Commons Sitting of 13 December 1994

Preamble
The House met at half-past Two o'clock
PRAYERS
[MADAM SPEAKER in the Chair]
PRIVATE BUSINESS
  BRITISH WATERWAYS BILL [Lords]
  As amended, considered; to be read the Third time.
Oral Answers to Questions
  EDUCATION

    Parental Consultation
    Mr. Mackinlay: To ask the Secretary of State for Education by what methods she consults parents about their view of the level and extent of the education service.
    The Minister of State, Department for Education (Mr. Eric Forth): All the Department's Ministers frequently meet parents and their representatives, both in formal meetings and when visiting schools. We regularly consult parents' organisations on a range of issues.
    Mr. Mackinlay: When contemplating parents' views and representations, does the Minister reflect on the fact that since 1989 there has been a doubling in the number of appeals from parents who have been refused their first choice for their children's school? On appeal, some 17,000 people have had their request for a school rejected. Does that not show a failure of the Education Reform Act 1988, and is it not time that we reviewed it to ensure that parents have true choice about school admissions?
    Mr. Forth: I do not think that the hon. Gentleman has quite caught up with the rest of his party, or certainly with his party leader. There is a new air blowing through certain elements of the Opposition on choice, and we welcome that. We want to give parents the maximum possible choice of schools. Happily, about four out of five parents get their first choice, but every year a certain number are inevitably disappointed and have to go through an appeals procedure. I suspect that that will always happen, because man has yet to devise a scheme under which everybody gets just what he wants all the time.
    Mr. Colvin: Do Ministers' consultations with parents reveal their anxiety about the reorganisation of local government? Can my hon. Friend assure us that new unitary authorities such as that for New Forest, if they
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    come into being, will have the resources to enable them to deliver an education service that is as good as, if not better than, the previous one?
    Mr. Forth: My hon. Friend raises an important point. My right hon. Friend the Secretary of State keeps a close eye on developments in local government reorganisation. We feel that the initial onus is on parents and local people to make representations to the Local Government Commission in the first place if they are uneasy about the possible impact on education of the proposed changes. Beyond that, we think that it should be possible to make arrangements in areas where unitary authorities emerge to protect the education service and to ensure continuity and effective delivery in the newly defined areas. We shall keep a close eye on the matter.
    Mr. Dafis: Local government reorganisation is already under way in Wales and will soon be under way in England. Local authorities will set up transitional committees charged with the task of describing their service delivery plans, including those that relate to education. Will it not be almost impossible to carry out that task properly if there is no certainty for local education authorities about the number of schools for which they will have to cater? In view of that, is it not totally irresponsible at this time—
    Madam Speaker: Order. This is Question Time and hon. Members are drifting towards making statements and putting arguments. I am sure that the Minister has heard the question. Can he make some stab at an answer?
    Mr. Forth: Intriguingly, I do not think that we got to the punchline. I suspect that the hon. Gentleman may have had in mind something to do with grant-maintained schools.
    Mr. Dafis indicated assent.
    Mr. Forth: I thought that it might be that; in that case, the answer is quite clear. It is incumbent on present, future and even transitional authorities to liaise with the Funding Agency for Schools, as was always the intention in the Education Bill, now the Education Act 1994. I recall that the hon. Gentleman served with great distinction on the Committee that examined that Bill. Those bodies should work together to ensure that sufficient places are provided in each locality. I see absolutely no reason why that should not be the case.

    School Inspections
    Mr. Hendry: To ask the Secretary of State for Education how many schools will be inspected each year under the new school inspection arrangements; and if she will make a statement.
    The Secretary of State for Education (Mrs. Gillian Shephard): This is mainly matter for Her Majesty's Chief Inspector of Schools, who heads the independent Office for Standards in Education. However, I can advise that around 3,000 schools will be inspected this year.
    Mr. Hendry: Can my right hon. Friend confirm that the rate of inspection in primary schools will be stepped up to ensure that inspection targets are met? Can she

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    also confirm that the inspectors will give praise where praise is due and that they will be not only rigorous in identifying problems but equally helpful in providing solutions?
    Mrs. Shephard: Clearly, encouragement is also important. I can reassure my hon. Friend that I attach the utmost importance to regular and rigorous inspection of our schools. Around 1,000 secondary schools have been inspected and the cycle is on target to be completed within four years. By the end of this term, about 800 primary schools will have been inspected, and I intend to ensure that the four-year cycle for primary and special schools is successfully completed. I welcome, therefore, the three-point action plan announced by the Office for Standards in Education and will keep it closely monitored.
    Mr. Don Foster: Further to the answer that the Secretary of State has just given, is she aware that, to meet the target for primary schools, the number of schools to be inspected in the three subsequent years after the current academic year will have to be double the number of schools inspected this year? How can that be achieved without reductions in the length of inspections and the number of inspectors at a time when the budget for Ofsted has been reduced for next year compared to what we were told it would be last year?
    Mrs. Shephard: Perhaps the hon. Gentleman is not entirely familiar with the action plan which has been prepared by the chief inspector and which we absolutely intend he should adhere to. I wish to reassure the hon. Gentleman that funding will rise next year to nearly £100 million and in the public expenditure survey period to £121 million, which is hardly a cut.
    Mr. Patrick Thompson: Will the new inspection arrangements focus properly on standards achieved in English and mathematics? Is my right hon. Friend aware that many specialist and advanced teachers cite lack of facility in basic English as the main stumbling block to achievement at a later stage in education?
    Mrs. Shephard: We have made it clear throughout that the reform of the national curriculum and the main thrust of tests must put facility in English, maths and science at a high premium.
    Mr. Blunkett: Will the Secretary of State confirm that the fact that only 60 per cent. of the primary schools that should have been inspected actually had inspections by this autumn is entirely due to the fact that the privatised market tendering system for individual schools has failed? Will she further confirm that the Government's programme and their claim to be interested in standards have been shown to be an entire myth, given that £13 million has been cut from the Ofsted budget for next year and the reading recovery scheme funding programme has been stopped? Is it not time that the Government admitted that their blarney and hot air about standards of achievement are nothing more than a smokescreen for cuts and failure?
    Mrs. Shephard: If Opposition Members were remotely interested in standards—time and again, they have proved that they are not—they would welcome the fact that, after only four terms, 2,200 schools will have been inspected by Christmas and 3,000 inspections
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    will have been completed by the end of the year. Schools and governors welcome the inspection process and the information that it gives them, and, above all, pupils benefit. The new system is operating successfully; it is a huge improvement on what went on before. The hon. Gentleman is right: the chief inspector should take early corrective action to meet the target of four-yearly inspections of all schools. I should have thought that the hon. Gentleman would welcome that.

    Higher Education
    Mr. Evennett: To ask the Secretary of State for Education what proportion of young people are now entering higher education; and what was the figure 10 years ago.
    The Parliamentary Under-Secretary of State for Further and Higher Education (Mr. Tim Boswell): The Government's policies have led to record participation in higher education. Some 30 per cent. of young people now enter full-time higher education compared with 14 per cent. 10 years ago.
    Mr. Evennett: I thank my hon. Friend for that reply and congratulate him and the Department on the excellent figures that he has just provided. I also thank him for taking the time and trouble recently to visit our local university in south-east London, the university of Greenwich. His visit was much appreciated by all concerned. It is an excellent university doing a first-class job. May I ask my hon. Friend what he is doing to encourage more links for research between the universities and industry so that we can develop a good partnership?
    Mr. Boswell: I am grateful to my hon. Friend for his comment and, indeed, his interest in his local university in Greenwich. I was delighted with the provision that I saw there. The message is that local participation and the role of the university in the local community and its link with industry there are extremely important.
    On my hon. Friend's specific point, the Department is taking a number of measures, including enterprise and higher education, and have given a commitment to assess all kinds of research, including contract research, in the funding council's next research selectivity exercise.
    Mr. Pike: Is it not regrettable that many county councils are unable to give people discretionary grants because they simply do not have enough cash? It is no good the Minister saying that they have a choice. If county councils do not have the cash, they cannot give grants. What will the Minister do about that?
    Mr. Boswell: The hon. Gentleman raises an interesting, if somewhat irrelevant, point. I was under the impression that the local authority financial settlement was about £17 billion. I have held a series of discussions with interested parties in the light of the Gulbenkian report on discretionary awards, and the Department is continuing to review the position with a

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    view to securing achievements; but the funding is there and it is open to local authorities to provide that funding for the purpose.
    Mr. Barry Field: Does my hon. Friend agree that one of the great success stories in education was the unshackling of colleges from the control of local authorities? Has that not given greater diversity of choice to sixth form students, who, rather than furthering their education, were held on to by schools because of the budget that they represented? Will he ensure that, in future, the careers service is up to this new challenge?
    Mr. Boswell: I am grateful to my hon. Friend for those remarks. We believe in diversity and choice. We believe in the benefits of unshackling the further education sector, with its natural and characteristic progression towards higher education where appropriate.

    Special Needs
    Mr. Bayley: To ask the Secretary of State for Education what funding has been added to local education authority budgets to meet the extra costs incurred by the implementation of the new code of practice for special educational needs in primary schools.
    Mrs. Gillian Shephard: The code of practice has been widely welcomed as reflecting existing best practice in schools. Many schools will have been following the procedures recommended in the code, and its purpose is to encourage others to do so.
    Mr. Bayley: Given the great demands on the special educational needs co-ordinator, as spelt out in the code of practice, will the Secretary of State say what account she has taken—in the funding that she has made available to local authorities—of the problems of rural authorities such as North Yorkshire, which has a large number of small primary schools, and where the heads of schools, who would normally be the special educational needs co-ordinators there, also have formidable teaching commitments?
    Mrs. Shephard: As the hon. Gentleman will know, the code followed extensive consultation and included points on the work load of teachers, head teachers, and so on. Indeed, it was redrafted in the light of the concerns expressed. The Department is funding research into effective practice by SEN co-ordinators, or those who have to fill that role in small rural schools. We will publish the results and will look at all aspects of implementation, as it is obviously very important, including the question of resources. The main point is that the code is building on existing best practice.
    Sir John Hannam: I congratulate my right hon. Friend on the new code of practice. Will she outline what measures are in place to ensure that schools spend what they should on children with special educational needs?
    Mrs. Shephard: The only extra requirement for schools, resulting from the code, is that they should publish their policy on special educational needs by August next year. In-service funding of £5.6 million
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    will be provided through grants for education support and training to local education authorities to help schools with that.

    Student Loans
    Mr. Steinberg: To ask the Secretary of State for Education what representations she has received regarding delays in the processing of applications for student loans in the current academic year.
    Mr. Boswell: My right hon. Friend has received a copy of a letter from the chairman of the Committee of Vice-Chancellors and Principals of Universities in the United Kingdom to the chief executive of the Student Loans Company, and 14 other letters about delays in the processing of loans. The Department has also received a number of telephone calls from students, their parents and higher education institutions.
    Mr. Steinberg: In terms of what the Minister said, there appears to be chaos in the Student Loans Company. What will he do about the thousands of students who failed to get their loans this year? Will he explain a parliamentary answer that he gave me last week in which he said that he was considering putting private finance into that company? What will be the consequences of that in terms of interest rates for students who took out such a loan afterwards?
    Mr. Boswell: Perhaps characteristically, the hon. Gentleman has managed to muddle two separate issues. First, there is currently what I consider to be an unacceptable delay at the Student Loans Company in relation to the repeat application procedure. I should acknowledge that more than 200,000 loans have been granted in the current year—the number has risen by over one third—but the new procedure has led to delays, partly owing to the inability of students to return their forms.
    The company has written to the Committee of Vice-Chancellors and Principals explaining the position. We have encouraged the company to deal with it as a matter of urgency; it is doing so, and hopes to resolve the problem by Christmas. It has also undertaken, at our request, to examine the repeat application procedure, and we have invited the National Union of Students to join in.
    The involvement of private finance, whether in the Student Loans Company or elsewhere, is kept under constant review.
    Dame Elaine Kellett-Bowman: May I thank my hon. Friend for his efforts to tackle the problem? Students at my local university undoubtedly had problems, particularly—as my hon. Friend pointed out—with the repeat application procedure. I am glad that my hon. Friend has confirmed that he has no intention of privatising the Student Loans Company. The only pressing issue is the financing of loans.
    Mr. Boswell: I am grateful to my hon. Friend for what she has said. We are anxious to tackle the position in conjunction with the Student Loans Company, and it is being addressed as a matter of urgency.
    As for the longer-term prospects, I should remind the House that the whole purpose of the Student Loans Company was to offer students concessionary loans on

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    very favourable terms, thus enabling them to pursue their studies. In a recent study of graduate employment, one of the newspapers listed a series of starting salaries, none of which would have required the initial repayment of loans by any of the employees.
    Mr. Bryan Davies: Does the Minister recognise that the House will be shocked at the complacency with which he has approached the issue? He has issued not a word of apology to the thousands of students who have been deprived of essential resources. If the elderly had been deprived of the chance of obtaining their pensions, or the unemployed prevented from drawing their dole cheques, there would have been a national uproar. How can the Minister address the House with such complacency when students are denied the resources they need to sustain themselves at college?
    Does the Minister not recognise that Members of Parliament are finding it difficult to get through to the Student Loans Company to protest about the situation on behalf of the students whom they represent? When will the Minister do something?
    Mr. Boswell: Interestingly, the hon. Gentleman seems to have drafted his supplementary question before listening to my answer. I readily acknowledge that I was not satisfied with the position; nor, indeed, is the Student Loans Company, which is doing something about it as urgently as possible. As for the hon. Gentleman's specific point, his hon. Friend the Member for City of Durham (Mr. Steinberg) asked me about the number of representations that we had received and I gave him the answer—14. The position became apparent recently, and as soon as it became apparent we tackled it vigorously and urgently.
    Mr. John Marshall: Did my hon. Friend say that there had been a 30 per cent. increase in the number of student loans paid out? Does the problem not lie in the fact that the Student Loans Company listened to inaccurate forecasts from Opposition Members, who said that there would be no demand for student loans? Does the increase not underline the fact that the scheme has become much more popular than the Opposition ever expected?
    Mr. Boswell: The purpose of the loans is to be available to those who wish to avail themselves of them; the facility is intended to enable them to pursue their studies. The figure mentioned by my hon. Friend is not entirely accurate—he may have misheard me. The total increase this year is 35 per cent., and that is despite the administrative difficulties that I mentioned.

    Grant-maintained Schools
    Mr. Bill Michie: To ask the Secretary of State for Education what plans she has to phase out extra capital grants to grant-maintained schools.
    The Parliamentary Under-Secretary of State for Schools (Mr. Robin Squire): The distribution of capital resources continues to reflect Ministers' judgment of appropriate funding levels in each sector, and our commitment to setting up grant-maintained schools on
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    a sound basis. The detail of the capital grants regime for grant-maintained schools is now a matter for the Funding Agency for Schools.
    Mr. Michie: Another Tory pledge has not been fulfilled. Following the Budget settlement, local education authorities now face cuts while grant-maintained schools still receive three times as much capital per head. Is it not about time that the Government treated local education authorities with fairness rather than prejudice, and eliminated a gap that is not only indefensible but immoral?
    Mr. Squire: The hon. Gentleman is misled and his comments are facile. Let me briefly give him some reasons why. He seeks, presumably, to make a pound for pound comparison, yet he knows, or should know, that every GM school is not able to draw on capital receipts or to transfer from revenue expenditure to capital, like local education authorities can. To take one further instance, GM schools attract VAT, and LEA schools do not. Spending £1 in a GM school, therefore, is not the same as spending £1 in an LEA school. The Government are satisfied that the settlement is fair to GM schools, but not excessively fair.
    Mr. Robert Banks: I offer my most sincere thanks to my hon. Friend and to my right hon. Friend the Secretary of State for Education for approving the application for grant-maintained status from Nunmonkton school in my constituency. It is the result of a remarkable campaign by all 19 pupils—[Interruption.]—all the parents and all the villagers. They have led the way against North Yorkshire county council's decision to close the school. It means that the school can go ahead and will be saved, and I pass on the appreciation of all the villagers to my hon. Friend.
    Mr. Squire: I am obviously grateful for my hon. Friend's kind comments. I agree with him that Nunmonkton school has all the prospects of being an excellent school and the House will have no noted the derision with which Opposition Members greeted his announcement that there were 19 pupils at the school. All people worried about small rural schools will know which party not to trust.
    Dr. Wright: Although the Government have talked the language of diversity, have they not given us the practice of discrimination in relation to the funding of GM schools? Has that discrimination not been established both by the Education Select Committee and by the National Audit Office? Once the pot of gold and the bribe are taken away, interest in moving to GM status will wane by the day.
    Mr. Squire: In light of current discussions, I am not sure whether interest in GM schools is waning or whether it would be wise for me to comment on that, if one considers the hon. Gentleman's party. As he should know, revenue funding for GM schools is on the same basis as revenue funding for LEA schools, and he heard my earlier answer on capital funding.

    School Building Programme
    Sir Teddy Taylor: To ask the Secretary of State for Education if she will review the provision of capital expenditure in the school building programme.
    Mr. Robin Squire: The Budget announcement meant good news for schools capital, with an additional £21 million above the published baseline for 1995–96. We have made clear our willingness to consider changes to the criteria for distributing capital, which were agreed with the local authority associations some 10 years ago.
    Sir Teddy Taylor: Southend's Lancaster school for disabled children, many of whom are in wheelchairs, has been unable to undertake essential work demanded by the Health and Safety Executive two years ago. Does the Minister see any merit in the all-party representations that he received on 14 November from Essex county council that its spending was inadequate and discriminatory? Has any concession since been made to Essex county council?
    Mr. Squire: As my hon. Friend may be aware, the announcement on 1995–96 capital guidelines will be made shortly and I cannot, for obvious reasons, preview that announcement. I can say to him, and underline, that responsibility for building and conditions for LEA schools remains with the local authority. As I have already made clear, the guidelines were drawn up in discussion with local authorities many years ago and I am open to suggestions from a significant number of authorities that there is room for those guidelines to be changed.
    Mr. Spearing: Does the Minister agree that, where a Government have given authority or promoted large-scale urban or suburban development in any region, there is an obligation to provide matching provision for primary schools and secondary schools in those neighbourhoods? Is this a matter not just for one Department of State but for all Departments? Will he assure us that that principle will be followed in the announcement to which he referred?
    Mr. Squire: I can certainly confirm that the most important aspect of the capital criteria is provision for basic needs. Although there are sometimes arguments about the exact cost of specific projects, there is no argument between the Government and local education authorities about the importance of ensuring that every child has a school place when he starts or changes school.

    General National Vocational Qualifications
    Mr. Brandreth: To ask the Secretary of State for Education what progress has been made with the development of an advanced diploma for the GNVQ; and if she will make a statement.
    Mr. Boswell: I understand that my hon. Friend is referring to advanced general national vocational qualifications—the new "vocational A-levels". They are a success. They are motivating students of all abilities to work hard and achieve high standards. Ofsted and the
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    Further Education Funding Council inspectorate have confirmed that standards in advanced GNVQs are comparable to two GCE A-levels.
    Mr. Brandreth: I am grateful to my hon. Friend for that reply. Will he confirm that he will continue to do everything he can to enhance the standing of advanced GNVQs so that they are increasingly recognised not only by employers but, in time, by universities?
    Mr. Boswell: Universities are already accepting advanced level GNVQs in significant numbers. Approximately 85 per cent. of people who applied received offers from universities and there is a gate project designed to inform universities and admissions tutors of their exact merits. The Government have done a great deal, but the task now is to ensure rigour and effectiveness in GNVQs and their acceptability by higher education institutions.

    Lancashire Schools
    Mr. Gordon Prentice: To ask the Secretary of State for Education what assessment she is making of the work of the Institute of Education in determining the added value contribution of schools in Lancashire to the education of their students.
    Mrs. Gillian Shephard: The Department has established close links with the Institute of Education about its work on value added in Lancashire schools and on other aspects of school improvement and effectiveness.
    Mr. Prentice: Are not the conclusions of the Lancashire study inescapable, showing that the publication of raw data is in itself highly misleading and can be very damaging? Does the Secretary of State agree that it is no more appropriate to publish raw data in that form than to judge the effectiveness of the economy by using a single measure such as inflation?
    Mrs. Shephard: I understand that the Lancashire study is producing results consistent with other work—namely, that the prior attainment measures at age 11 are the best predictors of performance at age 16. In the light of that, I have no doubt that the hon. Gentleman will be doing all he can to persuade the National Union of Teachers to co-operate in the administration of tests for 11-year-olds.
    Mr. Hawkins: Does my right hon. Friend agree that the enormous support given to school performance tables by the parents of children in Lancashire is reflected elsewhere in the country? Does she further agree that we are witnessing a desperate attempt by the Opposition to shift their ground? Are they not moving from ignorance, prejudice and outright opposition to performance tables in an attempt to fudge the issue and claim that they supported them all along?
    Mrs. Shephard: I agree with my hon. Friend that performance tables are popular and easily understood and that they provide the facts. Schools recognise that they are a major factor in encouraging improvements in

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    performance. They are important to parents, pupils, governors and the communities served by the schools involved.
    Mr. Blunkett: Will the Secretary of State join me in congratulating Lancashire county council and a range of other Labour authorities which have been working on added value, not to denigrate the schools involved but to increase standards and opportunities and to ensure that all children have a chance to achieve? Does she accept that she has done a complete about-face in accepting that added value and not crude league tables is the way forward?
    Mrs. Shephard: I remind the hon. Gentleman that, far from performing a U-turn, Ministers launched a consultation exercise on assessment in 1992 and at the same time asked for respondents' initial views on publishing value added measures. No doubt that escaped the attention of the Opposition, who at the time were busy opposing the publication of performance tables.

    Primary Schools
    Mr. Bennett: To ask the Secretary of State for Education what steps she is taking to improve resources in primary schools.
    Mrs. Gillian Shephard: It is for local education authorities to decide the level of resources to be available to primary schools and to the other education services for which they are responsible.
    Mr. Bennett: What advice can the Secretary of State give to head teachers in Tameside and Stockport who find that they are receiving between £300 and £200 per pupil less than neighbouring schools just across the border in Manchester? Given that they have checked up on the way in which local authorities spend their money, and given the capping that those authorities are under, it seems extremely difficult for those head teachers to find out why they should be receiving so much less than schools in Manchester. The only explanation that they can come up with is that the Government are treating schools in Thameside and Stockport unfairly. Does the Secretary of State agree that if league tables are to be used, at least some measure ought to be taken of the amount of money that schools have to spend in the first place?
    Mrs. Shephard: I remind the hon. Gentleman that even with the capping rules all LEAs will be able to increase their education budgets next year if they so chose. They will be greatly helped by the low level of inflation, which is two percentage points lower than was forecast when the 1994—95 settlement was agreed. Local authorities therefore receive a windfall benefit this year. That will benefit the hon. Gentleman's local authority as well as all others.
    Sir Peter Fry: Does my right hon. Friend agree that one way in which we could help to improve the resources in primary schools is to recognise those LEAs and those schools which are already educating the rising-fives? In the current financial settlement, that is proving difficult without any Government grant. Will my right hon. Friend
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    give an early response so that those who are making that pioneering progress are getting some kind of assistance from the central taxpayer?
    Mrs. Shephard: That and other matters are under consideration in our review of work on education for children in the pre-school years.
    Mr. Kilfoyle: Does the Secretary of State accept the evidence that there are lasting benefits from educating pupils in smaller classes in their early years? If so, when will she seek a significant national shift of funding towards primary schools?
    Mrs. Shephard: Funding priorities are a matter for local education authorities. I must repeat that to the hon. Gentleman. The size of classes therefore depends on the decisions made by LEAs. In any case, there is no evidence that marginal increases in class sizes threaten standards.

    School League Tables
    Mr. Harry Greenway: To ask the Secretary of State for Education what plans she has to introduce further school league tables; and if she will make a statement.
    Mr. Forth: My right hon. Friend intends to publish the national curriculum assessment results for 11-year-olds in national school performance tables once the assessment arrangements for this age group are satisfactorily established. Full consultation will be undertaken in due course on the presentation of the data.
    Mr. Greenway: Does my hon. Friend agree that it would be best not to try to dress up school league tables with subjective and therefore dangerous value added judgments? Will not a Rolls-Royce always be a Rolls-Royce and a Mini always a Mini? How can objectivity, which is vital, be achieved in that important area?
    Mr. Forth: My hon. Friend is correct in saying that it would be quite wrong to seek to massage or tweak the published performance data on schools to try to conceal bad performance. However, I think that there is broad agreement that an appropriate and factual measure of value added by schools is something towards which we are working and which we would probably envisage implementing in stages over the next few years. Nevertheless, I must not underestimate the difficulties. The recent report to my right hon. Friend the Secretary of State by the Schools, Curriculum and Assessment Authority brought out rather well the difficulties and the potential in that area and we are working towards that end.
    Mr. Miller: The Minister seems to recognise that it is necessary to ensure that one is comparing apples with apples. Does he agree that schools such as Cambridge Road school in my constituency, which has inadequate playing facilities, and John Street school, which is in a battle with the community action programme about the availability of classrooms, are disadvantaged? Should not his priority be to correct that disadvantage before seeking to make comparisons?
    Mr. Forth: I certainly hope that the local education authority would make a priority of such schools. That is something on which everyone could agree. However, I hope that the hon. Gentleman is not suggesting that we

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    should somehow excuse or explain away inadequate school performance simply because of difficulties in respect of premises or location. The truth, and the real giveaway here, is that many schools in difficult and deprived areas operating in difficult circumstances are producing magnificent results year after year. We want to find out how they do that and then make sure that everyone else does the same.
    Mr. Jenkin: Is not the vital point about league tables not so much the quality of the analysis as the fact that they make schools concentrate on outcomes rather than inputs? If we had concentrated more on outcomes over the past 20 years, would we not have a better education system?
    Mr. Forth: Yes. My hon. Friend makes a very important point. We are now reaching the stage at which most people in education are at long last looking at outcomes, results and achievements and are no longer obsessed with how much money is required to produce those results. Money is and always will be important, but the main requirements and factors affecting educational performance have nothing whatever to do with money.

    School Meals
    Mrs. Jane Kennedy: To ask the Secretary of State for Education what advice she receives from the Department of Health about the nutritional value of school meals.
    Mr. Robin Squire: The Department is represented alongside the Department of Health on a project team drawing up voluntary nutritional guidance for school meals providers. This forms part of the nutrition task force's programme of action to achieve the targets set in the Government's "The Health of the Nation" strategy.
    Mrs. Kennedy: I am grateful to the Minister for that interesting reply. Would he be interested in new evidence which shows that one in nine of our schoolchildren starts the day without breakfast, and that more than half have snacks, biscuits and crisps later in the day instead of a hot school meal? As part of its studies, will the project team consider the link between poor nutrition and the performance of our schoolchildren, and will the Minister publish the results?
    Mr. Squire: I should like to ponder the hon. Lady's last two points, but she was correct to highlight the problems that too many school children face by not having even one decent meal a day. One reason why school meals are so vital is that, assuming that parents take them up, they ensure that every child has at least one square meal a day. When the proposals are published next summer, I hope that they will persuade more schools and local education authorities to put more effort into that very important area.
    Mr. Dykes: Ignoring Labour party propaganda on the subject, and in view of the recent worrying publicity in the borough of Harrow about the fact that a small number of children from low-income households are not receiving
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    proper nutrition at lunchtime, may I ask my hon. Friend to have special discussions with Harrow local education authority to ensure that that problem is resolved?
    Mr. Squire: I invite my hon. Friend to forward to me any evidence of problems which may exist in Harrow. On the wider issue, he will be aware that it is precisely to ensure that children from low-income families are properly provided for that an LEA is required to provide free school meals for the children of parents on income support.

    Derbyshire Education Committee
    Mr. Skinner: To ask the Secretary of State for Education if she will increase the amount of Government grant paid to Derbyshire education committee.
    Mr. Squire: In 1995–96, Derbyshire's education standard spending assessment will increase by 0.7 per cent. I will shortly be announcing annual capital guidelines for education capital work in 1995–96.
    Mr. Skinner: That grant is not good enough. Is the Minister aware that more than six years ago, when the reorganisation plan for north Derbyshire was in process, the Government promised that Bolsover school would be placed on one site with the necessary money to implement that? More than six years have elapsed, but the Government have failed to carry out their promise. Instead, they have been cutting the grant for Derbyshire schoolkids ever since. It is time that they put a stop to that.
    Mr. Squire: I am sure that the hon. Gentleman enjoys his daily rant, even if the House is coming to expect it. I repeat to the hon. Gentleman that, as the House is aware, it is the responsibility of LEAs to bid for capital work separately. As I reminded the House in an earlier answer, the order for those capital bids was determined some time ago in conjunction with LEAs. Those priorities must be the basis on which the Government fund capital funding.
    Mr. McLoughlin: Is my hon. Friend aware that Derbyshire county council holds back from schools as much of its budget as it possibly can? Will my hon. Friend confirm that schools in Derbyshire would receive more money if they followed the lead taken by 30 per cent. of secondary schools and became grant-maintained?
    Mr. Squire: My hon. Friend is certainly right to say that, for all sorts of reasons, strangely enough not alluded to today by Opposition Members, grant-maintained schooling makes a lot of sense. As to the way in which Derbyshire local education authority handles its funding, that is its responsibility, including the way in which it funds individual schools within the total sum that it chooses to set aside.

    Pupil Numbers
    Ms Hoey: To ask the Secretary of State for Education what proposals she has to reduce the numbers of pupils per class in primary and secondary schools.
    Mr. Forth: Determining the size of a class is a matter for the school concerned. Last year, teacher numbers increased by 1,300 and education support staff increased by more than 6,000.
    Ms Hoey: The Minister said recently that the number of children in classes made no difference to the performance of those children. Would he prefer his child to be taught in a class of 30, 25 or 20?
    Mr. Forth: That would depend entirely on the quality of the teaching, the quality of the school, the dedication of the staff and so on. The hon. Lady is quite correct; I have said, and I repeat today, that there is no proven causal connection between class size and educational output. If the hon. Lady thinks otherwise, I should be glad to see any evidence that she can produce.

  PRIME MINISTER

    Engagements
    Mrs. Ewing: To ask the Prime Minister if he will list his official engagements for Tuesday 13 December.
    The Prime Minister (Mr. John Major): This morning, I had meetings with ministerial colleagues and others. In addition to my duties in this House, I shall be having further meetings later today.
    Mrs. Ewing: Does the Prime Minister believe in the principle of referendums?
    The Prime Minister: I have indicated in the House on several occasions that there may be circumstances in which I would support one. Clearly, in the case of Northern Ireland that is so, for I have already announced one.
    Mr. Patrick Thompson: To ask the Prime Minister if he will list his official engagements for Tuesday 13 December.
    The Prime Minister: I refer my hon. Friend to the reply I gave some moments ago.
    Mr. Thompson: Bearing in mind reports today of an official survey showing that 11-year-old pupils do not have sufficient command of English to answer questions in science and mathematics, and bearing in mind the mounting evidence of the damage being done by the National Union of Teachers' boycott of tests, will my right hon. Friend urge Opposition Members with influence on that union to urge it to drop the boycott today?
    The Prime Minister: What my hon. Friend says illustrates the importance of regular testing of pupils and equally regular reporting of the results. I welcome
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    very much the fact that most teachers' unions have now called off their boycott. It is high time that the NUT did the same, and I hope that it will do so.
    Mr. Blair: On railway privatisation, is it right, as the report to the Transport Select Committee states, that the costs of legal consultancy fees and relocation costs for British Rail alone are now £100 million, and that when underwriting and City fees are added in the total cost may be as much as £700 million? Are those figures right or wrong?
    The Prime Minister: They are certainly not figures that I recognise, but if the right hon. Gentleman wishes to pursue the matter I will give him a more detailed answer.
    Mr. Blair: I believe that the £100 million figure was given in a parliamentary answer. Perhaps the Prime Minister will check that. Is it also right, as the report indicates, that if the privatisation targets are to be met, the rail network will virtually have to be halved or there will be savage reductions in the timetable across the service? Can the Prime Minister guarantee that if there is found to be the remotest possibility of those things happening he will cancel the privatisation?
    The Prime Minister: The right hon. Gentleman is using yet another of the scare stories which have surrounded the privatisation process for some time. Since the start of the rail privatisation process, there has been no shortage of scare stories; that is just the latest one. As recently as 24 November, my right hon. Friend the Secretary of State for Transport stated and restated unequivocally that franchise services would be broadly based on the existing timetable. That remains the position.
    Mr. Blair: The Prime Minister has not given that guarantee. If he proceeds with a privatisation which has no popular support, which will put the future of the railways at risk— [Interruption.]
    Madam Speaker: Order. The hon. Member for Lancaster (Dame E. Kellett-Bowman) should not be barracking from a sedentary position.
    Mr. Blair: If the Prime Minister proceeds with a privatisation that has no popular support, which will put the future of the railways at risk and, in the process, spend hundreds of millions of pounds which should be spent on providing a better public transport service, will that not show how completely out of touch the Government are with the British people?
    The Prime Minister: The right hon. Gentleman is quite wrong. His comments about rail privatisation are precisely the same as the comments that his predecessors made about almost every privatisation that has occurred. Each privatisation has proved a success. The initial costs of past privatisations have been more than outweighed by efficiency and benefits, and that will be the case for rail users as well. The right hon. Gentleman relies on precisely the same scare stories which existed for each privatisation that has occurred. If he seeks further assurance, it will come tomorrow when the franchise director launches the pre-qualification documents. The right hon. Gentleman will then see how wrong he is.

    Gibraltar
    Sir Teddy Taylor: To ask the Prime Minister if he will raise at the next meeting of the European Council the position of Gibraltar within the European Union.
    The Prime Minister: I have no plans to do so.
    Sir Teddy Taylor: As the present appalling restrictions at the Spanish border, with four-hour delays for people and eight-hour delays for vehicles, seem designed to cripple the economy of Gibraltar, and as the European Union seems unable to prevent these illegal blackmail activities, will the Prime Minister give guidance to Ministers to the effect that there should be no further concessions to Spain in the EU until the problem is resolved? Is the Prime Minister aware that it would hearten the loyal people of the rock if he would visit Gibraltar and assure them of the full support not only of the Government but, I hope, of every party in the House of Commons which believes in freedom?
    The Prime Minister: On my hon. Friend's second point, I can guarantee that we have no intention of deviating from the commitment that we made to the people of Gibraltar in the 1969 constitution. That commitment is there and it will remain. With regard to his first point, we have already made strong protests to the Spanish Government about the secondary checks imposed by the Guardia Civil at the frontier between Gibraltar and Spain. It is very important that the controls should cease and we have made it absolutely clear that the Spanish Government must bring them to an end. They are aware of our views, and we are in contact with them about it.

    Engagements
    Mrs. Ray Michie: To ask the Prime Minister if he will list his official engagements for Tuesday 13 December.
    The Prime Minister: I refer the hon. Lady to the reply I gave a few moments ago.
    Mrs. Michie: Can the Prime Minister explain how an assembly for Northern Ireland will strengthen the United Kingdom while a Scottish parliament will apparently weaken it? The situations may be different, but surely the principle is the same.
    The Prime Minister: As the hon. Lady graciously admits, the situation is not just different—it is wholly different. A tax-raising assembly is proposed for Scotland, whereas in Northern Ireland an assembly is proposed which will give Northern Ireland proper control over local government matters. That power already exists in Scotland.
    Mr. Haselhurst: To ask the Prime Minister if he will list his official engagements for Tuesday 13 December.
    The Prime Minister: I refer my hon. Friend to the answer I gave some moments ago.
    Mr. Haselhurst: Amid all the discussions about the European Union in the long term, does my right hon. Friend agree that there is a practical and urgent agenda to try to ensure that the single market is working fairly
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    and openly, so that British companies have a genuine opportunity to compete successfully in civil aviation, energy and other spheres in which there are currently impediments to competition?
    The Prime Minister: My hon. Friend is entirely right about that and about its importance. At Essen during the weekend it was self-evident that that is an agenda on which Britain is increasingly winning the arguments. There is wide recognition of the fact that the liberalisation of aviation, energy, telecommunications and a range of other areas is vital to Europe's future competitiveness. A great deal of work needs to be done to ensure that. It must figure very prominently in the Community's agenda in future, and we will ensure that it does.
    Mrs. Adams: Is the Prime Minister aware of the havoc wrought in the west of Scotland at the weekend by severe flooding in which lives were lost? Is he further aware that the Scottish Office Minister who visited the Paisley area yesterday gave us little comfort? Will the Prime Minister visit the stricken areas and make a statement that adequate funding will be available to reimburse families and local authorities?
    The Prime Minister: I know that the whole House will wish to join me in expressing regret at the loss of life and the very significant damage following the severe flooding in Strathclyde. As the hon. Lady may or may not know, my hon. Friend the Under-Secretary of State for Scotland with responsibility for industry and local government was able to make a statement about the flooding to the Scottish Grand Committee this morning. He said that grant aid from central Government might be available under the Bellwin scheme.
    Mr. Gallie: To ask the Prime Minister if he will list his official engagements for Tuesday 13 December.
    The Prime Minister: I refer my hon. Friend to the answer I gave some moments ago.
    Mr. Gallie: Has my right hon. Friend seen the "Scottish Engineering Quarterly Review" issued this week, which shows that orders are up, investment is up, recruitment is up and optimism is strong? Is he further aware that today Jetstream Aircraft at Prestwick announced yet another order? Is that not good news in the run-up to Christmas?
    The Prime Minister: I must confess that I have not seen the journal to which my hon. Friend refers, but I will ensure that it is delivered to me regularly in future. I am pleased to hear my hon. Friend's good news and delighted to hear about Jetstream. A further order will be another welcome endorsement of the success of Scottish manufacturing.
    Mr. McCartney: To ask the Prime Minister if he will list his official engagements for Tuesday 13 December.
    The Prime Minister: I refer the hon. Member to the answer I gave some moments ago.
    Mr. McCartney: The Prime Minister will know that the blood transfusion service is a unique service in the United Kingdom national health service. Last year, the

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    British people gave 2.5 million units of blood freely and saved thousands of lives. Does he appreciate the dismay and disgust at the Bain proposals to privatise the service and close down five regional centres, from Plymouth to Lancaster, with 1,000 job losses? When will the Prime Minister put the national health service before private greed and abandon that proposal?
    The Prime Minister: The hon. Gentleman knows that the NHS is getting more resources and more funding year after year. He also knows that there are areas which can be dealt with in the private sector without harm to patient care and that where that releases resources for patient care it is economically and medically sensible.
    Mr. Yeo: Does my right hon. Friend agree that the results of the past four general elections show that the good sense of the British people can normally be relied on? Against that background, does he further agree that, if the 1996 intergovernmental conference produced substantial changes in the European Union the use of a referendum might be justified, but that in the intervening period speculation about the type of question to be asked is entirely bogus?
    The Prime Minister: In advance of the IGC, it is extremely difficult to know precisely what the question in a referendum might be. I have said that I am not
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    prepared to close the door on the possibility of one, but, equally, that there are important constitutional matters to be considered and it would be very unwise to make snap judgments as to how to deal with that matter. As I understand it, two days after I stated that last week, it suddenly became the Opposition's position as well.
    Mrs. Helen Jackson: To ask the Prime Minister if he will list his official engagements for Tuesday 13 December.
    The Prime Minister: I refer the hon. Member to the answer I gave some moments ago.
    Mrs. Jackson: According to official figures given to me by the Child Support Agency last week, that body has processed just four claims for compensation in the past 12 months. Will the Prime Minister ensure urgently that the thousands of families who have suffered from the incredible incompetence of that body are fully compensated for their financial and emotional losses?
    The Prime Minister: As the hon. Lady knows, my right hon. Friend the Secretary of State for Social Security is looking at the child support arrangements. He will be responding to the Select Committee's report and will make an announcement as soon as the Government have finished their deliberations. Proposals for any changes will be brought forward at that time.

Pergau Dam
3.30 pm
The Secretary of State for Foreign and Commonwealth Affairs (Mr. Douglas Hurd): With your permission, Madam Speaker, I would like to make a statement on the Pergau dam in Malaysia.
I have now considered the written judgment of the divisional court. As I told the House on 17 November, I needed to establish whether, in the light of this judgment, the Overseas Development Administration can continue to run an aid programme of benefit to this country as well as to the recipients of aid.
I have considered whether there are particular forms of aid which in the light of this judgment should not be financed under the authority of the Overseas Development and Co-operation Act 1980. 1 have concluded that the activities financed by the Overseas Development Administration are not in general vulnerable to the kind of legal challenge brought in the case of Pergau. In the light of this, and having now considered the written judgment and taken legal advice, I have decided not to appeal. I have asked the ODA to ensure that all new spending decisions are weighed carefully, in order to respect fully the implications of the court's judgment.
In co-operation with the National Audit Office, my officials have carefully reviewed all projects receiving finance under the aid and trade provision, to see whether any of these projects approved under our previous understanding of the Overseas Development and Co-operation Act 1980 might fall outside the interpretation of that legislation now given by the divisional court. It appears that in the light of this review three projects might be held to raise legal difficulties following that judgment. These are £22 million of ATP support for a British sub-contract for the metro in Ankara, which was approved in 1990 and is in progress; a £9.3 million contribution to the costs of a television studio in Indonesia, approved in 1985 and completed several years ago, for which soft loan payments are continuing; the Botswana flight information region project, costing £2.9 million of ATP, approved in 1988 and physically complete.
In each of those projects, issues were raised about the strength of the economic or wider development case, though in none of them did the ODA accounting officer ask for a ministerial direction.
My hon. Friend the Parliamentary Under-Secretary for Foreign and Commonwealth Affairs announced to the House on 17 June 1993 new procedures for ATP projects as a result of our review of the programme. All ATP projects approved since these new procedures were introduced fully meet the criteria laid down in the Act as now interpreted by the divisional court.
In the light of the judgment, arrangements will be made for the outstanding commitments to Pergau to be met from funds voted by Parliament outside the scope of the Overseas Development and Co-operation Act. In order to avoid any possible doubt, similar arrangements will be made for the other three ATP projects I have mentioned. In the case of Pergau and the Indonesian project, which are financed by soft loans, the Export Credits Guarantee Department will continue to make the necessary payments under the relevant statutory
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provisions of that Department. A supplementary estimate will be sought to replace the relevant appropriations in aid from the ODA. In the case of the other two projects, which are financed by mixed credit, funds will be sought under the authority of the Appropriation Act. The necessary supplementary estimates will be laid before Parliament in due course.
A number of hon. Members have called for the money which ODA has spent in the past, and would have spent in the future on Pergau, to be available for other aid purposes. But the aid and trade provision of the aid programme for previous and future years was set on the assumption that the cost of Pergau and the other three projects would be met from within it. For the future, a financial obligation has been lifted from the aid programme and will have to be met outside the scope of the Overseas Development and Co-operation Act. It is not self-evident to me or to the Government that the Government should in consequence ask the taxpayer for additional money to allow the ODA to expand its aid activities.
The Government have concluded that, in respect of expenditure on the four projects in previous years, no adjustments will be made to ODA's future budget. Under our system of annual budgets, the books for those years are effectively closed, and we believe that they should remain so.
For the future, the planned aid programme again contains provision for all four projects. Expenditure on the four projects is expected to be £34.5 million this financial year and £31 million next financial year. It might be thought harsh if the aid programme were reduced by those amounts. The Government have therefore decided that funding from the Reserve will be provided to meet the costs of the four projects, thus releasing an extra £34.5 million this year and £31 million next year for overseas development.
For later years, my right hon. and learned Friend the Chancellor of the Exchequer announced to the House on 29 November increases of £56 million and £115 million in the aid programme in 1996–97 and 1997–98 respectively. Final figures for the aid programme in those and later years will as usual be determined during the annual public expenditure survey in the light of all relevant factors.
Mr. Harry Cohen: On a point of order, Madam Speaker.
Madam Speaker: Points of order are taken after the statement.
Mr. Cohen: Will you check whether the loudspeakers are working, Madam Speaker? I did not hear the Foreign Secretary say that he was sorry.
Madam Speaker: Increase the loudspeakers, please.
Miss Joan Lestor: First, may I thank the Foreign Secretary for sending me a copy of the statement a short time ago?
I welcome the fact that the aid programme will no longer have to bear the cost of the four projects, estimated at £34.5 million to date. Will the money that has already been spent on those projects—that spent on Pergau alone comes to £35 million—be repaid, since those funds have clearly been misappropriated? In the case of Pergau, the funds were unlawfully

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misappropriated. Will the right hon. Gentleman confirm how much has already been lost on the four unlawful projects? That lost money could otherwise have been used to alleviate poverty and to feed the hungry of the third world, where most people imagine that much of the aid budget is used.
Does the right hon. Gentleman recall that, when I first raised this matter in the House, in 1989, I was advised by the Minister that I was imagining a link between defence sales and aid. The Secretary of State has since admitted to what he coyly described as a brief entanglement—which occurred in 1988—between our aid programme in Malaysia and our support for defence exports. That admission is not a full confession, but it is certainly a start.
Does the right hon. Gentleman believe that promises given by a former Prime Minister are always defensible? Is it common practice for aid projects to get a provisional go-ahead, but to undergo rigorous reassessment? It should not be the guiding force of Ministers to prop up the tarnished reputation of former Prime Ministers. Furthermore, if we are to accept the Secretary of State's claim that at no time did he seek legal advice on the project, we can only conclude that he was either incompetent or so dismissive of the monitoring process that he felt that there was no need for him to cover his tracks.
Can the right hon. Gentleman also tell the House which of the three new projects that he mentioned—the metro in Ankara, the television studios in Indonesia and the flight information centre in Botswana—the former Prime Minister had a hand in? Were any of them queried by the former permanent secretary, as in the case of Pergau? Either way, the Secretary of State's case does not really stand up. As a recent editorial in The Times put it:
"If the loan was illegal, his position will be untenable."
It was and it is.
Mr. Hurd: I sent the hon. Lady a copy of my statement in advance, I hope in sufficient time. She does not seem to have read it with any great care because I have already answered several of the questions that she asked. The amount already spent on Pergau is £24 million over the past two years. The hon. Lady's first question, which I think goes to the heart of the matter, shows a misunderstanding as to how the aid budget is arrived at. It is not plucked out of the air. We do not say, "Let us spend £2 billion on aid," and then decide how to spend it. It is built up out of our estimate of needs and commitments. Part of those commitments for the past two years was certainly the aid and trade provision, and part of that was Pergau. Everybody knew that, questions had been asked about it, and it was known in Parliament and through Government.
It is not a question of money having been filched from the aid programme. When that programme was approved by the Government and voted by Parliament it was known to everybody who took an interest in it. It included the ATP and a commitment to the Pergau project, which had been discussed.
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The arrangement that I have announced says that we will not open the books on the £24 million that has already been spent. However, for this year, when £34.5 million will be spent on the four projects, and for next year, when £31 million will be spent, the aid figures announced by the Chancellor will remain and will not be reduced because of Pergau. They will thus be available for such extras as extra relief for Bosnia, which will certainly be needed.
Much of the ground covered by the hon. Lady has already been covered in debate, for example on 17 November. The 1988 entanglement was examined in depth by the Select Committee, and its report is available to the hon. Lady. I repeat what I said on 17 November: that at no time while I have held this position have I approved or been aware of any link between the provision of overseas aid and defence sales. I ask the hon. Lady, as I asked the hon. Member for Cynon Valley (Mrs. Clwyd), to accept that.
I have already dealt with the question about the ODA accounting officer. As I said in my statement, in terms of the three additional projects of which I have told the House, there was no question of the accounting officer asking for a direction. I will need to check this and let the hon. Lady know if I am wrong, but I do not believe that there was any involvement by the former Prime Minister, my noble Friend Baroness Thatcher, in any of these projects.
The arrangement that I have announced, the decisions not to appeal and on how to honour our commitment to Pergau, which with the other projects brings substantial benefit to British industry and to our trade, coupled with our arrangements for financing and the decision not to reopen the books on the £24 million that has already been spent on Pergau and, equally, not to cut the aid budget for the present year and the coming year, are equitable ways to settle the matter.
Mr. Tom King: Will my right hon. Friend confirm that by far the greatest part of our aid budget goes to the poorest countries, that ATP represents only about 5 per cent. of our aid budget and that it has been of considerable benefit to British industries in overseas markets? Does he agree that, after all, those industries help to fund the aid budget in any case?
Mr. Hurd: I am grateful to my right hon. Friend. He is perfectly right. Eighty per cent. of the aid budget goes to the poorest countries, and 92 per cent. goes to the lowest and middle income countries. I think that ATP is between 5 and 6 per cent. of the total and, of course, the Pergau commitment is a small part of that. I believe that the ATP which was put into action was invented by the Labour party. It has proved itself in a modest way to be a help to British industry.
Sir David Steel: Like the hon. Lady, I would like to thank the Foreign Secretary for sending me the statement in advance. I have read it carefully and I genuinely admire the gall with which he wrote the sentence:
"I have asked the Overseas Development Administration to continue to ensure that all new spending decisions are weighed carefully".
The whole House knows that that spending decision was weighed carefully by the ODA. It recommended against it, it was steamrollered by the Foreign Secretary

