§ Amendment made: No. 6, in page 291, line 42, at end insert—
§ '(3) The arrangements must be such as to secure that, except as required or permitted (whether expressly or by necessary implication) by this Part or Part II of this Schedule, no payments shall be made into or out of the member's special reserve fund.'.—[Mr. MacKay.]
§ Amendment proposed: No. 21, in page 294, leave out lines 27 to 29.
§ Question put, That the amendment be made:—
§ The House divided: Ayes 236, Noes 312.
878| Division No. 330] | [6.27 pm |
| AYES | |
| Abbott, Ms Diane | Cox, Tom |
| Adams, Mrs Irene | Cryer, Bob |
| Ainger, Nick | Cummings, John |
| Ainsworth, Robert (Cov'try NE) | Cunliffe, Lawrence |
| Allen, Graham | Cunningham, Jim (Covy SE) |
| Alton, David | Cunningham, Rt Hon Dr John |
| Anderson, Donald (Swansea E) | Dalyell, Tam |
| Anderson, Ms Janet (Ros'dale) | Darling, Alistair |
| Armstrong, Hilary | Davidson, Ian |
| Austin-Walker, John | Davies, Bryan (Oldham C'tral) |
| Banks, Tony (Newham NW) | Davies, Rt Hon Denzil (Llanelli) |
| Barnes, Harry | Davies, Ron (Caerphilly) |
| Barron, Kevin | Davis, Terry (B'ham, H'dge H'I) |
| Battle, John | Dewar, Donald |
| Bayley, Hugh | Dixon, Don |
| Beckett, Rt Hon Margaret | Dobson, Frank |
| Bell, Stuart | Dowd, Jim |
| Benn, Rt Hon Tony | Dunnachie, Jimmy |
| Bennett, Andrew F. | Dunwoody, Mrs Gwyneth |
| Berry, Dr. Roger | Eagle, Ms Angela |
| Betts, Clive | Eastham, Ken |
| Blair, Tony | Enright, Derek |
| Boateng, Paul | Etherington, Bill |
| Boyce, Jimmy | Evans, John (St Helens N) |
| Boyes, Roland | Ewing, Mrs Margaret |
| Bradley, Keith | Fatchett, Derek |
| Bray, Dr Jeremy | Faulds, Andrew |
| Brown, Gordon (Dunfermline E) | Field, Frank (Birkenhead) |
| Brown, N. (N'c'tle upon Tyne E) | Fisher, Mark |
| Burden, Richard | Flynn, Paul |
| Byers, Stephen | Foster, Rt Hon Derek |
| Caborn, Richard | Foulkes, George |
| Callaghan, Jim | Fraser, John |
| Campbell, Mrs Anne (C'bridge) | Fyfe, Maria |
| Campbell, Ronnie (Blyth V) | Galloway, George |
| Campbell-Savours, D. N. | Gapes, Mike |
| Canavan, Dennis | Garrett, John |
| Cann, Jamie | George, Bruce |
| Chisholm, Malcolm | Gerrard, Neil |
| Clapham, Michael | Godman, Dr Norman A. |
| Clark, Dr David (South Shields) | Godsiff, Roger |
| Clarke, Eric (Midlothian) | Golding, Mrs Llin |
| Clarke, Tom (Monklands W) | Gordon, Mildred |
| Clelland, David | Gould, Bryan |
| Clwyd, Mrs Ann | Graham, Thomas |
| Coffey, Ann | Grant, Bernie (Tottenham) |
| Connarty, Michael | Griffiths, Nigel (Edinburgh S) |
| Cook, Frank (Stockton N) | Griffiths, Win (Bridgend) |
| Cook, Robin (Livingston) | Grocott, Bruce |
| Corbett, Robin | Gunnell, John |
| Corbyn, Jeremy | Hain, Peter |
| Corston, Ms Jean | Hall, Mike |
| Cousins, Jim | Hanson, David |
| Hardy, Peter | Mowlam, Marjorie |
| Harman, Ms Harriet | Mudie, George |
| Heppell, John | Mullin, Chris |
| Hill, Keith (Streatham) | Murphy, Paul |
| Hinchliffe, David | Oakes, Rt Hon Gordon |
| Hoey, Kate | O'Brien, Michael (N W'kshire) |
| Hogg, Norman (Cumbernauld) | O'Brien, William (Normanton) |
| Home Robertson, John | O'Hara, Edward |
| Hood, Jimmy | Olner, William |
| Hoon, Geoffrey | Patchett, Terry |
| Howarth, George (Knowsley N) | Pendry, Tom |
| Howells, Dr. Kim (Pontypridd) | Pickthall, Colin |
| Hoyle, Doug | Pike, Peter L. |
| Hughes, Kevin (Doncaster N) | Powell, Ray (Ogmore) |
| Hughes, Robert (Aberdeen N) | Prentice, Ms Bridget (Lew'm E) |
| Hughes, Roy (Newport E) | Prentice, Gordon (Pendle) |
| Hutton, John | Prescott, John |
| Illsley, Eric | Primarolo, Dawn |
| Ingram, Adam | Purchase, Ken |
| Jackson, Glenda (H'stead) | Quin, Ms Joyce |
| Jackson, Helen (Shef'ld, H) | Radice, Giles |
| Jamieson, David | Redmond, Martin |
| Janner, Greville | Robertson, George (Hamilton) |
| Jones, Barry (Alyn and D'side) | Robinson, Geoffrey (Co'try NW) |
| Jones, Lynne (B'ham S O) | Roche, Mrs. Barbara |
| Jones, Martyn (Clwyd, SW) | Rogers, Allan |
| Jones, Nigel (Cheltenham) | Rooker, Jeff |
| Jowell, Tessa | Rooney, Terry |
| Kennedy, Jane (Lpool Brdgn) | Ross, Ernie (Dundee W) |
| Khabra, Piara S. | Rowlands, Ted |
| Kilfoyle, Peter | Salmond, Alex |
| Kinnock, Rt Hon Neil (Islwyn) | Sheerman, Barry |
| Kirkwood, Archy | Sheldon, Rt Hon Robert |
| Leighton, Ron | Shore, Rt Hon Peter |
| Lestor, Joan (Eccles) | Short, Clare |
| Livingstone, Ken | Simpson, Alan |
| Lloyd, Tony (Stretford) | Skinner, Dennis |
| Llwyd, Elfyn | Smith, Andrew (Oxford E) |
| Loyden, Eddie | Smith, C. (Isl'ton S & F'sbury) |
| McAllion, John | Smith, Rt Hon John (M'kl'ds E) |
| McAvoy, Thomas | Snape, Peter |
| McCartney, Ian | Soley, Clive |
| Macdonald, Calum | Spearing, Nigel |
| McKelvey, William | Spellar, John |
| Mackinlay, Andrew | Steinberg, Gerry |
| McLeish, Henry | Stevenson, George |
| McNamara, Kevin | Strang, Dr. Gavin |
| Madden, Max | Straw, Jack |
| Mahon, Alice | Tipping, Paddy |
| Mandelson, Peter | Vaz, Keith |
| Marek, Dr John | Walker, Rt Hon Sir Harold |
| Marshall, David (Shettleston) | Walley, Joan |
| Marshall, Jim (Leicester, S) | Wareing, Robert N |
| Martlew, Eric | Welsh, Andrew |
| Maxton, John | Wigley, Dafydd |
| Meacher, Michael | Williams, Rt Hon Alan (Sw'n W) |
| Meale, Alan | Williams, Alan W (Carmarthen) |
| Michie, Bill (Sheffield Heeley) | Winnick, David |
| Milburn, Alan | Wise, Audrey |
| Miller, Andrew | Worthington, Tony |
| Mitchell, Austin (Gt Grimsby) | Wray, Jimmy |
| Moonie, Dr Lewis | Wright, Dr Tony |
| Morgan, Rhodri | Young, David (Bolton SE) |
| Morley, Elliot | |
| Morris, Rt Hon A. (Wy'nshawe) | Tellers for the Ayes: |
| Morris, Estelle (B'ham Yardley) | Mr. Gordon McMaster and Mr. Dennis Turner. |
| Morris, Rt Hon J. (Aberavon) |
| NOES | |
| Ainsworth, Peter (East Surrey) | Ashdown, Rt Hon Paddy |
| Aitken, Jonathan | Aspinwall, Jack |
| Alexander, Richard | Atkins, Robert |
| Alison, Rt Hon Michael (Selby) | Atkinson, David (Bour'mouth E) |
| Allason, Rupert (Torbay) | Atkinson, Peter (Hexham) |
| Amess, David | Baker, Nicholas (Dorset North) |
| Ancram, Michael | Baldry, Tony |
| Arbuthnot, James | Banks, Matthew (Southport) |
| Arnold, Jacques (Gravesham) | Banks, Robert (Harrogate) |
| Arnold, Sir Thomas (Hazel Grv) | Batiste, Spencer |
| Ashby, David | Beith, Rt Hon A. J. |
| Bellingham, Henry | Fowler, Rt Hon Sir Norman |
| Bendall, Vivian | Fox, Dr Liam (Woodspring) |
| Beresford, Sir Paul | Fox, Sir Marcus (Shipley) |
| Biffen, Rt Hon John | Freeman, Rt Hon Roger |
| Blackburn, Dr John G. | French, Douglas |
| Body, Sir Richard | Fry, Peter |
| Bonsor, Sir Nicholas | Gale, Roger |
| Booth, Hartley | Gardiner, Sir George |
| Boswell, Tim | Garnier, Edward |
| Bottomley, Peter (Eltham) | Gill, Christopher |
| Bottomley, Rt Hon Virginia | Gillan, Cheryl |
| Bowden, Andrew | Goodlad, Rt Hon Alastair |
| Bowis, John | Goodson-Wickes, Dr Charles |
| Boyson, Rt Hon Sir Rhodes | Gorman, Mrs Teresa |
| Brandreth, Gyles | Gorst, John |
| Brazier, Julian | Grant, Sir Anthony (Cambs SW) |
| Bright, Graham | Greenway, John (Ryedale) |
| Brooke, Rt Hon Peter | Griffiths, Peter (Portsmouth, N) |
| Brown, M. (Brigg & Cl'thorpes) | Grylls, Sir Michael |
| Browning, Mrs. Angela | Gummer, Rt Hon John Selwyn |
| Bruce, Ian (S Dorset) | Hague, William |
| Bruce, Malcolm (Gordon) | Hamilton, Rt Hon Archie (Epsom) |
| Budgen, Nicholas | Hamilton, Neil (Tatton) |
| Burns, Simon | Hampson, Dr Keith |
| Burt, Alistair | Hanley, Jeremy |
| Butcher, John | Hannam, Sir John |
| Butler, Peter | Hargreaves, Andrew |
| Campbell, Menzies (Fife NE) | Harris, David |
| Carlile, Alexander (Montgomry) | Harvey, Nick |
| Carlisle, Kenneth (Lincoln) | Haselhurst, Alan |
| Carrington, Matthew | Hawkins, Nick |
| Cash, William | Hawksley, Warren |
| Channon, Rt Hon Paul | Hayes, Jerry |
| Churchill, Mr | Heathcoat-Amory, David |
| Clappison, James | Hendry, Charles |
| Clark, Dr Michael (Rochford) | Hicks, Robert |
| Clarke, Rt Hon Kenneth (Ruclif) | Higgins, Rt Hon Sir Terence L. |
| Clifton-Brown, Geoffrey | Hill, James (Southampton Test) |
| Coe, Sebastian | Hogg, Rt Hon Douglas (G'tham) |
| Colvin, Michael | Horam, John |
| Congdon, David | Hordern, Rt Hon Sir Peter |
| Conway, Derek | Howarth, Alan (Strat'rd-on-A) |
| Coombs, Anthony (Wyre For'st) | Howell, Rt Hon David (G'dford) |
| Coombs, Simon (Swindon) | Howell, Sir Ralph (N Norfolk) |
| Cope, Rt Hon Sir John | Hughes Robert G. (Harrow W) |
| Couchman, James | Hughes, Simon (Southwark) |
| Cran, James | Hunt, Sir John (Ravensbourne) |
| Currie, Mrs Edwina (S D'by'ire) | Hunter, Andrew |
| Curry, David (Skipton & Ripon) | Jack, Michael |
| Davies, Quentin (Stamford) | Jackson, Robert (Wantage) |
| Davis, David (Boothferry) | Jenkin, Bernard |
| Day, Stephen | Jessel, Toby |
| Deva, Nirj Joseph | Johnson Smith, Sir Geoffrey |
| Devlin, Tim | Johnston, Sir Russell |
| Dorrell, Stephen | Jones, Gwilym (Cardiff N) |
| Dover, Den | Jones, Robert B. (W Hertfdshr) |
| Duncan, Alan | Kennedy, Charles (Ross,C&S) |
| Duncan-Smith, Iain | Key, Robert |
| Dunn, Bob | Kilfedder, Sir James |
| Durant, Sir Anthony | King, Rt Hon Tom |
| Dykes, Hugh | Kirkhope, Timothy |
| Eggar, Tim | Knapman, Roger |
| Elletson, Harold | Knight, Mrs Angela (Erewash) |
| Emery, Rt Hon Sir Peter | Knight, Greg (Derby N) |
| Evans, David (Welwyn Hatfield) | Kynoch, George (Kincardine) |
| Evans, Jonathan (Brecon) | Lait, Mrs Jacqui |
| Evans, Nigel (Ribble Valley) | Lamont, Rt Hon Norman |
| Evans, Roger (Monmouth) | Lang, Rt Hon Ian |
| Evennett, David | Lawrence, Sir Ivan |
| Faber, David | Legg, Barry |
| Fabricant, Michael | Lennox-Boyd, Mark |
| Fairbairn, Sir Nicholas | Lidington, David |
| Fenner, Dame Peggy | Lilley, Rt Hon Peter |
| Field, Barry (Isle of Wight) | Lloyd, Peter (Fareham) |
| Fishburn, Dudley | Luff, Peter |
| Forman, Nigel | Lyell, Rt Hon Sir Nicholas |
| Forsyth, Michael (Stirling) | Lynne, Ms Liz |
| Forsythe, Clifford (Antrim S) | MacGregor, Rt Hon John |
| Forth, Eric | MacKay, Andrew |
| Foster, Don (Bath) | Maclean, David |
| McLoughlin, Patrick | Shersby, Michael |
| McNair-Wilson, Sir Patrick | Sims, Roger |
| Madel, David | Skeet, Sir Trevor |
| Maitland, Lady Olga | Smith, Tim (Beaconsfield) |
| Malone, Gerald | Speed, Sir Keith |
| Mans, Keith | Spencer, Sir Derek |
| Marland, Paul | Spicer, Sir James (W Dorset) |
| Marlow, Tony | Spicer, Michael (S Worcs) |
| Marshall, John (Hendon S) | Spink, Dr Robert |
| Marshall, Sir Michael (Arundel) | Spring, Richard |
| Martin, David (Portsmouth S) | Sproat, Iain |
| Mates, Michael | Squire, Robin (Hornchurch) |
| Mawhinney, Dr Brian | Stanley, Rt Hon Sir John |
| Mayhew, Rt Hon Sir Patrick | Steel, Rt Hon Sir David |
| Mellor, Rt Hon David | Steen, Anthony |
| Merchant, Piers | Stephen, Michael |
| Michie, Mrs Ray (Argyll Bute) | Stern, Michael |
| Milligan, Stephen | Stewart, Allan |
| Mills, Iain | Streeter, Gary |
| Mitchell, Andrew (Gedling) | Sumberg, David |
| Mitchell, Sir David (Hants NW) | Sweeney, Walter |
| Moate, Sir Roger | Sykes, John |
| Monro, Sir Hector | Tapsell, Sir Peter |
| Montgomery, Sir Fergus | Taylor, Ian (Esher) |
| Moss, Malcolm | Taylor, Rt Hon John D. (Strgfd) |
| Needham, Richard | Taylor, John M. (Solihull) |
| Neubert, Sir Michael | Taylor, Sir Teddy (Southend, E) |
| Newton, Rt Hon Tony | Temple-Morris, Peter |
| Nicholls, Patrick | Thomason, Roy |
| Nicholson, David (Taunton) | Thompson, Sir Donald (C'er V) |
| Nicholson, Emma (Devon West) | Thompson, Patrick (Norwich N) |
| Norris, Steve | Thornton, Sir Malcolm |
| Onslow, Rt Hon Sir Cranley | Thurnham, Peter |
| Oppenheim, Phillip | Townsend, Cyril D. (Bexl'yh'th) |
| Ottaway, Richard | Tracey, Richard |
| Page, Richard | Tredinnick, David |
| Paice, James | Trend, Michael |
| Patnick, Irvine | Trotter, Neville |
| Pattie, Rt Hon Sir Geoffrey | Twinn, Dr Ian |
| Pawsey, James | Tyler, Paul |
| Peacock, Mrs Elizabeth | Vaughan, Sir Gerard |
| Pickles, Eric | Viggers, Peter |
| Porter, Barry (Wirral S) | Waldegrave, Rt Hon William |
| Porter, David (Waveney) | Walden, George |
| Portillo, Rt Hon Michael | Walker, A. Cecil (Belfast N) |
| Powell, William (Corby) | Waller, Gary |
| Redwood, Rt Hon John | Ward, John |
| Rendel, David | Wardle, Charles (Bexhill) |
| Renton, Rt Hon Tim | Waterson, Nigel |
| Richards, Rod | Watts, John |
| Riddick, Graham | Wells, Bowen |
| Rifkind, Rt Hon. Malcolm | Whitney, Ray |
| Robathan, Andrew | Whittingdale, John |
| Roberts, Rt Hon Sir Wyn | Widdecombe, Ann |
| Robertson, Raymond (Ab'd'n S) | Wiggin, Sir Jerry |
| Robinson, Mark (Somerton) | Wilkinson, John |
| Roe, Mrs Marion (Broxbourne) | Willetts, David |
| Ross, William (E Londonderry) | Wilshire, David |
| Rowe, Andrew (Mid Kent) | Winterton, Mrs Ann (Congleton) |
| Rumbold, Rt Hon Dame Angela | Winterton, Nicholas (Macc'f'ld) |
| Ryder, Rt Hon Richard | Wolfson, Mark |
| Sackville, Tom | Wood, Timothy |
| Sainsbury, Rt Hon Tim | Yeo, Tim |
| Scott, Rt Hon Nicholas | |
| Shaw, David (Dover) | Tellers for the Noes: |
| Shaw, Sir Giles (Pudsey) | Mr. David Lightbown and Mr. Sydney Chapman. |
| Shepherd, Colin (Hereford) |
§ Question accordingly negatived.
§ Order for Third Reading read.
6.38 pm§ The Chief Secretary to the Treasury (Mr. Michael Portillo)I beg to move, That the Bill be now read the Third time.
879 It is some time since the Budget. We have been involved since then in detailed discussion of the Bill in Committee, and it is perhaps timely to set the Finance (No. 2) Bill once more in its strategic context.
Recently, there has been a lot of good news about the economy. We have had growth in the gross domestic product for the past three quarters and encouraging statistics on inflation and industrial production. We have seen the latest figures for retail sales rising by 3 per cent., and there has been good performance on exports. Business optimism is at its highest level for 10 years and today's figures for manufacturing output show that it rose by 1.8 per cent. in May. In the first five months of the year, manufacturing output recovered by more than half the total loss it sustained during the recession. In the past four months, even the figures for unemployment have been encouraging, very much against the expectations of many commentators.
The Organisation for Economic Co-operation and Development forecasts that Britain will have the fastest growth of any major European Community country in 1993, and that that will be repeated in 1994. Those are all encouraging statistics. The principal threat to our economic prospects now comes from the size of our fiscal deficit.
The threat posed by the size of the deficit is not removed by the series of good figures that we have had, although recovery is now clearly established across a range of indicators in the economy. Part of our deficit is caused by the cycle, by reduced receipts to the Government, and by extra money that the Government have to pay out in benefits to the unemployed. None the less, the Government have made provision in their new public spending plans to count separately those elements that are due to the cycle, and to focus upon the new control total.
Whatever the extent of the cyclical elements within the present fiscal deficit, to say that some elements are cyclical is not the same as saying that they will unwind automatically at the end of the recession. If one went to one's bank manager and said that one's large overdraft did not matter because it was merely cyclical, the bank manager would not be impressed, and would not let one off paying the debt interest.
That is the position in which the Government find themselves. The burden of debt interest is rising sharply and, over the next few years, it will rise by £10 billion a year. That is money that cannot be devoted to the public spending programmes that many of my hon. Friends and other hon. Members might regard as desirable.
