill, Martin
Griffiths, Win (Bridgend)	Orme, Rt Hon Stanley
Grocott, Bruce	Parry, Robert
Hain, Peter	Patchett, Terry
Hardy, Peter	Pendry, Tom
Hattersley, Rt Hon Roy	Pike, Peter L.
Haynes, Frank	Powell, Ray (Ogmore)
Heal, Mrs Sylvia	Prescott, John
Henderson, Doug	Primarolo, Dawn
Hinchliffe, David	Quin, Ms Joyce
Hoey, Ms Kate (Vauxhall)	Radice, Giles
Hogg, N. (C'nauld & Kilsyth)	Randall, Stuart
Home Robertson, John	Redmond, Martin
Hood, Jimmy	Rees, Rt Hon Merlyn
Howarth, George (Knowsley N)	Richardson, Jo
Howell, Rt Hon D. (S'heath)	Robertson, George
Howells, Geraint	Rogers, Allan
Howells, Dr. Kim (Pontypridd)	Rooker, Jeff
Hoyle, Doug	Rooney, Terence
Hughes, John (Coventry NE)	Ross, Ernie (Dundee W)
Hughes, Robert (Aberdeen N)	Rowlands, Ted
Hughes, Simon (Southwark)	Ruddock, Joan
Illsley, Eric	Salmond, Alex
Ingram, Adam	Sedgemore, Brian
Janner, Greville	Sheerman, Barry
Johnston, Sir Russell	Shore, Rt Hon Peter
Jones, Barry (Alyn & Deeside)	Short, Clare
Jones, Ieuan (Ynys Môn)	Skinner, Dennis
Kilfoyle, Peter	Smith, Andrew (Oxford E)
Kinnock, Rt Hon Neil	Smith, C. (Isl'ton & F'bury)
Lambie, David	Snape, Peter
Lamond, James	Soley, Clive
Leadbitter, Ted	Steel, Rt Hon Sir David
Leighton, Ron	Steinberg, Gerry
Lestor, Joan (Eccles)	Strang, Gavin
Litherland, Robert	Straw, Jack
Livingstone, Ken	Taylor, Mrs Ann (Dewsbury)
Lloyd, Tony (Stretford)	Taylor, Matthew (Truro)
Loyden, Eddie	Thompson, Jack (Wansbeck)
McAllion, John	Wallace, James
McCartney, Ian	Walley, Joan
Macdonald, Calum A.	Wardell, Gareth (Gower)
McFall, John	Watson, Mike (Glasgow, C)
McKay, Allen (Barnsley West)	Welsh, Andrew (Angus E)
McKelvey, William	Welsh, Michael (Doncaster N)
McLeish, Henry	Wigley, Dafydd
Maclennan, Robert	Williams, Rt Hon Alan
McMaster, Gordon	Williams, Alan W. (Carm'then)
McNamara, Kevin	Wilson, Brian
Madden, Max	Winnick, David
Mahon, Mrs Alice	Wise, Mrs Audrey
Marek, Dr John	Worthington, Tony
Marshall, David (Shettleston)	Wray, Jimmy
Marshall, Jim (Leicester S)	Young, David (Bolton SE)
Martin, Michael J. (Springburn)
Martlew, Eric	Tellers for the Noes:
Maxton, John	Mr. Thomas McAvoy and Mr. Robert N. Wareing.
Meacher, Michael
Meale, Alan

Question accordingly agreed to.

Bill read the Third time, and passed.