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and the previous Prime Minister, and it was subsequently found to have acted illegally by the courts. It is not a minor technical matter to be treated like a page of the telephone directory.
As for what is self-evident to the taxpayer, which the Foreign Secretary included in his statement, it is clear that the money was misused and the taxpayer believes that the limited budget for overseas aid should be used for its proper purpose and that the Foreign Secretary should reinstate those funds.
Mr. Hurd: I do not wish to repeat myself on reinstatement of funds. I believe that the decision I have announced is equitable; it will enable the aid programme this year and next year to undertake activities for which there will be a crying and continuing need in Bosnia and which otherwise they would not have been able to do.
On the right hon. Gentleman's main point, an undertaking was made in circumstances on which the Select Committee has reported in detail. It was twice made by the Prime Minister of Britain to Malaysia that we would help the projects, which they and we believed was developmental. When the time came in 1991 for me to decide whether the promise should be kept, it was clearly more expensive than it was supposed to have been three years earlier, but the right hon. Gentleman will acknowledge that the fact that keeping a promise is more expensive than was supposed when it was made is not always a reason for breaking it.
Mr. Michael Colvin: Will my right hon. Friend confirm that our defence sales and aid proceed quite separately and that the September 1988 memorandum of understanding on defence matters with Malaysia does not mention overseas aid?
Mr. Hurd: My hon. Friend is quite right. The Select Committee examined the matter exhaustively under the chairmanship of the right hon. Member for Bethnal Green and Stepney (Mr. Shore) and I have nothing to add to its report, which seems to me a balanced account. I simply repeat what I said before: that since I have held this position I have never approved or been aware of any linkage between aid and defence sales and I am confident that no such linkage exists.
Mr. Peter Shore (Bethnal Green and Stepney): This is a long and appalling story which, as the Foreign Secretary well knows, began with an aid for arms protocol signed by the former Secretary of State for Defence and has now ended with himself being judged to have been a law breaker in terms of the Overseas Development and Co-operation Act 1980, which it is his duty to administer. Surely some sign of regret or remorse, let alone an apology to the House of Commons, would be much more fitting than the rather strident tone in which he has addressed the House. Although he has made restitution for the next two years, he must be aware that unless further restitution is made, £181 million, which has still to be paid by the British Government to complete the Pergau project, will be deducted from what would otherwise be the legitimate overseas aid budget?
Mr. Hurd: As regards the future, when the Treasury and spending Ministers discuss spending in the public expenditure survey, they take everything into account
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and these events will be taken into account. I cannot say what decision will be reached on that in the public expenditure survey next year. The right hon. Gentleman is not contesting what I have said about the equity of the arrangements that I have announced for this year and next year; they are equitable and will give the Overseas Development Administration funds that it did not expect in order to carry out its duties.
As regards regret, the right hon. Gentleman knows the arguments. He does not agree with me, but I believe that the penalties which the national interest would have incurred had we broken in 1991 the undertaking given in 1989, would have been formidable. The court has not said the Pergau dam should not be financed or that Lady Thatcher's promise should have been broken; the court did not deal with any of those matters or with the question of arms. It simply dealt with the specific point of whether or not funding of the Pergau dam should be taken under the 1980 Act.
Mr. Jim Lester: Will my right hon. Friend confirm that much of the pseudo-indignation from Opposition Members is manufactured, in the sense that this money, which is allocated to the aid and trade budget, could have been used for other aid projects? We have already heard from my right hon. Friend that more than 91 per cent. of our aid budget goes to specific purposes. Will he also confirm that the Pergau dam has never been subject to corruption, that it is a triumph of British engineering, that it will generate electricity, which will be of value to Malaysian development, and particularly for development in the northern region of Malaysia, which is a very under-privileged area?
Mr. Hurd: I agree with all my hon. Friend's points. He speaks with close and sympathetic knowledge of the matter and I repeat my estimate of where the national interest lay. Of course, since then, the ATP policy and the aid policy have changed. An application from Malaysia—because its standard of living, its development, has been so successful in the past few years—for ATP on this kind of project would not now be granted. The House knows of the change of policy. We are not talking, therefore, about what would be approved in future. As I said in my statement, it is quite clear that the guidelines have been tightened and projects for a Pergau dam in Malaysia would not be approved today. That was not the question in 1991. The question then was whether the word given by the Prime Minister of this country should be kept.
Mr. Tony Banks (Newham, North-West): Will not the Secretary of State accept that the link between arms and aid was judged by the courts to be unlawful? How, then, can a promise that is unlawful be expected to be kept? Is not it a fact that if a council had been found guilty in the courts of misappropriating such a level of funds it would have been surcharged and, perhaps, independently taken to gaol? Why should there be different standards between central and local government?
Mr. Hurd: The hon. Gentleman cannot have read the judgment. He can have read only the initial advertisements of the World Development Movement. The court was not asked to deal with any question of a link with arms sales, and therefore did not do so.
Sir Anthony Grant: Can my right hon. Friend confirm that the ATP was originally an initiative of the previous Labour Government? As the Opposition are always talking about help for British industry, is there not a very substantial element of humbug in their attitude to this matter?
Mr. Hurd: I agree with my hon. Friend. ATP, I believe, has justified itself. It has not taken over the aid budget; it is between 5 and 6 per cent. of the aid budget. It has justified itself in helping the development of countries that we want to help, and at the same time giving help to British companies. I see no harm in that, provided it is done within international rules, which it has been.
Mr. Dennis Canavan: Why should the taxpayer have to foot the bill for illegal misconduct by the Secretary of State, bearing in mind the fact that, if the Secretary of State were a local government councillor who flouted the advice of his officials, thereby incurring illegal expenditure, he would be surcharged, probably bankrupted and certainly barred from holding public office? Will he now do the decent thing and resign?
Mr. Hurd: The hon. Gentleman is being synthetic, I think. The criticism that reached me from the ODA on the Pergau project did not relate in any way to its legality. The question was whether it was economically sound, and Sir Tim Lankester said that, in his view, it was not. There was no question, no query raised, at that time as to whether it was a development project in accordance with the 1980 Act. I had to decide whether it was in the national interest that Sir Tim Lankester's doubts on the matter should prevail over the promise that had been given. Keeping the promise turned out to be more expensive than had been supposed when it was given. I did not think that it was in the national interest that it should be broken.
Sir Giles Shaw: If there is any regret to be expressed, it would, on my part, be that this issue may have damaged the huge importance of ATP. Will my right hon. Friend confirm that, as a proportion of total aid, the ATP should be increased from its current level of 5 or 6 per cent., that it provides, and has provided since it started, some £4 billion of income to British industry, many of them small companies, and that its administration is crucial if we really mean to gain export access to difficult markets, which only the Government can help us to achieve?
Mr. Hurd: I do not want to prejudge the decisions that we shall make about how the ODA will use the amounts announced in the Budget speech and the extra amounts that I have announced today; but I note what my hon. Friend has said about the importance of ATP, and I am both certain and keen that it should be preserved.
Mr. Dennis Skinner (Bolsover): There is a gang of serial crooks in the Government. We should consider all the ones who have been in court. When will one of them, instead of acting arrogantly, have the decency to
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admit that he or she was wrong and resign? That is one of the problems with this Government. May I tell the Foreign Secretary that I might have expected him to be the fellow to do it. There is a vacancy in a flower stall outside Waterloo station; the Foreign Secretary should go and fill it.
Mr. Hurd: The court decided that it was illegal to finance the Pergau dam under the 1980 Act. It interpreted the Act in a way in which it had not previously been interpreted, causing me to say that we must look through all the ODA projects to make absolutely sure that the law was being complied with. That we have done, with the results that I have mentioned.
That was the nature of the court's judgment. I have no desire to cross swords with the court, and have not done so in any way. As I have decided not to appeal, we must obey the court's verdict strictly. I believe that we can do that while still preserving an aid programme that is able, within the limits of the ATP, to help British industry.
Mr. Richard Page: In accepting my right hon. Friend's statement, the whole House will know that he was not Foreign Secretary at the time and that no personal responsibility attaches to him.
The Pergau dam project has attracted a great deal of criticism, but is it just coincidence that, since the signing of the contract, our trade with that country and that part of the world has increased considerably, providing many jobs for people in the United Kingdom?
Mr. Hurd: I feel strongly about the merits of the matter. I must obey the court's decision, as I have decided not to appeal against it, but I do not feel penitent about taking a robust view on where this country's interests lie.
Since the decisions of 1988–91—as my hon. Friend pointed out, I was responsible only for the final decision, but I entirely understand the reasoning behind the others—our trade with Malaysia and its neighbours has increased enormously. Those are the most expanding markets of the world, markets in which Britain has been strikingly successful. Does the House really believe that we would have enjoyed that success if in 1991—strikingly and stridently—we had decided to tear up an undertaking that we had given?
Mr. Ted Rowlands (Merthyr Tydfil and Rhymney): Did not Lord Justice Rose clearly state that the Foreign Secretary should agree
"to take appropriate steps to make good the deficiency in the overseas aid budget"?
As £24 million of that budget was spent unlawfully on the Pergau dam, could not the Foreign Secretary at least modestly restore that £24 million?
Mr. Hurd: I have been into that. The court said that what it described as the "unravelling" was not a matter for it, and that is obviously true. I believe that what I have done—I have not reopened the past books relating to the £24 million, but have dealt with the rather larger

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sums involved in this year's and next year's budgets—is an equitable way of dealing with the difficult situation that was created.
Mrs. Jacqui Lait: What progress has been made in the restoration of British business links with Malaysia?
Mr. Hurd: They were never wholly interrupted. There was a pause and a breakdown in public sector contracts as a result of the Malaysian Prime Minister's indignation over what he read in the British press, but that has passed and we are on track for a further steady expansion of our trade with Malaysia.
Mr. Llew Smith: The Foreign Secretary informed me that there was no link between defence sales and aid. Thanks to the stirring work of the World Development Movement, it has been shown that he misled the House. Many of my hon. Friends have requested either his resignation or perhaps words of regret. Is he willing to give either?
Mr. Hurd: I am not sure what the hon. Gentleman is referring to. The events of 1988, for which 1 have no responsibility, have been fully examined. If he is saying that, since 1989, a connection has been made between defence sales and overseas aid provision, he should say so. If that is what he is implying, he should say so. I believe it to be wholly untrue. I do not think that that sort of insinuation does good.
Mr. John Townend: Does my right hon. Friend agree that the majority of this country's population see nothing wrong in using aid to create British jobs? If it has been found to be against the law, is it not time that the law was changed? May 1 take issue with him on the £65 million from the reserve? That money is still coming from the taxpayer. It is still increasing overseas aid and it will not be welcomed in my constituency, particularly on a day when hon. Members have been asked to increase the burden of taxation by £800 million. More and more people in this country are beginning to say, "When does charity begin at home?"
Mr. Hurd: My hon. Friend's views on this matter are well known. Charity does begin at home, but it does not necessarily end at home. I hope that today's announcement illustrates that.
Mr. Robert N. Wareing: The Foreign Secretary cited the evidence of the Select Committee on Foreign Affairs almost in his own, or in the Government's, defence. Is he aware that one person refused to give evidence to that Committee—that dreadful woman, Baroness Thatcher? Until we know why there was a link in a letter of 8 August 1989 to the Malaysian Prime Minister, how can any of us be really convinced that there was no link in her mind between arms sales and the Pergau dam project?
Mr. Hurd: That is not a matter for me. The hon. Gentleman and his colleagues went into the matter carefully. I am not saying that their report justified everything that happened because it did not. It showed a good deal of understanding of my position in 1991 and it came to the conclusion that I did not have much
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choice at that time. Despite the fact that my noble Friend did not give evidence, the hon. Gentleman would agree that the Committee did a thorough job.
Mr. Peter Luff: Does my right hon. Friend agree that the World Development Movement's decision to pursue the court case and the manner in which it was exploited by the Opposition parties and by some sections of the British media were damaging to British interests, British jobs and our relations with Malaysia? One good thing, however, has come out of this. Will my right hon. Friend give the House an indication of how the additional sums in the overseas aid budget will be used this year and next?
Mr. Hurd: The World Development Movement was entirely entitled to act as it did and it showed considerable perseverance and skill in doing so. I am not so sure whether, against the background of the opinions expressed by my hon. Friend the Member for Bridlington (Mr. Townend), it did good to the cause of support for British aid and the people that it has helped. That is a matter for the World Development Movement to judge. The opposite opinion to the sort of views that it has expressed may have become quite strong.
On the last question of my hon. Friend the Member for Worcester (Mr. Luff), I do not know yet, because the decisions that I have announced today have only just been taken and we have only just had the Budget figures of my right hon. and learned Friend the Chancellor of the Exchequer. We need to put those two together and to decide how the Overseas Development Administration is to distribute the money. The human emergencies in the world, whether caused by civil war or famine and whether they occur in Africa or Bosnia, are not likely to diminish. The Chancellor's Budget announcement and the arrangements that I have announced today will enable the ODA to continue a tradition, which it has successfully established, of giving quick, prompt, adequate aid to deal with those emergencies. I imagine that some of the money will go for that purpose.
Mr. D. N. Campbell-Savours (Workington): Are the appraisal reports into ATP projects, which are conducted by independent consultants, still being revised at the request of departmental officials if it is considered that they might be embarrassing for the Government?
Mr. Hurd: Perhaps the hon. Gentleman would examine the announcement made in 1993 by my hon. Friend the Under-Secretary of State about the change in procedures following our review. Were he to do so, I think that he would be satisfied about the procedures. If not, perhaps he will let me know and I shall try to satisfy him.
Mr. Spencer Batiste: Does my right hon. Friend agree that in the eyes of most people in this country there is absolutely nothing wrong with linking an appropriate portion of aid with trade? This case has revealed that the present rules are too inflexibly drawn. Will he introduce proposals to widen the bands under which such decisions can be made, so that in future

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the Government can make sensible judgments without the danger of their being second-guessed by every lobby group on any subject?
Mr. Hurd: I am glad that my hon. Friends are strongly endorsing ATP and that the Opposition are not condemning it as such. That is useful. Of course, ATP has to take place under international rules which have been tightened since the period that we are discussing. It is not a good idea to have a race to subsidise exports, but it is right that, within international rules and the law, we should persevere with ATP, concentrated on those markets that make most sense, such as the poorer countries in which there are good trade prospects for this country. I am encouraged by today's exchanges to be robust in persevering with ATP.
Mr. Tony Worthington: The Secretary of State said that he believes that what he has announced today fulfils his obligation to the court after its judgment against him. What legal advice has he received, and is it unambiguous that his response is right? If the advice proves to be incorrect, will he resign?
Mr. Hurd: I have, of course, taken legal advice on the question of past payments. I am advised that it is not for the court to direct what should happen in that respect. I stand by what I said about the present and the future, and that is not open to legal question.
Mr. Gary Streeter: May I urge my right hon. Friend not to be blown off course by the Opposition's synthetic anger? When shaping future aid policy, will he be sure to take into account the employment prospects for British workers, just as the French, Germans and Americans do? Is not that what aid for trade is all about?
Hon. Members: Bribery.
Mr. Hurd: I am sorry that this has become a party matter because there is an underlying problem which is not being dealt with by the Opposition in their desire to make trouble. If they examined recent events they would see what that underlying problem is. I am grateful to my hon. Friend.
Mr. Harry Cohen: Does the Secretary of State recall the pictures that the nation saw of emaciated and dying children in Ethiopia and Somalia a few years ago? What does he think of a Government who preferred to use the aid budget to sell arms to what he has admitted are rich countries? Does not that fill him with shame?
Mr. Hurd: The record of this country and of the ODA in particular, often operating through non-governmental agencies, in taking prompt and effective help to the type of disasters to which the hon. Gentleman refers is second to none. Instead of making such remarks in order to cause the Government trouble, the hon. Gentleman should take a little pride in what we are doing overseas, whether in Rwanda most recently, or before that in Somalia, which he mentioned, or every day in Bosnia where we are supplying 20 per
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cent. of the international aid. Our record in dealing with exactly the type of problems that he mentions is unmatched.
Mr. Nigel Waterson: Can my right hon. Friend give us an idea of how many Labour Members persistently press for companies in their constituencies to be involved in projects linked to ATP? Does not that reveal the gross hypocrisy of much of what we have heard from them this afternoon?
Mr. Hurd: There is strong pressure—I cannot give the figures—from constituency members, of course, that ATP? help should go to projects in which they are interested. There is also very strong pressure from individual Labour Members that their constituents should benefit from the sale of arms to the third world.
Mr. Mike Hall: Earlier in his statement, the Foreign Secretary referred to evidence given to him by Sir Tim Lankester, the former permanent secretary at the Overseas Development Administration, and he described Sir Tim's reservations as being on economic grounds. When Sir Tim Lankester came before the Public Accounts Committee, he described the Pergau dam as an abuse of the aid project. The courts decided that it was illegal. I think that it is wrong for the Foreign Secretary to say that it is a party political issue. The only two things missing from his statement this afternoon were an apology and a resignation.
Mr. Hurd: I do not wish unnecessarily to repeat myself. I have described what the court decided. The court did not say that it was wrong to finance the Pergau dam. The court did not say that it was wrong to take into account political and commercial considerations. The court did not enter at all into the question of arms sales, which bulks so large in the controversy. The court simply said that it was not right. It produced a new interpretation of the 1980 Act and said that the financing of the Pergau dam did not fall within that interpretation of the Act. I am complying fully with that judgment.
Mr. Jacques Arnold: Will my right hon. Friend stress time and again the lavish use made of ATP procedures by our export competitors? Is it not a fact that the Government have given skilled support to British exporters, which has been good for jobs, not least jobs in the constituencies of Labour Members?
Mr. Hurd: That is certainly true. As a result of all that has happened, the importance of ATP is, if anything, more clearly established. I repeat the point that I made before. I am against having an international race to subsidise exports. I believe that there should be international rules on that—indeed, there are—and that they should be strictly enforced. Within those rules, I see no case whatever for sitting back and giving an advantage to our competitors.
Mr. Hugh Bayley: On a number of occasions this afternoon, the Foreign Secretary has stressed the importance of abiding by the verdict of the court in this matter. However, is it not equally important for him to abide by the policies of his own Department as set out in the annual report, which say that aid should be targeted on poor people in poor countries? Why,

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since he has been told by the court that he may not use that sum of money for aiding the Pergau dam, is he standing in the way of using it for purposes for which Parliament has voted?
Mr. Hurd: We are complying with our own policy. Of the aid budget, 80 per cent. goes to the poorest countries. The quality of British aid is often praised, as it was, for example, in the latest OECD report. From the aid budget, 92 per cent. of the aid goes to low and middle-income countries. We have nothing to be ashamed of in that respect. As regards the past, I have answered the question about reopening the books. As regards the present and the immediate future, the arrangements that I have announced today will enable us, for example, to give more effective and more immediate help to the kind of cases to which the hon. Member for Leyton (Mr. Cohen) referred a few minutes ago.
Mr. George Foulkes: There are one or two questions which the Foreign Secretary has not yet answered. I remain puzzled as to how the Foreign Secretary had no knowledge of what he described as an entanglement between arms sales and aid, which was known to the Prime Minister and to Lord Younger. Was he merely naive, or was he kept in the dark?
Mr. Hurd: I was Home Secretary.
Mr. Foulkes: He was a member of the Cabinet. There must be some collective responsibility for decisions taken by the Cabinet.
The right hon. Gentleman accuses us of making this a political issue. May I assure him that we support ATP, but we do not support ATP stealing money from humanitarian aid and help to the poorest of the poor? We do not support money going into unsound economic projects, which the Pergau dam was clearly seen to be. He made some amazing revelations in his statement today. How do a television studio in Indonesia and a
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metro in Ankara fit in with our aid policy of helping the poorest of the poor? How can they possibly be the kind of projects that we should be supporting?
As many of my hon. Friends have rightly said, in the good old days, any Secretary of State caught red-handed, in the way in which this Secretary of State has been, would have done the honourable thing and would have gone back to writing novels, which the Foreign Secretary does so well. However, if the Foreign Secretary is not willing to do that, I assure him, on behalf of all Opposition Members, that his standing would rise immeasurably in the House if he would simply apologise for his mistake.
Mr. Hurd: On the hon. Gentleman's specific points, he has his chronology a bit wrong, but I do not complain about that. The reference to ATP stealing money simply does not wear, because the figures for the aid programme included ATP and the commitment to the Pergau dam. There was no secret about any of that. There was no question of filching money.
The total of the aid programme took into account the commitments that had been made. That is how the aid programme is constructed. This talk of filching or stealing money surreptitiously from the aid programme is completely wrong. As it is completely wrong, what the hon. Member for Carrick, Cumnock and Doon Valley (Mr. Foulkes) followed up with is also completely wrong. [HoN. MEMBERS: "What about Indonesia?"] I will go into that. That is a programme of £9.3 million of support from the ATP. It was approved in 1986 by the then Minister of State.
In Bandung, it is designed to bring together a widely scattered community of poor people and make it possible for that community to function more effectively. If the hon. Member for Carrick, Cumnock and Doon Valley thinks that that is a wrong use of money, I would not agree with him. I believe that it is a good use for the money and my right hon. Friend was right to approve it. We believe that it may fall outside the Overseas Development and Co-operation Act 1980. In order to be absolutely sure, it is being financed as I have said.

Offices (Intrusion)
4.16 pm
Madam Speaker: The House will be aware of press reports about an intrusion last Friday into the suite of offices of the Leader of the Opposition. I have made inquiries into this matter and I understand that the intruders concerned were two research assistants and a guest. I am satisfied that there was no malice whatsoever in their action, which resulted from an excess of seasonal spirit and a mischievous walkabout.
Nevertheless, it must be understood that it is a privilege to work in, and have access to, the Palace of Westminster and I do not expect that privilege to be abused. In this instance, it has been abused. I have therefore given instructions that the researchers concerned should have their passes withdrawn with immediate effect and until 1 February.
Mr. Max Madden: On a point of order, Madam Speaker. This relates directly to your statement. I understand that the Administration Committee is currently reviewing the arrangements for the issuing of passes to the House of Commons. It appears that, at the moment, anyone who is nominated by a Member of the House for a pass is automatically issued with one unless anything is known on security grounds. In addition, there appears to be a very long list of organisations whose employees are issued with passes. Indeed, the list is so long that the Administration Committee has been unable to supply me with it.
My point of order is this: as it appears that virtually any Tom, Dick or Harry can be issued with a pass to this place, and undoubtedly a very large number of people have passes which give them access to the House, I wonder whether arrangements can be made to invite hon. Members to submit evidence to the Administration Committee so that more sensible criteria can be devised before passes are issued.
Madam Speaker: That is a matter for the Administration Committee and for the Serjeant at Arms. I will ensure that the point raised by the hon. Gentleman is referred to that quarter.
Mr. Tony Banks: On a point of order, Madam Speaker. May I refer you to page 380 of "Erskine May", which states:
"Opprobrious reflections must not be cast in debate on heads of state or governments of independent Commonwealth territories or countries in amity with Her Majesty, or their representatives in this country"?
You will recall, Madam Speaker, that yesterday, in answer to questions on the recent European Union summit, the Prime Minister said:
"Indeed, I must say that some of my fellow Heads of Government could scarcely find their way to their Parliaments with a guide dog."—[Official Report, 12 December 1994; Vol. 251, c. 625.]
That is an opprobrious reflection on the Heads of Government of countries which are in amity with Her Majesty.
Is it little wonder, with the hon. Member for Teignbridge (Mr. Nicholls) referring to our partners as collaborators, warmongers and beggars, and with the Prime Minister now suggesting that some of his fellow Heads of Government are visually challenged, that the British Government are seen on the continent and in the
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European Union as a bunch of exceedingly rude whingers? Would it not be appropriate for the Prime Minister to apologise and, perhaps, to offer a suitable donation to the appropriate guide dog charity?
Madam Speaker: The Prime Minister is responsible for his own remarks, as are all other members of the Government and Members of Parliament. I remind the House of the words of "Erskine May", and I add to them that not only good temper and moderation but tolerance of other people, whether in this country or abroad, are equal characteristics of parliamentary language.
Mr. D. N. Campbell-Savours: On a point of order, Madam Speaker. Will you authorise the House authorities to release the names of the three men who intruded into the office of the Leader of the Opposition? Can you establish why they were not searched when they left the office?
Many hon. Members find it difficult to understand—indeed, we do not believe that it is credible—that three men should walk the length of the Palace of Westminster and just happen to enter the Leader of the Opposition's office. It is not a credible story. We believe that their motive was deliberate—that is, to enter that office, knowing that they had no right to enter, and to do whatever they set out to do. We understand that no checks have been made.
Mr. David Winnick: Further to that point of order, Madam Speaker. Our suspicions would not have been so great had it not been for the recent memorandum from the vice-chairman of the Conservative party, Mr. Maples. Bearing in mind the distance to the office of my right hon. Friend the Leader of the Opposition, it seems almost incredible that those three people claim that it was simply a mistake on their part. What would have been the position if the person in charge of the office at the time did not take the necessary steps to identify the three concerned and to call in the authorities?
There is a feeling among Labour Members at least that this is a minor Westminstergate—a deliberate attempt unofficially to find out information from the office of my right hon. Friend the Leader of the Opposition. Therefore, I urge you, Madam Speaker, to consider it appropriate that further steps should be taken to look into the matter.
Madam Speaker: I have made extensive inquiries into the matter. I even went to the offices of the Leader of the Opposition very early this morning to refamiliarise myself with their geography. I am totally satisfied that, as I have said in my statement, no malice was intended. I gave my reasons why I thought that those three people—they were not all males; there were two males and one female—were there. A thorough police inquiry has been carried out, too. The police tell me that they are satisfied that nothing was taken and that nothing was disturbed. In all seriousness—we must be serious about such matters—I am sure that that would be the view of the Leader of the Opposition himself.
Several hon. Members rose—
Madam Speaker: We must leave the matter as it is. There will be no further points of order on it.
Mr. Dennis Skinner: On a point of order, Madam Speaker.
Madam Speaker: Is it on this matter?
Mr. Skinner: It is on security. During the past five years, and increasingly lately, there have been questions about the reduction in the number of police and security people positioned around this building. Most of the time the matter has been ignored, and we have been assured by Ministers that everything is all right. It is apparent to many people who are in this building on Fridays in particular and to the security people that there is not sufficient manning to cover all areas. I suggest that it is time that we looked at the number of people who have been removed from security and police positions, so that in future police and security officers are able to do their job effectively. I think you will find, Madam Speaker, that there has been a severe reduction in their number.
Madam Speaker: I am in touch with police and security figures not monthly but on a weekly basis. I do not discuss security matters across the Floor of the House, but if the hon. Gentleman would like some details about those matters I know that the Serjeant-at-Arms will be happy to place them in front of him.

Cleveland County Council
Mr. Frank Cook: On a point of order, Madam Speaker. Yesterday you heard my point of order about the promised deposition of the details of submissions made to the Local Government Commission in relation to the dismantling of Cleveland county council. I thank you, Madam Speaker, because your admonishment of the Treasury Bench yesterday resulted in the details being placed in the Library as your procession was passing it at 2.30 this afternoon.
My point of order is that the summary, which has taken nine months and four days to deliver, is a single sheet of paper. It does not say how many submissions were made in favour of the recommendations and there is no detail of the submissions which opposed the recommendations—in fact, there is no total of submissions received. The summary is little more than a repeat of the recommendations of the Banham commission. My two-year-old grandson could have done better than that in half a morning.
Frankly, the Government are treating the House with contempt and preventing any hon. Member who wishes to oppose the order from receiving necessary information. We are told that the order has been laid down and that the matter may be discussed next Monday. The Government are treating the House with contempt, and that is unacceptable. I appeal to you, Madam Speaker, to use your powers to urge the Government to act decently for a change.
Madam Speaker: I am very pleased that I was able to help the hon. Gentleman yesterday, but I certainly cannot help him on this matter. I am not responsible for the quality of material that is provided by the Government—I have many responsibilities in other respects, but that is not one of them.
I can only suggest that the hon. Gentleman see the Minister concerned—I realise that it may be a little late if the matter is to be debated next week—and perhaps make some representations to obtain the information that he requires.

Ways and Means
Madam Speaker: Before I call the Chancellor of the Exchequer, I inform the House that I have selected amendments (a) and (b), standing in the name of the Leader of the Opposition.
4.27 pm
The Chancellor of the Exchequer (Mr. Kenneth Clarke): I beg to move,
Mr. Robert Sheldon: Will the Chancellor explain one matter that he did not explain last Thursday? In the past 10 years, the average error in the public sector borrowing requirement has been £10.5 billion. He wants to raise £800 million. Why is he in such a hurry? Is he now a convert to fine tuning? Will the Pergau financing mean further increases in taxation? Why cannot he wait until February, during consideration of the Finance Bill, and make a decision in the light of further information?
Mr. Clarke: Confidence in policy requires clear consistency of purpose and determination to put that purpose into effect. I had a similar exchange with the right hon. Gentleman last week and explained that, of course, these are not exact forecasts or spot figures, but the best forecasts that we can make and that there is a variation around a median line.
The right hon. Member for Ashton-under-Lyne (Mr. Sheldon) was in the Treasury at a fairly terrible time—I think that he was there when the International Monetary Fund took over for a time because of the inability of the Government of the day to deliver healthy public finances. Even when he was in office, he did not take the view that £10 billion on the PSBR here or there was something that the Government would ignore. He and his colleagues published forecasts and missed them rather badly. The downward track on which we are setting the PSBR is essential to the restoration of confidence, as is our commitment to take no risks with inflation.
I think that we would all agree that the past week has been one of slightly greater than usual political turmoil. Fortunately, that has not shaken confidence here or abroad in Britain's ability to keep on course with its recovery. Many countries are going through substantial political crises. Usually, that has a knock-on effect on confidence in the Government's abilities to deliver their economic aims. That has not happened here, in part because of the prompt action that we took.
Mr. Tony Marlow: Is it possible that confidence was not dented because people think that the present solution is rather better than the one we had before? As we are talking about changes in solutions, and given the state of the housing market and the fact that mortgage interest relief at source is going down, why does my right hon. and learned Friend still think it wise to knock that market on the head again by making people insure their mortgages?
Mr. Clarke: That was as helpful as ever. Confidence was retained overnight not least because I had a monetary meeting and raised interest rates first thing the next morning. It was extremely important to do so to reconfirm the fact that political turmoil would not threaten our commitment to low inflation and to demonstrate that our policy of considering the economic evidence, looking forward and ensuring that, if inflation pressures are incipient, we act in good time and keep control of events remained unshaken. Confidence was retained before I proposed my package of measures on Thursday.
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As I told the right hon. Member for Ashton-under-Lyne, a prompt reaction to events to put in place the Budget judgment was essential to keep us on course. In the short term, the interest rate change was never likely to be welcomed by people concerned about the housing market. The present difficulty is that our manufacturing economy is roaring ahead, with very strong growth, while the housing market remains distinctly flat. In the medium-term interests of anyone involved in the United Kingdom economy, it is essential that a low inflation climate is retained and that it lasts. People involved in the housing market probably realise more than anyone else in business the dangers of returning to boom and bust, and of the apparent prosperity that inflation brings and its effects thereafter.
Mr. David Winnick: Most people clearly have no confidence in the economic competence of the Government, and the Chancellor knows that. The Government's humiliating defeat on VAT undoubtedly dented them, but does the Chancellor accept that it has in fact reinforced the standing of the House of Commons? Letters to national newspapers and hon. Members have shown that the vote has almost reaffirmed people's faith in parliamentary democracy and the workings of the House of Commons. As a parliamentarian, I think that is excellent. Does the right hon. and learned Gentleman agree?
Mr. Clarke: I regard myself as a parliamentarian, and I am extremely glad about anything that raises confidence in this House, which needs raising by a quite considerable extent. I accepted the judgment of the House, which, although I will not labour the point this afternoon, was reached in an extraordinary way. The House, having confirmed the tax in four separate votes, changed its mind in circumstances where—the hon. Gentleman will concede—background events had a lot to do with the decision.
I have accepted the decision, and that is where we now are. I am explaining that it is necessary to proceed with the resolutions so that the key economic policy of low inflation and healthy public finances is dealt with properly by the Government with the support of the House.
Virtually every major economy in the western world faces serious problems with its public finances as it emerges from recession. The general level of deficits throughout the European Union and across the Atlantic is far too high for comfortable and sustained growth, and every Government is having, or trying, to take action to deal with that problem. I believe that the British Government are tackling the problem more effectively and more promptly than almost any of our competitors in the developed world. That is one reason why confidence in Britain is so high—not only in the financial community, but among the business men and industrialists upon whose confidence we depend to get investment going to sustain our current good performance.
We are doing better than anybody else at the moment. That is why the House must accept—if we accept the House's verdict, as we do—that, having lost potentially £1 billion of tax revenue in the next financial year and

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£1.5 billion worth in years two and three of the survey period, it is essential that it confirms the action necessary to fill that gap in the public finances.
Mr. Dennis Skinner: I go back to the question of the interest rate increase. The Chancellor gave the impression that the increase was not as a result of the defeat in the House of Commons, but that it arose simply because he felt that the judgment had to be made at that time. Why, then, only a fortnight ago, when I asked him directly in the House whether there would be an increase in interest rates before Christmas, did he tell me that he had no plans for such an increase?
Mr. Clarke: With the greatest respect to the hon. Gentleman, I am quite certain that I never answer questions—either in the House of Commons or from journalists outside—about my intentions regarding interest rates. It would be totally irresponsible for any Chancellor to do that, as it would cause turmoil in the markets.
I have always explained my policy on interest rates, which is to ensure that we act in good time to keep control of events and to stop inflationary pressures building. The decision on interest rates to which the hon. Gentleman referred was taken the following morning, and not before, and it was taken on the basis of a judgment of the inflationary pressures. But, at the request of the Governor, we had brought forward the timing of the meeting so that, if we decided to raise interest rates, we would do so in good time before any turbulence in the markets after the decision of this House. I make my decisions on the evidence of the meetings that I hold, but the House must bear in mind the fact that those decisions, and their timing, have to include, among other things, the surrounding political events and the possible consequences of a defeat in the House of Commons the night before and the loss of a billion pounds worth of taxation.
Mr. Tony Banks: The Chancellor said that the manufacturing economy was "roaring ahead" Will he tell us when we last had a balance of payments surplus on our trade in manufactured goods, and when he expects us to move into surplus again?
Mr. Clarke: It is a long time since we have had such a strong balance of payments recovery at a time of economic recovery. The hon. Gentleman knows that that is because the recovery is export-led: in volume terms, our exports are up 10 per cent. on a year ago and investment is beginning to press ahead. The course for our balance of payments is improving precisely because this is a competitive country. It is attracting inward investment because it the best place in western Europe in which to invest if one wants to manufacture modern products.
As I said in my statement last week, when it came to filling the gap in the Budget judgment, I turned first of all, instinctively, to public spending. It was obviously right to look at that side of the account. I know from last week's intervention from my hon. Friend the Member for Bridlington (Mr. Townend), as well as from his representations to me for about as long as I can remember in his capacity as chairman of the Conservative finance committee, that he wanted me to do just that.
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As I explained, to make further changes in the public spending total for next year and the year beyond at this stage, after the end of the public spending round, was simply not practicable. I could not do that because of our enormous success in the two successive public spending rounds, which reduced general Government expenditure by at least £43 billion over the four years covered by those two public expenditure surveys. That sum was taken out of general Government expenditure without disturbing the Government's policy priorities and, so long as efficiency is maintained, without threatening the delivery of good, high-quality services.
I accept that a further adjustment to recover money out of those public spending totals may well have been attractive to a number of hon. Friends, as it was to me, but it would not have represented good competent government. It was too late in the year to make such a change. We had just settled the survey and health authorities, local authorities and Government Departments had made their plans on the basis of the figures that we had provided. If we had gone ahead, within 36 hours, to find areas of public spending from which we could have quickly recovered the money further required, it would have been damaging.
I know that my hon. Friend for Bridlington is not alone in making representations to me about public spending—my hon. Friend the Member for Chingford (Mr. Duncan Smith) and others have also done so. Because I was unable to go further on this year's public spending round, however, does not mean that we are lessening our determination to keep public spending under control. In years two and three we have already committed ourselves to filling the expenditure gap by £300 million. The tight public spending control of the kind that we are delivering is not a short-term, temporary Government policy; it is one of the hallmarks of Conservative government that we keep tight control of expenditure.
The resolutions deal with the need to raise taxation. We know that the ability to raise or to reduce taxation is directly linked to control of public spending. If one cannot control that spending, one has lost control of one's taxation policy. In future years we will stick to that principle, but this year, for purely practical reasons, we did not attempt to alter the public spending totals.
Mr. Malcolm Bruce: Does the right hon. and learned Gentleman accept, however, that choosing to recover money in taxes has had an inflationary effect of 0.4 per cent., which has meant indexing benefits to the tune of nearly £600 million? Surely he would have faced a much easier task if he had found the money elsewhere. When does he think that the borrowing level will be at a pitch where he will be able to justify reducing taxes? Can he tell us what the criteria would be?
Mr. Clarke: We looked at alternative packages, but one of the attractions of the package that I am commending to the House in the resolutions is that the impact on inflation is rather less than that of the taxes that it replaced. I accept that there are disadvantages in the new package, and, if I am pressed, I will explain why what I am now presenting is, as everyone realises, my second choice, starting from where we were before I prepared this year's Budget. Nevertheless, the substitute package has one advantage, because it slightly reduces the impact on inflation.

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On the borrowing requirement, we published in the Red Book the public sector borrowing requirement that we now expect to be sustained. We published our expectation that general Government expenditure will fall as a proportion of gross domestic product. Judgments about taxation in future years must be made on the same basis as the judgments about taxation that I made this year and last. The lower one gets the PSBR, the more one gets public spending under control and the more one is able, when conditions begin to improve, to consider how far one can reduce taxes rather than increase them.
According to the Government, judgments about taxation must be made, and will always be made, on the basis of the health of the real economy. We are committed to industry, to jobs and to prosperity. Our past policy of declining to decide on low rates of marginal taxation was based on our belief that that stimulates a healthy economy. We will make changes in taxation only as and when we believe that it is in the interests of a healthy economy to do so.
Mr. Nigel Griffiths: The Chancellor may talk about judgments on taxation, but how can we trust his judgment to match what he has said about taxation? Before the election, he told us that there was no need to extend the scope of VAT and he made specific promises not to increase the rate of VAT. When he came back to the House, however, he offered proposals that went against everything that he had promised. What will happen on a wet night in Dudley tomorrow?
Mr. Clarke: Before the election, the hon. Gentleman and his hon. Friends campaigned on a policy of increasing taxation in order to increase public expenditure. They also ran a campaign suggesting that they had somehow done their calculations and discovered that the Conservative party would be obliged to raise the rate of VAT. We did not.
The hon. Gentleman has no quotations from me about VAT. He may, however, be referring to some remarks that I made during the election campaign, which were made at a time when his party and my party believed that the recession was over and that public finances would not fall into a worse state. The difference is that when, thank heavens, I am glad to say we found ourselves charged with the responsibility for turning the recession into the recovery, we took the necessary steps to deal with the deficit to get us back on course.
The hon. Gentleman's party opposed every increase in taxation and every spending reduction. Had the Labour party taken office, it would have put into effect the budget of the late John Smith, which would have meant increased taxation and increased public spending. The Opposition would obviously have turned a dangerous borrowing position into a catastrophic one. I recall that that is exactly what the Labour party did when it last took office in similar circumstances.
Mr. Gordon Brown: Did or did not the Prime Minister say that the Conservative party would not extend VAT? The truth is that he said just that. Will the Chancellor, just like the Prime Minister told us before the general election, now tell us that he will never extend VAT to food, travel, children's clothes, books and newspapers? Will he repeat the Prime Minister's promise?
Mr. Clarke: Did or did not the hon. Gentleman and his hon. Friends tell us that, if elected, the Labour party would put up child benefit and all retirement pensions? The Opposition would not have done that if they had been
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remotely responsible upon taking office and discovering that the PSBR was in crisis. The hon. Gentleman looks shocked at my response. He appears to be saying that if the electorate had made a mistake at the election, the Labour Government's reaction to discovering that public finances were in crisis would have been to raise public expenditure on those items by enormous amounts.
The hon. Gentleman has wrung that lemon of the old election quotations dry. As he asked me to give undertakings about the future, let me tell him that we have put in place a policy to match the occasion, which has dealt with the crisis and turned the recession into recovery. The hon. Gentleman cannot even come up with any proposals. Any question to him is waved away and he refuses to give any undertakings about any future Budget, which I hope he will never deliver.
Mr. Patrick McLoughlin: I do not believe that we should take too many lessons from the Labour party. Is my right hon. and learned Friend aware that some time ago the hon. Member for Brent, East (Mr. Livingstone) said that those who pay tax on more than £50,000 should be taxed even more? According to press reports at the weekend, however, the hon. Gentleman's accountant has managed to do some clever tax fiddling for him.
Mr. Clarke: I will not comment on my hon. Friend's second point. We are beginning to quote the hon. Member for Brent, East (Mr. Livingstone) with approval; I have done it myself. There is no point in Opposition Members shrieking derision at their hon. Friend. He is almost the only Labour Member who attempts to make positive proposals. His hon. Friends do not say that they disagree with him: the inclination to go for higher taxation is not disowned. They are silent when we press them, and we shall press them again in the debate.
I shall now deal with the substitute indirect taxes to replace those that the House has rejected and with the increases in duty. The debate is sensible, certainly in the context of Conservative Members. We will support the resolutions but we will do so with some regret. When I was preparing my Budget I rejected those indirect taxes, because, although they raise the necessary revenue, they all present disadvantages which, until we had the vote, I had hoped to avoid.
The first issue is duty on alcohol, which I am obliged to raise to make a contribution to revenue. I received[ a large number of representations about the excise duty on alcohol before I prepared my Budget. I do not meet many of those who wish to speak to Ministers, but all Treasury Ministers meet deputations. I met representatives of the brewers and of the Scotch Whisky Association because, as hon. Members will recall, last year I reflected my concern for the situation that they faced following the opening of the single market and the ending of frontier controls.
One of the delegations was a powerful one and consisted of some of my hon. Friends. It was led by my hon. Friend the Member for Birmingham, Edgbaston (Dame J. Knight) who urged on me the importance to the British economy of the Scotch whisky industry and the need to ease its burden of duty. I accepted that case when I presented my Budget. I had hoped this year to repeat what I did last year—to freeze alcohol duties for the benefit of the British brewing industry and the Scotch whisky industry.

