§ Order for Second Reading read.3.35 pm
§ The Chief Secretary to the Treasury (Mr. William Waldegrave)
I beg to move, That the Bill be now read a Second time.
In his three Budgets, my right hon. and learned Friend the Chancellor of the Exchequer has built the foundations for sustainable growth, with low inflation, which will lead to higher living standards for all in this country. The economic fundamentals of the economy are now firmly established. Output is almost 6 per cent. higher than its previous peak, with steady growth forecast to continue. Inflation is enjoying its best run for almost 50 years and we are on course to meet our target of underlying inflation of 2½ per cent. or less. Unemployment has fallen by more than 730,000, with 250,000 new jobs created in the past year. Interest rates are low and people's mortgage rates are at their lowest for 30 years.
The 1995 Budget, of which the Bill is the central part, maintains the strategy. It takes no risks with the recovery, but starts to cut taxes, based on the good control of spending. It makes real further progress towards our goal of making Britain the enterprise centre of Europe. It keeps us on course for a low-spending, low-tax economy which fosters enterprise and lets people take their own decisions with their own money, in complete contrast to the Opposition's plans.
§ Mr. Barry Sheerman (Huddersfield)
Why did the Budget not contain any strategy for Britain's manufacturing industry?
§ Mr. Waldegrave
Absolutely central to this year's Budget and to previous Budgets is a strategy for Britain's industry: a strategy of lower interest rates, an enterprise economy, deregulation and competition—all the things about which the Labour party is suspicious in its bones.
We are on course to reduce the share of national income taken by the state to below 40 per cent. of gross domestic product by 1997–98, making Britain the best place in Europe in which to employ people and to invest. That has been done while finding additional resources for the services that people care most about—the health service, schools and the police. There is another £900 million for schools, there are another 5,000 police officers and there are almost 4,000 more prison places. There are 10,000 extra closed-circuit television cameras in town centres. Current spending on the NHS is to increase by £1¼ billion next year—1½ per cent. in real terms.
§ Mr. Sheerman
Does the right hon. Gentleman accept that people care very much for their university sector? Does he believe that a 7 per cent. cut in the universities' budgets will help either higher education or an enterprise economy, let alone the enterprise centre of Europe? Universities are increasingly at the cutting edge of the new technology that produces the wealth creation ability of our country.
§ Mr. Waldegrave
The hon. Gentleman has made a useful point to which I shall return. Although the Labour party has not voted against the tax cuts, it opposes each of the spending restraints on which those tax cuts are based. That is the fundamental incoherence at the heart of the Opposition's position. The universities, which are well placed and skilful in terms of raising money from the private market, have been required to do more and I am sure that they will be able to do so.
To achieve the strategy that I have set out, we have had to take tough decisions, one of which the hon. Member for Huddersfield (Mr. Sheerman) has just referred to, about priorities and about reducing expenditure elsewhere. We aim to reduce fraud in social security, for example, by £2½ billion a year within the next three years. We have redoubled our pressure on central Government costs. We plan a reduction in the real costs of Whitehall of more than 12 per cent. over the period. Although much more can of course be done—by greater efficiency, competitive tendering, contracting out, and increasingly by the private finance initiative and challenge funding—tough decisions on priorities must be made; reining back individual programmes that are not of the highest priority.
§ Mr. David Winnick (Walsall, North)
Although the Budget was cheered to the echo by Tory Members of Parliament at the time, it has been a total flop in the country. Will the Minister explain why that is so?
§ Mr. Waldegrave
I am in danger of reading out the several pages of congratulations from industry and others, including the Confederation of British Industry, the heads of many great firms and some editorials of newspapers sympathetic to the Labour party, with which I have been provided, but in order not to embarrass the hon. Gentleman, I shall not do so now.
§ Mr. Waldegrave
The hon. Member for Bolsover (Mr. Skinner) is always helpful. I will always give way to him—not always, but mostly.
§ Mr. Skinner
Has the Minister received any letters from any prison officers about the state of their jobs? If the Budget was so good and the country's economy is in such good shape, why have the Government announced that 3,000 prison officers are to get the sack? Surely when the Home Secretary is talking about increasing the prison population, it is scandalous to be putting 3,000 people on the dole if, as the Minister is saying, the country's economy is in good shape. How has that happened?
§ Mr. Waldegrave
The hon. Gentleman straightforwardly, openly and honestly speaks—and I think would be proud to speak—for the voice of the public sector trade unions on this matter and many others. I think that he would regard it as an insult if I said that he did anything other. We take a different approach. We believe that there are major efficiency gains to be made in the prison services as elsewhere. Private sector prisons have demonstrated greater efficiency than those retained and run directly in the traditional way. That is why we can achieve the objective of more prison places, which we unfortunately need, while making economies.
413 Every one of those economies—Labour Members have been helpful enough to demonstrate that already in the debate—is opposed openly, or sometimes after talking to the pressure groups concerned, by the Labour party and the Liberal Democrats. Without those economies, the tax cuts in the Budget are not affordable. Those tax cuts are right for the economy. They build incentives and encourage enterprise. They help individuals, families, pensioners, business men and entrepreneurs to keep more of what they earn or have built up through work, saving and creating wealth and employment. Without the cuts in spending plans, which finance the tax cuts, those tax cuts would not be affordable.
That is the hypocrisy of Labour Members: supporting the tax cuts yet arguing day after day against the measures that make those tax cuts affordable.
§ Mr. Gerry Sutcliffe (Bradford, South)
What good are tax cuts to people out of work? Is not the Government's economic strategy about having a pool of unemployed people? What will the Budget do—and what is the Minister going to do—to create jobs?
§ Mr. Waldegrave
We believe that the way in which to create jobs—this is perhaps one of the real divides between the Conservative party and the Labour party—is to make it economic and affordable to employ people, by cutting the costs of employment. We have therefore achieved the lowest level of unemployment of the big economies in Europe. All the policies for which the Labour party argues would turn that round and send our unemployment towards the levels in France, Germany, Spain and the other countries in Europe where such policies, which make it difficult to employ people, are followed.
The hon. Member for Bradford, South (Mr. Sutcliffe) and especially Opposition Members who consistently sit below the Gangway believe that the state can create jobs.
§ Mr. Waldegrave
That is the proper divide between us. "Of course", says the hon. Member for Bolsover. We do not believe that. We believe that enterprise creates jobs. That is the heart of our strategy.
Part of the overall economic strategy was the cut in interest rates announced in December. That reduction, fully consistent with meeting our inflation target, means that mortgage rates have fallen to their lowest level for a generation. There is more good news ahead. In the spring, households in England and Wales will receive a rebate of over £50 on their electricity bills following the recent flotation of the national grid. There are also maturing tax-exempt special savings accounts, or TESSAs—a Government invention—to consider, with investments worth about £15 billion being unfrozen in the first quarter of this year. That is all in addition to the tax cuts announced in the Budget.
A number of surveys show that the views of my right hon. and learned Friend the Chancellor about the growth of consumer spending and of the economy this year look more and more justified. The House can be assured that the strategy embodied in the Bill will keep the British economy strong and that it promises excellent prospects for the coming year—the fourth year of growth since the recession.
414 My right hon. and learned Friend had three main aims in his Budget tax measures—first, to help people to keep more of what they earn and save; secondly, to protect family savings; and, thirdly, to continue to reinforce Britain's status as the enterprise centre of Europe.
§ Mr. Waldegrave
It is good.
The Finance Bill contributes to all my right hon. and learned Friend's aims. It starts with a cheerful clause on which I am sure I can unite the House—the first cut in whisky tax for 100 years. As a former Agriculture Minister, I know the importance of that great industry for both Scotland and the United Kingdom as a whole, so there could not be a better way to start a Finance Bill.
After dealing with various other duties, the Bill reduces income tax. When we came to power, the basic rate of income tax was 33 per cent. and the higher rates rose to 83 per cent. on earnings and 98 per cent. on what Labour called unearned income—an unpleasant euphemism for the interest on people's savings. That was the punitive tax system under Labour. It was hostile to people who wanted to work hard and do well and savage for people who wanted to set aside a little for their old age. During the past 16 years, Conservative Governments have cut the basic rate to 25 per cent. and the higher rate to 40 per cent. We have stopped the surcharge on savers. The Bill goes further and takes significant steps towards the Government's clear target of moving towards a 20 per cent. basic rate of income tax as soon as possible. Clause 64 reduces the basic rate to 24 per cent. It also widens the lower rate band by £700—£500 more than indexation. Clause 65 and schedule 5 reduce the tax on savings income to 20 per cent. for basic rate taxpayers. Clause 66 increases personal allowances by £100 more than indexation.
In all, 26 million income tax payers and 14 million savers will be better off and 220,000 people—low earners and pensioners—will be freed from tax altogether.
§ Mr. Bruce Grocott (The Wrekin)
In view of the rosy picture that the Minister is painting, can he explain the persistent absence of any feel-good factor among the people whom we represent? More specifically, can he explain the results of an opinion poll among parents who were asked whether they thought their children faced a better or worse future than they had faced, when 18 per cent. said that they thought it would be better, but 63 per cent. thought it would be worse? Is not it a unique achievement of the Government that under them, alone among Governments in our history, people are now rather fearful of being young?
§ Mr. Waldegrave
The hon. Gentleman should cast his mind back to the 1970s when the Labour party ran the country and we were genuinely at the bottom of all the league tables, with about 1 per cent. growth a year and virtually no growth in real personal disposable incomes. People's future and their hopes for the future are far better based today than they were under Labour.
In parallel with the income tax changes, 3 million self-employed taxpayers will benefit under the Bill. The 1p off the small companies rate of corporation tax in clause 70 will benefit more than 300,000 small companies. The extension of the business rates transitional scheme—which is not in the Bill—will help 415 800,000 businesses. Those measures, together with the changes to inheritance tax in clause 169 onwards, and to capital gains tax in clauses 163 and 164, offer practical help to businesses, as does the cut in the employers' national insurance charge.
§ Mr. Winston Churchill (Davyhulme)
I draw my right hon. Friend's attention to the impact of the landfill tax on port dredgings and, in particular, the operation of the Manchester ship canal. The idea behind the landfill tax is clearly environmental, with the aim of discouraging tipping. However, in the case of port dredgings—and in particular the Manchester ship canal—there is nowhere else to tip because the Ministry of Agriculture, Fisheries and Food will not allow tipping in the North sea or St. George's channel. The impact of the tax, as conceived in the Bill, will be a £4.7 million additional burden each year, which will drive the company into deficit, could lead it to bankruptcy and could result in the flooding of many tens of thousands of homes in the Greater Manchester area.
§ Mr. Waldegrave
My hon. Friend, who is a powerful voice for Manchester and the region, makes a point that will be properly debated on the Floor of the House, at which point it will be carefully considered by my hon. Friends and me.
The Budget proposed two sets of measures to help to protect family savings and addressed many families' concerns about the cost of caring for elderly relatives in residential or nursing homes. My right hon. and learned Friend the Chancellor announced that he would exempt from tax a range of insurance policies that provide long-term care benefits, and that was widely welcomed. Those measures are contained in clause 134.
§ Mr. Ronnie Campbell (Blyth Valley)
Will the Chief Secretary explain the Government's housing benefit policy, which I gather will double the rents of the poorest people of this country in many council areas?
§ Mr. Waldegrave
There is no need for that to happen. As far as I recall, the public expenditure settlement does not propose an additional guideline rent increase. I would be surprised if the hon. Gentleman is correct, but it depends on the behaviour of individual local authorities.
My right hon. and learned Friend explained that from April—and sooner if practicable—the Government would more than treble to £10,000 the level of assets below which people would be required to make no contribution from their capital to the cost of long-term care, and would double the upper threshold above which full contributions are required to £16,000. That is not in the Bill as it is a public spending measure, but I can reassure the House that the necessary preparations are being made and that the regulations will be introduced as soon as possible.
The Budget also addressed the concerns that people have about their ability to pass on more to their children and their families. As my right hon. and learned Friend said, it is a myth that inheritance tax affects only the very rich, who are better placed to dispose of their assets before death. It is middle Britain—those with a house and a few modest investments—that is under threat as a result of inheritance tax. Clause 169 alleviates that by increasing the threshold from £154,000 to £200,000. The number paying inheritance tax will be reduced by a third. Only one in 45 estates will now pay any tax, and all estates will pay less.
416 To continue our successful campaign to make Britain the enterprise centre of Europe, the Government aim to have a tax system that encourages wealth creation and keeps business taxes and employment costs low. New taxes are seldom seen to help in that, but the landfill tax does. It shifts costs from making it expensive to employ people to making it more expensive to create waste. That is obviously good environmentally, and it enables us to cut employers' national insurance contributions by 0.2 per cent. to 10 per cent. from April 1997.
§ Mr. Keith Bradley (Manchester, Withington)
May I declare an interest, as I am a former director of the Manchester ship canal company? May I follow up what my hon. Friend the Member for Davyhulme (Mr. Churchill) said? The landfill tax may be an additional tax, but it is certainly a further burden on business. If such dredging is to be environmentally sound, should it not take place ashore rather than out to sea? The Minister said that the matter will be debated. Is he sympathetic to the view that dredging that is carried out ashore should be exempt from landfill tax?
§ Mr. Waldegrave
I will not say off the cuff whether I am sympathetic to that view or not. The debate is clearly a serious one, and it is interesting that the hon. Member for Manchester, Withington (Mr. Bradley) is backing my hon. Friend the Member for Davyhulme (Mr. Churchill), who he called his hon. Friend. I hope that the hon. Gentleman is not giving a dangerous implication for the future. In this instance, I think that that would be very unlikely.
The cut in national insurance contributions reduces by£500 million the cost of employing people in this country. This contrasts starkly with Labour's plans, every one of which—including the social chapter and the minimum wage—would make it more expensive to employ people, and thus put unemployment here up to French, Spanish and German levels. More jobs means real stakeholding, to coin a phrase.
The next related measure builds on our achievement of giving employees a true stake in their companies by employee share ownership. That is why my right hon. and learned Friend the Chancellor of the Exchequer announced a package of changes in the Budget which are designed to encourage more companies to set up employee share schemes, particularly for their lower-paid employees, and to encourage employees to participate in those schemes. Clauses 102 to 111 set out the necessary changes to the law. As the chief executive of the organisation Proshare said:This is the best budget for employee share ownership that we have seen in many years".The Finance Bill is not just about the headline Budget measures, important as those are. It is about the good management of the tax system. The Bill contains measures to modernise and simplify the tax system and, like every other Finance Bill, to block loopholes. Clauses 72 to 97, for example, introduce a new system for tax and corporate loan relationships. The existing relationships and arrangements are a constraint on business, but they also give some businesses the opportunity to avoid tax.
The changes in the Bill will bring the tax system into line with commercial reality and will enable companies to organise their affairs more flexibly. It may seem unlikely at first sight, but those clauses also constitute a 417 simplification of the tax system. Although the Bill contains almost 100 pages of measures on that subject, much of this consists of transitional arrangements. Once the new system is bedded in, we will have replaced 100 pages of tax law with 40 pages, which is a net reduction of 60 pages. Another large and complex block of the Bill—clauses 112 to 133—sets out further provisions on self-assessment and completes what was done in the last two Finance Acts.
Our Finance Bill takes forward a coherent and successful strategy for the British economy. We heard no alternative strategy from Labour in the Budget debate, which was not surprising. We are used to that, and I doubt whether we will hear a strategy today. The truth is that Labour's approach is riddled with contradictions. The first contradiction—
§ Mr. Waldegrave
Perhaps the hon. Gentleman will let me develop the argument a little. The first contradiction, as the hon. Member for Brent, East (Mr. Livingstone)—whom I do not see in his place today—said with his usual candour, is that the Leader of the Opposition's main strategy is to say anything he can think of to reassure Tory voters. His latest ploy is to start praising no less a person than Lady Thatcher and the measures on privatisation and trade union reform, among others, which she took in the 1980s.
Meanwhile, the hon. Member for Dunfermline, East (Mr. Brown), with his league tables, has said that everything that has happened since 1979 has been a failure. An article in The Wall Street Journal last Saturday said that that was both "contradictory and devious" and that:If the policies didn't work, why does a socialist party need to perform ideological contortions by adopting them? If they have been successful"—the article argued that they had been, and I would certainly agree—wouldn't the debate over the real policy options available to Britain become more informed and transparentif Labour openly admitted it?
The second contradiction is that Labour has lost its nerve about admitting the higher spending, higher borrowing and higher taxation which follows from everything its spokesmen and spokeswomen say. I shall take one example, of many.
I am sorry to keep picking on the hon. Member for Bristol, South (Ms Primarolo) in this matter, but unlike most Labour Front Benchers she at least shows signs of life and says things. In the Budget debate, she forced me to withdraw my disgraceful allegation that she had called for more spending on health, which I did at once—although the idea that she is not in favour of more health spending strikes those of us in Bristol who have heard her on such matters as odd.
The hon. Member for Bristol, South has had something else to say, this time about education. She has written round Bristol saying that another £16 million is needed for education in the city. [Interruption.] I shall not withdraw this one because I have the letter here. That letter, from a Front-Bench spokesperson, is presumably at least some sort of commitment. It has inevitably been taken as a commitment by the school governors and parents who received her letter.
418 The increase, however, surely cannot be just for Bristol, however faithful the hon. Member for Bristol, South is to her constituents. If she is promising a cap which allows an 8 per cent. increase in spending for Bristol, in all fairness she must promise the same for other local authorities, which would be £2.3 billion on public spending—or a penny ha'penny on income tax.
§ Ms Dawn Primarolo (Bristol, South)
I have to clarify and correct what the Chief Secretary has said. The Chief Secretary wrote to every board of school governors in Bristol to say that Bristol had an extra £4 million to spend on education because the SSA had increased by that much. The Chief Secretary did not understand that Bristol was already spending £16 million above its SSA on education. There was therefore still a shortfall. I have merely pointed out that he does not understand education spending in the city that he claims to represent, and which he does so poorly.
§ Mr. Waldegrave
I would never say to an hon. Member that he or she did not represent their constituents properly. I am sure that the hon. Lady represents her constituency admirably; I have often heard it said by her predecessor, who has expressed to me very interesting opinions on that matter.
I believe it was another of Lord Cocks of Hartcliffe former colleagues, Lord Healey, who said that when one is in a hole, the best thing to do is to stop digging. The hon. Lady made it clear in her letter, which I have before me, that she has given the nod and the wink to the people in Bristol that the amount spent on education is inadequate for the needs of Bristol.
§ Mr. Waldegrave
I mention it, and I pick on the hon. Member for Bristol, South, only because I happen to be familiar with her argument—
§ Mr. Waldegrave
And because she did me the courtesy of sending it to me.
I am sure that my hon. Friends know of many other examples throughout the country of local spokesmen saying to the pressure groups, "Yes; more money" after which, if we challenge them in the House, Labour Front Bench spokesmen—sometimes the same people—say, "Oh no, we did not mean that". It would be braver, and Labour Members sitting below the Gangway would like it, if Labour Front Bench spokesmen said, "Let us have the spend", because that is what the spokesmen below the Gangway say. It cannot be only for Bristol.
§ Mr. Betts
While he is discussing education, will the Chief Secretary reflect on the evidence that he gave to the Treasury Select Committee a couple of weeks ago? When we asked how that extra so-called "money for education" had been calculated, he could not say that it was in any way related to the needs of education, to the additional pupils who will attend schools next year, to the teachers' 419 pay award, to inflation or to any other meaningful figure that affects daily life in our schools. He simply said that that was a figure that had been arrived at during a meeting between himself and the Secretary of State for Education and Employment.
Is it any wonder, therefore, that when letters such as the one that he sent to schools are received, schools throughout the country do not respond to them as any more than Conservative propaganda unrelated to the needs that school governors, parents and teachers experience in our schools today?
§ Mr. Waldegrave
There is another example, coming from the former sponsor of the great student games in Sheffield. Is the hon. Gentleman saying that more should be spent on education this year? If so, let him say so; but he will not say so. Is he saying perhaps that too much is being spent? He will not say so. That is at the heart of the equivocation that gives so much pain to Labour Members sitting below the Gangway. Labour Front Bench spokesmen will not say that they will spend more on anything; they have not voted against the tax cuts. They are therefore adopting our strategy, and the hon. Member for Bolsover is in a high old rage.
§ Mr. Skinner
No; I am not. I feel no pain. I have listened carefully to the exchange. I have reached the conclusion that what my hon. Friend the Member for Sheffield, Attercliffe (Mr. Betts) said was not dissimilar to what a lot of Labour Members have said—that when the Tory Government said in their Budget that they were going to increase the amount of money for education, we found out in 24 hours, having considered the facts and figures, that schools would be about £40 per pupil worse off than they were before.
I do not expect the right hon. Gentleman to understand that. He went to Eton. He is educated beyond his intelligence.
§ Mr. Waldegrave
That is an unwarranted attack on the hon. Member for East Lothian (Mr. Home Robertson).
The hon. Member for Bolsover makes my argument for me. He is unwilling to say—or perhaps he is willing to say, but Labour Front Bench spokesmen certainly are not—whether Labour intends to spend more on education this year. The Front Bench spokesmen will not say.
§ Mr. Waldegrave
The hon. Gentleman had the consistency to vote against the income tax cuts, and that makes him someone who it is at least worth debating with. It is not worth debating with Labour Front Bench spokesmen because, although they sometimes quietly say that they want more spent, they did not vote against the income tax cuts.
It is not really fair to blame the hon. Member for Bristol, South—or even the hon. Member for Dunfermline, East, who is not in his place—for the incoherence at the heart of Labour's position. They would probably run their party differently if they had the chance. The incoherence comes from the top—what the hon. Member for Bolsover, in a memorable phrase, called "the sirloin tendency" in the Labour party.
We all know why the "stakeholder" soundbite was deployed. It is because it can mean two completely different things to two different audiences. To the floating 420 voter, it can be made to sound like the good old Conservative idea of the property-owning democracy—a central theme of Toryism, from Lord Randolph Churchill via Rab Butler to Lady Thatcher and the present Prime Minister—wider ownership of homes, shares and pension funds. There is nothing threatening in that, which is why the phrase was used.