There are important reasons why the Government should maintain control of the public sector deficit. I do not believe that the people of this country who have had to make great sacrifices during the recession, or those in business who have had to retrench during the recession, have any desire to see their Government living beyond their means on a sustained basis, and there can be no moral case for doing so.
That is why the Government have developed a medium-term strategy for dealing with our public sector borrowing requirement. We have also embarked on establishing a rhythm of good decision making, which is a vital ingredient for the restoration of confidence.
880 The autumn statement was made in November by my right hon. Friend the Member for Kingston upon Thames (Mr. Lamont). It set out for three years ahead the Government's public spending plans. In March this year, the Budget set taxation policy in a medium-term context, setting out the tax increases that will occur over the next three years.
That has been translated into the Finance (No. 2) Bill, consideration of which we are completing today. I believe that the rhythm of decision making—of decisions well thought out, well presented and stuck to—is a vital ingredient in restoring confidence. Its effects can now be seen in growing confidence, in the business optimism survey, which I have already quoted, which is the best for 10 years, and in the performance of the markets, with recent pressure on the pound being, if anything, upward rather than downward.
§ Mr. BettsOf the £50 billion deficit this year, will the Chief Secretary tell the House how much he regards as cyclical, which will unwind naturally as part of any recovery, and how much is structural and will not unwind? Does he accept that there could be considerable damage to the unwinding of the cyclical element if the Government acted at the wrong time in the cycle to tackle the structural element?
§ Mr. PortilloI should make it clear that to say that something is cyclical and that it will unwind is not the same thing. For example, the increase in the burden of debt interest is clearly cyclical, inasmuch as it is caused by the fact that the Government are borrowing more because they are spending more and receiving less. The fact that we have made those extra borrowings will not lead, at the end of the recession and when recovery is well under way, to our being let off the debt interest payment. The debt interest payment will still have to be made on the borrowings that have been incurred. So that which is cyclical and that which will unwind are not the same.
That is why, although one could make guesses about the cyclical element within the PSBR, the Government are rightly wary of pursuing that argument too far, because they recognise that not all the elements will unwind at the end of the period.
The Government are headed in the direction of reducing the public sector borrowing requirement by three routes: growth in the economy, which will help to reduce the cyclical elements to which the hon. Member for Sheffield, Attercliffe (Mr. Betts) referred and which will mean that there will be less to spend on social security and that the Government's receipts will increase; the constraint of public spending; and the tax rises announced in the Budget.
I recognise that some of the measures in the Bill are unpopular with my hon. Friends and in the country. That is why I should like to thank my hon. Friends for the support that they have given to the measures in the Bill. It is in no way satisfying to me to have to propose tax increases to my hon. Friends, but I hope that at least it has dealt with the myth that, in some way, to raise taxes is an easy option, whereas to constrain public spending is not.
Both constraining public spending and raising taxes are extremely difficult. My hon. Friends have been willing to support the difficult measures proposed in the Bill because they value the objective of achieving, above all, sound public finances. They are committed to restoring the
881 Government's financies. They recognise that the Government must not live beyond their means, and that that is what is expected of us by the people we govern.
Fairness is extremely important in the package that we put together. My hon. Friends have found difficult the proposals to extend VAT to fuel and power. I remind them that we have taken care in the Budget and the Bill to ensure that the extra taxes that we have to raise fall proportionately across the various divisions of income.
In the full year of the effects of the Bill, we will be raising an extra £10.5 billion of revenue. Of that, only £2.3 billion comes from the extension of VAT to fuel and power. The money will also come from the changed taxation of dividends, the change in taxation for the married couples allowance for those on higher tax rates, changes in taxation on company cars and the different treatment of mortgage interest relief, again confined to 20 per cent., and therefore affecting in particular those people on higher rates of tax.
Therefore, I believe that we have produced a package that is fair to people across the income ranges and I think it has been recognised as such by independent commentators.
§ Ms Harriet Harman (Peckham)Since the Chief Secretary says that fairness is important, can he tell the House, and in particular his hon. Friends whom he will ask to vote to impose VAT on gas and electricity, how much money he will put into the compensation scheme to ensure that it does not disadvantage the poor, the elderly and those with disabilities?
§ Mr. PortilloNo, I cannot give an exact answer. The appropriate time to make that announcement will be in the autumn. My right hon. Friend the Secretary of State for Social Security is under an obligation to make an uprating statement to the House in the autumn, and when he does so he will take into account all the factors which at the time affect his judgment about what the appropriate uprating should be. I do not believe that it is right to try to prejudice the decision that is best taken at that time.
§ Mr. Alex Salmond (Banff and Buchan)The Chief Secretary said that there were three routes for controlling the Budget deficit—restraining spending, increasing taxes and growth. He did not give any idea of the proportions that he thought would be contributed by each of those avenues. Can he give us a broad-brush idea of, for example, how much of the PSBR he expects to be dealt with by increased growth?
§ Mr. PortilloThe present prospects for the course of the PSBR and all the assumptions on growth and on other matters are set out in the Red Book. They show a declining path for the PSBR over the next five years. If the hon. Gentleman wishes to study those assumptions, he will find them all set out. What can be answered with absolute precision is the contribution to be made from taxation, which is an extra £6.5 billion in 1994–95, and £10.5 billion in 1995–96.
The Government are concerned not just with borrowing, important though that is, but also with the level of public spending. That has now reached a level of around 45 per cent. of GDP. The Government believe that the burden imposed by public spending on the 882 wealth-creating sector should be kept to a minimum. If that burden is allowed to grow too much, it will choke off the wealth-creating sector.
We believe that those who create the wealth in our society should be left with the lion's share of that wealth. We do not believe that the state has a pre-emptive right to help itself to more than half of what is produced by the people of the country.
The Government are wary of the burden that is imposed by the state, and we have therefore now embarked upon a new public spending round. We confirmed, following last month's Cabinet meeting, that the new control total figures in cash that we intend to achieve for 1994–95 and 1995–96 are the same as those that were announced at the time of last year's autumn statement and which were confirmed in the Red Book, published at the time of the Budget.
The targets that we have set ourselves are challenging—perhaps more challenging than my hon. Friends realise. They assume virtually no growth in real terms, either between this year and next year or between next year and the year after.
Within the total of public spending that has been so restricted, important pressures have been set up by programmes that are demand-led. In particular, I think of education; many more students are predicted to go into higher education in the years ahead. There are also the demands from social security, which is far and away the largest public spending programme.
The task that faces us is to find ways of reducing the trend rate of growth of programmes. If public spending is limited as a total to zero growth in real terms, but some programmes within it, such as social security, are growing by 3 per cent. in real terms, that obviously sets up a problem. We must reduce the trend rate of growth of those programmes, and probably make savings in other programmes.
I have been gratified by the support that my hon. Friends have given to the Government's objectives for the control of public spending. Their support makes the task a great deal easier. I hope that, when we come to propose specific measures to the House, we shall find the same support for the specific measures which are necessary to deliver those totals which have the support of my hon. Friends. Public spending control is important, because it plays a vital part in establishing Britain's competitiveness.
During the 1980s, Britain's proportion of GDP that was taken up by public spending moved from close to and sometimes above the EC average to a level well below the EC average, and much closer. to the American average, although still some way above the Japanese average. That is still true today.
The amount of public spending within GDP is an important component in the competitiveness of this country. It has enabled us to run low rates of taxation that are attractive to investors and to people who want to do business, and has also provided good incentives to people in this country who are doing business. We forget the attraction of low rates of direct taxation at our peril.
The Bill is crafted to impose the minimum disincentive upon our economy, and to maintain incentives to help industry to keep costs low. Of all the recent statistics on the British economy, the improvement in competitiveness has been the most satisfying and perhaps the most important. We have seen productivity grow by 8 per cent. in the past year to its highest ever level. Unit labour costs have fallen 883 by about 3 per cent., whereas German unit labour costs rose last year by 10 per cent. The wage increases in British industry today are lower than at any time for 25 years.
I pay tribute to British management for many of those achievements. One would not expect productivity to rise during a recession. One would expect businesses to find it difficult to cut their costs as fast as they are losing orders. But British business has improved productivity to a record level and, as a consequence, we expect that competitiveness will improve by 20 per cent. in a single year. We also expect British business to improve its share of world trade for the first time in three decades.
Exports are at a record level, up by 6.5 per cent. on a year ago. Competitiveness should concern not only this country but the rest of the EC. The Community has been out-performed in economic terms by Japan in the 1960s, 1970s and 1980s. The EC was also out-performed by the United States in the 1980s. The prospect, I am afraid, is that the EC will continue to be outperformed by both the US and Japan.
That is why it is important to maintain competitiveness and protect incentives in the way that the Bill does. It is also important, of course, that we remain firmly outside the social chapter of the Maastricht treaty, which would drive up our costs to the highest levels in Europe, and would affect our competitiveness.
§ Mr. BeithThe Minister pays tribute to British management. What about the British workers? They, after all, have shown great flexibility and have adapted to new technologies. A fair proportion of their colleagues and friends have now found themselves out of work as part of the process of bringing about lower costs for some manufacturing companies.
§ Mr. PortilloI agree that the costs of the recession have been felt by everyone in Britain. That is one of the reasons why the Government must not be the only institution in Britain not to feel the effects of the recession.
I recognise that immense costs have been paid by those who have become unemployed. I also recognise the flexibility of the British labour market, which is and will continue to be one of its great strengths in the years ahead. It may be too early to tell, but one of the reasons why the unemployment figures have turned may be the greater flexibility of the United Kingdom labour market. If so, I pay tribute to both management and to work force.
I also pay tribute, if I may, to Government policies, which have, in the face of opposition from the Opposition parties, created a more flexible and more responsive labour market, which has enabled Britain to be competitive and unemployment to fall.
I hope that unemployment falls more quickly, as the recovery comes upon the economy, than it did in the 1980s. All the strategies that I have talked about are clearly exemplified within the Finance Bill, and demonstrate the Government's clear medium-term policy for the British economy.
I am bound to ask myself, "What has been offered to us by the Opposition? What have they put up by way of reasonable alternatives during discussions on the Bill?" First of all, I turn to the hon. Member for Peckham (Ms Harman). Ideally, a Chief Secretary to the Treasury should be flinty-faced, stony-hearted and odious. I believe that I 884 fit the bill. But the shadow Chief Secretary also should be flinty-faced, stony-hearted and odious. To what extent does the hon. Lady fit the bill? Is she flinty-faced? No, she is kind and radiant-faced. Is she stony-hearted? No, she is open-hearted. She is generous to a fault. She wants to spend money on any good cause that is put her way. Those are not the natural instincts of a Chief Secretary.
Is the hon. Lady odious? Do Opposition spokesmen tremble over their pens when writing their speeches, worrying that they may inadvertently commit the Labour party to a new promise on public spending that has not been approved by the shadow Chief Secretary? I fear that they do not fear the hon. Lady. Indeed, I am afraid that they could not fear the hon. Lady. I am tempted to say that she has fragrance, and fragrance is not something which any Chief Secretary or shadow Chief Secretary should have.
My hon. Friends may protest that the hon. Member for Dunfermline, East (Mr. Brown) may appear better qualified for the job of shadow Chief Secretary. He is Grim Gordon, Gloomy Gordon, Glowering Gordon—indeed, anything other than Gay Gordon. He probably would make an admirable shadow Chief Secretary. Unfortunately, the hon. Gentleman is shadow Chancellor of the Exchequer, and it is incumbent upon him to come up with an economic policy. What have we had from the hon. Gentleman? He wishes to spend the receipts that are held by local authorities. He wishes, he says, to bring down unemployment to bring about a recovery. Both those aims demonstrate such complete economic illiteracy that I want to share it with the House.
If one were to spend the receipts of local authorities, which have after all been set aside against their debts, one would increase public borrowing and public spending. To say that one would be able to bring about recovery by reducing unemployment is nothing but a fudge. The House knows perfectly well that a recovery produced by the economic policies that we follow can reduce unemployment. It is not possible to reverse the process and say that one can reduce unemployment and thus bring about recovery.
The economy needs sound finances. It needs policies for sound finances. The hon. Member for Dunfermline, East offers sound-bite finances. His policies were described by the right hon. Member for Chesterfield (Mr. Benn) as sound bites strung together, and they do not constitute an economic policy. Unfortunately, that is all that the hon. Member for Dunfermline, East has to offer.
Moving up the scale, we come to the right hon. and learned Member for Monklands, East (Mr. Smith), the Leader of the Opposition. He is the man who stands at the Opposition Dispatch Box and amuses the House. He is the man who makes speeches about hotels falling off cliffs and the grand national not starting properly, blames that on the Government and gets a laugh. One would think that he was auditioning to be the host of "Clive Anderson Talks Back". He is supposed to be auditioning for the role of Prime Minister. It is an extremely sad reflection on him that he is unable to come up to scratch. All around the country—
§ Madam Deputy Speaker (Dame Janet Fookes)Order. I am sorry to sound like a spoilsport, but, before the right hon. Gentleman continues, I must ask what this has to do with the Third Reading of the Finance Bill.
§ Mr. PortilloThe connection with the Finance Bill, Madam Deputy Speaker, is that, during the passage of the Finance Bill, we had hoped to hear an exposition from the Opposition spokesmen about the Labour party's policies. Unfortunately, and to conclude this section, we have instead found a complete failure by the Opposition to put themselves forward as a reasonable Opposition and an alternative Government.
There is not a boardroom, factory floor or council estate in the country where any confidence is felt in the policies of the Opposition, even when people have read carefully the proceedings of the Finance Bill upstairs.
§ Mr. Robert Sheldon (Ashton-under-Lyne)So that the House can get him off the hook of that last passage, will the Chief Secretary now turn to serious matters and discuss the situation that will arise in the autumn when we will have the combined Budget? He has decided so much of the public expenditure that is settled for the next few years, much of which cannot be changed during the autumn Budget. What he can do in that Budget is raise taxation. He cannot adjust the balance between expenditure and revenue, because so much of the expenditure is already settled on.
§ Mr. PortilloThe right hon. Gentleman, by his tone, puts that forward as a criticism. The Government established a medium-term strategy for public spending, which is set out in the Finance Bill, and in all logic it will now bring together in a single statement both our plans for public spending—the details of how those totals are to be achieved—and our plans for taxation—any changes that may need to be made from the plans set out in the Finance Bill.
The right hon. Gentleman is criticising, apparently, the medium-term clarity that has been established by the Government. That clarity is, in my view, one of the great underlying strengths of our approach. That is also the view of the markets, which have shown their confidence over recent months.
Our economic strategy, as shown by the Bill, is clear. It extends beyond the three years covered by the public expenditure survey and beyond the years covered in the Bill. It clearly tells the nation what the Government want to achieve over the medium and long-term. We have a strategy for low inflation, and a clear medium-term framework to restore public finances. We have set fixed spending ceilings, above which we will not go. The Bill contains further measures for tackling the deficit in future.
We look forward to the unified Budget on which the right hon. Gentleman has just questioned me. In it, we will continue the steady and purposeful progress that we have made in achieving our economic objectives of low inflation, restored public finances and sustained growth. We shall make our choices. However difficult they may be, we shall make them. There will be many difficult decisions to take, but they will be taken well. We shall confirm that rhythm of good decison making about which I have spoken and which now underpins confidence.
A party that does not choose, or a party that cannot choose, is a party that does not govern. We are not afraid to choose, and that is why we now govern. When the critical economic decisions ahead have been made, the Government will present their package to the House, and 886 we will then look to my right hon. and hon. Friends to support that package—as I know they will support the Finance Bill which is before us.
§ 7.5 pm
§ Ms HarmanThe Finance Bill makes it clear beyond all doubt that, because of the Government's failure on the economy over the past 14 years, the Conservative party is now the party of high taxation, high borrowing and high unemployment. Although the rhetoric is still there—we heard it again tonight—and although it was in the election addresses of Conservative Members and in the Tory manifesto, the Government's economic failure has led to a situation in which the rhetoric is wholly separate from reality. Conservative assertions about low taxation and sound public finance are now nothing more than an old aspiration that they have proved completely incapable of achieving.
It was clear from last night's debate that the Conservatives are divided, the Government are on the defensive and, worse than that, they have no strategy. Having failed to make the economy work properly, they are now—partly through desperation but also partly through dogma—planning this autumn to dismantle the welfare state. The autumn battle to defend public services will be a battle to defend the very heart of the welfare state.
The Chief Secretary said that there was good news on the economy, but the Finance Bill is dealing with the consequences of economic failure. If one looks at the measurements that matter—the growth of manufacturing output, gross domestic product and the change in manufacturing employment—the story is the same all round. We are way behind Japan. We are behind the USA. We are also behind Germany, Italy and France.
The Finance Bill does not contain any measures to help industry, but the Government have insisted on measures that threaten the North sea oil industry. Already today Shell has slashed exploration, which affects jobs.
§ Mr. PortilloI am intrigued by the hon. Lady's comparison with Germany. I told her a moment ago that manufacturing output in this country had risen by 5 per cent. over the first five months of this year, while industrial production has fallen by 7 per cent. in Germany. How does she equate that with Germany being way ahead of us? Is she using a negative scale?
§ Ms HarmanI am not. The problem with Ministers is that they twist the baseline in order to present something that people know is completely at variance with reality. If we hear about the pound replacing the deutschmark, or of an economic miracle in this country, people will know that the Government are refusing to face reality. Therefore, there is no chance to put the economy right and deal with the deficit, and with investment in skills, in our infrastructure and in our industry.
The statement that the right hon. Gentleman has just made shows that he is more interested in presentation and trying to cover over the cracks of the Government's division than he is in having a serious economic policy to put right the deep problems in this country. He is not prepared to recognise the situation, so it is welcome that the hon. Member for Wolverhampton, South-West (Mr. Budgen) described the reality.
Last night, the hon. Member for Wolverhampton, South-West said that the Government were "near 887 bankrupt". The hon. Member for Southend, East (Sir T. Taylor) described the country as "bust". However, it is not only the Tory Back Benchers who have been describing the Government's economic failure. We have had a Conservative analysis of the economic failure of the past few years which I would like to quote to the House.
§ Mr. Stephen Milligan (Eastleigh)As the hon. Lady will not pursue the point made by my right hon. Friend the Chief Secretary to the Treasury, can she explain how, when she makes an incorrect statement about German and British industrial production, that is perfectly fair, but when my right hon. Friend produces the correct figures, that is just a matter of presentation?
§ Ms HarmanThe Chief Secretary to the Treasury did not produce the correct figures. If we consider the growth of manufacturing output in the G7 countries between 1979 and 1992, Japan had 50 per cent. growth; the United States had 32 per cent. growth; Germany had 23 per cent. growth; Italy had growth of 16 per cent.; France had growth of 7 per cent; and Canada had growth of 8 per cent. Would the hon. Member for Eastleigh (Mr. Milligan) care to volunteer the growth figure for the United Kingdom? I will give way to the Chief Secretary if he can tell us how we compare.
§ Mr. DorrellPerhaps the hon. Lady would like to tell the House what happened to manufacturing output under the last Labour Government.
§ Ms HarmanAgainst a figure of 50 per cent. growth in manufacturing output in Japan between 1979 and 1992, the United Kingdom had growth of barely 5 per cent. I am glad that the Financial Secretary to the Treasury has intervened because I was about to quote from his analysis of the Government's economic failures. The Financial Secretary said:
Think back six years. The yuppie revolution was in full swing. It had a lot going for it. It encouraged young people to regard wealth creation as a benign activity. It broke class barriers. It embraced change. It exuded confidence. All of that was positive. But it was built on sand.How right he was. In this Finance Bill, the country is paying the price of those years of economic failure.The Financial Secretary went on to say that
the resources that were attracted, like moths to a lamp-bulb"—and to property development and to what the hon. Gentleman described asthe lure of easy money"—were wasted resources. He said:Resources are scarce, and we cannot afford the luxury of—and he then described his own Government's economic policy as "waste and distortion." I have to agree with the hon. Gentleman about that.
§ Mr. DorrellWill the hon. Lady give way?
§ Mr. DorrellWould the hon. Lady like to change her mind?
§ Ms HarmanNo, I would not. I am afraid that I am going to be flinty-faced on this occasion.
888 This Finance Bill pays the price of economic failure, unemployment and the soaring cost of unemployment. When we consider the public sector borrowing requirement and the cost of unemployment, it is clear that the figures are enormous. The cost of unemployment in London and the south-east for one year is £8 billion. That is £8 billion just for one year to finance idleness, waste and forcing people to be on the dole.