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Unless one wants to load even more on the other chosen sources of revenue, it was impossible to stick to what would have been my preferred policy of repeating that freeze. I assure my hon. Friends who are interested in this matter, and certainly those who came to see me about it, that force majeure compels me to do this: it is not a change of policy. I continue to believe that in next year's talks we must explore the objective of approximation of duties across the European Union. That has been made even more urgent.
I assure the House that we shall sustain and strengthen our actions against the illegal importation of alcohol and tobacco. I am satisfied by recent evidence showing that we are becoming more effective in our operations against criminal gangs of smugglers. Since the ending of frontier controls, we have steadily strengthened the intelligence gathering part of our effort and are becoming steadily more successful.
Mr. William O'Brien: What items other than excise duties could the Chancellor have examined in his second look at the Budget? Is he aware of the jobs that will be lost in brewing and distilling and the effect that that will have on regional economies? Will there be less smuggling because of the increase in duty?
Mr. Clarke: I told the House a few days ago about the alternatives and I do not propose to go over them again. Those who argue for alternatives should face the fact that they are either increases in direct taxation by raising the rates or squeezing the allowances, increasing taxation on business in various ways or indirect taxation. That involves the possibility of raising the rate of VAT on its narrow base or indirect taxation in the form of increased duties. I shall not rehearse again the process by which I arrived at the decision. It had to be indirect taxation.
Mr. John Townend: I am grateful to my right hon. and learned Friend for his efforts to stop smuggling. Of course, we could have put VAT on newspapers and I would have welcomed that. Does he accept that, inevitably, if we are to have any success on the approximation of duties with other countries, at some stage the Government will have to reduce our duties to the level of those in other countries? We cannot expect the problem to be solved by other countries putting their duties up to our level.
Mr. Clarke: That may be so, but I do not want to anticipate our negotiating position. I am grateful to my hon. Friend because, without going wider than the terms of the debate, he sometimes shows a slightly fuller understanding than other hon. Members of how European negotiations proceed. I am all too familiar with coming back from European negotiations and, unless I have received agreement to every last dot and comma of the negotiating position with which I set out, being accused of taking part in another humiliation for Britain. One must go to Europe with a negotiating position. Our position is strong, and we have chosen a perfectly legitimate area in which to raise revenue. We need approximation to make sure that revenue is not lost in one country and gained in another, and that trade is not distorted by goods going across borders.
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We would be reluctant to lose that source of revenue altogether. It is perfectly legitimate to raise duties on alcohol, which some people welcome because they blame alcohol for crime and other problems. The difficulty is unlawful smuggling and the legal trade that is encouraged when people go shopping and take advantage of lower duty.
We must get the loss of duty in proportion. I sympathise with the argument that jobs and so on will be lost, and that sympathy has twice been demonstrated in my Budgets. Nevertheless, with the greatest respect to them, the brewers and the Scotch Whisky Association negotiate in the way that perhaps one negotiates in Europe—by slightly exaggerating the consequences. Changes in brewing have much to do with changes in custom, trade and consumer taste and changes in the industry.
The brewers are making healthy profits, as are manufacturers. I am extremely glad that, because of the recovery, sectors of our industry are showing a healthy recovery in profits. To put the matter in proportion, the best estimate by Customs and Excise of the current loss of duty from goods smuggled from across the channel is about £65 million a year. We must put in proportion the idea that we can simply afford to wave away all that revenue without recovering it elsewhere.
Mrs. Margaret Ewing rose—
Mr. Clarke: I give way to the hon. Lady, who is interested in the Scotch whisky industry.
Mrs. Ewing: The Chancellor will appreciate the importance of the industry to my constituency, which has more than 40 distilleries, in terms of direct and indirect employment. Essentially, I am concerned about how the Chancellor reconciles his decision to put 26p on a bottle of whisky with the reduction of 20p on a bottle of champagne. What kind of message will that send to the other members of the European Union, where 40 per cent. of our export market is based, when he argues for the reduction of discrimination against Scotch whisky?
Mr. Clarke: My statement last week put another 8p back on to sparkling wine, and that was in line with the way that we had based duty before. If one is scraping the barrel for arguments, the champagne thing is fun, but it is fairly irrelevant. The sparkling wines in question include champagne, but they also include many other sparkling wines that are manufactured in this country. The change about which so much fuss was made was a perfectly ordinary, common sense move to bring the duty on sparkling wines into line with that on fortified wines. There was no logical reason for different amounts. My corrigenda statement at the end of last week was to put another 8p on wines, which included Champagne.
The serious point about whisky is that I would have preferred to freeze duty. Scotch whisky is a major employer in the hon. Lady's constituency and in that part of Scotland; it is also one of our most successful industries. The Scotch whisky industry has been even more successful than the brewers in responding to pressures on the trade. It is a successful exporter and is building up its position in many important markets.
The best argument was made by the hon. Lady. In due course, when arguing about the approximation of duty, we shall encourage other countries not to discriminate against

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spirits in their pattern of duties, and perhaps to increase the duty on wine to reduce the distortion. This year, forced as I was to find the revenue, I have not been able to maintain the freeze, but I shall certainly address that key question in talks with our European partners against the background of the policy that I have described.
Mr. Quentin Davies: Does my right hon. and learned Friend agree that, whatever impact personal imports under the single market may have on excise duty or on the trade of off-licences and supermarkets, there is no reason why the brewing industry or the distillers should suffer? It is no more difficult to ship British beer from Burton on Trent or from London to a hypermarket in Calais than it is to ship beer from Strasbourg, Amsterdam or Copenhagen. There is therefore no reason why there should be a negative impact on the volume of production by British distillers and brewers.
Mr. Clarke: I might, with caution, try out that argument on a brewer, but my hon. Friend should bear in mind the position of off-licence retailers and others who have no such protection against the trade.
I turn to the duties on petrol and diesel, which also will not be welcomed by many right hon. and hon. Members. Again, it was quite impossible to raise the necessary revenue without making a further addition to duty on petrol and diesel over and above that which I had previously resolved to impose. Nevertheless, even with the moves we have made, which have good environmental consequences and are welcomed by the environmental lobbies, petrol remains cheaper in real terms than it was 10 years ago. After both increases in duty, unleaded petrol will still be cheaper in Britain than in most of the major economies of western Europe, including Germany, France and Italy.
Tobacco is subject to many of the arguments that I deployed earlier. We are caught in a dilemma.
Mr. Harry Greenway rose—
Mr. Clarke: I shall give way shortly to my hon. Friend, who has a constituency interest in the matter.
The Government are following a policy of raising taxation on tobacco to reduce consumption. That policy has been supported by hon. Members on both sides of the House for some time, so it is not possible to argue against the duty simply on the basis that it is damaging the tobacco industry. It is a positive act of policy to reduce sales and there is no point in shrinking away from it. However, it is never Government policy to damage British sales in favour of continental sales; therefore, the same point that I made about differing levels of duty on alcohol applies. Personally, I am in no doubt—and nor is my right hon. Friend the Secretary of State for Health—that European countries should follow our commendable health policy and raise their duties on tobacco to approximate with ours.
Mr. Harry Greenway rose—
Mr. Clarke: My hon. Friend has many constituents who work in the tobacco industry, so no doubt he has a point of view.
Mr. Greenway: I know that the Labour party spokesman wants to go much further than my right hon. and learned Friend, but does he not realise that cigarettes are not only being imported from France and Germany,
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where duty is much lower, but smuggled too? Does he accept that that means jobs are being exported from Britain? In Gallahers in Northholt, 204 jobs have been lost within the week. My constituents' jobs are being exported to other countries. They cannot accept that, and why should they?
Mr. Clarke: I am sorry to hear about the loss of jobs at Gallahers. As the economy is recovering so strongly, and new jobs are being created, I hope that his constituents do not have to wait too long before resuming work in other jobs. My hon. Friend would find it difficult to maintain that the loss of jobs is directly related to my statement last Thursday. I doubt whether that was the critical decision-making factor. It is also by no means easy to demonstrate that it was a result of smuggling; it is a result of changing habits. The point of taxation policy is in part to discourage smoking. My remarks on smuggling remain. We must tackle smuggling ever more effectively and keep up pressure on other Europeans to raise their duties.
Mr. D. N. Campbell-Savours: Will the Chancellor give way on that point?
Mr. Clarke: I must get on.
Mr. Campbell-Savours: I have waited patiently.
Mr. Clarke: Sooner or later, I shall have to refuse someone. I have not picked out the hon. Gentleman, but I shall certainly make him wait.
I have covered all the resolutions before the House bar one—the first resolution that the Opposition have sought to amend. I can tell from the amendments that they believe that they have read into the first resolution an intention to extend VAT to zero-rated goods. I hope that I am not cutting out a large part of the speech of the hon. Member for Dunfermline, East (Mr. Brown), but before he launches on that I should like to give him a reassurance and undertaking, as it looks like that when one first reads it.
The first resolution is a wholly technical resolution of a kind that has been tabled ever since VAT was introduced in Britain in 1972. It means merely that if, in the course of operating the duties on fuel at an intermediate level and the new ones I have announced—particularly those on fuel—it turns out that anomalies are creeping in and that the drafting is incorrect, that can be changed by order and would not require fresh primary legislation. I am advised that it is quite essential to the proper operation of a complicated tax such as VAT.
The argument has been made before; it is not original. If the hon. Gentleman pretends to read into it a tremendous intention to extend VAT to other zero-rated goods, I shall repeat the undertaking that has been given by all my predecessors since Tony Barber, because the drafting on the Order Paper is the same as that used by Labour Chancellors and not just by Conservative Chancellors. The Government have no intention and would never extend VAT to zero-rated goods without primary legislation. At the moment I have not thought about any future Budget and would not do so. To press the amendments, although they appear to be aimed at a serious political point, would impede the sensible operation of the tax and I hope that the Opposition will not do so.

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I hope that the Labour party will turn instead to taking the third opportunity to try to produce a macro-economic policy of its own. If it plans to vote against any of the resolutions, it must have some germ of an alternative idea in mind about how it would tackle the problems.
I do not wish to ask difficult questions for which the Opposition are not yet ready; I have only straightforward fundamental questions. Is the level of public borrowing too high or too low? Is the general level of taxation we are proposing too high or too low? If the Opposition are unable to answer those questions, they are unable to make a serious contribution to an economic debate.
I hope that we do not hear any more about loopholes. There were £10 billion worth last year and there are none this year. The windfall tax is based on the assumption that when and if a sale of the national grid goes ahead, one taxpayer might be exposed to a particular sum of money replacing a stream of revenue. I shall not go into that again, but at the moment the Shadow Chancellor is putting forward policies that are so shadowy as to be invisible.
This evening the House will vote in a responsible way for resolutions that will deal with the gap in the public finances and, far more important, with the key issue: to back the Government's economic policy which has put Britain on course for recovery.
These resolutions keep intact the economic policy of the Government. That policy is a successful economic policy and is sustaining growth and bringing down unemployment. It must be kept on the road. It is the only sensible economic policy on offer in the House and is strongly supported by the business and financial community. These resolutions are consistent with strong and decisive action, which will give us a powerful manufacturing industrial economy again. I commend the resolutions to the House.
5.9 pm
Mr. Gordon Brown: I beg to move amendment (a), in line 7, leave out "for the time being".
This second debate on the Budget, like the mini-Budget last Thursday, arises because the Chancellor got it wrong over VAT on fuel. He got it wrong by going ahead with it in the first place. He then got it wrong by refusing to listen to the representations that were made before the Budget. He got it wrong a third time by refusing to rethink even when the strength of opposition became clear.
Events have already shown how right we were to defeat the Government last Tuesday. If the Chancellor gets it wrong on an issue as crucial as VAT, why should anybody believe that he can get anything else right? He has already made his views clear about VAT. He wanted VAT on fuel at 17.5 per cent.—not next April but this April. He has voted for VAT on children's clothes. He favours a principle, as he told a constituent, of going even further, and wants to extend VAT to other goods as well. He said at a by-election that not to extend VAT to items, including food, transport, books, newspapers and children's clothes, was "an anomaly". Therefore, we will need more from the Chancellor than the assurances that he gave at the end of the debate, about existing legislation and statutory orders, before we believe that it is not his long-term plan to extend VAT to other items.
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I noticed when I raised the issue with the Chancellor this afternoon that, once again, he refused to give the promise that even the Prime Minister was prepared to give before the last election—that they would not extend VAT to those items.
Mrs. Jacqui Lait: I wonder whether the hon. Gentleman will confirm whether it is Labour party policy never to extend VAT to any of the zero-rated goods?
Mr. Brown: I have said on many occasions that it is not our proposal to do that. The question is whether the Chancellor will tell us his policy on these matters. The hon. Lady should think twice before she intervenes to ask about promises, because when she spoke to her constituents during the previous election, she said, "We need low taxes." She has been unable to deliver that, so perhaps an apology from her to her constituents would be in order before she proceeds to interrogate anybody else.
Mr. Kenneth Clarke rose
Mr. Brown: I shall give way to the Chancellor if he will answer the question that I put to him earlier. Will he repeat the promise that was made by the Prime Minister, that the Government would not extend VAT to food, children's clothes, books and newspapers, and transport? Will he repeat that promise, yes or no?
Mr. Clarke: That is a bit rich considering that the hon. Gentleman just ducked, with no great elegance, the question that was asked by my hon. Friend the Member for Hastings and Rye (Mrs. Lait). He said that his party has no proposals to extend VAT to those items. We have no proposals to do so. He makes extended and distorted use of quotations that I have never considered.
I have said for years that, if we went back and started again, there is a case to be made for having a lower rate of VAT and fewer exemptions. But I have had a policy. I have not extended things. I have had two Budgets. Will the hon. Gentleman give—as he is making so much of this—the guarantee for which my hon. Friend asked? Will he get up and say—he should not if he ever wants to be Chancellor—that he will never extend VAT to any of those goods?
Mr. Brown: I notice—[HON. MEMBERS: "Yes or no?"]—very clearly that the Chancellor has given something away this afternoon that he will live to regret. He has said that he will not give the guarantee that he will not extend VAT to food, children's clothes, books and newspapers, and transport. The Chancellor is now on record in the House of Commons as saying that he refuses to give that guarantee. This is a very revealing afternoon for the House, and I believe that, if the Prime Minister were sitting next to him, he would be very angry indeed that his statement had been contradicted by the Chancellor.
Mr. Richard Ottaway: Will the hon. Gentleman give way?
Mr. Brown: I shall give way once more, but then I must move on.
Mr. Ottaway: I thank the hon. Gentleman for giving way. He is particularly keen on telling people what they have pledged and what they have not in elections. Is he aware that his own election address in 1992 for Dunfermline, East contained the pledge that Labour

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would be tough and protect the environment? It also said that the polluter must pay. What is that if it is not a carbon tax? Is it not just the same as VAT on fuel?
Mr. Brown: Those are precisely the sort of proposals that we have been making—for example, the proposal for a landfill levy, which I notice that the Chancellor is now prepared to support. But before we leave the question of VAT, perhaps the Chancellor will answer one question. He gave a guarantee to the House only a few minutes ago that he would not extend the coverage of VAT other than by primary legislation. Will he therefore withdraw the VAT transport order?
Mr. Clarke: I have been answering questions all afternoon. The hon. Gentleman is answering none, but I am happy to answer questions in his speech as well, if he likes.
The extension of the VAT transport order was done partly under these resolutions and partly under the Finance Bill as well. The VAT zero rating on transport is designed to protect passenger transport. It has now been extended to air balloon rides, funfair rides, to things inside theme parks. This legislation covers anomalies of that kind, but in this case a combination of an order and, I think, measures in the Finance Bill has been used as well.
The hon. Gentleman knows perfectly well what we are talking about. He comes out with a litany about children's clothes, food, and so on, but he has refused to give a guarantee this afternoon that he will not extend VAT to those as well.
Mr. Brown: The Chancellor made a promise that lasted for about three and a half minutes—that he would never proceed with extending VAT other than by primary legislation. The VAT transport order was laid by the Chancellor. Will he withdraw it and put the measure in the Finance Bill so that we may have a proper debate on the matter, or will he dishonour yet another promise? I think that the House knows exactly where the Government stand on issues such as VAT.
We must look at the Budget as a whole and look at its effect on the living standards of people throughout this country.
Mr. Quentin Davies: Will the hon. Gentleman give way?
Mr. Brown: I shall give way if the hon. Gentleman wants to ask me something that I have been talking about in the past few minutes.
Mr. Davies: Indeed. Before the hon. Gentleman moves on to other subjects and tries to bury this issue, will he or will he not give a guarantee to the House this afternoon that he would not extend VAT if ever he were Chancellor?
Mr. Brown: We judge the Conservatives by their actions. The hon. Gentleman has the gall to come to the House this afternoon and talk about promises on taxation. What did he say to his electorate in Stamford and Spalding? He said:
"We are absolutely committed to continuing to bring down taxes."
Yet another promise has been broken by Conservative Members. [Interruption.]Conservative Members are clearly living up to the Maples memorandum this afternoon. They are behaving as though they want to
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disrupt the debate entirely, they are so embarrassed by the broken promises of two years' standing over the whole issue of taxation.
Mr. Nigel Evans: Answer the question.
Mr. Brown: The hon. Gentleman asks me to answer a question that the Chancellor will not answer. The Chancellor made a promise five minutes ago and broke it five minutes later.
I want to look at the issues affecting the Budget in relation to living standards. Let us look at how it affects the home owner. Let us look at the Budget overall. Horne owners are faced with mortgage rises that have already come through since September and are facing likely mortgage rises from decisions on interest rates that were announced last week. The Chancellor must justify and explain to the House why the very same home owners are also being hit by the withdrawal of mortgage tax relief and the imposition of a home insurance tax. We have seen even in the social security statement—at a time of growing insecurity in the jobs market, which has been recognised by surveys and opinion polls only this week—the withdrawal of support for mortgages when people are unemployed.
Home owners have been hit by this Budget, as they were by previous Budgets. They have been hit with interest rate rises, the withdrawal of mortgage tax relief and home insurance tax. As they will tell Conservative Members—no doubt Thursday's by-election in Dudley will serve as a starting point—unemployed people are now hit by the withdrawal of mortgage tax relief.
How has the Budget hit motorists? We have often heard the Chancellor defend an increase in the cost of petrol; but let us examine the overall cost to the motorist. The price of petrol has now risen twice, a car insurance tax is being introduced and vehicle excise duty is being increased. It is no wonder that motoring organisations express worries about people's ability to hold on to their cars.
Let us consider the cumulative effect of Budgets on widows. The starting point at which a widow paid tax used to be £99; now, as a result of the changes made by the Chancellor, it is £93. The Chancellor tells us that we should not worry about his decision to cut duty on champagne, but I believe that people will observe the contrast between his ability to cut champagne duty and his ability to tax widows at the same time.
The Chancellor also defended his measures in relation to beer and spirits this afternoon, saying that last Thursday he raised the tax on champagne. What, however, is the final result? Beer is up by 1 p and whisky by 26p, while champagne is down by 19p.
Mr. John Townend: Does the hon. Gentleman really think it sensible to levy a higher tax on a bottle of claret costing £25 than on a bottle of cheap Australian sparkling wine costing £3? The previous position was an illogical anomaly that the Chancellor has put right. It is ridiculous to make out that we are trying to benefit the wealthy by cutting the price of champagne.
Mr. Brown: That shows the difference in the priorities of the parties. I regard it as an anomaly that widows who used to start paying tax at £99 are now starting to pay it at £93. I think the hon. Gentleman would agree that, in a

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Budget that raised everyone's taxes, it was not a priority for the Chancellor to cut duty on champagne for people who have enough money to afford it.
Two weeks ago, the Chancellor said that he had "listened to the concerns" of industry. He said:
"No Chancellor can remain unmoved in the face of this".— [Official Report, 29 November 1994; Vol. 250, c. 1096.]
Let me ask the Chancellor and the Chief Secretary how many jobs they expect to be lost as a result of the rise in beer and whisky duties. If the Chancellor could not remain unmoved in the face of those concerns two weeks ago, will he now tell us how many jobs he expects to be lost?
The Chancellor presented a second argument. He said that he could have introduced no alternative measures that would not penalise middle or lower-income Britain. He gave us the impression that he had been as fair as possible. But what did Mr. John Spiers, of BESt Investment, say in the Financial Times only last week?
"If we had written it ourselves we could not have come up with a better Budget for the tax shelter industry."
Those are not my views; they are the expert views of people close to the industry, who do not usually speak highly of this aspect of Budgets.
Mr. Spiers went on:
"I cannot see why ever anyone should pay capital gains tax again."
Commenting on the Budget, the Financial Times said:
"The scale of the incentives dangled by the Chancellor suggests sponsors and venture capitalists will be queueing round the block to launch venture capital trusts."
That leads me to a statement issued by the journal of BESt Investment, entitled "Tax Shelter Service". The Chancellor had better be aware of the implications of the measures that he is asking us to approve. The company states:
"The Budget may have been regarded as boring … but for the tax shelter business it contained arguably the most exciting combination of measures ever seen. The Government is now offering up to 60 per cent. tax rebates on investments … Investors will have no less than four opportunities for sheltering tax … As a result we cannot see why anyone should choose to pay capital gains tax in future."
Why is all that happening? Why is the Chancellor's Budget leading to the biggest ever boost for the tax avoidance industry? Far from ending tax abuses, as the Chancellor implied he was doing in his speech last week, he has opened up many more. Far from dealing with the criticisms of executive share options that have been put to him—not least by the vice-chairman of the Conservative party—he has cost himself much more money, and in the process has introduced more tax shelters for the capital tax avoidance industry.
Mr. Kenneth Clarke rose—
Mr. Brown: I am happy to give way to the Chancellor, but I think he should explain why the tax shelter industry describes the Budget as the best boost that it has had for years.
Mr. Clarke: The hon. Gentleman keeps slipping between the words "tax shelter" and "tax abuse". What he describes are people trying to explain the tax advantages of investing in small, emerging, growing companies through the vehicle of venture capital trusts. It is new
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investment in new businesses and new jobs. It is absurd to describe those tax reliefs as a tax abuse; they are good for small industry and good for employment.
Mr. Brown: If the Chancellor were telling us the whole truth, he would mention the fact that he has extended the tax reliefs to the property industry. He has reopened all the abuses that made the closing down of the business expansion scheme necessary. Far from simply helping new manufacturing industry to get off the ground, as the Chancellor implies, the Budget—in two instances—extended the capital gains exemptions to the property industry. It is for that reason—the return of 60 per cent. tax relief, not the creation of jobs—that the tax avoidance industry is telling people about the great new opportunities that are available to them.
Last year, the Chancellor said that we would receive £1.3 billion from capital gains tax revenues. Now, in the Budget, he has downgraded the amount to £800 million. Despite all that he says about the boom in the economy, he has frozen the amount that he expects to receive next year at £800 million as well.
The Chancellor tells us that there is not a single alternative that he could consider, other than penalising middle and lower-income Britain, and that it would be wrong to end the tax privileges surrounding executive share options. In fact, the Chancellor's Budget has opened up even more opportunities for tax avoidance—opportunities available both to those who hold executive share options and to those who are prepared to avoid their capital gains tax liability throughout the 1990s and probably beyond.
I remind the Chancellor that it was not me alone who raised the question of capital gains tax abuses. The vice-chairman of the Conservative party put it thus:
"Although in the 1980s Conservative seemed to promise a classless society … the reality is now that the rich are getting richer on the backs of the rest who are getting poorer. Excessive pay packages especially in the privatised utilities cause real offence. Could we in future tax share options as income not capital gains and introduce some level of options above which tax would be charged as they rise in value not just when they are exercised?"
The Chancellor says that, by refusing to do that, he loses only £60 million. Indeed, he said in the House last week—the Chief Secretary nods—that the sum was only £50 million to £60 million. That is not an insubstantial amount; it could be used to defray the rising cost of dental treatment or eye tests, for instance. It could have given a better deal to many people who face tax rises. I do not see how the Chancellor can justify the loss—if it were so—of £60 million through this scheme. Even the Financial Times has said:
"the real joy of executive share options is that there is no risk of losing money."
The Association of British Insurers and the National Association of Pension Funds have said that the schemes may not be in the interests of shareholders, the public or employees. All the research that has been carried out recently shows that two thirds of the schemes do not have performance targets. The all-party Select Committee that examines these matters—its members come from both sides of the Chamber, but it is dominated by Conservative Members—criticised the schemes and commented that they rewarded short-term performance and not the long-term needs of the economy. Yet the Government have refused, even though it has cost £370 million on their own figures, to deal with the problem.

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If the Chancellor of the Exchequer examines carefully the Treasury's assumptions about the revenue that it loses as a result of executive share options—I do not believe that he has—he will find that the assumptions are wanting, and that the loss is substantially larger. Perhaps the Chief Secretary to the Treasury will do us the courtesy of responding to my arguments one by one when he replies later this evening.
The Chancellor of the Exchequer should understand that the estimated £60 million is based on some strange assumptions. Those who hold executive share options include Lord Young, Sir John Nott and other well-known Conservatives. It is assumed that those men, who are sophisticated in terms of financial markets, will buy shares other than at the best time for share values. It is then assumed that they will sell just about every share on the day that they buy them. It is further assumed that most of the capital gains tax exemption has been used in other ways and is not available to be set against share options. The next assumption is that none of the advantage is transferred to wives or spouses.
Mr. Kenneth Clarke: Will the hon. Gentleman give way?
Mr. Brown: I shall give way if the right hon. and learned Gentleman can correct what I have just said.
Mr. Clarke: I am advised that the figure that I used includes the possibility of transfers to spouses.
Mr. Brown: Why is it not stated in the assumptions underlying the proposals, especially as the Chancellor of the Exchequer promised at the beginning of the year that all the assumptions—the promise was based on a freedom-of-information gesture—would be explained to the House? In fact, the necessary statement has not been made. That is why we have a figure as low as £60 million. The Chancellor has been wrongly advised.
Why is it also assumed that men or women with executive share options will fail to perceive the advantage of defraying up to £200,000 of their capital tax liability by using the various schemes that the Chancellor has over time introduced, or by continuing to use the reinvestment relief that is available? It seems that the assumption behind the Treasury calculations is that the business acumen, flair and entrepreneurial spirit for which share option holders have been praised by the Government desert them on the day that they get hold of an executive share option. The Treasury's £60 million is based on a guesstimate that share option holders will act irrationally and against their interests when it comes to dealing with their own finances.
The main tax planning tool is the annual capital gains exemption—the spreading of disposals to wives. At the same time, it is assumed that shares will be bought 'when it is not the best time to buy them and when they do not represent best value. The Government's assumption will lose the Treasury substantial moneys.
As I have said, Lord Young has executive share options. He could pick up £1.1 million in profit on share options. Let us assume that he is granted them and decides not to sell in one go. He can then spread his capital gains tax liability over 10 or more years. He can transfer some of the shares to his spouse. He could take up a venture capital trust now. He could secure reinvestment relief and invest in property. As I have said, he could use up all his
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capital gains tax liability by means of such schemes. There is no reason why he or anyone else around him should have to pay CGT. None of these factors is properly taken into account in the Treasury's calculations.
If a few men in the privatised utilities can set against their share option liabilities—they run into £3 million for three top directors of PowerGen and £1 million for the top man at National Power—the various schemes to which I have referred, the moneys that will be received as a result of executive share options will be far less than assumed. The Government have not calculated the cost to the nation properly; they have not been serious about tackling the abuses which have arisen; and they are unaware of the anger throughout the country at the fact that they are prepared to penalise middle and lower-income Britain while allowing those who are extremely rich to go ahead and cash in their executive share options without paying a proper amount of tax.
Mr. Nick Hawkins: Does the hon. Gentleman agree with his departing colleague, the right hon. Member for Islwyn (Mr. Kinnock), that those who fall into the so-called category of the undeserving rich are those earning less than £60,000 a year—I ask the question in the light of the hon. Gentleman's recent remarks—or does he feel that the figure should be pitched a little lower than that?
Mr. Brown: The hon. Gentleman has misread the remarks of my right hon. Friend the Member for Islwyn. I talked to my right hon. Friend about those remarks on the day he made them. He never mentioned "undeserving rich". He and I have made a distinction between those who create wealth, start businesses and provide jobs—they deserve rewards for doing so—and others who under the Government have been given, because of monopoly positions or other privileges accorded to them, unfair rewards that cannot be justified in any taxation arrangements that the Government may make for them. When a millionaire can avoid paying any income tax, there is something extremely wrong with the taxation system. The hon. Gentleman should put his question to the Chancellor of the Exchequer, not to me.
Mr. James Clappison: Will the hon. Gentleman give way?
Mr. Brown: I shall give way once more and then I wish to conclude my remarks.
Mr. Clappison: I am grateful to the hon. Gentleman, especially as he has said that he wants to bring his remarks to an end.
Perhaps the hon. Gentleman will consider his overall macro-economic strategy and say something about borrowing. Does he accept the Government's approach to borrowing, or would he be prepared to accept a higher level of borrowing? Which is it?
Mr. Brown: I have said on many occasions that the aim of policy that is directed towards the public sector borrowing requirement should be to enable us to fund consumption. Investment is justified in certain circumstances, as any company or family would invest. The golden rule to which I would adhere is that consumption should be funded over the cycle by revenues. In my view, investment justifies borrowing in certain circumstances. That is a far more prudent policy than the

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one that the Government pursued over the 1991–1993 period. Either they misled us about the real position of the economy or they have been entirely incompetent in implementing their policies.
The executive share option issue will not go away. We heard today that Mr. Maurice Saatchi of Saatchi and Saatchi is proposing at some stage to cash in share options that would be worth about £5 million. He obviously meant it when he said words to this effect, "Don't let Labour ruin it." I refer to the slogan for the 1987 election. The tax bombshell was for others; the tax bonanza was for him.
For people like Mr. Saatchi and those in the privatised utilities, there is a national lottery that does not involve scouring the country looking for the winner. Winners are known in advance. By naming those who occupy the boardrooms of privatised utilities, we can predict with precision those who are making the millions. It is a lottery in which the participants do not win once: they win every year under the Government. Indeed, many people have been winning for 15 years. They are the happy few. Many of them are part of a band of tax avoiders under a Cabinet whose members make promises to take good care of them.
We propose that the Government should consider levying a windfall tax on utilities. The Chancellor of the Exchequer said that he would not consider the proposal in detail because he rejected the concept of a windfall tax, despite the fact that one had been imposed on the banks by a Conservative Government in 1981.
Let us consider the facts; the House should be aware of them. Utilities have made profits of £45 billion during the recession, doubling their profits. The profits of electricity units increased by 250 per cent. Profits within the water industry have virtually doubled to £1.8 billion. National Power has trebled its profits during the same period. PowerGen has doubled its profits. In the past few days, it has been reported that Northern's dividends have increased in value by 30 per cent. while Eastern's and Southern's have increased by 25 per cent. and 24 per cent. respectively. The business is so lucrative that many electricity companies are buying back their own shares and making extra payments in dividends.
Is it not obvious—
Mr. Nick Hawkins: They should cut prices.
Mr. Brown: The price cuts will be coming from next year. We must deal with the situation that has arisen this year and last year as a result of the excess profits that have been made.
Mr. Peter Rost, a former Conservative Member, who now represents the Major Energy Users Council, said:
"The right course is for the taxpayer to benefit. It is right to claim back the money and use it to pay for policies that benefit the economy as a whole."
He speaks for a substantial body of opinion. Artificially created profits have resulted from the monopoly position that the Government have given to industries through privatisation and their profits have doubled during the recession when most ordinary industrial companies had no profits. That should be re-examined.
The Chancellor of the Exchequer should consider the position in relation to the national grid. Will he confirm that, for the purposes of sale, the national grid was valued
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at £1 billion or less when it was sold to the electricity companies and that it is now valued at nearly £4 billion—some people say £5 billion—that a windfall profit will be made as a result of its demerger, that the Government have a golden share in the national grid which they should use to extract the best benefit for the country, and that the electricity companies are even resisting a scheme that would give a substantial amount of the money to their customers? Is it not right that the public should share in the benefit from the windfall profit, which has accrued not because of the companies' good management but because the Government gifted them the resource?
If the Chancellor rejects the idea of a windfall tax, let him consider the comments of Sir Geoffrey Howe in 1981, who said that the business sector—this was his justification for the windfall tax—had largely been protected from the effects of recession. That has happened in relation to the utilities because of the monopoly position. When the Chief Secretary to the Treasury argues against that view this evening, he will be arguing against Lady Thatcher's position when a Conservative Government were in power. Sir Geoffrey Howe said that profits
"have increased sharply, both absolutely and by contrast with the experience of most other businesses."
That has happened in relation to the utilities. He said that he could not avoid the conclusion that he should require banks
"to make a special fiscal contribution."—[Official Report, 10 March 1981; Vol. 1000, c. 772–73.1]
If it was right for the banks with windfall profits to make a contribution, it is surely right for the utilities to do so, especially when we know about the profits to be made by the national grid.
The Chancellor says that he knows nothing about the taxation benefit that may accrue, but will he confirm that, the day after the Budget, a week before his mini-Budget, the President of the Board of Trade met the electricity companies to discuss the windfall that should come to the Treasury once the sale had taken place? The Chancellor looks as if he knows nothing about it. He should check what sources of revenue are available before he introduces new taxes on ordinary people.
The Chancellor prides himself on being tough on ambulance men, tough on prison officers, hard on the people that he has been up against, including teachers, and hard on doctors; but when it comes to the utilities and to people at the very top with substantial sums of money, he is a soft touch, and the Budget is increasingly viewed as unfair.
Let us apply the fairness test to the Budget. It is clear that income tax cuts were made between 1979 and 1992 for people at the very top—the top 1 per cent. received 30 per cent. of tax cuts and the top 5 per cent. received nearly 50 per cent. of tax cuts. However, the top 5 per cent. do not pay 50 per cent. of tax rises; at best estimates, they pay only about 10 per cent. That is not a fair approach, given the substantial benefits that they received throughout the 1980s, which even Mr. Maples has been forced to acknowledge.
What is the strategy behind the Budget statement and the follow-up statement that had to be made last Thursday? It is the only strategy that the Conservative party has left for the next election. It is not an economic strategy but simply an election strategy. There are no taxes that the Government will not be prepared to increase

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and no suffering that they will not be prepared to impose to create the scope for what they think is the election-winning card—a tax cut next year, running into an election next year or the year after. That is how the Prime Minister in particular views the position.
Let me tell the Chancellor the facts about taxation which will confront the electorate in 1996 or 1997. In 1992, £37 billion was paid in VAT. Next year, it will be £48 billion. Despite all the promises at the previous election, the amount taken in VAT has risen by £11 billion and much of that amount arises from increases announced by the Government.
The Chancellor went to the electorate with a pledge that he would lower income tax. Let us consider what has happened in relation to income tax and national insurance. In 1992, total income tax and national insurance paid amounted to £72 billion. Next year, it will amount to £90 billion. In 1992, £57 billion was paid in income lax. By next year, it will be £70 billion. Even if the Government were able to cut the basic rate of income tax by 5p in the pound, the overall tax bill would be higher in 1996 and 1997 than in 1992 when the election was fought.
As a result of all the tax rises that have taken place, next year the British people will pay £50 billion more in taxation than they paid in the 1990–1992 period. Even a cut of 5p in the basic rate of income tax will not undo the damage that is equivalent, as the Chancellor admits, to 7p in the pound. That is why Conservatives will be embarrassed in their explanations to the electorate in the next election campaign.
When we face the next election, we will have tax rises that have been real and lasting, that have happened all the time and that have hit the many most. That should be compared with tax cuts that people will realise are token, an attempt at a pre-electoral bribe and beneficial to the few most. An election year tax cut, contrived to obscure relentless increases in taxation, year after year, will not impress the British people, especially when it is clear from what we have said today that the biggest beneficiaries of the Budget and the mini-Budget statement will be people at the top who are able to shelter substantial capital gains through tax avoidance.
Where the Chancellor could have been fair, he has been unfair. Where he could have taxed excesses at the top, he has taxed the daily purchases of the vast majority. Where he could have closed tax shelters, he has opened them up. He has taxed beer but cut tax on champagne. He has even introduced new taxation on ordinary savers but given millionaires huge windfall help. A tiny minority of the people stand to benefit most as a result to his measures.
These are not the Budget measures of a caring or competent Government. These are the Budget measures of a Government who are out of touch with the British people. The House, by its actions and speaking on behalf of the public, stopped VAT on domestic fuel rising to 17.5 per cent. It is time for the House and the people of this country to stop the Government. What the people of Dudley, West will say on Thursday, the whole country will say at the earliest possible opportunity, and the Government will go.
5.47 pm
Mr. John Biffen: I apologise to the House and, more particularly, to the Front-Bench spokesmen, that I have an unbreakable commitment that
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will keep me from the bulk of the debate, including the winding-up speeches. I assure the Whip, however, that I shall be here for the vote and I shall, I hope, compensate for my bad behaviour by making a short speech.
I always enjoy these occasions, not least because my right hon. and learned Friend the Chancellor of the Exchequer clearly revels in these exchanges. He revels in that good-natured bruising, rather like Brian Clough in happier days, as he berates his opponents and even, in more hilarious moments, his friends. I thought that I should get in with an early bid for his favour by saying how much I welcome his decision to present the Budget resolutions. It would have been ill-advised to take the implied advice of the right hon. Member for Ashton-under-Lyne (Mr. Sheldon) and to allow the elasticity of the public sector borrowing requirement to cope with the statistical problem.
Similarly, I welcome my right hon. and learned Friend's decision not to place any further pressure on public spending, partly because it is often an illusory gesture that only rephases public spending commitments, but also because the local government settlement this year is extremely stringent.
I should like to reflect on the unique nature of the corrigendum, as my right hon. and learned Friend called it, to the original Budget statement. It has come about because of a taxpayers' revolt. Taxpayers did not exactly take to the streets, but they nevertheless made it known to Members of Parliament in the most powerful and genuine way imaginable that VAT on domestic fuel was inequitable and challenged a great many of the inherent value judgments about our taxation priorities. That is not a wholly novel experience, because almost exactly the same thing happened with the community charge.
My mind strayed back to the happy days before the 1979 general election, when Tory policy on taxation and public spending was reinforced by the experience of proposition 13 in California, where Howard Jarvis and Paul Gann pioneered a revolt on the streets to enforce tax discipline and, subsequently, public spending discipline. The movement that we are experiencing is subtly different.
There is no doubt that the pressures being put on us are against any disturbance of our inherited tax pattern. The community charge was a new tax and the extension of VAT to domestic fuel was an innovation involving an existing tax, but it was deemed to go beyond the original social objectives of VAT, which is what I shall dwell on for a moment.
I understand that my right hon. and learned Friend the Chancellor did not have much time to manoeuvre, but he responded to last week's events by reinforcing all the old traditional taxes. We have in fact diverged fractionally from our European Union partners as a result of this exercise, but I dare say that there will not be many damp handkerchiefs on that account.
The House must recognise the disciplines on it that are implicit in the strong public reaction against further taxation, especially in certain respects. The hon. Member for Dumfermline, East (Mr. Brown) is perfectly right to take up the cudgels against the extension of VAT. My right hon. and learned Friend the Chancellor responded fraternally, but it was a bit of a custard-pie exercise. I did not think that it was altogether real politics. Is it seriously supposed that any party wants to extend VAT to food, transport or housing? The hon. Member for Dumfermline,

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East points across the Chamber, but I would love to know what he thinks in his heart is the difference between his conditional stance and that of my right hon. and learned Friend.
Those are bound to be conditional stances because we do not conduct our fiscal policy in a vacuum. It is conducted with the advice, guidance and nudging of our European Union partners—and with the negotiating skills of which my right hon. and learned Friend feels that he is possessed. That brings us into a genuine confrontation with our European partners, not necessarily a bitter confrontation, but one that the House must recognise. Their taxation policies proceed from quite different social and economic backgrounds from ours.
We have always had a cheap food policy. Historically, it was based on free trade, but there are now social considerations in deciding to have a zero rate on food and travel and, until recently, on fuel. We know what storms are released when one begins to disturb that social pattern. It is a matter of great anxiety for Chancellors and shadow Chancellors that their tax manoeuvres are constrained in that way, but our experience of the past few months is that they are so constrained.
There is a European context to this debate. That is not the paranoia of a Tory Euro-sceptic, but the calm reflection of someone who tries to be tolerably well informed about what is happening around and about. One cannot talk about convergence, cohesion or a single currency without accepting that they have implications for a fiscal pattern that will have broad comparability across the European Union.
I watched Opposition Members this afternoon with an almost missionary zeal and I have to ask what the parliamentary Labour party's position is on Europe, or that of Labour Back Benchers. Originally I would have said, and will still say, that they are today's Trappists and tomorrow's sceptics. There is not a significant element in the Labour party that would trade in our present taxation pattern and social objectives expressed in our low or zero rates of tax over wider areas of the Community. For them, there is no merit in that. There may not be much merit in it for many others, but it becomes politically impossible to put taxes such as VAT on food, travel and housing if it is seen as part of a deal inspired by external agreement and force.
Dr. John Reid: Surely the real comparison is not between the United Kingdom and other countries, but between the total taxation levied on the typical individual or family in Britain when the Government came to power and that levied 15 years later. As my hon. Friend the Member for Dumfermline, East (Mr. Brown) constantly points out, despite the fact that a central plank of the Government's programme was to reduce taxation, the average share of the typical family's gross income that goes in tax has gone up in 15 years from just over 32 per cent. to 36 per cent. That is the real comparison.
Mr. Biffen: I am happy to acknowledge the underlying shift in public spending that has occurred under the Conservative Government. I suspect that the hon. Gentleman will find that roughly the same has happened in other western European countries, because in many ways they have exactly the same social characteristics as
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us. They have the same population structures and the same demands from the elderly and the young, which all make for a powerful spending base for the Government.
My point is that we have come to finance that spending in accordance with our past social and economic judgments as to what were acceptable balances of taxation. We shall not find it easy to move away from that which will inevitably bring us into conflict with other economies that have different taxation patterns but which requires movement on our part in the light of common commitments within the European Union.
My thoughts on the matter were given a particular focus by The Times on Monday. At the Essen summit meeting, Mr. Kohl said that the Prime Minister's Euro-sceptic critics would be
"swept away by the wind of history, as they deserve".
It is nice to be told to hitch up one's Lederhosen and get marching into the future, but it is not like that. The social and economic judgments that have created our tax policy and structure came about because our constituents put pressure on their Members of Parliament who, in due course, determined the system that we now have. It is not one that can be easily mortgaged to outside interests, and nor should it be.
5.58 pm
Mr. Malcolm Bruce: I always enjoy following the right hon. Member for Shropshire, North (Mr. Biffen), whose contributions are nothing if not individual. However, it is important to put it on record that this particular tax change was an entirely self-inflicted wound for the Government and did not originate in Brussels.
It is extraordinary that the turntable has revolved to such an extent in two weeks. We were told initially that the extension of value added tax on fuel was absolutely crucial to the Government's Budget requirements and that the £1.5 billion revenue that it would raise was irreplaceable but, within a fortnight, the Government came up with alternative measures and settled for almost half of what they had said was absolutely essential. They have settled for £750 million to £800 million instead of £1.5 billion.
We were also told that if the House of Commons were so foolish as to vote down the extension of VAT, it would have a catastrophic effect on interest rates, which would rise by 2 to 3 per cent. The Chancellor may, of course, have been simply trying to protect himself from what he saw as the future effect of his current economic policy. But, so far, there is no sign that any such emergency increase is anywhere in the wind.
Indeed, the Governor of the Bank of England, giving evidence to the Treasury and Civil Service Select Committee, of which I am a member, made it clear that, as far as he was concerned, although the outcome of the vote may have affected the timing of the increase—at his request, the meeting was brought forward to 8.45 am as opposed to 9.30 am—the increase was related to the overall economic situation and his judgment of what was required at the time and had nothing whatever to do with the changed circumstances resulting from the vote.
Just for the record, it was interesting that the Chancellor indicated that he decided to increase interest rates. Of course, technically that is absolutely true, but the Governor of the Bank of England made it clear that the

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increase was at the Governor's request. So there may have been a slight difference in perception of exactly who was making the decision.
The right hon. Member for Shropshire, North made an interesting point about taxation and the distribution and balance of taxation, which had not been made before in the debate. The Government and the Conservative party ought to address it. When Conservative Members set out a policy of cutting income tax in 1979, many naive souls thought that they meant just that; nothing else. Some people thought that if they voted Conservative, they would pay less income tax. Hooray! Hallelujah! Reassuring speeches continued throughout the past 15 years saying that that would be achieved without any cuts in education or health. The Conservatives said that there would be painful spending cuts in general, but when it came to the specifics, Ministers were always ready at the Dispatch Box to say that social security spending was being protected, health spending was being protected and education spending was being protected.
That was, of course, a fantasy world. The standard rate of income tax was reduced, but that reduction was more than compensated for in other taxes elsewhere, which fell more unevenly and more unfairly. The intervention of the hon. Member for Motherwell, North (Dr. Reid) was more about the burden that has fallen on the average family when it calculates its total tax payment than about the deductions at source on its income.
Mr. Nigel Evans: Is the hon. Gentleman trying to say that the Government tried to deceive the electorate by saying that income tax would come down, but that any shortfall would not have to be made up from expenditure taxes? That is not true. The hon. Gentleman must remember that we fought those general elections in that period on a manifesto which said that we would switch taxes away from income tax to expenditure taxes. That is exactly what we have done.
Mr. Bruce: I seem to recall that Lord Howe, as he now is, said that he had no intention, when challenged, of doubling the rate of VAT. Of course, he was right, since it has risen from 8 per cent. to 17.5 per cent. That statement was specific. Indeed, when pressed at the last election, the Prime Minister said, in a formula that we all now recognise, that the Conservatives had no plans to increase taxes. That phrase means, of course, that they will do whatever they please as and when the time arises. However, the public have learn to understand that formula.
When the Chancellor made his second Budget speech, I made the point that he seemed absolutely determined to ensure that he got the revenue for which he settled from the most painful and irritating taxes on consumers, which they would really feel. I described that as "the politics of pique". I believe that it is just that. I find it extraordinary that the Chancellor could have found the money in other ways, causing less irritation and, indeed, less inflationary pressure, to which I shall return, yet chose not to. In fact, in his Budget, he gave away just over £1 billion in tax reductions, which he clearly decided were more urgent and more important than responding to the public demand not to extend VAT on fuel.
Certainly, quite a number of those tax changes were not urgent, or required or necessary to any strategy, public or private, which had been declared or communicated to the electorate. If the Chancellor had been in touch at all with
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public opinion, he would have recognised that he had room to manoeuvre, and could have made a virtue of not going ahead with the second tranche and saved the Government from the embarrassment of being defeated in the House.
I agree that the Government's defeat in the House of Commons has had a beneficial effect on the public's belief that the House, perhaps, for a change, has some real control over the Executive. However, the Chancellor has done nothing to improve the credibility of the Government, of which he is a member. Indeed, he could have retrieved a little of that credibility if he had been only a little more sensitive and a little more in touch.
The pique has gone into taxes on drink and petrol. The Chancellor tried to say that it was all the Opposition's fault. From the Liberal Democrats' point of view, all I can say is that we clearly identified alternatives which would have provided the money that he now says is necessary and which would not have caused the irritation and inflationary pressure.
When I questioned the Chancellor in his opening speech on that inflationary pressure, he said—perhaps it was an understandable answer—that the new tax changes were slightly less inflationary than the extension of VAT on fuel. My understanding is that VAT on fuel would have put 0.4 per cent. on the retail prices index, and the subsequent changes announced will put 0.3 per cent. on the RPI. However, when we are working with inflation levels of 2 per cent. or thereabouts, those increases have significant impact, which one would have thought that the Chancellor would wish to take on board.
Of course, 0.1 per cent. on the retail prices index, as, indeed, the Chief Secretary to the Treasury was telling the Treasury and Civil Service Select Committee yesterday, has an immediate effect on the uprating of social security benefits. From reading the Chancellor's statement, I understand that social security charges rise by £160 million for every 0.1 per cent. on the retail prices index. In those circumstances, I put it to the Chancellor that, if he had not sought to get that money from putting up taxes at all, he would saved himself more than £600 million in social security uprating requirements. It seems strange that he did not take that opportunity.
I want to address the particular point of the extra duty on drink. A serious industrial issue arises, which the Chancellor has acknowledged and accepted. Indeed, I welcomed his response to the hon. Member for Moray (Mrs. Ewing), which implied that he was prepared to look at the issue again to see whether there could be an adjustment in the distribution of drink taxes that would be beneficial to the whisky industry and, incidentally, I suppose, to gin makers as well. The Chancellor said on 29 November that his reason for not putting duty on drink was that he recognised the industrial issue and the concerns over smuggling. He said:
"No Chancellor can remain unmoved in the face of this".— [Official Report, 29 November 1994; Vol. 250, c. 1096.]
Having been moved then, a week later he had moved right back again. He has put pressure on the industry in ways that most of us who have a direct interest in the health of the Scotch whisky industry cannot understand. We have distilleries in our constituencies and therefore a real understanding of the industry's difficulty in the face of tax changes, which has been acknowledged in the past two Budgets.