To the soft left the phrase can be dressed up to sound like Will Hutton or Andrew Gamble or any of the old leftist think-tankers—a miasma of failed corporatist wheezes and schemes all involving more legislation and costs imposed by politicians and civil servants on business. It is the same old stuff that Labour sought, with disastrous results, to introduce in the 1970s, when this country was at the bottom of the league tables.
When the Leader of the Opposition is challenged, as usual he slips away. Sir David Frost is told that "stakeholder" is only a slogan. It turns out that the right hon. Member for Derby, South (Mrs. Beckett) and the hon. Member for Oxford, East (Mr. Smith), who is in his place, are chairing working groups on corporate taxation and corporate governance which involve steering companies in the way that the Labour party, not the markets, want them to go on matters of dividend policy, investment, takeover policy and relationships with employees and suppliers—the same old issues.
How familiar it all sounds—it is familiar from the old days of Labour in the 1960s and 1970s. That is where we should be again if Labour ever came to power: there would be the old distrust of free enterprise; the old meddling from Whitehall and the old intervention. It would be a return to the old ways of decline and failure.
Our strategy is different: we believe in enterprise, competition and freedom—those are the only ways to achieve jobs and growth. The Bill embodies our principles and our practices. It is not just a matter of slogans, but of practical action. I commend the Bill to the House.
§ 4.5 pm
§ Mr. Andrew Smith (Oxford, East)
I beg to move, To leave out from 'That' to the end of the Question, and to add instead thereof:this House declines to give a second reading to the Finance Bill because it fails to address the needs of the country for long-term investment, jobs and fairness in the interests of opportunities for all, and in particular does not include a welfare to work strategy paid for by a windfall levy on the monopolistic profits of the privatised utilities, fairness measures to cut VAT on fuel for domestic and charitable use or to implement in full the Greenbury Report, investment measures including adequate reform of the Private Finance Initiative and does not address the burdens on tax-payers, especially small businesses and the self-employed arising from the introduction of self-assessment.The Finance Bill is the dull product of a tired and divided party—and it shows. Like the Budget to which it gives effect, the Bill fails to match the challenges that confront our country or the potential of our people. Our amendment sets out the central grounds of our argument: the Bill fails to address the pressing needs of the country.
The Chief Secretary's speech said much more about the Government's complacency than the Bill's content. The House could have expected more than muddled quotations from The Wall Street Journal and unfounded allegations about nods and winks in Bristol. Even as he spoke, his claims were challenged by the report published today by the Treasury Select Committee, which represents a damning indictment of the Government's economic record.
421 The report underlines concern on the economic strategy being pursued by the Government. On the latest figures for growth for 1996, the Committee observed "scepticism rather than assent". The report calls into question the basis of the Chancellor's investment forecast; it accuses him of wishful thinking and over-optimism, grounded in his forecast last year of a 10.75 per cent. increase in business investment, which turned out to be 3.25 per cent. The Committee also remains sceptical on the investment forecasts this year.
More accusations of wishful thinking occur over the Treasury's forecasts for the housing market. The forecasts were criticised for putting a gloss on "major areas of concern". The report questions the Government's record on public finances, citing the slippage in the public sector borrowing requirement from the previous year's estimates asthe biggest disappointment in this year's Budget".The Chief Secretary's claims that all is well with the economy are contradicted by the Select Committee as well as by people's everyday experience and by the facts. He cannot be allowed to hide behind his carefully constructed smokescreen of selective statistics. He must explain why Britain still has 2.2 million people unemployed, why 800,000 people have been out of work for more than a year, and why 600,000 young people are without a job.
The right hon. Gentleman must explain why people feel so insecure and why living standards fell last year as real disposable income in the third quarter was lower than at the beginning of the year. He must explain why housing repossessions were as high as 25,000 in the first half of 1995, and why negative equity continues to afflict more than 1 million home owners.
The right hon. Gentleman makes claims, as the Government always do, about inward investment. They must explain why 1994 saw the lowest level of inward investment for eight years, and why outward investment in the first three quarters of 1995 exceeded inward investment by more than £6 billion as compared with the net inflow of £8 billion when his right hon. Friend became Prime Minister.
§ Mr. Winnick
Apart from the devastation caused over the past 16 years in so many parts of the country, and certainly in the manufacturing sector in the west midlands, is my hon. Friend aware that, when I was out of the House during the 1970s, I worked in the Strand opposite the High Court, and that never once in all those years, in the day or the evening, did I see people sleeping on the streets or at Charing Cross station? When I go home in the evening after leaving here, I see a large number of people sleeping around the Strand and in Charing cross station simply because they have no alternative. Is that not one of the contrasts between the 1970s and now?
§ Mr. Smith
My hon. Friend is absolutely right. If everything is going so wonderfully, why are people sleeping in the streets and begging? Why is there such evidence of the breakdown of social cohesion and the fragmentation of our society as a consequence of the Government's divided policies?
If everything is going so well on the economic front, why does Britain have the worst balance of trade figures for more than three years? Why do we have the lowest 422 share of world trade this century? If the British people were listening to the Chief Secretary, they would be asking why, if everything is on course, they are paying so much more tax now than when the Prime Minister promised tax cuts year on year at the last general election, and why the Chancellor is forced to double public borrowing for the rest of the decade compared with what he was planning just a year ago.
§ Mr. Quentin Davies (Stamford and Spalding)
May I ask the hon. Gentleman a simple but fundamental question in the hope that I get a simple and straightforward answer? Does he consider that the present level of Government expenditure is too high, too low or exactly right?
§ Mr. Smith
I have answered his question. [Interruption.]
If the Government are doing as well as the Chief Secretary claims in comparison to other countries, why, as the Governor of the Bank of England put it, arethe chances…against the Government achieving their inflation target"?Why are long-term interest rates so much higher in Britain than in Germany? Why has growth under the Government been lower in nearly all our main competitors, and why has Britain gone from 13th to 18th in the world prosperity league?
§ Mr. Bernard Jenkin (Colchester, North)
Why does the hon. Gentleman think that the OECD survey of the British economy said:United Kingdom economic performance in 1994 was impressive"?
§ Mr. Smith
The OECD statistics show that the performance of the United Kingdom economy falls well below that of our major competitors in long-term growth, investment and training in the skills essential to our future economic well-being.
The Government's economic failure and incompetence have denied Britain the productive investment and quality training needed in today's global economy. They have secured insufficient capacity to get people into jobs and pay our way in the world and they have allowed an ever larger share of public spending to meet the costs of unemployment and poverty. The Government have taxed and borrowed hugely, not for investment in success, but to pay the bills of economic failure and social division.
423 It is against the test of a strategy for a strong economy and society that the Bill and the Government must be judged. We must judge what the Government have done for jobs, investment opportunities and fairness, and on each count they have failed.
§ Mr. Smith
We want sustainably low inflation. I have quoted the Governor of the Bank of England, who has forecast that the Government will not hit their inflation target. The way to meet that target is to ensure levels of investment and capacity that will lead to efficient production and the ability to expand supply to meet demand, without running into inflation problems or balance of payments constraints.
§ Mr. Waldegrave
Perhaps the hon. Gentleman did not understand the question posed by my hon. Friend the Member for Dartford (Mr. Dunn). He asked whether the target of 2.5 per cent. or lower is adequate.
§ Mr. Smith
The Government have demonstrated their unending confusion about what the inflation target really is, and the Chancellor has given various estimates. The Governor of the Bank of England has made it clear that the Government are not on course to hit their inflation target, because they have not taken the investment and training measures that we called for. They have not succeeded in getting people back to work to end the scandal whereby there are 1.2 million fewer people in work today than when the Prime Minister took office. One in five non-pensioner households has no one in work.
The costs of unemployment and low income-related benefits are eating up more than twice the share of gross domestic product than when the Conservatives came to office. In those circumstances, Britain needs a welfare-to-work strategy in order to get people off benefits and into jobs. There is no such strategy in the Bill.
Britain faces an investment crisis. Under this Government, Britain has fallen from 13th to 18th position in the world prosperity league. We are now 21st in the international league table for investment. Investment at this stage of the economic cycle is well below its level at a similar stage of any cycle this century.
In its report published today, the Treasury Select Committee castigates the Chancellor for his over-optimistic business investment forecast last year. If the Chancellor got it wrong so badly last year, we must ask how people can be confident that he and the Chief Secretary are correct this year. The private finance initiative is held back by tendering costs, complexity and a lack of clear priorities. In the face of that, Britain needs a concerted strategy to increase productive and profitable long-term investment in order to secure sustainable growth, rising living standards, quality of life and public services for the future. There is no such investment strategy in the Bill.
§ Mr. Tim Smith (Beaconsfield)
Given the hon. Gentleman's concern about the present level of investment, does he think that interest rates are too high? Would he reduce them? Does he believe that interest rates are too high, too low or about right?
§ Mr. Andrew Smith
I have already referred to the fact that, in Britain, long-term interest rates—which I am sure 424 the hon. Member for Beaconsfield will agree are a very important measure of the market's future economic estimates—are much higher than those in Germany. If I recall the figures correctly, interest rates in this country are more than 25 per cent. higher than those in Germany.
We must decrease long-term interest rates and keep them low in order to create a low-inflation environment. That will be achieved through investment in capacity and training and the productivity and competitiveness of our economy, based on social cohesion and the knowledge that we, as members of society, depend one upon the other, economically and socially.
The Conservative party used to appreciate that in the days when the Chief Secretary spoke of his enthusiasm for "one nation" Conservatism. However, the Conservatives have now abandoned that approach, in a laissez-faire setting where one is pitted against another. That division in our society is causing much damage.
§ Mr. Ronnie Campbell
The Conservatives say that they are running the economy well—I do not want to take my hon. Friend too far down that road—but I remind him that the botch-up that they caused through the poll tax has cost taxpayers £14 billion and that black Wednesday cost them nearly £4 billion.
§ Mr. Smith
Conservative Members and the Government have wasted incalculable sums on mistakes and disasters such as the poll tax and black Wednesday. They have failed to run the economy with a level of employment that can enable them to sustain healthy public finances. That is why they have been forced to raise taxes so much since the previous general election, so great is their failure on employment.
The Bill fails the crucial tests of jobs, investment and fairness. It fails—as do the Government—to pull the country together with opportunities for all. Where Britain needs to work together to win in the face of global competition, what do Conservative Members have to offer? Nothing but introspection, in-fighting and division: left from right, Macleod group from Way Forward group; Euro-sceptics from Euro-enthusiasts; and today's Prime Minister is undermined by the previous Tory leader and by the next—all half-dozen of them.
How ironic that the party that spent 16 years dividing the country is now applying the full force of that destructive talent on dividing itself. It is even fighting over the lurch to the right. Those who argue that it has gone too far confirm the people's verdict on the Tory record. Those who argue that it has not gone far enough confirm people's nightmare of any Tory future.
No wonder the north Oxfordshire Conservatives recently started an appeal letter with the stirring words:I am sure you will agree that the Conservative Party has taken a bit of a battering recently.That was before Lady Thatcher's speech. The letter continued:We all need to draw on hidden strengths at some point in life, and that is why I am writing to you now".So well hidden were those hidden strengths that the letter could not say what they were. Still, we must have some sympathy for the poor, battered north Oxfordshire agent. After all, what hidden strengths might he have turned to? Loyalty? Abandoned in today's Conservative party, as the battle for the succession hots up. Unity? 425 A cowardly cop-out from the ideological firmament needed to distil Conservative purity. One-nation Conservatism? The ultimate dirty word—cover for no-nation Euro-subservience.
The tragedy of today's Conservative party, in the Finance Bill and in everything else it does, is that it has allowed itself to be enticed down—
§ Mr. Jacques Arnold (Gravesham)
On a point of order, Mr. Deputy Speaker. Can you confirm, as I have just entered the Chamber, that we are discussing the Finance Bill? I have heard nothing to do with the Finance Bill for many minutes.
§ Mr. Deputy Speaker (Sir Geoffrey Lofthouse)
I do not think that the hon. Gentleman has just entered the Chamber; he was here before I took over the Chair. I have been listening very carefully, and the hon. Member for Oxford, East (Mr. Smith) has been in order. He referred to the Finance Bill. He nearly got outside it, but he referred to it, although very late.
§ Mr. Smith
The tragedy of today's Conservative party, in the Finance Bill and in everything else it does, is that it has allowed itself to be enticed down the road from one-nation Conservatism to the unthinking, uncaring free-for-all, where the only duty of Government is to hang on to power.
Lady Thatcher can talk. There are a few Conservative Members who know that she started it all when she said that there was no such thing as society. When social cohesion is weakened, as the Government have weakened it, and when broken promises, incompetence and weak leadership destroy confidence in what we can achieve together, there is nothing left but everyone out for themselves. That is how we end up with a Government who stumble from one crisis to another, whose only abiding function is survival, where the dismal calculus of avoiding defeat for the party always comes before the needs of the country.
Demoralised Conservative party members will search in vain for any hidden strengths, in the Finance Bill or anywhere else. I know Conservative Members who believe that rarely has so much paper, as in the Bill, included so little substance. It is extraordinary that a Government who are so long on the rhetoric of tax and regulation burdens on business should add so copiously to tax legislation: the longest Finance Bills ever produced have been introduced by them since the last general election.
Last year, we joined the hon. Member for Beaconsfield in defeating the Government on tax simplification; yet this year's Bill—the second longest presented to the House since the last election—shows how much further there is to go. According to the Financial Times, the former president of the Institute of Taxation read the Bill with "resignation and desperation", because of the underlying complexity of British tax law.
Although, for the first time, nine clauses and three schedules were drafted by private sector practitioners, there is no evidence that they were able to improve on the work of the Office of Parliamentary Counsel. The Chancellor's separate Budget proposal to rewrite the revenue tax code in plain English followed our own calls for simplification, and 426 we support it, but the House will have to give careful consideration to how that is to be done. We shall need to examine how far clarification of the language can be achieved if the underlying tax structures and the literal interpretation of tax law are left unchanged. We shall seek further debate on that in Committee.
We shall scrutinise the Bill closely, and we shall take every opportunity to improve it as we improved last year's Bill. We shall continue to expose the Government's failure to implement the Greenbury report fully, or to get to grips with abuses in the privatised utilities. We shall press for full disclosure of directors' pension entitlements. Disclosure and transparency are sound principles, in the interests of shareholders and regulators as well as the general public.
We shall raise important questions in regard to the way in which the privatised utilities' affairs are being obscured from public scrutiny when they are incorporated as subsidiaries of larger groups. It cannot be right that, as the water regulator puts it,Without a listing requirement, a utility's operations could take place in darkness only penetrable by the regulator.There is no doubt that the public want proper accountability and an end to abuses, and it is up to the House to ensure that they get that. It was the Labour party—speaking up for public opinion—that forced the need for action on to the agenda. We shall keep up the pressure until the people are given a fair deal.
We welcome the Government's climbdown on share options, but we shall scrutinise the detail of the Bill's proposals very closely. Our aim will be to promote wider shareholding and make opportunities available to employees, while ending the excesses that brought the executive share option scheme into such disrepute. We shall challenge aspects of the Bill that add to the burdens on business or damage job generation. We shall question the way in which the landfill levy has been introduced, and ask why the Chancellor described the cut in employers' national insurance contributions as a "matching cut" in his Budget speech, but does not match the timing in introducing those measures into law.
We are aware of the enormous challenge—already turning into an enormous burden—that businesses, especially small businesses and the self-employed, will face in the next year and beyond because of the way in which tax self-assessment is being introduced, and especially because it is being introduced at the same time as the shift from previous-year to current-year assessment. For a long time, Labour has warned of the enormous difficulties and costs that that can cause.
We are talking about a big switch in responsibilities from the Government to taxpayers, some 9 million of whom will become responsible for calculating their own tax liability. For businesses starting up, it involves a period of double taxation of profits which will be relieved only in future years; it puts new burdens on employers, who will have to take responsibility for quantifying the taxable value of benefits that they provide for employees, and who at the same time will face a new penalty regime for their pains, as unpaid tax collectors.
§ Mr. Nigel Forman (Carshalton and Wallington)
Perhaps the hon. Gentleman was just about to tell us, but what would he do differently? Would he postpone self-assessment for another year?
§ Mr. Smith
I was coming to that. There is a strong case for postponing the introduction of parts or all of 427 self-assessment. We shall table amendments in Committee, which is the proper place, in an attempt to relieve the burden that the proposal will undoubtedly impose on small businesses and the self-employed. We think that the Government are papering over the cracks and understating the complications and costs of the new system to the taxpayer.
The Inland Revenue's own compliance cost assessment admits to extra costs of between £130 million and £250 million a year, but assumes that they are going to be offset by savings on estimated assessments, postponements and appeals. Even if that is right—it sounds rather optimistic to me—there will be a period of double jeopardy as the new system comes in. The self-employed will still be tied up in delays, appeals and postponements under the old system, while they are simultaneously having to gear up to deal with the burdens of the new system. Furthermore, it seems likely that everyone will face the extra costs of complying with the new system, while the savings will be distributed more partially.
In addition, page 112 of the Red Book contains the revelation that the extra tax yield arising from self-assessment is going to be £850 million. That figure appears to arise in two ways: first from the effect of assessment of taxable profits on a current rather than a previous year basis, and secondly, because personal allowances will be set against the current rather than the previous year's profits. We shall debate in Committee the extent to which that will be a one-off or an on-going effect.
In any event, it means an extra £850 million tax take from schedule D taxpayers. It is a tax increase that the Government have tried to hide by smuggling it in the back door and hoping that no one will notice before the election.
§ The Financial Secretary to the Treasury (Mr. Michael Jack)
I have a straightforward question for the hon. Gentleman. I know that he has difficulty in dealing with this type of question, but I shall try again. I published a letter in The Independent which dealt point by point with the hon. Gentleman's allegations about self-assessment. I made it absolutely clear that profit growth accounted for the figure in the Red Book, and that there will be no double tax hit on companies. Does he agree with the analysis in that letter in The Independent? Did he even read it?
§ Mr. Smith
If the Financial Secretary expects me to read his letters, it would be good if he addressed them to me in future. I should then certainly read and study them. I did not see his letter in The Independent, but he cannot dispute what appears on page 112 of the Red Book. There is a list of all the measures arising from the Budget, along with a list of other revenue and cost effects. The lists reveal an extra £850 million tax yield. Before I issued the news release, I checked the figures with the Library, which in turn checked with the Inland Revenue. We shall examine in Committee whether that is a one-off or an on-going effect.
The fact is that taxation self-assessment is going to impose an enormous extra burden on small businesses and the self-employed. If the Financial Secretary and his colleagues do not believe that, they should talk to small business men and the self-employed in their own 428 constituencies, who will tell them how great the extra burden will be. The Federation of Small Businesses, for example, said that it feltstrongly that at least a transitionary period of two years should be put into place during which time there should be no recourse to hefty penalties for late returns.Leading tax advisers are saying that the Government have not yet got the system right, and that there might well not be sufficient Inland Revenue staff available to give advice to sort things out.
The Bill contains 22 clauses on self-assessment, many of them dealing with matters that one might have expected the Government to get right. This is the final opportunity for the Government to avert what could well be a great disaster for the self-employed and small businesses and could have disastrous employment consequences in general. I invite the Government to join me in addressing the subject seriously and objectively, to get the proposals right in order to help the self-employed and small businesses that will otherwise face an intolerable burden.
Small businesses will get precious little help from other measures in the Budget. Although the cut in the small business tax rate is welcome, it must be set against the fact that the VAT registration threshold did not go up fully in line with inflation; that business rates will go up by 5 per cent. more than inflation; and that the knock-on effects of the landfill levy will kick in six months before the associated cuts in employers' national insurance.
§ Mr. Jack
The hon. Gentleman may not yet have received the letter that I wrote to him in the spirit in which he put his arguments on self-assessment. I invited him to clarify any practical ideas he has. Will he give me an undertaking today to publish his ideas, if any, so that we might learn his policy, once and for all, on an issue that the Labour party has welcomed on principle in the two previous Finance Bills?
§ Mr. Smith
I am not sure whether the Financial Secretary means a separate letter from the one he sent to The Independent. In any event, I will read his letter when I receive it, and I am more than happy to set out our proposals. The Financial Secretary will find plenty of proposals in the amendments that we will table to the Finance Bill. The proposals will be on record in Hansard for him to read and thereby profit from. Let us hope that small businesses and the self-employed will benefit from our debate because the Government take notice of what we have said.
I shall now deal with the proposals in the Bill on housing investment. We welcome the principle of attracting private investment in housing, and we will explore how effective the proposals are likely to prove in practice. We will want to be assured that there are safeguards against abuse. We are concerned that the scheme is open-ended, because there appears to be no requirement that properties are held for any length of time. The implications for rent levels and the housing benefit subsidy are not clear.
How far might the investment trusts provide a shelter for former business expansion scheme properties? Do the proposals provide a double tax subsidy? Time and time again, we have seen tax breaks for property schemes in which costly concessions have been given for low-risk investment in properties with little or no housing, economic or social value. We need to be sure that the 429 proposals will not prove to be a repeat performance. We want to see a genuine partnership between the private and public sectors in the provision of affordable, good-quality housing, but housing companies must be a means of increasing supply and extending choice, not a vehicle for restricting them by privatising council housing.
There is nothing in the Bill to address effectively the problems of insecurity, negative equity and still high levels of mortgage repossessions. Conservative Members may be inclined to point to changes in personal taxation, but people have got back but a small fraction of the extra taxation that the Government have imposed since 1992. Typical families are still paying some £600 more a year in taxes than at the time of the general election, when the Prime Minister promised tax cuts year on year.
We welcome the fact that fear of an electorate that has been hit with 21 tax increases since the general election has forced the Government to give a little back. However, even that little is being eaten away by extra demands for everything from the council tax to rail fares.
The lower tax rate on savings and the exemption of insurance benefits arising from long-term care will provide modest help. However, those proposals do not begin to address the real challenge of reforming the welfare and pensions systems to ensure that everyone has the chance of a rewarding working life, and dignity and security in retirement.