That is why we have said all along that the reduction of unemployment should be at the heart of the Government's economic policy so that we can end the high dole bills and lift the fear of unemployment which, to this day, still hold the economy back. However, still lurking in the Government's view is the idea that the first objective is sound public finances, although the Government have failed to achieve that, and that somehow high unemployment is "a price worth paying".
Having failed to tackle unemployment, the Government are now turning on the welfare state.
§ Mr. James Paice (Cambridgeshire, South-East)By how much does the hon. Lady believe that the public sector borrowing requirement could be lowered by reducing unemployment?
§ Ms HarmanIt is clear that the PSBR is too high. That is the price that has been paid for economic failure and for high levels of unemployment. Economic failure has been the result of failure to invest in training, skills and our infrastructure. We need to invest in those areas to set the economy to rights.
It is no longer any good for the Conservative party to posture as the party of sound finances. The Conservatives have ripped the finances of this country to pieces through the failure of their economic policy. Having failed to tackle unemployment, the Government are now turning on the welfare state.
§ Mr. Quentin DaviesWill the hon. Lady give way?
§ Ms HarmanI am sure that the hon. Gentleman cannot be trying to intervene on my point about the welfare state because clearly he has no connection with it. However, many people have.
The Chief Secretary to the Treasury has said that the growth of the social security budget is
a sort of cuckoo in the nest.He also said thatPrescription charges is only one of 100 different things to look at.We have heard of a secret letter from the Secretary of State for Social Security referring to cutting and taxing invalidity benefit. He recognised in that letter that that would cause an outrage. The Government are turning on single mothers, complaining that they are on benefits and a drain on public finances. However, the Government deny them the child care and job opportunities that would enable them to work and be independent and able to support themselves and their children. That is what they want to do.The Government have broken their promises. The Prime Minister said:
We have no plans and no need to extend the scope of VAT.But that is exactly what the Government have done. The Government have said:We are the only party that understands the need for lower taxation",889 but in this Finance Bill they have raised taxation. The Prime Minister has also said:I have no plans to raise … the level of national insurance contributions."—[Official Report, 28 January 1992; Vol. 202, c. 808.]But that is exactly what he has done.The Finance Bill raises taxes £17.5 billion over the next two years. It freezes personal allowances and puts 1 p on national insurance contributions and it affects VAT. Even now, the Chancellor of the Exchequer is warning that further tax increases are in the offing.
Tory Members cannot justify those tax increases on the grounds that they are the only way to raise public money. During this Finance Bill, we proposed 14 separate measures that would raise money, deal with tax abuses and plug tax loopholes. Not only did the Government reject them all—they would not even allow them to be debated.
The Tories would rather freeze personal allowances than abolish tax relief for private medical insurance. They want to subsidise people using private medical insurance and give them tax relief while freezing everyone else's personal allowances. The Government would rather put 1p on national insurance than tax the share options given to top executives. That is the Government's sense of priorities. In addition, of course, the Government would rather put VAT on gas and electricity than make the gas and electricity companies pay their fair share of corporation tax.
Treasury Ministers will no doubt claim that this Budget—this Finance Bill—has been a success. But it has cost the Government a Chancellor. It has cost the Government 400 Tory county councillors. It cost them the Newbury by-election and it will cost them the by-election in Christchurch.
How can the Government call it a success to increase taxes for the low paid and cause dismay among the elderly? The Chancellor is setting the scene for cuts in the welfare state and tax increases in the autumn Budget. But the country wants to see an economic policy that begins the task of putting our industry and economy back on their feet.
The Chancellor and the Chief Secretary, possibly over a bottle of champagne, might congratulate themselves on getting the Finance Bill through Parliament, but for the people of this country fear of this Bill will be followed by dread of the bills that they cannot pay. Parliamentary proceedings on the Bill may be drawing to a close, but the political fallout has only just begun.
§ Mr. John Watts (Slough)We have just heard the hon. Member for Peckham (Ms Harman) make some wild assertions. In particular, she mentioned the subject of tax relief for private medical insurance. She will remember that such tax relief is available only to those over the age of 60. When the proposal came before the House in an earlier Finance Bill, I did not vote in favour of it because I prefer not to increase the tax breaks that are available as a reduction of income tax. It will not be lost on the voters of Christchurch, 30 per cent. of whom are over the age of 60, that the hon. Lady is advocating, on behalf of the Labour party, that that tax concesson should be withdrawn.
890 I should like to consider three matters contained in the Bill which, as you reminded my right hon. Friend the Chief Secretary, Madam Deputy Speaker, is the subject of the debate.
I always look back on Finance Bills with a mixture of pleasure and disappointment. On Second Reading, I referred to the changes in the regime for petroleum revenue tax, and urged my right hon. and hon. Friends to improve the transitional relief offered. In Committee, my hon. Friend the Financial Secretary brought forward some further limited measures of transitional relief which the industry welcome, particularly the smaller companies towards which they are targeted. My hon. Friend knows, however, that I believe that those transitional measures do not go far enough.
The amendments which I tabled in Committee and which, with my right hon. Friend the Member for Woking (Sir C. Onslow) and others, I sought to table on Report, could not be debated on either occasion for technical reasons.
§ Mr. Robert Hughes (Aberdeen, North)Will the hon. Gentleman confirm that he had a meeting last Thursday with the Financial Secretary? Will he further confirm that he told the oil companies' representatives that same evening that a deal had been stitched up and that the Government were going to accept his amendments Nos. 40 and 41?
§ Mr. WattsNo, I cannot confirm that. I can confirm that there was a meeting between my hon. Friend the Financial Secretary, representatives from a number of oil companies, myself, my hon. Friend the Member for Bournemouth, West (Mr. Butterfill), my right hon. Friend the Member for Woking and myself. At the conclusion of that meeting I certainly did not suggest to any representatives of the oil industry that any deal had been stitched up.
§ Mr. HughesCan the hon. Gentleman explain why I was telephoned on Friday morning, by a representative of an oil company who attended that meeting, and was asked, "Please will you make sure that no Labour Back Benchers sign the motion because, if they do, it will screw up the deal"?
§ Mr. WattsI would have been very happy if I had been able to conclude a deal with my hon. Friend the Financial Secretary, but that is not what happened. There may be some confusion in the mind of the person who spoke to the hon. Gentleman. At the conclusion of our meeting, we explained the way in which the amendments had been framed and why there were two separate sets of amendments.
We considered that one set of amendments would be technically in order for selection but would not produce the desired solution. The other set of amendments would have achieved our objective of a three-year relief period, but we understood that if the amendments were tabled by Back Benchers they could not be selected for technical reasons. They would be in order only if they were tabled by the Government.
Our amendments were tabled on Thursday, which is normally the last day for tabling amendments to be considered on Report. It was our outside hope that, if my right hon. and hon. Friends in the Treasury were convinced of the force of our argument, they could be 891 persuaded to adopt our second set of amendments as Government amendments and provide a vehicle for them. It was not my intention, or that of any of my right hon. and hon. Friends, to convey to the representatives of the oil industry that any such deal had been struck. Indeed, as late as last evening, we discussed the matter further with my right hon. and learned Friend the Chancellor of the Exchequer. He had just returned from Brussels and we were grateful to him for making time to discuss the matter with us at such short notice. Sadly, the vehicle that we hoped to provide was not one that my right hon. and hon. Friends chose to ride in.
§ Mr. DarlingThe hon. Gentleman will appreciate that this is a very important point, especially as Shell has announced that it is going to cut back on its drilling because of the changes that the Government intend to introduce.
§ Mr. DuncanThat is not what it said.
§ Mr. DarlingIt is what it said.
The hon. Member for Slough (Mr. Watts) has mentioned that he had a private conversation with the Chancellor. Will he tell us whether the Government now accept that far more generous transitional relief must be offered to stop an even greater decline in exploration than that anticipated? That will have disastrous long-term consequences for the country's balance of payments.
§ Mr. WattsI am sure that my hon. Friend the Financial Secretary will answer for himself. It is not my understanding that my right hon. and hon. Friends are yet persuaded that there is a need to go further than the measures introduced in Committee.
The purpose of the amendments that I tabled, in Committee and on Report, was to obtain relief, in a tax neutral way, over a three-year transitional period. That would have been financed by restricting the reduction of PRT to 55 per cent. for that period rather than going immediately to the 50 per cent. rate mentioned in the Bill.
I am persuaded by my hon. Friend the Financial Secretary's argument that the 50 per cent. rate of PRT will have the effect of stimulating further investment in existing mature fields, and that that will be beneficial to the future development of the North sea. I am not persuaded, however, that we will see such new investment in the near future. Any substantial investment will take two or three years to be productive. I believe that in that intervening period, exploration and appraisal activity will be subject to a marked decline before any major new investments come on stream.
Our proposals have been put in a number of different guises, but our intention has always been to smooth that transition. We want to give those parts of the industry that have been hardest hit by the tax changes more time to adapt. That would enable a high level of activity in the North sea to be maintained in the intervening period, and ensure smoother progress for our North sea oil industry.
§ Mr. SalmondWill the hon. Gentleman clarify what happened at last week's meeting because I was given the same information as the hon. Member for Aberdeen, North (Mr. Hughes)? It may be a question of who is misleading whom. Were the hon. Gentleman and his hon. Friends misleading the representatives of the oil 892 companies with unwarranted expectations of success, or were he and his hon. Friends being misled by Ministers promising concessions that did not materialise?
It is to be regretted that the hon. Gentleman's amendments were not tabled on an all-party basis. If they had been, the issue could have been put to the test yesterday. Presumably, all-party amendments stand a better chance of selection than those tabled by Conservative Back Benchers.
§ Mr. WattsI am clear in my own mind that neither I nor any of my right hon. or hon. Friends was misled by Ministers. It was not our intention to mislead any representative of the oil industry. I have tried to explain how I think some confusion may have arisen. I certainly did not give any indication to anyone in the industry with whom I was in contact that I believed that a deal had been done. I was certainly trying my hardest to bring about a solution, but we have failed. That is why I referred in my opening remarks to looking back on the Bill with a mixture of pleasure and disappointment. That failure is one of the disappointments.
Even at this late stage, I urge my right hon. and hon. Friends in the Treasury to look again at what has happened in the North sea. Perhaps they will be proved to be right and that the anticipated dramatic reduction in activity will not occur or, at least, will not be sustained—activity in the North sea has already markedly declined.
The hon. Member for Edinburgh, Central (Mr. Darling) referred to the announcement by Shell UK Exploration and Production yesterday that it was reducing its manning levels by 30 per cent. I understand that there have been some denials about whether that was directly related to the change in the tax regime, but there is no doubt that it intends to reduce its exploration activity.
§ Mr. DuncanDo not the statements that Shell UK Exploration and Production has made to the press make it explicit that its decisions were made a long time ago and that its decision to reduce its activity has nothing whatever to do with the change in the PRT regime announced in the Budget?
§ Mr. WattsThat may be what the company maintains, but it is reducing its activity and, not surprisingly, some people will link the changes in the tax regime with that fact.
§ Mr. DorrellThis is an important point. Opposition Members were shouting "No" when my hon. Friend the Member for Rutland and Melton (Mr. Duncan) intervened. My hon. Friend is right. The statement issued by Shell UK Exploration and Production on 12 July says:
The cost cuts in the exploration division of Shell ExPro are not due to the proposed budget changes in PRT.Nothing can be more explicit than that.
§ Mr. Peter Mandelson (Hartlepool)On a point of order, Madam Deputy Speaker. The Financial Secretary has unwittingly—no doubt not intentionally—misled the House by his intervention. The memorandum written by a responsible person at Shell says clearly:
Doubtless you are aware … some very significant changes in petroleum revenue tax regulations will be implemented this year by the Government. The main effect that this will have on exploration is that our net costs will go up by a factor of four. In these circumstances, our exploration programme will have to be reassessed carefully.893 That is at variance with what the Financial Secretary said.
§ Madam Deputy SpeakerOrder. That may be an important point, but it is certainly not a point of order for the Chair. It should be raised by means of an intervention if the hon. Gentleman is able to have the Floor.
§ Mr. WattsThe hon. Member for Banff and Buchan (Mr. Salmond) asked whether orderly amendments could have been tabled on an all-party basis. To achieve a tax-neutral package of transitions, we would have needed to propose that the rate of PRT be maintained at more than 50 per cent. We wanted the transition to be a three-year period, which is longer than that provided for in the Bill. However, any such amendments tabled by mere Back Benchers would have been ruled out of order. I understand that the orderly amendment that we tabled was not selected because it was considered that the matter had been adequately debated both in Committee of the whole House and in Committee upstairs.
§ Mr. Robert HughesIn attempting to explain the position, the hon. Gentleman is simply causing further confusion. Why did he and his right hon. Friends table an amendment which they knew in advance was out of order, and tell the oil companies that they knew it was out of order, if they had not believed that something would happen to it? Surely that was the worst thing to do because it was kidding the industry along.
§ Mr. WattsThe hon. Gentleman clearly did not hear my explanation. Two sets of amendments appear on the amendment paper today. The first deals with an enhancement of the 18-month transition period and could have been selected had it not been deemed that the matter had been adequately debated. We knew that the second set of amendments was not in order. It was tabled by Back Benchers and set out what we considered to be the proper solution to the problem. The Government could have adopted it as a suitable vehicle had they been persuaded of our argument but, sadly, that was not the case.
§ Mr. DarlingWill the hon. Gentleman give way?
§ Mr. WattsI shall give way to the hon. Gentleman for the last time because I said that I would refer to three matters.
§ Mr. DarlingI am grateful to the hon. Gentleman for giving way because I was the first hon. Member to raise the question of Shell. I have seen the text of the memorandum to which my hon. Friend the Member for Hartlepool (Mr. Mandelson) referred. It says that the changed tax regime had made exploration four times more expensive. Shell has subsequently denied it, but companies do that sort of thing.
Our difficulty is that many Tory Back Benchers, including the hon. Gentleman, have unwittingly been sold a pup by the Government. Exploration and appraisal will suffer, and the oil companies may do better next time if they remember not to bother dealing with Tory Back-Bench Members or consultants, because that is throwing good money after bad.
§ Mr. WattsNobody has thrown money at me. I am not a consultant but I took an interest in the issue because it seemed to be a valid argument to pursue. I have financial interest neither in an oil company nor in a business representing an oil company. If I had such an interest, I 894 would have declared it at the beginning of my speech. My understanding of the Shell memorandum is exactly as the hon. Member for Edinburgh, Central (Mr. Darling) just stated. As he said, the company has now put a different gloss on the matter.
I was about to conclude my remarks on PRT by saying that I am still convinced that a substantial and damaging reduction in activity in the North sea could have been prevented had a three-year transition been provided. I hope that, if those of us who take that view are proved right and the Financial Secretary's more optimistic assumptions of what will happen in the next few months are proved wrong, even though it is too late Ministers will be prepared to reconsider the matter when preparing the November Budget and the next Finance Bill.
Lest it should be thought that I speak merely to pour condemnation on my hon. Friend the Financial Secretary, let me say that he also gave me pleasure in Committee because, for five or six years, I have been arguing for a more favourable tax treatment of unit trusts selling into other European countries. The gist of the argument is that if unit trust companies could pay dividends gross to residents of other European countries, their export performance would be much better. Evidence suggests that that is so. Ten years ago, Luxembourg had virtually no such funds under management. It now manages £86 billion worth of funds and has outstripped the funds under British management.
I was therefore pleased when, in responding to the debate in Committee, my hon. Friend the Financial Secretary said that suitable measures would be proposed in the November Budget and incorporated in the next Finance Bill following consultation with the industry in the intervening period. That was welcome news, not just for the industry but for the financial services industry in this country. To avoid doubt, may I confirm that I am not a consultant for the unit trust industry, although it kindly sent me a crate—12 bottles—of wine earlier this year. We excel in the financial services industry and could increase our earnings on exports to the European Community. The Bill's measures will be greatly welcomed.
The third and final measure to which I wish to refer is the abolition of the business expansion scheme. It was probably right for the Government to propose that the existing scheme should be brought to an end. However, faced with the loss of my legislative programme for the Finance Bill now that my proposals on unit trusts have been taken up, and needing to look for another cause, that new cause may be "Son of BES".
I am convinced that we need to provide a means of encouraging equity investment, particularly in small manufacturing companies and other small companies. I hope that my right hon. and hon. Friends in the Treasury will consider how that might be done. If they do not make their own proposals, I may argue the case for the next five or six years until, in the fullness of time, my hon. Friend the Financial Secretary or his successor—I expect that my hon. Friend will be in a more exulted position by that time—concedes that it is a good argument and introduces his own measures.
Overall, this is a good Bill, although the measures relating to PRT are unattractive. It presents a balanced approach to improving the state of the national finances, and it is a good foundation on which my right hon. and learned Friend the Chancellor can build as he prepares his Budget for presentation in November.
§ Mr. Robert Ainsworth (Coventry, North-East)The Chief Secretary said at least one thing with which I agree: that on Second Reading, in Committee and on Third Reading, the main issues have remained the same. Those issues are the reneging on election promises, the failure to address the underlying problems in our economy, and the nature and effect of the huge tax increases that have been proposed and are to be introduced in the measure.
I think that all hon. Members will recall the clear commitments that were given before the general election. They were that there would be no extension of VAT, no increase in national insurance contributions and—a commitment given in the clearest of terms—tax decreases year on year. The excuse with which we have been repeatedly presented is that the circumstances that we now face have changed and were totally unforeseen when those honest commitments were given to the electorate before the general election.
However, the Chief Secretary said tonight that there was a lot of good news in the economy. He talked about the success in the last three quarters, the fact that unemployment was down, and forecasts that showed that we would have the highest growth of the nations of the Organisation for Economic Co-operation and Development. What on earth should we believe? If those success stories are correct, what are the unforeseen events that have happened since the Government gave those clear pre-general election commitments that there would be no tax increases?
Last night, I heard Conservative Members say that one can, in certain circumstances, renege on election pledges, but there has to be some honesty of intent. If the Government have honesty of intent, why are they boasting about the wonderful news in the economy? If there is wonderful news in the economy, where was the honesty of intent in those pre-general election promises? The Government cannot square the circle. One or the other of their claims is not true. The nation is getting sick of the Government's slick presentation and wants them to give the facts about the problems that face the country.
A couple of years ago, when we were enjoying a huge budget surplus, the Government took the opportunity to decrease taxes, and they gave those decreases to the better-off in society. The biggest single adjustment they made was the abolition of all tax grades above 40 per cent. That act alone gave more than £2 billion to those who are better off.
Now that we are picking up the cost of those foolish measures and the inability to sort out the long-term problems in our economy, we have a huge £50 billion deficit in public finances. There are two major proposals designed to deal with that deficit. The first is to increase national insurance contributions. That policy was deliberately chosen rather than an increase in income tax, because it hits those on average and below-average earnings, while protecting those in the highest income tax bracket. The second and far and away the worst proposal in the Budget is the appalling proposal to impose VAT on fuel.
There has been much disquiet about the election promises and the proposals. In the past few weeks, that concern has centred on the issue of VAT increases. Almost all the representations which I and, I think, others have 896 received have been on the VAT issue. Almost all the representations that I have received have been from pensioners.
I do not believe that pensioners are the only people to have realised that they will be affected by the VAT proposals in the Budget; I do not believe that they are better informed than the rest of the population. The pensioners' representations have been made for one simple reason: fear. There is fear among ordinary pensioners living on, and just above, income support levels about how they will pay the increased fuel bills and survive.
We are told that the policy is not designed merely to raise revenue, but involves the environment. Does not the environment of those pensioners count? Is it not their world? Is their environment of no concern to those people who say that the measure is an environmental policy?
A recent survey conducted by Age Concern showed that already—without the implementation of the Budget proposals—30,000 to 40,000 more people die in this country in winter than in summer. It also discovered that 18 per cent. of pensioners had no insulation on their hot water tanks, 26 per cent. had no loft insulation, and 64 per cent. had no double-glazing on their windows.
If anyone—whether members of the Conservative party or supporters of Friends of the Earth—wants to support the measure on the grounds that it is a green policy, they should address the problems relating to pensioners. We are talking not about a green measure, but about a hypothermia enhancement measure—that is the effect that it will have on pensioners. That is the reason the pensioners have made representations, and the reason for their fear.
The people who have made representations to me fall into two categories. First, there are those who are already on income support, who are dependent on means-tested benefits and who do not believe that they will receive full compensation from the Government for the costs imposed on them by the proposals. They have no reason to believe that they will receive adequate compensation when they look at the Government's track record of deliberately and repeatedly reneging on their commitments.