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Wine is relatively less taxed than whisky. With the greatest respect to a few vineyards in the south of England, wine is not one of the United Kingdom's great beverages that we produce in substantial quantities and not one of our great industries. On the other hand, Scotch whisky has a global market in which we are pre-eminent. It is clearly acknowledged by the industry that its health in the home market is a major determinant of its continuing ability to sustain a healthy export market. If the Chancellor were determined to take his money from alcohol, he should have gone for the wine market rather than for the whisky industry.
I find it puzzling that the Chancellor seems to be more concerned about the sensitivities of the wine and champagne industries, which are not British—we do not make those products in significant quantities—and rather less concerned about a major home-grown industry. I hope that he will address that concern in a radical fashion, which will give the industry some confidence and optimism in its future regime.
I am not alone in that view. The Institute for Fiscal Studies, referring to that point, stated:
"If the relevant measure of 'sin' is the alcoholic content of the drink, then there may be an argument for narrowing the 'tax per litre of alcohol' gap between spirits, and wines and beers. This would have the added benefit of lessening the current discrimination against a largely domestically produced good."
I hope that the Chancellor will consider that recommendation seriously, because it would be extremely welcome. I take his response to the hon. Member for Moray as a sign that he might be prepared to do that.
The increase in tobacco duty seems to be widely recognised as an area in respect of which there is a clear and unarguable health problem and where tax is a reasonable way of dealing with that problem. However, in the Liberal Democrat alternative Budget, we would have used the money specifically for the national health service.
We are particularly cross about the petrol tax. The Government do not seem to have a strategy for transport. The lead story in The Guardian today refers to the completely shambolic state of railway privatisation and the lack of a transport strategy. People in rural areas know that we do not have the potential for significant public transport development. As a consequence, the Government have simply increased the cost of using a car, particularly in rural areas, without a corresponding reduction elsewhere.
The Liberal Democrats believe that the Government should have cut vehicle excise duty, at least on small fuel-efficient cars. That would have reduced the tax on car ownership. As a result of that, one could have justified increasing tax on petrol so that that was a tax on use rather than on ownership. Increasing petrol tax while increasing vehicle excise duty imposes a burden with no compensation for people living in rural areas.
The Chancellor could have found the money in other ways. Indeed, I sent him a letter in which I enclosed my suggestions for raising that money. At least £600 million worth of tax cuts in the Chancellor's original Budget were unnecessary. The savings in respect of social security uprating by not including it in taxes would have been about £600 million. There were other areas where waste
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could have been eliminated in Departments, and that would have provided more revenue than the Chancellor has raised.
Perhaps the Chief Secretary to the Treasury would care to answer a question to which I have not received a satisfactory answer. He suggested to me yesterday that there was no way of cutting public expenditure in the current year once the Budget is set. I do not accept that it is not possible on procurement strategies, about which the Chief Secretary knows something, to say that, as the inflation outturn is better than expected, one is looking for additional savings to come back. I do not believe that that could not or should not happen.
I also want to know why the Government have done nothing about the more than £500 million that they are spending on consultants when the civil service analysis suggests that they have produced only £10 million of material benefit. That is clearly an area in respect of which there is identifiable waste inside and outside the Government.
For the benefit of the House and the Chancellor, I say that Liberal Democrats accept the need for a disciplined approach to budgeting. The Chancellor wanted to know what level of borrowing is acceptable and whether it was too high or too low. We have been working on the convergence criteria as a reasonable base to work towards. Three per cent. of gross domestic product is about £22 billion.
When we approached our budgetary exercise this year, we were quite clear that as the public sector borrowing requirement was well above that level, we could not justify an increase in borrowing and our Budget was calculated within that framework. I hope that the Government will acknowledge that we have accepted that discipline and that we have included it in our calculations. As the finances improve, we shall be able to select different priorities and people will be able to debate the choices. However, in the present climate, the Government have left us with very little room for manoeuvre, although I believe that we have found some quite creative ways of manoeuvring.
In his response to me the other day, the Chancellor said that our suggestion for taxing benefits in kind that are paid to employers on employers' national insurance charges was administratively impossible. I have checked that and, frankly, the Chancellor was talking absolute nonsense. That is a perfectly routine matter.
The Chancellor knows perfectly well that, as the threshold has never been increased in living memory above £8,500 a year, and as form P11D is required for everyone who earns more than £8,500 a year, it is simply a matter of ensuring that benefits in kind are declared and that the tax is calculated. It is nonsense to suggest that that cannot be done.
The Government have rushed into a situation where they simply did not need to create such pain. They have caused the maximum amount of pain for the minimum amount of gain. That is a rather churlish exercise, which I believe was motivated by pique. It ignores many of the arguments that the Government had previously put forward.

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That point has been noted outside this place. Roger Bootle of the Hong Kong and Shanghai Banking Corporation—which includes the Midland bank—has written:
"The Chancellor seems to have missed a trick. He surely could have raised the necessary money without increasing excise duties at all‖thereby saving a full 0.4 per cent. on the RPI. This would have helped the battle against inflation directly and would have minimised the danger of an increase in wage inflation. In addition, it would have helped to reduce public expenditure, not least on benefits which are tied to the RPI. It seems particularly odd to target alcoholic drinks which the Chancellor ostentatiously left alone in his Budget"—
except for the cut in champagne. The City, like me, believes that the Chancellor has created irritation for no purpose.
Many of us are left with the belief that the Government have acted deliberately to try to get the message across to people that they had to increase taxes and that the Opposition forced them to raise those unpopular taxes. The truth is that the Government imposed those taxes on themselves. They have created the situation for themselves. They had enough disciplined means operating within their own constraints for raising such taxes. The Government are trying to get their hands on revenue so that they can give it back to people later and hope that they will be persuaded that that is great generosity resulting from the success of a Conservative Government.
Given that the Chief Secretary has already made it clear that the tax increases of the past two years were necessary and justified because of the potential borrowing requirement of £50 billion, will he tell us what level borrowing would have to be reduced to, to justify tax cuts, or at least will he tell us what the criteria would be to determine whether tax cuts were justified?
The House and the country are entitled to expect that the Government's argument that required tax increases should be the same argument that justifies tax cuts. If the Government have not been able to create the economic performance to justify that, they should not introduce cuts imprudently for purely political reasons when the economy cannot stand such cuts. If the Government are prepared to lecture Opposition parties about discipline, I hope that they will accept the constraints that their own discipline imposes on them.
6.18 pm
Mr. Roger Sims: I preface my remarks by declaring an interest as parliamentary adviser to the Scotch Whisky Association. I shall elaborate on some of the points made by the hon. Member for Gordon (Mr. Bruce) in connection with the industry.
I have never been a great enthusiast for VAT on fuel, but given the need for additional revenue I understand why my right hon. Friend the Member for Kingston upon Thames (Mr. Lamont) felt justified in introducing it. There is a perfectly valid argument to be made for it, not least that VAT on fuel applies in most European Union countries. Of course, in the case of most goods and services which attract VAT, the consumer can choose whether to purchase them. Fuel is a necessity.
That is not an argument against imposing VAT on fuel, but it is self-evident that it would be necessary to protect from its impact those on low incomes, particularly pensioners and others on social security benefits. I was one of several hon. Members who voiced concern on that
822
score when the VAT proposals were announced in April 1993. I am bound to say that I was astonished that the need for a package of compensation was not recognised by Ministers and announced at the time of the April 1993 Budget, or at least soon after it. Instead, it was not until November last year that detailed proposals were announced. It was not surprising, therefore, that during those six or seven months a campaign against the tax built up a substantial head of steam. The campaign was never effectively countered, with the outcome that we saw a week ago—a case, I fear, of a defendable policy poorly presented.
Despite the fact that the first stage of VAT and the first stage of the compensation package were already operative, the House decided last week not to implement the second stage. That seemed to be an illogical, if not perverse, decision. However, the decision was clear, and my right hon. and learned Friend the Chancellor was right to accept it—indeed, he could not do otherwise. He was then forced to find alternative sources of revenue, and he spelled out the various possibilities that were open to him last Thursday and, to some extent, again today, and gave us his decisions.
The increase in respect of petrol is clearly unwelcome, but it is a well established source of revenue and should procure what the Chancellor wants. The House will not be surprised to know that I welcome the increase in tobacco duty. It is also a well established source of revenue and again should produce what my right hon. and learned Friend wants. I hope, too, that it will play a part in persuading smokers to reduce their consumption and in dissuading those who might be tempted to take up the habit from doing so. I am particularly concerned about the incidence of smoking among young girls.
If people choose to smoke, they should be free to do so, provided that they do not cause offence to others. However, given what we know of the effects of smoking, it is surely the duty of Her Majesty's Government to take every possible step to discourage the habit. It is clearly established that price is a factor, especially among the young.
Mr. Ottaway: My hon. Friend says that smoking should not be encouraged and refers to its detrimental effect. He says that the Government should intervene where relevant. I hope that my hon. Friend will not go as far as consultants at the Mayday university hospital in Croydon, who refuse to treat patients who habitually smoke. After all, they are civil servants whose duty is to serve the community and not to dictate the terms on which they are prepared to do so.
Mr. Sims: My hon. Friend the Member for Croydon, South (Mr. Ottaway) tempts me on that issue, not least because the Health Select Committee, of which I am a member, is currently considering priority setting and where funds should be most appropriately used. Much as I would like to launch into a dissertation on that interesting matter, you would rightly rule me out of order, Madam Deputy Speaker, but I certainly would not endorse the action that my hon. Friend has described.
Mrs. Lait: As my hon. Friend knows, I share many of his views about a policy of high taxation acting as an effective deterrent against smoking. Will my hon. Friend share his thoughts on the availability of cheap cigarettes,

823
particularly to the young market, through illegal importation? Does my hon. Friend agree that that undermines our policy of high taxation?
Mr. Sims: Naturally I do, and I am very concerned about that matter. It must be tackled. We cannot let it continue. There are various other ways in which Government policy could reduce the incidence of smoking. For instance, I would like a more robust approach to tobacco advertising. Again, however, if I launched into that subject, I might try your patience, Madam Deputy Speaker.
The increased duty on alcohol is far from welcome in any quarter. Indeed, the reasons for that were spelt out by my right hon. and learned Friend himself in his original Budget statement. There is no doubt that the increase will exacerbate the problem of cross-channel traffic in alcohol, especially beer, and it will have an adverse effect on brewers and on off-licences. For the reasons that I have given, I am especially concerned at the effect of the increase on the fragile home market for whisky. That was recognised by the Chancellor in the past, by freezing the duty at existing levels in the previous two Budgets, but his present proposal to increase the cash differential between spirits on the one hand and beers and wines on the other can only harm the whisky industry.
The proposal will also affect European markets at a time when minimum rates in the Union are being discussed. We want to persuade our European partners to reduce discrimination against spirits. As the hon. Member for Gordon said, Britain is a large producer of spirits, whereas our European partners are wine producers. Increasing rates on spirits must surely weaken our Government's negotiating position.
Similarly, in overseas markets the Scotch whisky industry is constantly trying to overcome the high barriers of domestic duties which are erected against imported spirits and urging that they be reduced. How much more difficult its case will be made when our own Government increase the domestic level of duty on spirits.
Will the measure produce the increased revenue for which my right hon. and learned Friend the Chancellor is looking? The reason for freezing the level a couple of years ago was that the duty had reached the point of diminishing returns. After the 1992 uprating, the total Treasury take on whisky declined by £80 million. Last year, the duty remained unaltered, and that produced an extra £45 million, although it is still below the 1991 level.
The Treasury must be aware that whisky is a particularly price-sensitive product. Will the increase in duty produce any revenue gain at all? Certainly, I doubt whether it will do so to the extent that my right hon. and learned Friend hopes. Perhaps in winding up the debate my right hon. Friend the Chief Secretary will tell us what the Treasury forecasts as its yield from the increased duty on whisky and whether those expectations are well founded. The last time the duty went up, receipts went down. Why should that not happen again?
At 10 o'clock tonight I shall support my right hon. and learned Friend in the Lobby by voting to increase the tax on petrol and tobacco for the reasons that I have given. However, I fear that he is wrong about alcohol. First, his
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proposals will damage the whisky industry; secondly, they will weaken our negotiating stance in Europe; thirdly, they are unlikely to produce the revenue that he requires.
I have been critical of several of my hon. Friends who were sent to Parliament—as I was—to support our party, our Prime Minister and our Government and who chose to withhold their support for one or two specific matters despite being well aware of the possible consequences of their actions, on which I need not elaborate. I have no intention of being so self-indulgent: I refuse to put my Government at risk simply because I have doubts about a specific issue.
I shall follow my right hon. and learned Friend into the Lobby when we come to vote on the increase in tax on alcohol, but I shall do so with a heavy heart as I believe that it is a step which will prove to be ill considered both in principle and in practice.
6.31 pm
Mr. D. N. Campbell-Savours: My remarks will be brief. I hoped to intervene during the Chancellor's speech, but he would not give way.
I think that Ministers of the Crown are completely out of touch in their handling of the increase in tax on tobacco and I think that they have made a major error of judgment. The right hon. Member for Thanet, South (Mr. Aitken) has some experience in his constituency of the matters to which I shall refer.
It is assumed that the increase in tobacco tax will reduce consumption. However, I argue that it will increase, for the reason given by the hon. Member for Hastings and Rye (Mrs. Lait). She is absolutely correct about what is happening in the marketplace. The reality is that one can buy black market cigarettes in any town in the United Kingdom. A huge secondary market has developed in cigarettes costing between £1.50 and £1.80 per packet or 15 per carton.
In Workington one can buy as many black market cigarettes as one wants. They are freely available, and the situation is the same all over the country because of the current tax regime. I do not smoke, so I shall not purchase black market cigarettes; indeed, even if I did smoke, I would not purchase them because I would be cheating the Revenue. Nevertheless, black market cigarettes are available anywhere in the United Kingdom because of the difference between the retail price of cigarettes and the price charged by black marketeers who sell them at substantially reduced prices.
It is wrong to assume that all cigarettes sold on the black market are imported cigarettes. Most of the cigarettes that are sold on the black market in the United Kingdom are made in Britain. All the major brands are available. One can purchase black market cigarettes from pubs, shops and social clubs in all parts of the country.
As a consequence of that thriving black market, the price of cigarettes will fall. The people who want to smoke—including young people—will purchase black market cigarettes. The Budget will not raise revenue in the way that the hon. Member for Chislehurst (Mr. Sims) imagines; it will reduce it. More cigarettes will be made available to young people at a lower price. Clearly, the Government have not taken that consequence into account.
Smokers—the people we are trying to target for health reasons—recognising that they will have to pay more for cigarettes each week, have a reason for finding and

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purchasing black market cigarettes. If the measure is carried, the Government can do nothing to prevent that development, except intervene in the area of smuggling. People are entitled to bring large numbers of cigarettes into the country, but many re-sell them within the United Kingdom.
The Government should start by looking at any United Kingdom port—such as Edinburgh, Newcastle and Hull—which trades with European ports. They are all routes by which large numbers of cigarettes are imported into the United Kingdom. People travel to Europe, fill their vans with cigarettes and return to the United Kingdom to sell them on the black market. Only last week in Wales some people were prosecuted for importing large numbers of cigarettes on a very organised basis—they were clearly running a business.
Many shopkeepers in the United Kingdom sell cigarettes, tax paid in full, across the counter. They, too, will suffer because their revenue will fall as a result of the Government's measure. We do not require extra technology to deal with the problem. The Government are mad if they are prepared to reduce the number of customs officers when hundreds of thousands of people are coming through British customs carrying cigarettes far in excess of their own requirements. In effect, the Government are inviting black marketeers to enter the market.
We should consider what has happened in other countries where high prices have created product shortages. In the Scandinavian countries, high prices for spirits led to the development of a black market in home-produced "hooch". In the end, those countries were required to liberalise the market and reduce duties and internal taxation so that the legitimate internal market in spirits and beer could take off. The Government's Budget measure will have unintended consequences, and that is very wrong.
The answer is harmonisation, but, due to the principle of subsidiarity, there are varying views as to whether it can be applied in these conditions. There has to be harmonisation of the tax regime for cigarettes throughout the European Community. That will mean a substantial increase in the rates of taxation in other European countries, but Ministers have a duty to press for that.
In the meantime, the Government must act to protect local retailers, who will lose business. They must also act to protect young people, who may be drawn into smoking as a result of the reduction in cigarette prices that I believe will occur throughout the United Kingdom.
6.39 pm
Mr. Richard Ottaway: I agree with much of what the hon. Member for Workington (Mr. Campbell-Savours) said about health, although not with his political arguments. I share his concerns about the dangers of young people being lured into smoking. That is a non-political view that hon. Members on both sides of the House share.
The pre-Budget submission that the Confederation of British Industry made to the Government was entitled, "kecovery in progress: do not disturb." That headline was appropriate before the Budget, was reflected by it and is still a good summary of the current state of affairs, despite the political upheavals of the past few weeks.
With unemployment of 11 per cent. in the south-east compared with 9 per cent. in the Rhondda valley—I thought that it would be a long time before a Conservative
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Member of Parliament for the south-east would be saying something like that, but there it is—in constituencies such as mine we are only too keenly aware of the need for a sustained recovery, which will lead to a rise in living standards.
While we want to encourage that sustained recovery and ensure that it is maintained, it is essential that we do not allow it to turn into a boom that is followed, as night follows day, by a bust. There is a danger of that happening.
The economy is showing the most superb set of performance figures. Underlying inflation is 2 per cent., which is its lowest level for a generation, especially over a sustained period. We all know that inflation is the enemy of investors—both commercial investors and the elderly person with savings trying to live off fixed interest. Inflation is the danger to them all. It is a credit to the Government that they have managed to get inflation down to their target. They set a range of between 1 and 4 per cent. and expressed a preference for getting it in the lower half of that bracket. The figure is wobbling on the edge of the bracket, but let us hope that the Government can keep it on target.
The OECD confirmed the second good set of performance figures—this year, the United Kingdom economy is predicted to be the fastest-growing major economy in the European Union. That should come as no surprise when one studies our export performance. One of the most exciting aspects of this recovery is that it is export-led. How many times have we had booms when all the surplus money generated simply went in house price increases and was wasted unproductively? This time, exports are leading the way and house prices are fundamentally stable. Our exports to the European Union are up 17 per cent. on a year ago, while the economies of the other member countries grew by only 5 per cent. It comes as no surprise, therefore, when commentators say that we are closing the trade gap.
It is also fair to say that inward investment is transforming our industrial practices, as ideas and concepts are imported from overseas to make ours a more efficient and productive economy.
Perhaps privatisation is a controversial subject, but it has been a fundamental success and is very much a part of our economic revival. As the Opposition are constantly saying, "That's not true," we must consider how we achieved it. Throughout the 1980s, productivity grew faster here than in any other European Union country. Since 1979, investment in plant and machinery has risen by 54 per cent. and business investment by 35 per cent.—
Dr. Reid: Growth was slower.
Mr. Ottaway: If the hon. Gentleman is patient, I will get to that issue in a moment.
Against that background, one is tempted to argue, "If it ain't broke, don't fix it." The Budget largely did that and it reflected the views of the CBI, with one notable exception. The measures contained in last year's Buclget show signs of fulfilment. The aim this year—rightly—is to continue the reductions in public expenditure that have partially been achieved by the tight control of inflation, while ensuring that public expenditure continues to decrease as a percentage of gross domestic product. This afternoon, the Chancellor put that succinctly when he talked of "filling the gap."

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The net effect is a welcome and continuing decline in the public sector borrowing requirement, which is projected to go into surplus by the end of the decade. Given the way in which forecasts have constantly been beaten, and the growth in the economy, I predict that in his November 1996 Budget the Chancellor will be able to forecast a nil PSBR for 1997–98. Then, the challenge will be to start to reduce the national debt.
After all, the relatively small size of that debt has given us a competitive advantage over our rival economies, both in Europe and the world. As we have to pay a relatively small amount of interest each year, we have been placed in an enviable position when compared with other economies. That, coupled with the strong emphasis on private pensions that was brought about by the reforms of the past decade, means that we will be paying out much less in pensions to an aging population than other countries. Those two factors give us a highly competitive edge and bode well for the future.
I do not need to remind the House why we are here. Obviously, most people would demur when asked whether they supported the introduction of new taxes. If we carried out a survey on whether to introduce income tax, I am sure that the country would be emphatically against it. No one likes new taxes, but, as Oscar Wilde reminded us, the only two things in life that are certain are death and taxes.
We debated value added tax on fuel in two Budgets and on other occasions. My only concern was whether the people least able to pay would be unable to do so. Once the package of compensation for the unemployed, the old and those on low incomes was established, however, I had no personal quarrel with the increase. As the people with the largest houses would be the hardest hit, the proposal struck me as one that might have come from the Labour, rather than the Conservative, party.
What puzzled me about last Tuesday was the fact that the introduction of the second tranche was ultimately brought down by Members who voted for it on other occasions and I regret the fact that those Conservative Members involved seem to have an alternative agenda that has little to do with protecting the elderly and more to do with disrupting the Government. As the Conservative party braces itself for what I suspect will be a massive by-election defeat in Dudley, I hope that those Members will realise what they are doing to one of the oldest political parties in the world.
Mr. Campbell-Savours: Why does not the hon. Gentleman look at his hon. Friend the Member for Northampton, North (Mr. Marlow)?
Madam Deputy Speaker (Dame Janet Fookes): Order. I remind hon. Members that the hon. Member for Croydon, South (Mr. Ottaway) was correctly looking at me, the person to whom he was addressing his remarks.
Mr. Ottaway: I am aware of the presence of other hon. Members in the Chamber, Madam Deputy Speaker.
I have no quarrel with the Chancellor's decision to make up the shortfall in funding by introducing excise duties, on which we will vote tonight. We have a growing problem with cross-border smuggling and I welcome his anti-smuggling proposals. He was right not to increase the duty on wines and spirits in his original
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Budget. His forced decision to raise that duty will do little to help the drinks trade, especially in the south-east of England.
During his short statement last week, my right hon. and learned Friend the Chancellor said that the introduction of excise duty on smokers would be a healthy deterrent. In my intervention on my hon. Friend the Member for Chislehurst (Mr. Sims), I asked whether it was appropriate for the medical profession to decide whom to treat. A serious problem at the Mayday university hospital in Croydon is a matter of some concern to me. If the duty is to be a deterrent, what do we say to drug addicts or alcoholics? We must remind ourselves that those who refuse to treat people who habitually smoke are there to serve the community, and not to dictate the terms on which they do it. I shall return to the motion before the House.
The decision of the Chancellor of the Exchequer to raise interest rates by 0.5 per cent. was particularly interesting. He was quite right to do so to maintain confidence in the global markets. Statements from the Chancellor and the Bank of England suggested that the rise was likely to happen anyway. It did, however, have a noticeable steadying effect on the markets, which have remained particularly stable in the aftermath of the decision of the House on Tuesday.
I found the Opposition's statement that the increase in interest rates was a major blow to the economy most concerning. One can only assume that if they had been in a similar position, they would not have introduced that interest rate increase. How they can reach that conclusion is beyond me.
Mr. Campbell-Savours: We would not have been in that position.
Mr. Ottaway: Is the hon. Gentleman saying that he would not have introduced an interest rate increase?
Madam Deputy Speaker: Order. There is a good reason why I deplore seated interventions.
Mr. Ottaway: I am happy to give way to the hon. Gentleman if he wants to say what he would have done. As I thought, he has nothing to say.
It is perfectly obvious to a moderately well-informed observer such as myself that inflation pressures are stoking themselves up in the economy. With output growing by 5.9 per cent., the dangers of those pressures reappearing are always close to the surface. It is possible that the Labour party believes that inflation is licked and that it does not have to bother about it. That would be to defy history where, in any economic cycle, inflation will rise and fall.
Confidence is growing, but employers are also complaining about skill shortages. The warning signs are clear for all to see. In my constituency, I recently received a report that the price of paper had risen by more than 20 per cent. in the past four months, and there was strong evidence that paper suppliers were acting in unison to force up the price.
Mr. Andrew Smithindicated assent.
Mr. Ottaway: The Opposition spokesman, who frequently speaks a lot of sense, nods in agreement. Why, therefore, did he say that the interest rate rise was a danger to the economy?
The Governor, who has by far the best access to data in the economy, firmly believes that there are inflationary pressures. Under the circumstances, it would be plain folly not to raise interest rates as a warning shot to the economy.
The most depressing thing has been the lack of concise proposals from the Opposition. The Chancellor asked the hon. Member for Dunfermline, East (Mr. Brown) a simple question this afternoon—did the hon. Gentleman think that the Chancellor's expenditure and taxation plans were too high or too low? My right hon. and learned Friend got no reply.
The President of the Board of Trade put a similar question to his opposite number, the right hon. Member for Copeland (Dr. Cunningham), during the Budget debate last week. The reply was that the right hon. Gentleman could not say what the position would be in three years' time, so how could he say what the Opposition's economic proposals were? That was a perfectly reasonable position to take. However, the question my right hon. and learned Friend asked this afternoon was whether the hon. Member for Dunfermline, East thought the Government's figures were too high or too low. It is a sign of the paucity of arguments from the Opposition that the hon. Gentleman was unable to respond to that question.
The nearest we have seen to sound policy from the Labour party has been the Commission on Social Justice, which was set up by the late John Smith as a blueprint for a new economic strategy, no doubt designed to entice the middle-class voters the Labour party needs to win an election. It is a curious document, strong on rhetoric and weak on remedies. Not unsurprisingly, it attacks the Government's policies of cost-cutting, deregulation and privatisation, although I fail to see how that squares with the party's intention to scrap clause 4. The Labour party will have to try harder to convince my constituents when they argue that the reforms of the 1980s have made the economy less efficient.
The document makes the plea—often repeated by the hon. Member for Dunfermline, East—that our alleged economic failure has been due to a lack of investment. The flaw in that argument is that investment has not been particularly weak. From 1960 to 1990, investment in machinery and equipment as a percentage of GDP was well ahead of that of America and Canada, and only marginally behind that of Germany and France. Britain's investment shortfall is due mainly to exceptionally low levels of housebuilding. It is the quality, and not just the quantity of investment that matters. One need only look at the rusty investments of the steel industry in the 1970s to have that point underlined.
Finally, there is the question of what the Opposition would do to stimulate investment if they were in power. There are several ways in which they could do this. I can
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imagine a Labour Government proposing direct Government intervention by renationalisation, or another similar proposal.
Mr. Campbell-Savours: No.
Mr. Ottaway: No? Fair enough. A Labour Government could offer tax incentives to industry.
Mr. Campbell-Savours: Yes.
Mr. Ottaway: They could cut corporation tax.
Mr. Campbell-Savours: Yes.
Mr. Ottaway: Finally, they could encourage savings and discourage consumption. It is interesting that the Borrie commission rejected the final three proposals, and the only one which it was prepared to look at was renationalisation.
Mr. Campbell-Savours: We are the Labour party.
Mr. Ottaway: I know—
Madam Deputy Speaker: Order. I do not expect to have to remind Members twice of the same fault.
Mr. Campbell-Savours: On a point of order, Madam Deputy Speaker. I am sorry to intervene, but there must be a little give and take during a debate. You are excellent in the Chair, but I would ask for a little flexibility, as I am not in any way being discourteous to you.
Madam Deputy Speaker: We simply cannot conduct a debate on the basis of cross-Floor arrangements, simply because it is very confusing. At the very least, Members ought to think about the Hansard reporters.
Mr. Ottaway: We are deeply indebted to the Hansard reporters, and I apologise for the rapport that the hon. Member for Workington and I have been generating.
The point that I was trying to make was that, of the four proposals extolled by the Borne commission, the one it was most prepared to look at was renationalisation. As the hon. Member for Workington said—improperly, from a sedentary position—"We are the Labour party." He was implying that the Borrie commission was not binding on him. The Opposition have said that on a number of occasions, and that is fair enough.
If the Opposition want to have any chance of winning votes in the south-east of England and in the midlands—the battlefield of British politics—I suggest that they leave the commission proposals as a consultative document and not look at them at all. Otherwise, they will make absolutely no progress.
Mr. Campbell-Savours: I thank the hon. Gentleman for his advice.
Mr. Ottaway: I am always pleased to hand out advice to the Opposition, and I hope to continue to do so. I remember an occasion in the 1980s, when the late John Smith was a shadow trade and industry spokesman and I was a fairly green Member, when I was going on about the shipbuilding industry, and he asked what I would do about it. I felt rather flattered that an Opposition spokesman should ask me for my opinion, and yet again I am pleased to give the Labour party advice.

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This debate has been brought about in difficult circumstances. Like my right hon. Friend the Member for Shropshire, North (Mr. Biffen), I do not mourn the loss of VAT on fuel. The circumstances in which that loss has been brought about are regrettable, but I do not believe that either the Budget or the Government has been blown off course by recent developments.
Mr. Marlow: On a point of order, Madam Deputy Speaker. As you know, there is to be an important debate tomorrow on fisheries. I understand that it is normal for Government motions to be put down by half past two, but, as of now, no motion has been put down. Many colleagues would like to table amendments which could strengthen the Government's position. I do not know whether this has anything to do with the authorities of the House, but it would be much appreciated if something could be done to get a motion put down quickly.
Madam Deputy Speaker: My understanding is that a motion can be put down at any time until the House rises. I have no doubt that the hon. Gentleman's point will be taken on board by those more able to deal with it than I.
6.58 pm
Mr. Mike O'Brien: Far be it from me to intrude on private grief, but while listening to
the hon. Member for Croydon, South (Mr. Ottaway) attack his unwhipped colleagues I was struck by the thought that perhaps the hon. Gentleman and many of those Conservative Back Benchers who voted for 17.5 per cent. VAT on fuel would, in due course, thank those unwhipped rebels for saving them from having to defend that policy during a general election campaign.
Afterwards, I thought the better of that, because people will remember those Back-Bench Conservatives who wanted the 17.5 per cent. VAT to be imposed on fuel and who voted for it. They will also remember those Conservative Back Benchers who, when they stood for election in 1992, advocated tax cuts, but delivered the biggest tax hike in history in last year's Budget. When they go to the electorate next time, they will have to answer the question, "Why should we believe you this time when you did not tell us the truth last time?"
The Chancellor's revised Budget is better than the original one, but that is not due to his decision, but because he could not convince enough of his own Back Benchers to stay with him, so they voted for the Labour amendment. The way in which the Chancellor sought to proceed with imposing 17.5 per cent. VAT on fuel demonstrated how out of touch he is with the reality of life for ordinary people. He never really understood the depth of anger that ordinary people felt at the imposition of VAT on fuel and the reasons for it.
That public anger was compounded not only by the reality of 8 per cent. VAT on fuel and the prospect of 17.5 per cent. VAT, but by the decision of companies like British Gas to charge people with bank accounts less than those who do not have them, because that latter group pay in a certain way. That decision angered an awful lot of pensioners, as did the 75 per cent. pay increase, equivalent to £740,000, paid to one British Gas boss. Although the Prime Minister said that he too felt that that increase was unjustified, he refused to condemn it. If workers had been
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asking for 2 per cent. pay rises instead of a 1.5 per cent. settlement, no doubt the Prime Minister would have pronounced them a danger to the country. The 75 per cent. increase was an appalling example of bosses following the dictum, "Do as I say, not as I do."
The Chancellor does not seem to have appreciated or understood the anger in the country caused by that pay increase and the proposed VAT increase. He paid the price for that misjudgment. The Chancellor and his colleagues should now not only admit that it was wrong to propose to increase VAT on fuel to 17.5 per cent., but they should urgently implement the Prime Minister's own wish to make a law to allow shareholders to control directors' salary increases. Perhaps they should go further by allowing shareholders to reduce directors' salaries at each annual general meeting if those directors have cut jobs or failed to make the company prosper.
The Government should also intervene to put an end to the British Gas wheeze of offering cheaper bills to those who hold bank accounts. That policy penalises the poor and pensioners who may never have had a bank account and who do not want one now. Many people feel angry about that decision because of its implications for civil liberties. A middle-aged business man came to my surgery the other day and said that he did not want a bank account because he paid his bills within seven days. He wanted to know why he should he penalised in that way.
Dr. Reid: I agree with my hon. Friend that the depth of the resentment felt against the direct debit discount offered by British Gas is far more widespread than that company and hon. Members appreciate. Can my hon. Friend think of any good reason why that discount should not be offered to all those who pay their bills on time rather than just to those who pay by a particular method, which is exclusive to certain sections of the community?
Mr. O'Brien: It is obvious that British Gas aims to increase its profits at the expense of poor people and those who do not have bank accounts. That is unacceptable and the Government should take action to prevent it.
Mr. William Ross: Has the hon. Gentleman any evidence that British Gas pays all its bills within seven days of receiving them?
Mr. O'Brien: I have no evidence that it does and I suspect that it may not.
The compensation for the 8 per cent. VAT on fuel needs to be extended. As well as his package of tax rises, the Chancellor also cut the amount of help that he is giving to pensioners to compensate for that VAT. The right hon. and learned Gentleman's bribe on Tuesday night to the hon. Member for Brighton, Kemptown (Sir A. Bowden) seems to have been forgotten. He has also cut into the compensation package that he first announced in last year's Budget and which he confirmed last week. He attempted to take away any gains that pensioners might have received, because he could not raise VAT on fuel to 17.5 per cent.
From April 1995, single pensioners will receive just 20p instead of the 50p that they had been promised. The total compensation for a single pensioner will be 70p while pensioner couples will receive £1.05. The Chancellor's claim that that will be enough to compensate all pensioners completely ignores the fact that heating costs vary enormously both according to household type

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and by regions. The right hon. and learned Gentleman could and should have been more generous and kept his original promise to pensioners.
Many vulnerable people will receive no compensation for that 8 per cent. VAT on fuel, which remains unchanged. Low-paid workers, who get maximum help with housing benefit, will be offered no help with their gas and electricity bills. That will leave the poorest 20 per cent. of households 85p a week, and £44 a year, worse off as a result of VAT at 8 per cent. The compensation scheme also excludes many on unemployment benefit. Households headed by someone who is unemployed will be £1 a week—£52 a year—worse off. It also fails to address properly the needs of the disabled, because those on disability living allowance will not receive any compensation.
We must ask whether the increase in taxes on cigarettes, beer and car fuel was really necessary. Surely, as hon. Members have already said, £1 billion was within the margin of error in the Budget. Not only that, but as the Chairman of the Public Accounts Committee has already said, the margin of error in previous Budgets in the past decade averaged around £10 billion. The Chancellor had his own rather large margin of error in last year's Budget. He told us then that the PSBR deficit was £50 billion and that he needed to impose VAT at 8 per cent. on fuel to reduce the PSBR over the year to £38 billion. In fact, he had his figures wrong, because the PSBR was £46 billion—£4 billion less than forecast. The estimate for the outturn this year is not £38 billion but £34.5 billion. The loss of £1 billion was therefore well within the margin of error in this year's Budget.
The current Budget forecasts also gave the right hon. and learned Gentleman plenty of room for manoeuvre. For months the Chancellor has been trumpeting an on-going trend of lower unemployment. The Red Book cites an unemployment figure of 2.4 million people, spread over a number of years. That is the normal way in which the unemployment figures are recorded and I do not quarrel with that. The Budget Red Books do not try to estimate or predict our future levels of unemployment.
The departmental budgets have been set according to that Red Book figure. For most of the Departments that will cause few problems, but for unemployment-sensitive Departments, such as the Department of Social Security, it means that, according to table 6.5 on page 119 of the Red Book, the DSS budget will increase from £67 billion to £70 billion and up to £79 billion in 1997–98.
If the unemployment rate was to fall to 2 million during next year there would be plenty of room for the DSS budget to change. It is clear that that would have an impact on the overall PSBR. The £1 billion that the Chancellor was looking for would therefore be found easily.
I accept that other things might happen, for example, that inflation or interest rates may rise. We know from evidence to the Treasury and Civil Service Select Committee that there is leeway in the Red Book for interest rate rises in the future. There may also be inflationary pressures caused, for example, by the increasing cost of raw materials. There remains enough flexibility within the PSBR, however, to meet the targets within the margin of error without raising the extra £1 billion from new taxation.
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The real gap is not in the PSBR, but in the Chancellor's credibility, to which he alluded in answer to a question from the Chairman of the PAC earlier today. The tax rises have been introduced to protect the rather ragged reputation for financial prudence that the Chancellor liked to have. Last week's defeat was a humiliation for the right hon. and learned Gentleman, but it is all the greater when we remember the spectacle in the closing stages of the debate.
Then, the right hon. and learned Gentleman tried desperately to buy off his the hon. Member for Kemptown with £120 million. He did that not because he believed that it should be done—or he would have done it himself earlier—but because he had been forced into it. He lost anyway. VAT on fuel was bad politics and bad economics, and pursuing it in the Budget showed the bad judgment of the Chancellor and the Prime Minister.
The City knows that the Chancellor and his Conservative predecessors cannot be trusted on the economy. That is not just because of the Lawson boom, the two harrowing recessions or withdrawal from the ERM but because of the pre-election tax cuts which went wrong after 1987 and 1992. That is why there were feverish midnight telephone calls to the Governor of the Bank of England after the Chancellor lost the vote.
Those calls were an attempt to bring forward by 45 minutes the meeting scheduled for the following morning, so as to get an interest rate rise announced as quickly as possible. The City had to be steadied by Steady Eddie in case it started to panic because it did not trust the Chancellor. Only that meeting with Steady Eddie George, the Governor of the Bank of England, and the raising of interest rates prevented severe problems.
Ordinary mortgage payers and businesses are paying higher interest and higher taxes because the Chancellor lost last week's vote through bad judgment and his ragged reputation had to be saved. Perhaps it would have been better if the person responsible for the bad judgment had gone and interest rates had not had to rise. The other reason for the Chancellor's decision to recover the £1 billion is that he secretly harbours fears for the economy. I share those fears, and the Governor of the Bank of England sees them as great difficulties.
The economy lacks capacity. It is coming out of recession quicker than expected and that brings its own problems. The damage that has been inflicted by two Tory recessions and the neglect of manufacturing over 15 years mean that its capacity for recovery is constrained. Unless investment rises sharply the capacity buffers will be hit some time next year or shortly thereafter, and inflation will take off. The hon. Member for Croydon, South (Mr. Ottaway) was right to say that inflation has not been licked and is always there. The Chancellor knows that, and that is the reason for his decisions.
Mr. Ottaway: Why did the hon. Gentleman's Front-Bench spokesman say that the increase in interest rates was a mistake?
Mr. O'Brien: It was increased at that time because of the Chancellor's error of judgment in trying to pursue the policy of increasing VAT to 17.5 per cent. He could not even convince his own Back Benchers. The rise need not have occurred at that time.
I understand that the minutes of the meeting before the one last week between the Chancellor and the Governor will be published in two weeks. At that time, the Governor

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foresaw difficulty in the economy and its capacity, and pointed out that it might be necessary to raise interest rates at some stage. However, the rush and the feverish phone calls before the vote and almost immediately after it to bring the meeting forward were caused exclusively by the Chancellor's misjudgment. That is why people are paying higher interest rates.
The recoveries in Canada, Australia and the USA started before our recovery. The USA is already hitting inflation problems despite interest rate rises and despite the fact that the recession there was not as bad as ours. The economy is ill prepared for recovery and the Bank of England has accepted that. The Governor said as much in giving evidence to the Select Committee on the Treasury and Civil Service.
The Governor voiced concern about a lack of capacity in the economy and pointed to survey evidence of business men who feel that they must be operating above normal capacity. That must be taken into account. He said that delivery times were direct evidence that capacity problems might be on the horizon; that the situation had to be closely monitored; and that it was a matter of feeling our way towards our capacity limits. The Governor was clearly concerned and warned that, if there were pre-election tax cuts next year, he would have to consider or perhaps demand interest rate rises. Conservative Members should be careful about thinking ahead and saying to themselves, "Perhaps the Chancellor has tax cuts up his sleeve to be announced just before the election," because the Governor gave fair warning that he would ask for interest rises to compensate for such cuts.
The Chancellor decided to damp down the recovery, and it seems that his objective was to prevent us from hitting the capacity buffers too soon. That was another reason for him pressing ahead with his tax rises. He realises that the economic news is not as good as it appears, that there are tangible dangers on the horizon, and that he may not be able to deliver tax cuts to his Back Benchers in the next Budget. He tried to damp down the recovery in this and the previous Budget, and the new tax increases on cigarettes, car fuel and alcohol have two main purposes. The first is to protect the Chancellor's battered reputation and the second is to slow down the economy to respond to weaknesses that have been caused by the failure of Government policy over the past 15 years.
The tax cuts are unjustified, and the way in which the Chancellor decided to raise money is open to question. Perhaps he can justify tax increases on cigarettes and petrol and perhaps even on wine, but the increase on beer and whisky is worrying. The Treasury and Civil Service Select Committee recently published a report about problems in the brewing industry. Although it did not advocate a reduction in duty, it warned of the serious problems caused by imports from abroad. The Chancellor's tax gift to smugglers could have been avoided. Even if he felt that there was no margin for error in the Budget, he could at least have recognised that the increase in the tax on beer and whisky would cost jobs and increase smuggling crimes.
There was some leeway, and the damage that the Chancellor has caused to an important sector of the economy and the effect of his measures on law and order could be considerable. To say that we will be more
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effective against smugglers while cutting Customs and Excise staff beggars belief. If those people were not made redundant but were employed in intelligence gathering, the Government's policy would be much more credible. The one Tory who got it right was the vice-chairman of the party, John Maples, who said:
"The Conservatives have let voters down, they have been in government too long, are complacent and have lost a sense of direction. They fail to fulfil promises, are clumsy at implementing policy and 'shoot themselves in the foot'."
Shooting himself in the foot was precisely what the Chancellor did in his Budget. The Budget and the mini-Budget are not about Britain's future, but about attempting to salvage the Chancellor's reputation and the election prospects of the Conservative party. The price of that salvage operation will be paid by families who will have to meet the extra taxes that the Government will impose in the next year and by home owners who, because of restrictions in benefit, not only feel insecure about losing their jobs but fear that they will lose their homes as well. A price will also be paid by industry, which has been ignored for much too long by the Government.
Although they do not yet realise it, the real victims of the Budget, the mini-Budget and the Budget that preceded them are Conservative Members who will for ever be tagged with promising no tax rises and then voting for them, who promised prosperity but were prepared cynically to undermine it, and who hope to win the next election, but will lose it.
7.19 pm
Mr. Nigel Evans: I am extremely grateful for the opportunity to take part in this evening's important debate. We all know the reasons for the second Budget. Sequels never measure up to original movies and the same applies to the second Budget, but one has to appreciate the fact that we never wanted a second Budget.
I found it peculiar to listen to Opposition Members saying how dreadful it was that the Government were raising taxes on fuel to 17.5 per cent. They condemned us for doing so and said that the compensation package was simply not enough. I looked through some old newspapers going back to May 1974, which reported shocking rises in electricity prices. On one occasion there was a 30 per cent. rise and an article in the business section of The Observer of 5 May 1974 stated that a 30 per cent. increase announced in the Budget speech by Mr. Denis Healey took account only of fuel price increases of 300 per cent. on oil and 45 per cent. on coal and ignored the uncomfortable fact that the industry was already heavily in the red even before the oil crisis and the miners' strike.
During the period 1974–79, electricity prices rose on average by 2 per cent. every six weeks. Electricity prices rose by 30 per cent. above the rate of inflation, which averaged 15.5 per cent. I tried to recollect what compensation package was in place for pensioners and those on fixed incomes during those bleak days. Of course there was none. Exactly the same applied to gas bills and other prices that pensioners and people on fixed incomes had to meet because of runaway inflation.
The position is very different today. I received a letter from NORWEB dated 9 December that mentions standing charges being reduced by £1.50 each quarter—or £6 a year—from 1 January 1995. It says that that decrease, on top of the decrease already announced earlier this year,

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was more than enough to offset the rise in VAT. People—certainly those in the north-west—have been more than compensated for VAT increases and there is additional compensation for many people on fixed and low incomes.
The hon. Member for Warwickshire, North (Mr. O'Brien) spoke about discounts for British Gas consumers who have standing orders, but not for those who pay their bills diligently. I agree with him, and I hope that British Gas moves quickly to ensure that many consumers who pay their bills on time are not penalised simply because they do not pay by direct debit. I hope that British Gas will soon announce that it will heed the voices of many hon. Members on both sides of the House on this issue.
Mr. Mike O'Brien: I am grateful to the hon. Gentleman for endorsing my view, which is shared by many hon. Members. Has he made representations to Ministers to ensure that they put as much pressure as possible on British Gas to make those changes? Will Ministers make public statements condemning these practices? It would weigh heavily with the shareholders and directors of British Gas if the Minister said exactly what the hon. Gentleman has just said.
Mr. Evans: I have already made representations to British Gas. It is not a party political matter; I am sure that all hon. Members have made representations on behalf of their constituents. I have received many letters, particularly from pensioners who are extremely keen to pay their bills as soon as they get them. They are not used to having reminders sent, as they pay their bills on time. I hope that will be recognised quickly by British Gas.
The Chancellor talked about the various alternatives for making up the shortfall because the second tranche of VAT on fuel would not be applied. He dismissed them one by one for various reasons. He then considered the three areas where the Chancellor decided the extra revenue was to be raised: tobacco, petrol and alcohol, which are targeted in every Budget.
I must declare an interest, as I have a retail business in Swansea that sells tobacco products. I am also an executive member of the all-party beer group. I have no interest to declare on petrol.
I understand that there is a hand-rolling tobacco product called Drum, which is the third best selling hand-rolling tobacco in the country. It is not sold legally anywhere in Britain for copyright reasons, as it would conflict with another brand called Duma, but it is coming into the country in large quantities. The Chancellor was quite right to recognise that specific problem, and no extra funds were sought from hand-rolling tobacco.
I also accept that the Chancellor has decided to raise extra revenue from tobacco products because of the health reasons, which have been listed time and again in the House. That is one reason why in the past I have raised the problem of the European Community subsidising tobacco production and I hope that sooner rather than later we can eradicate the subsidy to growing tobacco in the European Community. It seems quite absurd to pay people to grow tobacco products in other parts of the European Community and at the same time to impose taxes on British consumers to deter them from smoking it. I hope that we can do something about tobacco subsidies.
Mr. Bernard Jenkin: The story that my hon. Friend tells about tobacco growing in the European Community at the European taxpayers' expense
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is worse than he describes, because the tobacco we subsidise is of such low quality that nobody in the European Community smokes it; it is exported to third-world countries, where it poisons the lungs of much poorer people. We buy in much higher quality tobacco from elsewhere, which adds to the lunacy of the situation.
Mr. Evans: I can only agree with my hon. Friend. I do not believe that European taxpayers' funds should support social services in Greece and other countries that are in receipt of such funds to grow tobacco. Surely we should be looking to trying to get them away from growing tobacco if it is such a low grade as my hon. Friend says and get them doing something else.
The 21/2p rise in petrol imposed in the first Budget was quite substantial and will hit many motorists, particularly in rural areas such as my constituency. I do not particularly welcome the extra penny imposed by the second Budget. I have already received my first letter from a constituent who has a transportation company, who writes that the Budget measures are causing increases
"of over 221p for every mile a truck moves".
It is not good news, not only for businesses but for people who live in rural areas who will have to find that extra money.
I shall make the bulk of my comments about alcohol. In an Adjournment debate on 11 May 1994, I raised the problem of alcohol being smuggled into Britain from the rest of the European Community. It was a problem then and it is a greater problem now, but the duties imposed on alcohol in the second Budget are neither here nor there. A penny on a pint of beer will not greatly exacerbate a problem that already exists.
The Chancellor commented on the existing problems of which he is aware. Obviously, the penny increase is not a move in the right direction. I believe that we must direct our attention to how we can eradicate smuggling, which costs the Exchequer money and, I believe, costs jobs in the brewing industry and in the retailing of alcohol in pubs.
The indicative level that is now set on various items of alcohol and tobacco and the single European market have presented Customs and Excise with a bit of a problem. Many people return to the country with very large amounts of alcohol—not so much tobacco, but certainly alcohol—and say that they are having parties, that Christmas is coming or that there is yet another wedding in the family. Customs and Excise is hard-pushed in many instances to say that those excuses are not real, so the problem will increase if we do not address it.
The industry proposed its own solution—a massive cut in the duty on beer. The Brewers and Licensed Retailers Association produced a document called "A Real Alternative", which I found quite compelling reading. It suggests that extra revenue would come from increases in food sales and from people using amusement machines in pubs and that extra employment in pubs would lead to people being taken off the dole, as a result of which the Exchequer would not be paying out money in social services and would, over three years, raise extra funds rather than lose revenue. I hope that the Exchequer will look at those proposals again.
I heard what my right hon. and learned Friend had to say about the harmonisation of duties, but I believe in subsidiarity and wish him well in trying to encourage the French to raise their duties on beer. If they do not wish

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to go down that route, it will be extremely difficult to push them. The differential on duty is so large—it is seven times higher here than in France—that it will take the French a long time to reach our level. If we do not address the problem of smuggling in the short term, we may find that, because so many jobs have been lost in the brewing industry, by the time we get to harmonisation it will be extremely difficult to make up those jobs again.
David Kay, a director of one of my own brewers, Thwaites, wrote to me the other day to express his fears about job losses in the north-west. I know that everybody thinks that the problem of smuggling means that beer just comes in and stays in the Kent area. That is not so. He suggested to me that as much as 18 per cent. of the beer that is coming in finds its way to the north-west. It is not just a problem for Kent.
Mr. Mike O'Brien: I agree with the hon. Gentleman that we need to deal with the problem of smuggling, but not by adopting the brewers' proposal of a 50 per cent. cut in excise duty on alcohol. The brewers suggested that there might be a greater return to the Exchequer if that were allowed, but that would come from an increased consumption of alcohol. That would put a greater burden, perhaps, on the health service—from people with health problems as a result of the increased consumption—and on the forces of law and order. Although I am not averse to some reduction, York university suggested that one of the main causes of beer price rises has been problems within the industry itself rather than simply excise duties. A lot can still be done within the industry and a lot can be done by the Government to deal with smuggling.
Mr. Evans: I understand fully what the hon. Gentleman is saying, but the industry is not simply trying to increase beer consumption in this country, which is already high. It is saying that 1 million pints of beer a day is being imported from France and that if we could only reclaim that share for the British market it would be a substantial boost to our brewing industry. If it means that people have to make more visits to the pub instead of drinking at home the beer that they brought back from Calais, and if they drank the same amount of alcohol, they would still be spending more money. Extra people would still be employed in the pubs and, instead of being closed, pubs would remain open. I hope that my right hon. and learned Friend will look at the proposals again.
Many other measures could help pubs. I was involved in the Committee that considered the Deregulation and Contracting Out Bill, as were many other hon. Members present. We tried to save the head on a pint of beer, and to prevent extra costs from being imposed on pubs. I am delighted that the Bill was enacted, but I hope that we shall look at licensing hours generally. That is one area on which I hope that we can harmonise further with the European Community, as it is quite absurd in this day and age that some pubs, particularly where they do not affect people around them, have to close at 11 o'clock, forcing people to go out to clubs where they have to pay an entry fee. It is absurd that we have such archaic and antique licensing laws. I hope that we can look at those matters to support some of our hard-pressed pubs.
Earlier this year I went on a trip to Calais to have a look at the problem that currently exists there. I visited some of the cash-and-carries to see for myself the scale
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of business for people who buy alcohol and bring it back. I went to a few of the well-known ones—EastEnders, Beers R Us—which display signs all over the place showing where they are. Even Sainsbury's has opened within one of the hypermarkets in Calais, trying to encourage the British shopper to buy beer and alcohol from it.
What disturbed me most was not the consumers going around with their trolleys buying beer and alcohol, but the heavy goods vehicles inside some of those cash-and-carries, which were being loaded up with beer by the pallet load. They had offloaded their various goods in France, Spain or wherever, and were loading pallets of beer before coming back to Dover. That beer was destined not only for Kent but, as the tarpaulin suggested, Scotland, north Wales, Yorkshire and the north-west. It is finding its way all over the country. I was quite shocked to see that such a business is going on.
Yesterday's papers reported what they called "Victory for the Bootlegger". They mentioned a big surge this weekend in illicit trading, with more than 100,000 Britons flooding across the channel to Calais to buy supplies from supermarkets and cash-and-carries. They say:
"Since European trade barriers came down two years ago, anyone can buy limitless amounts of cheap alcohol".
Ian Brading, a senior purser on P and O's Pride of Burgundy, estimates that 80 per cent. of the 4,000 people he ferried to Calais on Saturday were travelling there only for the beer. He said:
"On some return trips we have 50 vans, all heavily loaded."
That shows the extent of the problem, which will get worse. Many of those ferry companies are putting on cheap trips to Calais to try to encourage people to use them. As part of the enticement they spell out to people the gains that can be had from taking a visit across to Calais, buying some beer and bringing it back.
A few weeks ago I went to Dover and chatted with some Customs and Excise officers. I was able to see one of their warehouses. It was packed full of drugs that they had seized and tobacco and alcohol. I talked about the problem of HGVs and of Transit vans. I understand that it is difficult to hire a Transit for the weekend in Kent because they have already been taken for that business. If people are stopped and the vehicle is seized, they think that it is far better to have a hire vehicle seized rather than one's own vehicle. Smugglers are already learning that trick. Others are bringing their Transits across, driving some way out of Dover, loading the alcohol on to a larger van and then getting straight back on to the next ferry, thus ensuring that the larger vehicle is full before driving off to another part of the United Kingdom.
Only last week we witnessed the success of a Customs and Excise operation: 28 former Yorkshire miners were arrested for smuggling alcohol and then selling it on. I believe that that is just the tip of the iceberg. In the newspaper article from which I quoted, officers suggest that for every £1 worth of alcohol that they stop at ports of entry another £9 worth is getting through. As last week's case showed, organised groups are involved, but many individuals are giving it a go, having read in the newspapers about the amount of alcohol that can be brought back to this country.

