§ Turning next to the duties on alcohol, let me start with beer. I have listened carefully to the arguments put by the industry about the declining consumption of beer in this country, the effect of the change to end-product duty and the growth of cross-Channel imports of beer. Taking all these factors into account, I have decided that, for the first time in five Budgets, there will be no increase this year in the duty on beer.
§ Mr. David Blunkett (Sheffield, Brightside)That is what comes of having a beer-swilling Chancellor.
Mr. ClarkeLet me assure the House that this decision has nothing whatever to do with the drinking habits of the Chancellor of the Exchequer, and to prove it, I am also proposing to freeze the duty on spirits for a further year.
The spirits industry, which is a major United Kingdom export business, is facing problems similar to the brewers'. I know that my proposals will be warmly welcomed by the House, and will give right hon. and hon. Members from Scotland something to celebrate on St Andrew's day.
For wine, sparkling wine and cider, I propose to raise the duty in line with inflation. This will add 2p to a bottle of wine. But it will not take effect until after Christmas. [Laughter.]
For those hon. Members who are still here, the overall effect of all the tax measures I have announced will be to raise revenue next year by a little under £1¾ billion. By 1995–96, that will rise to about £5 billion, and to £6 billion by 1996–97, about ¾ per cent. of GDP.
These sums fall a long way short of the reduction in the borrowing requirement I judge necessary. As I announced 940 earlier, I intend with my Budget to reduce the public sector borrowing requirement next year, not by £1¾ billion, but by £5½ billion, with a reduction by 1996–97 of £10½ billion.
The central challenge I have faced in finalising this Budget is how this gap could be bridged. Every commentator realised that one of my options must be to extend the VAT base. The main candidates are food, children's clothes, transport, sewerage and newspapers. A powerful case for each of them can be made, and no amount of lobbying need put us off, but before looking at that, I have always made clear that my first responsibility as Chancellor is to get public expenditure under the firmest possible control.
I have already announced that the Government's new spending plans fully meet the remit agreed by Cabinet in June, but when the House comes to study the Red Book it will see that the figures for the new control total in each of the next three years are markedly lower than those set out in the March Budget and the cash ceilings agreed by the Cabinet in June.
The explanation for this difference is simple. The Cabinet has decided to establish new spending plans which are not just consistent with the ceilings that we set for ourselves in June, tough though they were. We have decided to set plans which in each of the next three years are lower than the June ceilings.
Our spending plans for the coming year have been reduced by more than £3½ billion. The new control total for next year will be £3½ billion below the level we set last year, and £8 billion below the plans for that year that we first set two years ago.
That is not all. In 1995–96, we have reduced the new control total by £1½ billion and in 1996–97 by nearly £3 billion. Taking into account lower debt interest payments resulting from lower borrowing, I expect that, as a direct result of the Budget, total public spending over the next three years will be around £10 billion less than we assumed at the time of the March Budget.
Including also the reduction in cyclical spending as the economy recovers, and other changes, the total reduction in public spending over the next three years compared to the March Budget projections will be no less than £15 billion.
Those public expenditure savings dramatically reduced my need to raise taxes to get the borrowing requirement down. As a result of that achievement —and only because of that —I can now confirm that I have no need this year to propose any changes to the VAT base.
Throughout the public spending round, all my Cabinet colleagues understood that the essential job in this Budget was to move back towards a balanced budget; and we all understood the clear preference on this side of the House for this to be done, so far as possible, by firm control of public spending. That is what we said we would deliver, and that is what we have delivered, because that is what is required to keep the recovery going.