The second category of people are those living just above income support levels, who receive no state benefits because they have struggled all their lives to make some small extra provision by paying into an occupational pension scheme or something similar. They now find that their prudence and the struggle that they have maintained throughout their lives by paying taxes and national insurance contributions has resulted in their being pushed into the poverty trap. The proposals will bring them no benefits.
The Chief Secretary said that he hoped that he had established a rhythm of good decision making. What sort of rhythm of decision making will the pensioners have to take up when they try to balance their water bills, council tax bills, rent bills and fuel bills? What sort of rhythm of good decision making does the Cheif Secretary suggest that the pensioners should adopt?
Undoubtedly, the Government are proposing deliberately and cynically to make the poorest people—the most vulnerable in the country—pay for their own mishandling of the economy over not only the past three or four years but the past 14 years.
The Conservative Government told the nation that they were the Government of prudent economic management. However, they have got themselves into such a mess that 897 we are now imposing these appalling measures on pensioners. It is disgraceful. I hope that the Government are never forgiven for deliberately reneging on their election pledges. I shall do everything in my power to ensure that they are not forgiven.
§ Mr. Alan Duncan (Rutland and Melton)It is almost four months since the Budget statement was read to the House. Since then, we have studied it in great detail, on the Floor of the House and in Committee.
As we reflect on our deliberations, it is important to recall the mood that prevailed when the Budget was read. Spending was admittedly high, and we knew that that matter had to be addressed. There was a strong feeling that any severe attack on public spending could jeopardise what was seen to be a fragile recovery. My hon. Friends were wary of doing anything too severe so as not to put into reverse the small signs of progress that could already be observed as the economy crept out of recession.
On Budget day, I said that the Budget could have been tougher on the public sector borrowing requirement—I still hold that view—because I felt that the most attested economic phenomenon is probably the business cycle. However fragile we might think the recovery is, the business cycle has a momentum of its own which we expect to perform.
When I study research papers on economic indicators in the Library, I am always struck by how steeply the graph is pointing upwards to reflect the increasing size of the public sector borrowing requirement. That must determine our decision on whether the Finance Bill tackles what needs to be tackled.
A lot has happened since Budget day. Of course, we now have a new Chancellor. I pay tribute to my right hon. Friend the Member for Kingston upon Thames (Mr. Lamont), who drafted the Budget. He is an economic radical. The Budget definitely had his personal stamp on it. Setting aside all the political problems that have beset him since he spoke in the House on 16 March, he can feel justly proud of the way in which the Budget is shaped, and the economic prosperity that it will deliver in due course.
We must put the Budget in the context that, because the United Kingdom was the first country to go into recession we are showing that we are the first to come out of it. That puts us in a unique position to take advantage of the improved competitiveness in the British economy as we emerge from recession while our partners are still suffering.
Only a cursory look at Germany and France shows that, in contrast to our economic fortunes, they are facing severe difficulties. A visit to Germany shows that, in Stuttgart, 25,000 people have been laid off at the Mercedes-Benz factory, the production of Porsche cars has gone down by about 80 per cent., and the machine tool industry is all but in a state of collapse.
The German economy, which depends heavily on the motor industry, is facing severe difficulties. Effectively, having bought a bankrupt country, the Germans must now support the debt that they took on to do so. Having invested so much pride—and rightly so—in sustaining the value of their currency, they face a severe conflict between deciding how to protect the parity of the deutschmark and reducing interest rates to stimulate economic activity. I do not envy them that problem. Indeed, we had the same 898 problem. None the less, it will shape the economic behaviour of our European partners over the next few years.
The problem in France is not quite so severe—
§ Madam Deputy Speaker (Dame Janet Fookes)Order. Before the hon. Gentleman continues his tour of Europe, I must remind him that we are debating the Third Reading of the Bill. Although it is in order to take some general economic policy as background, it must not turn into a debate on policy that is unrelated to the Third Reading of the Bill.
§ Mr. DuncanI am grateful for your guidance, Madam Deputy Speaker, and I will abide by it. I was merely setting the Budget in context. The judgments contained in the Bill can be justified. In making such judgments, we must increasingly examine our European competitors to assess whether the judgments made in the House can be supported.
In reverting to the details of the Bill, my right hon. Friend the Member for Kingston upon Thames will be vindicated in the details that he injected in the measures by having a delayed clawback in the structure of the public sector borrowing requirement for the future. To retrieve £6.5 billion in 1994–95 and £10.5 billion in 1995–96, it is necessary to build economic confidence, but at the same time not severely to attack a fragile recovery.
We are in a good position as a result of the Bill. Inflation is now below the EC average, and our interest rate is the lowest in the EC. At 6 per cent., it is the lowest rate since December 1977, and the fifth reduction since we left the exchange rate mechanism. As a result of the Bill, unemployment has shown an unexpected improvement, costs and earnings are increasingly contained, car registrations are up, and industrial production and exports are up.
§ Dr. John Reid (Motherwell, North)Can the hon. Gentleman explain how unemployment has fallen as a result of the Bill when it has not yet been enacted?
§ Mr. DuncanPeople are well aware of what the Budget contains, because the Bill has been discussed in detail in the House and in Committee. Indeed, giving the Bill Royal Assent merely confirms that the House wishes to see it enacted.
The Finance Bill sets the foundation for sustainable growth. We still have certain structural problems and a certain bias to housing, which has been addressed by ensuring that mortgage interest relief at source is at the lowest rate. There are many things that we will have to discuss in the November Budget.
The Finance Bill has brought us back to reality. It will ensure that we entertain realistic expectations of what the economy can deliver. It does not suggest that there is any good sense in making a dash for growth. Rather, we will see growth of 1 or perhaps 2 per cent., plus 1 per cent. and then another 1 per cent. The Bill will ensure that we have the sustainable prosperity for which we must aim.
During the passage of the Bill, we have listened in vain for any constructive alternative from Labour Members. The speech of the hon. Member for Peckham (Ms Harman) was completely bereft of any alternative proposal for or commitment to what she thinks the upper 899 rate of tax should be. She did not say why the Labour party dropped its election policy of imposing an investment income surcharge on savers.
If she was still here, I would ask the hon. Lady whether she agrees with the shadow Chancellor that to raise income tax would be a mistake, and would probably take demand out of the economy. How would she fulfil her party's pledge to increase Government spending without raising taxes? What does she think is the correct level for the public sector borrowing requirement? We missed all that from Labour Members.
I commend the Bill to the House for the Third Reading that it so properly deserves.
§ 8 pm
§ Mr. BeithI will not attempt to answer many of the questions that the hon. Member for Rutland and Melton (Mr. Duncan) put to the hon. Member for Peckham (Ms Harman), because I would be ruled out of order. We are supposed to be discussing what is in the Finance Bill.
The Chief Secretary sketched in the economic background, which it was reasonable for him to do, and I do not quarrel with the main elements he quoted as favourable and positive in the current economic climate, although he was inclined to leave out some unfavourable elements.
For example, the construction industry is still not showing the signs of recovery that are vital in that crucial sector of the economy. The unemployment news cannot give the Government ease and comfort. We have very high levels of unemployment, and most commentators expect them to persist, even if there are some offsetting job improvements through gains achieved by British exporters in world markets.
Hon. Members point out that many countries are going deeper into recession as we are coming out of it. They talk about that as good news, whereas it is really bad news for exporters, who must sell into markets which are in recession. Other countries being in recession acts as an inhibition on our recovery. We should not be pleased about their plight. No more should we be pleased about the continued high import penetration of our domestic economy, which remains a worry for industry.
I was tempted to intervene in the speech of the hon. Member for Slough (Mr. Watts) to say that he was pouring petrol over the Government but not putting a match to it. On the other hand, the hon. Member for Corby (Mr. Powell) last night poured domestic fuel over the Government and put a match to it by pointing out—[Interruption.] I am not sure whether political self-immolation was a necessary part of that—that the Christchurch by-election, and, by implication, any other by-elections that may occur in the near future, is likely to go against the Conservatives because of the provisions in this measure.
The Bill includes the hated and feared VAT on domestic fuel, imposed without adequate compensation or channelling of revenues into measures that will help people to pay for it by making their homes more energy-efficient. That alone is sufficient reason to oppose the Bill.
The Budget, of which the Bill is a part, contains in effect an income tax increase, even though it is not to be found in the Bill in that form. The 1 p increase in national 900 insurance contributions represents an income tax increase for the low-paid, because all higher levels of income are not subject to the 1p charge. Perks, which are subject to income tax but not to national insurance contributions, escape. In other words, it is a back-door income tax increase, and we were not able to discuss it at earlier stages of the Bill because it is being done through the national insurance system.
The Bill imposes substantial additional burdens on charities, through VAT and changes in advance corporation tax, both of which will hit them hard. Hon. Members are still receiving extensive representations on the issue from charities.
The Bill's petroleum revenue tax regime is costing thousands of jobs. That cannot be denied, because, whatever is happening at Shell, thousands of jobs will be lost in the oil industry and in many others which that industry supports and from which it buys. I was struck by a revised Shell statement, quoted in the Financial Times today, which bears the hallmark of some careful drafting. A company spokesman is reported as having said:
The PRT changes have underlined, and given focus to, what we were already looking at in the North Sea".Those were carefully crafted words. They put into sharp relief the fact that one of the only two companies which welcomed the new PRT regime is shedding a vast number of jobs. The other company is also shedding many jobs.
§ Mr. DorrellFor the sake of completeness, the right hon. Gentleman will want the House to know that the sentence which he quoted finishes with the words:
without further affecting the drilling programme.
§ Mr. BeithEven so, it significantly affects the exploration programme, which is the complaint that everybody is making about the new PRT regime. Many companies, particularly those committed on the exploration side, are devastated by the new regime.
It is a bitter blow that, after all the pleas that they received, including many from Conservative Members, the Government have still not gone nearly far enough, even in transitional provisions which would have helped the industry with the difficulties that it is facing. The Government cannot be oblivious to the severe job impact that the regime is having, not just in Scotland but throughout the United Kingdom.
I urge the Government to realise that oil exploration workers live in all parts of Britain. One need only go to Newcastle airport on a Friday night or to Leeds station or Teesside airport to see people going home to all parts of the United Kingdom, particularly to areas down the east coast, from areas of oil activity. That is not to mention the many companies supplying the oil industry.
The Bill will unfairly tax people who are forced to move because of their work. In particular, it will tax van drivers unfairly, and what a group of people to pick on. Instead of imposing a scale of charges in a field of activity that increasingly has been taxed by the Revenue, when the Revenue caught up with it, the Government have imposed such a high scale charge that, for example, people on modest incomes who drive vans and take them home so that their tools will be safer overnight, rather than leaving the van on site, will be subject to an unfairly high tax charge.
There are serious faults in the Bill—right from large aspects to the micro-elements of its provisions. In many respects, it takes'a wrong attitude to the tax system. That 901 attitude is not based on fairness. The Government are too fond of direct taxes, they are too fond of national insurance contributions as a means of raising the equivalent amounts by way of income tax, and they are too hostile to rises in standard and higher rates of income tax, which would be a fairer means of increasing taxation, if it is necessary to do that.
Had the Government wished to introduce provisions to achieve an extremely large increase in taxation over, say, the next two years—the Bill does precisely that—they should have addressed fairer means of achieving that objective. They would have been subject to much less criticism from the Opposition had they done so. They would still have been criticised for creating a situation in which such tax increases were necessary, but they would at least have placed those increases on the population on a fairer basis.
The Budget and the Finance Bill do not square the circle. There will remain a large public sector borrowing requirement. The Government must have regard to the PSBR and seek to reduce it, but I warn them not to be mesmerised by it. To do so could lead them into some extremely mistaken decisions. As well as a substantial budget deficit, there is in Britain a substantial investment deficit. There has been a considerable failure to invest in areas of crucial importance to the economy.
Historically, we have not in recent years had a high PSBR. We do not have a high level of existing national debt. We have a large and worrying PSBR which could have marked consequences, so we cannot ignore it, but if we were to rein back severely on investment as opposed to taking action on current expenditure, we could be adding to, rather than ending, the damage. We would be bringing about a situation in which the long-term problems of the British economy that have helped to get us into the present mess would persist into the future, and perhaps even get worse. So the Government must draw a distinction between current and investment expenditure in their attempts to deal with the PSBR. They must not be so mesmerised by the PSBR that investment and capital expenditure are severely damaged into the future.
The Chief Secretary set the Bill in the context of what he described as "steady and purposeful progress", and "good decision making". His use of such phrases surprised me, because we have been on a roller coaster. We have gone from the most ridiculous heights of boom into the most desperate depths of depression. The hon. Member for Rutland and Melton knows that, because he has delivered a critique of Thatcherite economics, of which we shall hear more on an appropriate occasion.
Yet the Chief Secretary—the man who gave us the poll tax—talks about the considerable costs and other elements of Government that will have to be reined in. He has been an expensive man for the Government to have around—he gave us the poll tax and all its costly consequences—so he will find it hard to convince some of us that his credentials are sound when it comes to making sensible cuts in public expenditure.
The Chief Secretary may talk about good decision making, but I cannot recall another Finance Bill during my 20 years in the House when the Chancellor who delivered the Budget has been sacked before the Bill had completed its legislative course. Not only has he been sacked, but he comes before us in the midst of our considering the Bill and says that there has been
too much short-termism, too much reacting to events".902 He added:We give the impression of being in office but not in power. Far too many important decisions are made for 36 hours' publicity.When we read the Bill, the right hon. Gentleman's words ring in our ears. He went on:I believe that in politics one should decide what is right and then decide the presentation, not the other way round. Unless this approach is changed, the Government will not survive, and will not deserve to survive."—[Official Report, 9 June 1993; Vol. 226, c. 283.]We saw an instance of that last night, when, in a vote on a crucial part of the Bill, the Government had a majority of only eight. Their majority is shrinking, and it will shrink more after the Christchurch by-election: they will be increasingly unable to get Bills such as this through the House, and increasingly required to respond to the House's demands. Moreover, that will apply at a time when—as the Government themselves point out—difficult decisions must be made.The Government cannot simply go for what is popular; I accept that. They must present the House with tough packages, which—while dealing with the current deficit, and the urgent needs of the economy—are at the same time seen to be fair. That, in my view, is where the Bill fails. It is seen not as a fair Finance Bill, but as an unfair way of inflicting the price of the Government's mistakes on the people.
Well may it be called a Bill: it is the bill that the people must pay for those mistakes. It is the sort of bill that arrives in a brown envelope through our constituents' letter boxes. It does not provide for constructive investment in the future, or for the easily definable good things that the country needs; it is the bill for the mistakes that the present Government have made. I well understand why so many people resent having to pay it, and resent the unfair distribution that it represents.
§ Dr. Liam Fox (Woodspring)One of the aspects of the way in which the House deals with legislation is the fact that, by the time we discuss the Finance Bill, some time has elapsed since the Budget statement: it seems a considerable time to those of us who served on the Standing Committee.
As my hon. Friend the Member for Rutland and Melton (Mr. Duncan) said, however, it is clear that recovery is now under way. We are seeing increased manufacturing output and more housing starts—an increase of 18,000 this year—lower inflation and more employment. At the time of the Budget statement, we wondered whether the recovery was sustainable; now we know that it is.
In a lucid intervention, the hon. Member for Motherwell, North (Dr. Reid) asked how the Budget could be taking effect when its provisions had not yet been passed. As the Chancellor said at the time, the important feature of the Budget was that any tax increases would come later so as not to choke off the recovery at its outset. His important statement that there would be no tax rises this year has made it possible for the recovery to take root as strongly as it has.
§ Dr. ReidI thank the hon. Gentleman for his courtesy. Does his logic suggest that, when the tax increases are introduced next year, the recovery will be undermined?
§ Dr. FoxGiven his knowledge of economics, the hon. Gentleman should understand that, by that time, the recovery will be so well under way that the greatest threat will be not a lack of consumer confidence, but the need for sound public finances. The Government's overwhelming duty will be to tackle that task. In this context as in others, the Government will ultimately be judged on whether what we leave behind is better than what we inherited. That means not only improving living standards and lowering inflation and unemployment, but reducing public debt. That is the point that I made to the hon. Gentleman earlier.
Some hon. Members seem to believe that the Government will make short-term decisions. Several have already mentioned the Christchurch by-election. I trust that my ministerial colleagues will make no decisions that might be influenced in any way by the thought of a forthcoming by-election, but will do what the Conservative party was put in office to do—make the correct decisions, however unpopular they may be in the short term.
One fundamental principle must guide us. As we go for growth—as we undoubtedly will—the value of money should not be up for grabs in our economic policy. That means that we must reduce spending.
I praise the efforts of my right hon. Friend the Chief Secretary to the Treasury in the spending review it is surely right to consider welfare spending as part of overall spending. The welfare state was originally intended to be a genuine partnership between Government and those who needed help, rather than a perpetual Santa's grotto that would deliver money to anyone who happened to pass through it. That surely must still be the right approach.
It would also be wrong to suggest that the current recovery is based solely on the short-term measures that we have announced since the Budget. Surely that recovery is also due to the supply side reforms of the 1980s, not least the reform of the labour and trade union movements. The flexibility that we now enjoy will lead to faster falls in unemployment than we could otherwise have expected—and those supply side changes would have been possible only under a succession of Conservative Governments. We must resist the temptation to rewrite history as having begun in 1989 or 1992; the Government's economic policy goes back to 1979.
The lesson of the policy of the late 1980s is that growth is sustainable only if inflation is kept low. It gives Conservative Members no great pleasure to admit the mistakes of the monetary policy of the late 1980s—a policy that advocated over-loosening of a money supply that the Opposition urged us to loosen even further. At least their economic policy is consistent in one respect: they demand interest rates that are perpetually 1 per cent. lower than the Government want at any given time, whether the requirement is for a tightening or a loosening of the money supply.
We must not return to the house price inflation of the 1980s. We must be willing to tax consumption, and we must not be willing to tax earnings. That surely is one of the fundamental differences between Government and Opposition.
904 I am disappointed to note that the hon. Member for Peckham (Ms Harman) is not present. She talked of 14 years of Conservative economic mismanagement; yet unemployment was reduced from 3.2 million in 1986 to 1.5 million in 1990, despite the arrival of 1 million more people on the jobs market. That is a record that we would gladly repeat. We repaid £14 billion of national debt in a year—the very national debt that the hon. Lady was keen to see repaid as soon as possible. But our monetary policy was too loose.
It is sad that, in a debate that lacks the fevered atmosphere of a more packed Chamber, the hon. Member for Peckham could not bring herself to accept the basic truth. She could not even accept that, while the German economy is now in recession, the British economy is growing. It is indeed sad when that level of maturity cannot be achieved on the Opposition Front Bench.
Even worse, the hon. Lady revealed that—as all of us who served on the Standing Committee already know—she does not know the numbers. When my hon. Friend the Member for Cambridgeshire, South-East (Mr. Paice) asked by how much the public sector borrowing requirement would be reduced if unemployment fell, she was—as ever—unable to give a figure. It is a remarkable feat for a shadow Chief Secretary to make a speech in a finance debate without mentioning any figures. I suppose that Opposition Members must be very careful when the shadow Cabinet elections are approaching, even if three women have to be elected.
§ Mr. SalmondWill the hon. Gentleman give way?
§ Dr. FoxNo, I will not.
I was also disappointed to hear the accusation that the Government were not willing to tolerate debate on the Opposition's amendments to the Bill. The simple truth is that, if those on the Opposition Front Bench had been remotely competent in drafting the amendments, the Chair would not have ruled them out of order.
Our prosperity ultimately depends on sound public finances, honest money, individual and corporate incentive, and export-led growth in an increasingly deregulated market. I believe that this Finance Bill sets us well on the road, and I commend it to the House.
§ Mr. Alan Milburn (Darlington)This Finance Bill is very long; if my memory serves me aright, it runs to 312 pages. As I recall, the Chancellor's speech also set records for its length—it certainly felt like that sitting on these Benches listening to it. But long speeches and long Finance Bills do not add up to much, certainly not to a strategy for economic recovery. Indeed, any prospect of a sustained recovery will be undone by the legacy of 14 years of gross economic mismanagement and the inadequacies of this Finance Bill. The deep-seated problems of the United Kingdom's economy, which hon. Members on both sides of the House recognise, are left untouched by the Bill and, arguably, are compounded by it.
Take the long-promised consumer-led recovery about which we have heard so much this evening, and from the Government Front Bench over the last year or so. Even if it is accepted that a personal consumption boom rather than an investment-led recovery is necessary to get the 905 British economy back on its feet, the personal sector debt remains too high and confidence remains too low to promote a new consumer boom.