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Sometimes Customs and Excise officers come across the vehicles involved after police have stopped them just outside Dover because they are overloaded. People are so greedy that they fill the vans that they have hired, or their own Transits, with as much alcohol as possible.
I saw one boat arrive at Dover and watched the passengers disembark. Customs officers stopped two Transits, both of which were packed with alcohol. One driver trotted out the old excuse that it was "for Christmas", but all the alcohol was taken out of the van. I thought that I was generous and that my family liked to drink, but either that man's family consisted of about 200 people or he was very generous indeed, and his family would remain inebriated throughout the Christmas period and probably into March.
I did not accept that excuse, and neither did the Customs officers, but they did not have anything to go on until they found a shopping list in the van. It would otherwise have been difficult for them to prove that that person had not imported the alcohol for his own consumption. I think that they are doing a superb job, and would be loth to think that their numbers will be reduced at ports of entry.
Harmonisation of alcohol duties is a possible solution to the problem: it might remove the incentive to load up in France. I also support the idea—mentioned by the Chancellor—of initiating more high-tech methods of detection, such as profiling. As the authorities know what sort of people are smuggling alcohol, it should be possible to build up a dossier and subsequently to stop them from doing so.
We should, however, ensure that customs officers remain at the ports of entry. The channel tunnel now provides an extra route for those who wish to bring in alcohol, and officers will be switched to the tunnel to deal with that problem. More people than ever will travel to France—especially now that Christmas is coming—and I hate to hazard a guess at what may happen. If 1 million pints a day are coming in now, the amount will be that much more in 12 months' time unless we ensure that enough Customs officers are provided to prevent the current widespread smuggling.
We should also support the officers who are working in the United Kingdom, visiting pubs, clubs and car boot sales where they believe that trading is taking place. Some people have an image of an Arthur Daley type who nips across to Calais, brings back a bit of booze and sells it to his neighbours. There is nothing wrong with that, they think. But the problem is much larger.
Our Customs and Excise officers should liaise more with their French counterparts, sharing information, so that they can exercise more intelligence in stopping heavy goods vehicles that they see loading with pallets of alcohol. Obviously they cannot stop every vehicle, as I saw when I watched the flood of vehicles coming off that ferry, but I think that more should be stopped. If people thought that they had more chance of being stopped, they would be deterred.
Much has been said this evening about the Budget, and the second Budget. Some hon. Members believe that we are storing up tax cuts for the next Budget and the one after that. I hope that that is true, because in 1992 I was elected as a member of a Conservative party that supported low tax rates. I hope that, as the economy grows and we have the capacity to cut taxes, we shall do so. I shall look carefully to see which Lobby Opposition
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Members enter tonight, for that is the clear blue water that exists between the Labour party—and the Liberal Democrats—and the Conservatives: the Conservatives believe in lower taxes.
I hope that the Chancellor will consider the specific problem of Customs and Excise. We must say no to the bootlegger's charter and the stripping of Christmas beer money from British tills—indeed, to the stripping of that money at all times of the year. We must say no to the loss of brewing jobs. We must tackle the problem head on: we cannot allow it to continue for another 12 months.
7.46 pm
Dr. John Reid: Following the speech of the hon. Member for Ribble Valley (Mr. Evans), I am tempted to say, "The case for the prosecution rests." I have never heard such a frank confession of what the Conservative party is up to. The hon. Gentleman made it absolutely plain that the Conservatives were taking money out of people's pockets in this year's Budget in order to give it back in next year's, in tax cuts. Let me say, with all respect to the hon. Gentleman, that as we approach Christmas I would not like to be a member of his family: I can imagine his children having their pocket money stopped in October or November, so that it could be given back to them on Christmas day in the guise of a generous gift.
I have come to treasure occasions such as this. Although the Chancellor shows the normal lack of substance and clarity, there are always one or two little jewels from Conservative Members for us to preserve in our memories for future reference. We heard two such gems today from the hon. Member for Croydon, South (Mr. Ottaway), who unfortunately is not present: I assume that he has gone to rest after his efforts to explain the Government's economic and fiscal strategy.
The hon. Gentleman said, "If it ain't broke, don't fix it." That was his comprehensive analytical explanation of the Government's failure to do anything in the Budget. I must say, again with all respect, that anyone who can look at the British economy—at the scattered ruins of our manufacturing industry, the piles of bodies on the unemployment register, the death of investment in all industry and the manufacturing deficit that has piled up for the first time in our industrial history—anyone who can look at those 15 years and say, "It ain't broke" will certainly not win first prize as observer of the year.
The second little gem from the hon. Gentleman took the form of advice. He quoted not the Chancellor, the Chief Secretary or the Prime Minister, but Oscar Wilde. He said, "As sure as eggs is eggs, only two things are certain under a Conservative Government." As predicted by Mr. Wilde, one was death and the other was taxation. Out of the mouths of the sucklings on the Conservative Benches comes the truth, dripped down to us in, perhaps, a moment of weakness or a sudden surge of honesty. Conservative Members are telling the British people that, as the next election approaches, if they want a prediction about taxation they should look not to a Prime Minister under pressure or the promises of a Chancellor, especially if it is raining and they are within 100 miles of Dudley, but to Oscar Wilde.
The Chancellor of the Exchequer has managed to combine fiscal ineptitude with political crisis. He has also led the Government into the worst political defeat over three decades of any Chancellor. In the face of that defeat,

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and against the background of the political mire through which he has dragged his already beleaguered leader, there was no hint of an apology this afternoon. There was no remorse. There was not even the cynical recognition that one would expect of a politician of the right hon. and learned Gentleman's depth of the political damage that he has done to himself and to his Prime Minister. Perhaps he does not regret the damage that he has done to the Prime Minister, but no doubt he regrets the political damage that he has done to himself.
The Chancellor seems not to understand how far he is distancing himself and the Conservative party from the majority of those outside the House. Even I am astonished at how the right hon. and learned Gentleman can turn a fiscal crisis into a political drama. Equally, I am astonished at how far he has separated himself from the British people, including his constituents.
I was surprised to receive a copy of last week's edition of the local newspaper in the Chancellor's constituency. With the indulgence of the House—the article is pertinent—I shall read the paragraph which is headed:
"No sign of boom for Rushcliffe's dressmakers."
It will become obvious why dressmakers are the small traders who have been selected. The article reads:
"The owner of a dressmaking shop which faces closure after 20 years has accused Chancellor and Rushcliffe MP Kenneth Clarke of being out of touch with his own constituency."
Even the dressmakers of Rushcliffe—not generally regarded as the most revolutionary vanguard of the proletariat—are apparently being forced towards protest in the local press by their own beloved Member, the Chancellor.
I am not sure of the relationship that the Chancellor has with dressmakers in Rushcliffe or why he has lost their confidence in particular, but it is a sign of how detached the right hon. and learned Gentleman is when his local newspaper is lambasting him on behalf of small business men and women and entrepreneurs, not industrial workers. I am talking of people who produce quality goods and artistic goods that the Chancellor deems to be a part of the centre of the dynamic new economy that he is creating.
I shall explain to the Chancellor why such a reaction comes from the dressmakers of Rushcliffe and from all thoughtful people throughout Britain to his political mistake over value added tax. Rejection was led by the Labour party, but it was fuelled, supported and sustained by people throughout the country of all political persuasions or of none because the Chancellor's proposals were unjust, because they did nothing to assist economic recovery and because they went entirely against the grain of the fair-mindedness of the British people.
The Budget and the appendix before us will do nothing to resolve the fundamental problems of the economy. That brings me again to the comment of the hon. Member for Croydon, South, that the economy "ain't broke".
What are the problems to which the Chancellor should have had regard in the Budget? They can be neatly summarised as the problem of the lack growth over the past 15 years—this year's growth will bring problems in its own wake—along with trade, tax, unemployment and investment problems over the same period.
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It must be remembered that the Conservative party formed a Government 15 years ago, but the Chancellor speaks as if he had only recently inherited power. He suggests that all the problems of taxation that he has inherited were written in the Book of Revelations and had nothing to do with him or his predecessors. The Government came to power promising that they would lighten the burden of taxation on the British people. They claimed that it has been levied on the backs of the people by interfering socialists and that they would sort it.
What is the result? This year, we are facing a tax burden on the typical family in Britain in 1995–96 of 36.1 per cent. of gross income. Last year it was 35 per cent. When the Government came to power it was 32.1 per cent. under the dreadful high-taxing Labour Government. The gross proportion of tax taken from the average family has increased by 4 per cent., and 4 per cent. of the original 32 per cent. is, in absolute terms, a 12.5 per cent. increase. That is the burden that has been placed on the average family. That is the result of the Government's efforts.
What was set out in the Budget to deal with the increasing burden of taxation? The Chancellor retained VAT on fuel. He was forced under pressure from the Labour party, from people throughout the country and even from his fifth column—perhaps we should call it the eighth column—to abandon the proposed increase. As I have said, he retained the rate of VAT on fuel which was imposed last year. He pressed ahead with the seven new taxes that were introduced in last year's Budget. In addition to the already record levels and proportions of income that are taken in taxation—last year it was 35 per cent.—seven individual taxes were introduced, to increase the burden on the average family by £360 a year or about £7 a week. The VAT proposals in last year's Budget will add another £80 a year to the average tax burden.
When Conservatives take the advice of the hon. Member for Ribble Valley and steal this year from Peter to give back next year to Peter, they had better take things back to where they were. They will have to return the equivalent of 7p in the pound in direct taxation. The British people would still ask, "Has it all been worth it?" A financial system cannot be worked by mirrors, but that is what the Chancellor is trying to do.
A reallocation of taxation is taking place. The Chancellor is hooked on VAT; he is a VAT addict. He stood at the Dispatch Box agonising about the decisions that he had to take to increase taxation on the purchase of goods. We were deeply moved. The right hon. and learned Gentleman would have brought a tear to a glass eye. He told us how agonised he was. If, however, he were given the choice of taking agonising decisions on VAT increases or increasing indirect taxation by 1p, he would certainly take the first course. The right hon. and learned Gentleman's strategy is to build up a war chest of direct tax cuts, the contents of which will be funded by the moneys that he has taken from the British people in indirect taxation.
The Chancellor derided some of the suggestions that have been made by Opposition Members, yet he constantly asks us for suggestions. He constantly demands that my hon. Friend the Member for Dunfermline, East (Mr. Brown) produces solutions, only to deride them. He derided the suggestion that the Government should impose a windfall tax only this afternoon. I recall that two Budgets ago he derided my hon. Friend for talking about loopholes. It emerged implicitly, and sometimes

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explicitly, during his Budget statement this year that the closing of loopholes has saved the Exchequer over £3,000 million. The loopholes that he claimed did not exist or could not be closed when they were talked about by Labour Members have now been closed, with a saving of £3,000 million. He claims that that is a measure of his financial prudence. The Chancellor has done nothing about taxation.
What about unemployment, the second problem? Unemployment is not only a social blight but an economic problem. By referring to unemployment's economic effects, I do not mean to undermine in any way its social consequences. Unemployment cannot be described by a graph on an economist's wall or by a chart in a bureaucrat's office. It is a living tragedy. Many of us have lived among it for a decade or more and Conservative Members are seeing the problem among their constituents and in their constituencies. In addition, however, unemployment is an economic waste.
When the Government took office, there were about 1 million unemployed people. There are now more than 2 million, despite more than 30 changes in the way in which unemployment is calculated. Even more important, when the Conservatives came to power in 1979, there were 340,000 long-term unemployed people; there are now more than 1 million.
The Government tell us that they have created more than 400,000 jobs but if we consider the number of people in employment—this shows how the statistics have been fiddled—we find that, since the bottom of the recession four years ago, employment has not increased by 400,000 but decreased by 440,000. The Chancellor of the Exchequer's genius has created a large hole somewhere in the Treasury with the disappearance of 800,000 jobs—the Government say that 400,000 jobs have been created but employment has decreased by about 400,000 according to the figures.
The Government's response to that in the Budget was a national insurance rebate of less than £10 a week. That will not begin to tackle the sort of problems faced by the long-term unemployed. We suggested a rebate of about £75 for employers who were willing to take on the long-term unemployed. The Government therefore offered nothing on employment growth, which has not increased.
What about housing and homelessness, which are not only social problems but the dynamo of the economy, especially in relation to the construction industry? No other sector of the economy would have a more catalytic effect on the rest of the economy than the construction industry.
The Chancellor's main concern during the Budget was not the fact that people were homeless and that we were not building houses but that housing benefit was out of control. Let us assume that his supposition is correct. Does not the fact that the Chancellor and his Treasury team should be surprised that housing benefit has increased because rents have gone up illustrate their naivety? Does not the fact that rents have gone up as a direct consequence of Government action explain how out of touch they are with the real world?
First, the Government withdrew subsidies on social housing, as a result of which social housing rents, especially council housing rents, went up by two, three and four times the rate of inflation. Secondly, the Government deregulated the private housing market. Thirdly, they created the economic conditions whereby
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the building industry was decimated. The Government prevented either private sector building or social building by refusing to release the receipts of council house sales.
Surely the Government, who are full of Adam Smith fans—the intellectuals who have studied the market and who festoon the Conservative Treasury team—should be able to work out that, if one reduces the number of houses, withdraws the social housing rent subsidy and deregulates private sector rents, the excess of demand over supply would probably lead to an increase in rents and, therefore, housing benefits. The Labour party recognised and predicted it. Its much maligned non-marketeers predicted exactly would happen.
The Government's solution in the Budget is not to build more houses, to reduce the imbalance between supply and demand or to create a catalyst in the economy by allowing local authorities to build more houses, but to penalise the victims of high rents who are suffering from deregulation of the private sector and the dearth of housing in the first place. Those people are the homeless, the about-to-be homeless and those who depend on Government benefit in the first place. It is a scandal of the first order.
Today, we had yet another budget opportunity and yet another opportunity was lost. Today, the Chancellor could and should have introduced a system of fair taxation. He should have ended tax abuse. The Government told us that there is no public interest in that or any flagrant abuse of the system on the same day as one member of Saatchi and Saatchi stands to benefit by £5 million from a share option system. The Government have a great deal of work to do to convince the British public. We should remember that Saatchi and Saatchi has presumably been paid £5 million for its tremendous foresight in declaring that, if any party other than the Conservative party were elected, we could expect tax rises. That failure of foresight while reaping the benefits of a £5 million share option only adds insult to injury.
The Government should have diminished tax privilege, abolished the tax on fuel, introduced measures to tackle unemployment and encouraged local authorities to build homes with capital receipts by phasing them in. The Government should have reformed the benefit system to encourage employers to take on long-term unemployed people and introduced a meaningful national insurance rebate. They should have changed the 21-hour rule for the long-term unemployed. They should have offered incentives for that.
The Government should have followed the policy of incentives for action and investment proposed by Labour. They should have discussed, proposed and thought about new, improved initiatives for public-private partnership. They should have tackled the real challenges and opportunities for the Post Office by developing commercial freedom in public ownership. I think that the hon. Member for Ribble Valley said that he received a letter from Norway.
Mr. Nigel Evans: NORWEB.
Dr. Reid: I beg the hon. Gentleman's pardon. At least we all have the satisfaction of knowing that we paid for the postage on the letter. Presumably he received it yesterday, but he said that it was dated 9 December. Even at the peak Christmas season, the Post Office—that efficient, publicly owned service—is delivering letters to Conservative Members within three days. If "it ain't broke", why did the Government want to fix it? Why

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could they not develop commercial freedoms and allow the Post Office to live in balanced public ownership but with private investment?
The Government should have introduced proposals to help small businesses, to promote innovation and to improve regional investment. There was none of that in the Chancellor's speech and he has had not one but two goes at it this year alone. There is nothing constructive in the proposals. I return to the quotation to which I referred earlier—that jewel from the hon. Member for Croydon, South, who said, "If it ain't broke, why fix it?" That little gem was an attempt to justify what effectively has been a do-nothing Budget or, certainly, a do-nothing-good Budget.
In my previous speech, I mentioned that this was, in a sense, a Government in waiting. I said that the Foreign Secretary was waiting for his blessed retirement, that the President of the Board of Trade was waiting for the call and that the Secretary of State for Employment was waiting for his opportunity. That is how they have appeared throughout the whole economic shambles, paralysed by inaction and inventing a new ideology based not on Oscar Wilde, who was mentioned earlier, but probably on Dickens—a Majorism-Micawberism based on the principle that something will turn up. However, nothing has turned up or is likely to turn up. If the Government continue to wait, they will become the only Government in history to have stayed a Government-in-waiting after they have been elected.
The Government may wait but they will not suffer the effects of their inability to act and their lack of strategy and economic foresight. Nor is it Conservative Members who will suffer because they are guaranteed an income for as long as the Government continue in power—but no longer. The people who really suffer are those outside, not only the unemployed, the homeless and the socially deprived but the business men and women who are prepared to play their part by risking and investing their labour and their time if the Government were prepared to do the same.
Those people are being let down by the Government more than the House has been let down. For as long as the Government continue on that path, those people will ultimately be the judges, and I very much doubt that their judgment will be other than the harshest when the time comes.
8.10 pm
Mrs. Jacqui Lait: I listened to much of the debate on the Budget last week and the week before and to most of the debate this evening. The dominant impression that I received is that our public finances are in apple-pie order, so we can spend every ha'penny that we can get our hands on, a notion exemplified by many of the Opposition's contributions tonight. The Liberal party's spokesman, the hon. Member for Gordon (Mr. Bruce), seemed to think that we had plenty of money and he was planning to spend it on a range of usually woolly Liberal ideas. In fact, we have heard a list of ways to spend money that we do not have.
Only when we can make it clear to the Opposition parties that the whole purpose of the austerity that we have had to inflict in the past couple of years was to ensure that our economy grows and becomes a good solid
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basis for expansion will we be able to achieve what we happily admit is our goal—to cut taxes so that people have more choice as to how they spend their income. That is what we are all working very hard to achieve.
It was interesting to learn that the hon. Member for Dunfermline, East (Mr. Brown) clearly cannot differentiate between the increased income that is derived from income tax and value added tax in an expanding economy and increased rates of tax. That would disturb me greatly if he had any pretensions to becoming Chancellor of the Exchequer.
The hon. Gentleman set out to describe the perfect entrepreneur to be rewarded through our economic system. He said that it should be a man of vision, someone who creates jobs, is successful and who exports. He described perfectly Maurice Saatchi who, with his brother, set up and for many years ran the most successful advertising agency in the world. It went through a bad patch but has now recovered and that man should be rewarded and be able to reap the benefits of his own skills. That the Opposition are still censorious about such achievements gives me great cause for concern and reminds me of the famous saying about the Bourbons to the effect that they have forgotten nothing and learnt nothing.
One of the great strengths of the Budget this year and last year was the determination to ensure that inflation should never again ruin our economy. It has paid off. We have very low inflation and, consequently, an expanding export market and a recovery that many of us could only have dreamed of. The conditions are now parallel to those which allowed the German economy to become one of the strongest in the world after the second world war and the deutschmark to take over the dominant role in world trade once occupied by the pound. We have managed to create those conditions in the United Kingdom.
It was interesting to learn that at Essen at the weekend one of the Commission's officials said that, should we ever wish to adopt a single currency, on current projections only two countries would make it—one was Germany and the other was the United Kingdom, and our finances are in better nick than the Germans'. We have created the right conditions and we must hang on to them.
We must encourage our manufacturing and export sector. Many of our services also make a great deal of money from exports and should not be deprived of the opportunity to do so. We must ensure that that sector drives our economy and continues to keep it on course.
In the past, any expansion in our economy has come through the housing market. We have driven up housing prices and the demand for consumer durables, which have had to be imported. We have thereby drained any strength from our economic recovery. Sad and difficult though it might be, the housing market remains depressed. There are many reasons for that, but one that is rarely dealt with is the fundamental change in demography, which will in the long term ensure that house prices remain steady.
We have an aging population and most of us own our own homes. There is no longer such a demand for housing to buy. When parents die, the family house is no longer occupied and owned by the children, but goes on the market for sale and resale, thereby meeting the existing demand. That demand matches supply, so there will not be a significant increase in house prices for a long time. That may be difficult, but it is as it should be. It is another factor in the effectiveness of the German economy.

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I am conscious of the fact that this is the second time that I shall have detained the House on the same topic, but smuggling concerns me greatly. I shall try not to repeat what I said in the Budget debate or what some colleagues and Opposition Members have said about it. I understand entirely why the Chancellor had to do what he has done but, as someone said on the radio, we have given smugglers a pay rise. I shall consider the issue under three headings.
First, I clearly have a constituency interest in smuggling. Any Member of Parliament with a constituency on the south coast who denies that there is a problem with smuggling is not in touch with his constituents. As hon. Members have said, smuggling extends beyond the south coast, but it is having an adverse effect on many small businesses there, some of which have been struggling to keep going.
The second reason why I am so concerned about smuggling is that it undermines the rule of law, and the third is related to health. Let me cite some examples, other than those that we have already heard, of the extent of smuggling.
The hon. Member for Workington (Mr. Campbell-Savours) gave a very elegant exposition of the problem as he sees it, and I cannot disagree with him. In one sense, I have some sympathy with the private enterprise shown by smugglers. There is a well-known character in my constituency who lives on social security benefits. Once a week he takes his backpack, gets on the ferry from Ramsgate to Belgium, goes to a tobacconist where his order is waiting for him, puts it in his rucksack, gets the same ferry home and makes a profit of £150 a week.
I do not blame him. We are handing people profits. In my heart, I find it very difficult to say that that man should not commit such an act. Indeed, there are many other cases where one has tremendous sympathy with the opportunity being presented. We wish to create a nation of entrepreneurs. We are doing it. Unfortunately, we are doing it through them having to break the law.
Mr. Thomas Graham: I do not wish to take up much of the hon.Lady's time, but is she aware that, in Scotland, we have a big coastline and, not long ago, smugglers trying to smuggle in cocaine and marijuana were found? Does she also realise that the Customs and Excise service is being cut, and we shall not have the same number of people trying to defend our coast from the smuggling of cocaine and other drugs?
Mrs. Lait: If the hon. Gentleman cares to listen to the rest of my speech, he will hear that I have reached the conclusion that, fundamentally, prevention of smuggling is not the answer.
When it comes to alcohol, many people have talked about the beer smuggling that goes on. In fact, Shepherd Neame, one of the Kent brewers, has told me that it is brewing an extra 1 million pints a year, which it sends to Calais—99 per cent. of which catches the next boat back. However sensible a commercial decision that is, there is something faintly ludicrous in Shepherd Neame doing that. The brewer, however, makes the sensible commercial point that, of course, its beer no longer stays in Kent. It is getting better known throughout the United Kingdom. So, commercially, Shepherd Neame is making
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a much bigger impact than it would if it remained a small regional brewer in Kent. However, is that the way in which we wish to go?
I am not aware that any hon. Member has mentioned that in the UK, especially in the south, there is an increasing number—there was an increasing number—of English vineyards making increasingly better wine, which is quite drinkable and very drinkable in many cases. Those vineyards were some of the very first businesses to be hit after the creation of the single market.
One of the areas in which they specialised was vineyard-gate sales. Those disappeared because people were going across to France. I accept that the making of English wine will never be a dominant industry as it is in France and Germany, but I applaud the English vineyards and I drink their wine. It is very hard for them to have to cope with the increased amount of wine that comes into the country and hits their market quite directly. In fact, I know that they, too, have tried to set up their own wine-selling operation in France to bring wine back.
We need to look at the practicality of what is happening in the smuggling world in a legal context. One of my fundamental worries, quite apart from my parochial concern, is about the undermining of the rule of law. We find that there is not a tobacconist, a newsagent, a pub owner, a restaurateur, or a café owner who has not had somebody knocking at the back door asking whether he or she wanted cheap tobacco and cheap alcohol. I admire those who have the guts to say no, because they are facing commercial death. However, I have great sympathy with those who say, "Yes, I'll take it." If one is offered alcohol and tobacco at prices that one cannot match anywhere else in a recession, it is a very great temptation. We all know that human nature is fallible.
The issue goes further than that. It is easy, very easy, for honest traders to fall into temptation as well. The more available cheap tobacco and alcohol is, the easier it is to fall. I know that some of the tobacco companies are trying to make their cigarette packs smuggle-proof.
Mr. Jimmy Wray: Will the hon. Lady tell the House just what the solution to that problem is? The Government have had 16 years to do something about it, and they created the problem.
Mrs. Lait: I am afraid that the hon. Gentleman clearly has not been following the advent of the single market. The problem has arisen only in the past two years. If the hon. Gentleman bears with me, I shall get to the solution.
I do not think that hon. Members have yet appreciated the damage that smuggling is doing to the body politic and to the health of the nation. My hon. Friend the Member for Chislehurst (Mr. Sims) defended the high taxation of tobacco. I have every sympathy with that, as I pointed out to him at the time. I am a non-smoker. I loathe smoking and I find it exceedingly difficult when I address the problem.
I also find it very difficult when I deal with people in the health industry—I use that term in its wider sense—because I do not think that they have yet realised the nature of the problem. General practitioners have not yet seen the increase in the number of patients with respiratory diseases. It is too soon. They have not seen the increase in the number of patients with alcohol-related problems. Also, we are not yet finding schools picking up on youngsters who have access to cheap tobacco.

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Research needs to be conducted in those areas. We need also to change the mindset, to take into account availability and the damage that, in the long run, could be done by the excessive provision of cheap tobacco and alcohol.
So one of the things that the Department for Education and the Department of Health should do is institute research plans to check where the effects of that excessive provision are evident. I am sure that it will not be long before we start to pick up through GP surgeries signs of greater access to cheap tobacco and alcohol. We need to work closely with the medical profession to ensure that its mind-set is changed to take into account the damage that is being done, because there is no point in having a policy of high taxation on tobacco if it is being undermined by easy access to much cheaper stuff.
Opposition Members have been encouraging me to come up with the answer. I have already told them that prevention does not work. I come from the historic smuggling area of the Romney marsh, and the figures from the 18th century that I have discovered so far showed that the cost of prevention far outweighed the cost of any of the goods captured. We are seeing precisely the same happening today, even with the recent successes in Eastbourne and with the South Yorkshire miners. Prevention is not the most cost-effective way in which to deal with the problem and, while every little helps, it does not answer the problem.
I also endorse the remarks about the European Union tobacco subsidies. I take issue—slightly—with my hon. Friend the Member for Colchester, North (Mr. Jenkin). We had a debate in the House about whether Community tobacco was even used. I have to tell him that 100,000 tonnes of tobacco produced in the Community is being smoked in the Community. As we are all agreed that it is pretty poor stuff, think of the lungs of the people who are smoking it. We cannot glibly say that we do not use that tobacco. We do use it and we are spending about £1 billion a year on subsidising its production. I was glad that, in Essen, it was agreed that the entire common agricultural policy should be looked at. I hope that the first thing that is done is to get rid of that tobacco subsidy.
We also must take into account the point made so effectively by my right hon. Friend the Member for Shropshire, North (Mr. Biffen) about the clash of cultures between ourselves and the other members of the European Union. We have always had a policy of high taxation on tobacco and alcohol and low taxation on food. The opposite has been the case on the continent. It is too easy to say that we must harmonise. Those of us who believe in subsidiarity would never suggest that harmonisation is the answer. My right hon. and learned Friend the Chancellor used the term "approximation". I would say, "Take the profit out of smuggling." That is the way forward.
I accept that that is a long-term business because we must persuade countries that cheap tobacco and alcohol are bad for their populations. The medical profession in this country must work much more closely with its colleagues on the continent to make them recognise the damage that is being caused to the lungs and livers of the populations of those countries. That is a long-term proposal because we all know how resistant the medical
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profession is to change. However, I believe that the medical profession has a real responsibility to work with its colleagues on the other side of the channel.
Will the Treasury please stop considering excise duty as the mulch cow from which it can solve any problem? For the reasons that I have cited, for my constituents and anyone on the south coast, for the rule of law and the continuing good health of our population, I urge the Treasury to take its responsibilities seriously and to stop using excise duty as a way of solving all its problems as that wrecks the health of more people than I, and many hon. Members, would wish to take responsibility for.
Mr. Graham rose—
Mr. Deputy Speaker (Mr. Geoffrey Lofthouse): I call the hon. Member for Londonderry, East (Mr. Ross).
8.31 pm
Mr. William Ross: I apologise for speaking ahead of the hon. Member for Renfrew, West and Inverclyde (Mr. Graham), as I always like to listen to him. I promise to try to be around to hear what he has to say.
We are not constricted in this debate as we were in the last Budget debate when speeches were restricted to 10 minutes. For much of this afternoon, when I looked around the Chamber, I was reminded of the hymn which states:
"The tumult and the shouting dies;
The Captains and the Kings depart".
There is not the pressure to be present today to make our case. The bite has gone out of the debate. As a result, we have ventured into some very interesting highways and byways.
I listened to most folk this evening with a fair degree of interest. I was particularly interested in the Chancellor's comments. At one stage, he told us that the Government had taken the necessary steps to restore the nation's finances. When I think back to the absolute essential, which was September 1992, I recall that the Government were dragged kicking and screaming to the point where the necessary step was forced on them. Without that, we would still be in the dreadful situation that had pertained for a year or two before then.
I also listened with interest to the comments of Opposition Members. It appeared to me that, on occasion, there was a germ of convergence on the view that public debt had to be kept under control. When I think back to the debates to which I listened when I first became a Member, I believe that that convergence of view is very welcome.
This is a particularly interesting debate on the economy of the entire nation in view of what is happening in Belfast today and what is going to happen tomorrow with regard to the investment forum for Northern Ireland. I hope that that will have considerable effects down the years for my constituents.
I am grateful to the hon. Member for Redcar (Ms Mowlam), who kindly let me have a copy of the Labour party's views on what should be done in Northern Ireland. I assure her and her colleagues that we will read that document with great care. Whether or not we agree with it is a different matter, but we will read it with great care. The mere fact that we can think about such things is a sign that, even in Northern Ireland, we are approaching

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what passes for normal politics in the rest of the United Kingdom. That is a welcome change from that which normally gives us cause for concern.
With regard to the Northern Ireland economy, we are promised money from many sources in the coming months. My view is simple: those who call for that money to be spent on good works, community relations, training and all the rest of it should be told very quietly, "No, this is one off." When the money is spent, we want to see something on the ground. Whether that is a bridge, a new school or a new road is immaterial to me; we want something permanent in the infrastructure, or possibly in education in Northern Ireland, even at the level of primary or secondary schools, where much rebuilding is needed.
That money will not last. It is not normal government expenditure which will roll on for many years into the future. It is a short-term, one, two or three-year process and the money will then be gone. We want something permanent when the money is spent. We do not want it to be frittered away on projects which, no matter how worthy in themselves, should be met from normal government expenditure over a longer period. My party will give the Government its views on how those extra sums should be spent on very worthy things which should be done and which we believe should be carried into effect as speedily as possible.
In the first Budget debate, I referred to the consequences for rural dwellers of the rising cost of motoring. I suppose that I could do worse than repeat what I said then. However, I must add to what I said by saying that, as so many people have no real alternative and are absolutely stuck in their homes from morning to night if they do not have a vehicle and as the social and economic life of the countryside depends totally on the ownership of a car, and the more remote one is from a large conurbation the more essential that vehicle becomes, the further increase in the cost of transport fuel in this mini-Budget is most unwelcome.
Under the Rio convention, the Government have already committed themselves to steadily raising the cost of fuel for transport. That cannot be allowed to pass unchallenged and it cannot go on. If we allow it to continue, we will so damage the social fabric of our rural areas that social life as we know it will simply cease to exist. There is no alternative, whether we like it or not, to personal transport for much of the United Kingdom and for many millions of people who live here.
Where alternatives exist, such as the transport systems in large cities and suburban areas, let us by all means promote them and use them. Let us make them attractive to the people who use them and try to cut the number of personal vehicles that enter towns and cities every day. However, we must not forget the very real problems and concerns of rural dwellers in that respect.
The hon. Member for Hastings and Rye (Mrs. Lait) and others referred to some of the problems that have arisen as a result of the increase in duty on alcohol and tobacco. Our experience in Northern Ireland, especially with regard to the tobacco and cigarette manufacturing industry there, is that increases in taxation on tobacco have the unwelcome effect of sucking in legal imports, never mind the illegal imports which are exercising the minds of hon. Members who represent the south-east of England and further afield.
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A balance must be struck in the new borderless Europe. The right hon. Member for Shropshire, North (Mr. Biffen) drew attention to the underlying reasons for some of the problems. However, we simply cannot go on allowing important sectors of the economy to be undermined or destroyed because we are so out of step with other countries. We need to exercise control over those matters to protect government revenue and the income and jobs of our constituents throughout the kingdom.
Much has been said about the smuggling of alcohol. I am one of those who believe that far too much alcohol is consumed in the western world, anyway, not least in the United Kingdom. Those of us who have encountered the effects of the excess consumption of alcohol and the utter misery that it has caused for many people would normally welcome the fact that it had become so pricey that most people could not afford it. I used to have a very simple view of pubs. I thought that they should be nationalised and then they would be bound to go broke and fail. Unfortunately, no Government have had the guts to go down that road, so a lot of people drink a lot of alcohol.
Mr. Graham: Hear, hear.
Mr. Ross: Scotland is infamous in that respect, but it is not the only place in the United Kingdom where alcohol is used to excess.
The subject of alcohol and tobacco smuggling draws my mind back a few years. I am sure that the Chief Secretary to the Treasury will recall the immense problem from which people in the car retail business in Northern Ireland have suffered for many years. I refer to the enormous problem of huge numbers of vehicles being imported from the Irish Republic on such a scale and for such a period as to wreck many legitimate businesses in Northern Ireland. The problem arose because of the manufacturers' pricing policy. They changed their prices to sell cars in each nation state. Different prices were paid for the same car in each nation state. Once one was able to import a car, one was able to reap the benefits. Manufacturers' pricing arrangements arose largely because of the different taxation arrangements.
The Government should explore whether they can persuade the manufacturers of beer and other alcoholic drinks to alter their prices in order to bring the matter under control. However, I suspect that, like the efforts to control the importation of cars and the resultant damage in Northern Ireland—they were quite ineffectual, and whatever the Government did was soon circumvented—anything that the Government do in respect of the importation and smuggling of alcohol and tobacco will be a waste of time.
The money is available, but, unless the Government are prepared to close the borders and to control them, they simply cannot control or destroy the trade which has been built up. The hon. Member for Hastings and Rye has told us the reason for that trade—there is money in it. Therefore, a lot of people will do it if there is a lot of money in it. Some of them must think that they have drawn six lottery numbers every Saturday, judging by the way that they are behaving.
The other matter to which I draw the attention of the Treasury team yet again is the tax on heavy fuel which is used for electricity generation. The Chief Secretary to the Treasury will recall that I mentioned previously that, until the Budget, Northern Ireland was paying 30 per cent. of the total tax on heavy fuel for electricity generation in the

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United Kingdom—£11.67 million last year. The increase in the Budget brought about an increase of £4.82 million, so we are now up to £17 million.
That is an extremely heavy burden on the small generation capacity in Northern Ireland. It must be dealt with, if not in the short term, certainly in the long term. I understand that that burden alone amounts to roughly 1p a unit on electricity in Northern Ireland. That is only one of two or three such measures in the pipeline.
Bearing in mind that there is a forum and various efforts to increase investment in Northern Ireland, when we tell people that electricity there is the dearest in the United Kingdom, it is a bit off-putting. The best interests of the United Kingdom are not served by such a burden on generation costs. Although I welcome the two interconnectors—one has been constructed and another is being constructed—they are only a help. In the long run, we must bring down our generation costs, and there is no short-term way of doing that other than by doing something about the tax on heavy oil.
The main matter is the amount of money that is raised by indirect taxation in the United Kingdom. The right hon. Member for Shropshire, North drew attention to the difference between our view and that of the rest of Europe. He said that there was a limit beyond which people simply would not go. I must tell the Treasury team that we have reached the limit of the money that we can extract from the population by means of indirect taxation. Indirect taxation is much beloved by the Conservatives, and one can understand why.
It is like a banker's order; once it is in place, it is very hard to remove, and one never thinks about it while paying it every day of one's life. But it is an onerous tax, because it applies to everyone. Of course, people on low incomes pay a larger proportion of their income in indirect taxation than do those on higher incomes. The Government have had to resort to increased benefits for those people, thereby increasing the social security bill.
I should have thought that it was self-evident that, whenever taxation reached the point at which the Government had to compensate from tax, something was going far wrong and it was time to go back to basics and take a long, hard look at how they were trying to raise tax. Therefore, we need to reconsider the relationship of high taxation to the social security benefit entitlement system; we might then discover that lowering such taxes will lead to a lower bill for social security benefits. That would always be a help.
In the previous debate on such matters, I drew attention to my party's view that, although we should be absolutely adamant that we will not tax essentials that people need every day—fuel is clearly regarded by the population as one of them—that is not the whole story. We have a high public sector borrowing requirement. It is coming down again. Much of the drop in the requirement this year is as a result of more people being back at work, the fall in inflation and the fall in interest rates. That is very welcome, because it lays a long-term, sound foundation. However, if there is a sudden large rise in the public deficit for a year or two, surely the only honest way to deal with that is to put up income tax. It is the most flexible tax of all.
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If, instead of trying to put 17.5 per cent. VAT on fuel, the Government had stuck 3p on income tax, that would have been mighty unpopular, but it would have been honest. The Government would have received the revenue immediately, and that would have been welcome. The pain would have been felt immediately, and people would have said, "You are the lot who did it, and you promised not to do it." Perhaps that is a good reason for not doing it, but the alternative has turned out to be even worse. Furthermore, there would have been no recycling of the complaint; the matter would have been over and done with.
Surely one of the great lessons of VAT on domestic fuel is that, if the Government are going to tax, they should get it over and done with, instead of having six or seven bites at the bitter lemon. It does not get any nicer; it just allows people more time to think about how they will beat the Government, as they will eventually do. An increase in income tax is over and done with in one fell swoop and can be easily reversed when conditions allow.
I wonder whether the Government have pondered in the last week or two what the situation would have been if, instead of putting 3p on income tax to raise the £5 billion they need, they had put on 4p or 5p. They would have been in a wonderful position come next December. They could have taken 4p from income tax without being any worse off and they would have received the plaudits of the entire country for fulfilling their election promises by reversing unfortunate taxation measures.
The Government could have been in a much happier position in the run-up to the next general election. As a result of the decision taken in the House on VAT on fuel, the Chancellor was freed from that massive millstone. I suspect that, when he looks back in three months or six months, he will realise how fortunate the Government were to have been defeated. The matter will not return to haunt them.
Tax that is imposed to meet an immediate need should be able to be reversed easily and quickly. That leads me to question why the Government tried to increase VAT on fuel. It can only mean that they believe that they will need considerable revenue for a long time. They opted for a tax with long-term consequences which is difficult to reverse. For that reason, I fear that the Government do not expect to be out of the woods for some time; therefore, they are laying the foundations for sound public finances at the time of the next election. When that time comes, I hope that we will have seen a huge reduction in the PSBR, and that we will be close to repaying public sector debt.
8.51 pm
Mr. David Lidington: The test for this Budget is the extent to which it equips the British economy to cope with the dramatic and turbulent changes being experienced not just by the United Kingdom but by the entire industrialised world. The pressures on our economic policy making derive from two immensely powerful forces: technological change and international competition.
The hon. Member for Londonderry, East (Mr. Ross) began his speech by quoting from Kipling's "Recessional". If my memory serves me correctly, a later verse reads:
"Lo, all our pomp of yesterday
Is one with Nineveh and Tyre."

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Western nations have become used to material prosperity, high personal living standards and a standard of public services of which our grandparents would scarcely have dared to dream. In the face of competition from the far east and Latin America, if we are not careful we shall find the expectations with which we have grown up undercut by a very harsh economic reality.
The second great force for change is technology, which affects not only the manufacturing sector but also service provision. There are constant reports of redundancies in banks and building societies. Big employers in my constituency, such as Equitable Life, grapple daily with the fact that machines can do jobs more efficiently and with fewer mistakes than people can.
Those pressures will not go away. The test of our economic policy must be whether, in the face of that turbulence, the policies announced by the Chancellor of the Exchequer will help British companies to sell their goods and services to customers in this nation and throughout the world. In the end, that is the only way to ensure sustained growth and secure jobs. It is the only way to provide high personal living standards and the wealth to spend on the schools, hospitals and railways that hon. Members on both sides of the House and thousands of our constituents want.
The Government must look wider than the Budget in addressing those problems. We do not have to accept entirely the analysis of an historian like Correlli Barnett to appreciate that the British economy has deep-rooted problems which must be tackled through a range of policies, and not solely by the economic levers available to a Chancellor of the Exchequer. I am convinced that our hopes of creating wealth and increasing living standards critically depend upon policies of sound money, low inflation and controls on Government borrowing and spending. Those economic measures alone will not be sufficient to achieve our aims, but they are necessary elements of our continued future prosperity.
That is why, whatever quibble I may have with the particulars of the Chancellor's package, he has my wholehearted backing for his top priority of getting public finances in order and keeping them in order—even if my colleagues and I must accept the necessity of following policies which in more propitious circumstances we would have preferred not to see enacted.
What I find depressing about Labour Members' speeches is that they fail to grasp the scale of the present problems confronting our country and to advocate persuasive, economically literate solutions to those problems. Unemployment in my constituency is still far too high, but it is falling. Manufacturing industry, particularly exporting businesses, has done well. In a depressed domestic market, the Hoselock company has thrived in overseas markets, winning new customers and bringing profits to this country.
Retailers, particularly small independent retailers, and construction businesses are also finding life very tough. The alternative strategies advocated by our critics produce specious, attractive-sounding measures which in practice would damage those sectors of the economy that they say they wish to assist. That can be seen most of all in their demands for spending. Usually, those demands are hidden because of the Labour Front-Bench team's efforts to keep them under some sort of control at least for a couple of years.
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The pressures for additional spending and borrowing are there all the time, as we heard from the hon. Member for Motherwell, North (Dr. Reid), who mentioned the need to allow local authorities to spend more than their capital receipts. During the last general election campaign, even Labour party Treasury spokesmen admitted that such a policy change would inevitably bring about an increase in public borrowing. In today's circumstances, that would increase the present upward pressure on interest rates. Such pressure is potentially damaging for the retail and construction sectors, which are already the slowest to benefit from the economic recovery.
Despite the advocacy of the hon. Member for Londonderry, East (Mr. Ross), I am not persuaded of the need for further—
Mr. Wray: Does the hon. Gentleman agree that, under the Public Health Act 1897, local authorities have a responsibility to bring their houses up to a tolerable standard so that they can house people? How are we to clear the homeless queues if the Government will not allow those authorities to spend their capital receipts?
Mr. Lidington: The hon. Gentleman would benefit from studying the Conservative manifesto commitment on housing and the record. During the past two years, through our grants to housing associations, we have secured a greater increase in social rented housing provision than we thought possible at the last general election. That is the practical policy for securing better housing standards that the Conservative Government are pursuing.
The hon. Member for Londonderry, East said that an increase in income tax would be preferable to increases in direct taxation. I am not persuaded by his argument, for two reasons. First, the disincentives are obvious—especially for people with earnings around the tax thresholds—and we want to encourage people to take on work rather than rely on benefits. Secondly, in the longer term the labour market is moving towards more self-employment. More people will have a portfolio of occupations, rather than one job with one employer for 30 years. In those circumstances, it is even possible that income tax will become a less predictable and reliable source of revenue for the Treasury and Government spending. For those reasons, the Chancellor was right to avoid further increases in direct taxation last week.
On tobacco and petrol, I share the view of my hon. Friend the Member for Ribble Valley (Mr. Evans). It would be desirable for the European Union to phase out the indefensible subsidies for tobacco growing in southern Europe as quickly as possible.
I was less persuaded by the arguments of my hon. Friend the Member for Hastings and Rye (Mrs. Lait). As a non-smoker with 800 constituents who depend on the tobacco industry for their jobs, I take the view that smoking, to which I have never been attracted, is an activity that should be allowed to consenting adults in the privacy of their own homes. I therefore find myself unable to agree with my hon. Friend's ideas.
On road transport, I must mention to my hon. Friend the Chief Secretary the representations that I have received about excise duty and the changes in classification. I have received strong representations from farmers and the owners of small breakdown and road recovery businesses, saying that the way in which the changes have been framed bites hard on their businesses.