The mere fact that the Government have made it clear in the Bill that compensation for mis-sold personal pensions should be exempt from tax—a scandal for which the Conservative Government must accept their share of responsibility—is a reminder that people cannot place their trust for the future in a party that has got it so wrong in the past.
The Finance Bill is profoundly disappointing, even if the sins of omission are greater than those of commission. It has all the hallmarks of a tired, frightened Government, who have no new ideas to revitalise a sluggish economy. They have no vision to bring together a divided society or to embark on the training and investment revolution that Britain needs.
This is not a Finance Bill for jobs, investment or fairness. It does nothing to advance the opportunities for everyone to make the most of his potential with a true stake in society. It does nothing to build a strong economy or a fair society, still less to recognise how far one depends on the other. For all those reasons, as set out in our amendment, the Opposition will reject the Bill in the Lobby tonight, as surely as the British people want rid of the failed and divided Government who produced it.
§ Mr. David Hunt (Wirral, West)
I find it difficult to follow the first two speeches because they appear to have been delivered by people living on different planets.
The first speech delivercd by the Chief Secretary to the Treasury was based in the real world—a world in which the Prime Minister, the Chancellor of the Exchequer and the Chief Secretary to the Treasury have regaled for us economic statistics better than I can ever remember in my political lifetime. Indeed, the Opposition had no real answer to my hon. Friend the Member for Colchester, 430 North (Mr. Jenkin), who pointed out not only that the statistics are put forward by the Government but corroborated by the OECD. I cannot recall a time when we had better conditions for sustaining a period of non-inflationary growth.
We then had the speech from the hon. Member for Oxford, East (Mr. Smith). I believed that his amendment promised much, but delivered very little in his speech. Many of us waited with some expectation for the details of the welfare to work initiative to be given in the debate. Perhaps they may be published during the proceedings on the Finance Bill—I very much hope so. We have heard reference again to a one-off tax, but, by definition, one cannot build an alternative economic strategy on a windfall tax. The Opposition, however, seem once again just to have taken refuge in a series of soundbites.
The Leader of the Opposition has become a master of the double entendre. He is a leading politician who needs spin doctors to explain everything he says. As my right hon. Friend the Chief Secretary pointed out clearly, the stakeholder economy can mean two different things at least. Therefore we need explanations, but today there came none. I greatly regret that.
I just want to make two points. First, I congratulate the Chancellor on what I believe to be a one-nation Budget. I challenge what the hon. Member for Oxford, East said about the Conservatives allegedly having deserted one-nation Toryism. That could not be further from the truth.
As I said, the first two speeches in the debate appeared to have been delivered by people living on different planets. That very phrase was used by Benjamin Disraeli in "Sybil", chapter five, book II, when he wrote:Two nations between whom there is no intercourse and no sympathy; who are as ignorant of each other's habits, thoughts and feelings, as if they were dwellers in different zones or inhabitants of different planets…the rich and the poor.In chapter eight, book I, Disraeli wrote:I was told that the Privileged and the People formed two nations.The desire to overcome that difference has been the theme running through my strong belief in Conservatism and Christian democracy. I see it very much in the Budget. I recall on a previous occasion when my right hon. and learned Friend the Chancellor said that one of his clear objectives was to ensure that we did not have developing within the United Kingdom the sort of underclass that we have seen develop in the United States. The Budget and the Finance Bill do much to ensure that that will never happen here.
Just after the war a group of eminent Conservatives published a pamphlet entitled "One Nation". In the subtitle it described itself asa Tory approach to social problems.That group of Conservative members included the former Prime Minister, my right hon. Friend the Member for Old Bexley and Sidcup (Sir E. Heath) and Enoch Powell, Iain Macleod, Angus Maude and others. One-nation Toryism is not the possession of the left, the centre or the right. It is fundamental to Conservatism. I wanted to echo that message in the debate and put the record straight.
Members of the Opposition have used the phrase "one nation" as though it was the latest thing in soundbites without realising that it is fundamental to many of our beliefs in politics.
431 Secondly, I also believe that this is a Budget for jobs. I come from an area where we have had a high level of unemployment for far too long, going back beyond when I first came into the House 20 years ago. That high rate of average unemployment has also contained pockets of extremely high levels of unemployment, which have done a great deal to undermine the social fabric of society. It is the Tory approach to those problems that provides the answer.
In his Budget, the Chancellor clearly defined the social market. Of course we must allow the market to produce the wealth so that we can then afford the social policies that enable us to ensure fundamentally that we are one nation.
§ Mr. Hugh Bayley (York)
I wonder how the right hon. Gentleman squares his belief in one-nation Toryism with the findings of the Rowntree Trust's commission on wealth? That revealed that during the period in which he sat in Cabinet for many years the gulf between rich and poor throughout Britain, including Wales, was substantial.
§ Mr. Hunt
Different interpretations have been put on that Rowntree report, but it demonstrated clearly, as John Rawls has always said about the social market justifying the market, that the poor are now better off than they have been before. It may be that in certain circumstances the gap between rich and poor has increased, but the justification for the market is that it ensures that people are better off, and in particular that the greatest help is concentrated on those in the greatest need.
I just wanted to make clear that for me the spirit of one-nation Toryism is as strong in the Tory party today as it has ever been. The centre ground is our territory—it is the territory where we have won successive general elections under Lady Thatcher and the Prime Minister. We must never surrender our election-winning strategy. Siren voices from the extreme left, and indeed from the right, may urge us to sidetrack, to move away from one nation policies, but we must remain true to our long-standing beliefs.
That is why I wanted to stress that, certainly in my parliamentary career, I want to devote myself to ensuring that in my area we do not allow high levels of unemployment to undermine our social fabric. We must ensure that in the Wirral, Liverpool and Merseyside we get more jobs, and better ones. We will do that only if we espouse the economic policies that have brought us the success that we are now seeing. It must be part of our objective to ensure that that success is spread to all parts of the United Kingdom. That is the only way in which we can sustain those policies that were the fundamental bedrock of that group of Conservatives in 1950 who produced "One Nation". We must continue to ensure that we capture the electorate's imagination with the new ideas that lie within the one-nation policies of the future. That is why I strongly support the Prime Minister in his belief that we must lay the foundation for sustained, non-inflationary growth in the 21st century too.
We will do that by espousing once again, in clear detail, the five fundamental policies that the Prime Minister has clearly laid out: first, sound economic growth, the foundations of which.. are made more secure by this Finance Bill; secondly, opportunity and choice in health and education; thirdly, strong law and order policies, enabling everyone to walk our streets without fear; 432 fourthly, first-class public services, building on successful privatisation policies that have brought better quality services, and on the citizens charter, which has given people the rights and the responsibilities that they welcome; finally, pride in our nation.
Pride in our nation means a lot of things—perhaps different things to different people. For me, it means having a nation that is one nation. Of course, the place for our one nation is very much right at the heart of Europe. I hope that all my right hon. and hon. Friends will be more positive about Europe, although recognising, at the same time, that we must continue to fight for British interests. That was very much our Prime Minister's theme in securing, rightly, the opt-out from the social protocol and the postponement of—the opt-out from—a decision on a single currency until we know much more about what that entails, but it also means fighting all along the line to ensure that we have a Europe that is powerful, peaceful and prosperous, built again on the fundamental principles of one-nation Conservatism.
§ Mr. Robert Sheldon (Ashton-under-Lyne)
We have listened to an exceptional speech. I fully agree with the right hon. Member for Wirral, West (Mr. Hunt) that the one-nation idea is not the prerogative of one side of the House or the other. It should belong to us all. Some people feel that what has happened in the past—I do not know for how many years—has been an abberation that must be put right. I was one of the three Labour Members who had the privilege of having their name inscribed on a silver platter given to Ian Macleod's widow. Although we had our great differences, we were accorded that sort of respect because we were all trying to do the best for this country's people, and that must be the task.
When my right hon. Friend the Leader of the Opposition and my hon. Friend the Member for Oxford, East (Mr. Smith) talk about the need for this one nation, they are pointing out the differences that have emerged and that need to be put right by the Conservative party, but it is its problem and we will be considering that problem with great interest.
My first comment on the Finance Bill involves the limited number of economic debates that we now have. We have debates on the Queen's Speech, the Budget and the Finance Bill and then a desert through to July. It cannot be right that the central issues involving the running of our country should be the subject of so few economic debates. Under normal circumstances, the next debate will not take place for another six months, which is clearly inadequate.
We now have a regular two-volume issue of the Bill. I remember my horror when I saw the first two-volume issue come out, but the Government are pledged to reduce the burdens on industry and to simplify the taxation system's operation. I know the aims of that, but, despite their assurance, I am not convinced. As the simplification is likely to lead to more complicated transitional arrangements, I suspect that it will not be too long before we have a three-volume edition of the Finance Bill.
The simplification was mentioned in Accountancy Age by the hon. Member for Beaconsfield (Mr. Smith). He was right when he pointed out the need for such simplification, but it will not be an easy task to achieve, as he probably recognises. In my many years in the House, I 433 have heard similar promises about taxation simplification, but I have seen Finance Bills go from strength to strength, increasing in size as they go along.
Baroness Thatcher's speech gives the opportunity to assess her impact on the economy. I do not want to dwell on the poll tax. Many hon. Members on the Government Benches share in the humiliation of its introduction. It will serve as a text book on how to overcome the dangers of an over-mighty Prime Minister and a cowed House of Commons. What is more lasting than the billions of pounds lost in that venture is the serious decline in local government.
As a consequence of so much local government finance coming from central Government, decisions are not being made in the places where they should be made. I believe in local government and in the initiatives that many people can introduce in their community's interests. I was politically involved in some small way when Manchester city council decided to retain the airport in Manchester. It was a big decision. Large commitments of money were involved over a long period, but the example of the creation of the Manchester ship canal was put forward, and it was felt that the successors of the city councillors who were involved in that should at least to be able to do the same thing.
Against great Government hostility, those successors went ahead and built Manchester airport, which is of enormous value to the region's citizens and to the communications of the whole of the north-west. They could do that then, but not now, which is wrong. There were people with local knowledge, people of standing and of ability, who would have come to the House but decided not to as they felt that their centre of operations was in their local community, which is what made that community great, impressive and powerful. The trouble is that such people are not likely to undertake that sort of work because of the limited opportunities that they have.
On the size of the Finance Bill, the interesting thing is the number of new taxes that we now have from this Government. We have had the air travel tax, amended in this Finance Bill—one of the consequences of simplification is the amendments that will be made in due course: any changes will be the subject of alterations over the years to come—the insurance tax, and now we have the landfill tax, with its 29 clauses and pages and pages of schedules. The boast of Lord Lawson, then Chancellor of the Exchequer, about the number of taxes that he had abolished will not, therefore, be emulated by the present Chancellor of the Exchequer—that is clear now—unless he listens to the Prime Minister, who wishes to abolish capital gains tax and inheritance tax, but that would be a disaster.
The justification for capital taxes such as capital gains tax and inheritance tax was that capital was a sure source of income. It was differentiated from earned income because that was less sure: people could lose their jobs. The value of capital and the income from that capital would remain, and that was the justification, over many years, for the difference between earned and unearned income. Unearned income deriving from capital was more secure and certain; earned income could just be lost rapidly.
In the post-war years, that aspect changed. With full employment, unearned income was scarcely enough to maintain the value of the capital because of inflation levels, which eroded capital, and the value of capital as a 434 source of income declined. However, we had full employment so the value of earned income rose by comparison. But the position has changed again. We now have high unemployment levels, great fears of redundancy and low inflation so the position has reverted to what it historically was: capital produces much greater certainty in relation to income. Unearned income should be treated in the same way as it historically had been until the Government came into office. That is one of the aspects that we need to take into account.
§ Mr. Tim Smith
Is the right hon. Gentleman telling the House that he favours, therefore, the reintroduction of the investment income surcharge?
§ Mr. Sheldon
The investment income surcharge was the right sort of reaction. How we deal with the consequences of the changes in the value of capital under the next Government remains to be seen. An important aspect of the matter is that the value of capital has changed; it went one way and now it has gone another.
In terms of inheritance tax, I can see the case for moderate levels of taxation of capital. Those who have created wealth want to pass it on to their successors and I understand that. To a certain extent, I can see the case for those who want to accumulate wealth and to pass it on to their families. I understand people who work hard to accumulate wealth for themselves and I understand people who work hard to accumulate wealth so that they can pass it on to their successors. What I do not see is why we should relieve from taxation those who are the beneficiaries of that wealth, to which they have contributed nothing. A person who makes wealth needs to be treated with some respect because of the wealth created, but the person who receives that wealth as a beneficiary—as an inheritor—should not be regarded in quite the same way. There is a need for such people to pay some taxes. We can argue about whether they should pay more than they have in the past, but we should certainly not remove the existing level of taxation. That is clearly wrong.
Another issue is the cost nowadays of earning a living. We never used to take such costs into account. Apart from a small allowance for tools, which was a trivial amount, the costs of earning a living were always excluded from income tax assessments. Nowadays, the costs of earning a living are great. Transport costs are one example. In my constituency, there are people who travel 30 or 40 miles to Leeds or Bradford; people never did that before. Transport costs are not allowed against tax at all although people cannot get the kind of work that they used to be able to get.
Fifty, 60 or 70 years ago—not all that long ago—people walked down the road to the mill. People wore ordinary working clothes and took a jam butty or whatever for lunch. People do not do any of that now; things have changed. There is great expense in earning a living today and that needs to be taken into account. Earned income is not the same as unearned income. Unearned income does not cost people anything, but earned income does and we shall have to find some way in which to deal with that.
The central feature of Lady Thatcher's period in office was not the changes she made. What was exceptional about the period was the rise in the exploitation of North sea oil. Anything else was a disclaimer. In the past, Governments took unwise courses, but the balance of 435 payments constraint always limited the extent to which they could proceed with a particular folly. In 1956, we had the folly of Suez, which was brought to an end by balance of payments constraints. We had Maudling's dash for growth in 1963–64, which was brought to an end by a balance of payments crisis. It might have succeeded otherwise and have been one of the great moves of the post-war years. It could not, however, succeed because of the balance of payments problem. We saw the rise in OPEC—Organisation of the Petroleum Exporting Countries—prices which would have been a much smaller problem if we had not had the difficulty of a balance of payments crisis. All those efforts—some of them useful, some of them not—were brought to heel by the constraint of the balance of payments.
In the 1980s, for the very first time since the 1914–18 war—perhaps since the beginning of the century—we had a balance of payments that was no constraint. The question was what we would do with that enormous advantage. With one bound, we were free. What did we do with that freedom? We destroyed much of our manufacturing industry. There were $2.40 to the pound and there was a 17 per cent. interest rate.
Like many hon. Members, my firmly held views are reinforced by my constituency experiences; they are burnt deeply into me. From 1979 to 1981, my constituency lost one third of its industry. Good firms which had every justification to succeed were lost. If they had been in Germany or Japan, they would have continued. Few of them were low-tech; most were medium-tech and one or two were high-tech. They could not survive in that period. Engineering was a prominent industry in my area, but good firms went.
I am pleased that our amendment refers first to the need for manufacturing industry and that my hon. Friend the Member for Oxford, East referred to that first in his valuable speech, which I much enjoyed. I might have been prepared to tolerate a massive Finance Bill if it had included much in the way of comfort for manufacturing industry, but I see nothing of real merit. I have argued for manufacturing industry since I came into the House and the situation is now becoming even more urgent.
The pound is now down from DM2.95 to DM2.22. We ran a £1.7 billion trade deficit in October, the latest month for which we have figures. Even the Red Book forecasts a £5 billion deficit in our balance of payments. There are no signs in our overseas account of the consequences of a devaluation of more than 20 per cent., with no erosion by wage inflation, and of unemployment at well over 2 million.
After the years of reckless destruction of our manufacturing industry, we are now seeing the consequences plainly. In such circumstances, one might have expected a contrite Government to do their utmost to repair the disasters of the past. The opportunities are there in this enormous Finance Bill, but they have not been taken.
§ Mr. Tim Yeo (South Suffolk)
The right hon. Gentleman said that the destruction of the manufacturing industry in this country was at least partly caused by an exchange rate that was too high. In the past few minutes, he seems to have said exactly the reverse. He complains 436 about the destruction of manufacturing industry, yet he criticises the fact that the pound has gone down against the deutschmark—from DM2.90 to DM2.20.
§ Mr. Sheldon
My point is that under normal circumstances, such a devaluation would have produced an enormous export revival. That is what used to happen and we should have seen it happen again. We did not because manufacturing industry was so damaged by the events of the past that it was not able to make use of that advantage. The devaluation and the limit on the size of wage settlements were enormous advantages, but we could not make use of them because of what had happened to manufacturing industry in the years before. We have a high level of skills in my constituency; people earned well above the average for the north-west as a whole and above the average of the country as a whole. Yet those people could not find jobs.
We have a Finance Bill in two thick volumes, yet it contains nothing to deal with the central economic problem of our time, which is how we help manufacturing industry to deal with our failure to pay our way in international markets. The first step should have been to increase substantially the level of capital allowances for plant and machinery. The second should have been to continue to defy the Bank of England on interest rates. Here I pay tribute to the Chancellor of the Exchequer. Few Chancellors would have been prepared to defy the Bank in the face of market pressure and I look forward to seeing him continue that defiance in the coming months.
Thirdly, the Chancellor could have provided funds for our manufacturers. I know that the best sources for investment are within the companies themselves; no one needs to tell me that. However, if one considers the danger of our overseas position, the case for supplementing such investment sources is overwhelming. The Government cannot operate a hands-off approach at a time of such urgency. Those investment sources should be supplemented—work on that should have been started long ago—whether by encouraging retentions for investment or by more favourable grants. Those are tasks that the Government should have undertaken.
The economic future of our country lies in the hands of our manufacturers. It is a terrible indictment of this Government that such an obvious case needs to be made at all.
§ 5.9 pm
§ Mr. Tim Yeo (South Suffolk)
I tried to follow the points made by the right hon. Member for Ashton-under-Lyne (Mr. Sheldon). His speech seemed a little like a history lesson in which we rehearsed answers that would have been correct for last year's examination paper on economics—especially his reference to the destruction of manufacturing being caused by the high exchange rate of the very early 1980s. He seemed to overlook the unbelievable damage done to manufacturing industry by the antediluvian industrial relations practices encouraged, approved, welcomed and supported by the Labour Government of the 1970s.
The right hon. Member for Ashton-under-Lyne seemed to ignore entirely the effects of the penal rates of taxation—which drove many of the best managers and researchers to offer their skills in competing economies—and the rates of interest and inflation, which discouraged 437 risk taking and investment in this country. Those were the causes of the decline of manufacturing at the beginning of the 1980s.
It is to the Government's credit that the situation has been totally transformed, to the point where we export more per head than Japan, where we are shortly to become a net exporter of motor cars, and we export more televisions and other goods than any other European country. That is as a result of the transformation in industrial relations and the fact that we have a grip on inflation, fair rates of taxation, and so on.
I agreed with the right hon. Member for Ashton-under-Lyne on one point: his approval of the speech made by my right hon. Friend the Member for Wirral, West (Mr. Hunt), who gave an excellent, clear and timely reminder of the true nature of one-nation Conservatism. He spoke eloquently, warmly and in a well-informed way about the origins of one-nation Conservatism, which quite wrongly is now characterised as some excessively pro-European, left-wing body of philosophy. It has nothing whatever to do with that, as my right hon. Friend pointed out, which I very much welcomed.
Last week, Baroness Thatcher delivered an important speech in the City of London. The central theme of the speech was a vigorous attack on the principles and policies close to the heart of the Labour party. It encompassed a specific attack on new Labour. It issued a clear warning about the dangers to the country of those people who flirt with the idea that a brief period of opposition for the Conservative party would be either good for Britain or good for the party. She made it clear that that was not true. I welcomed all that. Indeed, we have heard today evidence of how right she was.
Surprisingly, the most reported part of Baroness Thatcher's speech was the allegation that the Conservative party had undergone a lurch to the right. Of course, nothing could be further from the truth, as the Finance Bill demonstrates. The Bill is based on a one-nation Budget. Baroness Thatcher was right not only in that respect but in her attack on the Labour party. The speech of the hon. Member for Oxford, East (Mr. Smith) was the single most incompetent and ignorant speech that I have heard a Treasury spokesman make in the 12 years that I have been in the House.
The hon. Member for Oxford, East absolutely refused to answer any of the fundamental questions that would face any incoming Labour Government. He could not or would not say whether the present level of public spending was too high, too low or right. He could not or would not say whether the present inflation target was too high, too low or about right. He could not or would not say whether the present level of interest rates was too high, too low or about right. As he could not answer those most basic questions, it was only to his good fortune that neither the right hon. Member for Sedgefield (Mr. Blair) nor the hon. Member for Dunfermline, East (Mr. Brown) was present to hear him make such an unbelievable mess of his opportunity.
The Budget has introduced measures through the Finance Bill which put the interests of the lower-paid at the top of the agenda. The extension of the low-rate, 20 per cent. tax band. a cut in the basic rate and a rise in 438 personal allowances are all designed to give maximum help to people on lower incomes. Indeed, the Budget was so responsible, so centrist in its approach, so one nation in its foundations that most pundits were astonished by its moderation.
Many commentators who had been looking forward to a great display of fireworks and huge tax cuts were positively frustrated at the responsibility displayed by the Chancellor in his Budget measures. There was a degree of sourness in some of the immediate reactions because such people had not got what they had expected to be able to attack: large-scale tax cuts.
Some of those howls of protest were somewhat silenced a week or two later by the cut in interest rates. Few people—even if they do not know at what level they want interest rates—are able to criticise lower interest rates. The fact that, as my right hon. Friend the Member for Wirral, West pointed out, mortgage rates are at the lowest level for 30 years is an achievement that everyone in the country can celebrate.
The only people who do not benefit from low interest rates are savers. There are, of course, many small savers, especially pensioners, for whom the interest derived from their modest savings is an important supplement to their pension. It is for that reason that I particularly welcome clause 65, which introduces the lower rate of taxation on investment income for basic rate taxpayers.