The threat of unemployment continues to deter too many individuals from taking major investment decisions. Since the general election, 8,000 people in Darlington have experienced unemployment. Unemployment remains the single biggest social and economic problem faced by this country. It is a sure sign of the Government's priorities that the new Chancellor of the Exchequer, in his first Mansion House speech, did not even utter the word "unemployment". He does not recognise the problem; he has no solution for it; and I am afraid that the Finance Bill is a direct reflection of that failure.
The Finance Bill threatens to make matters worse by imposing higher tax rises on people on low and middle incomes. Those people are still struggling with the effects of falling property prices; they are still suffering from having mortgage debts around their necks; and they still face the threat of redundancy. Any consumer upturn will be snuffed out by this approach.
The real failure of the Finance Bill—I believe that this is recognised, in all honesty, by hon. Members on both sides of the House—is that it turns its back on measures to plug the investment gaps that hinder Britain's ability to compete. With Europe already heading into a deep and damaging recession, and accounting for some 60 per cent. of United Kingdom exports, the prospects for an export-led recovery are difficult in any case; in this situation, it is surely doubly incumbent on the Government to act to help Britain's competitive position.
What has been the Government's response? The Bill introduces a special 40 per cent. capital allowance scheme, presumably because it is recognised that it will help to speed industrial investment. But the Government have ignored the pleas, not only of the Opposition but of the Confederation of British Industry and other business organisations, who have all called for the maintenance and extension of that special capital allowance scheme. Indeed, in the Red Book, the Government recognise that business investment this year will not remain stagnant, but will fall.
§ Mr. DorrellPerhaps the hon. Gentleman would like to remind the House also that business investment in plant and machinery, which he says will fall this year, is now 50 per cent. higher in real terms than in 1979, and that total business investment, as the recession is coming to an end, is still higher than it was at any time during the 1960s and 1970s measured as a percentage of gross domestic product.
§ Mr. MilburnIf business investment has been so successful, the Minister might like to explain to the House why, even in the middle of a recession, British companies still cannot meet even weakened consumer demand, and hence the massive increase in Britain's imports bill. I notice that the Chief Secretary to the Treasury, when he spoke earlier, lauded Britain's export performance, but he totally failed to mention the dreadful state of our imports bill. I am afraid that, once again, the Government's priorities and, indeed, their double dealing on economic statistics have been laid bare before the House and the country.
The parlous state to which our manufacturing base has been reduced by the Government requires more than rhetoric from the Prime Minister; it requires action, and it certainly requires more than a one-year, one-off, headline-grabbing investment incentive. British industry 906 now receives less financial support from the Government than its competitors in any other European country. We are even falling behind the newly industrialising countries of the Pacific rim in terms of investment, training, and research and development.
The Finance Bill could have represented a turning point in the Government's approach. Instead, it is business as usual: it is free market, hands off, non-interventionist. The short-termism that has so characterised the last 14 years of Conservative economic policy has rarely been made more explicit. It will be the whole country that, in the medium term, will pay the price. The writing is already on the wall. The fact that the imports bill continues to boom in the middle of a recession is a sure sign that British manufacturing has been seriously weakened by the Government's performance. Whole sectors have simply been wiped out, so that even a modest recovery will precipitate a balance of payments crisis far worse than that envisaged by the former Chancellor when he delivered the Budget. The real results of the Government's economic mismanagement will be realised only when and if recovery finally arrives. It is then that their failures will be most clearly exposed.
Quite simply, the Finance Bill does nothing to tackle the economic mess created by the Conservatives. Instead, it asks the country to foot the bill for the Government's failures. Inevitably, it will be the people on low and middle incomes who will be asked to pay the price. They have been betrayed and let down by a Government who promised the earth—recovery, tax cuts and a new boom—and delivered precisely the reverse. The Finance Bill means the biggest rise in British history.
The Chief Secretary to the Treasury outlined the figures—some £17 billion to £18 billion in just two years. The Bill makes a mockery of Tory claims from the last general election, but it is at least consistent in one respect: 14 years of Tory tax policy have increased, not cut, the tax burden, and it has weighed most heavily on those least able to pay. Meanwhile, the wealthiest people.in society, representing a fraction of all taxpayers, have had the benefit of a veritable tax bonanza, paid for by the rest of us. The regressive nature of the tax rises, the imposition of value added tax on fuel, the freezing of personal allowances and, of course, the increase in national insurance contributions affect every taxpayer, but they particularly affect the low-paid.
The Finance Bill, interestingly, also hits those on middle incomes. In a parliamentary answer dated 22 April, the Financial Secretary admitted that, as a result of the freeze on personal allowances, there would be 120,000 more higher rate taxpayers. Similarly, restricting the married couple's allowance to 20 per cent., as proposed for the next financial year, would increase the number by a further 210,000. Like the poorest people in society, people on middle incomes are being asked to dig deeper to pay for the massive tax handouts to the very rich over the past few years.
I remind the House that top-rate tax cuts have earned the wealthiest more than £10 billion since 1988, when Lord Lawson, as he now is, introduced his tax-cutting Budget. They have done very well out of the Government, and they continue to do so. The Government's failure to tackle tax evasion and abuse earns the wealthiest people in society a pretty penny. Why should a person earning, say, £20,000 a year have to pay tax on his income, while a person who 907 receives a bequest of, say, £100,000 pays nothing because he can afford to pay tax advisers and thereby avoid his inheritance tax liabilities?
The Government could have done something about that in the Finance Bill, but they refused to do so. The result is that we have a financial scandal on our hands. The nation's coffers are being plugged by increases in national insurance contributions and income tax and, of course, by the VAT extension. By contrast, the very wealthiest are getting off scot free.
The Bill continues to give inherited wealth an enormous tax break. The very richest are subsidised while the very poorest are penalised. So much for the Prime Minister's classless society. This Finance Bill is a con. It aids the wealthiest by affording enormous tax loopholes to them. It stings the poorest and those on middling incomes with swingeing tax rises. It does nothing to promote lasting recovery because it fails to promote investment in jobs or in industry. That is why the Bill deserves to be rejected by the House.
§ Mr. Quentin DaviesFor the second time this afternoon I should remind the House of my interests which are declared in the Register of Members' Interests, in particular of my connection with NatWest Securities, Dewe Rogerson and the Institute of Taxation.
We had a characteristic performance this afternoon by the hon. Member for Peckham (Ms Harman). It was certainly long on charm and on what my right hon. Friend the Chief Secretary rightly called fragrance. On substance, however, it was short, I fear, to the point of superficiality. [Interruption.] As the hon. Member for Hartlepool (Mr. Mandelson) says from a sedentary position, that is what I always say. Yes, that is what I always say, precisely because it is always justified.
The Labour party's economic policy consists of saying, in the most mindless fashion, that the answer to unemployment is to spend money and that everything else will follow on from that. It is far from clear that that would happen. No coherent argument has been advanced by the Opposition showing why the sudden expenditure of public money would reduce unemployment. Very much the reverse would occur.
Even if we were to suppose that the spending of public money was the way automatically to reduce unemployment, the Opposition ought, if there were any economic rigour about their thinking or any reality at all about their plans, to tell us by how much they are prepared to increase taxation, or by how much they are prepared to see the public sector borrowing requirement increase in the short term in order to bring about the so-called reduction in unemployment over the medium or longer term that the model that they hawk about predicts. To that we are never given an answer. A so-called alternative Government who are not prepared to face the costs of their own policies deprives them automatically of the right to be taken seriously. The performance of the hon. Member for Peckham has done nothing even to begin to fill the enormous credibility gap that the Labour party has consistently opened up.
I pay sincere tribute to the Government's determination to reduce the PSBR. A year ago, I admit, I was less 908 concerned about the rigour of fiscal policy. We were then part of the exchange rate mechanism. We are no longer part of it. Things have changed considerably. No country can with impunity afford for long to have a reduction in interest rates, a relaxation of monetary policy and a devaluation as well as an increase in the deficit, or a relaxation of fiscal policy. In present circumstances, therefore, it is particularly important that we should make a vigorous and, if necessary, a ruthless attempt to cut public expenditure and reduce the PSBR.
I pay tribute to the courage of my right hon. Friend the Member for Kingston upon Thames (Mr. Lamont) and the rest of the Treasury Bench in putting together this Budget which has laid the basis for increases in public revenues next year and the year after that. I thoroughly agree with the revenue-raising measures that have been selected: the increase in the taxation of company cars and the application of tax to allowances at the 20 per cent. rate, which seems to me to be right and proper. I thoroughly agree, too, as I said earlier this afternoon, with the extension of VAT to domestic fuel.
When the combined Budget and public expenditure statement is made in November, I hope that those measures will be accompanied by a demonstrable effort on the part of the Government to cut their own spending—I hope to below the level of the control totals that were published last year for this year, next year and the year after. It is a necessary move. Therefore, I hope that it takes place.
As for VAT, I know that the Government will not be discouraged by the fundamentally synthetic agitation of the Opposition, none of which was accompanied by an explicit commitment by the Labour party to abolish VAT on domestic fuel should the Labour party, by some mischance, be returned to power. [Interruption.] Well, we shall see, but we are used to the Labour party accusing the Government of spending too little, of taxing too much and of having too large a PSBR.
§ Mr. Geoffrey Hoon (Ashfield)The hon. Gentleman sat with me throughout the Committee proceedings on this Bill and knows full well that European legislation will not allow this change to be revoked. Is he suggesting that the Labour party would defy European law, or is he suggesting that his own party would be in a position to do so?
§ Mr. DaviesThe hon. Gentleman has put forward an absolutely splendid excuse.
§ Mr. MandelsonThat is true.
§ Mr. DaviesIndeed.
§ Mr. MandelsonThe hon. Gentleman should therefore sit down.
§ Mr. DaviesThe hon. Gentleman clearly wants me to end my remarks, which encourages me to feel that I may be scoring a few hits.
I hope that the Government will go further and extend VAT to other things as well—in fact, to everything, with the sole exception of food and children's clothing, for which we have negotiated, with some difficulty, a derogation from Community rules. What I hope that the Government will not do and what they have correctly not done in the Finance Bill, which I hope we shall send on its 909 way this evening, is to increase direct taxes—income tax, capital gains tax and corporation tax. Those are the three—
§ Mr. DaviesNo, I am not going to give way, and I shall tell the hon. Gentleman why. On several occasions this evening the hon. Member for Peckham refused to give way to me during her speech. As you know, Mr. Deputy Speaker, I am normally very generous in giving way to the Opposition. I did so earlier today when I was on my feet. There must, however, be some reciprocity. Therefore I propose not to give way but to continue with my speech.
It seems to me to be absolutely right not to increase the rates of those three direct taxes. I hope that the Government will continue on that course when they present their next Budget at the end of this year. They are the most economically damaging taxes. Perhaps the most economically damaging of them all is capital gains tax, for it has a direct impact on risk taking in the economy. All three of them, though, have a direct impact on incentives to work, on incentives to invest, on the location of industry and on the choice of residence.
It is tempting and popular to say that the rich should be clobbered and that we ought to introduce a new higher rate of tax of 50, 60 or 70 per cent. for higher incomes or, alternatively, that the 40 per cent. rate ought to be increased in respect of those categories of income to which it currently applies.
But that would be very damaging. The more attractive, in political and demagogic terms, it is to increase the rate of income tax as one moves up the income scale, the more economically damaging it is to do so. We are talking about people who are relatively more and more internationally mobile—well paid lawyers and financiers, as well as the pop stars and tennis stars, who could pursue their activities equally well in Paris, New York, Geneva or any other one of a whole variety of places. It would be very foolish to drive those people away. In this context, I hope that the Government will be very careful indeed not to mess about with the residency and domicile rules. Were they to do so, many of the people to whom I have referred would not be here.
Over the past few years, there have been great advantages—in terms of inward investment, the location of industry and the residence of people—in our acquisition, for the first time since the second world war, of the reputation of being, by international standards, a lower-tax area. Previously we had the reverse reputation. I hope that nothing will be done to damage this very considerable achievement—one of many—of the Conservative Government over the past 15 years.
It is a pity that the Government have not taken the opportunity afforded by this Bill to iron out some of the anomalies that result from the differential taxation of certain benefits. I hope that they will do so next time round. As hon. Members know, some non-means-tested benefits, such as the old-age pension, are regarded as income—which, indeed, they are—and are subject to tax in the normal way, whereas others, such as child benefit and invalidity benefit, are not regarded as income and are not subject to tax. There can be no rhyme or reason in that. Taxing all those benefits would not in any way constitute an attack on the poor. People whose income consisted entirely of benefit would not be liable to tax. However, 910 there is no reason why anyone receiving benefit on top of another significant income should not have to pay tax on it. I hope that the Government will address this matter.
The hon. Member for Peckham, among others, said much about the future of the welfare state. It is true that the welfare state does a wonderful job in the protection of many vulnerable people. It prevents a great deal of misery among families. All parties in the House are united in believing that a welfare state is necessary to a humane society. However, the present system is riddled with anomalies and perversities of all kinds and requires thorough examination. For example, it is absurd that teenagers receive housing benefit at public expense although they come from loving families that want them back. There have been some very tragic cases in my constituency. Why should children be paid to stay in some hostel in an inner city, such as Manchester or London, where they run all kinds of risks? In fact, public money is being used to support the unnecessary break-up of families.
I am sure that you, Mr. Deputy Speaker, would not want me to stray into the general area of welfare state and social security policy. I should like, however, to refer to a number of very clear taxation implications in this field. For example, the Bill makes provision for the so-called protection of people in receipt of income at or below income support level from the effect of the extension of VAT to domestic fuel. It must be realised that every time we "protect" certain categories of people below the benefit level against such price increases but do not do the same for others, we produce a perverse social and economic situation. We reduce the gap between what people earn by way of income support and what they would earn if they were in work. As a result, we reduce the marginal return to work. We reduce, at the margin, the willingness of people to go back to work and, thereby, run a higher level of unemployment than is necessary. That is very dangerous.
If old people have a little income in addition to their pension, if they have worked all their lives and have made a great effort to save a little—perhaps a few hundred pounds a year, amounting to £10,000 or £20,000—out of a modest income, why should they be deprived of benefits on the ground that help is being targeted at people whose income is below a certain arbitrary poverty level? Such a policy would send to society as a whole the signal that work and thrift are not to be rewarded and that people who work and save will be made fools of. Clearly I am referring to those whose incomes are not much above the level that would entitle them to income support and other benefits such as assistance with mortgage interest payments. We would pay a price, in terms of employment and of the propensity to work and save—indeed, the whole culture of society—by going down that road. I hope that the Government will be very cautious.
This has been a good Budget in extremely difficult circumstances. No Chancellor could produce a blockbuster, popular Budget in the present climate. Indeed, it would be wrong and irresponsible to do so. The Government have been quite ingenious in putting together a package that will enhance revenues. If ingenuity in this respect can be matched with ingenuity and equivalent effort in the reduction of Government expenditure, we shall show the world that we mean to bring our fiscal deficit down. We shall lay the basis for the confidence that our economy needs if the very encouraging upturn that we 911 have seen in recent months is to be sustained in the 1990s, as happened under the Conservative Government in the 1980s.
§ Mr. SalmondAs several hon. Members who have sat through the debate want to participate, I shall be brief. The magic carpet that mysteriously transports Conservative Members into the Chamber has some time to operate.
As I listened to the Chief Secretary's speech, I had a strange feeling of déjà vu. I was trying to place the quotation that the right hon. Gentleman used at the climax of his address—the one about governing and choosing and choosing to govern. I knew that it was from a resignation speech, but we have had so many of those over the past few years that I could not quite place the valedictory address that was the source. Then it came to me. The speech was that of the noble Lord Lawson addressing the House as Chancellor. As on this occasion the idea came from the Government Front Bench, I thought that it must mark the rehabilitation—or at least the reconstruction and development—of Lord Lawson's position in the Conservative party. That must be very refreshing for the noble Lord after so many years of having the finger pointed at him for all the ills that have befallen the economy. However, it will be some time before the latest fallen Chancellor—who at half-past seven appeared like Banquo's ghost and took a long look at the Government Front Bench—reaches the stage of rehabilitation. I do not know which Minister would play the part of Macbeth, but I would not recommend an overnight stay in the house of any of them.
In an intervention during the speech of the Chief Secretary, I referred to growth in the economy. The Red Book forecast is 2.5 per cent.—exceptionally modest indeed. A growth rate of 2.5 per cent., on average, over the next few years is not just exceptionally disappointing—it will come nowhere near closing the fiscal deficit in the economy. Thus the Government's hard choices between tax increases and spending reductions will be very severe indeed. It also means that the structural weakness in the United Kingdom economy has been laid bare for all to see.
We have experienced the longest recession in living memory. Yet the recovery from recession is not so much a bounce back as a clawback. We are not engaged in a dash for growth; if anything, it is a crawl for growth, and the so-called economic miracle of the 1980s has been exposed for what it was—if, of course, the Government's forecasts for growth over the next few years are accurate.
If I were a member of the Government Front Bench, I would be worried not only about the £1 billion per week deficit in the public sector borrowing requirement but in particular about the £1 billion per week deficit on the balance of payments because, as sure as eggs are eggs, that deficit will ensure that the faltering recovery is aborted in a balance of payments crisis sooner rather than later.
It was interesting that, apart from a brief mention of the success of exports in recent months, at no point did the Chief Secretary show any appreciation of the extent and inevitability of the enduring problem of the balance of payments, especially when oil forms less of a protection for 912 the United Kingdom's balance of payments. I should have liked the Bill to contain a realisation of the key underlying problem of the economy.
With the Budget, the Government visited a double whammy on the people of Scotland. The first blow was the changes to petroleum revenue tax. For the sake of completeness, I shall read into the record an internal memo distributed to Shell staff in Scotland. It gives what may be called the private company view of the effect of the oil tax changes as opposed to the public view which was hastily cobbled together when the private view was unfortunately released to the newspapers. The internal memo reads:
Doubtless you are aware … some very significant changes in Petroleum Revenue Tax regulations will be implemented this year by the Government…The main effect that this will have on exploration is that our net costs will go up by a factor of four. It will be clear that, under these circumstances, our exploration programme will have to be reassessed carefully.Strong reductions in this activity will force us into corresponding reductions in staff. In total we are looking at a reduction in manpower of approximately 20–30 per cent. of the present workforce in exploration between now and the end of 1994.It is clear and unambiguous that the internal company view, at least of the exploration side of the business, is that the PRT changes will mean the loss of fairly massive numbers of jobs. Let us remember that that is the view of one of the handful of oil companies which were in favour of the PRT changes; one can only imagine what the consequences will be for the vast majority of oil-related companies which were strongly against the PRT changes.We should be grateful to the hon. Member for Slough (Mr. Watts) for trying to enlighten us about the process which ended in something like a farce yesterday when the out-of-order amendments tabled by Conservative Back Benchers were not selected for debate. The hon. Gentleman probably left us none the wiser about the tactics of that group of Conservative Back Benchers, and I should have thought that in-order amendments tabled on an all-party basis may have had a better chance of selection than out-of-order amendments signed only by Conservative Back Benchers.
My constituents were this morning treated to the sight of the right hon. Member for Woking (Sir C. Onslow), on the front page of The Press and Journal, holding a copy of the newspaper and saying that he would fight on against the PRT changes and would be trying to speak in the debate tonight. It must be especially disappointing to them that that particular knight in shining armour has been notable by his absence.
I do not know if there is still a backroom, back-stair strategy to try to get a concession from the Government to mitigate what will otherwise be a calamity for jobs in the oil industry, a calamity running into the loss of thousands of jobs. To judge from his current demeanour, I do not think that the Financial Secretary is going to enlighten us. It was a great mistake that the issue could not be forced to a vote yesterday because there is clearly all-party concern about the impact of the PRT changes, just when the oil industry is in a cyclical downturn. It is probably one of the most significant matters in the Budget in terms of an immediate effect on jobs.
The second aspect of the double whammy is the well-ventilated increase in fuel tax. I and my colleagues have for many years campaigned for a cold climate allowance, a recognition within the social security 913 structure of the fact that there are different climatic conditions in various parts of the United Kingdom. Often, especially when there are only faltering changes to the current social security provision, we despaired of getting any reasonable concession but never in our wildest imaginings did we think that we would end up with a cold climate surcharge through the imposition of value added tax on fuel. People who pay 30 per cent., 40 per cent. or 50 per cent. more a year on fuel than the United Kingdom average will be infinitely worse off. Let us be clear: the imposition of VAT on domestic fuel will not save the world from environmental damage, but it will sacrifice pensioners and low-income families, especially those in areas with poor climatic conditions.
In summary, this Budget was introduced by a failed Chancellor and it is being ushered by a failed Treasury team.