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I hope that Ministers will be prepared to consider that matter again when the Finance Bill comes before Parliament.
On the principle that the increase in petrol duty forms part of a sensible strategy to restrain car use, I have no quarrel with the Government. It causes difficulty to individuals, but if we are honest about the need to restrain private car use and if we are in adult politics, that is surely one of the measures that we must employ.
9.3 pm
Mr. Thomas Graham: I have listened to a number of speeches tonight, and it is sad that none of them has touched on a real aspect of local government which the people of Scotland need desperately. For the past three days, I have spent my time in the turmoil of flooded homes. Nothing has come from the Chancellor today, except further cuts in public expenditure—the public expenditure that the people of Scotland so desperately need.
I was in an elderly woman's home today. It was a beautiful home, but it had been absolutely wrecked and ruined by flood damage. The raging torrent of a river had burst through into her house and devastated her lifelong possessions. She was devastated, and she asked me what I could do to help her. I said that I would raise the matter in Parliament tonight and ask the Government to release money so that the Chancellor of the Exchequer could take the decision to allocate funds to that desperate emergency situation.
I have mentioned many occasions when certain things have hurt me, and have made me feel sorry for my constituents. There are hundreds upon hundreds of people in Scotland tonight—some 800 families—who do not know what Christmas will bring to them. They will not get Santa Claus coming through the door with a big bag of presents, because they saw their presents floating out of the door the other night. Yet the Government stand idly by and say that they can do nothing. They say that there are emergency powers, and that the Bellwin formula states that the Government pay 85 per cent. while the district council pays the other 15 per cent.
If the Government are to make further cuts in public expenditure, how will local government deal with an emergency such as the flooding? I plead with the Chancellor to release money tonight to deal with the flood disaster in Scotland and to assure my people—the people of Scotland—that they can live in comfort and face the new year with the same decency that Ministers will enjoy. Ministers know that they can go back to a warm home. They are well provided for, because Ministers have plenty of money. My constituents tonight do not know what will happen to them. They expect the Government to govern, and to look after the people, but the present Government abandon them.
I had a go at the Chancellor for reducing the price of champagne by 19p—that is literally mind-boggling—and increasing the price of whisky by 26p. A lot of the people affected by the flood work in the whisky industry, so they might be facing not just flood damage but further unemployment as a result of the measures that the Chancellor has taken. In France, of course, people will be over the moon, because they will be getting the jobs.
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I am quite sure that the Champagne Charlies in London will be well looked after. The Chancellor looks after his friends in the City and makes sure that they can bevvy champagne until it bubbles out of their earholes. But they keep punishing the workers and they create huge unemployment in Scotland and the rest of Britain.
I know Scotland well, but I also know England well. The rural communities in both countries are now to be punished by the increase in the price of petrol and diesel. The Government do not seem to think about that, despite the fact that they have destroyed rural bus services and are now destroying rural train services.
After nearly 16 years in power—the Chief Secretary should hang his head in shame—the Government have made the country nearly bankrupt, and they have destroyed businesses by the million.
Mr. Wray: The Government are bankrupt.
Mr. Graham: My hon. Friend is right. We are now approaching Christmas, but what a bleak Christmas it will be for millions of our people and for the pensioners facing the 8 per cent. VAT on fuel.
The other night—after pressure from Opposition Members and one or two abstentions—the Government had to drop the proposal to increase the VAT to 17.5 per cent. I was delighted that Members of the House combined to achieve that, but many hon. Members seem not to realise that the people we look after and represent—the elderly, the disabled, the unemployed and the low paid—demand that the 8 per cent. VAT on fuel should also be dropped. They want a sensible Budget which does not hurt the poor and which starts to take something off the immensely rich whom the Tory Government have created.
The Government have created a division so enormous that it is like the man in the moon. One individual has won £17.5 million in the lottery while hundreds of my constituents face a bleak and horrifying Christmas because the Prime Minister does not know whether to be Mr. Scrooge or Mr. Misery. He should take the opportunity to support the Opposition today and to become Santa Claus and give folk some hope for the future.
The best hope that we have is to burn 16 candles to mark the 16 years and ensure that there is a general election. I should be happy to burn all those candles and to see the end of the Government. I hope that 1995 will indeed see the end of this miserable—aye, very, very, miserable—Government.
9.10 pm
Mr. Andrew Smith: My hon. Friend the Member for Renfrew, West and Inverclyde (Mr. Graham) could, unfortunately, speak but briefly, but he more than compensated for that with the passion with which he pleaded for the sake of his constituents. Those constituents must be extremely proud of him for the way in which he has spoken up for Scotland, which has been affected so awfully by floods. Let us hope that his pleas have been heard by the Government.
The debate started with an extraordinary admission—perhaps it should not be surprising—from the Chancellor, who refused to give any guarantee to my hon. Friend the Member for Dunfermline, East (Mr. Brown) that he would

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not extend VAT further. He was pressed on that several times, but he absolutely refused to give that guarantee. All hon. Members will have heard his refusal.
He then offered us the assurance that VAT would not be extended without primary legislation. That promise lasted all of four minutes, because we were then confronted with the resolution on VAT on transport, now before the House, in which the right hon. and learned Gentleman proposes to do just that. The Opposition were unconvinced by the Chancellor's assurance, and we will press our amendment to a vote. That amendment would greatly improve the House's control over the Government's addiction to extending VAT.
One simple question has not been answered by the Government. If the measures before us are right, why were they not included in the original Budget? The Chancellor and the Prime Minister could have spared us a lot of bother by getting it right the first time. We could put that question round the other way. Before the hon. Member for Croydon, South (Mr. Ottaway) predicted a massive Conservative defeat at the Dudley, West by-election—his prediction is certainly accurate—he said that he believed that his hon. Friends preferred the original version of the Budget. Judging from the way in which they voted on Tuesday, it is clear that that majority preferred the original version—something that we will have cause to remind their electorate of between now and the next general election.
We must ask why the Prime Minister did not force the original Budget through, as he could have done, by making it a vote of confidence. Three possible explanations can be offered, each of which is profoundly damaging for the Government. The first is the cock-up theory, according to which those on the Government Treasury Bench were so incompetent that they thought all along that they had the vote on VAT in the bag. They did not believe that they had to use the confidence threat even when defeat stared them in the face.
They saw the danger too late and put the Chancellor up to the tawdry and ultimately self-defeating farce of Tuesday's winding-up speech when he brandished £100 million worth of baubles at his Back Benchers 10 minutes before the vote like some second-rate department store Santa Claus. That is no way to carry on with the nation's finances or to run a Government. The House will not forget the pathetic spectacle of the Chancellor casting around for prearranged interventions. He tried to appear clever, but it made him look all the more foolish when his cobbled-together last minute deal came thoroughly unstuck.
The second theory is that the Prime Minister feared that to make VAT a vote of confidence would not be enough to secure victory. If that is correct, his confidence in the Conservative party's will and ability to govern is beginning to match that of the country. I suppose one could say that, unlike the Chancellor, the Prime Minister did not underestimate the vindictiveness of some of his Back Benchers.
The third plausible and interesting theory is that, when the Prime Minister said that the vote on VAT would not be a vote of confidence, he was signalling that he could live with defeat on that. Having been turned over on it in Cabinet, he would let the House turn over the Chancellor. In view of all the talk about the Chancellor being strong
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and taking the lead over Europe, perhaps the Prime Minister thought that it was high time he had his come-uppance.
Whatever the reason, that was a humiliating defeat for the Government in general and for the Chancellor in particular. He was unable to deliver his side on what he had described only a week before as essential to the strategy of achieving economic recovery. The Government got into the mess because they simply did not listen. They thought that they could break their promises with impunity and that what people outside said did not matter.
The hon. Member for Chislehurst (Mr. Sims) said that the Chancellor's policy was defensible but poorly presented. I half agree with him: it was an indefensible policy poorly presented. One of the lessons of the past couple of weeks is that we must listen to what constituents say. I trust that Conservative Members will have heard at Christmas bazaars and senior citizens' dos what we have heard, but only a handful of them take any notice.
In his opening speech the Chancellor said that we are having a few too many Budget debates. I wonder whether he has had a bit more exposure over the past couple of weeks than is good for him and the Government. I was given a charming child's eye view of the Budget by a Conservative councillor who shall remain nameless. His small daughter came into the kitchen and said, "Mummy, mummy, there is something wrong with the television. The same man is on all the channels and I can't get rid of him." I think that the answer was, "Don't worry dear, we are working on it."
People say that it is great news that the 17.5 per cent. VAT on fuel was defeated. However, it is typical of the Government that when they are forced to stop hitting the average punter with one tax increase they hit him with six others. I shall deal with some of those increases. The Chancellor speaks of an extra 1p on a pint of beer, but that is not what the customer will have to pay. By the time profit, VAT and higher transport costs resulting from the increase in diesel fuel are added, it is more likely to be 3p per pint of bitter. For higher strength beers and lagers, the increase may be as high as 5p.
Others have quoted what the Chancellor said in the first of his Budget speeches in the autumn, but it bears repetition. He said:
"one of the most widely publicised other effects of the single market has been the increase in legitimate cross-border shopping in alcohol and tobacco, and in smuggling. Both of these have inevitably meant some loss of duty to Exchequer, pressures on the British drinks industry and some damage to British business. No Chancellor can remain unmoved in the face of this".—[Official Report, 29 November 1994; Vol. 250, c. 1095–96.]
He listened to the concerns of the industries, but, true to form for the present Government, it did not last. His listening was truly a nine-day wonder. Now he is back to putting up tax on beer. Let us make no mistake about it—it will be a jobs killer.
While there is room for argument over the magnitude of the effects, no one disputes that the present and growing extent of cross-channel shopping—both legal and illegal—is having a serious impact on the British drinks industry and in particular on distribution, off-licences, supermarkets and pubs where, in total, thousands of jobs may be at risk.

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Let me repeat the challenge put earlier by my hon. Friend the Member for Dunfermline, East. Will the Chief Secretary in his reply say how many jobs will be lost as a consequence of the Chancellor putting up the duty on beer? Faced with that threat, Opposition Members believe—as the Chancellor said he did two weeks ago—that now is not the time to be putting up duty on beer and widening the differential with France, and we shall vote against that increase tonight.
Many of the same arguments that have been spelt out by my hon. Friends apply to spirits, particularly to whisky, which is so important to jobs in Scotland. We shall also vote against that increase. The hon. Member for Chislehurst (Mr. Sims) argued against the increases as being damaging to jobs and undermining Britain's negotiating position within the European Union. Although he is not in his place, perhaps he will consider voting in line with the arguments he put forward.
With the further increases in petrol duty, the Chancellor is hitting many individuals and families of modest means harder than they reasonably could have expected. Presumably, the whole point of indicating last year that road fuel duties would increase on average by 5 per cent. in real terms was to give people some warning, but on top of the 2½p per litre in his main Budget two weeks ago, the further 1p will increase petrol costs by 10 per cent., which will hit many people very hard—the Automobile Association estimates, by £51 a year.
The hon. Member for Londonderry, East (Mr. Ross) spoke with feeling about the effects of that on his rural constituents and about the particular effects of the increase in duty on heavy fuel, which is used for electricity generation in Northern Ireland.
I shall say something about tobacco. The Chancellor's proposed increase of 6p on a packet of cigarettes on top of the 10p he announced in the Budget is not a change we intend to vote against this evening, recognising the importance of tobacco taxation in helping to cut smoking and the consequent benefits to health, but there are limits to how far the Chancellor can go in hitting smokers.
As my hon. Friend the Member for Workington (Mr. Campbell-Savours) spelt out, smuggling is increasing at an alarming rate. The hon. Member for Ribble Valley (Mr. Evans), drawing on his own commercial experience, protested at the possible loss of front-line customs officers. With smuggling increasing at such a rate, what are the Government doing cutting 500 front-line customs officers? It is absolutely disgraceful.
The hon. Member for Ribble Valley must have been as pained as we were to hear the hon. Member for Hastings and Rye (Mrs. Lait) praising the entrepreneurial instincts of smugglers. Her approach to solving the problem seemed to be to condemn a little less, research as little as possible and do nothing at all. It was a very unpersuasive argument. We are debating a serious issue which the Chancellor recognised, to the extent that he did not increase the duty on hand rolling tobacco, which is particularly prone to smuggling.
I shall now touch on the important issue of equity in relation to tobacco taxation. Given the social distribution of smokers, banging tax on cigarettes is one of the most regressive forms of taxation. A study was carried out earlier this year—we would all do well to take note of
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it—for the Policy Studies Institute, by Alan Marsh and Stephen McKay, funded by the Health Education Authority. It showed just how severe the effects now are. Looking at low-income families with children, it found that nearly three quarters, for example, of council tenants receiving means-tested benefits smoke, spending, on average, more than 14 per cent. of their net disposable income, or £1 in every £7 on tobacco.
We must remember when we vote these increases in the House that giving up smoking, laudable, important and good for us though it is, is certainly not easy. We must remember, too, the particular difficulties for the people who are addicted to tobacco and who are under all the pressures that struggling along in poverty brings. The effect of the Budget will be to take an extra £2 a week out of the already meagre budget of the poorest families. There will come a point at which the poverty effect on children of such families will begin to exceed even the ill health effect of their parents' smoking.
Mr. Graham: My hon. Friend will realise that there are people in my constituency tonight who, because of poverty, because of their very low income, cannot afford to insure their houses, and their houses are now damaged. We will have to pay a fortune to try to put these folk on the right path. That is what poverty inflicts.
Mr. Smith: My hon. Friend speaks with deep knowledge of his constituency. As well as their insurance premiums, which are likely to go up, those people will also have to pay the insurance premium tax as well.
I hope that the Chief Secretary will agree that, with such a big tax increase and with such seriously regressive effects, the Government should act to ensure that help is given to people on low incomes to give up smoking and that the Government should act now to ban tobacco advertising.
Although some hon. Members argued that the mini-Budget measures might be less unfair than the original Budget measures, they are, as my hon. Friend the Member for Warwickshire, North (Mr. O'Brien) pointed out, still unfair.
As the Government's political credibility was on the line and, indeed, was so very fragile, we can understand why the £1 billion had to be found. But there were fairer and better alternative ways in which to raise the money, which the Labour party spelt out—for example, tightening up on executive share options, not going ahead with the venture capital trusts, ending the enterprise investment scheme, ending tax relief on private medical insurance and raising a levy on the windfall profits of the privatised utilities, as spelt out by my hon. Friend the Member for Dunfermline, East earlier. Those measures would have been much fairer and would have added next to nothing to the retail prices index, whereas the Chancellor's measures in both the mini-budget and the original Budget put it up.
As my hon. Friend the Member for Motherwell, North (Dr. Reid) said in his effective contribution, the Labour party would put in place employment measures now to get people back to work and to cut the cost of keeping people unemployed, whereas the national insurance rebate comes comes into effect for the long-term unemployed only in April 1996, when they will have been unemployed for so very much longer.

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What of the Chief Secretary? Opening the Budget debate, he dismissed our VAT amendment as an "opportunistic wheeze."
"True Conservatives,"
he said,
"will not, I believe, cast their votes in the House to support Labour's procedural dirty tricks"—[Official Report, 30 November 1994; Vol. 250, c. 1238.]
It is a fine irony, is it not, that our victory and the victory of the people of this country has forced hint to eat those words and come back to the House to lay in front of us measures to put in place the very proposals about which he was so dismissive just a week ago? We must ask him whether he agrees with the Chancellor's refusal to give any guarantee not to extend VAT in future to food, children's clothes, transport and books. Will he give a guarantee not to extend VAT?
The fact is that Labour spoke for Britain in defeating the VAT increase last week. What is more, together with everyone in the House and the country who supported us, we struck a blow for fairness in taxation. However much it can be argued that the measures we are now discussing improve on the Chancellor's original Budget, they still hit middle and lower-income Britain.
It should be remembered that people are still experiencing the biggest tax increase in British history. At a time when living standards are already falling and real personal disposable incomes are lower than they were, on average, at the last general election, taxes are rising by an average of £800 this year. Conservative Members' constituents will not forget that, however much the Chancellor attempts to bribe them next year.
Mortgage payments are rising; rents are rising; car tax and insurance are rising; holiday insurance, holiday flights, petrol, beer and spirits are all rising. Only the price of champagne is coming down. What an indictment of the Government: they are hitting people with taxes left, right and centre, but cutting the cost of champagne.
One way or another, ordinary families are being hit, while at the same time the Chancellor is unveiling new tax avoidance devices for the super-rich. It is all part of the price that people are being forced to pay for Conservative broken promises—for the Government's unerring instinct for unfairness, and their economic incompetence. With this Budget, people have further proof of why they can never trust the Government on tax again. Labour's message to the people is clear and unequivocal: "We are on your side." As with the whole VAT campaign, we do not just talk about it; we act to change things.
The Government are wrong to underestimate the British people's instinct for fairness and their longing for competence. The people know that they will get neither fairness or competence from this Government, with their "wet night in Dudley" broken promises. It is to the Labour party that the people look for good government; to the Labour party that they look for fairness; to the Labour party that they look for economic policies that work.
This week, the people of Dudley, West will have an opportunity to show the way forward for Britain with Labour. They will show the way forward for Britain with Labour, and they will show the way out for this failed and unfair Conservative Government.
9.32 pm
The Chief Secretary to the Treasury (Mr. Jonathan Aitken): Far from eating any words, as the shadow Chief Secretary hopes, I am proud to stand by what I said last week. It is clear that the Opposition are still in a mood of opportunism and wheezing. My right hon. and learned Friend the Chancellor and I both regret the necessity for today's debate and are sorry that the package of measures introduced to remedy the hole that was blown in the public finances—
Mr. Andrew Smith rose—
Mr. Aitken: No, I shall not give way. Opportunistic wheeze No. 1 will not succeed.
This is very much a package of second choices, but just as the Government have accepted the will of the House—
Mr. Smith rose—
Mr. Aitken: Very well, I shall give way.
Mr. Smith: Is the Chief Secretary confirming that his first choice is still to impose VAT on fuel at 17.5 per cent?
Mr. Aitken: No; the Government have accepted the will of the House. Opposition Members would be wise to understand, however, that there is no such thing as a free rebellion on a Budget measure. That is the fundamental reason why the package contains second-choice measures that the Government would have preferred not to introduce, and it is why we have considerable sympathy with hon. Members on both sides of the House who have advanced arguments about aspects of the package. Other Ministers also originally sympathised with some of those arguments.
Mr. David Shaw: Talking of sympathy, will my right hon. Friend confirm that he and I—as Members of Parliament representing port constituencies—are very concerned about the impact of the rises in alcohol and tobacco duties? Will he also confirm that he and his colleagues will instruct Customs and Excise to ensure that, at every opportunity, anyone who seeks to evade alcohol or tobacco duty is prosecuted and that prosecutions are pursued fully in the courts?
Mr. Aitken: I certainly confirm that vigorous measures are being taken by Her Majesty's Customs, about which I shall say something a little later.
As I have said, we have accepted the will of the House. I am, however, slightly in the mood of the Irishman who in the famous story was giving directions to a stranger. He ends by saying, "But if I were you, I would not have started from here." Perhaps it would have been best if we had not started from where we now find ourselves, but we have—[Interruption.]—and so I shall respond to the various remarks of hon. Members on both sides of the House.
It has been a curiously muted debate, but one would not think so with the sudden chorus of noise that has suddenly manifested itself. The Opposition Benches were until recently notable for the absence of Opposition Members, and consequently their silence. The hon. Member for Londonderry, East (Mr. Ross) got it right when he quoted Kipling's "Recessional", saying

867
that it had been a question of whether the "tumult and the shouting" had died away and the "Captains and the Kings" had departed.
Most Labour Back-Bench Members departed for most of the afternoon, and it was a pretty soporific debate. The first soporific note was made in an intervention—not even a speech—by the right hon. Member for Ashton-under-Lyne (Mr. Sheldon), who seemed not to want the £1 billion or £1.5 billion replaced. He seemed to think that it was not necessary to do so.
The right hon. Gentleman's intervention reminded me of the story of an American senator who—
Mr. Sheldon: Will the Minister give way?
Mr. Aitken: Very well.
Mr. Sheldon: I was making the point that the Chancellor seems to be addicted to fine tuning. As soon as he sees £800 million, he wants to correct it. He could have done it in February. He could have done it in February after he had received further information during the passage of the Finance Bill. He could have done it at his leisure with a greater understanding of what was happening in the economy.
Mr. Aitken: I understood the point the first time round. The right hon. Gentleman's solution would have been to do nothing for a while, to be patient, to wait and to snooze. That would have meant that the uncertainty created by the hole that was blown in the Budget arithmetic would not have been replaced by the certainty of the markets and by the sound and sensible measures that my right hon. and learned Friend the Chancellor introduced.
A great deal of concentration during the debate was focused on the drinks industry. The topic was introduced first by the hon. Member for Gordon (Mr. Bruce), who made an eloquent plea for the Scotch whisky industry, and it was echoed by my hon. Friend the Member for Chislehurst (Mr. Sims). I was somewhat underwhelmed by the hon. Gentleman's plea. He had written to my right hon. and learned Friend the Chancellor on 7 December suggesting various ways in which he could put back the lost revenue following the defeat on the levying of additional VAT on fuel. He did not suggest letting off the Scotch whisky industry. In the eighth paragraph he suggested cuts in the drinking duty, or that they should be put back. He wrote one thing on 7 December and reversed it on the 15th. It is typical Liberal policy to say one thing on one pavement and another thing on another pavement.
Mr. Malcolm Bruce: The Chief Secretary is misreading and misrepresenting my letter. I was saying that he should have reversed the cut in champagne duty, which was introduced in the first Budget. That the Chancellor has chosen not to do.
Mr. Aitken: The hon. Gentleman is quoting from a letter that he has not written. I have his letter. There is no mention of champagne and no mention of Scotch whisky. It reads:
"The Chancellor should review the cuts"—
that is what the hon. Gentleman called them—
"in the drinking industry."
868
Several of my hon. Friends have referred in some detail to the problems that are faced by the drinks industry, not only as a result of added taxes but because of cross-border shopping and smuggling.
I represent a constituency that includes many people who work in and around the two large channel ports of Dover and Ramsgate. I am under no illusion—nor are my hon. Friends, including my hon. Friend the Member for Hastings and Rye (Mrs. Lait)—about the severity of the effects of legal cross-border shopping and illegal smuggling rackets. The effects bear severely on many shops, pubs, wine markets and other businesses where livelihoods depend on alcohol and tobacco sales.
It is no great consolation for a small business man to be told that the loss of revenue to the taxpayer is lower than expected, but that happens to be true. The latest available figures to December 1993 suggest that a full year revenue loss estimated to be £250 million was running at only £200 million. There was a split of £130 million in taxes on alcohol and £70 million on tobacco. A loss of £65 million is estimated to be due to smuggling.
I do not underestimate the severity of the problem. I subscribe to the anecdotal evidence, but I have to deal with the factual and numerate evidence. Let us view the national picture. Revenue receipts from tobacco and alcohol sales—£6.5 billion for tobacco and £5 billion for alcohol—are up significantly, despite the losses from smuggling and cross-border shopping. The paradox is that the local publican, wine merchant and tobacconist are being hurt by the smugglers and cross-border shoppers—as are the vineyards to which my hon. Friend the Member for Hastings and Rye referred—even though national revenues are not so adversely affected.
Mr. John Townend: Will my right hon. Friend give way?
Mr. Aitken: No. I am sorry, but I have to press on because of the time.
The Government sympathise very much with those traders and that is why my right hon. and learned Friend's original Budget contained no proposals to increase duties on alcohol and provided for only small increases in duties on tobacco. We were forced, however, with great reluctance to impose the measures. I regret it, and my right hon. and learned Friend the Chancellor regrets it. We hope that perhaps one or two Opposition Members will start to regret it, too. We hope that all their scaremongering speeches about hypothermia deaths are recognised as falsehoods that cost jobs and cause business closures in the drinks and tobacconist sectors.
I should pick up on the point about solutions to the problem which were mentioned at various stages of the debate.
Mr. Alex Salmond rose—
Mr. Aitken: On the whole, I do not give way to hon. Members who have not been present in the debate.
The hon. Member for Workington (Mr. Campbell-Savours) came up with a bright scheme for harmonisation of tax regimes. The trouble is that the cost in revenue of harmonisation with, say, French rates will amount to between £3 billion and £4 billion, which

869
needs to be set against estimated bootlegging costs of some £65 million. Revenue loss of that magnitude would have to be made up elsewhere, with massive increases in other taxation.
My hon. Friend the Member for Croydon, South (Mr. Ottaway) made some good points on the need to be responsible in increasing interest rates. He said that it was right to increase them by 0.5 per cent., because the warning signs of inflation were there. There have been rises in the cost of raw materials and in commodity prices. My hon. Friend's view was that of my right hon. and learned Friend the Chancellor and that of the Governor of the Bank of England.
I deplored the speech of the hon. Member for Warwickshire, North (Mr. O'Brien), who said that the Chancellor had taken a complete panic measure, and that it was all due to Steady Eddie. The decision to raise interest rates on 7 December was taken on the basis of an assessment of the inflation outlook which had been considered carefully for some time. It reflected economic and political considerations. The Government are determined to take no risks with inflation. It was wrong for the hon. Gentleman to say what he did.
Mr. Mike O'Brien: I am grateful to the Chief Secretary for giving way. Is he trying to tell the House that the panic telephone calls just after the vote, whereby the meeting was brought forward by 45 minutes, had nothing to do with that vote? That beggars credibility. It was, of course, a panic measure and people are paying higher interest rates because the Chancellor made a bad judgment about being able to persuade the House to accept the proposal.
Mr. Aitken: The hon. Gentleman is talking ignorant nonsense. First, he should consider that, throughout the night after the vote, the international markets, including the Tokyo market, remained calm and steady because they were assured by my right hon. and learned Friend's statement at the Dispatch Box that evening. Secondly, the meeting was brought forward by some three quarters of an hour, but it was to do with an auction of gilts that was to take place at 10 o'clock. We wanted to make the announcement at the earliest possible time.
My hon. Friend the Member for Ribble Valley (Mr. Evans) concentrated on cross-channel smuggling and emphasised the need for a stronger and greater intelligence effort. I assure him that we shall increase the intelligence effort because, nowadays, the detection of smuggling is a game not of numbers of uniformed officers at ports but of impressive intelligence effort. That effort is already showing some good results and has achieved some considerable coups in catching smugglers. A major announcement was made only the other day.
I shall also respond to some points made by my hon. Friend the Member for Hastings and Rye, who produced a great deal of anecdotal evidence on smuggling. I was especially impressed by the story of her constituent who makes a regular £150 a week in that way. She said that she wished that the Government would not use excise duties as the milch cow. I assure her that we would much rather not have gone to those particular cows or those particular dairies, but there is no such thing as a free rebellion on a Budget vote and that is what we have to cope with.
870
I deal briefly with the speech of the hon. Member for Londonderry, East. I am glad that a voice from Northern Ireland was heard and that the hon. Gentleman mentioned the investment seminar on Northern Ireland, which was opened by my right hon. Friend the Prime Minister. The peace process grows steadily and quietly and, as it does so, the prosperity of Northern Ireland will grow with it. The inward investment record in Northern Ireland has already been good for many years. In the past five years, total inward investment from the United States has been £536 million. Some 10 per cent. of all employment in Northern Ireland is provided by American-owned companies, which shows that there is a good chance that the momentum will grow.
My hon. Friend the Member for Aylesbury (Mr. Lidington) made an excellent speech, in which he was right to warn us that international competition in technology could cause a revolution of falling expectations. He is right to alert us to the magnitude of these challenges but also to point out that we have record-breaking exports and inward investment and that we are a world trading nation and a world financial centre. These successes depend on sound financial judgment, our excellent supply side reforms and the growing success of Britain's economy, all of which are underpinned by the excellent Budget.
I deal now, as I have been longing to all evening, with the extraordinary speeches of the Opposition's spokesmen. As usual, at least half the speech made by the hon. Member for Dunfermline, East (Mr. Brown) was taken up with completely phoney proposals for taxes to fill the gap which he thinks could have been filled in a better way. We have already demolished his windfalls and his loopholes and I now want to do a demolition job on his share options proposal. He went on about tax avoidance and he attacked Lord Young, Sir John Nott and some poor man from PowerGen who had bought some share options in his company. I shall deal with Labour's continuous attack on share options, and the party might learn a thing or two.
The hon. Member for Dunfermline, East worked himself into a lather of indignation during his denunciation of share options. His thesis is that they are a scandal and a wicked windfall for the undeserving rich. He intends to raise £200 million in new taxation by abolishing them. I have three serious criticisms of the hon. Gentleman for his stance on share options.
The first criticism is the familiar one that the hon. Gentleman has got his sums completely wrong. He claims that £200 million could be saved by abolishing share options, which is a typical exaggeration. As my right hon. and learned Friend the Chancellor told the House on Thursday and today, the actual cost of such an abolition—even if one includes the spouses whom the hon. Gentleman invented—would be around £50 million, so he got his sums wrong by a multiplier of four, which is about par for the course for him and his voodoo mathematics.
My second criticism is that the hon. Gentleman has completely misunderstood his target. In any sensibly run company, share options are offered to and usually taken

871
up by key employees at all levels, including clerical staff,secretaries and junior and middle executives as well as company directors.
Mr. Gordon Brown: I was talking about executive share options.
Mr. Aitken: The hon. Gentleman is going to learn a thing or two tonight. I am glad that he is encouraging me.
The fundamental point is that it is a good practice, because share options give employees the chance to have a stake in the business in which they work. If their company does well, perhaps a few years later they can make a profit on their options. They have to pay capital gains tax, and in some circumstances they might have to pay income tax on them, but it is a way for them to receive a reward for their contribution to making the company in which they work a success. The Conservatives fully support fair share options schemes of the type that I have described. It is typical of the politics of envy of the Labour party that so many of its Front-Bench spokesmen denounce them as a scandal.
That brings me to my third criticism of Labour's attack on share options, which is its barefaced hypocrisy and humbug. I am now going to reveal something to the House, something about some prominent Labour supporters, close friends and advisers to the Leader of the Opposition, who have done extremely nicely out of a certain share option scheme and who have used their profits from those options in an extremely nice political way for the benefit of the leader of the Labour party. I stress that I am talking here about extremely nice people. They appear in columns with headlines such as, "Who's who on the new Socialist social list?" More recently, they have been appearing under headlines such as, "Blair challenged to reveal source of his £79,000 leadership campaign," or as The Independent on Sunday headlined it, "How London Weekend Television men funded Tony."
Those reports, which I see are making Opposition Front-Bench spokesmen uneasy—
Mr. Gordon Brown indicated dissent.
Mr. Aitken:—are all about three London Weekend Television men and their share options. First, there is Mr. Barry Cox, who is described in the press as "running the Blair show" and the "mastermind of fundraising". Secondly, there is the well-known broadcaster, Mr. Melvyn Bragg, who was quoted as saying, "It is quite flattering at my age to be called a Labour luvvie." Then there was Mr. Greg Dyke, who was last month's guest speaker at the annual dinner of Labour's Fabian Society.
Those three friends and advisers of the right hon. Member for Sedgefield (Mr. Blair), the leader of the Labour party, forked out most of the cash or fund-raised it to finance his £79,000 leadership election campaign. There is nothing wrong in that, although I can probably see somewhere a sour face being pulled by the right hon. Member for Derby, South (Mrs. Beckett), who had to run her leadership campaign on a shoestring budget of merely £17,000. The deputy leader had to run his campaign on an even shorter shoestring of £13,000. The one thing that those three former London Weekend Television
872
executives have in common, besides, of course, being good, down-to-earth socialists and good Blair men, is that they made millions out of share option schemes.
Mr. Barry Cox, who, as I was saying, runs the Blair show, made a profit of £1.2 million on his share options. Mr. Melvyn Bragg, the "Labour luvvie", made a profit of £2.2 million on his share options. That Fabian socialist, Mr. Greg Dyke, made £5.3 million profit on his share options. No doubt the shadow Chancellor had such instant media millionaires in mind when he ranted at the Labour party conference in Blackpool and said:
"I am serving notice on executive share option scrounging, on the something-for-nothing elite … the undeserving rich, who in pursuit of short-term gain, largely for themselves, have starved the country".
He may have added the words, if he had been truthful, "and they have fattened up the coffers of the Labour party".
But we Conservatives are not the party of the politics of envy, so we say, well, good luck to those instant media millionaires, even if their share option schemes seem to bear more than a passing resemblance to the national lottery. It brought them bigger and faster bucks than almost any other share option scheme in Britain because of some rather strange devices called golden handcuffs. Perhaps those golden handcuffs were the sort of thing—
Mr. Graham: Will the Minister give way?
Mr. Aitken: No.
Perhaps they were the sort of thing that the Leader of the Opposition had in mind when he replied—
Mr. Graham: Will the Minister give way?
Mr. Aitken: I hope someone will put some handcuffs on the hon. Gentleman. That would be helpful. Anyway, I am looking forward to seeing Labour's—[Interruption.]
Mr. Deputy Speaker (Mr. Michael Morris): Order. The House must settle down a little. I know that it is—
Mr. Aitken rose—
Mr. Deputy Speaker: Order. The right hon. Gentleman must obey the orders of the House as much as anybody and pay attention to the Chair.
Mr. Aitken: I can quite understand why the—
Mr. Salmond: On a point of order, Mr. Deputy Speaker. I am having—[Interruption.] I am having extreme difficulty in hearing. I could not make out whether the Minister was referring to the undeserving rich or the undeserving Ritz.
Mr. Deputy Speaker: That is not a matter for the Chair at all.
Mr. Aitken: I can see what the Labour party cannot stand about the interesting story that I have been telling about everyday Labour folk. It is what I think the House and the country cannot stand, either—the bare-faced humbug of a shadow Chancellor who has been trying to

873
make a sanctimonious scandal out of share options. Fair and legal share option schemes that are acceptable to the friends of the Leader of the Opposition should also be acceptable to the working business people of Britain. So let us have no more double-talk and double standards on taxation gimmicks such as windfalls and loopholes and share option schemes. They will not work. Taxing them will not raise serious revenue.
Mr. Gordon Brown: Will the Chief Secretary simply confirm that it will not be Government policy at any time to tax executive share options as income?
Mr. Aitken: In certain circumstances, share options are already taxed under income tax. That just shows how little the hon. Gentleman knows about it.
Mr. Brown: Will the right hon. Gentleman give way?
Mr. Aitken: No, I shall not give way a second time.
Being thoughtful for a moment, these exchanges show that there are perhaps two fault lines running through British politics at the moment: the unity gap on the Conservative Benches and the credibility gap in the Labour party. Both gaps are bad for the country.
Mr. Graham: Will the right hon. Gentleman give way?
Mr. Aitken: In the long run, when the general election comes around in two years' time, it will be Labour's credibility gap that will prove to be the greater and more enduring liability. The greatest and most depressing feature of our six days of debates on the Budget resolutions has been the complete absence of answers, let alone serious alternatives and policies, from the Opposition Front Bench.
As The Sunday Times said in its editorial last Sunday, in words which must have chilled the Opposition:
"A 39.5 Labour opinion poll lead will not last long if it rests on a policy vacuum."
What an incredible vacuum it is, and how cruelly Labour has been exposed in these debates. So much so that the national society for the prevention of cruelty to shadow Chancellors almost had to rush in the stretcher bearers last Thursday when my right hon. and learned Friend the Chancellor attacked the hon. Member for Dunfermline, East.
As everyone knows, my right hon. and learned Friend the Chancellor made mincemeat of the hon. Member for Dunfermline, East. He chopped him up into little pieces and finally held aloft to public ridicule the one and only remaining portion of his anatomy, which he called the hon. Gentleman's brass neck.
However, my right hon. and learned Friend understated his case. What we have on the Opposition Front Bench is not one brass neck, but a brass band of brass necks. They cannot play a tune. They do not understand the instruments of economic policy. Even their negative
874
noises of discord fall into embarrassed silence whenever they are asked serious questions about the economy.
For example, we can ask the following questions: do the Opposition think that the present and planned levels of borrowing are too high or too low? Would they put taxes up or down? Do they think that public spending is too high or too low? Will they give a figure to define the full employment that they so glibly promise—
Mr. Graham: Will the right hon. Gentleman give way on that point?
Mr. Aitken: No, I shall not give way.
Mr. Graham: On a point of order, Mr. Deputy Speaker.
Mr. Deputy Speaker: Order. The hon. Member for Renfrew, West and Inverclyde (Mr. Graham) has been leaping up and down for the past 12 minutes. It is clear that the Chief Secretary to the Treasury does not intend to give way.
Mr. Aitken: I have a couple more embarrassing questions. At what figure will the Opposition set the minimum weekly wage which they have undertaken to introduce? Will it be more or less than the £60 price of the Leader of the Opposition's haircut? What is their estimate of the number of jobs that will be lost as a result of what the deputy Leader of the Opposition euphemistically calls the "shake-out" in employment that the minimum wage policy will create?
We hear no answer to those questions. When we ask the shadow Chancellor those questions—he is not just soundbite man, he is soundbiteosaurus rex of the air waves—he becomes Dumbstruck of Dunfermline. That is why today's credibility gap in Labour's economic policy will become tomorrow's vote-losing chasm.
By contrast, this Government and this party are united in support for the commitment to sound finances of my right hon. and learned Friend the Chancellor. We are united in our determination to continue the reduction in public borrowing so that we can get back to our core belief of reducing taxation as soon as it is prudent to do so.
We are united in our determination to back a Budget that will sustain and strengthen Britain's growing recovery. That recovery is showing some of the most impressive signs and statistics seen in Britain for many years—inflation at 2 per cent.; unemployment coming down for the past 20 months, month after month; and 450,000 people have come off the register since December 1992.
What the hon. Member for Dunfermline, East said at the beginning of the debate on the 1993 Budget resolutions bears repeating:
"I make one Budget forecast—that, after the Budget, unemployment will rise this month, next month and for months afterwards."—[Official Report, 17 March 1993; Vol. 221, c. 289.]
He was wrong that month, next month, the month after and the month afterwards. The unemployment figures fell by 45,000 in the month of October, they fell by 28,000 in

875
the month of September, and they are coming down by 1,000 a day.
The feel-good factor might not be here yet, but the feel-safe factor is here. People feel safer because of my right hon. and learned Friend's excellent Budget, which will stand the test of time and sustain the recovery. I commend my right hon. and learned Friend's Budget to the House.
Question put, That the amendment be made:—
The House divided: Ayes 274, Noes 317.

Division No. 20]

[22.00 pm

AYES

Abbott, Ms Diane

Cummings, John

Adams, Mrs Irene

Cunliffe, Lawrence

Ainger, Nick

Cunningham, Jim (Covy SE)

Ainsworth, Robert (Cov'try NE)

Dafis, Cynog

Allen, Graham

Dalyell, Tam

Alton, David

Darling, Alistair

Anderson, Donald (Swansea E)

Davidson, Ian

Anderson, Ms Janet (Ros'dale)

Davies, Bryan (Oldham C'tral)

Armstrong, Hilary

Davies, Rt Hon Denzil (Llanelli)

Ashton, Joe

Davies, Ron (Caerphilly)

Austin-Walker, John

Davis, Terry (B'ham, H'dge H'I)

Banks, Tony (Newham NW)

Denham, John

Barnes, Harry

Dewar, Donald

Barron, Kevin

Dixon, Don

Battle, John

Dobson, Frank

Bayley, Hugh

Donohoe, Brian H

Beckett, Rt Hon Margaret

Dowd, Jim

Beith, Rt Hon A J

Dunnachie, Jimmy

Bell, Stuart

Dunwoody, Mrs Gwyneth

Benn, Rt Hon Tony

Eagle, Ms Angela

Bennett, Andrew F

Eastham, Ken

Bermingham, Gerald

Enright, Derek

Berry, Roger

Etherington, Bill

Betts, Clive

Evans, John (St Helens N)

Blunkett, David

Ewing, Mrs Margaret

Boateng, Paul

Fatchett, Derek

Boyes, Roland

Field, Frank (Birkenhead)

Bradley, Keith

Fisher, Mark

Bray, Dr Jeremy

Flynn, Paul

Brown, Gordon (Dunfermline E)

Foster, Rt Hon Derek

Brown, N (N'c'tle upon Tyne E)

Foster, Don (Bath)

Bruce, Malcolm (Gordon)

Foulkes, George

Burden, Richard

Fraser, John

Byers, Stephen

Fyfe, Maria

Callaghan, Jim

Galloway, George

Campbell, Mrs Anne (C'bridge)

Gapes, Mike

Campbell, Menzies (Fife NE)

Garrett,John

Campbell, Ronnie (Blyth V)

George, Bruce

Campbell-Savours, D N

Gerrard, Neil

Canavan, Dennis

Gilbert, Rt Hon Dr John

Cann, Jamie

Godsiff, Roger

Chidgey, David

Golding, Mrs Llin

Chisholm, Malcolm

Gordon, Mildred

Church, Judith

Graham, Thomas

clark, Dr David (South Shields)

Grant Bemie (Tottenham)

clelland, David

Griffiths, Nigel (Edinburgh S)

Clwyd, Mrs Ann

Griffiths, Win (Bridgend)

Cohen, Harry

Grocott, Bruce

Connarty, Michael

Gunnell, John

Cook, Frank (Stockton N)

Hain, Peter

Cook, Robin (Livingston)

Hall, Mike

Corbett, Robin

Hanson, David

Corbyn, Jeremy

Hardy, Peter

Corston, Jean

Harman, Ms Harriet

Cousins, Jim

Harvey, Nick

Cox, Tom

Hattersley, Rt Hon Roy

876

Henderson, Doug

Moonie, Dr Lewis

Heppell,John

Morgan, Rhodri

Hill, Keith (Streatham)

Morley, Elliot

Hinchliffe, David

Morris, Rt Hon Alfred (Wy'nshawe)

Hodge, Margaret

Morris, Rt Hon John (Aberavon)

Hoey, Kate

Mudie, George

Hogg, Norman (Cumbernauld)

Mullin, Chris

Home Robertson, John

Oakes, Rt Hon Gordon

Hood, Jimmy

O'Brien, Mike (N W'kshire)

Hoon, Geoffrey

O'Brien, Bill (Normanton)

Howarth, George (Knowsley N)

O'Hara, Edward

Howells, Dr. Kim (Pontypridd)

Olner, Bill

Hoyle, Doug

O'Neill, Martin

Hughes, Kevin (Doncaster N)

Orme, Rt Hon Stanley

Hughes, Robert (Aberdeen N)

Parry, Robert

Hughes, Roy (Newport E)

Patchett, Terry

Hutton, John

Pendry, Tom

Illsley, Eric

Pickthall, Colin

Ingram, Adam

Pike, Peter L

Jackson, Glenda (H'stead)

Pope, Greg

Jackson, Helen (Shef'ld, H)

Powell, Ray (Ogmore)

Jamieson, David

Prentice, Bridget (Lew'm E)

Janner, Greville

Prentice, Gordon (Pendle)

Jones, Barry (Alyn and D'side)

Prescott, John

Jones, Ieuan Wyn (Ynys Mon)

Primarolo, Dawn

Jones, Jon Owen (Cardiff C)

Purchase, Ken

Jones, Lynne (B'ham S O)

Quin, Ms Joyce

Jones, Martyn (Clwyd, SW)

Radice, Giles

Jones, Nigel (Cheltenham)

Randall, Stuart

Jowell, Tessa

Raynsford, Nick

Kaufman, Rt Hon Gerald

Reid, Dr John

Keen, Alan

Rendel, David

Kennedy, Charles (Ross,C&S)

Robertson, George (Hamilton)

Kennedy, Jane (Lpool Brdgn)

Robinson, Geoffrey (Co'try NW)

Khabra, Piara S

Roche, Mrs Barbara

Kilfoyle, Peter

Rogers, Allan

Kirkwood, Archy

Rooney, Terry

Lestor, Joan (Eccles)

Ross, Ernie (Dundee W)

Lewis, Terry

Rowlands, Ted

Liddell, Mrs Helen

Ruddock, Joan

Litherland, Robert

Salmond, Alex

Livingstone, Ken

Sedgemore, Brian

Lloyd, Tony (Stretford)

Sheerman, Barry

Llwyd, Elfyn

Sheldon, Rt Hon Robert

Loyden, Eddie

Shore, Rt Hon Peter

McAllion, John

Short, Clare

McAvoy, Thomas

Simpson, Alan

McCartney, Ian

Skinner, Dennis

Macdonald, Calum

Smith, Andrew (Oxford E)

McFall, John

Smith, Llew (Blaenau Gwent)

McKelvey, William

Soley, Clive

Mackinlay, Andrew

Spearing, Nigel

McLeish, Henry

Spellar, John

Maclennan, Robert

Squire, Rachel (Dunfermline W)

McMaster, Gordon

Steel, Rt Hon Sir David

McNamara, Kevin

Steinberg, Gerry

MacShane, Denis

Stevenson, George

McWilliam, John

Stott, Roger

Madden, Max

Strang, Dr. Gavin

Maddock, Diana

Straw, Jack

Mahon, Alice

Sutcliffe, Gerry

Mandelson, Peter

Taylor, Mrs Ann (Dewsbury)

Marek, Dr John

Taylor, Matthew (Truro)

Marshall, David (Shettleston)

Thompson, Jack (Wansbeck)

Marshall, Jim (Leicester, S)

Timms, Stephen

Martin, Michael J (Springburn)

Tipping, Paddy

Martlew, Eric

Turner, Dennis

Maxton, John

Tyler, Paul

Meacher, Michael

Vaz, Keith

Meale, Alan

Walker, Rt Hon Sir Harold

Michael, Alun

Wallace, James

Michie, Bill (Sheffield Heeley)

Walley, Joan

Michie, Mrs Ray (Argyll & Bute)

Wardell, Gareth (Gower)

Milburn, Alan

Wareing, Robert N

Miller, Andrew

Watson, Mike

Mitchell, Austin (Gt Grimsby)

Welsh, Andrew

877

Wicks, Malcolm

Wray, Jimmy

Wigley, Dafydd

Wright, Dr Tony

Williams, Rt Hon Alan (SW'n W)

Young, David (Bolton SE)

Williams, Alan W (Carmarthen)

Wilson, Brian

Tellers for the Ayes:

Winnick, David

Mr. Eric Clarke and

Worthington, Tony

Mr. Joe Benton.