I was very interested to hear the right hon. Member for Ashton-under-Lyne say that he favoured the reintroduction of the investment income surcharge. I looked carefully for any response from the Opposition Front-Bench team to that. I did not detect any, but perhaps later in the debate Labour Front Benchers will make it clear whether they agree with that proposed reintroduction.
I take precisely the opposite view. I believe that people who have accumulated modest savings, which have usually been paid for out of income that has already been taxed, deserve a lower rate of tax on their investment income. Clause 65 at least begins to remove the element of double taxation on investment income. I hope in due course that it will be possible for my right hon. and learned Friend the Chancellor to extend that measure by setting an even lower rate for basic rate taxpayers who enjoy a certain amount of investment income.
I have been asked by pensioners in my constituency whether that concession is likely to be maintained. Their point makes any Opposition Front-Bench comment on the suggestion of the right hon. Member for Ashton-under-Lyne about the investment income surcharge particularly interesting.
The landfill tax is one of the important new proposals in the Bill.
§ Mr. Sheldon
I should intervene before the hon. Gentleman leaves that point. I did not favour the investment income surcharge. I merely drew the distinction between earned and unearned income, which needs to be maintained. The main point of my argument is that there is a cost of earning a living. There is very little cost involved in getting a living from one's investments. The point that I was making was that those two sorts of income need to be treated separately—whether that is by means of allowances or by some other way has yet to he decided.
§ Mr. Yeo
I am grateful to the right hon. Gentleman for making that point. That was not what I understood him to 439 say in answer to the intervention from my hon. Friend the Member for Beaconsfield (Mr. Smith). When we study Hansard, we shall perhaps be able to determine whether his clarification is in fact a slight withdrawal from what appeared to be his earlier position.
I welcome the landfill tax as the introduction of a market instrument which will influence the behaviour of industry in an environmentally positive way. I recall from my time at the Department of the Environment how difficult it was to find ways of putting into practice the excellent theory that the tax system can be used to influence behaviour in such a way. Indeed, apart from the lower rate of duty on unleaded petrol, it is difficult to think of a good example of any differential tax or any other kind of market instrument that has been environmentally effective.
The introduction of the landfill tax is to be welcomed for another reason: the proceeds are to be recycled directly for the benefit of industry in the form of the cut in employers' national insurance contributions. That is a way of using a tax, which will produce greener results, as a job-creating measure as well. It will be very widely supported.
I hope that the Labour party will assure us at some stage that, in the improbable event of its coming to power, it would not use the landfill tax simply as a means of raising revenue and that the proceeds would continue to be recycled directly and in their entirety for the purpose of job creation.
Although I support the Government's aim of eliminating inheritance tax and capital gains tax, I hope that greater priority can be given to reducing the rate of taxation on long-term capital gains. Indeed, if the rate of capital gains tax on investments that have been held for a minimum of, say, five years were cut from 40 to 20 per cent—or, preferably, even lower—the consequence would be increased revenue. A great many investors are locked into large, long-term capital gains that they are unwilling to realise at a tax rate of 40 per cent. A lower rate would not only encourage them to realise those gains but be economically beneficial, because the distortions in the economy and in investment decisions would be removed.
If my hon. Friend the Financial Secretary wanted to be really Machiavellian, he could introduce a rate cut that was effective for one year only—for example, for the financial year 1996–97 the rate could be reduced from 40 to 10 per cent. I expect that investors will rush to take advantage of any such cut.
Finally, I want to examine the question of stakeholding, about which we have heard so much recently. It was helpful yesterday to have some clarification from the right hon. Member for Sedgefield showing that the term "stakeholder economy" is not a policy or a philosophy but simply a slogan.
§ Mr. Yeo
"Slogan" is new Labour-speak for "soundbite".
After all the efforts of the right hon. Member for Sedgefield over the past 18 months, I do not know how anyone could think that he was capable of producing something as coherent as a policy or a philosophy. Now that we know that it is just a slogan, perhaps we should explore how it relates to the Finance Bill. This debate is 440 an opportunity to shed some light on that. I do not seek clarification solely for the benefit of Conservative Members; Labour Members are keener than we are to know what is behind the slogan. I think in particular of the hon. Member for Brent, East (Mr. Livingstone), who understandably may be alarmed by the way in which policy announcements—slogans—pour down from on high when the right hon. Member for Sedgefield is on his way back from a winter holiday.
It is clear that, for the Conservative party, a stakeholder economy stands, above all, for three things: for giving tenants the chance to become home owners; for giving employees, in particular the employees of former nationalised industries, the opportunity to become shareholders; and for giving trade union members the right to be balloted before they are forced to strike and to re-elect their leaders regularly. We know that, for the Labour party, a stakeholder economy means none of those things, because the current party leadership voted against those proposals when they first came before the House.
The Bill deals with a wide range of economic and fiscal matters. I hope that the hon. Member for Oxford, East will tell us which of the 191 clauses and 37 schedules will help to create a stakeholder economy. If that is too difficult a question for him, perhaps he could tell us which of those 191 clauses and 37 schedules is at least compatible with Labour's new slogan. If he cannot answer those questions, we can conclude only that the stakeholder economy is not about individuals paying less tax, not about small businesses paying less tax, not about using the tax system for environmental purposes and not about allowing pensioners to keep a little more of the income from their savings—their stake in the economy.
If the stakeholder economy is not about any of those, we are forced to conclude that it is just another soundbite—a way of filling time between now and the next election when the waffle, which is new Labour's substitute for real policy, will be put to the test. It is a way of avoiding answering the questions that the hon. Member for Oxford, East so assiduously avoided answering in his lengthy opening speech.
If the stakeholder economy is none of the things that have mentioned, if it is not just empty waffle and a meaningless slogan, presumably the stakeholder economy is, for new Labour, what we all suspect and fear: a bigger stake for trade union leaders at the expense of employers and rank-and-file employees; a bigger stake for the European Commission at the expense of British interests; and a bigger stake for Labour local councils at the expense, usually, of council tax payers. If that is the case, I hope that the hon. Member for Oxford, East will be honest enough to say so. If he says nothing, we can conclude only that it is truly the case.
I warmly support the Bill. I do not intend to say any more about the detail of policy in case the eye of the Committee of Selection falls on me when it is choosing hon. Members to serve on the Standing Committee. I commend the Bill to the House.
§ Mr. Malcolm Bruce (Gordon)
It was interesting to watch the hon. Member for South Suffolk (Mr. Yeo) follow the lead of the right hon. Member for Wirral, West (Mr. Hunt) in his robust defence of one-nation conservatism. The contents of the Bill seem to have 441 provoked a sudden debate about that, which I assume has nothing to do with anything that has happened outside the House.
There is a fundamental difference between the aspirations of Conservative Members, but there appears to be an agreement that the Bill meets all aspirations, from whatever wing of the party. One possible reason for that is that the Chancellor's room for manoeuvre was very limited, and he was forced to compromise, thereby pleasing none or pleasing all.
I want to focus on the report of the Treasury Select Committee—of which I am a member—which was published today. It makes a number of pertinent comments on the Bill and on the detail that we will have an opportunity to consider both today and in Committee. The three aspects of the Budget to which I want to draw attention are, first, the current level of public borrowing; secondly, the details of the education settlement and public expenditure control of it; and, thirdly, the private finance initiative and the investment spending attached to that.
The Select Committee has expressed concern about the level of public borrowing. Indeed, in advance of the Budget, I pointed out that the Chancellor's room for manoeuvre was very narrow because of his failure to bring public borrowing under control. At that time, I did not realise how badly out of control it was. The reality is that we have ended up with a rather half-baked Budget—modest in tax cuts, with notional spending cuts and rises in petrol and council taxes.
A number of Conservative Members challenged the Labour party spokesman, the hon. Member for Oxford, East (Mr. Smith), on the appropriate level of spending and taxation. However, the Chancellor is still predicting that the tax burden will continue to rise every year right through to 2000–01. I suspect that, by that time, the Conservative party will not be in charge of the management of the economy.
The Chancellor is to be commended for resisting the siren calls from one wing of his party to go for broke. He recognised that, whatever the aspirations of his party, he had a responsibility to the national finances which required him to put them before recovering lost ground or buying back lost supporters.
That description may not be to the taste of Conservative Members, so I draw their attention to the Chancellor's comments on "The Frost Programme" in September 1994, before the borrowing figures for that year were published. The right hon. and learned Gentleman was asked whether taxes could be cut if borrowing fell to £30 billion. He said:Well, big deal down to £30 billion. £30 billion is not the basis for cutting taxes, and would actually worry all those people out there if they thought I was going to start tax cutting on the back of even a £30 billion public sector requirement.That could not have been clearer.
One year on, however, the Chancellor is forecasting a borrowing requirement of £29 billion, and all the comments made in the past few days suggest that it is proving hard to achieve even that figure. There is a real possibility that the Chancellor will cut taxes when the borrowing requirement is higher than £30 billion, contrary to his indication that it would he irresponsible to do so. I accept the advice of the Chancellor—the tax cut is not 442 justified, and should not have been proposed. The cut has not been supported by Liberal Democrats, or by at least some Labour Members.
§ Mr. Barry Legg (Milton Keynes, South-West)
The hon. Gentleman may be in danger of misleading the House to some extent about the Treasury and Civil Service Committee's position on the matter. The Committee's report—from which the hon. Gentleman did not dissent—stated that the Committee was "broadly in favour" of the overall stance of the Budget.
§ Mr. Bruce
I recognise that the Chancellor accepted his responsibility, and sought not deep tax cuts but to ensure that the Budget's overall impact was close to neutral. Nevertheless, he stated that a borrowing requirement of £30 billion would not justify tax cuts. The present position is different from that of a couple of weeks ago, when the Committee produced its report, and it appears that a borrowing deficit of £30 billion may be the outcome this year. That wholly justifies my opinion that the Chancellor may not have been cautious enough.
The hon. Member for Milton Keynes, South-West (Mr. Legg) will have to contain himself as I deal with the education settlement, and I shall make clear exactly what the report says. Liberal Democrat and Labour Members have rightly pointed out that the Government's claim to be providing extra funding for education is simply a deception—it simply is not true. The Committee's report makes it clear that we did not accept the Government's view, and that Opposition Members who made that point were correct. Ministers cannot go on claiming credit for any generosity in education funding, as it does not exist.
The Select Committee report states:The increase in spending does not…have quite the substance the Chancellor claimed for it…There seems little doubt that some local authorities will be unable to pass on any increase in spending, and that some schools may neither perceive nor receive any increase in resources.That could not be clearer. Education is not receiving the financial support it needs, which in itself justifies the Committee's contention that, if there was any room for manoeuvre in the Budget, the money should have been made available for education and not for tax cuts.
The Select Committee also expressed concern about the working of the Government's private finance initiative, and we are about to produce a report on that subject. This year's Red Book makes it clear that, far from unlocking new private finance to allow higher public investment, the private finance initiative is being used simply as a substitute for previously committed Government spending. That is not an attack on the principle of the private finance initiative, and the Select Committee may be able to inform the House on the matter in a few weeks' or months' time, after we have taken evidence. We can then show whether our scepticism about the real benefits of the initiative is justified.
It is clear from the Government's presentation that the private finance initiative is not unlocking any additional public investment, but is simply being used to help the Government to bring their borrowing under control. In spite of that, the Government have not been successful.
I should like to refer to a number of specific measures that certainly will be raised in Committee. I have made it clear that the 1 p reduction in income tax is not justified, and that I shall vote against it. I also wish to pick up on 443 the Chief Secretary's ebullient claim about the impact of the reduction in spirits duty of 27p per bottle—the biggest reduction in sprits duty since the war, he said. That is true, but the Chief Secretary failed to tell the House that the Government increased the duty last year by 26p a bottle.
Following the Government's defeat in the VAT vote in the House, the Chancellor—in a fit of pique—forgot his fine words about supporting the industry, and sought to claw back revenue. In doing so, however, the Government lost revenue. They depressed the domestic demand for spirits, to such an extent that less revenue was received following the increase in duty than was received in the previous year when the duty was lower. I hope that the industry will recover and that revenue will return to last year's level, not because I want the Chancellor to secure revenue but because I want to see an increase in the sales of home-consumed whisky, to the benefit of the industry.
I should like to see a consistent strategy from the Government which recognises that the tax regime disadvantages the home-produced spirits industry. Taxation should be based on alcohol content, not on some specious view that spirits are somehow more harmful than wine. I have often said in the House that I find it extraordinary that we choose to tax home-produced spirits—consistently our largest export commodity— to the advantage of imported wines. That is a crazy approach, which I cannot believe any other country would pursue.
An item of which I was unaware has been raised with me by constituents, and seems to be the result of a strange anomaly. The 17.5 per cent. VAT rate, rather than 8 per cent., is applied to orders of 2,300 litres of central heating fuel, on the grounds that such an order is deemed to be for commercial use. That seems unfair, and I am aware of people who have such a large requirement and are being charged 17.5 per cent. The Government should consider raising the threshold, or take account of council tax banding as proof that a consumer's requirement is domestic. The anomaly seems to be affecting and angering a number of people.
The Government should reconsider their very unfair cut in energy efficiency grants, which has caused a great deal of anger and frustration among those involved in the provision of home insulation. The two major bodies concerned are Neighbourhood Energy Action and Energy Action (Scotland). The Government must acknowledge that they are seen as having deceived the public and the agencies, and to have gone back on clear promises to this House.
After the Government defeat on the motion to increase VAT on fuel to 17.5 per cent., and on a number of occasions since, Ministers gave assurances that the budget for home insulation would continue to be £100 million a year. They have now cut the budget to £69 million a year, despite the fact that, on 23 January last year, the Paymaster General, the right hon. Member for Wells (Mr. Heathcoat-Amory), said that the £100 million a year budget would continue during the next three years.
On 22 May last year, the Minister for Construction, Planning and Energy Efficiency, the hon. Member for West Hertfordshire (Mr. Jones), said that, during 1995–96, some £100 million would be made available for grants, and that a similar sum would be set aside for the next two years. That promise was clear and unequivocal, and agencies have operated on that basis. As a result of the 444 complete betrayal of that assurance and the reversal of that policy, many people—particularly elderly people—who need home insulation will not be able to get it.
It is no good the Government saying that they will make a 25 per cent. grant for people who fall outside the qualification threshold. All the evidence suggests that, unless the grant is about 70 to 75 per cent., the take-up level among those who are just outside the threshold will be very low. The Government know that to be the case, and they have calculated on that basis. I urge the Government yet again to reconsider what they have done, because their policy is neither justified nor fair.
The hon. Member for South Suffolk (Mr. Yeo) talked about the landfill tax, and the benefit of using that revenue to reduce charges on employers. He surely accepts that that was not the policy which applied when VAT was imposed on fuel, but it was one small, offsetting gesture that the Government took on board: they would use some of the revenue to provide home insulation grants for those most in need of them. In those circumstances, it is regrettable that the Government have gone back on that policy.
§ Mr. Bruce
Of course that is true. The point is that a promise was made, on which agencies based their plans. The agencies now expect that the reversal in policy will reduce the number of people who will receive the benefit of home energy insulation by 200,000, which is one third. That is the point at issue, as well as the fact that it was a link which the Government accepted and have now broken.
A number of developments have hit charities particularly hard, and unfortunately, to date, the Government have not responded to them. The national lottery has clearly hit charities extremely hard, but so has the switch from income tax to VAT. Charities estimate that they will have an extra £350 million of costs as a result of that policy. As a consequence, the reduction in the standard rate of income tax means that more revenue will be lost to charities, because, of course, people who benefit from covenants will get back one penny in the pound less in tax relief than would have been the case. It is estimated that that change in policy will cost charities some £17 million a year.
I hope that the Government will consider, for example, allowing covenants which were signed before the Budget to continue to qualify for a 25 per cent. relief, on the basis that donors could not have taken into account when making their donations the fact that the relief would be less than anticipated. I see the Financial Secretary nodding. I hope that his nod is a sign that the Government will either accept or propose such an amendment.
§ Mr. Bruce
I am grateful to the Financial Secretary, and I will be here to listen on that basis.
There are other issues that I think would probably be better raised in Committee; and I and my colleague on the Committee intend to raise them.
445 The Bill is extremely long, which is a depressing comment on the complexity of our tax system and our apparent inability to simplify it. My view, and the view of my colleagues, continues to be that, within his broad responsibility, the Chancellor of the Exchequer has acted responsibly, which is possibly why he won no praise from Lady Thatcher—or possibly because he is a one-nation Tory; I am not sure which it was. Nevertheless, I believe, for the reasons I have stated, that the overall thrust of the Budget, and the Finance Bill which flows from it, is flawed and not one which I or my colleagues have supported or will support.
As a point of clarification, I do not regard the Opposition amendment as satisfactory either, because, as one Conservative Member has said, a windfall tax is no basis for financing an alternative strategy. I and my colleagues are fundamentally opposed to that, and we cannot support such a strategy or the Labour motion. We will, if necessary, force a Division on the Second Reading of the Bill.
§ Mr. Quentin Davies (Stamford and Spalding)
I remind the House of my interests, as declared in the Register of Members' Interests—not that my remarks will be in any way remotely connected to any of them.
It is a pleasure to follow the hon. Member for Gordon (Mr. Bruce). He is a colleague on the Treasury Select Committee, and will not be surprised to know that I frequently disagree with him. Nevertheless, I shall say two things for the hon. Gentleman and the Liberal Democrats this afternoon. First of all, they do at least have the honesty and the courage, when proposing a specific increase in public expenditure, to propose at the same time the increase in taxation that will pay for it. Secondly, they do at least occasionally appear to have some policies.
The hon. Member for Gordon set out a list of thoughts this afternoon, and he has obviously given some consideration to all of them. Some of the proposals, no doubt, have greater merit than others, and I hope that he will forgive me for not engaging with them all now. At least there were some policy ideas there. What an extraordinary and breathtaking contrast his speech was to that of the hon. Member for Oxford, East (Mr. Smith), who spoke on behalf of the Labour party this afternoon. That was an amazingly vacuous, shambolic speech.
I agree with the comments of some of my hon. Friends that the vacuity of the speech of the hon. Member for Oxford, East was unprecedented, even coming from the Labour party. Mr. Deputy Speaker, you will recall that he was specifically asked by Conservative Members for his views on interest rates—whether they were currently too high or too low or whether they were right. He was asked what his views were on an inflation target; whether there should be one and, if so, what it should be. He was asked for his views on a range of fundamental elements in any economic policy in any country, and it was quite obvious from the hon. Gentleman's refusal—
§ Mr. Davies
I will give way in a moment, if the hon. Gentleman will let me finish.
446 It was obvious from the determination of the hon. Member for Oxford, East to evade all those questions that the Labour party does not have the rudiments of an answer to any of them. It is quite clear that the hon. Gentleman and the party that he was speaking for this afternoon have not even begun to put together the very rudiments of any economic policy for the country. Yet the Labour party has the extraordinary pretention to claim to the British electorate that it is a credible alternative Government.
The speech by the hon. Member for Oxford, East was an amazing performance. Mr. Deputy Speaker, I hope that you will not think that I am making a personal attack on the hon. Gentleman. He is not an unintelligent man. I know him well. He is no less intelligent than other hon. Members who sit on the Labour Back Benches and Front Benches. The fact of the matter is that he was in an impossible position.
Even if the Gentleman had wanted to or been capable of it, how could he have devised an economic policy when his boss was incapable of devising or expounding one? The abdication and the vacuity in the Labour party come from on high—from the very top of the Labour party. That will obviously paralyse every statement by junior members of the Front-Bench team.
§ Mr. Bayley
The hon. Gentleman discussed inflation with my hon. Friend the Member for Oxford, East (Mr. Smith). Has he read the briefing in the Library, which shows that Britain has the second highest rate of inflation of the G7 countries, and that it is slightly more than 1 per cent. greater than the top end of the target in the Treasury forecast? Does he believe that inflation is too high, too low or about right in comparison with the Government's target?
§ Mr. Davies
Inflation, which has reduced enormously since we joined the exchange rate mechanism in 1990—which fact is, of course, satisfactory, encouraging and gratifying—remains too high; we wish it to be even lower. However, I believe that the balance of professional opinion in the academic world, the City and elsewhere is that the Government have more than a sporting chance of achieving their target of reducing recorded inflation, as shown in the retail prices index, to less than 2.5 per cent. during the present Parliament.
I have to say to the hon. Member for York (Mr. Bayley) that, when that is achieved—and it will be achieved—it will be regarded as one of the great historic achievements of the present Parliament, because the Government will have reduced inflation, and with it inflationary expectations, to a level that neither the hon. Gentleman nor I have known in our adult lifetime. That is a major achievement. It represents the moment when the country has finally climbed out of the hole that was dug for us by the Labour party's policies in the 1960s and 1970s.
Let me turn, as I am sure you are anxious I should, Mr. Deputy Speaker, to the specifics of the Budget. The Budget is first rate. I do not say that as a cliche; I say it in a thoroughly considered sense.
The Budget is built on, and enshrines, the two great principles of the Conservative party, which I am proud to represent. First, it represents the belief in sound money, in responsible, competent management, because every penny of the tax reductions that have been offered to the British public in the Budget have been met pound for pound and penny for penny by public expenditure reductions, and one cannot get much sounder than that.
447 The second great principle on which the Conservative party is based, and about which I am proud to speak on its behalf this afternoon, is the principle of one nation. It is the principle that, when dividends are to be paid—dividends from economic growth or from sound financial and fiscal management—they should not be directed at one section of our people, but the whole nation should benefit. That is the principle that is enshrined in the Finance Bill.
There is something in the Budget for the great mass of the working population who pay tax at the standard rate—a reduction of 1p. No doubt there will be more reductions as long as the Conservative Government remain in office, which I hope will be a very long time.
There is something significant in the Budget for those people who are just entering the labour market, or who are still on relatively low salaries or wages, in the considerable increase in the 20 per cent. band. There is something for families in the increase of the married man's allowance. There is something for those people who, perhaps as a result of thrift and hard work, have something to hand on to their children—the inheritance tax threshold has been increased to £200,000.
There is something in the Budget for unemployed people, those who hope to get back into work, and in the reduction in employers' national insurance contributions. I could continue.