§ Mr. Peter Luff (Worcester)I am grateful to you, Mr. Deputy Speaker, for allowing me to catch your eye despite my discourtesy in not being in the Chamber to hear at least two speeches. I was attending an extremely important event elsewhere. You will understand that when the chairman of one's regional television company is hosting an event on the Terrace, and when he is a constituent, a certain priority attaches to being there, especially as the occasion was to say goodbye to the political editor of Central Television, Jon Lander, who has served this House so well in so many ways through the years.
This is a historic occasion because it is the last Finance Bill that we shall discuss separately from the public expenditure statement. I for one look forward to the new unified structure for presenting the national accounts, which we shall receive in November or early December this year. I suspect that the Treasury team has had an especially difficult battle in Committee trying to remember what is going into the next Finance Bill and what is in the current Bill. The House owes the team a debt of gratitude for the skill with which it negotiated the Bill through its Committee stage.
I look forward to the fact that in the combined expenditure statement there will be a splitting of capital and current expenditure. It is a long overdue measure which will allow for much greater clarity in the presentation of our national accounts and will enable the House to take a more enlightened and informed view of the true state of the public sector borrowing requirement.
I welcome the fact that the House recognises that the public sector borrowing requirement is the fundamental issue confronting the Treasury team and the Government. Even the hon. Member for Peckham (Ms Harman) seems able to agree with that. Having heard her remarks earlier, however, I am still not sure what the Labour party believes to be the right level for the PSBR. I have heard what Treasury Ministers and others have said about the likely relative weight of the cyclical and structural elements of the PSBR, but I regard the £15 billion to £20 billion structural element as being too high. I welcome unreservedly the steps taken in the Finance Bill to narrow that gap, raising about £6.5 billion of revenue in the next financial year and about £10.5 billion in the year after.
I cannot, however, unreservedly welcome the Bill. Sadly, certain things that I should have liked to see in it are not. Perhaps those omissions are, at least in part, a product 914 of that first year fixation which seems to have mesmerised the Treasury down the years. I am afraid that, just as in business it is sometimes necessary to invest to generate revenues in later years, so it is necessary for the Treasury occasionally to take a view about what sums of money might sensibly be spent in year one to ensure that there are revenues to spend in years two, three and later.
Before mentioning two or three of those matters, I must declare an interest. For several years I have had the privilege of advising first the General Council of British Shipping and now the Chamber of Shipping, and my work with the shipping industry has persuaded me of the imperative need to do something to help that industry. I am disappointed that nothing in the Bill helps the shipping industry. In Committee on the Floor of the House we had a useful and constructive debate on an amendment when in a series of speeches Conservative Members expressed the concern that the party feels about the future of the shipping industry. It was something of a disappointment to me that Ministers were not able to be more generous in their response to that debate, for the shipping industry would derive special benefit from a more informed and enlightened approach to the first year fixation to which I referred earlier.
I am in no sense questioning the Chair's selection of amendments, but I regret that new clause 19 was not selected for debate on Report, as that would have enabled us to debate another aspect of the investment needs of the shipping industry. I think that I speak for the shipping industry when I say that I am grateful for the intelligent, informed and constructive debate with Treasury Ministers and officials that has been possible in recent months. As a result, we are at least beginning to build some kind of general agreement about the costs likely to be incurred as a result of the measures that the industry seeks. That is at least a step forward.
The House will be aware that two principal issues relating to investment in shipping would have been welcome in the Bill: 100 per cent. capital allowances for shipping, the subject of the amendment in Committee, and roll-over relief, the subject of new clause 19. Those measures alone will not produce the revival of the British shipping industry that all hon. Members want. Other measures relating to employment are necessary, but they are not matters for the Finance Bill.
I am grateful to my hon. Friend the Financial Secretary for his recent answer about relative corporate tax regimes as they relate to shipping industries in the European Community. That answer showed that, even on the Treasury figures, the relative, advantage to the British shipping industry is much smaller than is sometimes claimed from the Dispatch Box. The answer did not deal fully with many of the important nuances that apply to shipping company taxation in other EC member states. The combination of those effects is to make the British taxation regime for the shipping industry the most unfavourable in the EC. I, for one, cannot accept that as a permanent state of affairs.
My hon. Friend the Minister for Transport in London recently stated from the Dispatch Box that he intended to seek to phase out other countries' state aid. His view is widely shared by Conservative Members. We do not want shipping, or any other industry, to be subsidised unreasonably, but when other countries provide advantages to their companies through the tax system, we should seek the same treatment for ours. My hon. Friend said that 915 his policy was to seek to phase out those other state aids, so I am disappointed that the Government are not making much progress with the increases in aid being given by the German, French and Dutch Governments to their shipping industries. All those countries are doing more, and I am afraid that at present our Government seem reluctant to do anything.
We are in danger of throwing away an industry in which we enjoy real competitive advantages in the international economy. I understand that there is a problem with the way we do our public accounts. Who should pick up the bill? The Department of Transport obviously would not be happy with an increase in its budget provision for that sector without receiving some additional total funding from the Treasury, although it is worth recalling that only 2 per cent. of Department of Transport expenditure goes on air and sea combined. The Ministry of Defence, which ought to have a vested interest in picking up the bill because of the enormous bonus that a strong British merchant fleet provides to the country's defence, is also reluctant. The Treasury, because of the first year problem that I mentioned, seems to be equally reluctant. If I were an entrepreneurial member of the Cabinet I would beseech the Treasury to be allowed to pick up the bill in year one, so long as I could have the profits in years two, three, four, five and six, because I would have a lot more money to spend if I took that approach.
I especially agree with the comments of my hon. Friend the Member for Stamford and Spalding (Mr. Davies) about residence and domiciliary rules. London remains the maritime centre of the world, and that is in large part due to the presence of foreign nationals engaged in shipping activities. It has been a long-running obsession of the Inland Revenue to try to tax those people on the same footing as British residents, which would kill the goose that lays the golden egg and drive those residents elsewhere, causing a great loss to the British economy. So I am glad that at least we seem to have resisted that temptation in the Bill.
Another industry that might have looked for slightly more sympathetic treatment in the Bill is the British beer industry. There must be concern about the effects of steadily higher rates of duty on beer, the effect that those rates have on depressing sales in the United Kingdom and especially the encouragement that that provides to personal and even illegal imports with the completion of the European single market. I hope that as Ministers approach the next Finance Bill they will look carefully at the price elasticity of those increases in duty and decide whether they generate additional or less revenue for the Exchequer, either through the port of Dover or in the loss of sales at the local pub.
The Government have recently taken a number of welcome steps to benefit the car industry, such as the abolition of the special car tax. One has only to look at the increase in car registrations that has occurred as a result. The Government have also benefited the scotch whisky industry. Speaking as someone who intends to holiday in Scotland this year, I am glad of the warm reception I shall get for that measure. The Government have even looked after the horse racing industry. All those measures are good and I hope that a similarly enlightened view will prevail in relation to brewing and shipping.
916 It has been said that the Bill contains hard thinks, and it does—especially the matter of VAT on fuel and power. I cannot pretend that I welcome that tax, but I recognise it as essential and one that I will definitely support. It is important to remember that fuel prices have fallen in real terms since 1986. Electricity prices are broadly level, but they are going down this year. Gas prices have fallen by 20 per cent. because of the tough regulation that the Government introduced to accompany the privatisation of those industries. Despite the phased increase in VAT over the next few years, many people will be paying less in real terms for gas than they would have been before the imposition of VAT and before the privatisation of those industries. We must remember that that compares sharply with fuel bills under the previous Labour Government, when electricity prices rose by 30 per cent. in real terms. What was done then to help the poorest members of society?
I believe that the imposition of VAT is important to raise revenue. That is its clear objective. I also have no hesitation in supporting it on environmental grounds. At Question Time earlier, my right hon. Friend the Prime Minister explained the hypocrisy of the Opposition parties on that issue. We heard then of their policies. We heard what the Opposition said was necessary to protect the environment by reducing carbon dioxide emissions. I especially welcome the endorsement by Friends of the Earth of our attempts to increase measures taken to control carbon dioxide emissions.
It is right, though, to sound a small warning. I am sure that those on benefit will be fully compensated and I welcome that unreservedly. However, there is the question of those just above benefit levels, especially single elderly people. I hope that the next Finance Bill will not increase the burdens on those with modest incomes who are not eligible for benefit, especially those living on their own. A number of recent measures have had an adverse impact on that group and I hope that the burden will not increase in future Finance Bills.
The Bill has had a reassuring effect on foreign exchange markets, which has in turn affected interest rates. We should be careful before further reducing interest rates. I hear no great calls from companies in my constituency for a further reduction and we should recognise the implications that any reduction would have for those on fixed incomes.
I welcome the stability that the Finance Bill and the promise of future levels of revenue that the Government plans have brought to foreign exchange markets, and the beneficial effect that that has had on interest rates as a result.
The hon. Member for Peckham (Ms Harman) earlier accused the Government of not facing facts. I believe that the Bill shows that the Government are all too prepared to face the facts. I would remind her, were she still present, of the rise in manufacturing output. I would also remind her that in my region, the west midlands, manufacturing output and business optimism are running at the highest level for many years—according to one survey, the highest level since the survey began eight years ago.
The production of Land Rover Discovery vehicles is up by 44 per cent. and 300 more jobs are sought for the production line. Unemployment is down for the fourth month in a row, inflation is at a 29-year low, decades of decline in our share of world trade have been halted,
917 exports are up by 6.5 per cent. in the first quarter of this year and manufacturing investment is up by 5.4 per cent. in the same period.
Those are the facts that the Opposition should be facing and I hope that they will have the courage and honesty to do so, though somehow I doubt it. It is no wonder that in reflecting on the economic strategy of the Labour party and what it might have introduced through the Finance Bill if—God forbid—it had been the party in power, Tribune said on 23 April:
Dissatisfaction with Lbour's hopelessly unconvincing economic policies … is widespread within the Shadow Cabinet".The success of this Finance Bill has been proved. There is growing recovery, a strengthening pound, falling unemployment and falling inflation. The broad strategy of the Bill is essential to our continued economic success. There are no sins of commission in the Bill. In a mildly critical passage, I have highlighted some sins of omission. I hope that the second 1993 Finance Bill will begin to address those sins of omission, but I have no hesitation in commending this Bill to the House.
§ 9.9 pm
§ Mr. Jim Cunningham (Coventry, South-East)The hon. Member for Worcester (Mr. Luff) referred to the improvement in the economy, and he referred specifically to the west midlands. I should remind him that there are still about 250,000 unemployed people in the west midlands. In my constituency, there are still redundancy announcements at companies such as GPT, which has announced 300 more redundancies over the past three or four weeks. The same thing is happening at Dunlop in Coventry. I should like to know where all the signs are that the economy in the west midlands is improving in the way in which the hon. Member for Worcester suggested.
There is no doubt that the Bill does not deal with the hidden time bomb of the balance of payments problem, to which many hon. Members referred. If we analyse the balance of payments, we may find that the industrial base of many of the wealth-creating industries—manufacturing industries—has been eroded. That has an effect on the creation of wealth in the national economy.
I was interested in the Prime Minister's statement yesterday in which he referred to the talks on the general agreement on tariffs and trade. The Government and their partners have not resolved the agricultural problems involved in GATT. Also within that statement—it is relevant to the Bill—the Prime Minister did not hold out any hope that there would be any major reduction of unemployment in the western economies. We must look at the Government's measures, particularly in the Bill, to tackle the balance of payments problem, unemployment and wealth creation.
Only afortnight ago, together with a number of colleagues, I met the old-age pensioners' lobby. Some hon. Members have referred to the concerns of old-age pensioners and I do not want to dwell too much on that. When old-age pensioners apply for state benefits, their meagre savings are taken into account; as a result, the pensioners do not accrue any interest on them, and that affects their planned budgets. As we know, most old-age pensioners have some form of planned budget to run their homes, so they will be hurt by the increases in VAT and the changes in their state benefits. There is a double whammy which should be minimised.
918 Some Cabinet committees are looking at Government expenditure outside the Bill and as part of it. They are looking at cuts in the national health service and there has been talk about charges. About a fortnight ago, thousands of people outside the House expressed great concern about possible post office closures. Therefore, we are not just looking at the Bill in relation to the economy as we understand it. There are hidden factors at work within the economy that the Bill does not necessarily address. I hope that the House will give serious thought to those issues.
The Government have said that they have a medium-term economic strategy. They have not spelled out to the House what they mean by "medium-term". Do they mean 10 years down the road, three years or 12 months.
Over the past 14 years, we have had a succession of Budgets that it was claimed would put right all the economic ills of Britain. They have dismally failed to do that. It is no good going back 14 years and making comparisons with the last Labour Government. The economic policies that are practised by the Government are those of the ancient Britons rather than of the modern Britons.
The Chief Secretary's opening remarks certainly alluded to my hon. Friend the Member for Peckham (Ms Harman). I interpreted his remarks as a job description for the position not only of Chief Secretary but of shadow Chief Secretary. I could not help but think that that job description might have applied in an ideal world; in other words, his words showed the wishes and visions of a Don Quixote rather than those of a strong Government determined to tackle Britain's economic problems and equally determined that sacrifices should be made on a fair basis. The Bill does not address those matters.
§ Mr. BettsThe Budget is almost exclusively about the Government's obsession with curing the Budget deficit that they have created. The previous Chancellor of the Exchequer talked in his resignation statement about the absence of long-term policy thinking from the Government. He could also have said, had he been more objective, that the Government's economic policy had been based on a number of obsessions.
The Government's obsession in the early 1980s was with dealing with inflation, and that obsession caused the disastrous collapse of our manufacturing industry. The Government were then obsessed with financial deregulation, which created the credit boom and the debt overhang with which the Government must now cope. Their obsession with inflation at the end of the 1980s caused the longest recession in Britain since the war. Now the Government's obsession is with the public sector borrowing requirement.
The Chancellor's one policy statement since his appointment—if one can call it that—said, in effect, that if the recovery is stronger than the Government think, tax incomes will go up. There will then be less of a need for the Government to act by making public expenditure reductions and further tax increases. Unfortunately, the reverse is also true: if the recovery is slightly less strong, there will be a greater need for the Government to impose more tax increases and cut expenditure further. The worry 919 is that the Government are obsessed totally with the PSBR. The recovery comes as an afterthought in that process.
The recovery and the appalling problems of unemployment should be the Government's prime objectives. I do not mean simply short-term unemployment, when people have been out of work for two or three weeks; I mean cases such as the young man to whom I talked in Sheffield recently. He is aged 27 and has never had a job in his life. He has moved from one training scheme to another. He has had the misfortune to spend the whole of his working life—or, in his case, non-working life—under the Government and their policies.
It is not true for the Government to say that the recovery is under way and that it is all right for them to deal with the PSBR by raising taxes or reducing expenditure. A recent survey of Sheffield industry was carried out by The Star and a local firm of accountants. The results showed that
despite the recent spate of news concerning recovery, businesses believe the effects of the recession will be felt into 1994 and beyond and that the real recovery will be delayed until then.More than half—62 per cent.—of business respondentsthought the recession would end in 1994 and beyond.A similar figure—68 per cent.—thought thatGovernment policy was not working for the benefit of UK businesses".That is what businesses in Sheffield feel about the Government's claims about the recovery.Despite the Chief Secretary's analysis of the PSBR, the problem is totally the Government's fault. Cyclical PSBR problems are the fault of the immediate recession, but the structural problems of the PSBR are the fault of the Government's long-term economic policy and the underlying weakness of the economy.
It worried me that the Chief Secretary did not answer my earlier question. The Government do not understand the difference between the cyclical and the structural problems of the PSBR or how to deal with them. If they get it wrong and attempt to tackle the structural problems at the wrong point in the economic cycle, they will squash any faint hope of recovery. That will cause damage for years to come. The Government have not faced up to that issue and are not prepared to answer questions about it. They have not seen the need for action, and their idea is that one can somehow mirror the national economic situation as an aggregate of household budgets.
The Chief Secretary talked about a bank account. That is a throwback to the neoclassical economics idea that macro-economics is merely micro-economics writ large. Let us learn some lessons from the past. Wynne Godley, one of the seven wise men appointed to help the Chancellor, said in a submission to the first round of the Chancellor's review that he believed that eventually the PSBR would
add enough to national output to generate enough tax revenue… to cover not only the addition to public expenditure, but also the interest payments which have been generated by the additional public sector debt.That answers the Chief Secretary's point about the problems of a cyclical recovery reducing the PSBR by the full amount.I agree with my hon. Friends that the real problem for the Government is not the PSBR but the balance of 920 payments crisis—a £12 billion debt at a time of economic depression. That boils down to a lack of economic and industrial capacity, caused by the Government's economic policies. The real problem for the Government is that there is a limit to the amount of recovery that can be generated without creating an even bigger balance of payments deficit. There is also a further restraint in the shape of how the cyclical element of the balance of payments can be dealt with during the recovery, and the Government have not come to grips with it. For an answer, they should go to the Bank for International Settlements, which recently said:
Growth above the current rate will be required to reduce the budget deficit but could increase the current account deficit. On the other hand, growth compatible with a stable current account deficit might lead to an unsustainable rise in the public sector imbalance.The Government are not facing up to that dilemma. It is no use Conservative Members saying that fiscal restraint is not the answer—that the Government can deal with the problem by relaxing monetary policy. We have not heard what the Government's monetary policy is. Do they have one? It is all very well saying that we have left the exchange rate mechanism so there are now no international restrictions; there is every evidence that the Government are merely shadowing the deutschmark at DM2.5. Is there an internal, domestic policy governing the money supply? It is certainly unclear how the Government see monetary and fiscal policy.The Government have an obsession with the PSBR to the exclusion of all else. One objective does not make an economic policy. We know from the previous Chancellor that the Government have no long-term policies: in my submission, they have no short-term economic policies either. They have created an appalling economic mess. They should be condemned for that, and doubly condemned for the fact that they have no coherent economic strategy to get the country out of the mess that they have created.
§ Mr. HoonThe Bill is based on a lie told to the British people at the time of the general election—the lie that a Conservative Government had no need and no plans to raise taxation, and that people could vote Conservative in the expectation of tax cuts to come. That was the essence of the Conservative appeal to the electorate in the election campaign.
Within 12 months, the Government brought in the Bill, imposing a series of tax increases and changes on the British people—not only VAT increases and increases in national insurance contributions but alterations in allowances and reliefs against income tax for almost everyone, increasing taxes right across the range of measures that are available to any Government. When challenged repeatedly about that, the Chief Secretary defends each tax regime measure almost cheerfully. He cheerfully admitted this evening that this was a revenue-raising, tax-increasing Budget. He did that in Committee and he has done it again tonight. It is necessary, he says, to fund the £50 billion deficit at the heart of the Government's finances.
What is curious about the right hon. Gentleman's approach to the deficit is the fact that he has consistently failed to deal with its causes. Where does the deficit come from? It is almost as if it arrived one day from another 921 planet and was nothing to do with the Government, who have had, rather distastefully, to deal with it. Yet throughout the election campaign and parliamentary progress on the Bill Conservative Members have attacked the Labour party's spending plans even though a Conservative Government are forecasting a £50 billion deficit. They are therefore not in the strongest position from which to criticise.
Apart from admitting to a newly discovered enthusiasm for raising taxes, the Government have provided us with little analysis of how they got into such a sorry state. Instead, they continue to try to face both ways, claiming to be the party of tax cuts just as they significantly increase the burden of taxation on the British people.
In Committee, the Financial Secretary pointed to the limitation on reliefs to 20 per cent. as a sign of the Government's so-called commitment to reducing taxation. It is a remarkable exercise in double-speak for a tax-raising Government to try to claim credit for their so-called commitment to reducing taxes by increasing income tax for anyone with a mortgage, yet pretend that it was a sign of better things to come.
There is little doubt that the measures are designed to deceive and defraud the electorate—big tax increases now with a view to smaller tax reductions later. Some Conservative Members may ask what is wrong with that. The answer is clear: it is making the British economy and the British people subservient to the interests of the Conservative party in being re-elected. It makes them subservient to the interests of Ministers who want to keep their jobs, ahead of the real interests of the country.
Anyone who has any doubts about that argument should consider the history of the past two Budgets. The 1992 pre-election Budget was designed to win votes at a time when serious economic commentators were pointing to the dangers of the growing size of the public sector borrowing requirement. When asked about that during the general election, what did Ministers say? Minister after Minister stated that he saw no difficulty with the PSBR, that he had no need to raise taxes, that he had set the right targets for public expenditure.