NOES

Ainsworth, Peter (East Surrey)

Curry, David (Skipton & Ripon)

Aitken, Rt Hon Jonathan

Davies, Quentin (Stamford)

Alexander, Richard

Davis, David (Boothferry)

Alison, Rt Hon Michael (Selby)

Day, Stephen

Allason, Rupert (Torbay)

Deva, Nirj Joseph

Amess, David

Devlin, Tim

Arbuthnot, James

Dicks, Terry

Arnold, Jacques (Gravesham)

Dorrell, Rt Hon Stephen

Arnold, Sir Thomas (Hazel Grv)

Douglas-Hamilton, Lord James

Ashby, David

Dover, Den

Aspinwall, Jack

Duncan, Alan

Atkins, Robert

Duncan Smith, Iain

Atkinson, David (Bour'mouth E)

Dunn, Bob

Atkinson, Peter (Hexham)

Durant, Sir Anthony

Baker, Rt Hon K (Mole Valley)

Dykes, Hugh

Baker, Nicholas (Dorset North)

Eggar, Tim

Baldry, Tony

Elletson, Harold

Banks, Matthew (Southport)

Emery, Rt Hon Sir Peter

Bates, Michael

Evans, David (Welwyn Hatfield)

Batiste, Spencer

Evans, Jonathan (Brecon)

Bellingham, Henry

Evans, Nigel (Ribble Valley)

Bendall, Vivian

Evans, Roger (Monmouth)

Beresford, Sir Paul

Evennett, David

Biffen, Rt Hon John

Faber, David

Body, Sir Richard

Fabricant, Michael

Bonsor, Sir Nicholas

Fenner, Dame Peggy

Booth, Hartley

Field, Barry (Isle of Wight)

Boswell, Tim

Fishburn, Dudley

Bottomley, Peter (Eltham)

Forman, Nigel

Bottomley, Rt Hon Virginia

Forsyth, Michael (Stirling)

Bowden, Sir Andrew

Forsythe, Clifford (Antrim S)

Bowis, John

Forth, Eric

Boyson, Rt Hon Sir Rhodes

Fowler, Rt Hon Sir Norman

Brandreth, Gyles

Fox, Dr Liam (Woodspring)

Brazier, Julian

Fox, Sir Marcus (Shipley)

Bright Sir Graham

Freeman, Rt Hon Roger

Brooke, Rt Hon Peter

French, Douglas

Brown, M (Brigg & Cl'thorpes)

Fry, Sir Peter

Browning, Mrs. Angela

Gale, Roger

Bruce, Ian (Dorset)

Gallie, Phil

Budgen, Nicholas

Gardiner, Sir George

Burns, Simon

Garel-Jones, Rt Hon Tristan

Burt, Alistair

Garnier, Edward

Butcher, John

Gillan, Cheryl

Butler, Peter

Goodlad, Rt Hon Alastair

Butterfill, John

Goodson-Wickes, Dr Charles

Carlisle, John (Luton North)

Gorman, Mrs Teresa

Carlisle, Sir Kenneth (Lincoln)

Gorst, Sir John

Carrington, Matthew

Grant, Sir A (Cambs SW)

Carttiss, Michael

Greenway, Harry (Ealing N)

Cash, William

Greenway, John (Ryedale)

Channon, Rt Hon Paul

Griffiths, Peter (Portsmouth, N)

Churchill, Mr

Grylls, Sir Michael

Clappison, James

Gummer, Rt Hon John Selwyn

Clark, Dr Michael (Rochford)

Hague, William

Clarke, Rt Hon Kenneth (Ru'clif)

Hamilton, Rt Hon Sir Archibald

Clifton-Brown, Geoffrey

Hamilton, Neil (Tatton)

Coe, Sebastian

Hanley, Rt Hon Jeremy

Colvin, Michael

Hannam, Sir John

Congdon, David

Hargreaves, Andrew

Conway, Derek

Harris, David

Coombs, Simon (Swindon)

Haselhurst, Alan

Cope, Rt Hon Sir John

Hawkins, Nick

Cormack, Patrick

Hawksley, Warren

Couchman, James

Hayes, Jerry

Cran, James

Heald, Oliver

Currie, Mrs Edwina (S D'by'ire)

Heath, Rt Hon Sir Edward

878

Heathcoat-Amory, David

Neubert, Sir Michael

Hendry, Charles

Newton, Rt Hon Tony

Heseltine, Rt Hon Michael

Nicholls, Patrick

Hicks, Robert

Nicholson, David (Taunton)

Higgins, Rt Hon Sir Terence

Nicholson, Emma (Devon West)

Hill, James (Southampton Test)

Norris, Steve

Hogg, Rt Hon Douglas (G'tham)

Onslow, Rt Hon Sir Cranley

Horam, John

Oppenheim, Phillip

Hordem, Rt Hon Sir Peter

Ottaway, Richard

Howard, Rt Hon Michael

Page, Richard

Howarth, Alan (Strat'rd-on-A)

Paice, James

Howell, Rt Hon David (G'dford)

Patnick, Sir Irvine

Howell, Sir Ralph (N Nortolk)

Patten, Rt Hon John

Hughes, Robert G (Harrow West)

Pattie, Rt Hon Sir Geoffrey

Hunt, Rt Hon David (Wirral W)

Pawsey, James

Hunt, Sir John (Ravensbourne)

Peacock, Mrs Elizabeth

Hurd, Rt Hon Douglas

Pickles, Eric

Jack, Michael

Porter, Barry (Wirral S)

Jackson, Robert (Wantage)

Porter, David (Waveney)

Jenkin, Bernard

Portillo, Rt Hon Michael

Jessel, Toby

Powell, William (Corby)

Johnson Smith, Sir Geoffrey

Rathbone, Tim

Jones, Gwilym (Cardiff N)

Redwood, Rt Hon John

Jones, Robert B (W Hertfdshr)

Renton, Rt Hon Tim

Kellett-Bowman, Dame Elaine

Richards, Rod

Key, Robert

Riddick, Graham

King, Rt Hon Tom

Robathan, Andrew

Kirkhope, Timothy

Roberts, Rt Hon Sir Wyn

Knapman, Roger

Robertson, Raymond (Ab'd'n S)

Knight, Mrs Angela (Erewash)

Robinson, Mark (Somerton)

Knight, Greg (Derby N)

Roe, Mrs Marion (Broxbourne)

Knight, Dame Jill (Bir'm E'st'n)

Ross, William (E Londonderry)

Knox, Sir David

Rumbold, Rt Hon Dame Angela

Kynoch, George (Kincardine)

Ryder, Rt Hon Richard

Lait, Mrs Jacqui

Sackville, Tom

Lamont, Rt Hon Norman

Sainsbury, Rt Hon Tim

Lang, Rt Hon Ian

Scott, Rt Hon Nicholas

Lawrence, Sir Ivan

Shaw, David (Dover)

Legg, Barry

Shaw, Sir Giles (Pudsey)

Leigh, Edward

Shephard, Rt Hon Gillian

Lennox-Boyd, Sir Mark

Shepherd, Colin (Hereford)

Lester, Jim (Broxtowe)

Shepherd, Richard (Aldridge)

Lidington, David

Shersby, Michael

Lilley, Rt Hon Peter

Sims, Roger

Lloyd, Rt Hon Peter (Fareham)

Skeet, Sir Trevor

Lord, Michael

Smith, Sir Dudley (Warwick)

Luff, Peter

Smith, Tim (Beaconsfield)

Lyell, Rt Hon Sir Nicholas

Soames, Nicholas

MacGregor, Rt Hon John

Speed, Sir Keith

MacKay, Andrew

Spencer, Sir Derek

Maclean, David

Spicer, Sir James (W Dorset)

McLoughlin, Patrick

Spicer, Michael (S Worcs)

McNair-Wilson, Sir Patrick

Spink, Dr Robert

Madel, Sir David

Sproat, Iain

Maitland, Lady Olga

Squire, Robin (Hornchurch)

Malone, Gerald

Stanley, Rt Hon Sir John

Mans, Keith

Steen, Anthony

Marland, Paul

Stephen, Michael

Marlow, Tony

Stem, Michael

Marshall, John (Hendon S)

Stewart, Allan

Marshall, Sir Michael (Arundel)

Streeter, Gary

Martin, David (Portsmouth S)

Sumberg, David

Mates, Michael

Sweeney, Walter

Mawhinney, Rt Hon Dr Brian

Sykes, John

Mellor, Rt Hon David

Tapsell, Sir Peter

Merchant, Piers

Taylor, Ian (Esher)

Mills, Iain

Taylor, Rt Hon John D (Strgfd)

Mitchell, Andrew (Gedling)

Taylor, John M (Solihull)

Mitchell, Sir David (Hants NW)

Taylor, Sir Teddy (Southend, E)

Moate, Sir Roger

Temple-Morris, Peter

Molyneaux, Rt Hon James

Thomason, Roy

Monro, Sir Hector

Thompson, Sir Donald (C'er V)

Montgomery, Sir Fergus

Thompson, Patrick (Norwich N)

Moss, Malcolm

Thomton, Sir Malcolm

Needham, Rt Hon Richard

Thurnham, Peter

Nelson, Anthony

Townend, John (Bridlington)

879

Townsend, Cyril D (Bexl'yh'th)

Wells, Bowen

Tracey, Richard

Whitney, Ray

Tredinnick, David

Whittingdale, John

Trend, Michael

Widdecombe, Ann

Trimble, David

Wiggin, Sir Jerry

Trotter, Neville

Wilkinson, John

Twinn, Dr Ian

Willetts, David

Vaughan, Sir Gerard

Wilshire, David

Viggers, Peter

Winterton, Mrs Ann (Congleton)

Walden, George

Winterton, Nicholas (Macc'f'ld)

Walker, A Cecil (Belfast N)

Wolfson, Mark

Wood, Timothy

Walker, Bill (N Tayside)

Yeo, Tim

Waller, Gary

Young, Rt Hon Sir George

Ward, John

Wardle, Charles (Bexhill)

Tellers for the Noes:

Waterson, Nigel

Mr. David Lightbown and

Watts, John

Mr. Sydney Chapman.

Question accordingly negatived.
Main Question agreed to.
Resolved,

Ways and Means

  1. VALUE ADDED TAX (FUEL AND POWER)
  That—

  (1) The Value Added Tax Act 1994 shall be amended as follows.

  (2) In section 2 (rate of VAT) in subsection (1) the words "and paragraph 7 of Schedule 13" shall be omitted, and the following subsections shall be inserted after that subsection—

  "(1A) VAT charged on—

  (a) any supply for the time being falling within paragraph 1 of Schedule A1; or

  (b) any equivalent acquisition or importation, shall be charged at the rate of 8 per cent.

  (1B) The reference in subsection (1A) above to an equivalent acquisition or importation, in relation to any supply for the time being falling within paragraph 1 of Schedule Al, is a reference (as the case may be) to—

  (a) any acquisition from another member State of goods the supply of which would be such a supply; or

  (b) any importation from a place outside the member States of any such goods.

  (1C) The Treasury may by order vary Schedule Al by adding to or deleting from it any description of supply for the time being specified in it or by varying any other provision for the time being contained in it."

  (3) The following Schedule shall be inserted immediately before Schedule 1—

  SCHEDULE A1
  Charge at Reduced Rate

  The supplies

  1.—

  (1) The supplies falling within this paragraph are supplies for qualifying use of—

  (a) coal, coke or other solid substances held out for sale solely as fuel;

  (b) coal gas, water gas, producer gases or similar gases;

  (c) petroleum gases, or other gaseous hydrocarbons, whether in a gaseous or liquid state;

  (d) fuel oil, gas oil or kerosene; or

  (e) electricity, heat or air-conditioning.

  (2) In this paragraph "qualifying use" means—

  (a) domestic use; or

  (b) use by a charity otherwise than in the course or furtherance of a business.

  (3) Where there is a supply of goods partly for qualifying use and partly not—

  (a) if at least 60 per cent. of the goods are supplied for qualifying use, the whole supply shall be treated as a supply for qualifying use; and

  (b) in any other case, an apportionment shall be made to determine the extent to which the supply is a supply for qualifying use.

  Interpretation

  2. For the purposes of this Schedule the following supplies are always for domestic use—

  (a) a supply of not more than one tonne of coal or coke held out for sale as domestic fuel;

  (b) a supply of wood, peat or charcoal not intended for sale by the recipient;

  791

  (c) a supply to a person at any premises of piped gas (that is, gas within paragraph 1(1)(b) above, or petroleum gas in a gaseous state, provided through pipes) where the gas (together with any other piped gas provided to him at the premises by the same supplier) was not provided at a rate exceeding 150 therms a month or, if the supplier charges for the gas by reference to the number of kilowatt hours supplied, 4397 kilowatt hours a month;

  (d) a supply of petroleum gas in a liquid state where the gas is supplied in cylinders the net weight of each of which is less than 50 kilogrammes and either the number of cylinders supplied is 20 or fewer or the gas is not intended for sale by the recipient;

  (e) a supply of petroleum gas in a liquid state, otherwise than in cylinders, to a person at any premises at which he is not able to store more than two tonnes of such gas;

  (f) a supply of not more than 2,300 litres of fuel oil, gas oil or kerosene;

  (g) a supply of electricity to a person at any premises where the electricity (together with any other electricity provided to him at the premises by the same supplier) was not provided at a rate exceeding 1000 kilowatt hours a month.

  3.—

  (1) For the purposes of this Schedule supplies not within paragraph 2 above are for domestic use if and only if the goods supplied are for use in—

  (a) a building, or part of a building, which consists of a dwelling or number of dwellings;

  (b) a building, or part of a building, used for a relevant residential purpose;

  (c) self-catering holiday accommodation;

  (d) a caravan; or

  (e) a houseboat.

  (2) For the purposes of this Schedule use for a relevant residential purpose means use as—

  (a) a home or other institution providing residential accommodation for children;

  (b) a home or other institution providing residential accommodation with personal care for persons in need of personal care by reason of old age, disablement, past or present dependence on alcohol or drugs or past or present mental disorder;

  (c) a hospice;

  (d) residential accommodation for students or school pupils;

  (e) residential accommodation for members of any of the armed forces;

  (f) a monastery, nunnery or similar establishment; or

  (g) an institution which is the sole or main residence of at least 90 per cent. of its residents,

  except use as a hospital, a prison or similar institution or an hotel or inn or similar establishment.

  (3) For the purposes of this Schedule self-catering holiday accommodation includes any accommodation advertised or held out as such.

  (4) In this Schedule "houseboat" means a boat or other floating decked structure designed or adapted for use solely as a place of permanent habitation and not having means of, or capable of being readily adapted for, self-propulsion.

  792

  4.—

  (1) Paragraph 1(1)(a) above shall be deemed to include combustible materials put up for sale for kindling fires but shall not include matches.

  (2) Paragraph 1(1)(b) and (c) above shall not include any road fuel gas (within the meaning of the Hydrocarbon Oil Duties Act 1979) on which a duty of excise has been charged or is chargeable.

  (3) Paragraph 1(1)(d) above shall not include hydrocarbon oil on which a duty of excise has been or is to be charged without relief from, or rebate of, such duty by virtue of the provisions of the Hydrocarbon Oil Duties Act 1979.

  (4) In this Schedule "fuel oil" means heavy oil which contains in solution an amount of asphaltenes of not less than 0.5 per cent. or which contains less than 0.5 per cent. but not less than 0.1 per cent. of asphaltenes and has a closed flash point not exceeding 150 degreesC.

  (5) In this Schedule "gas oil" means heavy oil of which not more than 50 per cent. by volume distils at a temperature not exceeding 240 degreesC and of which more than 50 per cent. by volume distils at a temperature not exceeding 340 degreesC.

  (6) In this Schedule "kerosene" means heavy oil of which more than 50 per cent. by volume distils at a temperature not exceeding 240 degreesC.

  (7) In this Schedule "heavy oil" shall have the same meaning as in the Hydrocarbon Oil Duties Act 1979."

  (4) In section 97 (orders etc.) in subsection (4) (orders requiring approval) the following paragraph shall be inserted immediately before paragraph (a)—

  "(aa) an order under section 2(1C);".

  (5) In Schedule 13 (transitional provisions and savings) paragraph 7 (fuel and power) shall be omitted.

  (6) This Resolution shall apply in relation to any supply made on or after 1st April 1995 and any acquisition or importation taking place on or after that date.

  And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.

  This year's Budget is being debated on the Floor of the House rather frequently and at an earlier stage than usual. This debate should conclude our discussion of the tax measures that will take effect before the Finance Bill is introduced. It will also put in place, intact, the Budget judgment and keep the Government's economic policy on course.
  A healthy economic recovery forms an essential background to the debate. The House is familiar with the Government's record of growth, rising industrial production, rising manufacturing production, falling unemployment and good records on productivity and inflation. We know that the recovery must be sustained and made stronger to deliver the prosperity and the increased number of jobs that are essential aims of all economic policy.
  Keeping our recovery going and ensuring that it is one of the strongest and most effective in the developed world imposes certain duties and obligations on the Government and the House of Commons. In order to sustain our recovery and to keep it strong, we must keep inflation down so that high inflation does not halt recovery again, as it often has in the past. We must also ensure that we can deliver healthy public finances.
  The Government have other obligations, such as supporting increased competitiveness in industry, but our two preconditions for a sustained and strong recovery are to deliver a macro-economic climate in which inflation is low and to deliver healthy public finances as quickly as we can upon emerging from the recession.

  793
  I emphasise those points because they underline the decisions that the House is being asked to take. We are growing so strongly and the business community is so optimistic about the outlook for output and jobs because the Government are on top of the job of keeping inflation down and delivering healthy public finances.

  1. VALUE ADDED TAX (FUEL AND POWER)
  That—

  (1) The Value Added Tax Act 1994 shall be amended as follows.

  (2) In section 2 (rate of VAT) in subsection (1) the words "and paragraph 7 of Schedule 13" shall be omitted, and the following subsections shall be inserted after that subsection—

  "(1A) VAT charged on—

  (a) any supply for the time being falling within paragraph 1 of Schedule Al; or

  (b) any equivalent acquisition or importation, shall be charged at the rate of 8 per cent.

  (1B) The reference in subsection (1A) above to an equivalent acquisition or importation, in relation to any supply for the time being falling within paragraph 1 of Schedule A 1, is a reference (as the case may be) to—

  (a) any acquisition from another member State of goods the supply of which would be such a supply; or

  (b) any importation from a place outside the member States of any such goods.

  (1C) The Treasury may by order vary Schedule A1 by adding to or deleting from it any description of supply for the time being specified in it or by varying any other provision for the time being contained in it."

  (3) The following Schedule shall be inserted immediately before Schedule 1—

  SCHEDULE A1
  Charge at Reduced Rate

  The supplies

  1.—

  (1) The supplies falling within this paragraph are supplies for qualifying use of—

  (a) coal, coke or other solid substances held out for sale solely as fuel;

  (b) coal gas, water gas, producer gases or similar gases;

  (c) petroleum gases, or other gaseous hydrocarbons, whether in a gaseous or liquid state;

  (d) fuel oil, gas oil or kerosene; or

  (e) electricity, heat or air-conditioning.

  (2) In this paragraph "qualifying use" means—

  (a) domestic use; or

  (b) use by a charity otherwise than in the course or furtherance of a business.

  (3) Where there is a supply of goods partly for qualifying use and partly not—

  (a) if at least 60 per cent. of the goods are supplied for qualifying use, the whole supply shall be treated as a supply for qualifying use; and

  880

  (b) in any other case, an apportionment shall be made to determine the extent to which the supply is a supply for qualifying use.

  Interpretation

  2. For the purposes of this Schedule the following supplies are always for domestic use—

  (a) a supply of not more than one tonne of coal or coke held out for sale as domestic fuel;

  (b) a supply of wood, peat or charcoal not intended for sale by the recipient;

  (c) a supply to a person at any premises of piped gas (that is, gas within paragraph 1(1)(b) above, or petroleum gas in a gaseous state, provided through pipes) where the gas (together with any other piped gas provided to him at the premises by the same supplier) was not provided at a rate exceeding 150 therms a month or, if the supplier charges for the gas by reference to the number of kilowatt hours supplied, 4397 kilowatt hours a month;

  (d) a supply of petroleum gas in a liquid state where the gas is supplied in cylinders the net weight of each of which is less than 50 kilogrammes and either the number of cylinders supplied is 20 or fewer or the gas is not intended for sale by the recipient;

  (e) a supply of petroleum gas in a liquid state, otherwise than in cylinders, to a person at any premises at which he is not able to store more than two tonnes of such gas;

  (f) a supply of not more than 2,300 litres of fuel oil, gas oil or kerosene;

  (g) a supply of electricity to a person at any premises where the electricity (together with any other electricity provided to him at the premises by the same supplier) was not provided at a rate exceeding 1000 kilowatt hours a month.

  3.—

  (1) For the purposes of this Schedule supplies not within paragraph 2 above are for domestic use if and only if the goods supplied are for use in—

  (a) a building, or part of a building, which consists of a dwelling or number of dwellings;

  (b) a building, or part of a building, used for a relevant residential purpose;

  (c) self-catering holiday accommodation;

  (d) a caravan; or

  (e) a houseboat.

  (2) For the purposes of this Schedule use for a relevant residential purpose means use as—

  (a) a home or other institution providing residential accommodation for children;

  (b) a home or other institution providing residential accommodation with personal care for persons in need of personal care by reason of old age, disablement, past or present dependence on alcohol or drugs or past or present mental disorder;

  (c) a hospice;

  (d) residential accommodation for students or school pupils;

  (e) residential accommodation for members of any of the armed forces;

  881

  (f) a monastery, nunnery or similar establishment; or

  (g) an institution which is the sole or main residence of at least 90 per cent. of its residents,

  except use as a hospital, a prison or similar institution or an hotel or inn or similar establishment.

  (3) For the purposes of this Schedule self-catering holiday accommodation includes any accommodation advertised or held out as such.

  (4) In this Schedule "houseboat" means a boat or other floating decked structure designed or adapted for use solely as a place of permanent habitation and not having means of, or capable of being readily adapted for, self-propulsion.

  4.—

  (1) Paragraph 1(1)(a) above shall be deemed to include combustible materials put up for sale for kindling fires but shall not include matches.

  (2) Paragraph 1(1)(b) and (c) above shall not include any road fuel gas (within the meaning of the Hydrocarbon Oil Duties Act 1979) on which a duty of excise has been charged or is chargeable.

  (3) Paragraph 1(1)(d) above shall not include hydrocarbon oil on which a duty of excise has been or is to be charged without relief from, or rebate of, such duty by virtue of the provisions of the Hydrocarbon Oil Duties Act 1979.

  (4) In this Schedule "fuel oil" means heavy oil which contains in solution an amount of asphaltenes of not less than 0.5 per cent. or which contains less than 0.5 per cent. but not less than 0.1 per cent. of asphaltenes and has a closed flash point not exceeding 150 degreesC.

  (5) In this Schedule "gas oil" means heavy oil of which not more than 50 per cent. by volume distils at a temperature not exceeding 240 degreesC and of which more than 50 per cent. by volume distils at a temperature not exceeding 340 degreesC.

  (6) In this Schedule "kerosene" means heavy oil of which more than 50 per cent. by volume distils at a temperature not exceeding 240 degreesC.

  (7) In this Schedule "heavy oil" shall have the same meaning as in the Hydrocarbon Oil Duties Act 1979."

  (4) In section 97 (orders etc.) in subsection (4) (orders requiring approval) the following paragraph shall be inserted immediately before paragraph (a)—

  "(aa) an order under section 2(1C);".

  (5) In Schedule 13 (transitional provisions and savings) paragraph 7 (fuel and power) shall be omitted.

  (6) This Resolution shall apply in relation to any supply made on or after 1st April 1995 and any acquisition or importation taking place on or after that date.

  And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.

  MR. DEPUTY SPEAKER then, pursuant to order [9 December] put the Questions necessary to dispose of the further motions.

  2. SPIRITS (RATE)
  Motion made, and Question put,
  That—

  (1) In section 5 of the Alcoholic Liquor Duties Act 1979 for "£19.81" there shall be substituted "£20.60".

  (2) This Resolution shall come into force on 1st January 1995.

  And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.
  The House divided: Ayes 317, Noes 275.

  Division No. 21]

  [22.16 pm

  AYES

  Ainsworth, Peter (East Surrey)

  Devlin, Tim

  Aitken, Rt Hon Jonathan

  Dicks, Terry

  Alexander, Richard

  Dorrell, Rt Hon Stephen

  Alison, Rt Hon Michael (Selby)

  Douglas-Hamilton, Lord James

  Allason, Rupert (Torbay)

  Dover, Den

  Amess, David

  Duncan, Alan

  Arbuthnot, James

  Duncan Smith, Iain

  Arnold, Jacques (Gravesham)

  Dunn, Bob

  Arnold, Sir Thomas (Hazel Grv)

  Durant, Sir Anthony

  Ashby, David

  Dykes, Hugh

  Aspinwall, Jack

  Eggar, Tim

  Atkins, Robert

  Elletson, Harold

  Atkinson, David (Bour'mouth E)

  Emery, Rt Hon Sir Peter

  Atkinson, Peter (Hexham)

  Evans, David (Welwyn Hatfield)

  Baker, Rt Hon K (Mole Valley)

  Evans, Jonathan (Brecon)

  Baker, Nicholas (Dorset North)

  Evans, Nigel (Ribble Valley)

  Baldry, Tony

  Evans, Roger (Monmouth)

  Banks, Matthew (Southport)

  Evennett, David

  Bates, Michael

  Faber, David

  Batiste, Spencer

  Fabricant, Michael

  Bellingham, Henry

  Fenner, Dame Peggy

  Bendall, Vivian

  Field, Barry (Isle of Wight)

  Beresford, Sir Paul

  Fishburn, Dudley

  Biffen, Rt Hon John

  Forman, Nigel

  Bonsor, Sir Nicholas

  Forsyth, Michael (Stirling)

  Booth, Hartley

  Forsythe, Clifford (Antrim S)

  Boswell, Tim

  Forth, Eric

  Bottomley, Peter (Eltham)

  Fowler, Rt Hon Sir Norman

  Bottomley, Rt Hon Virginia

  Fox, Dr Liam (Woodspring)

  Bowden, Sir Andrew

  Fox, Sir Marcus (Shipley)

  Bowis, John

  Freeman, Rt Hon Roger

  Boyson, Rt Hon Sir Rhodes

  French, Douglas

  Brandreth, Gyles

  Fry, Sir Peter

  Brazier, Julian

  Gale, Roger

  Bright Sir Graham

  Gallie, Phil

  Brooke, Rt Hon Peter

  Gardiner, Sir George

  Brown, M (Brigg & Cl'thorpes)

  Garel-Jones, Rt Hon Tristan

  Browning, Mrs. Angela

  Garnier, Edward

  Bruce, Ian (Dorset)

  Gillan, Cheryl

  Budgen, Nicholas

  Goodlad, Rt Hon Alastair

  Burns, Simon

  Goodson-Wickes, Dr Charles

  Burt, Alistair

  Gorman, Mrs Teresa

  Butcher, John

  Gorst, Sir John

  Butler, Peter

  Grant, Sir A (Cambs SW)

  Butterfill, John

  Greenway, Harry (Ealing N)

  Carlisle, John (Luton North)

  Greenway, John (Ryedale)

  Carlisle, Sir Kenneth (Lincoln)

  Griffiths, Peter (Portsmouth, N)

  Carrington, Matthew

  Grylls, Sir Michael

  Carttiss, Michael

  Gummer, Rt Hon John Selwyn

  Cash, William

  Hague, William

  Channon, Rt Hon Paul

  Hamilton, Rt Hon Sir Archibald

  Churchill, Mr

  Hamilton, Neil (Tatton)

  Clappison, James

  Hanley, Rt Hon Jeremy

  Clarke, Dr Michael (Rochbid)

  Hannam, Sir John

  Clarke, Rt Hon Kenneth (Ru'clif)

  Hargreaves, Andrew

  Clifton-Brown, Geoffrey

  Harris, David

  Coe, Sebastian

  Haselhurst, Alan

  Colvin, Michael

  Hawkins, Nick

  Congdon, David

  Hawksley, Warren

  Conway, Derek

  Hayes, Jerry

  Coombs, Simon (Swindon)

  Heald, Oliver

  Cope, Rt Hon Sir John

  Heath, Rt Hon Sir Edward

  Cormack, Patrick

  Heathcoat-Amory, David

  Couchman, James

  Hendry, Charles

  Cran, James

  Heseltine, Rt Hon Michael

  Currie, Mrs Edwina (S D'by'ire)

  Hicks, Robert

  Curry, David (Skipton & Ripon)

  Higgins, Rt Hon Sir Terence

  Davies, Quentin (Stamford)

  Hill, James (Southampton Test)

  Davis, David (Boothferry)

  Hogg, Rt Hon Douglas (G'tham)

  Day, Stephen

  Horam, John

  Deva, Nirj Joseph

  Hordem, Rt Hon Sir Peter

  883

  Howard, Rt Hon Michael

  Ottaway, Richard

  Howarth, Alan (Strat'rd-on-A)

  Page, Richard

  Howell, Rt Hon David (G'dford)

  Paice, James

  Howell, Sir Ralph (N Norfolk)

  Patnick, Sir Irvine

  Hughes, Robert G (Harrow West)

  Patten, Rt Hon John

  Hunt, Rt Hon David (Wirral W)

  Pattie, Rt Hon Sir Geoffrey

  Hunt, Sir John (Ravensbourne)

  Pawsey, James

  Hurd, Rt Hon Douglas

  Peacock, Mrs Elizabeth

  Jack, Michael

  Pickles, Eric

  Jackson, Robert (Wantage)

  Porter, Barry (Wirral S)

  Jenkin, Bernard

  Porter, David (Waveney)

  Jessel, Toby

  Portillo, Rt Hon Michael

  Johnson Smith, Sir Geoffrey

  Powell, William (Corby)

  Jones, Gwilym (Cardff N)

  Rathbone, Tim

  Jones, Nigel (Cheltenham)

  Redwood, Rt Hon John

  Jones, Robert B (W Hertfdshr)

  Renton, Rt Hon Tim

  Kellett-Bowman, Dame Elaine

  Richards, Rod

  Key, Robert

  Riddick, Graham

  King, Rt Hon Tom

  Robathan, Andrew

  Kirkhope, Timothy

  Roberts, Rt Hon Sir Wyn

  Knapman, Roger

  Robertson, Raymond (Ab'd'n S)

  Knight, Mrs Angela (Erewash)

  Robinson, Mark (Somerton)

  Knight, Greg (Derby N)

  Roe, Mrs Marion (Broxbourne)

  Knight, Dame Jill (Bir'm E'st'n)

  Ross, William (E Londonderry)

  Knox, Sir David

  Rumbold, Rt Hon Dame Angela

  Kynoch, George (Kincardine)

  Ryder, Rt Hon Richard

  Lait, Mrs Jacqui

  Sackville, Tom

  Lamont, Rt Hon Norman

  Sainsbury, Rt Hon Tim

  Lang, Rt Hon Ian

  Scott, Rt Hon Nicholas

  Lawrence, Sir Ivan

  Shaw, David (Dover)

  Legg, Barry

  Shaw, Sir Giles (Pudsey)

  Leigh, Edward

  Shephard, Rt Hon Gillian

  Lennox-Boyd, Sir Mark

  Shephard, Colin (Hereford)

  Lester, Jim (Broxtowe)

  Shepherd, Richard (Aldridge)

  Lidington, David

  Shersby, Michael

  Lilley, Rt Hon Peter

  Sims, Roger

  Lloyd, Rt Hon Peter (Fareham)

  Skeet, Sir Trevor

  Lord, Michael

  Smith, Sir Dudley (Warwick)

  Luff, Peter

  Smith, Tim (Beaconsfield)

  Lyell, Rt Hon Sir Nicholas

  Soames, Nicholas

  MacGregor, Rt Hon John

  Speed, Sir Keith

  MacKay, Andrew

  Spencer, Sir Derek

  Maclean, David

  Spicer, Sir James (W Dorset)

  McLoughlin, Patrick

  Spicer, Michael (S Worcs)

  McNair-Wilson, Sir Patrick

  Spink, Dr Robert

  Madel, Sir David

  Sproat, Iain

  Maitland, Lady Olga

  Squire, Robin (Hornchurch)

  Malone, Gerald

  Stanley, Rt Hon Sir John

  Mans, Keith

  Steen, Anthony

  Marland, Paul

  Stephen, Michael

  Marlow, Tony

  Stem, Michael

  Marshall, John (Hendon S)

  Stewart, Allan

  Marshall, Sir Michael (Arundel)

  Streeter, Gary

  Martin, David (Portsmouth S)

  Sumberg, David

  Mates, Michael

  Sweeney, Walter

  Mawhinney, Rt Hon Dr Brian

  Sykes, John

  Mellor, Rt Hon David

  Tapsell, Sir Peter

  Merchant Piers

  Taylor, Ian (Esher)

  Mills, Iain

  Taylor, Rt Hon John D (Strgfd)

  Mitchell, Andrew (Gedling)

  Taylor, John M (Solihull)

  Mitchell, Sir David (Hants NW)

  Taylor, Sir Teddy (Southend, E)

  Moate, Sir Roger

  Temple-Morris, Peter

  Molyneaux, Rt Hon James

  Thomason, Roy

  Monro, Sir Hector

  Thompson, Sir Donald (C'er V)

  Montgomery, Sir Fergus

  Thompson, Patrick (Norwich N)

  Moss, Malcolm

  Thomton, Sir Malcolm

  Needham, Rt Hon Richard

  Thumham, Peter

  Nelson, Anthony

  Townend, John (Bridlington)

  Neubert, Sir Michael

  Townsend, Cyril D (Bexl'yh'th)

  Newton, Rt Hon Tony

  Tracey, Richard

  Nicholls, Patrick

  Tredinnick, David

  Nicholson, David (Taunton)

  Trend, Michael

  Nicholson, Emma (Devon West)

  Trimble, David

  Norris, Steve

  Trotter, Neville

  Onslow, Rt Hon Sir Cranley

  Twinn, Dr Ian

  Oppenheim, Phillip

  Vaughan, Sir Gerard

  884

  Viggers, Peter

  Wiggin, Sir Jerry

  Walden, George

  Wilkinson, John

  Walker, A Cecil (Belfast N)

  Willetts, David

  Walker, Bill (N Tayside)

  Wilshire, David

  Waller, Gary

  Winterton, Mrs Ann (Congleton)

  Ward, John

  Winterton, Nicholas (Macc'fld)

  Wardle, Charles (Bexhill)

  Wolfson, Mark

  Wood, Timothy

  Waterson, Nigel

  Yeo,Tim

  Watts, John

  Young, Rt Hon Sir George

  Wells, Bowen

  Whitney, Ray

  Tellers for the Ayes:

  Whittingdale, John

  Mr. Sydney Chapman and

  Widdecombe, Ann

  Mr. David Lightbown.

  NOES

  Abbott, Ms Diane

  Dafis, Cynog

  Adams, Mrs Irene

  Dalyell, Tam

  Ainger, Nick

  Darling, Alistair

  Ainsworth, Robert (Cov'try NE)

  Davidson, Ian

  Allen, Graham

  Davies, Bryan (Oldham C'tral)

  Alton, David

  Davies, Rt Hon Denzil (Llanelli)

  Anderson, Donald (Swansea E)

  Davies, Ron (Caerphilly)

  Anderson, Ms Janet (Ros'dale)

  Davis, Terry (B'ham, H'dge H'I)

  Armstrong, Hilary

  Denham, John

  Ashton, Joe

  Dewar, Donald

  Austin-Walker, John

  Dixon, Don

  Banks, Tony (Newham NW)

  Dobson, Frank

  Barnes, Harry

  Donohoe, Brian H

  Barron, Kevin

  Dowd, Jim

  Battle, John

  Dunnachie, Jimmy

  Bayley, Hugh

  Dunwoody, Mrs Gwyneth

  Beckett, Rt Hon Margaret

  Eagle, Ms Angela

  Beith, Rt Hon A J

  Eastham, Ken

  Bell, Stuart

  Enright, Derek

  Benn, Rt Hon Tony

  Etherington, Bill

  Bennett, Andrew F

  Evans, John (St Helens N)

  Bermingham, Gerald

  Ewing, Mrs Margaret

  Berry, Roger

  Fatchett, Derek

  Betts, Clive

  Field, Frank (Birkenhead)

  Blunkett, David

  Fisher, Mark

  Boateng, Paul

  Flynn, Paul

  Boyes, Roland

  Foster, Rt Hon Derek

  Bradley, Keith

  Foster, Don (Bath)

  Bray, Dr Jeremy

  Foulkes, George

  Brown, Gordon (Dunfermline E)

  Fraser, John

  Brown, N (N'c'tle upon Tyne E)

  Fyfe, Maria

  Bruce, Malcolm (Gordon)

  Galloway, George

  Burden, Richard

  Gapes, Mike

  Byers, Stephen

  Garrett, John

  Callaghan, Jim

  George, Bruce

  Campbell, Mrs Anne (C'bridge)

  Gerrard, Neil

  Campbell, Menzies (Fife NE)

  Gilbert, Rt Hon Dr John

  Campbell, Ronnie (Blyth V)

  Godsiff, Roger

  Campbell-Savours, D N

  Golding, Mrs Llin

  Canavan, Dennis

  Gordon, Mildred

  Cann, Jamie

  Graham, Thomas

  Chidgey, David

  Grant, Bemie (Tottenham)

  Chisholm, Malcolm

  Griffiths, Nigel (Edinburgh S)

  Church, Judith

  Griffiths, Win (Bridgend)

  Clark, Dr David (South Shields)

  Grocott, Bruce

  Clarke, Tom (Monklands W)

  Gunnell, John

  Clelland, David

  Hain, Peter

  Clwyd, Mrs Ann

  Hall, Mike

  Cohen, Harry

  Hanson, David

  Connarty, Michael

  Hardy, Peter

  Cook, Frank (Stockton N)

  Harman, Ms Harriet

  Cook, Robin (Livingston)

  Harvey, Nick

  Corbett, Robin

  Hattersley, Rt Hon Roy

  Corbyn, Jeremy

  Henderson, Doug

  Corston, Jean

  Heppell, John

  Cousins, Jim

  Hill, Keith (Streatham)

  Cox, Tom

  Hinchliffe, David

  Cummings, John

  Hodge, Margaret

  Cunliffe, Lawrence

  Hoey, Kate

  Cunningham, Jim (Covy SE)

  Hogg, Norman (Cumbernauld)

  885

  Home Robertson, John

  Mullin, Chris

  Hood, Jimmy

  Oakes, Rt Hon Gordon

  Hoon, Geoffrey

  O'Brien, Mike (N W'kshire)

  Howarth, George (Knowsley N)

  O'Brien, Bill (Normanton)

  Howells, Dr. Kim (Pontypridd)

  O'Hara, Edward

  Hoyle, Doug

  Olner, Bill

  Hughes, Kevin (Doncaster N)

  O'Neill, Martin

  Hughes, Robert (Aberdeen N)

  Orme, Rt Hon Stanley

  Hughes, Roy (Newport E)

  Parry, Robert

  Hughes, Simon (Southwark)

  Patchett, Terry

  Hutton, John

  pickthall, Colin

  Illsley, Eric

  Pike, Peter L

  Ingram, Adam

  Pope, Greg

  Jackson, Glenda (H'Stead)

  Powell, Ray (Ogmore)

  Jackson, Helen (Shef'ld, H)

  Prentice, Bridget (Lew'm E)

  Jamieson, David

  Janner, Greville

  Prentice, Gordon (Pendle)

  Jones, Barry (Alyn and D'side)

  Prescott, John

  Jones, Ieuan Wyn (Ynys Mon)

  Primarolo, Dawn

  Jones, Jon Owen (Cardiff C)

  Purchase, Ken

  Jones, Lynne (B'ham S O)

  Quin, Ms Joyce

  Jones, Martyn (Clwyd, SW)

  Radice, Giles

  Jones, Nigel (Cheltenham)

  Randall, Stuart

  Jowell, Tessa

  Raynsford, Nick

  Kaufman, Rt Hon Gerald

  Reid, Dr John

  Keen, Alan

  Rendel, David

  Kennedy, Charles (Ross,C&S)

  Robertson, George (Hamilton)

  Kennedy, Jane (Lpool Brdgn)

  Roche, Mrs Barbara

  Khabra, Piara S

  Rogers, Allan

  Kirkwood, Archy

  Rooney, Terry

  Lestor, Joan (Eccles)

  Ross, Ernie (Dundee W)

  Lewis, Terry

  Rowlands, Ted

  Liddell, Mrs Helen

  Ruddock, Joan

  Litherland, Robert

  Salmond, Alex

  Livingstone, Ken

  Sedgemore, Brian

  Lloyd, Tony (Stratford)

  Sheerman, Barry

  Llwyd, Elfyn

  Sheldon, Rt Hon Robert

  Loyden, Eddie

  Shore, Rt Hon Peter

  McAllion, John

  Short, Clare

  McAvoy, Thomas

  Simpson, Alan

  McCartney, Ian

  Skinner, Dennis

  Macdonald, Calum

  Smith, Andrew (Oxford E)

  McFall, John

  Smith, Chris (Isl'ton S & F'sbury)

  McKelvey, William

  Smith, Llew (Blaenau Gwent)

  Mackinlay, Andrew

  Soley, Clive

  McLeish, Henry

  Spearing, Nigel

  McMaster, Gordon

  Spellar, John

  Squire, Rachel (Dunfermline W)

  McNarmara, Kevin

  Steel, Rt Hon Sir David

  McWilliam, John

  Steinberg, Gerry

  Madden, Max

  Stevenson, George

  Maddock, Diana

  Stott, Roger

  Mahon, Alice

  Strang, Dr. Gavin

  Mandelson, Peter

  Straw, Jack

  Marek, Dr John

  Sutcliffe, Gerry

  Marshall, David (Shettleston)

  Taylor, Mrs Ann (Dewsbury)

  Marshall, Jim (Leicester, S)

  Taylor, Matthew (Truro)

  Martin, Michael J (Springburn)

  Thompson, Jack (Wansbeck)

  Martlew, Eric

  Timms, Stephen

  Maxton John

  Tipping, Paddy

  Meacher, Michael

  Turner, Dennis

  Meale, Alan

  Tyler, Paul

  Michael, Alun

  Vaz, Keith

  Michie, Bill (Sheffield Heeley)

  Walker, Rt Hon Sir Harold

  Michie, Mrs Ray (Argyll & Bute)

  Wallace, James

  Milburn, Alan

  Walley, Joan

  Miller, Andrew

  Wardell, Gareth (Gower)

  Mitchell, Austin (Gt Grimsby)

  Moonie, Dr Lewis

  Wareing, Robert N

  Morgan, Rhodri

  Watson, Mike

  Morley, Elliot

  Welsh, Andrew

  Morris, Rt Hon Alfred (Wy'nshawe)

  Wicks, Malcolm

  Morris, Rt Hon John (Aberavon)

  Wigley, Dafydd

  Mudie, George

  Williams, Rt Hon Alan (SW'n W)

  886

  Williams, Alan W (Carmarthen)

  Wright, Dr Tony

  Wilson, Brian

  Young, David (Bolton SE)

  Winnick, David

  Tellers for the Noes:

  Worthinglon, Tony

  Mr. Eric Clarke and

  Wray, Jimmy

  Mr. Joe Benton.

  Question accordingly agreed to.
  Motion made, and Question put,

  3. BEER (RATE)
  That—

  (1) In section 36(1) of the Alcoholic Liquor Duties Act 1979 for "£10.45" there shall be substituted "£10.82".

  (2) This Resolution shall come into force on 1st January 1995.

  And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.

  The House divided: Ayes 314, Noes 270.