In the most genuine sense, and most strikingly, the Budget is to the highest degree a one-nation Budget, and I am proud to support it as such.
I did not intend, when I entered the Chamber, to mention the name of the previous Prime Minister, but her name has been mentioned several times, and it might be artificial to pretend that that has not happened.
One of the extraordinary things about Baroness Thatcher's criticisms of the Government a few days ago was her suggestion that the Government had not cut public expenditure sufficiently. The position is very sad. I fear that Baroness Thatcher, who takes second place to no one in my admiration for her historic achievements, that great personage of our history, in her decline has forgotten one of the great rules that she held dear in her prime—that one should do one's homework before making a pronouncement.
Had Baroness Thatcher done her homework, she would have discovered that the Chancellor has cut no less than £44 billion from the public expenditure expectations that he inherited, including a reduction of £11 billion in the Budget this year.
Had she done her homework, she would have known that, in the 1995–96 financial year, public expenditure as a proportion of gross domestic product is about 42.5 per cent. I am afraid that the Government of Baroness Thatcher, which I was proud to support, never succeeded in reducing that ratio to 42.5 per cent. between 1979 and 1987. She achieved it only in the irresponsible, uncontrolled and regrettable boom that existed at the end of the 1980s, the price of which all hon. Members in the Chamber know about.
I must remind Baroness Thatcher of the figures; I must remind her of reality. The average of public expenditure as a proportion of domestic product throughout her time of office, from 1979 to 1990, was about 44 per cent., considerably greater than the present proportion—and that is decreasing. So much for Baroness Thatcher. 448 There is an extraordinary state of affairs. The economy is almost unprecedentedly sound. Last year, we had growth of about 2.5 per cent. We hope for about 3 per cent. this year. Inflation is down to levels that most hon. Members in the Chamber cannot remember. Unemployment has decreased, month after month, for two or three years.
The present state of the economy is extraordinary. Even more so is the fact that that process has continued for rather a long time. After all, growth in output revived, the recession came to an end, in the spring of 1992—about six months, incidentally, before we left the ERM, in case there are any illusions on that score.
We have never had—at least not in my lifetime or since the second world war—almost five years of continuous growth without running into the balance of payments constraints and the inflationary constraints of which we were reminded by the distinguished right hon. Member for Ashton-under-Lyne (Mr. Sheldon), who was Chief Secretary in the Wilson Government and who has every reason to remember the constraints that operated on the British economy in the bad old days.
That is an extraordinary state of affairs, which demands an explanation. I believe that it is consistent only with the notion that there has been a genuine supply side revolution in the British economy, and that that genuine supply side revolution in the British economy has taken place under a Conservative Government.
The media, and many people in the country who comment on political affairs, do not even consider that revolution. They are obsessed by what one might call the superficialities, or the flotsam and jetsam, of politics. But what counts, and what will be remembered in historical retrospect, is the underlying reality, which is that the tide is strong. It is bearing forward the British economy; it is bearing forward our nation, and it will bear our party forward to victory at the next general election.
§ Mr. Denzil Davies (Llanelli)
It is tempting to follow the hon. Gentlemen who have sought to analyse those fashionable slogans of "one nation" and "stakeholder economy", but I shall not do so. There seems to be a great danger. In the modern, competitive market economy—I believe that that is a phrase now used for capitalism—with globalisation, the fashionable inflation targets and control by central bankers, it may not be possible to have such an economy and, as well, have either one-nation Toryism or a stakeholder economy if what we mean by "stakeholder economy" is the sort of social cohesion in which western European countries believe. I do not know and I am delving into deep water. I see that you, Mr. Deputy Speaker, are looking at me and perhaps I should return to the Bill's Second Reading.
I will not talk about the economy or tax changes, but about a subject that is, perhaps, marginal in this period of pre-election fever: the length and complexity of the Bill and of previous legislation introduced by successive Conservative Governments since 1979. Many hon. Members have commented on the fact that the Bill is 408 pages long. I believe that it is the longest Finance Bill in history, although there might have been a longer one. It is made up of two volumes because, apart from the complexity of its drafting, it cannot be physically handled in one volume.
449 The figures compiled by the Inland Revenue in a report show that since 1979 the average length of Finance Bills introduced by successive Conservative Governments has been almost 200 pages—193 pages. In the period from 1974 to 1979—the period of old Labour and those terrible socialists, Lords Wilson and Callaghan—the figure was 103. In the years since 1979, under Conservative Governments, Finance Bills have doubled in length and complexity. Those Governments were elected on a promise to roll back the frontiers of the state—or socialism, I am not sure. If the promise was to roll back socialism, they have kept it; if the promise was to roll back the state, they have not. Conservative Governments have used the state in an almost Leninist way to roll back the frontiers of socialism—perhaps that is the justification.
My right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) and I remember the pompous speeches of Opposition spokesmen before 1979. They said that taxation and Finance Bills were about raising money and nothing else—certainly not some terrible thing such as social or fiscal engineering. What we have seen—and it is borne out in the Inland Revenue's report if one reads between the lines—is a massive attempt at fiscal and social engineering using Finance Bills.
Those of us who occasionally read professional publications on accountancy and taxation know that, over a number of years—not just this year or last year—hardly a month has gone by without those publications including condemnations of and concerns and complaints about the length, complexity and obscurity of tax legislation under successive Conservative Governments. It became so bad that the Inland Revenue was asked to commission a report, on which it did a good job, called "The Path to Tax Simplification". It recommended that over the next five years most of the legislation introduced by the Inland Revenue over the past nine or 10 years should be redrafted. The Government accepted the recommendation, so we now have the prospect of the 408 pages of the Finance Bill being redrafted over the next five years.
The poor Inland Revenue—I feel sorry for it—says that the legislation is to be redrafted insimpler, more user-friendly language, which will be easier for everyone to understand".I am not sure who "everyone" is supposed to be. Lawyers have a romantic image of the man on the Clapham omnibus. I do not know whether he or she is to be "everyone", but an idyllic picture is painted of the man or woman on the Clapham omnibus reading on his or her way to work the redrafted, easy-to-read Finance Bill that the Government now promise.
There has also been a reprehensible tendency to blame the poor old draftsman. I heard the Chief Secretary in his speech—or perhaps it was my hon. Friend the Member for Oxford, East (Mr. Smith) in his speech—say in an offhand remark that parts of the Finance Bill had been drafted by the private sector. That is fine, but the implication is that the parliamentary draftsman has not been up to his job. It is unfair to blame the parliamentary draftsman for what has happened. It is equally unfair to blame the Inland Revenue or Customs and Excise. Responsibility for the Finance Bill lies with Treasury Ministers.
450 Things may have changed since my right hon. Friend the Member for Ashton-under-Lyne and I were in the Treasury, but I doubt it. I remember that a list used to appear around Budget time that was prepared by Customs and Excise and the Inland Revenue. The list was usually very long and it became longer every year. But Ministers can prune the list and cut proposals from it; they do not have to accept even half of it. The only conclusion that I can draw is that, year after year, including this year, Tory Ministers have had neither the courage nor the will to prune that list. It is important to do so and it is unfair for Ministers to ask parliamentary draftsmen to draft 408 pages in the period between the Budget being prepared and publication of the Finance Bill for Second Reading.
§ Mr. Tim Smith
It is easy to criticise Treasury Ministers, but has the right hon. Gentleman noticed that the Bill implements in law a large number of extra-statutory concessions for which the Public Accounts Committee is always calling to be implemented in Finance Acts? Is not that a welcome addition to the Bill? Are there not a number of measures in the Bill for which the private sector has been asking?
§ Mr. Davies
I accept that, but if the hon. Gentleman reads the Inland Revenue report he will see that it makes it clear that at least half the contents of the Bills over the past 10 or 15 years have constituted social engineering by the Government.
I have a confession to make: a long time ago I was the Minister responsible for probably the most complex and complicated tax legislation introduced in the House. I should not think that anyone much remembers it, thank goodness—it was legislation on developing land tax. [HON. MEMBERS: "We do remember it."] I am sending shudders through Conservative Members. The legislation was impeccably drafted, clear and concise. It was the distillation of United Kingdom tax law, 900 years of English land law and some Scottish land law—with its feus and sasines—thrown in. Ministers were responsible for that legislation. It was a ministerial decision and, at least in that case, the draftsman was given enough time to draft that complex legislation.
That brings me to parliamentary time. Throughout the 1980s the time allowed for Standing Committees to discuss and scrutinise Finance Bills has been under threat from a succession of Conservative Governments. There have been more threats of timetables and guillotines and actual timetables and guillotines. It used to be unheard of for a Finance Bill to be guillotined in Committee. The Conservatives have produced longer Bills and used their power—I believe that it was an abuse of power—to reduce the opportunity to scrutinise the Bills.
Conservative Governments had such comfortable majorities that they did not bother worrying about those conventions of the constitution. There are conventions in the British constitution and those conventions are much more important when the constitution is unwritten and we have a first-past-the-post electoral system, with which I agree. However, time and again, Governments with comfortable majorities have been arrogant and have ridden rough-shod over the conventions and the result has been poorer, more complex and more obscure fiscal and other legislation.
In addition, there has been pressure from all sides of the House, even from the Opposition—I find that amazing—to turn working in the House into a nine-to-five 451 job, four days a week. If that happens, the House of Commons will be unable to scrutinise Bills such as we are debating tonight. All those pressures have contributed to the complexity of legislation and the difficulties in analysing and interpreting it.
As a consequence, the courts have gradually moved away from a literal interpretation of legislation. There have been other reasons for that, and I am not seeking to suggest that the complexity and length of legislation is the only reason, but when the courts are faced with complex legislation, they tend to move away from the literal construction—which is usually in favour of the citizen, be it in taxation or criminal matters—and look for the purpose of the statute.
I hate to mention Pepper v. Hart in the presence of my right hon. Friend the Member for Ashton-under-Lyne, but that case was the high watermark. During inquisitorial proceedings in a case between two parties, the Inland Revenue and the taxpayer, the House of Lords decided to overturn the rule of centuries that the courts did not read Hansard in construing legislation. It may be right that Hansard should be read, but that was not a matter for a court to decide. It should have been decided after analysis by the Law Commission, which exists to do just that, however, the Law Lords, who have little experience of parliamentary procedure, in an adversarial contest, made a decision that has considerable consequences for professionals and others who now have to read Hansard when they give advice. If they do not read Hansard and it contains something relevant that they should see, they can be sued for professional negligence so have to read Hansard at quite considerable costs. The high watermark has been Pepper v. Hart, as the courts move towards examining the purpose of legislation.
The fact that the courts now look at Hansard increases the power of the Executive. Perhaps it is already happening, but, especially with the looser simplified drafting about which we have been told, Ministers will be tempted to read out in Committee well-crafted statements, written for them by the Inland Revenue or whoever, from which they will not deviate under questioning. The courts will then read Hansard and use those statements to fill in the blanks created either because they cannot understand the complicated drafting or by the alternative simplified drafting. That will increase the power of the Executive. Of course, the reformed interpretation favoured by courts also increases the power of the judiciary.
I may be old-fashioned, but I believe that the best protection for the citizen, especially in fiscal and communal matters, is the close scrutiny of perhaps complex but well-drafted and precise legislation in the House so that the literal interpretation can be applied by the courts and if there is a conflict or a problem, the benefit of the doubt is given to the citizen. I would prefer such a system to the way in which everything is moving. I hope we are wrong and that we can draw it back.
§ Mr. Jack
I am grateful to the right hon. Gentleman and I have been following his line of argument closely. Does he agree, however, that it is to be welcomed that, wherever possible, the Inland Revenue consults widely on clauses which ultimately will find their way into Finance Bills? There is a real attempt to enable those who will be 452 affected by certain legislation to have a say at an early stage in the drafting of a proposed parliamentary enactment of such legislation.
§ Mr. Davies
The hon. Gentleman has not been in the House very long, but history reveals that when some of us were Ministers, we published entire Bills as draft clauses. The development land tax legislation was published as draft clauses as was the banking legislation that I introduced in 1976 or 1977. When the Conservative Government came to power in 1979, however, the policy of publishing draft clauses was stopped and they took a Leninist attitude to pushing through all legislation as quickly as possible. The Minister cannot say now, 16 or 17 years later, that draft clauses are a good thing. Why have not we seen more of them since 1979?
Resimplification will be a major task. It is no good the Minister thinking that he has solved the problem by spending £25 million and asking for everything to be redrafted as that will also cause problems. The main way to deal with the matter is not to introduce Bills that are 408 pages long and expect the House of Commons to scrutinise them.
§ Mr. Tim Smith (Beaconsfield)
When I asked the hon. Member for Oxford, East (Mr. Smith) whether the present level of interest rates were too high, too low or about right, he did not answer the question, but we should not be surprised about that because he does not answer any questions on matters of economic policy. He said that long-term interest rates are too high and something should be done about that. When he was asked what should be done, he said we should increase investment as if that would bring down interest rates.
Apart from the fact that that is economic gobbledegook, the reason why we have higher real interest rates than Germany is that we have a poor record on inflation over a 35-year period and people still do not believe that successive British Governments will commit themselves to consistently low inflation, although the very low inflation under the present Government will clearly remain in place under the present arrangements vis-á-vis the Bank of England.
One reason why we have a wide differential is that the markets naturally fear that we may have another Labour Government and Labour has the worst record of all on inflation. Labour Members may find that amusing, but in 1975 we had 26 or 27 per cent. inflation under Denis Healey and gilts, which were issued on a coupon of about 15.5 per cent.—the highest ever interest—not surprisingly, were known in the market as Healeys. Gilts are no longer issued at those excessive rates of interest today because we have low interest rates and low inflation, but the markets fear what Labour might do because of its appalling record. That is one reason why we have to bear the burden of higher real interest rates. To believe that increased investment will somehow solve the problem is to get the argument the wrong way around.
If one were to single out one criterion against which to assess whether the Government are pursuing a successful economic policy, undoubtedly opinions would differ as to what that should be. However, I believe that many people would choose to use the level and the trend of unemployment. On that score, the Government's record is one of the most successful in the European Union.
453 Of course, it suits the hon. Member for Oxford, East simply to quote the absolute figures and to say that the present level of unemployment is still too high at 2.2 million. I agree with that. However, we should compare our record with that of the other major member states of the European Union. Unemployment in France is rising and Germany faces considerable difficulties because of the huge on-costs associated with the employment of labour. Spain, under a socialist Government, has an unemployment rate of more than 20 per cent. Those countries have much higher rates of unemployment than Britain and they do not know how to tackle the problem.
§ Mr. Andrew Smith
While the hon. Gentleman is making comparisons, will he recognise, first, that we are not talking about absolute numbers: we are talking about people, their lives and their prospects of making a decent livelihood? Secondly, will he tell the House why average unemployment under the last Labour Government was 960,000 when it has been 2.4 million under this Government since 1979?
§ Mr. Tim Smith
I agree that the absolute number refers to an absolute number of people. That is why I have said that 2.2 million is an unacceptably high level of unemployment. My point is that the Government have put in place policies that are designed to decrease the level of unemployment by reducing employers' payroll costs. For example, the £500 million that will be raised by the landfill tax will be used to reduce a levy on employment. That is extremely welcome.
The Labour party wants to impose extra costs on employers—I suspect that that is what the Leader of the Opposition meant in his speech about a stakeholder economy. That is what the social chapter is about: it would introduce the very costs which are driving German manufacturers to ensure that products are manufactured anywhere but in Germany, where manufacturing costs are high. Although the present level of unemployment is too high, we can be proud of our job creation record.
Another criterion that one might choose is manufacturing productivity. Our record in that area is even better, as all independent assessments show that we have narrowed the gap with Germany very substantially in the past 16 years. On that basis, I believe that we have a successful and a growing economy.
I now turn to the Finance Bill and to the subject of self-assessment, which the hon. Member for Oxford, East touched upon. I do not think that there is any disagreement about the principle of self-assessment. I understand that the Opposition support the introduction of self-assessment and the Public Accounts Committee has argued consistently for a change from the prior to the current basis of assessment for the self-employed.
Self-assessment has had a long programme of introduction and I pay tribute to the Inland Revenue for the work that it has done. It has bent over backwards to consult taxpayers, to whom it has sent sample tax returns. We must accept the fact that, when one introduces a change of that kind, some people will pay no attention to it until the new tax return lands on their doormats. However, I do not believe that we should criticise the Inland Revenue, which has made a great effort to consult taxpayers.
454 The Inland Revenue recently sent a tax return consultation pack to all Members of Parliament. I do not know whether anyone has taken the trouble to read it, but when I received the pack requesting my comments I telephoned the Inland Revenue. Three officials came to see me and I discussed with them the form that they proposed to send to Members of Parliament. It seemed to be unnecessarily complex compared with the present system. I am glad to say that the form has been simplified considerably for the latest round of consultation. However, I understand that Inland Revenue must ensure that every contingency and possible situation is dealt with, which leads to a degree of complexity.
I think that we should allow the measure to proceed. I shall be interested to hear the arguments that are advanced in Committee, as I do not see how one can defer one part of it while introducing another. That does not make a great deal of sense to me, but we shall discuss the matter in detail in Committee.
The right hon. Member for Llanelli (Mr. Davies) referred to tax simplification. I welcome the report that the Inland Revenue published before Christmas to comply with section 160 of the Finance Act 1995. I particularly welcome the fact that the Inland Revenue seems to have had a substantial change of heart and that there appears to be the political will to address the problem.
The right hon. Gentleman was correct to draw the attention of the House to the speed at which the size of Finance Bills has increased. I have the figures for recent years. In 1986 the Finance Bill was 265 pages long. I think that the right hon. Gentleman said that this year's legislation comprised 408 pages. In 1993 it was 415 pages, in 1994 it was 616 pages and last year it was 505 pages. So we have seen a huge growth in the size of the legislation. Of course, the problem is not simply the growth in the legislation—if it were clear and easy to understand perhaps we would have no difficulty. More important is the complexity of the legislation.
I think that Inland Revenue has been persuaded that the problem is of sufficient scale that it must be tackled. I believe that the exercise will be justified in terms of the benefits that will accrue, although I know that some cost will be involved. However, I do not suppose that the man on the Clapham omnibus will be much the wiser. We are currently concerned that professional tax advisers—accountants and lawyers—find the legislation difficult to understand. That is not a satisfactory situation and we must address the problem. Fortunately, most taxpayers are pay-as-you-earn and they do not need to read the Finance Bill every year—which is just as well—but we must produce intelligible legislation for sophisticated taxpayers and professional tax advisers. I believe that the Treasury is now committed to a programme that will deliver the desired benefits.
Of course, some consideration must be given to the parliamentary procedures, as the change will fall somewhere between consolidation legislation and the major changes in the law that we associate with a Finance Bill. As it will give rise to voluminous documentation, I believe that the Procedure Committee should consider how we shall deal with it.
The right hon. Member for Llanelli mentioned Pepper v. Hart. I do not think that the concerns are as great as he suggested because Pepper v. Hart applies only where the law is absolutely ambiguous and it is not possible for the 455 court to determine what Parliament intended simply on the basis of the words of the Act. It is only in those circumstances—which hopefully shall be rare when we simplify the wording of the legislation—that the courts will refer to Hansard to see what was said.
However, I agree that it must affect the way in which Ministers approach matters in Committee if they know that their every word will be scrutinised in the same manner as the words of the right hon. Member for Ashton-under-Lyne (Mr. Sheldon) in the matter of Pepper v. Hart, which I understand related to the 1976 or 1977 finance legislation. I welcome the tax simplification programme and I hope that we shall be able to make good progress with it.
Finally, while I welcome the fact that charities will be assisted by the increase in the maximum amount under the give-as-you-earn scheme from £75 to £100 per month, they will lose out as a result of a reduction in the standard rate of income tax. Although the Government have done a great deal in the past few years to encourage people to give money to charities—there is no tax reason to prevent it, as it is an extremely tax-efficient exercise—charities have been subjected to considerable extra taxation. I refer particularly to the value added tax burden on charities.
The Charities Tax Reform Group has made proposals to Treasury Ministers for a scheme that would provide some relief to charities on the VAT that they incur—not on the costs of running the charity but the charitable services that they provide. I am sorry that up to now it has not been possible to persuade my right hon. and hon. Friends of the merits of such a scheme, which would not be hugely expensive but which would be of great benefit to many charities that do such important work in our community.
Notwithstanding its length and complexity, I welcome the Bill, in particular the balanced tax changes and tax reductions included within it, and I look forward to the debates in Committee.
§ Mr. Hugh Bayley (York)
I have listened carefully and with interest to comments that have been made by hon. Members, on both sides of the House, about the increasing length and complexity of tax legislation. I am sure that with legislation, as with any other document, the longer, more complicated and detailed it becomes, the more likely it is that one will lose sight of the strategic objective—the purpose for which the legislation is intended.
I take the House back to 1992 to the general election, when the Conservative party hustled its way back into power with fanciful and fabricated allegations about Labour's tax plans. I believe that the Conservative party's posters warning the public of Labour's tax bombshell will come back to haunt it, because the reality in Finance Acts since then is that the tax bombshell has been imposed by the Conservative party. I asked the Library to compare the tax burden under the Conservatives during their 16 or 17 years in office with that under the previous Labour Government. I expected the rosy picture painted by Conservative Members to be somewhat dented, but nothing prepared me for the magnitude of the Tory tax rises, not just in the few years since the 1992 general election but in the whole period during which they have been in power.
In every year since 1979, taxes have been higher in real terms than in 1978–79, when Labour was in government, and higher in real terms than in any year during the last 456 Labour Government. Last year, the Government raised £236.6 billion in taxes. In 1978–79, at current prices, the Labour Government raised £170.9 billion. In cash terms, the Labour Government, in their last year of office, raised some £58.6 billion, which shows, among other things, the inflation that we have had since the Conservatives have been in office, because the pound is now worth barely more than one third of its 1978–79 value.
If the Conservatives had kept tax down in real terms to the level of the last Labour Government, they would have collected almost £0.75 trillion less—£735 billion less—from the pockets of British taxpayers. That amounts to some £32,000 per household in Britain—or more than £2,000 per year for each of the 16 years that they have been in office. Conservative Members might well say that one would expect the overall tax burden to rise because of overall growth in the economy. That is a weak argument from a party that promised to cut public spending in real terms, to cut the size, power and spending of the state, but it is an argument that I take seriously.