Twelve months later, those same Ministers are standing on their heads, their forecasts and promises empty of content and meaning. Are we really to believe that they were genuinely caught out by some apparently unforeseen growth in the PSBR? Those same Ministers, in the 1992 general election campaign, confidently forecast recovery for the British economy. They predicted that their assessment of the country's needs for borrowing and taxation could be contained within the guidelines set out in the 1992 Budget. They had access to all of the relevant Government figures when they said last year that their assessments in April 1992 were accurate. They were either incompetent or dishonest. Which is it? It is important that we and the British people know the answer.
I have little doubt that the Government plan to make most people's lives more miserable this year, next year, and perhaps even the year after. By 1996, the likely Tory target date for a general election, they can start easing back. They can look for tax cuts and handouts going into a general election campaign, paid for by the tax increases in this year's Finance Bill. That is their real policy. It is not so much an economic policy as a re-election policy. By then, as electricity and gas bills start to hit the doormats with their 17.5 per cent. Government surcharge, the British people will he looking for change. The Government will no 922 doubt introduce proposals to reduce the level of income tax, not for the benefit of the British economy, but simply to boost their prospects of re-election.
The Government cannot expect that deception to work yet again. It is time for them to stop playing politics with the British economy and to face up to the fundamental problems that their policies have created.
§ Mr. MandelsonIt is no secret that Opposition Members hate the Budget, which is being implemented by the Bill. We hate it for what it does not do about unemployment, which has dramatically increased in so many regions and is still chronic in regions such as mine. We hate it for the unfairness of its measures and the savage impact that it will have on so many of the needy and most vulnerable. We hate it for the distance that the Government have travelled from the glossy gift-wrapped prospectus that they presented to the electorate in the election campaign last year, notwithstanding the fact that Opposition Members will be the political beneficiaries of the betrayal of so many of the Tories' supporters last year.
We wanted to see in this Budget ideas to get the young people in our constituencies and communities back to work, to get the long-term unemployed back to work, or at least on proper quality training schemes where they can pick up skills in readiness for the recovery, whenever it occurs. In no sense have we seen a Budget for jobs. That is undoubtedly the greatest indictment of the Budget and the Bill, the effect of which will be felt by so many people in our constituencies.
The Bill is grossly unfair and unequal in its impact on different sections of the community. It is ironic, although perhaps not surprising, that those of us who served on the Committee considering the Finance Bill spent many hours sorting out problems and making things better—but, tragically, not for the people in real and desperate need. Throughout, the Government cared most about their friends—for example, the Lloyd's names, for whom they have created what will probably turn out to be a highly beneficial tax shelter. For large oil companies, there is massively reduced petroleum revenue duties. As speaker after speaker has reminded us, this measure will destroy jobs in exploration among the medium-sized and smaller oil companies as well as the onshore activity that is so important in my constituency and others in Scotland and in the north-east.
The Committee even took time to create a tax break for wealthy foreigners so that they could buy homes here without running the risk that they might be caught for tax. Tory Members may say that that was worth only £10 million, but was that £10 million used for the poor, for the low-paid, for struggling businesses? No, it was for the friends of the Tory party. It was particularly symbolic for that.
It was noteworthy, but probably predictable, that nothing of equal value requiring similar effort was done throughout the proceedings of the Committee to close the loopholes and stop the abuses that offer such opportunities to the already wealthy and well-off, and other friends of the Conservative party. The Government know how to look after their friends. They have not even bothered to chase up those missing millions—the £1.7 billion-in last year's uncollected taxes. That is twice the sum that went uncollected in the previous year and possibly, most 923 significantly of all, twice the expected revenue from VAT on fuel that the Government are intending to claim next year.
In Committee, we should have spent our time implementing a straight quid pro quo, ensuring that there were measures in place to collect the uncollected taxes from the most wealthy and privileged, rather than extending VAT on fuel—a tax on warmth, light and heat. It is not surprising that that is seen as the most notorious, nefarious and objectionable feature of the Bill, which will haunt the Government from here to Christchurch and back via Newbury.
The contrast between what the Government promised that they would do for the low-paid, the typical taxpayer and the middle-income earner and those whom they are actually helping goes to the heart of what is so damnable and objectionable about the Bill. It has laid bare the whole cynical, fraudulent case that the Conservative party put to the voters at the election last year. The Tories said that it would be safe to reduce taxes and possible to lower borrowing and that it would not be necessary to increase costs or impose new charges. They said that economic growth would square the circle and deal with the details, yet the Budget and the Bill have put up taxes. The Bill has done nothing to get people back to work, enabling borrowing to be reduced; instead, it has increased the cost of living, of mortgages and employment and provided not a single new policy or fresh initiative to create new jobs or to spur enterprise and growth.
Overwhelmingly, people recognise that the country is in a hole. Everyone knows it and the Chancellor has even said it. Hardly a soul does not realise that, in the long term, we cannot live with the public sector financial deficit we have now. People know that difficult decisions have to be taken; they do not expect anything else. However, they do expect the Government to accept responsibility and to take action to get the economy moving. They expect the Government to respond vigorously and imaginatively to the crisis of unemployment. Above all, they expect the Government to be fair on the tax measures that they take. On all those counts, the Government have failed and the Finance Bill deserves to fail as well.
§ Mr. Nicholas BrownThe Chief Secretary to the Treasury opened this debate by referring to the views of the Organisation for Economic Co-operation and Development. He treated us to a fairly partial run through the OECD's views of the British economy before describing himself as odious. In returning to those aspects of the OECD's review of the British economy which the Chief Secretary overlooked, I should like to draw the attention of the House to the OECD's review, which it instigated and reported on in its publication "Economic Outlook", in which it considered the health of the public sector in all OECD countries.
One would not have learnt this from the Chief Secretary's contribution to the debate, but the OECD found in its review that the United Kingdom compares very unfavourably with other OECD countries. Between 1989 and 1993, the United Kingdom's deficit widened by 924 more than 9 per cent. of GDP, and that is more than that of any other G7 country. That point puts the Chief Secretary's remarks in context.
The unique depth and duration of the United Kingdom's recession are clearly partly responsible for that state of affairs, although I know that it is fashionable—and probably obligatory—for Conservative Members to blame the world recession for the shrinkage of the British economy.
The OECD estimates that 2.6 per cent. of GDP—about one third of the deficit—is a result of the recession. However, when the Chief Secretary was asked to quote even the broadest of estimates for those figures, he declined to do so. He could at least have quoted the OECD in that respect as he was keen enough to quote it on other matters. The OECD estimate would leave a PSBR of 5.7 per cent. of GDP which is structural. That means that the borrowing will remain even when the economy recovers. That structural deficit is a measure of the health of public sector finances, purged of the effects of short-term economic cycles. That is worse in the United Kingdom than in any other G7 country bar Italy. That is the problem which the Budget attempts to address.
Conservative Members always ask what Labour would do in such circumstances. I will answer that not by saying what Labour would do in the future, but by saying what Labour has done in the past. The problem has been made substantially worse by tax cuts of £6 billion given in 1988 and tax cuts of a further £2 billion to which we were treated in 1992 before the general election. Labour believed then, and we believe now, that those tax cuts were beyond what public finances could afford, and the blame for that lies with the Government and with no one else.
If people want to know what we said at the time, I can tell them that we voted against those measures. That is a matter of public record. A Labour Government would not have got us into the position into which the present Conservative Government have got us.
As my hon. Friend the Member for Coventry, South-East (Mr. Cunningham) pointed out, before the last election the Government said that the economy would grow by 2 per cent. in 1992–93, by 3.25 per cent. this year, by 3.75 per cent. next year and by 3.5 per cent. in 1995–96. The Red Book this year showed that the economy was stagnant for 1992–93. It forecast growth of just 2 per cent. this year, 2–5 per cent. next year and 2.75 per cent. for each year after that.
The Government boast of recovery and revise the forecasts down. The Government promised recovery and they now show that the economy did not grow for a year. The Government promised vigorous economic growth for the next five years, but they now say that the economy will be just 2 per cent. larger this year rather than the 5.25 per cent. promised last year. The Government have cut their forecast for the size of the economy in 1996–97 by 7 per cent., or some £55 billion.
That £55 billion means that the economy will be poorer by the equivalent of £1,000 a year for every man, woman and child in the country. Those are not short-term forecasts subject to the inevitable uncertainties arising from the vagaries in economic cycles. Those changes reflect a fundamentally different view about the capacity of the United Kingdom economy to grow and to improve living standards and pay for public services.
Last year the Government's figures showed a public sector borrowing requirement of £32 billion for the current 925 year; the Red Book shows that the Government now expect to borrow £50 billion. Last year, the Government showed the deficit declining to £6 billion in 1996–97. The Government said that there would be no need to cut spending or raise taxes and that the public finances would return to balance as the economy followed the recovery that I have just outlined. It has already been revealed that the £6 billion was massaged downwards on the orders of the former Chancellor, but now we are told that the borrowing required will be £46 billion if the Government do not raise taxes.
My hon. Friend the Member for Sheffield, Attercliffe (Mr. Betts) has pointed out that the Government painted a false picture last year. The Government said that the economy would recover; it did not do so for another year. The Government said that recovery would be vigorous; now they take a significantly gloomier view of growth prospects. The Government said that taxes would not need to be raised. Now, in line with the new realism about economic growth that the Chief Secretary treated us to earlier, he has said that taxes need to be increased.
As my hon. Friend the Member for Ashfield (Mr. Hoon) pointed out, the Conservatives were not content with lying about our tax policies before the general election; they comprehensively lied about their own.
The Chief Secretary, in opening the debate, asserted that the Budget was broadly distributionally neutral, with the average proportion of income lost equal across income deciles at around 2.5 per cent. But 2.5 per cent. of income is of differing importance to the poorest and richest groups in society. Is it not disproportionate to ask the rich and poor alike for the same proportion of their income to reduce the deficit?
Contrasting the distributional effects of what happens when the Government need to raise tax rather than cut it, surely it is right to assert that they have increased national insurance contributions when they have cut income tax. Individuals start to pay national insurance contributions on earnings at least £1,000 lower than those on which income tax is paid. The Government have frozen income tax allowance, which raises money from people on the lowest incomes, when they have cut the higher rates of tax.
All in all, the richest 10 per cent. of the population are now £4,500 a year better off after the tax and benefit changes since 1979, and the poorest 10 per cent. of our fellow citizens are actually £50 a year worse off.
None of this is popular, but it is typical of this Prime Minister's decision making that, when he was faced with an unpopular Chancellor and an unpopular Budget, he got rid of the Chancellor and kept the Budget.
My hon. Friend the Member for Coventry, North-East (Mr. Ainsworth) has pointed out that the Government have cynically dressed up the extension of VAT to domestic fuel as an environmental measure. The truth of the matter is that it is nothing more than a large tax rise. VAT on fuel is the most regressive extension of the VAT base. Before knock-on effects and compensation, it will raise 2 per cent. of net income from the poorest 10 per cent, and less than 0.5 per cent. from the richest 10 per cent. I ask even Conservative hon. Members, how can that be fair? At least some Conservative Members realised last night that it was not fair, and, very bravely, they voted with us in the Lobby to assert what one of them described as social justice. I noticed that his colleagues stared at him as if he had said something peculiarly offensive. Perhaps 926 the Conservative party does regard social justice as something peculiarly offensive, but I bet that the electors of Christchurch do not.
§ Mr. DorrellThey are not voting for the hon. Gentleman.
§ Mr. BrownI am not standing in the election. I prefer the climate in Newcastle.
As domestic heat and light are necessities, fuel consumption will not be cut by much as a result of this tax rise. If anyone is still giving the argument about the environment any credence, he cannot plausibly argue that the tax increase will do much to reduce the emissions of CO, in line with the United Nations climate for change convention. As my hon. Friend the Member for Darlington (Mr. Milburn) has pointed out, the changes hit the poorest the hardest.
My hon. Friend the Member for Hartlepool (Mr. Mandelson) asked who gains and who loses in this year's Finance Bill. If the Government decided to have their legislation financially sponsored rather than the arrangements that pertain at present, this could be known as the British Petroleum Finance Bill. The petroleum industry would be happy to acknowledge sponsorship of this year's measures.
The heads of foreign states have also gained from the Bill. Those with an interest in foreign affairs will be pleased to learn that they remain relieved of any obligation to pay tax on their British income. The hereditary rulers of Brunei, Saudi Arabia, Dubai and Oman are now treated more favourably than our sovereign, but they gave large sums of money to the Conservative party and our sovereign did not—[interruption.] Is the Chief Secretary trying to assert that Her Gracious Majesty gave money to the Conservative party, because I cannot believe it? I must have misheard that sedentary intervention.
The Bill makes a small concession to wealthy foreigners with tax-exempt status. If Asil Nadir were to return to this country, he would benefit from that little £10 million change to our tax regime. The British people, who have not contributed generously enough on a voluntary basis to Conservative party funds, are subject to a massive tax rise.
In a previous Third Reading speech on the Finance Bill I said that discussing the Finance Bill without the right hon. Member for Kingston upon Thames (Mr. Lamont) would be like discussing Hamlet without the ham. This will be the last Bill where we discuss the Budget with the right hon. Gentleman. Personally, I regret his passing. It is probably worth pointing out that that is the first nice thing that has been said about the right hon. Gentleman in the entire debate. What an astonishing legacy for a former Chancellor that not a single Conservative Member has said something nice about him.
§ Mr. DuncanI did.
§ Mr. BrownThe hon. Gentleman protests his innocence, although I am not sure that it would be regarded as innocence by his colleagues in the Treasury. I hope that he will be rewarded with being forgiven with the passage of time.
It is sad that hon. Members who followed the Chancellor loyally through the Division Lobbies on the Budget could not find a decent word to say for him when discussing the legislation that he has brought to fruition. 927 His epitaph is not a single kind word from Conservative Members, even from his loyal deputy, the Chief Secretary to the Treasury.
The Bill includes value added tax on fuel; ACT changes hitting charities and pension funds; a 1 per cent. increase in employees' national insurance contributions; the non-indexation of allowances; restricting mortgage tax relief and married couples allowances to the new 20 per cent. band; and significant new increases in excise duties, notably on petrol and cigarettes.
Tonight we are invited not just to acknowledge the extent of the Government's mismanagement of the economy but to pay for it. I suggest that my hon. Friends reject that invitation.
§ Mr. DorrellFirst, I wish to respond to the comment of the hon. Member for Newcastle upon Tyne, East (Mr. Brown) about my right hon. Friend the Member for Kingston upon Thames (Mr. Lamont). The most eloquent testimony of my hon. Friends' support for the Budget introduced by my right hon. Friend is for them to support the Third Reading tonight. I have not the slightest doubt that they will all take the opportunity to record their support for the Budget proposals tabled by my right hon. Friend on 16 March.
The Third Reading debate is the end of a long process in which the House and the Standing Committee considered the proposals tabled by my right hon. Friend on 16 March. My hon. Friend the Member for Slough (Mr. Watts) spoke about the petroleum revenue tax—one of the major tax proposals contained in the Budget. It has properly detained the Committee of the whole House and the Standing Committee as we have ensured that the issue is properly addressed. The concerns expressed within the oil industry and oil supply industries were also properly discussed.
It is true to say of my hon. Friend the Member for Slough and my right hon. Friend the Member for Woking (Sir C. Onslow), who has also taken a keen interest in the subject, that they accept, as do the vast majority of those actively involved in the oil industry, the objective of seeking to remove the distortions that the existing system of high rate and narrow base imposes on the oil industry through petroleum revenue tax. That objective is common ground.
As the Bill has proceeded, we have had considerable discussions on the nature of the transition arrangements which secure the transition from where we are now to where we all want to be. In the course of the Bill's consideration, the Government have sought to respond to the concerns expressed about the transition arrangements, not least by my hon. Friend the Member for Slough. The time has come to record the fact that, as the House has decided matters and the Bill has proceeded, it has become clear that there is a difference of opinion about the desirability of any further action on transitional arrangements. The House has made a decision in favour of the transition arrangements contained in the Bill.
§ Mr. Robert HughesDoes the Minister understand the deep sense of betrayal felt in the oil industry this morning about the events over the weekend? Can he give a clear answer to the following question: at his meeting with his 928 right hon. and hon. Friends on Thursday night, did he give a hint that he was likely to change his mind? If the answer is no, the placing of the amendments on the amendment paper was duplicitous, and if the answer is yes, he was being duplicitous.
§ Mr. DorrellThere is nothing duplicitous about placing amendments on the amendment paper. I listened to the representations made by my hon. Friends and undertook—as I should in the circumstances—to report and discuss those representations with my right hon. and learned Friend the Chancellor of the Exchequer. After the argument on the issue, it is important for us to be clear about matters.
The Government believe that the position set out in the Bill, on both the transition arrangements and the final objective, will endure in the long term. I can think of no perception more likely to undermine exploration and appraisal activity in the short term than the perception—if allowed to develop—that the Government may be about to reconsider the issues. That would be a powerful incentive for oil companies to delay exploration and appraisal until a future date when exploration and appraisal relief may be available. The Government have no plans to revisit the issue. We believe that the proposals contained in the Bill will endure, and when the results are clear our judgments will be vindicated.
We have agreed to look again at the narrow issue of the treatment of pipelines. We make no commitment, except in the broadest sense of maintaining the tax system—which is our continuing duty—to look again at any of the other issues relating to that subject contained in the Bill.
§ Mr. SalmondThe Minister knows all about undermining confidence in the oil industry. He said a few seconds ago that the House had made a decision on the subject. The House has had no opportunity, subsequent to the Government's refusal to make a concession in Committee, to make a decision on the subject, other than to vote in a few minutes' time.
§ Mr. DorrellThe House has considered the matter both in Committee of the whole House and in Standing Committee.
As the Third Reading of the debate has unfolded, I have listened to speeches from right hon. and hon. Members on both sides of the House. One factor which has become clear to me, particularly from the speeches of Opposition Members, is that not a single Opposition Member has made any serious reference to the fact that there are clear signs that recovery is under way in the British economy, as my right hon. Friend the Chief Secretary made clear in his opening speech on Third Reading.
That perspective was almost totally lacking in the speeches made by Labour Members. One listened in vain to their speeches to hear a reference to the survey of the Confederation of Business Industry, which records the best sentiment among British business men since April 1983. One listened in vain to hear about the increase in retail sales of 3 per cent. over the past 12 months. One listened in vain for a reference to the increase in car registrations, which are up by 6.5 per cent. over the past 12 months.
Despite Labour Members' protestations of interest in the manufacturing sector, one listened in vain to them for a reference to the fact that manufacturing output has been 929 increasing for 12 months but has now reversed in the first five months of this year to more than half of the total loss of manufacturing output in the recession. Despite all the occasions over the years on which Labour Members have said that unemployment is the key factor, one listened in vain to their speeches for a single reference to the fact that unemployment has fallen in the past four months. That is good news, but reference was not made to it by Labour Members. I have further bad news for them—
§ Mr. Robert AinsworthWill the hon. Gentleman give way?
§ Mr. DorrellI will not give way.
The further bad news is that we intend that the recovery which is under way, and to which Labour Members did not refer, will be sustained because the Government are determined to deliver the disciplines that will ensure that it is sustained.
I refer to the discipline of sound money. The hon. Member for Peckham (Ms Harman) has taken to quoting my speeches back at me. That is great flattery. Because she repeatedly quotes from my speech about the dangers of inflation, I can only assume that she agrees with those dangers. For example, I assume that she agrees that inflation causes economic waste by giving inaccurate signals and introducing short-term planning horizons.
I assume that the hon. Lady agrees that inflation causes social injustice, which ensures that the system does not reward those who produce—it rewards those with the sharpest elbows. Inflation is a tax on the unsophisticated, to the benefit of the sophisticated. I am pleased to welcome her support for those propositions.
The hands of Labour Members are not clean on the subject of inflation—far from it. In the 1970s, the Labour Government were responsible for an average inflation rate of 15 per cent. during their years in office. What were they doing from 1986 to 1988 when the misjudgments which we acknowledge were being made led to an excess inflation rate? They were busy winding the handle that distributed the seeds of the harvest that came later.
In those years, what was Labour Members' formula for interest rates? They travelled the country telling us that interest rates should be fixed by a simple formula—X minus 2 per cent. when X was the prevailing interest rate. Whatever the interest rate, they wanted to see it cut. They did not see the dangers of inflation. If we had followed their nostrums, we would have made the matter worse.