  Division No. 22]

  [22.30 pm

  AYES

  Ainsworth, Peter (East Surrey)

  Channon, Rt Hon Paul

  Aitken, Rt Hon Jonathan

  Chapman, Sydney

  Alexander, Richard

  Churchill, Mr

  Alison, Rt Hon Michael (Selby)

  Clappison, James

  Allason, Rupert (Torbay)

  Clark, Dr Michael (Rochford)

  Amess, David

  Clarke, Rt Hon Kenneth (Ru'clif)

  Arbuthnot, James

  Clifton-Brown, Geoffrey

  Arnold, Jacques (Gravesham)

  Coe, Sebastian

  Arnold, Sir Thomas (Hazel Grv)

  Congdon, David

  Ashby, David

  Conway, Derek

  Aspinwall, Jack

  Coombs, Simon (Swindon)

  Atkins, Robert

  Cope, Rt Hon Sir John

  Atkinson, David (Bour'mouth E)

  Cormack, Patrick

  Atkinson, Peter (Hexham)

  Couchman, James

  Baker, Rt Hon K (Mole Valley)

  Cran, James

  Baker, Nicholas (Dorset North)

  Currie, Mrs Edwina (S D'by'ire)

  Baldry, Tony

  Curry, David (Skipton & Ripon)

  Banks, Matthew (Southport)

  Davies, Quentin (Stamford)

  Batiste, Spencer

  Davis, David (Boothferry)

  Bellingham, Henry

  Day, Stephen

  Bendall, Vivian

  Deva, Nirj Joseph

  Beresford, Sir Paul

  Devlin, Tim

  Biffen, Rt Hon John

  Dicks, Terry

  Body, Sir Richard

  Dorrell, Rt Hon Stephen

  Bonsor, Sir Nicholas

  Douglas-Hamilton, Lord James

  Booth, Hartley

  Dover, Den

  Boswell, Tim

  Duncan, Alan

  Bottomley, Peter (Eltham)

  Duncan Smith, Iain

  Bottomley, Rt Hon Virginia

  Dunn, Bob

  Bowden, Sir Andrew

  Durant, Sir Anthony

  Bowis, John

  Dykes, Hugh

  Boyson, Rt Hon Sir Rhodes

  Eggar, Tim

  Brandreth, Gyles

  Elletson, Harold

  Brazier, Julian

  Emery, Rt Hon Sir Peter

  Bright, Sir Graham

  Evans, David (Welwyn Hatfield)

  Brooke, Rt Hon Peter

  Evans, Jonathan (Brecon)

  Brown, M (Brigg & Cl'thorpes)

  Evans, Nigel (Ribble Valley)

  Browning, Mrs. Angela

  Evans, Roger (Monmouth)

  Bruce, Ian (Dorset)

  Evennett, David

  Budgen, Nicholas

  Faber, David

  Burns, Simon

  Fabricant, Michael

  Burt, Alistair

  Fenner, Dame Peggy

  Butcher, John

  Field, Barry (Isle of Wight)

  Butler, Peter

  Fishburn, Dudley

  Butterfill, John

  Forman, Nigel

  Carlisle, John (Luton North)

  Forsyth, Michael (Stirling)

  Carlisle, Sir Kenneth (Lincoln)

  Forsythe, Clifford (Antrim S)

  Carrington, Matthew

  Forth, Eric

  Carttiss, Michael

  Fowler, Rt Hon Sir Norman

  Cash, William

  Fox, Dr Liam (Woodspring)

  887

  Fox, Sir Marcus (Shipley)

  Lilley, Rt Hon Peter

  Freeman, Rt Hon Roger

  Lloyd, Rt Hon Peter (Fareham)

  French, Douglas

  Lord, Michael

  Fry, Sir Peter

  Luff, Peter

  Gale, Roger

  Lyell, Rt Hon Sir Nicholas

  Gallie, Phil

  MacGregor, Rt Hon John

  Gardiner, Sir George

  MacKay, Andrew

  Garel-Jones, Rt Hon Tristan

  Maclean, David

  Garnier, Edward

  McLoughlin, Patrick

  Gillan, Cheryl

  McNair-Wilson, Sir Patrick

  Goodlad, Rt Hon Alastair

  Madel, Sir David

  Goodson-Wickes, Dr Charles

  Maitland, Lady Olga

  Gorman, Mrs Teresa

  Malone, Gerald

  Gorst, Sir John

  Mans, Keith

  Grant, Sir A (Cambs SW)

  Marland, Paul

  Greenway, Harry (Ealing N)

  Marlow, Tony

  Greenway, John (Ryedale)

  Marshall, John (Hendon S)

  Griffiths, Peter (Portsmouth, N)

  Marshall, Sir Michael (Arundel)

  Grylls, Sir Michael

  Martin, David (Portsmouth S)

  Gummer, Rt Hon John Selwyn

  Mates, Michael

  Hague, William

  Mawhinney, Rt Hon Dr Brian

  Hamilton, Rt Hon Sir Archibald

  Mellor, Rt Hon David

  Hamilton, Neil (Tatton)

  Merchant, Piers

  Hanley, Rt Hon Jeremy

  Mills, Iain

  Hannam, Sir John

  Mitchell, Andrew (Gedling)

  Hargreaves, Andrew

  Mitchell, Sir David (Hants NW)

  Harris, David

  Moate, Sir Roger

  Haselhurst, Alan

  Molyneaux, Rt Hon James

  Hawkins, Nick

  Monro, Sir Hector

  Hawksley, Warren

  Montgomery, Sir Fergus

  Hayes, Jerry

  Moss, Malcolm

  Heald, Oliver

  Needham, Rt Hon Richard

  Heath, Rt Hon Sir Edward

  Nelson, Anthony

  Heathcoat-Amory, David

  Neubert, Sir Michael

  Hendry, Charles

  Newton, Rt Hon Tony

  Heseltine, Rt Hon Michael

  Nicholls, Patrick

  Hicks, Robert

  Nicholson, David (Taunton)

  Higgins, Rt Hon Sir Terence

  Nicholson, Emma (Devon West)

  Hill, James (Southampton Test)

  Norris, Steve

  Hogg, Rt Hon Douglas (G'tham)

  Onslow, Rt Hon Sir Cranley

  Horam, John

  Oppenheim, Phillip

  Hordern, Rt Hon Sir Peter

  Ottaway, Richard

  Howard, Rt Hon Michael

  Page, Richard

  Howarth, Alan (Strat'rd-on-A)

  Paice, James

  Howell, Rt Hon David (G'dford)

  Patnick, Sir Irvine

  Howell, Sir Ralph (N Norfolk)

  Patten, Rt Hon John

  Hughes, Robert G (Harrow W)

  Pattie, Rt Hon Sir Geoffrey

  Hunt, Rt Hon David (Wirral W)

  Pawsey, James

  Hunt, Sir John (Ravensbourne)

  Peacock, Mrs Elizabeth

  Hurd, Rt Hon Douglas

  Pickles, Eric

  Jack, Michael

  Porter, Barry (Wirral S)

  Jackson, Robert (Wantage)

  Porter, David (Waveney)

  Jenkin, Bernard

  Portillo, Rt Hon Michael

  Jessel, Toby

  Powell, William (Corby)

  Jones, Gwilym (Cardiff N)

  Rathbone, Tim

  Jones, Robert B (W Hertfdshr)

  Redwood, Rt Hon John

  Kellett-Bowman, Dame Elaine

  Renton, Rt Hon Tim

  Key, Robert

  Richards, Rod

  King, Rt Hon Tom

  Riddick, Graham

  Kirkhope, Timothy

  Robathan, Andrew

  Knapman, Roger

  Roberts, Rt Hon Sir Wyn

  Knight, Mrs Angela (Erewash)

  Robertson, Raymond (Ab'd'n S)

  Knight, Greg (Derby N)

  Robinson, Mark (Somenon)

  Knight, Dame Jill (Bir'm E'st'n)

  Roe, Mrs Marion (Broxbourne)

  Knox, Sir David

  Ross, William (E Londonderry)

  Kynoch, George (Kincardine)

  Rumbold, Rt Hon Dame Angela

  Lait, Mrs Jacqui

  Ryder, Rt Hon Richard

  Lamont, Rt Hon Norman

  Sackville, Tom

  Lang, Rt Hon Ian

  Sainsbury, Rt Hon Tim

  Lawrence, Sir Ivan

  Scott, Rt Hon Nicholas

  Legg, Barry

  Shaw, David (Dover)

  Leigh, Edward

  Shaw, Sir Giles (Pudsey)

  Lennox-Boyd, Sir Mark

  Shephard, Rt Hon Gillian

  Lester, Jim (Broxtowe)

  Shepherd, Colin (Hereford)

  Lidington, David

  Shepherd, Richard (Aldridge)

  Lightbown, David

  Shersby, Michael

  888

  Sims, Roger

  Townsend, Cyril D (Bexl'yh'th)

  Skeet, Sir Trevor

  Tracey, Richard

  Smith, Sir Dudley (Warwick)

  Tredinnick, David

  Smith, Tim (Beaconsfield)

  Trend, Michael

  Soames, Nicholas

  Trimble, David

  Speed, Sir Keith

  Trotter, Neville

  Spencer, Sir Derek

  Twinn, Dr Ian

  Spicer, Sir James (W Dorset)

  Vaughan, Sir Gerard

  Spicer, Michael (S Worcs)

  Viggers, Peter

  Spink, Dr Robert

  Walden, George

  Sproat, Iain

  Walker, Bill (N Tayside)

  Squire, Robin (Hornchurch)

  Waller, Gary

  Stanley, Rt Hon Sir John

  Ward, John

  Steen, Anthony

  Wardle Charles (Bexhill & Battle)

  Stephen, Michael

  Waterson, Nigel

  Stern, Michael

  Watts, John

  Stewart, Allan

  Wells, Bowen

  Streeter, Gary

  Whitney, Ray

  Sumberg, David

  Whittingdale, John

  Sweeney, Walter

  Widdecombe,Ann

  Sykes, John

  Wiggin, Sir Jerry

  Tapsell, Sir Peter

  Wilkinson, John

  Taylor, Ian (Esher)

  Willetts, David

  Taylor, Rt Hon John D (Strgfd)

  Wilshire, David

  Taylor, John M (Solihull)

  Winterton, Mrs Ann (Congleton)

  Taylor, Sir Teddy (Southend, E)

  Winterton, Nicholas (Macc'f'ld)

  Temple-Morris, Peter

  Wolfson, Mark

  Thomason, Roy

  Yeo,Tim

  Thompson, Sir Donald (C'er V)

  Young, Rt Hon Sir George

  Thompson, Patrick (Norwich N)

  Thornton, Sir Malcolm

  Tellers for the Ayes:

  Thumham, Peter

  Mr. Timothy Wood and

  Townend, John (Bridlington)

  Mr. Michael Bates.

  NOES

  Abbott, Ms Diane

  Chidgey, David

  Adams, Mrs Irene

  Chisholm, Malcolm

  Ainger, Nick

  Church, Judith

  Ainsworth, Robert (Cov'try NE)

  Clark, Dr David (South Shields)

  Allen, Graham

  Clarke, Tom (MonHands W)

  Alton, David

  Clelland, David

  Anderson, Donald (Swansea E)

  Clwyd, Mrs Ann

  Anderson, Ms Janet (Ros'dale)

  Cohen, Harry

  Armstrong, Hilary

  Connarty, Michael

  Ashton, Joe

  Cook, Frank (Stockton N)

  Austin-Walker, John

  Cook, Robin (Livingston)

  Banks, Tony (Newham NW)

  Corbett, Robin

  Barnes, Harry

  Corbyn, Jeremy

  Barron, Kevin

  Corston, Jean

  Battle, John

  Cousins, Jim

  Bayley, Hugh

  Cox, Tom

  Beckett, Rt Hon Margaret

  Cummings, John

  Beith, Rt Hon A J

  Cunliffe, Lawrence

  Bell, Stuart

  Cunningham, Jim (Covy SE)

  Benn, Rt Hon Tony

  Dalyell, Tam

  Bennett, Andrew F

  Darling, Aistair

  Bermingham, Gerald

  Davidson, Ian

  Berry, Roger

  Davies, Bryan (Oldham C'tral)

  Betts, Clive

  Davies, Rt Hon Denzil (Llanelli)

  Blunkett, David

  Davies, Ron (Caerphilly)

  Boateng, Paul

  Davis, Terry (B'ham, H'dge H'I)

  Boyes, Roland

  Denham, John

  Bradley, Keith

  Dewar, Donald

  Bray, Dr Jeremy

  Dixon, Don

  Brown, Gordon (Dunfermline E)

  Dobson, Frank

  Brown, N (N'c'tle upon Tyne E)

  Donohoe, Brian H

  Bruce, Malcolm (Gordon)

  Dowd, Jim

  Burden, Richard

  Dunnachie, Jimmy

  Byers, Stephen

  Dunwoody, Mrs Gwyneth

  Callaghan, Jim

  Eagle, Ms Angela

  Campbell, Mrs Anne (C'bridge)

  Eastham, Ken

  Campbell, Menzies (Fife NE)

  Enright, Derek

  Campbell, Ronnie (Blyth V)

  Etherington, Bill

  Campbell-Savours, D N

  Evans, John (St Helens N)

  Canavan, Dennis

  Ewing, Mrs Margaret

  Cann, Jamie

  Fatchett, Derek

  889

  Field, Frank (Birkenhead)

  McAvoy, Thomas

  Fisher, Mark

  McCartney, Ian

  Flynn, Paul

  Macdonald, Calum

  Foster, Rt Hon Derek

  McFall, John

  Foster, Don (Bath)

  McKelvey, William

  Foulkes, George

  Mackinlay, Andrew

  Fraser, John

  McLeish, Henry

  Fyfe, Maria

  Maclennan, Robert

  Galloway, George

  McMaster, Gordon

  Gapes, Mike

  McNamara, Kevin

  Garrett, John

  MacShane, Denis

  George, Bruce

  McWilliam, John

  Gerrard, Neil

  Madden, Max

  Gilbert, Rt Hon Dr John

  Maddock, Diana

  Godsiff, Roger

  Mahon, Alice

  Golding, Mrs Llin

  Mandelson, Peter

  Gordon, Mildred

  Marek, Dr John

  Graham, Thomas

  Marshall, David (Shettleston)

  Grant, Bernie (Tottenham)

  Marshall, Jim (Leicester South)

  Griffiths, Nigel (Edinburgh S)

  Martin, Michael J (Springburn)

  Griffiths, Win (Bridgend)

  Martlew, Eric

  Grocott, Bruce

  Maxton, John

  Gunnell, John

  Meacher, Michael

  Hain, Peter

  Meale, Alan

  Hall, Mike

  Michael, Alun

  Hanson, David

  Michie, Bill (Sheffield Heeley)

  Hardy, Peter

  Michie, Mrs Ray (Argyll & Bute)

  Harman, Ms Harriet

  Milburn, Alan

  Harvey, Nick

  Miller, Andrew

  Hattersley, Rt Hon Roy

  Mitchell, Austin (Gt Grimsby)

  Henderson, Doug

  Moonie, Dr Lewis

  Heppell, John

  Morgan, Rhodri

  Hill, Keith (Streatham)

  Morley, Elliot

  Hinchliffe, David

  Morris, Rt Hon Alfred (Wy'nshawe)

  Hodge, Margaret

  Morris, Rt Hon John (Aberavon)

  Hoey, Kate

  Mudie, George

  Hogg, Norman (Cumbernauld)

  Mullin, Chris

  Home Robertson, John

  Oakes, Rt Hon Gordon

  Hood, Jimmy

  O'Brien, Mike (N W'kshire)

  Hoon, Geoffrey

  O'Brien, Bill (Normanton)

  Howarth, George (Knowsley N)

  O'Hara, Edward

  Howells, Dr. Kim (Pontypridd)

  Olner, Bill

  Hoyle, Doug

  O'Neill, Martin

  Hughes, Kevin (Doncaster N)

  Orme, Rt Hon Stanley

  Hughes, Robert (Aberdeen N)

  Parry, Robert

  Hughes, Roy (Newport E)

  Patchett, Terry

  Hughes, Simon (Southwark)

  Pickthall, Colin

  Hutton, John

  Pike, Peter L

  Illsley, Eric

  Pope, Greg

  Ingram, Adam

  Powell, Ray (Ogmore)

  Jackson, Glenda (H'stead)

  Prentice, Bridget (Lew'm E)

  Jackson, Helen (Shefld, H)

  Prentice, Gordon (Pendle)

  Jamieson, David

  Prescott, Rt Hon John

  Janner, Greville

  Primarolo, Dawn

  Jones, Barry (Alyn and D'side)

  Purchase, Ken

  Jones, Jon Owen (Cardiff C)

  Quin, Ms Joyce

  Jones, Lynne (B'ham S O)

  Radice, Giles

  Jones, Martyn (Clwyd, SW)

  Randall, Stuart

  Jones, Nigel (Cheltenham)

  Raynsford, Nick

  Jowell, Tessa

  Reid, Dr John

  Kaufman, Rt Hon Gerald

  Rendel, David

  Keen, Alan

  Robertson, George (Hamilton)

  Kennedy, Charles (Ross, C&S)

  Roche, Mrs Barbara

  Kennedy, Jane (Lpool Brdgn)

  Rogers, Allan

  Khabra, Piara S

  Rooney, Terry

  Kilfoyle, Peter

  Ross, Ernie (Dundee W)

  Kirkwood, Archy

  Rowlands, Ted

  Lestor, Joan (Eccles)

  Ruddock, Joan

  Lewis, Terry

  Salmond, Alex

  Liddell, Mrs Helen

  Sedgemore, Brian

  Litherland, Robert

  Sheerman, Barry

  Livingstone, Ken

  Sheldon, Rt Hon Robert

  Lloyd, Tony (Stretford)

  Shore, Rt Hon Peter

  Llwyd, Elfyn

  Short, Clare

  Loyden, Eddie

  Simpson, Alan

  McAllion, John

  Skinner, Dennis

  890

  Smith, Andrew (Oxford E)

  Vaz, Keith

  Smith, Chris (Isl'ton S & F'sbury)

  Walker, Rt Hon Sir Harold

  Smith, Llew (Blaenau Gwenf)

  Wallace, James

  Soley, Clive

  Walley, Joan

  Spearing, Nigel

  Wardell, Gareth (Gower)

  Spellar, John

  Wareing, Robert N

  Squire, Rachel (Dunfermline W)

  Watson, Mike

  Steel, Rt Hon Sir David

  Welsh, Andrew

  Steinberg, Gerry

  Wicks, Malcolm

  Stevenson, George

  Williams, Rt Hon Alan (SW'n W)

  Stott, Roger

  Williams, Alan W (Carmarthen)

  Strang, Dr. Gavin

  Wilson, Brian

  Winnick, David

  Straw, Jack

  Worthington, Tony

  Sutcliffe, Gerry

  Wray, Jimmy

  Taylor, Mrs Ann (Dewsbury)

  Wright, Dr Tony

  Taylor, Matthew (Truro)

  Young, David (Balton SE)

  Thompson, Jack (Wansbeck)

  Timms, Stephen

  Tellers for the Noes:

  Tipping, Paddy

  Mr. Eric Clarke and

  Turner, Dennis

  Mr. Joe Benton.

  Question accordingly agreed to.
  Resolved,

  4. CIDER (RATE)
  That—

  (1) In section 62(1) of the Alcoholic Liquor Duties Act 1979 for "£22.82" there shall be substituted "£23.78".

  (2) This Resolution shall come into force on 1st January 1995.

  And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.

  5. WINE AND MADE-WINE (RATES) (No. 2)
  Resolved,
  That the Resolution of the House (wine and made-wine (rates)) of 6th December shall have effect—

  (a) with the substitution for 22.46, 40.44, 134.77 and 19.81 of 23.41, 42.14, 140.44 and 20.60 respectively;

  (b) with the substitution for 192.53 (in each place) of 200.64.

  And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.

  6. TOBACCO PRODUCTS (RATES) (No. 2)
  Resolved,
  That as respects any time after 31st December 1994 the Resolution of the House (tobacco products (rates)) of 6th December shall have effect with the substitution for £55.58, £82.56 and £36.30 of £57.64, £85.61 and £37.64 respectively.
  And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.

  7. HYDROCARBON OIL (RATES) (No. 2)
  Motion made, and Question put,
  That as respects any time after 31st December 1994 the Resolution of the House (hydrocarbon oil (rates)) of 6th December shall have effect with the substitution for £0.3526 and £0.3044 of £0.3614 and £0.3132 respectively.
  And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.
  The House divided: Ayes 302, Noes 37.

  Division No. 23]

  [22.43 pm

  AYES

  Ainsworth, Peter (East Surrey)

  Dorrell, Rt Hon Stephen

  Aitken, Rt Hon Jonathan

  Douglas-Hamilton, Lord James

  Alexander, Richard

  Dover, Den

  Alison, Rt Hon Michael (Selby)

  Duncan, Alan

  Allason, Rupert (Torbay)

  Duncan Smith, Iain

  Amess, David

  Dunn, Bob

  Arbuthnot, James

  Durant, Sir Anthony

  Arnold, Jacques (Gravesham)

  Dykes, Hugh

  Arnold, Sir Thomas (Hazel Grv)

  Eggar, Tim

  Ashby, David

  Elletson, Harold

  Aspinwall, Jack

  Emery, Rt Hon Sir Peter

  Atkins, Robert

  Evans, David (Welwyn Hatfield)

  Atkinson, David (Bour'mouth E)

  Evans, Jonathan (Brecon)

  Atkinson, Peter (Hexham)

  Evans, Nigel (Ribble Valley)

  Baker, Rt Hon K (Mole Valley)

  Evans, Roger (Monmouth)

  Baker, Nicholas (Dorset North)

  Evennett, David

  Baldry, Tony

  Faber, David

  Banks, Matthew (Southport)

  Fabricant, Michael

  Batiste, Spencer

  Fenner, Dame Peggy

  Bellingham, Henry

  Field, Barry (Isle of Wight)

  Bendall, Vivian

  Fishburn, Dudley

  Beresford, Sir Paul

  Forman, Nigel

  Biffen, Rt Hon John

  Forsyth, Michael (Stirling)

  Bonsor, Sir Nicholas

  Forth, Eric

  Booth, Hartley

  Fowler, Rt Hon Sir Norman

  Boswell, Tim

  Fox, Dr Liam (Woodspring)

  Bottomley, Peter (Eltham)

  Fox, Sir Marcus (Shipley)

  Bowden, Sir Andrew

  Freeman, Rt Hon Roger

  Bowis, John

  French, Douglas

  Boyson, Rt Hon Sir Rhodes

  Fry, Sir Peter

  Brandreth, Gyles

  Gale, Roger

  Brazier, Julian

  Gallie, Phil

  Bright Sir Graham

  Gardiner, Sir George

  Brooke, Rt Hon Peter

  Garel-Jones, Rt Hon Tristan

  Brown, M (Brigg & Cl'thorpes)

  Garnier, Edward

  Browning, Mrs. Angela

  Gillan, Cheryl

  Bruce, Ian (Dorset)

  Goodlad, Rt Hon Alastair

  Budgen, Nicholas

  Goodson-Wickes, Dr Charles

  Burns, Simon

  Gorman, Mrs Teresa

  Burt, Alistair

  Gorst, Sir John

  Butler, Peter

  Grant, Sir A(Cambs SW)

  Butterfill, John

  Greenway, Harry (Ealing N)

  Carlisle, John (Luton North)

  Greenway, John (Ryedale)

  Carlisle, Sir Kenneth (Lincoln)

  Griffiths, Peter (Portsmouth, N)

  Carrington, Matthew

  Grylls, Sir Michael

  Carttiss, Michael

  Gummer, Rt Hon John Selwyn

  Cash, William

  Hague, William

  Channon, Rt Hon Paul

  Hamilton, Rt Hon Sir Archibald

  Chapman, Sydney

  Hamilton, Neil (Tatton)

  Churchill, Mr

  Hannam, Sir John

  Clappison, James

  Hargreaves, Andrew

  Clark, Dr Michael (Rochford)

  Harris, David

  Clarke, Rt Hon Kenneth (Ru'clif)

  Haselhurst, Alan

  Clifton-Brown, Geoffrey

  Hawkins, Nick

  Coe, Sebastian

  Hawksley, Warren

  Congdon, David

  Hayes, Jerry

  Conway, Derek

  Heald, Oliver

  Coombs, Simon (Swindon)

  Heath, Rt Hon Sir Edward

  Cope, Rt Hon Sir John

  Heathcoat-Amory, David

  Cormack, Patrick

  Hendry, Charles

  Couchman, James

  Heseltine, Rt Hon Michael

  Cran, James

  Higgins, Rt Hon Sir Terence

  Currie, Mrs Edwina (S D'by'ire)

  Hill, James (Southampton Test)

  Curry, David (Skipton & Ripon)

  Hogg, Rt Hon Douglas (G'tham)

  Davies, Quentin (Stamford)

  Horam, John

  Davis, David (Boothferry)

  Hordem, Rt Hon Sir Peter

  Day, Stephen

  Howard, Rt Hon Michael

  Deva, Nirj Joseph

  Howarth, Alan (Strat'rd-on-A)

  Devlin, Tim

  Howell, Rt Hon David (G'dford)

  Dicks, Terry

  Howell, Sir Ralph (N Norfolk)

  892

  Hughes, Robert G. (Harrow West)

  Pickles, Eric

  Hunt, Rt Hon David (Wirral W)

  Porter, David (Waveney)

  Hunt, Sir John (Ravensbourne)

  Portillo, Rt Hon Michael

  Hurd, Rt Hon Douglas

  Powell, William (Corby)

  Jack, Michael

  Rathbone, Tim

  Jackson, Robert (Wantage)

  Redwood, Rt Hon John

  Jenkin, Bernard

  Renton, Rt Hon Tim

  Jessel, Toby

  Richards, Rod

  Jones, Gwilym (Cardiff N)

  Riddick, Graham

  Jones, Robert B (W Hertfdshr)

  Robathan, Andrew

  Key, Robert

  Roberts, Rt Hon Sir Wyn

  King, Rt Hon Tom

  Robertson, Raymond (Ab'd'n S)

  Kirkhope, Timothy

  Robinson, Mark (Somerton)

  Knapman, Roger

  Roe, Mrs Marion (Broxbourne)

  Knight, Mrs Angela (Erewash)

  Ross, William (E Londonderry)

  Knight, Greg (Derby N)

  Rumbold, Rt Hon Dame Angela

  Knight, Dame Jill (Bir'm E'st'n)

  Ryder, Rt Hon Richard

  Knox, Sir David

  Sackville, Tom

  Kynoch, George (Kincardine)

  Sainsbury, Rt Hon Tim

  Lait, Mrs Jacqui

  Scott, Rt Hon Nicholas

  Lamont, Rt Hon Norman

  Shaw, David (Dover)

  Lang, Rt Hon Ian

  Shaw, Sir Giles (Pudsey)

  Lawrence, Sir Ivan

  Shephard, Rt Hon Gillian

  Legg, Barry

  Shepherd, Colin (Hereford)

  Leigh, Edward

  Shepherd, Richard (Aldridge)

  Lennox-Boyd, Sir Mark

  Shersby, Michael

  Lester, Jim (Broxtowe)

  Sims, Roger

  Lidington, David

  Skeet, Sir Trevor

  Lightbown, David

  Smith, Sir Dudley (Warwick)

  Lilley, Rt Hon Peter

  Smith, Tim (Beaconsfield)

  Lloyd, Rt Hon Peter (Fareham)

  Soames, Nicholas

  Lord, Michael

  Speed, Sir Keith

  Luff, Peter

  Spencer, Sir Derek

  Lyell, Rt Hon Sir Nicholas

  Spicer, Sir James (W Dorset)

  MacGregor, Rt Hon John

  Spicer, Michael (S Worcs)

  MacKay, Andrew

  Spink, Dr Robert

  Maclean, David

  Sproat, Iain

  McLoughlin, Patrick

  Squire, Robin (Hornchurch)

  McNair-Wilson, Sir Patrick

  Stanley, Rt Hon Sir John

  Madel, Sir David

  Steen, Anthony

  Maitland, Lady Olga

  Stephen, Michael

  Malone, Gerald

  Stern, Michael

  Mans, Keith

  Stewart, Allan

  Marland, Paul

  Streeter, Gary

  Marlow, Tony

  Sumberg, David

  Marshall, John (Hendon S)

  Sweeney, Walter

  Marshall, Sir Michael (Arundel)

  Sykes, John

  Martin, David (Portsmouth S)

  Tapsell, Sir Peter

  Mawhinney, Rt Hon Dr Brian

  Taylor, Ian (Esher)

  Mellor, Rt Hon David

  Taylor, John M (Solihull)

  Merchant, Piers

  Taylor, Sir Teddy (Southend, E)

  Mills, Iain

  Temple-Morris, Peter

  Mitchell, Andrew (Gedling)

  Thomason, Roy

  Mitchell, Sir David (Hants NW)

  Thompson, Sir Donald (C'er V)

  Moate, Sir Roger

  Thompson, Patrick (Norwich N)

  Molyneaux, Rt Hon James

  Thornton, Sir Malcolm

  Monro, Sir Hector

  Thumham, Peter

  Montgomery, Sir Fergus

  Townend, John (Bridlington)

  Moss, Malcolm

  Townsend, Cyril D (Bexf'yh'th)

  Needham, Rt Hon Richard

  Tracey, Richard

  Nelson, Anthony

  Tredinnick, David

  Neubert, Sir Michael

  Trend, Michael

  Newton, Rt Hon Tony

  Trimble, David

  Nicnlls, Patrick

  Trotter, Neville

  Nicholson, David (Taunton)

  Twinn, Dr Ian

  Nicholson, Emma (Devon West)

  Vaughan, Sir Gerard

  Norris, Steve

  Viggers, Peter

  Onslow, Rt Hon Sir Cranley

  Walden, George

  Ottaway, Richard

  Walker, Bill (N Tayside)

  Page, Richard

  Waller, Gary

  Paice, James

  Ward, John

  Patnick, Sir Irvine

  Wardle, Charles (Bexhill)

  Patten, Rt Hon John

  Waterson, Nigel

  Pattie, Rt Hon Sir Geoffrey

  Watts, John

  Pawsey, James

  Wells, Bowen

  Peacock, Mrs Elizabeth

  Whitney, Ray

  893

  Whittingdale, John

  Winterton, Nicholas (Macc'fld)

  Widdecombe, Ann

  Wolfson, Mark

  Wiggin, Sir Jerry

  Young, Rt Hon Sir George

  Wilkinson, John

  Willetts, David

  Tellers for the Ayes:

  Wilshires, David

  Mr. Timothy Wood and

  Winterton, Mrs Ann (Congleton)

  Mr. Michael Bates.

  NOES

  Abbott, Ms Diane

  Lewis, Terry

  Austin-Walker, John

  Llwyd, Elfyn

  Barnes, Harry

  Loyden, Eddie

  Beith, Rt Hon A J

  McAvoy, Thomas

  Bruce, Malcolm (Gordon)

  Maclennan, Robert

  Campbell, Menzies (Fife NE)

  Maddock, Diana

  Canavan, Dennis

  Marshall, David (Shettleston)

  Chidgey, David

  Michie, Mrs Ray (Argyll & Bute)

  Corbyn, Jeremy

  Pike, Peter L

  Dunnachie, Jimmy

  Rendel, David

  Foster, Don (Bath)

  Salmond, Alex

  Galloway, George

  Skinner, Dennis

  Gordon, Mildred

  Steel, Rt Hon Sir David

  Graham, Thomas

  Taylor, Matthew (Truro)

  Harvey, Nick

  Tyler, Paul

  Home Robertson, John

  Wallace, James

  Hood, Jimmy

  Wareing, Robert N

  Jones, Nigel (Cheltenham)

  Tellers for the Noes:

  Kennedy, Charles (Ross,C&S)

  Mrs. Margaret Ewing and

  Kirkwood, Archy

  Mr. Andrew Welsh.

  Question accordingly agreed to.

  SUPREME COURT OF ENGLAND AND WALES
  Motion made, and Question put forthwith, pursuant to Standing Order No. 101(5),
  That the draft Maximum Number of Judges Order 1994, which was laid before this House on 16th November, be approved.—[Mr. Andrew Mitchell.]
  Question agreed to.

  Ordered,
  That Mr. Stanley Orme be added to the Committee Privileges.—[Mr. Andrew Mitchell.]

Child Witnesses
Motion made, and Question proposed, That this House do now adjourn.—[Mr. Andrew Mitchell.]
10.56 pm
Mr. Julian Brazier: I am grateful for the opportunity to raise for the second time the important issue of child witnesses in child abuse cases.
It is a subject that we are often reluctant to think about because it involves some very sad cases. However, thanks to Government action and a great deal of hard work by the voluntary sector, progress has been made, especially in the past three or four years. I am thinking especially of the Criminal Justice Act 1991, which allows prerecorded videos, the package introduced jointly by the Government and the National Society for the Prevention of Cruelty to Children for best practice for courts and child witnesses and the provisions of the Criminal Justice and Public Order Act 1994, which have also assisted child witnesses. My hon. Friend the Minister of State, Home Office, the hon. Member for Penrith and The Border (Mr. Maclean), will be familiar with those provisions and I am delighted that he is to reply to the debate.
The fact remains that court is still a deeply harrowing experience for children who have often already been very seriously damaged. Of course, I am not suggesting—no reasonable person would—that children's testimony should not be tested in a proper legal process. It is inconceivable that we could start to convict people on the basis of allegations alone, but I am saying that, far from promoting justice, many features of our legal system in fact undermine it and do two things in the process. First, they further damage children who have already undergone extremely traumatic experiences and, secondly, they still often discourage the police and social services from pressing charges for the straightforward reason that they do not want to put a child through the horrendous experience that court all too often is.
I want to focus on four particular aspects. The first is delay. I know that the Government are trying to get such cases fast-tracked, as the Royal Commission on criminal justice recommended, but I have seen two surveys in the past week. One was carried out in Surrey by the National Society for the Prevention of Cruelty to Children, and the other, which is still in the process of compilation, is being conducted in Kent by the National Children's Home. They both suggest that, typically, child cases are still taking 10 to 12 months to come to court. That is a area in which I suggest that justice delayed is all too often justice denied. For a child to have to remember the exact details that long, very often to be denied therapy because of the danger of that causing the case to collapse and, worse still, frequently seeing the listings postponed and postponed, is prejudicial to justice.
The second issue, which seems to be imperative, is the training of judges and barristers. For divorce cases, when child custody issues are involved, we have specialist family courts, in which the judges and the lawyers concerned have had specialist training in how to deal with children. For criminal cases, of course, we cannot have such specialisation because it would further worsen the listings problems and we would have more delays rather than fewer. But we could have a sensible level of training for judges and barristers.

895
Very often, judges will allow barristers to ask children completely unintelligible questions. In a recent case—I am indebted to the NSPCC for the cases—a prosecution lawyer, supposed to be on the side of the child, asked him the following question:
"My learned friend has suggested that the incident you described earlier was in fact inaccurate. Was it accurate or not?"
That was asked of a mentally retarded 12-year-old. I am not even sure whether I would have known what it meant myself.
Worse still, often, judges allow defence barristers to bully people. Another case from the NSPCC survey said:
"Lucy had been questioned through the CCTV link by prosecution and had just begun cross-examination by the defence when the defendant was heard crying and wailing in the courtroom."
The defendant was a male adult. The case continued:
"As the defendant was distressed, the judge agreed to a 15 minute break to allow him to compose himself. The child waited for 15 minutes. Then, just after the questioning began again, the court decided to break for lunch. She returned to be confronted by repeated accusations of lying from the defence counsel until, eventually, the young child broke down and cried."
The judge allowed no adjournment in that case. A male adult was allowed an adjournment because he had burst into tears, yet a young girl was not.
That brings me to my third point, which is what I call the last-minute syndrome. All too often, the child is told only on or just before the day whether his or her recorded evidence will be allowed to be shown, whether a video link will be used for cross-examination, and whether the ridiculous paraphernalia—for a children's case—of wigs and gowns are to be used.
Mr. Alan Howarth: I am sure that the whole House is very grateful to my hon. Friend for raising these important and difficult issues. He is describing some intensely unsatisfactory aspects of court procedure. Does he agree that we need to assemble a model of best practice and to guide the courts in very clear terms that they should adhere to it?
Mr. Brazier: I am most grateful to my hon. Friend. I should note at this point that I am very impressed by the number of hon. Members on the Government and Opposition Benches who have chosen to support this debate. It shows the degree of interest in the subject. My hon. Friend the Member for Basildon (Mr. Amess) is here, and the right hon. Member for Berwick-upon-Tweed (Mr. Beith) and the hon. Member for Newcastle-under-Lyme (Mrs. Golding) are also present, as well as my hon. Friend the Member for Chislehurst (Mr. Sims).
Another aspect of the last-minute syndrome is whether a child will be allowed to review his or her evidence before taking the witness stand. Indeed, recently, an entire case collapsed after months of work and preparation, because when the child was finally confronted with the interview notes and requested to read them out on the witness stand, he could not read the original interviewer's handwriting. Of course, we need best practice. I suggest that we need a straightforward pro forma in which the bulk of those items are identified. The Lord Chancellor's office should send out a requirement for judges to notify the prosecution in advance so that the child can be told what is going to happen in respect of each of those items.
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That brings me to my fourth and final point. The most important point for a child is that it should have a supporting adult throughout the trial. If the child is to be placed in a cubicle for a video recording, it is unfair that the child should go in only with a court usher who is a complete stranger and who often wears a rather strange-looking gown.
However, the present guidelines state that in such cases, there should be another adult apart from a court usher only "under exceptional circumstances" and with the permission of the defence. Sadly, with our adversarial system, that permission is unlikely to be granted because, alas, with the declining ethics of the Bar today, the defence is very seldom willing to concede anything to help the child, as that would promote the chances of a conviction.
Surely we should be striking a balance. Surely it is intolerable that a judge should give better treatment to a male adult suspect than to a young child victim. Surely, even within our antiquated legal system, there must be room for judges to make decisions at least a few days in advance and formally notify the prosecution so that the child can be told what to expect and be prepared for it. Is it really right that children should not know until the day whether they will have an adult with them throughout the trial? Those questions are important and fundamental to British justice.
I end with this thought: there is a great deal of concern in this country today, which is being registered in several cases, one of which is sub judice but which was very widely reported, and another of which involved a child molester who was released on a technicality at the very beginning of a trial. All that concern comes down to the fact that the people are worried that, today, the victim is treated in a grossly inferior manner in comparison with the rights of the suspect. Surely we should be starting to restore the balance in the case of children.
I commend the Government on the progress that they have already made over the past few years and I hope that the points that I have raised will be examined to restore the balance still further.
11.7 pm
Mr. Roger Sims: I intervene briefly to commend my hon. Friend the Member for Canterbury (Mr. Brazier) on securing this opportunity to ventilate this very important matter, and to express my support for my hon. Friend.
Like the hon. Member for Newcastle-under-Lyme (Mrs. Golding), I was involved in the early stages in efforts to gain acceptance by the courts of video evidence by children. I recall particularly seeing some of the pioneering work carried out in Bexley before the general principle was accepted. I am delighted that my hon. Friend the Member for Canterbury is maintaining a watching brief on the way in which the changes are being implemented.
One of the arguments in favour of allowing video evidence to be shown to the courts was that, when the video was shown privately to a defendant who might be minded to plead guilty, he would change his plea to guilty and avoid the ordeal of the child having to appear before the court.

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I am aware that the Home Office has commissioned research into how the legislation is operating, and I wonder whether the Minister can make an assessment of the extent to which the hopes that I have expressed have been fulfilled.
Whatever the situation, the fact is that—alas—there are still many contested cases. A child has been through a terrifying experience at the time of the alleged offence. It is then asked to recount what happened before a video camera, and many months later the child may be asked to appear and relive the incident again, either in court or perhaps in an adjacent room, in an unusual setting with a video camera pointing at him or her. That would be a considerable ordeal for an adult. It is not difficult to imagine how overwhelming or terrifying that must be for a small child.
Judges, barristers and court officials must apply sensitivity and flexibility when dealing with child witnesses, particularly in child abuse cases—for example, in allowing the child's memory to be refreshed on incidents that might have happened some time ago, and asking the child a few informal, friendly questions to ease the tension before starting cross-examination. Of course the defendant is entitled to a fair trial and justice must be done, but that principle applies as much to the child witness as it does to the defendant.
11.10 pm
The Minister of State, Home Office (Mr. David Maclean): I am grateful to my hon. Friend the Member for Canterbury (Mr. Brazier) for bringing this important issue before the House. He has been a forceful campaigner for child witnesses in cases of child abuse for some years. I am grateful also for the speech of my hon. Friend the Member for Chislehurst (Mr. Sims) and for the intervention of my hon. Friend the Member for Stratford-on-Avon (Mr. Howarth). Indeed, when the Criminal Justice and Public Order Bill was being considered in Committee, my hon. Friend the Member for Basildon (Mr. Amess) was lobbying me hard on this point, as was my hon. Friend the Member for Gravesham (Mr. Arnold). Several amendments were successfully moved by my hon. Friend the Member for Brecon and Radnor (Mr. Evans), so he and others should take some of the credit for the changes that have been made in recent years.
I cannot underestimate the importance of having the right laws and procedures in place to ensure that the perpetrators of child abuse can be brought to justice. Child abusers can be convicted and punished only if it is possible for the children who have been their victims to give evidence effectively.
Until a few years ago, child witnesses seemed almost to be misfits in a criminal justice system which was designed by adults, for adults. They were even presumed to be incompetent as witnesses. But, as my hon. Friend the Member for Canterbury will know, the Government have done much to bring about change, to remove the old and outdated prejudices against children as witnesses, and to adapt the system to accommodate the needs of children, particularly those who have suffered a traumatic experience.
The Criminal Justice Act 1988 abolished the presumption that children were incompetent as witnesses. It also introduced the system which allows children to give their evidence at court by means of a closed-circuit
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television link. Building on that, the Criminal Justice Act 1991 extended the closed-circuit television link provisions, forbade the cross-examination of the child directly by the accused, and provided for a video-recorded interview with the child, conducted by police or social workers soon after the incident, to serve as the child's evidence-in-chief at the trial. The Act also provided for committal proceedings to be bypassed in cases involving children.
My hon. Friend was kind enough to acknowledge those reforms in his previous Adjournment debate on this subject nearly three years ago. Since then the Government have produced an important set of guidelines, the 1992 memorandum of good practice, for those involved in preparing for and making the video-recorded interview with child witnesses which may then serve as their evidence at trial. I believe that the memorandum has performed a useful function in enabling the police and social workers to interview a child soon after the alleged offence, and to do so in a way which increases the chances of the video being declared admissible in court.
We have also made legislative improvements to the provisions in the 1991 Act. The Criminal Justice and Public Order Act 1994 cleared up any remaining doubts about the abolition of the competence test for children by requiring judges to admit their testimony, unless the child is incapable of giving intelligible testimony. It is only fair to pay tribute to my hon. Friend the Member for Brecon and Radnor for being instrumental in having that amendment accepted.
We also accepted an amendment in another place during the passage of the Bill to enable the prosecution to examine the child witness on any matter not adequately dealt with in the video recording. That ensures that the prosecution is able to bring what may be important and relevant points to the attention of the court when an issue is mentioned but not fully explored in the video recording. Also in the Act, we abolished the requirement that the jury in sexual offence cases must be warned of the danger of convicting on the uncorroborated evidence of the complainant.
I believe that this level of activity and response to the needs of children demonstrates the Government's commitment to making it easier for them to give evidence in court. But we are always open-minded about possible legislative and administrative improvements which can be made, and we are prepared to consider any proposals which will help to ensure that the current provisions can be made to operate to maximum effect.
At present, we are not convinced that it would be right to make further radical structural changes to the system for taking children's evidence, but I do not rule these out, if, in the light of experience, they seem to be justified.
Mr. Brazier: I am most grateful to my hon. Friend for giving way. The National Society for the Prevention of Cruelty to Children asked me specifically to thank my hon. Friend for the very flexible and positive approach which he has brought to his office in building on moves which were already in train. However, I suggest that almost all the points that I listed in my speech come back to the need for judges to change their attitudes and to change the way in which they run their courts—and, of course, training and a memorandum from the Lord

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Chancellor are part of the solution. But we have identified very little that needs changing in the law—we need to change the climate in which judges operate.
Mr. Maclean: I am grateful to my hon. Friend for pointing out that he thinks that the law is adequate. Some people would disagree and would like to see legal changes. At present, I do not think that it would be wise to make substantial legal changes. We need some experience of how the current system is working and we need to receive the results of research in this area. Nevertheless, I take on board my hon. Friend's point: I think that the Lord Chancellor is very much aware of the need for training and sensitivity in dealing with those cases.
It was clear when the provisions allowing the video-recorded testimony of children to be submitted as their evidence-in-chief were introduced through the 1991 Act that it would be necessary to keep a close eye on how the provisions were working in practice. Accordingly, we commissioned a major independent research project by Professor Graham Davies of Leicester university into the effectiveness of the current provisions, and I can tell the hon. Member for Chislehurst that we hope to receive the results very shortly.
The research team aimed to obtain the views of a number of practitioners—police and social workers, barristers and judges—on the provisions of the 1991 Act at an early stage in its implementation, and also after they had had more experience of its operation. They have also been studying a number of video-recorded interviews and tracing their progress through the criminal justice system.
We shall be considering the findings of the project very carefully in deciding what further changes need to be made. If we had rushed into changes without commissioning the research or when the research was halfway through, we would rightly be subject to severe criticism if the research came to conclusions contrary to the hasty ones that we had arrived at.
I may be criticised and accused—unfairly—of wishing to hang people before giving them a fair trial, but I hope that my hon. Friend will accept that even I agree that we must consider the balance between the interests of the child and the interests of justice. In an ideal world, the two would be one and the same. In the past, the stress of criminal proceedings for children has resulted in cases being abandoned—or not even begun—because the child's evidence was not heard.
Mr. A. J. Beith: Will the hon. Gentleman give way?
Mr. Maclean: I want to cover the subject and crack on.
Too often the interests of justice have been frustrated, and the child further harmed, because it has not been possible for the child to cope with the full court process. But children have a right to justice, and their evidence is essential if society is to protect their interests and deal effectively with those who would harm them. Putting the child's interests first is our priority—but not to the extent of removing the defendant's right to a fair trial and to have the case against him properly tested.
Getting the balance right will always be a difficult and delicate task. Many people will be convinced that in individual cases the balance is not right—if they were the
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judge and the jury. Nevertheless, I hope that my hon. Friend will agree that the Government have been able to improve the lot of child witnesses since his previous Adjournment debate and that we remain open to the possibility of further changes, where they can be justified.
I turn now to the points that my hon. Friend raised tonight. As he pointed out, there is some evidence that it is taking too long for child abuse cases to reach court. The criminal justice agencies are well aware of the adverse effect on the child of any unnecessary delay in bringing the ordeal to an end, and considerable efforts are being made to ensure that that delay is kept to an absolute minimum.
In the Crown court, cases involving child witnesses are given high priority for hearing dates. Guidelines have been issued to listing officers, recommending that such cases be given a fixed date for trial, to ensure that expert and other witnesses have sufficient notice to make themselves available and so reduce the risk of late changes to the hearing dates. They also recommend that cases involving child witnesses should be given the earliest available date and that trial dates in such cases must be changed only in exceptional circumstances.
Child liaison officers are also charged with ensuring, as far as it is within the ability of the court to do so, that there is no unnecessary delay in bringing the cases to trial. Again, we are helping to fund research into the main reasons for delay.
The Crown Prosecution Service recently issued guidance about cases involving child witnesses, which reminds prosecutors to use the procedures that are in force to help expedite cases involving child witnesses through the court and provides practical guidance about how those procedures can be used.
The Home Office-chaired steering group on child evidence has been looking into the issue and each of the agencies involved in the process has looked both at how delays arise at present and how the process can be streamlined in future. There are a number of positive initiatives in different parts of the country, including some fast tracking projects.
So we are tackling the problem of delays in a number of ways, but like my hon. Friend I hope that further improvements can be made to speed up the process of bringing child abuse cases to court.
My hon. Friend raised the issue of therapy for children who have been abused. When a child receives certain types of counselling and therapy, the defence is liable to allege that the child has been coached, thus undermining the weight of his or her evidence. There is no absolute ban on children receiving therapy while investigations are taking place, but it is important that therapists operate within certain guidelines, so as not to prejudice a fair trial.
The Crown Prosecution Service has set up a seminar group to consider that issue. The group brings together legal practitioners and clinical experts. They are working on proposed guidance for therapists involved in treating child witnesses before trial. I very much hope that that guidance will make it easier for children who need therapy to receive it before trial, without in any way tainting their evidence in the eyes of the court.
My hon. Friend referred to judicial training and the need for training for the judiciary on conduct towards children in court. That is a matter for my right hon. and learned Friend the Lord Chancellor, but I can tell my hon.

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Friend and the House that the training of judges includes lectures on child evidence, child abuse and rape. Sessions have also been held on techniques for interviewing children.
The subject of judicial training is also on the agenda for the next meeting of the Home Office-chaired steering group on child evidence, when it hopes to discuss the issue with a representative of the Judicial Studies Board.
My hon. Friend also referred to the number of important decisions made at the last minute by the judge, such as whether to allow evidence to be given by a video link. I hope that the introduction of plea and direction hearings—in stages from the new year—in cases committed or transferred to the Crown court will make a significant difference to the problem.
At the plea and direction hearing, ail parties will be required to identify whether any witnesses need special attention, including child witnesses. The judge can then ensure that all the necessary steps, including applications for the use of video-recorded evidence, television links or screens, have been taken in good time. That should reduce the number of cases in which a decision about granting such an application is delayed.
My hon. Friend referred to guidelines preventing an adult from being present in the room when a child is giving evidence by closed circuit television link. Under the Crown court rules, the child witness
"shall be accompanied by a person acceptable to a judge of the Crown Court, and unless the judge otherwise directs, by no other person".
The prescribed form for making applications includes a section in which the applicant may propose a named individual to accompany the witness, and give his or her reasons for doing so, for the judge to consider.
In October 1991, the deputy chief justice, Lord Justice Watkins, gave a direction that a court usher would be the most appropriate person to accompany a child witness. That person would fulfil a number of important functions—ensuring that the equipment is used properly in the first place, alerting the judge to any needs that the child might have, preventing unauthorised access to the room, and ensuring that the child is not prompted in any
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way when giving evidence. The court usher has the independence that a child's relative or friend might not have and would be sufficiently knowledgeable about the procedures and equipment to be able to discharge the responsibility completely.
However, nothing would preclude an independent adult from accompanying the child, as long as the person was named on the application form. Of course, the final decision on who accompanies the child in the witness room is for the judge who considers the application.
My hon. Friend referred to the issue of cross-examination before trial. While the 1991 Act provided for children to give their evidence-in-chief in a video-recorded interview, it is still possible for a child to be cross-examined during the trial.
Quite often there will be a considerable delay between the giving of evidence on video and cross-examination upon that evidence. This could be seen to prolong the trauma for the child, and also to create an opportunity for defence counsel to exploit inconsistencies between the video recording and the answers to questions given on cross-examination. Being cross-examined can be a harrowing experience for adults, let alone children who have suffered abuse.
That underlies the suggestion that both the examination-in-chief and cross-examination of children should take place before trial. This could be done in a number of ways. One possibility, which was debated in the House as a proposed amendment to the Criminal Justice and Public Order Act 1994, would be to allow the evidence of children to be taken "on commission". The court could appoint an independent commissioner who would oversee the questioning of the child by both the prosecution and defence counsel, and that would be recorded on video.
A similar system has just begun to operate in Scotland. My hon. Friend may detect—
The motion having been made after Ten o'clock, and the debate having continued for half an hour, MR. DEPUTY SPEAKER adjourned the House without Question put, pursuant to the Standing Order.
Adjourned accordingly at twenty-six minutes past Eleven o'clock.