I asked the Library to look at the tax take under the Conservatives and under the previous Labour Government as a percentage of our national income. In 15 out of the 16 years in which the Conservatives have been in office, the proportion of the country's gross domestic product that they have taken in tax has been higher than under the previous Labour Government. In 1978–79, under Labour, taxation took 34.3 per cent. of GDP. During the 16 years that the Conservatives have been in power, it has averaged 37.3 per cent. of GDP—three full percentage points more than under the previous Labour Government. That illustrates clearly—the figures were prepared by the economic, policy and statistics section of the Library—the real cost of Conservative Finance Bills.
In 1987, in the Conservative manifesto, the Conservatives promised:we are engaged in steadily reducing the share of the nation's income taken by the State.That was and is a lie. Between 1979 and 1987, the percentage of GDP taken in taxation rose from 34.3 per cent. under Labour to 38.1 per cent. under the Conservatives.
The 1987 manifesto also promised:In the next Parliament:We aim to reduce the burden of taxation.What happened? Between 1987 and 1992, the tax burden imposed by the Conservatives rose from £147 billion to £221 billion, or at constant prices from £211 billion to £231 billion—a 9.2 per cent. increase in the tax burden in real terms.
The same approach was taken at the last general election. In their 1992 manifesto, the Conservatives said:We are the only party that understands the need for low taxation.They may understand it, but they do not do it.
Since the last election, the tax burden for a typical family in Britain has increased by £600 a year. The Government really do need to give the British public, who are faced with an ever-mounting burden of taxation, an answer to the question: where has their money gone? Some £14 billion was squandered on the poll tax—an ill-conceived and failed policy, which was eventually abandoned but at great cost to the taxpayer. The NHS administrative reforms cost an additional £1 billion a year. 457 Rail privatisation proposals will cost some £850 million a year. Low pay subsidies—the payment of family credit to people on ever-lower wages—cost the average taxpayer £100 a year. The common agricultural policy costs an average family £20 a week.
It was Benjamin Franklin who said:In this world nothing can be said to be certain, except death and taxes.The two go together. These Tory tax rises will result in the death of the Tory party. If one looks at Conservative Members, one sees a party bickering with itself, Members arguing with each other, trying to justify their individual positions. One sees a party in its death throes. Some Conservative Members realise that. Some do not. Those who do not are those who have swallowed their own propaganda about Tory tax cuts so often that they have come to believe them. That lie is a poison for the people of this country and it is eating away at the heart of the Conservative party. It is that poison that is giving the Conservative party such an ugly final few months before it fails and dies.
§ Sir Terence Higgins (Worthing)
In the Budget debate, I quoted lain Macleod's most frequently quoted view that a Budget that looked bad on Budget day might look a lot better by the time we came to the Finance Bill, and conversely, if it was good at the time of the Budget the reverse was the case. I feel bound to say that we are now debating the Finance Bill. It looked pretty good on Budget day and it looks pretty good now. It was entirely appropriate to the economic circumstances in which the Chancellor found himself, and I felt that he was given a grossly unfair press the next day. In fact, the economy is now in a very good state in terms of the level of inflation and prospects of growth. Having said that, however, let me add that there are serious dangers ahead in terms of both timing and balance—in particular, the balance between fiscal and monetary policy.
When I said what I did at the time of the Budget, I did not envisage the extent to which kin Macleod's name would be headline news by the time of Second Reading of the Finance Bill. Following Lady Thatcher's speech, numerous headlines have referred to Mr. Macleod—who, it must be admitted, was the personification of one-nation Toryism. Margaret Thatcher and I learnt our trade—if I may put it that way—dealing with Finance Bills on the Opposition Front Bench under lain Macleod's tutelage; I do not recall her referring disparagingly to one-nation Toryism then, or using words such as "baloney". Had she done so, I would have remembered, because lain Macleod would undoubtedly have made an appropriate response.
I find it sad that Lady Thatcher is so out of touch. She now seems even to confuse one-nation Toryism with an enthusiasm for European federalism. I believe that the Prime Minister, like me, is a one-nation Tory, but neither of us is in favour of European federalism, and what is nowadays described as a "coded attack" struck me as entirely wrong in this instance.
It is true, however, that the Bill needs to be put into a European context. Certain clauses refer to the European Community's second VAT simplification directive. I was responsible for steering the original VAT legislation 458 through the House; the so-called simplification directive, and the related clauses in the Bill, merely seek to make less complicated a change that complicated the original legislation. The provisions continue for pages and pages, allegedly simplifying the position, but if the arrangements had been left as they were when I introduced them there would have been no need for "simplification". The position is already much simpler than it will be after the implementation of the clauses and a huge schedule.
There is, however, a more important reason for seeing the Bill in a European context. Clearly, part of the Government's general fiscal policy—indeed, in a sense, the central part—relates to whether we are likely to meet the so-called Maastricht criteria, regardless of whether we decide to participate in European monetary union. Countries throughout the European Union seem to be trying to meet those criteria. As I pointed out in an intervention following the Prime Minister's return from the last European summit, there is considerable confusion over the expression "single currency". It is important to get the semantics right. It is inconceivable that we will achieve a single currency across the entire European Union as it currently stands; we are discussing whether there should be a core currency. That is relevant to the Bill, and to the general attitude to budget deficits.
The Chancellor has a wider remit than the Finance Bill, although it is part of the policy. If there is to be a core currency, and if the United Kingdom is to achieve the Maastricht criteria and a degree of convergence, he must consider whether it is advantageous for the UK to join the core currency. Those who join the currency will give up, for all time, the main means of adjusting to differential movements in costs and prices. If they join prematurely, they will risk facing either patches of endemic and indefinite unemployment, or a need for large subsidies from one area to another. The United Kingdom is, after all, engaged in a global rather than a purely European economy, and it is therefore important for us to make the choice; but insufficient consideration has been given to whether we should be inside the core currency—if, indeed, it comes about.
There is also concern about the timetable. There is an increasing tendency for countries throughout the European Union to rush—or attempt to rush—towards the Maastricht criteria in relation to budget deficits. It cannot be seriously disputed that that is likely to have a severe deflationary effect. I read with great interest in this morning's Financial Times a summary of an interview with Mr. Alexandre Lamfalussy, president of the European Monetary Institute: apparently, he hasrejected the idea that Europe is heading for a recession that would jeopardise European monetary union.Surely that has the position back to front. The danger is that if we rush towards a policy of cutting budget deficits throughout Europe, a move towards EMU will jeopardise employment. Mr. Lamfalussy, however, is enthusiastic about such policies.
In the context of a Finance Bill that attempts to adjust the fiscal balance, it is important for us to encourage the Chancellor—in his wider remit—to take such issues into account and, in particular, to suggest to our European partners that it is dangerous to take such action.
In any event, I find it extraordinary that we should consider meeting the Maastricht criteria on such matters as budget deficits and, at a certain point, say, "Snap! 459 We will join." We have no reason to suppose that those circumstances will continue over any length of time. Surely the countries concerned ought to have met the criteria for at least two or three years; otherwise their commitment is irrevocable. Short of the kind of break-up that we saw in the Soviet Union, once a country is part of a single currency it is stuck with it, and so far there has been no adequate analysis of the ways of escaping.
§ Mr. Forman
Is not my right hon. Friend saying something even more significant than he has let on? Is not he saying that, if monetary union over any area within the 15 member states of the European Union is to succeed in the longer term, it must be made reversible in some sense?
§ Sir Terence Higgins
As I was saying when I gave way to my hon. Friend, no one seems to have analysed that properly. As I said before, the idea that one can establish a single currency in the whole of the European Union—especially now that, I am happy to say, it has now been expanded—is wholly unrealistic on any conceivable time scale. In the context of the Bill, I think that the Chancellor needs to be encouraged to bring a sense of realism to such matters and a sense of the dangers of proceeding in the way in which Mr. Lamfalussy, for example, envisages.
I was in other parts of the European Union last week and found that increasing concern of the type that I have just expressed was very apparent. After all, other members of the European Union are proceeding against a background of growth rates worse than ours. I am thinking of, for example, Germany.
It is important to bear in mind the implications of the problems that I have outlined for the balance between fiscal and monetary policy. Effectively, we are creating an ever tighter fiscal policy but with total disregard for the economic situation. That is very strange. I am sure that the right hon. Member for Ashton-under-Lyne (Mr. Sheldon) will not be able to recall any Government saying that they were going to cut Budget deficits with no account being taken of the level of unemployment or what stage of the economic cycle they were in at the time. Regardless of where we are in the economic cycle, the idea recently has been that we must cut deficits.
I view with perhaps more equanimity than the Chancellor the extent of the Budget deficit when we are in an economic situation such as this. Clearly, inflation is now well under control, but I am worried that the rate of growth is not as fast as it could be. Of course, when the Budget was announced, many people thought that the growth rate predicted by the Chancellor was unlikely to be achieved unless there were also cuts in interest rates. I am glad that the Chancellor subsequently cut interest rates, and I believe that the Budget and the Bill provide a good background for him to make further moves in that direction.
The relationship between the deficit, the money supply and the rate of interest is complex, but a further tightening of fiscal policy should enable the deficit to be reduced and be financed at lower interest rates without generating further inflationary pressures or an excessive increase in the money supply. I hope that in this context, too, the Chancellor will consider timing and balance.
I wish to say a word or two about the comments of one of my successors as a Treasury Minister, the right hon. Member for Llanelli (Mr. Davies). I have much sympathy 460 with what he said. The first time that a draft clause was added to a Finance Bill for a particular tax change was in connection with value added tax. I commend that to my hon. Friends on the Front Bench as it is a good innovation.
One of the effects of the timetable change to our Finance Bill debates this year and for the previous couple of years is that there is very little time for consultation between the Budget being announced and the Finance Bill being published. Most of the available time is taken up by the Christmas and new year holiday. At this point, it might be worth commenting in passing on our economic statistics on growth. The entire country effectively goes on holiday for two weeks at Christmas and new year. Two weeks is quite a high percentage of the year as there are only 52 weeks in one year—perhaps we should adjust the gross national product figures accordingly.
The so-called unified Budget has been introduced, but we still have no opportunity to debate expenditure in any great detail. We shall grind through the Committee stage on the Floor of the House, the Committee stage upstairs and the Report stage, all of which deal with taxation, but there is still no time to discuss the expenditure side of the equation. Having said that, I believe that the Budget was an appropriate one.
It is a matter of some concern to our constituents that when they see our proceedings on television there appear to be very few of us in the Chamber. That has been exacerbated by the fact that many hon. Members now have a direct feed line from the Chamber to their offices. One is sometimes surprised when, once one has finished speaking and gone to the Tea Room, colleagues there say that they wholly disagree with what one has just said although they were not in the Chamber to hear the speech. The only solution is to have cameras facing in the other direction too so that the public can see hon. Members busily signing their letters while watching proceedings in the Chamber.
The prospects for the economy are now extremely good, but there is a real danger in an over-enthusiastic approach to proceedings in Europe. I firmly believe that being in Europe is the right way forward, but I am worried that the single market may be endangered if only some of its members join a single currency. None the less, the Finance Bill is an important building block, and I believe that the Chancellor and Treasury team should be congratulated.
§ Mr. Ian Pearson (Dudley, West)
Writing nearly 300 years ago, Pope could have been talking about the Government and the Bill when he wrote of the "wounded snake" thatdrags its slow length along.At 408 pages long, the Bill represents a 15 per cent. rise in output from the combined talents of the parliamentary and private sector drafting staff compared with the previous year. It has a third more clauses, adding to the 1,500 pages of primary tax legislation already introduced in the past five years. However, its size cannot obscure its failings.
This is a wholly inadequate Bill. Never before has such a big fig leaf been used to cover so little. The simple truth is that it does nothing to encourage investment and jobs, 461 nothing to provide opportunities for all and nothing to curb the excesses of the privatised utilities or improve the profitability of small businesses.
The Bill does nothing to close tax loopholes. Because of the Government's incompetence, taxpayers are subsidising corporate raiders—like Granada in its bid for Forte and National Power in its offer for Southern Electricity—to the tune of hundreds of millions of pounds through a loophole involving the use of special dividends in takeovers. When will the Government act in the public interest and end this scandalous state of affairs? This fig leaf of a Bill hides a Budget packet of minuscule proportions, and everyone knows it.
The CBI said of the Budget that itwould have preferred to see more measures to encourage investment.The Federation of Small Businesses is on record as saying that it was "extremely disappointed" by the Chancellor's speech and thatthere has been absolutely no encouragement for growth".Its chairman said:I doubt whether the speech will win many votes from our members".I think that she is right. Opinion polls also show that the British people have rumbled the Budget and the Government.
Even Government Back Benchers have twigged that the Budget is not up to much. The hon. Member for North-West Surrey (Sir M. Grylls), who is not here at the moment, is the chairman of the Small Business Bureau. He was reported in The Daily Telegraph of 29 October as saying that he wasdisappointed at the absence of measures to encourage investment, particularly among businesses in the £3m to £50m a year turnover bracket.He is right to be disappointed. The United Kingdom is currently 11 th in the European Union in terms of investment per head of population—that is not nearly good enough. Nearly three years ago, the then Chief Secretary to the Treasury, the right hon. Member for Enfield, Southgate (Mr. Portillo), who I understand is feeling persecuted these days, optimistically claimed that the 1993 Finance Bill wasputting in place the biggest ever deregulatory package for small businesses."—[Official Report, 26 April 1993; Vol. 223, c. 731.]Parliamentary rules and natural politeness prevent me from saying exactly what I think of that claim. Suffice to say, I have not met a single business man who thinks that there is less red tape today than there was three years ago. Nor have I seen a single credible survey of businesses which suggests that the regulatory burden has decreased.
Speaking in the debate on the previous Finance Bill, the right hon. Member for South Thanet (Mr. Aitken), last year's Chief Secretary—who could also be forgiven for thinking "infamy, infamy, they've all got it in for me", to quote the late Kenneth Williams—said:As for simplifying the tax system, the unwelcome size and weight of the Finance Bill highlights the strange paradox that simplification can be a complicated business, at least in terms of legislation."—[Official Report, 17 January 1995; Vol. 252, c. 596.]I am still relatively new to the House, but I recognise absolute rubbish when I see it. I trust that this year's Chief Secretary will have none of it, and that in Committee he 462 will devote his full attention to the many inquiries we will make and amendments on which we will probe him, rather than be diverted by a certain inquiry elsewhere.
In speaking in favour of the Opposition amendment, I must point out that the Government ignore at their peril the overwhelming public support for welfare to work measures, for tackling the privatised utilities abuses, for implementing Greenbury in full, for cutting VAT on domestic fuel and for measures to stimulate long-term investment.
People and businesses in Dudley, West wanted a very different Budget. I shall highlight three areas on which, should I be appointed to serve on the Standing Committee, I intend to consider tabling new clauses. First, I remain as convinced as I was last year that there is a compelling case for specific, limited tax breaks to help hard-hit high streets that have been devastated by major, out-of-town retail developments such as Merry Hill in my constituency. I also believe that the Government could be far more imaginative in using tax breaks to encourage investment and economic regeneration.
Secondly, changes are needed to the tax treatment of retained profits in privately owned businesses. The tax system discourages retained profits, as it is more tax efficient to withdraw capital and invest it in another's business. That needs to be changed.
I would also like the small firms loan guarantee scheme to be reformed. It is not particularly popular in the market, and it is certainly not a competitive package when compared with that offered to German or Japanese firms. We must seriously consider adopting the German and Japanese models of encouraging long-term investment. As a recent 3i report says, Britain's small companies have theshortest financing horizons in Europe".The report also states that they haveinherently more risky capital structures".That must be changed and the reform of the small firms loan guarantee scheme could play a role in that.
Thirdly, the deregulation initiative has been a major disappointment, and the small business litmus test is not working adequately. The Government are still listening too much to large companies and too little to small businesses. The Government have also chickened out on proposals to merge the Inland Revenue with the Contributions Agency. I believe that they should not only do that but join those institutions together with most of Customs and Excise. A number of major improvements could be made.
The Budget offers little or nothing for small businesses, and it does not address the real needs of the United Kingdom economy. It allows the perpetuation of major tax loopholes and abuses of the system, and I urge the Government to introduce new clauses to change that.
§ 7.4 pm
§ Mr. Nigel Forman (Carshalton and Wallington)
I am sure you will agree, Mr. Deputy Speaker, that during the time you have been in the Chair we have heard a wide, interesting and even discursive range of speeches, which must have been loosely connected because they were in order. I have benefited from the thoughts expressed by hon. Members on both sides of the House.
463 I shall inject a little party political enthusiasm into the debate—but not too much. I took the opportunity when I was waiting to speak to read the Labour amendment more closely. It is an extraordinary paragraph, as I shall seek to show. These days, more clarity and honesty come from hon. Members on the Opposition Back Benches than from those on the Front Bench, who seem to work on the principle of "can't say, won't say". We had another example of that today. Whenever the hon. Member for Oxford, East (Mr. Smith) was questioned about anything, he took refuge in a great deal of waffle, as has been mentioned.
I shall attempt to elucidate, for the benefit of the House and posterity, the words of the Opposition amendment. It mentions the desirability of a boost for long-term investment, as the hon. Member for Dudley, West (Mr. Pearson) said. If there is ever to be a Labour Government, that will imply some quite serious changes in the tax regime to dividends and some significant changes to the burden of proof in contested takeovers. Those two points are of quasi-industrial policy rather than finance policy, and people outside should take them into account.
The amendment refers to the introduction of a welfare to work strategy. I am not quite sure what that means and we received no clarification from the hon. Member for Oxford, East. I suspect that it has something to do with the introduction of a statutory minimum wage and signing up to the European social chapter, but unless the Labour party intends to adopt the proposal of the hon. Member for Birkenhead (Mr. Field) for compulsory private insurance, I fail to understand what that slogan means.
We hear much from the Opposition about a windfall tax on the utilities. It is a favourite refuge of the hon. Member for Dunfermline, East (Mr. Brown), who uses it every time we ask where the money will come from. Such a tax is economically illiterate. The hon. Gentleman gives the clear impression that the Labour party would seek to fund many recurrent expenditure commitments with a one-off windfall tax. That does not add up and it would do considerable damage to many of the small shareholders attracted to our share-owning democracy through privatisation of the utilities.
The amendment also mentions the old chestnut of cutting VAT on domestic fuel—something about which Labour Members were confused when they failed to vote for proposals tabled by the Liberal party to cut VAT by even more. Yet the only likely result of such a cut would be to reduce revenue substantially with no obvious way of making up the shortfall. The Labour party would have to address that problem in a future Finance Bill, if it ever had the chance.
The amendment also mentions implementing the Greenbury report in full, yet there seems to be confusion in new Labour about the ability of middle and senior management to be substantial stakeholders in a booming economy. I do not believe that the economy would be booming under a Labour Government, but they might inherit the fruits of Conservative good management of the economy. At any rate, all those in middle and senior management should be warned that they will not be expected or allowed to be part of the stakeholder society.
In the Budget debate before Christmas, and since, there has been a lot of talk about reforming and simplifying the private finance initiative. Try as hard as one might to elucidate what the Opposition have in mind, it seems to 464 be very much to be a policy of calculated ambiguity. I, for one, am not yet clear whether the Labour party is in favour of the PFI and wants more of it, or is against it and wants less of it. A certain difficulty arises because the right hon. Member for Kingston upon Hull, East (Mr. Prescott) claims to have invented it some years ago, in the transport sector. It is clear, however, that some of his hon. Friends are less sure about the PFI, because they believe that it is simply a way of getting some lumps of public expenditure off the books on to the private sector accounts.
We heard some very confusing words from the hon. Member for Oxford, East—some of them in answer to my intervention—on the subject of self-assessment. The hon. Gentleman and the Opposition amendment seem to call for the reform of that great scheme, which has been many years in preparation. I, too, commend the Revenue on the way in which it has sought to consult everybody about it. When I questioned the hon. Gentleman on that point in an innocent and friendly way, as is my wont, I gathered that the Opposition's policy is little more than one of prevarication, and possibly partial reform. I shall try to explain later why that would probably be worse than no reform. If one is to introduce self-assessment, one needs to be bold and comprehensive. If one sets out to do it, one needs to do it properly.
As the House will probably recall, I welcomed the Budget for its responsibility. I welcome the Finance Bill for many of its component parts. It is not the world's most exciting Finance Bill, but in many ways that is a function of the fact that it was a responsible Budget. I am particularly pleased about the 20 per cent. lower tax band on savings income. That change is important and long overdue. Since so much of the taxation on income is now already at 20 per cent., and only at 20 per cent—one third of all taxpayers now pay income tax only at 20 per cent.—it was a sensible extension to introduce the lower rate on savings income.
§ Mr. Denzil Davies
Can the hon. Gentleman explain why he thinks taxing income from investment—in this case, investment in a building society—at a lower rate than taxing income from employment is right?
§ Mr. Forman
Perhaps the right hon. Gentleman was not completely following my argument. I was saying that a third of all income tax payers already pay at 20 per cent. only. As I understand Government policy, which has been frequently spelt out on various occasions, the idea is to move progressively, as and when we can afford it, to making the 20p rate the standard rate of income tax. It is no bad thing to make sure that taxation on income from savings is set at 20 per cent. Contrary to what the Labour party says, those savings are not unearned income, because someone has earned it at some time—either the person himself or herself or perhaps, in the case of inherited income, a family member of an earlier generation. Whichever way one looks at it, that change is a healthy development.
The hon. Member for Dudley, West was fairly disparaging about the Chancellor's efforts to assist small businesses. None the less, it is welcome that the rate of corporation tax on small businesses has been cut to 24p in the pound. I hope that other measures will flow not only within the Exchequer remit but from the Department of Trade and Industry further to assist small businesses, especially in the realm of credit, late payment and other such problems.