In sharp contrast to that world, the Government have delivered the sound money and price stability objective that is the necessary precondition to sustainable growth. We have also made it clear that we will deliver sound public finance. That is the second discipline, which Labour Members talk about but on which we act. How would a Labour Government deliver sound public finance? It would not be through tax increases. The hon. Member for Dunfermline, East (Mr. Brown) shut and locked that door before the Budget when he said that to raise income tax, national insurance or VAT at that time would be a mistake. How would a Labour Government close the Budget deficit? Would the hon. Gentleman look to the hon. Member for Peckham? Would the whole burden rest on her? She wants more money for hospitals, schools, training and overseas aid. Under her, a spending round would be not so much a spending round as an auction.
930 The Bill lies at the heart of the difference between the parties. Others talk about the deficit. They recognise that it threatens sustainable recovery, but when asked what they would do about it, answer comes there none. The hon. Member for Dagenham (Mr. Gould) said of his party:
We have failed to come up with an alternative analysis.That is the luxury of opposition—sound-bite populism, the opportunity to be all things to all men. Labour Members have forgotten the dictum of Aneurin Bevan:The language of socialism is the religion of priorities.The modern Labour party has lost its faith. The world in which Labour Members live is not the real world. The House knows it and the British people know it, which is why the British people have consistently rejected the plausible blandishments of the Opposition.The Bill represents the Government's continuing commitment to deliver the disciplines which are the precondition of economic success, and I commend it to the House.
§ Question put, That the Bill be now read the Third time—
§ The House divided: Ayes 311, Noes 274.
934| Division No. 331] | [10.00 pm |
| AYES | |
| Ainsworth, Peter (East Surrey) | Carttiss, Michael |
| Aitken, Jonathan | Cash, William |
| Alexander, Richard | Channon, Rt Hon Paul |
| Alison, Rt Hon Michael (Selby) | Churchill, Mr |
| Allason, Rupert (Torbay) | Clappison, James |
| Amess, David | Clark, Dr Michael (Rochford) |
| Ancram, Michael | Clarke, Rt Hon Kenneth (Ruclif) |
| Arbuthnot, James | Clifton-Brown, Geoffrey |
| Arnold, Jacques (Gravesham) | Coe, Sebastian |
| Arnold, Sir Thomas (Hazel Grv) | Colvin, Michael |
| Ashby, David | Congdon, David |
| Aspinwall, Jack | Conway, Derek |
| Atkins, Robert | Coombs, Anthony (Wyre For'st) |
| Atkinson, David (Bour'mouth E) | Coombs, Simon (Swindon) |
| Atkinson, Peter (Hexham) | Cope, Rt Hon Sir John |
| Baker, Rt Hon K. (Mole Valley) | Couchman, James |
| Baker, Nicholas (Dorset North) | Cran, James |
| Baldry, Tony | Currie, Mrs Edwina (S D'by'ire) |
| Banks, Matthew (Southport) | Curry, David (Skipton & Ripon) |
| Banks, Robert (Harrogate) | Davies, Quentin (Stamford) |
| Bates, Michael | Davis, David (Boothferry) |
| Batiste, Spencer | Day, Stephen |
| Bellingham, Henry | Deva, Nirj Joseph |
| Bendall. Vivian | Devlin, Tim |
| Beresford, Sir Paul | Dickens, Geoffrey |
| Biffen, Rt Hon John | Dicks, Terry |
| Blackburn, Dr John G. | Dorrell, Stephen |
| Body, Sir Richard | Douglas-Hamilton, Lord James |
| Bonsor, Sir Nicholas | Dover, Den |
| Booth, Hartley | Duncan, Alan |
| Boswell, Tim | Duncan-Smith, Iain |
| Bottomley, Peter (Eltham) | Dunn, Bob |
| Bottomley, Rt Hon Virginia | Durant, Sir Anthony |
| Bowden, Andrew | Dykes, Hugh |
| Bowis, John | Eggar, Tim |
| Boyson, Rt Hon Sir Rhodes | Elletson, Harold |
| Brandreth, Gyles | Emery, Rt Hon Sir Peter |
| Brazier, Julian | Evans, David (Welwyn Hatfield) |
| Bright, Graham | Evans, Jonathan (Brecon) |
| Brown, M. (Brigg & Cl'thorpes) | Evans, Nigel (Ribble Valley) |
| Browning, Mrs. Angela | Evans, Roger (Monmouth) |
| Bruce, Ian (S Dorset) | Evennett, David |
| Budgen, Nicholas | Faber, David |
| Burns, Simon | Fabricant, Michael |
| Burt, Alistair | Fairbairn, Sir Nicholas |
| Butcher, John | Fenner, Dame Peggy |
| Butler, Peter | Field, Barry (Isle of Wight) |
| Carlisle, John (Luton North) | Fishburn, Dudley |
| Carlisle, Kenneth (Lincoln) | Forman, Nigel |
| Carrington, Matthew | Forsyth, Michael (Stirling) |
| Forth, Eric | Lyell, Rt Hon Sir Nicholas |
| Fowler, Rt Hon Sir Norman | MacGregor, Rt Hon John |
| Fox, Dr Liam (Woodspring) | MacKay, Andrew |
| Fox, Sir Marcus (Shipley) | Maclean, David |
| Freeman, Rt Hon Roger | McLoughlin, Patrick |
| French, Douglas | McNair-Wilson, Sir Patrick |
| Fry, Peter | Madel, David |
| Gale, Roger | Maitland, Lady Olga |
| Gallie, Phil | Major, Rt Hon John |
| Gardiner, Sir George | Malone, Gerald |
| Garnier, Edward | Mans, Keith |
| Gill, Christopher | Marland, Paul |
| Gillan, Cheryl | Marlow, Tony |
| Goodson-Wickes, Dr Charles | Marshall, John (Hendon S) |
| Gorman, Mrs Teresa | Marshall, Sir Michael (Arundel) |
| Gorst, John | Martin, David (Portsmouth S) |
| Grant, Sir Anthony (Cambs SW) | Mates, Michael |
| Greenway, Harry (Ealing N) | Mawhinney, Dr Brian |
| Greenway, John (Ryedale) | Mayhew, Rt Hon Sir Patrick |
| Griffiths, Peter (Portsmouth, N) | Mellor, Rt Hon David |
| Grylls, Sir Michael | Merchant, Piers |
| Gummer, Rt Hon John Selwyn | Milligan, Stephen |
| Hague, William | Mills, Iain |
| Hamilton, Rt Hon Archie (Epsom) | Mitchell, Andrew (Gedling) |
| Hamilton, Neil (Tatton) | Mitchell, Sir David (Hants NW) |
| Hampson, Dr Keith | Moate, Sir Roger |
| Hanley, Jeremy | Monro, Sir Hector |
| Hannam, Sir John | Montgomery, Sir Fergus |
| Hargreaves, Andrew | Moss, Malcolm |
| Harris, David | Needham, Richard |
| Haselhurst, Alan | Neubert, Sir Michael |
| Hawkins, Nick | Newton, Rt Hon Tony |
| Hawksley, Warren | Nicholls, Patrick |
| Hayes, Jerry | Nicholson, David (Taunton) |
| Heald, Oliver | Nicholson, Emma (Devon West) |
| Heathcoat-Amory, David | Norris, Steve |
| Hendry, Charles | Onslow, Rt Hon Sir Cranley |
| Hicks, Robert | Oppenheim, Phillip |
| Higgins, Rt Hon Sir Terence L. | Ottaway, Richard |
| Hill, James (Southampton Test) | Page, Richard |
| Hogg, Rt Hon Douglas (G'tham) | Paice, James |
| Horam, John | Patnick, Irvine |
| Hordern, Rt Hon Sir Peter | Pattie, Rt Hon Sir Geoffrey |
| Howard, Rt Hon Michael | Pawsey, James |
| Howarth, Alan (Strat'rd-on-A) | Peacock, Mrs Elizabeth |
| Howell, Rt Hon David (G'dford) | Pickles, Eric |
| Howell, Sir Ralph (N Norfolk) | Porter, Barry (Wirral S) |
| Hughes Robert G. (Harrow W) | Porter, David (Waveney) |
| Hunt, Sir John (Ravensbourne) | Portillo, Rt Hon Michael |
| Hunter, Andrew | Redwood, Rt Hon John |
| Hurd, Rt Hon Douglas | Renton, Rt Hon Tim |
| Jack, Michael | Richards, Rod |
| Jackson, Robert (Wantage) | Riddick, Graham |
| Jenkin, Bernard | Rifkind, Rt Hon. Malcolm |
| Jessel, Toby | Robathan, Andrew |
| Johnson Smith, Sir Geoffrey | Roberts, Rt Hon Sir Wyn |
| Jones, Gwilym (Cardiff N) | Robertson, Raymond (Ab'd'n S) |
| Jones, Robert B. (W Hertfdshr) | Robinson, Mark (Somerton) |
| Key, Robert | Roe, Mrs Marion (Broxbourne) |
| Kilfedder, Sir James | Rowe, Andrew (Mid Kent) |
| King, Rt Hon Tom | Rumbold, Rt Hon Dame Angela |
| Kirkhope, Timothy | Ryder, Rt Hon Richard |
| Knapman, Roger | Sackville, Tom |
| Knight, Mrs Angela (Erewash) | Sainsbury, Rt Hon Tim |
| Knight, Greg (Derby N) | Scott, Rt Hon Nicholas |
| Knight, Dame Jill (Bir'm E'st'n) | Shaw, David (Dover) |
| Kynoch, George (Kincardine) | Shaw, Sir Giles (Pudsey) |
| Lait, Mrs Jacqui | Shephard, Rt Hon Gillian |
| Lamont, Rt Hon Norman | Shepherd, Colin (Hereford) |
| Lang, Rt Hon Ian | Shepherd, Richard (Aldridge) |
| Lawrence, Sir Ivan | Shersby, Michael |
| Legg, Barry | Sims, Roger |
| Leigh, Edward | Skeet, Sir Trevor |
| Lennox-Boyd, Mark | Smith, Tim (Beaconsfield) |
| Lester, Jim (Broxtowe) | Speed, Sir Keith |
| Lidington, David | Spencer, Sir Derek |
| Lilley, Rt Hon Peter | Spicer, Sir James (W Dorset) |
| Lloyd, Peter (Fareham) | Spicer, Michael (S Worcs) |
| Lord, Michael | Spink, Dr Robert |
| Luff, Peter | Spring, Richard |
| Sproat, Iain | Vaughan, Sir Gerard |
| Squire, Robin (Hornchurch) | Viggers, Peter |
| Stanley, Rt Hon Sir John | Waldegrave, Rt Hon William |
| Steen, Anthony | Walden, George |
| Stephen, Michael | Waller, Gary |
| Stern, Michael | Ward, John |
| Stewart, Allan | Wardle, Charles (Bexhill) |
| Streeter, Gary | Waterson, Nigel |
| Sumberg, David | Watts, John |
| Sweeney, Walter | Wells, Bowen |
| Sykes, John | Whitney, Ray |
| Tapsell, Sir Peter | Whittingdale, John |
| Taylor, Ian (Esher) | Widdecombe, Ann |
| Taylor, John M. (Solihull) | Wiggin, Sir Jerry |
| Taylor, Sir Teddy (Southend, E) | Wilkinson, John |
| Temple-Morris, Peter | Willetts, David |
| Thomason, Roy | Wilshire, David |
| Thompson, Sir Donald (C'er V) | Winterton, Mrs Ann (Congleton) |
| Thompson, Patrick (Norwich N) | Winterton, Nicholas (Macc'f'ld) |
| Thornton, Sir Malcolm | Wolfson, Mark |
| Thurnham, Peter | Wood, Timothy |
| Townend, John (Bridlington) | Yeo, Tim |
| Townsend, Cyril D. (Bexl'yh'th) | Young, Rt Hon Sir George |
| Tracey, Richard | |
| Tredinnick, David | Tellers for the Ayes: |
| Trend, Michael | Mr. David Lightbown and Mr. Sydney Chapman. |
| Trotter, Neville | |
| Twinn, Dr Ian |
| NOES | |
| Abbott, Ms Diane | Clelland, David |
| Adams, Mrs Irene | Clwyd, Mrs Ann |
| Ainger, Nick | Coffey, Ann |
| Ainsworth, Robert (Cov'try NE) | Cohen, Harry |
| Allen, Graham | Connarty, Michael |
| Alton, David | Cook, Frank (Stockton N) |
| Anderson. Donald (Swansea E) | Cook, Robin (Livingston) |
| Anderson, Ms Janet (Ros'dale) | Corbett, Robin |
| Armstrong, Hilary | Corbyn, Jeremy |
| Ashdown, Rt Hon Paddy | Corston, Ms Jean |
| Ashton, Joe | Cousins, Jim |
| Austin-Walker, John | Cox, Tom |
| Banks, Tony (Newham NW) | Cryer, Bob |
| Barnes, Harry | Cummings, John |
| Barron, Kevin | Cunliffe, Lawrence |
| Battle, John | Cunningham, Jim (Covy SE) |
| Bayley. Hugh | Cunningham, Rt Hon Dr John |
| Beckett, Rt Hon Margaret | Dalyell, Tam |
| Beggs, Roy | Darling, Alistair |
| Beith, Rt Hon A. J. | Davidson, Ian |
| Bell, Stuart | Davies, Bryan (Oldham C'tral) |
| Benn, Rt Hon Tony | Davies, Rt Hon Denzil (Llanelli) |
| Bennett, Andrew F. | Davies, Ron (Caerphilly) |
| Benton, Joe | Davis, Terry (B'ham, H'ge H'l) |
| Bermingham, Gerald | Dewar, Donald |
| Berry, Dr. Roger | Dixon, Don |
| Betts, Clive | Dobson, Frank |
| Boateng, Paul | Donohoe, Brian H. |
| Boyce, Jimmy | Dowd, Jim |
| Boyes, Roland | Dunnachie, Jimmy |
| Bradley, Keith | Dunwoody, Mrs Gwyneth |
| Bray, Dr Jeremy | Eagle, Ms Angela |
| Brown, Gordon (Dunfermline E) | Eastham, Ken |
| Brown, N. (N'c'tle upon Tyne E) | Enright, Derek |
| Burden, Richard | Etherington, Bill |
| Byers, Stephen | Evans, John (St Helens N) |
| Caborn, Richard | Ewing, Mrs Margaret |
| Callaghan, Jim | Fatchett, Derek |
| Campbell, Mrs Anne (C'bridge) | Faulds, Andrew |
| Campbell. Menzies (Fife NE) | Field, Frank (Birkenhead) |
| Campbell, Ronnie (Blyth V) | Fisher, Mark |
| Campbell-Savours, D. N. | Flynn, Paul |
| Canavan, Dennis | Forsythe, Clifford (Antrim S) |
| Cann, Jamie | Foster, Rt Hon Derek |
| Carlile, Alexander (Montgomry) | Foster, Don (Bath) |
| Chisholm, Malcolm | Foulkes, George |
| Clapham, Michael | Fraser, John |
| Clark, Dr David (South Shields) | Fyfe, Maria |
| Clarke, Eric (Midlothian) | Galloway, George |
| Clarke. Tom (Monklands W) | Gapes. Mike |
| Garrett, John | Jones, Lynne (B'ham S O) |
| George, Bruce | Jones, Martyn (Clwyd, SW) |
| Gerrard, Neil | Jowell, Tessa |
| Gilbert, Rt Hon Dr John | Keen, Alan |
| Godman, Dr Norman A. | Kennedy, Charles (Ross,C&S) |
| Godsiff, Roger | Kennedy, Jane (Lpool Brdgn) |
| Golding, Mrs Llin | Khabra, Piara S. |
| Gordon, Mildred | Kilfoyle, Peter |
| Gould, Bryan | Kinnock, Rt Hon Neil (Islwyn) |
| Graham, Thomas | Leighton, Ron |
| Grant, Bernie (Tottenham) | Lestor, Joan (Eccles) |
| Griffiths, Nigel (Edinburgh S) | Lewis, Terry |
| Griffiths, Win (Bridgend) | Litherland, Robert |
| Grocott, Bruce | Livingstone, Ken |
| Gunnell, John | Lloyd, Tony (Stretford) |
| Hain, Peter | Llwyd, Elfyn |
| Hall, Mike | Loyden, Eddie |
| Hanson, David | Lynne, Ms Liz |
| Hardy, Peter | McAllion, John |
| Harman, Ms Harriet | McAvoy, Thomas |
| Harvey, Nick | McCartney, Ian |
| Hattersley, Rt Hon Roy | Macdonald, Calum |
| Heppell, John | McKelvey, William |
| Hill, Keith (Streatham) | McLeish, Henry |
| Hinchliffe, David | McMaster, Gordon |
| Hoey, Kate | McNamara, Kevin |
| Hogg, Norman (Cumbernauld) | Madden, Max |
| Home Robertson, John | Mahon, Alice |
| Hood, Jimmy | Mandelson, Peter |
| Hoon, Geoffrey | Marek, Dr John |
| Howarth, George (Knowsley N) | Marshall, David (Shettleston) |
| Howells, Dr. Kim (Pontypridd) | Marshall, Jim (Leicester, S) |
| Hoyle, Doug | Martlew, Eric |
| Hughes, Kevin (Doncaster N) | Maxton, John |
| Hughes, Robert (Aberdeen N) | Meacher, Michael |
| Hughes, Roy (Newport E) | Meale, Alan |
| Hughes, Simon (Southwark) | Michie, Bill (Sheffield Heeley) |
| Hutton, John | Michie, Mrs Ray (Argyll Bute) |
| Ingram, Adam | Milburn, Alan |
| Jackson, Glenda (H'stead) | Miller, Andrew |
| Jackson, Helen (Shef'ld, H) | Mitchell, Austin (Gt Grimsby) |
| Jamieson, David | Molyneaux, Rt Hon James |
| Janner, Greville | Moonie, Dr Lewis |
| Johnston, Sir Russell | Morgan, Rhodri |
| Jones, Barry (Alyn and D'side) | Morley, Elliot |
| Jones, leuan Wyn (Ynys Môn) | Morris, Rt Hon A. (Wy'nshawe) |
| Morris, Estelle (B'ham Yardley) | Short, Clare |
| Morris, Rt Hon J. (Aberavon) | Simpson, Alan |
| Mowlam, Marjorie | Skinner, Dennis |
| Mudie, George | Smith, Andrew (Oxford E) |
| Mullin, Chris | Smith, C. (Isl'ton S & F'sbury) |
| Murphy, Paul | Smith, Llew (Blaenau Gwent) |
| Oakes, Rt Hon Gordon | Smyth, Rev Martin (Belfast S) |
| O'Brien, Michael (N W'kshire) | Snape, Peter |
| O'Brien, William (Normanton) | Soley, Clive |
| O'Hara, Edward | Spearing, Nigel |
| Olner, William | Spellar, John |
| O'Neill, Martin | Steel, Rt Hon Sir David |
| Patchett, Terry | Steinberg, Gerry |
| Pendry, Tom | Stevenson, George |
| Pickthall, Colin | Strang, Dr. Gavin |
| Pike, Peter L. | Taylor, Rt Hon John D. (Strgfd) |
| Powell, Ray (Ogmore) | Taylor, Matthew (Truro) |
| Prentice, Ms Bridget (Lew'm E) | Tipping, Paddy |
| Prentice, Gordon (Pendle) | Turner, Dennis |
| Prescott, John | Tyler, Paul |
| Primarolo, Dawn | Vaz, Keith |
| Purchase, Ken | Walker, A. Cecil (Belfast N) |
| Quin, Ms Joyce | Walker, Rt Hon Sir Harold |
| Radice, Giles | Walley, Joan |
| Randall, Stuart | Wardell, Gareth (Gower) |
| Raynsford, Nick | Wareing, Robert N |
| Redmond, Martin | Watson, Mike |
| Reid, Dr John | Welsh, Andrew |
| Rendel, David | Wicks, Malcolm |
| Richardson, Jo | Wigley, Dafydd |
| Robertson, George (Hamilton) | Williams, Rt Hon Alan (Sw'n W) |
| Roche, Mrs. Barbara | Williams, Alan W (Carmarthen) |
| Rogers, Allan | Wilson, Brian |
| Rooker, Jeff | Winnick, David |
| Rooney, Terry | Wise, Audrey |
| Ross, Ernie (Dundee W) | Worthington, Tony |
| Ross, William (E Londonderry) | Wray, Jimmy |
| Rowlands, Ted | Wright, Dr Tony |
| Ruddock, Joan | Young, David (Bolton SE) |
| Salmond, Alex | |
| Sheerman, Barry | Tellers for the Noes: |
| Sheldon, Rt Hon Robert | Mr. Eric Illsley and Mr. Andrew Mackinlay. |
| Shore, Rt Hon Peter |
§ Question accordingly agreed to.
§ Bill read the Third time, and passed.