465 I was pleased by the measures to give further fiscal encouragement to employee share ownership. Perhaps I should declare a non-pecuniary interest to the House as I am an honorary director of Job Ownership Ltd., which has been campaigning for the very cause of employee share ownership for some considerable time. It is good to see the way in which the Government have responded to pressure from that quarter and others.
The Finance Bill contains a nice small measure to exonerate vintage cars over the age of 25 years from vehicle excise duty. I note that my hon. Friend the Member for Milton Keynes, North-East (Mr. Butler) is nodding in approval. It is true that many cars over 25 years of age are excellent vehicles. Members of vintage car clubs in or near my constituency have written to me to say how pleased they are with that small measure.
The most important thing about the Budget and the Finance Bill in the modern global economy is that they should be understood and, if possible, well received in the markets. It is sometimes thought that the global discipline to which we must now get used applies only to monetary policy and that only that policy must be kept in line with global market opinion. That is no longer the case because, increasingly, monetary, fiscal and supply side policy need to be competitive in the new global economy. The fiscal stance influences the global bond markets greatly, and hence the price that must be paid for money and investment in this country.
Since Budgets and Finance Bills can help or hinder the supply side of the economy, it is important to consider economic policy as a whole because that is what the markets and market analysts increasingly do. I hope very much that when the House considers Finance Bills in the future, this one included, it will always have in mind the monetary and supply side background, and the real conditions in which all national Governments now have to seek to steer their economies. Increasingly, those economies are no longer national ones but merely subsets of a much larger global economy.
As my right hon. and learned Friend the Chancellor pointed out in evidence to the Treasury and Civil Service Select Committee on which I am pleased to serve,You get punished more quickly if you get it wrong in today's global environment.How right he is and what a compelling argument for introducing what, by any reckoning, has been a responsible Budget and a responsible Finance Bill.
My right hon. and learned Friend is therefore to be commended for what he has done. The Budget was well received at the time, if in slightly sotto voce tones, and is proving to have a considerable shelf life, as I predicted. It has already created the fiscal conditions in which it has been prudent and possible to reduce interest rates. It should be possible to repeat that medicine as the year goes by.
My right hon. and learned Friend had to be cautious in present conditions because of the lack of buoyancy in the revenue—something to which we paid considerable attention in our Select Committee investigation—notably in income tax, corporation tax and VAT, which are three of the big engines of revenue in our economy. As the Select Committee pointed out, it is important to decide— 466 we did not come to any final view, so I hope that the Government can help us in due course—whether that lack of buoyancy in the revenue in the year just ending was an aberration or whether it betokens a changed relationship of a more long-term character between the level of domestic activity and the level of taxation collected—in other words, the elasticity and efficiency of the tax system.
Whatever the final answers to that conundrum may be, the situation underlines the need to recognise that we must strive to keep the system, structure and the rates of taxation in our economy as competitive as possible with other national tax jurisdictions. I have given that message in previous debates and I make no apology for repeating it, because I believe that the House of Commons—the heart of the nation, the supreme legislative body and all the other things on which we pride ourselves—needs to take account of the fact that, in a world of mobile capital and mobile individuals and corporations, we cannot afford to let our system and structure of taxation or our rates of taxation become too far out of line with those of our principal competitors in the OECD countries and in the more super-competitive countries on the Pacific rim and elsewhere. The Pacific rim is quite fashionable these days, so I hope that that point will not be lost on the Opposition spokesman, the hon. Member for Edinburgh, Central (Mr. Darling).
We should try to see that our tax system gives the country a continuing comparative advantage, if at all possible, in the increasingly fierce competition for globally mobile capital and increasingly skilled people. In that context, I hope that when circumstances next permit—probably next November—my right hon. and learned Friend the Chancellor will look more favourably than he was able to do last year on measures of bolder tax reform, designed to boost aggregate savings and investment. That was one of the missing pieces in this year's Budget. I understand why my right hon. and learned Friend may have decided eventually that he could not afford that particular political risk, but I hope that he will pull the proposals—perhaps those that I have put to him—out of the drawer again and find out whether there is merit in the idea for future years. This is an early Budget representation for next year.
This measure would assist people in their efforts to increase their financial security, and of course the Finance Bill has already done quite a bit in relation to long-term care for the elderly, which is to be welcomed. At the same time, it would enable us as a country to generate more of the funds for the extra investment that we shall need to finance the innovation that this country absolutely must have to remain internationally competitive. Without a stronger investment preference than we have exhibited in recent years, and the greater efficiency that can flow from that investment, if well directed, we will fall increasingly far behind in international competition.
It is therefore worth rehearsing once again the case for a simple, attractive savings incentive scheme to replace tax-exempt special savings accounts, personal equity plans and all the other mechanisms that tend to displace savings from one heading to another rather than to increase aggregate savings. The scheme would be called, say, a personal investment plan—a PIP for short—and would offer perhaps up to £10,000 a year of personal savings in any savings vehicle, to be completely free of tax. It could be self—assessed, which is in tune with the 467 flavour of the times, and self-certified, with the need only to have tough penalties for anyone who attempts to defraud the Revenue by not fully and properly declaring revenue from such sources, as from other sources.
I hope therefore that the Chancellor of the Exchequer and his right hon. and hon. Friends will reconsider this idea. It is full of merit and would help us to get up the international savings table and hence up the international investment table, which, as I am sure Opposition Members would agree, is important.
I cannot help but be struck by the extent to which we have debated not only the Bill's substance but some of our procedures. It seems clear—and it has seemed to me for many years to be clear—that, in dealing with such a Bill, its length is obviously a problem for the House. It is significant that the Bill is now in two volumes. However, the length in itself will not necessarily make it more obscure. From time to time, length can clarify if the language used is appropriate.
If the language were to be merely purposive, as the tax experts say, we would be passing more responsibility to the courts, as the right hon. Member for Llanelli (Mr. Davies) told us in his powerful speech, which I hope Ministers will read because he made some good points. Brevity might have the effect, paradoxically, merely of favouring declaratory law rather than law that removes the burden of doubt and complexity. Clarity may, paradoxically, need more words to explain Parliament's real intentions, but those words should be plainer and clearer—that should be the priority.
If that does not work—I suspect that none of these well-intentioned aspirations will necessarily work—we may have to revisit the need to reform the House's procedures when dealing with financial legislation of this sort, recalling some of the recommendations, as you will, Mr. Deputy Speaker, in the Armstrong committee report in the early 1980s which the Government did not substantially pursue, except the one for a unified Budget, which they did. We must find ways of making these debates more relevant and more important, not just to the media and the public outside—which is, of course, of interest in a democracy—but, more especially, to our right hon. and hon. Friends who, even as I speak are sitting in their office, as my right hon. Friend the Member for Worthing (Sir T. Higgins) said, looking at the colour of my tie and noting whether I am self-confident, when they should be in the Chamber listening to my words of wisdom and to those of everyone else.
We may have to consider some radical procedural measures. I am not going to go into this now, Mr. Deputy Speaker, because it would be an abuse of your courtesy in allowing me to pursue this point, but you will know that, on the continent, it is common practice for draft clauses and legislation in a preliminary phase to be considered in detail by competent committees, and then for the plenary session to come in at a much later stage to ratify their work. That would indeed be a radical solution and I would press it only if our present procedures are not adequate to deal with Finance Bills as important and complex as this one.
This is a responsible Budget. It is reflected in an interesting and worthwhile Finance Bill with many good components and I wish the Government well in their endeavours over the coming months.
§ Mr. Jim Cunningham (Coventry, South-East)
I congratulate the hon. Member for Carshalton and Wallington (Mr. Forman). If anyone on the Labour Back Benches expresses a view, that is a split in the Labour party, but when the hon. Gentleman expresses a view, that is a suggestion to the Government. He should make his mind up. He and some of his hon. Friends have been a revelation to Labour Members. He has suddenly discovered the global economy. When they attack the Labour Government of 1974–79, some of his hon. Friends forget that there was a global economy then. We all remember what happened during the oil crisis and with the Organisation of Petroleum Exporting Countries, but Conservative Members forget such things.
When, earlier, the brain drain was being used to justify the Government's policies since 1979, especially those in relation to the rundown of manufacturing industry, I could not help but cast my mind back to the period between 1959 and 1964 when, under a Tory Government, there was also a brain drain—and everyone knew it. It is interesting that, between 1974 and 1979—under Labour—there was no brain drain.
I must remind the hon. Member for Carshalton and Wallington of the period 1970 to 1974 when, under a Tory Government, we had record inflation. Conservative Members conveniently forget that time. They poke fun at Labour Members who even hint at regulation in industry, but it was the hon. Gentleman's party that had to move in to prop up Rolls-Royce. I do not hear anything about that. Whenever Labour Members suggest any assistance to major industries, the allegation, as always, is, "That could be nationalisation through the back door." Conservative Members must start to think about where they are going.
The Chief Secretary to the Treasury claims that he wants to reduce taxes and that this is a tax-cutting Budget. When we make any proposals or suggestions, Conservative Members say, "Ah. They want to increase expenditure." Perhaps the right hon. Gentleman will explain why the Government claim that the Conservative party is a tax-cutting party, but lift the cap on local authorities, saying, "You can increase council tax by about 2 per cent." Conservative Members cannot have it both ways.
Negative equity is a double-edged sword in some ways. It involves not only the 1 million people who have had their homes repossessed, but the inner cities. In the part of Coventry that I represent, especially in the Hillfields, Stokealdermore and Willenhall areas, many shopkeepers are going out of business because of business tax. Furthermore, if they want to sell their property, they cannot. Many of them tell me that they want the Government to introduce some flexibility into that sector and to understand some of the problems of inner cities and areas such as Hillfields. I am sure that some of my colleagues would say the same. We will never regenerate inner cities unless there is some flexibility on business tax. If Treasury Ministers visit the Hillfields area of Coventry, we can show them the effects of the business tax. It is no good Ministers trying to blame local authorities, because what they can do is limited.
Another issue that will cause concern is rent capping. [HON. MEMBERS: "What?"] Some Conservative Members do not seem to know what the Government are proposing. Rent capping will have a major effect on capital 469 investment in council house repairs. Conservative Members say that they want to do something about the inner cities, but they do not intend to do anything about rent capping. I have highlighted two points to which Conservative Members should be, but are not, addressing their minds.
Some other hon. Members have mentioned the global economy. Treasury Ministers have not yet told us how Britain will compete in the global economy. The general agreement on tariffs and trade and the Pacific rim countries are both important. Although 68 per cent. of our trade is with Europe, we need a positive response from the Government on the Pacific rim countries. I and a number of my colleagues have raised that matter for some time, but the Government do not seem to have a positive strategy for dealing with the global economy.
Nothing has been done to try to rejuvenate the building industry, which is as vital to the economy as is the industrial part of our economy; they go hand in hand. As long as we have an imbalance, we shall have a problem. We shall have 2.6 million unemployed because both those parts of our economy have a major effect. Nothing is being done in education and training, so if the economy really starts to take off, we shall have a major problem because of a lack of skills. Conservative Members may sit and smile; I do not mind. I suggest that the almost 60 million people outside the Chamber are not smiling as a result of Government policies.
It is not the Opposition's job at this stage to put forward policies; it is our job to look at the Budget and to highlight the problems with it. We will propose policies at the appropriate time. It is no good Conservative Members trying to deflect the flak to the Opposition when they should be taking the flak for their own actions.
§ Mr. John Butcher (Coventry, South-West)
I intend to consider some of the issues that underlie our consideration of the Budget and some of the specific measures in it.
Not just in economic debates, but in debates on social policy and what we used to call the social wage, we have discussed the growing sense of insecurity felt by people who wonder whether their jobs are jobs for life and whether their work security is that which their fathers and grandfathers enjoyed. That factor is prayed in aid when we discuss the so-called feelgood factor and is the background against which we make policy in the House.
I contend that any political party that claims that it can make people secure in jobs for life is not living in the real world because the real world has changed drastically. Policies made by domestic Governments which it is proposed will do something about job security, but which do not take cognisance of the changes in the global economy, will fail. They must bring along with them a recognition that the world has changed for ever and that the circumstances in which young British people seek their place in the job market have changed for ever.
What do we do? There is an impact on our social as well as on our economic debates. Companies are producing their solutions and there is lots of jargon out there. In parenthesis, I must point out that the stakeholder debate took place in the mid-1980s under the guidance of 470 people such as Professor Charles Handy and has been old hat for the past six or seven years. It has been discarded and people have moved on to other ideas.
Some of the ideas that companies are applying today are, I am afraid, surrounded by jargon. There are terms such as "business process re-engineering" and—
§ Mr. Butcher
Yes, there is "reinventing government". There is an awful phrase, which I do not like, but which has started off a rather worrying debate—the "virtual company".
A virtual company is one that says, "We have certain core skills. We will protect those skills and develop them. There may be only 1,000 people at the core of our company whose jobs need to be preserved. Whereas we employ 10,000 people around that core 1,000, we may in future employ only 2,000 or 3,000 on short-term contracts. We will buy in the semi-skilled requirements that we may have in keeping our company alive." That virtual company changes its shape, its size, its objectives and its tactics with disconcerting speed.
If the House will excuse my using the jargon, dare I say that what we must move towards, frightening as it may seem at first blush, is a virtual economy—an economy in which we can have more security than countries that adopt a siege mentality and think, "We shall have more security, but we shall all gradually get poorer together and have within our society a group of people who will never be able to enter the job market." I shall develop that point a little further in the context of this and previous Budgets.
The Organisation for Economic Co-operation and Development has said:UK economic performance in 1994 was impressive.It has also said that the UK economy hasbeen made more flexible, competitive and less inflation-prone by path-breaking structural reforms since 1979.What are the choices before politicians, industrialists, Chancellors of the Exchequer and putative Chancellors of the Exchequer? There are two. We can have an economy, which we are slowly but surely developing, that is fast on its feet, can respond to pressures and can generate more jobs. One path to security is choice—seeing a job to go to after the one in which one has served for 10 years has disappeared because of global forces. One choice is to generate jobs in a virtual economy.
The second choice is the one that, day by day, inevitably and remorselessly, is being discredited in the practices of some of our western European colleagues. I refer, of course, to France, Belgium and Spain. Furthermore, after 40 brilliant years, a sclerotic economy is now starting to strangle that wonderful creation which came out of the German wirtschaftswunder. The Germans were fast on their feet in years gone by, but they have now started to opt for security at all costs, even if it means that they, too, must eventually embark on a path down which they become comparatively poorer.
That second option produces a rather tragic consequence. We rightly envy many parts of the French economy. The French have pursued cleverly their traditional mercantilist approach in terms of world markets and the generation of jobs at home, but the price 471 is one that no British Government can tolerate and in France it is becoming more intolerable by the day, as we have seen in the strikes on the streets.
The price is this: with the French obsession with security for the people who are in work and the price that that exacts is being developed an underclass of people who are detached from their economy and who do not even come into the job market. That cohort is getting larger as years go by. Great flair, brilliance and intellectual pragmatism in tackling their problems is part of the French psyche, but it may be their tragedy. Every now and then, those who think that they know best are caught out by some awful tragedy that their rational minds could not foresee. I detect those factors coming together again in France to produce—perhaps—a second tragedy for them.
Our approach has been quite different. It is viewed with some suspicion by our continental colleagues, but it is our duty to keep faith with the methods that are working for us so that Europe can look to that torch and see that there is another way; that there is an approach which has worked for one part of western Europe.
Where else does insecurity come from? In this country it used to emerge from inflation, yet the OECD says that Britain'snew monetary framework is working welland has succeeded inenhancing the transparency and credibility of monetary policy".Defeatists in our economic debates used to argue that we had to have an external discipline to make British Governments control inflation because they were incapable of doing it themselves. I have heard hon. Members on both sides of the House argue for European integration measures because we have failed in the past to control inflation and because an external body would, and should, do it for us. That is no longer needed in this country. I hope that the Ken and Eddie show will become part of established procedure. It is transparent and honest and places the issues before the people every time there is a meeting.
Where else does insecurity come from? We argue a great deal in the House about pensions. In funding its pensions, France is actuarially bankrupt. The same goes for Italy. They are funding their current pensions from the taxes raised from their current work force. The stresses are immense. Others, who are not caught in the hurly-burly of our political arguments, recognise that the Brits have been rather clever again. We have built up huge funds—earned, saved, invested and available—that enable people to draw income out of previous earnings. We are no longer a country that has to fund its pensions from current economic activity and taxation.
There is a danger, however. Our pensioners can feel very relaxed compared with some of their continental counterparts, for whom the purchasing power of their pensions has to fall. As night follows day, that will happen.
§ Mr. Forman
Is there not one group of pensioners, about whom both my hon. Friend and I should still be concerned: the very elderly pensioners who are, say, over 75 years old? They are disproportionately reliant on the state pension, and income support where that is necessary. It is a priority for future public expenditure rounds to try 472 to target some help at that group since, as my hon. Friend has just said, the general group of pensioners in Britain is very well off compared with those in other countries.
§ Mr. Butcher
I agree entirely with my hon. Friend. When I think of that £90 billion social security budget and I listen to my colleagues quite rightly talking about targeting and focusing, that particular category of people comes to mind. If any group needed targeting, it is that one. I have great difficulty believing that we cannot adjust budgets of that size to cater for a dwindling number of people who are probably in greater need than most categories of folk. I hope that colleagues will take note of that comment and consider virement in the context of pensions and the social security budget.
This is the worry: what if we integrated our money into a common currency—or a core currency as I think it was called earlier—and, through majority voting, were unable to prevent the integration of social security systems? As I say it today, it sounds as if it might never happen, but we know from the way in which Europe, the Commission and voting procedures have worked in the past that it is not impossible.
If the social chapter were the background to that scenario, there would be a danger that prudent British pensioners would subsidise, through common mechanisms, the imprudent southern European pension funds and those of France and, say, Belgium. I say again that even to make the point today sounds slightly hysterical, but points made 10 years ago, which sounded equally hysterical, have turned out to demonstrate proven fears of a reality that came to pass. The issue of pensions relates to insecurity and the creation of jobs helps us to ease that. Honesty in our dealings with inflation will improve the security and peace of mind of our people.
I shall briefly raise two more points. I welcome the commitment from the Prime Minister downwards to the eventual abolition of capital gains tax. I happen to co-chair the all-party manufacturing group. Like every all-party group, it agrees, usually, on the objectives it wants—in this case the full health of the manufacturing sector, especially small and medium-sized enterprises—but it rarely agrees on the policy that would achieve that objective.
One of the areas of disagreement concerns the treatment of capital gains tax. We all know the problem. Unquoted companies—small and medium-sized companies—employ, typically, between 20 and 200 people. Their only access to finance is the local clearing bank. They have very little access to real risk capital without a great on-cost. The abolition of capital gains tax would put in place a significant piece of the jigsaw to help the sector of the country's economy which needs it most. What defines manufacturing, as opposed to a service sector activity, is that it is capital intensive, so any measure that releases a flood of capital—which I believe the abolition of capital gains tax would—would have a disproportionate benefit.
That highlights another problem in the House. Historically, the Conservative party is allegedly the party of capital and the Labour party is allegedly the party of labour, although everything is getting rather fudged and, shall we say, muddled at the edges of late, which is not a bad thing in some ways. I wonder whether the House has the wit to agree that the abolition of capital gains tax would cause the biggest job creation programme since 1945.
473 Abolition would have a marked impact on solving the problem for small companies, which are the generators of jobs—the big companies are not since they are shedding labour. If Britain, uniquely in Europe, had no capital gains tax, it would give us a Lee Kuan Yew Singapore-style renaissance in key sectors of our economy. I simply ask the House to consider whether we could break out of our straitjacketed way of thinking. If the Leader of the Opposition decided that he was a Thatcherite to that extent and abolished capital gains tax, he could cause us some real problems—but I do not think that he will abolish it.
There is another contrast between the Conservatives and the Labour party. If we are to be honest, let us consider the information elicited in hostile questioning of the hon. Member for Blackburn (Mr. Straw) in the mid to late 1980s when he was a Treasury spokesman. He was talking about the tax take which accrued to the nation as a result of the reduction of the top rates of income tax. Month after month there was persistent interrogation of Treasury Ministers; month after month the reply showed that, as the top rates came down to 60 per cent. and then 40 per cent., not only did the cash take from the top 10 per cent. go up, but the proportion of the total tax paid into the coffers by the top 10 per cent. went up. In other words, supply side economics works.
If those are the facts—and they are—and if the Labour party, behind all the verbiage, is working out a deal to do something for industry and manufacturing, it must know that the lads will not wear it if the top rate of tax remains at its present level. The Labour party will have to jack up the top rate—perhaps to 50 per cent. to start with and then 60 per cent. —and provide a sop for the CBI and other corporate stakeholders, to whom it now wishes to be in thrall, by giving them capital allowances. The odd hints from Dudley, West and elsewhere are that capital allowances will be the concession for the manufacturing sector. It is a double-edged package.
If the tax take goes down as a result of those two measures—which it will, as was shown in the reply given by the hon. Member for Blackburn—where will the Labour party get the extra money? It will have to go back to the same old milch cow, the middle income groups. That really will spell trouble because such a triple whammy will attack and deflate the wealth creating sector.
I had hoped to say something about a core currency, but I shall not. Instead, I shall end by saying that we now have a chance to secure an economic miracle. The problem with economic miracles is that, as in the mid-1980s, they can easily be blown away. We over-egged the pudding and then slammed on the brakes too hard by joining the ERM straitjacket. That is history and we have learnt from it. Now, we have a real opportunity. However, economic miracles are not cataclysmic explosions; they are not dynamic happenings over a short period of time. In fact, they are boring, steady, slow and incremental. We need an incremental lead over our competitors in a variety of factors to achieve an economic miracle. We are now going through just that process.
The Government are being honest and brave. Despite provocation from throughout the House—even from our own colleagues—to go out and do something sexy, 474 dynamic and clever, the Government are taking exactly the right approach and providing the basis for a solid economic renaissance. I commend the Budget as a part of the necessary process and the Government for not trying to be too dynamic and clever when the main chance lies in steady incremental improvement.
§ Mr. Barry Legg (Milton Keynes, South-West)
Several hon. Members have already expressed concern about the procedures of the House. The right hon. Member for Llanelli (Mr. Davies) made an interesting speech and looked back to the spectre of the 1970s and the formulation of tax legislation. He was concerned that the House was moving towards a nine-to-five four-day week. My hon. Friend the Member for Carshalton and Wallington (Mr. Forman) also said that the procedures of the House needed to be examined.
The procedures that the House has adopted tonight and the way in which political debate is developing in the country show that this place is a disappointing forum for the discussion of United Kingdom economic and financial policies. The age of the soundbite has arrived.
The last time we held an economic debate was at the beginning of December. The soundbite that the Opposition used before the debate was the lop tax rate, but when it came to the debate they did not want to talk about it. They have taken the same approach today—they floated a soundbite but have come to the House not wanting to talk about it. Last week's soundbite was the stakeholder economy and the Leader of the Opposition went all the way to Singapore to make his comments. He talked about the stakeholder economy in a forum where he would not be questioned. Today, we are holding a major debate on the economy—we are not likely to have another one for six months—but the shadow Chancellor of the Exchequer cannot even be bothered to attend and listen to the contributions from his shadow Treasury spokesmen.
§ Mr. Alistair Darling (Edinburgh, Central)
The hon. Gentleman would do well to observe the courtesies of the House, which are sometimes worth maintaining. My hon. Friend the Member for Dunfermline, East (Mr. Brown) accepted a long-standing invitation to address an audience in Wales this evening. As the hon. Gentleman well knows, the business of the House is arranged on a weekly basis. Indeed, one of his hon. Friends has apologised to me as he cannot he here for the whole of the debate because of a prior constituency engagement. The hon. Gentleman may by all means attack us on any perceived political points, but his attack on my hon. Friend has no place in a civilised debate.
§ Mr. Legg
I am glad to hear, at this stage of the debate, the hon. Gentleman apologising for the absence of his colleague, the shadow Chancellor. I maintain that when there is a major economic debate the whole of the shadow Treasury Front Bench should be here. Instead, we have the politics of the soundbite—the stakeholder economy being enunciated from Singapore.
We do not need to go to Singapore to learn about stakeholder capitalism—it is all in Will Hutton's book, "The state we're in". It contains a whole chapter on stakeholder capitalism. I am gravely disappointed that all the members of the Opposition Front-Bench team have 475 not come here this afternoon to lay out the measures that the Opposition want in the Budget to deliver what they call stakeholder capitalism.
I want to mention a few of the things that are involved in stakeholder capitalism. First, the Opposition want regional banks set up across the country. They also want regional Parliaments. The chief executives of the regional banks would be selected and appointed by the regional Parliaments. The Opposition want a federal system within the United Kingdom. They want to create stakeholding trade unions. I should be interested to hear from any Labour Member what he thinks should be done to realise the concept of stakeholder trade unions. Will Hutton says that more powers and rights should be given to trade unions to create stakeholder trade unions. That is what it is all about. Have not we heard that somewhere before? It sounds like a return to the 1970s.
What are the other prescriptions for stakeholder capitalism? There is the old canard that not enough finance is available in the UK. Stakeholder capitalism means urging the Bank of England to provide more finance so that businesses can borrow aggressively. That sounds like a return to the inflation of the 1970s. Stakeholder capitalism is about corporatism. Other measures include taking power away from individual shareholders.
§ Mr. Denis MacShane (Rotherham)
The hon. Gentleman has patronised Yorkshire bank. I hope that that fine regional bank will read his speech tomorrow. He appears to be saying that businesses should not have access to capital on reasonable terms.
§ Mr. Legg
The hon. Gentleman knows very well that the concept behind stakeholder capitalism is the state providing extra resources to banks to enable them to invest aggressively. That concept rejects free-market economics. It rejects resources being allocated by the free market. Labour wants to take power away from individual shareholders. It believes that company takeovers are wrong and it wants to create a corporate Britain in which only shareholders who are represented on the board have voting rights.
§ Mr. Jenkin
While listening to my hon. Friend, I am looking at a copy of the speech of the right hon. Member for Sedgefield (Mr. Blair). The right hon. Gentleman hinted at interference in the natural forces of the market when he said:But it is surely time to assess how we shift the emphasis in corporate ethos from the company being a mere vehicle for the capital market—to be traded, bought and sold as a commodity—towards a vision of the company as a community or partnership in which each employee has a stake and where a company's responsibilities are more clearly delineated.The right hon. Gentleman did not explain what he meant by that. Unless I am mistaken, pension funds and employee share-ownership already provide that sense of community in a company. What else can he be talking about?
§ Mr. Legg
As usual, the Leader of the Opposition made a vague statement. Hon Members probably saw the right hon. Gentleman on "Breakfast with Frost" yesterday trying to convince the nation about stakeholder capitalism. "It is only a soundbite. It means nothing at all," he said. "Forget it. It was just my soundbite for last week." Anyone who aspires to Government must understand that they cannot govern by soundbites.
476 My right hon. Friend the Chief Secretary was correct to say that behind the statements of the Leader of the Opposition lies a return to the corporatist 1970s, a return of power to the trade unions and a reduction in the power of ordinary shareholders. That is what stakeholder capitalism is all about.
Mr. Hutton's prescription for that matter is honest. He admits that he would like to see more public spending. Opposition Members would like more public spending on issue after issue, but Opposition Front Benchers fail to admit that that would entail extra taxation. Mr. Hutton is clear that there would need to be extra taxation to finance higher public spending, and he would extend the welfare state because, he believes, the problem of people not wanting to pay higher taxes could be solved by extending universal benefits. The more people have universal benefits, the less resistance there will be to high taxes. That is an honest socialist point of view, and I am sure that we could have a meaningful debate on the subject if Opposition Front Bench Members wanted to engage in such a debate in the Chamber. I would respect them if they honestly put forward a socialist point of view. Instead, all that we get from the Opposition Front Bench is a vacuum.
There has been much debate about Britain's international performance, and Labour focused much attention during our previous debate on economic affairs on the latest report from the Organisation for Economic Co-operation and Development, which suggested—the Opposition claimed—that Britain had been pushed down the league table. Today, we have heard nothing from the Opposition about international comparisons.
In the past few days, a new international study has been released which shows that economic prosperity and success are achieved on the basis of economic freedom and that the most succesful countries are those that make sure that economic freedom exists and expands. That international study ranks Britain sixth behind Hong Kong, New Zealand, Singapore, the United States and Switzerland. International comparisons show that the Government's policies are increasing the prosperity of this country.
§ Mr. Deputy Speaker
Order. The hon. Gentleman must not continue to intervene from a sedentary position.
§ Mr. Legg
Thank you, Mr. Deputy Speaker. What Labour stands for covertly and overtly is higher public spending, which will lead to higher taxation in one way or another as it always has done in the past.
I am particularly pleased to be able to welcome a Finance Bill that brings into effect measures that will cut taxation. We have had to take action for three years to reduce the deficit, but we are now able to introduce a Finance Bill which proposes lower business taxation, 477 lower personal taxation, lower excise duties and improved incentives. I particularly welcome the incentives for improved share participation through savings-related share options and approved profit-sharing schemes.
Many hon Members have commented upon the length of the Bill, and my hon. Friend the Member for Carshalton and Wallington (Mr. Forman) hoped that, although it was long, it would not be an obscure Bill. I hope that he and I will serve on the Finance Bill Committee together, and we shall then see whether this is obscure legislation or not.
Hon. Members may be interested in clause 53. It is said that the British are particularly fond of animals, and it is noteworthy to see that the hard-hearted officials of the Inland Revenue also seem to be fond of animals. Clause 53 deals with the landfill tax, from which there is an exemption wherethe disposal is of material consisting entirely of the remains of dead domestic pets".So even in the Inland Revenue we find concern for pets and for pet-owners. Typically, that concession for the disposal of dead pets is heavily qualified by a proviso in subsection (5), which reads:The test is that during the relevant period—hon Members will not be surprised to realise that subsequent subsections define the relevant period—(a) no landfill disposal was made at the site—hon Members will be pleased to know that there are subsequent clauses defining siteor(b) the only landfill disposals made at the site were of material consisting entirely of the remains of dead domestic pets.When studying the landfill legislation, one finds that there are a further five pages of interpretations and a schedule of 25 pages dealing with the administration of the landfill tax. The Committee will certainly have some interesting debates.
My hon. Friend the Member for Coventry, South-West (Mr. Butcher) commented on capital gains tax, and I endorse his comments. We need a thoroughgoing reform of capital gains tax. A system based on a tapering of capital gains tax rates so that only short-term gains were taxed would be beneficial to the economy and raise more revenue. At present, many people and institutions retain shares because there is potentially a high capital gains tax liability if they liquidate those assets. Scope for further tax reform is certainly available to Ministers.
Several hon. Members have commented on the Treasury and Civil Service Committee's report on the Budget which was published today. The Committee broadly supports the Government's taxation and spending policies and believes that the Government have the right fiscal strategy. The Committee was pleased to report that the Government were exercising more effective overhead control, but expressed concerns about the continuing growth of social security. All of us regret that the PSBR is higher than was forecast this time last year, but that is mainly due—as some of my hon. Friends have said—to lower revenues and a lower rate of growth in the economy. My right hon. and learned Friend the Chancellor's forecast for the coming year shows a revival in growth, an objective which most hon. Members hope will be achieved.
478 The Treasury Select Committee has also been critical of the Bank of England's advice on interest rates and the weight which it has given to certain factors in trying to support an interest rate rise. The Committee was concerned by the Governor's assertion that he was right to seek an interest rate rise in May. We have supported the moves of my right hon. and learned Friend the Chancellor for lower interest rates and we will continue to do so.
I conclude by returning to the subject of stakeholder capitalism and to the views of Mr. Will Hutton. One of Mr. Hutton's concerns about Britain is that there is still a north-south divide. He believes that the interest rate rises in the late 1980s were necessary in the south-east of England, but that they damaged the economy in the north of England. That view is worthy of consideration. If one reads on in Mr. Hutton's book, however, one finds that he is a committed supporter of the ERM. He believes in fixed exchange rates and supports the ultimate objective of a single currency. One may think that that is a strange stance for a man who believes that, even in the United Kingdom, an interest rate may be set for the nation which is appropriate for one part of the country but inappropriate for another part. I think that he has failed to make the connection between what is happening in the real economy and how interest rates should be set.
In the coming year Britain is likely to have a growth rate of around 3 per cent., while Germany—once the miracle economy of Europe—is likely to have a growth rate of only 1 per cent. I shall leave the House with this thought: if there was a single currency and the British economy was growing at 3 per cent. and the Germany economy was growing at 1 per cent., what should the appropriate interest rate be? Should we split the difference so that neither economy had the right interest rate, or should the interest rate be set according to the United Kingdom's or Germany's domestic requirements?
There is no prospect of a single currency being able to benefit an economy without a truly federal system in which financial resources can easily be transferred. Without this a single currency can only harm people and the component economies within the area concerned.
§ Mr. Denis MacShane (Rotherham)
It is a great pleasure to follow the hon. Member for Milton Keynes, South-West (Mr. Legg), and I look forward to doing business, as it were, with him in the Committee which considers the Finance Bill. I congratulate him in particular on the early, in-depth reading of the Finance Bill which has enabled him to discover the particular clause which covers the inhumation of pets. As some of Opposition Members' favourite pets are Tory Members of Parliament, we look forward to examining that part of the Bill in some detail.
I was touched by the references made by the hon. Member for Milton Keynes, South-West to Will Hutton, whom I count as a friend and whose book I remember reviewing last year, with some enthusiasm. I must say, however. that when the hon. Gentleman was describing Mr. Hutton's enthusiasm for Europe—not for economic and monetary union, but for the exchange rate mechanism—for a moment I thought that he was describing the short, medium and long-term goals of the Chancellor of the Exchequer, which will lead to private 479 agonies for the modern Conservative party as it dances on the Titanic in a deadly waltz between fanatical anti-Europeans and those who still see Britain playing a useful part in Europe.
This Budget—which is a serious piece of legislation—has been the most uncommented-on legislation to have been brought before the House since I was first elected a Member of Parliament. That may dismay my right hon. and hon. Friends on the Labour Front Bench, who must of course do doughty battle over the Budget with their opposite numbers. When I return to my constituency, however, and talk to the people of Rotherham—to business people, to people with houses and hopes, to people who look for a good education for their children and for some guarantee of health care, and, in particular, to the older members of the community who have paid national insurance and other contributions for many years, if not decades—I find that none of them have any confidence in either this Budget or in the Government's economic policies. It is easy enough to see why.
The only aspect of the Budget statement which seemed to excite the commitment or interest of Conservative Members was the removal of tax on Bugattis and Bentleys. As the debate proceeded, we suddenly saw that the spin doctors had come into action, and every Conservative Member told us that this was a holding Budget and not real—steady as she goes until the big tax giveaway next year.
The hon. Member for Coventry, South-West (Mr. Butcher) made a thoughtful and, if I may say so, typical speech as a solid, Birmingham, business-centred, fair to manufacturing, former Minister. I know that because I was the chairman of the local Labour party in Mosely, Birmingham, where he was once a councillor, and where the Chancellor of the Exchequer once lived.
The hon. Member for Coventry, South-West seemed to feel some relief that for the past two or three years there was a sense of economic guidance in the country that was not based on boom or bust and not based on giveaway Budgets, not there simply there to titillate groups of potential Conservative supporters but had some coherence to it. I invite him to join me in the debate on the November Budget next year, if the Government are still in office in 10 months' time. I think he will find that the prudence, honesty and sense of coherence that he discovered in the Budget is thrown to the winds because, whenever the choice comes between party or national advantage, the Conservative party in Government consistently opts for the former. So I was grateful to hear the speech by my hon. Friend the Member for Coventry, South-West and I shall read it with extra care if, as certainly I and the country hope that they will not, the Government reach the stage of presenting another Budget later this year.
I am particularly concerned not only about the regressive nature of the Budget—the taxes levied weigh most heavily on the poorer members of the community—but about its lack of excitement. It does not seek to grapple with the new challenges that a global economy presents. These challenges can be dealt with in many different ways. We see in the United States from the Republicans and from Mr. Newt Gingrich when he is taking time off from padding his own coffers with election expenses, a novel and challenging approach to national finances. I happen not to agree with it, but at least one may argue that it has a certain coherence.
480 Let us consider other economies throughout the world. Let us take as an example, as it was cited by the hon. Member for Milton Keynes, South-West, the country where my right hon. Friend the leader of the Labour party recently gave a speech—Singapore. It has a novel approach to public finance. A compulsory 25 per cent. is deducted from all employees' salaries and a compulsory 15 per cent. —nearly twice the percentage deducted in the United Kingdom—is deducted from every employer's payroll, to pay for a national health, pension and housing scheme.
Only my hon. Friend the Member for North Warwickshire (Mr. O'Brien) sits on the Front Bench as I speak. Were his senior colleagues on the Front Bench to stand at that Dispatch Box and say, "Here is Labour's policy. In addition to income tax, 25 per cent. will be taken off people's income to pay for national health and pensions and 15 per cent. off every employer", the Conservative Benches would be in uproar, with cries of "Socialism! Communism!"
I can imagine the hon. Member for Milton Keynes, South-West delving into back numbers of The Daily Telegraph to describe such a system, yet such is the way in which things are done in Singapore—not in a socialist state, not a communist state, not in the United States of America, but a massive 25 per cent. deduction from all employees' pay in Singapore. Had the Budget offered that as a proposal, one might have been interested.
I do not know, with the new configuration of the Government Front Bench team, exactly which of the two wings of the Conservative party all the Ministers come from. Let us say that the guiding spirit was that of the Chancellor, who I am happy to recognise as someone who believes that Britain should be part of Europe, unlike his right hon. Friend the Secretary of State for Defence.
Let us suppose that the European example had been followed—that of Germany. For all its current faults, I wish that British short-term interest rates were as low as those of Germany. I wish that our country had giant car-producing companies that belonged to British firms. I wish that we had regions of our country, such as the Germans have in the new Bundeslaender, where state of the art factories are being created with many fewer workers than previously, with high technology investment, in a way that we do not dream of in Britain as we proclaim our pride in taking the cast-off screwdriver assembly plants from Taiwan and Korea.
I acknowledge that there are some temporary difficulties in that immense economic drive forward, but I am prepared to take a bet with any hon. Member that when I leave the House or die, whichever is the sooner, the per capita gross domestic product of Germany will be greater than that of this country. I am ashamed of that fact.
If the Budget had embraced Mr. Hutton's stakeholder economy ideas, that would have had something to commend itself, but it is a Budget shorn of ideas, with no sense of direction—a Budget that treads water, that marks time.
Even Samuel Brittan—I have been a devoted reader of Mr. Brittan for many decades but he is not, it is safe to say, regarded as a socialist, social democrat or stakeholding commentator—asks in today's Financial Times whether we might consider hypothecation, at least for the national health service, arguing that the time has come for fresh consideration of the way in which we raise taxes.
481 I find that intellectual emptiness, that vacuous hollowness, at the heart of the Budget, a reflection of the emptiness at the heart of the present Government. The hon. Member for Colchester, North (Mr. Jenkin), whose contributions to our financial debates we all enjoy, may agree that, at the time when his father was in the Cabinet and the former right hon. Member for Blaby was Chancellor, there was some vim and viz of excitement to fiscal policy in this country.
§ Mr. MacShane
Mr. Lawson, it must be said, fought tooth and nail against the poll tax. The then Chancellor of the Exchequer recognised the poll tax for the stupidity that it was, but, with the typical courage of a Conservative Minister, he did what he was told.
That is the challenge for the nation. To a certain extent, that challenge has been met by Labour Front Bench Members, especially by the proposal, which I found exciting, by my hon. Friend the shadow Chancellor to reduce the basic rate of income tax to 10p in the pound, and the concept of the windfall levy on the disgraceful, scandalous and affronting profits that utility companies have made. Those are two modest suggestions, yet in them ideas were at work, but ideas there are none in the Budget.
§ Mr. MacShane
I do not know whether that will be possible in Committee, but I will gladly take technical advice on it. If the right hon. Gentleman—I am sorry, the hon. Gentleman, but I wait in hope—tonight pledges that he will vote with me across the Floor of the Committee on such a proposal, and on other proposals to make the Finance Bill more coherent and sensible, I hope that we can do business together. I look forward to meeting him in the Lobby after this debate.
The core questions that any Government economic statement and taxation policy must ask for our country are not those asked in stories in The Daily Telegraph, but those that arise from independent international assessments. Why have we fallen from 13th to 18th in the per capita GDP league, according to the Organisation for Economic Co-operation and Development? Why is our country's trade at its lowest this century? Why are we now 21st in the international league for investment? Why, for every pound of inward investment into the country, does £2.50 leave Britain?
Why are we now 35th in the world education league? Why, in one in five of our working-age households, does no one earn a wage? Why are a million fewer people in work now than were in work when the present Prime Minister, the right hon. Member for Huntingdon (Mr. Major), became Prime Minister? Why are one in three of our children deemed to be living in poverty compared with one in 10 in 1979?
482 We cannot walk 100 yd or, if the anti-Europeans prefer it, 100 m from this place, without stumbling across beggars. That is the real tribute to the economic and fiscal policy of the Government. Why have we had, in spite of that, the biggest tax increases during peacetime in our 20th century history?
Why is a typical family in Rotherham paying £600 a year more in tax than it did in 1992? Why have more homes been repossessed under the Conservatives? Why are more people suffering from negative equity—waking up each morning in their house knowing that they cannot sell it? Mrs. Thatcher made a fundamental promise—everyone should own their own home, which would give them a stake in the economy, but that stake has turned out to be a burden on them.
Why is this country more divided than ever before in its history? People repeatedly quote Disraeli's "Sybil" and the two nations that know nothing of each other and have no intercourse with each other. That is what the 16—nearly 17—years of Conservative Government have done to Britain. At the heart of that process has been economic policy; the Budget—the tax system—is the motor, structure or plan that defines a country. It is the social contract between the haves and the have-nots, between the rich and the poor, and between the old and the young. That social contract has been betrayed, corrupted and destroyed by a Government who care for nothing except their own survival.
§ Mr. Richard Alexander (Newark)
Despite the exaggerations and the curmudgeonly comments of the hon. Member for Rotherham (Mr. MacShane), I believe that we have had a civilised and interesting debate on the Finance Bill. One or two of my hon. Friends have mentioned the fact—without making any criticism—that it was a pity that more hon. Members, from all parties, had not been present in the Chamber. They said that, now we have television monitors in our rooms, it is much easier for colleagues to see what is going on, which is certainly true. But it is a pity that a wider audience outside the House should not have been able to hear the interesting contributions that have been made to our debate. People seem to think that two 15-minute slots each week are all that Parliament is about—there is a lot more to our proceedings than that, as the contributions to our debate have proved.
Despite the comments of the hon. Member for Rotherham—of course, we all make party political points as best we can—I believe that we have had a good Budget, which has now become the Finance Bill. The Budget has been much more widely welcomed in the country than either the Opposition or the so-called responsible press would have us believe.
We are debating the Finance Bill against a background of economic success and strength that no one on either side of the Chamber would have been able to forecast, even as recently as the last general election. If we had told our constituents that, by 1996, mortgage rates would be the lowest for 30 years, and inflation and the basic rate of tax would be the lowest for 50 years, we would not have been believed.
Despite the gloomy statistics given by the hon. Member for Rotherham, I believe that this country's economy is strong, and that we are entitled to say to my right hon. 483 and learned Friend the Chancellor of the Exchequer and my right hon. Friend the Prime Minister, "Well done, you have achieved that. You have been patient and steady, and now you deserve our thanks."
However, it is a fragile success, and my right hon. and learned Friend the Chancellor must be cautious about imposing unnecessary burdens on business because, although the economy is strengthening and business is undoubtedly confident, that confidence is fragile. We should be hesitant about penalising industry and business, particularly small business. The growth rate in the economy is almost certainly less than my right hon. and learned Friend the Chancellor had hoped for or would wish. That is understandable—all Chancellors want greater success than they have managed to achieve—but I do not resile from my earlier comment that he deserves our praise and thanks. We must be careful that we do not harm business and industry.
The reason why I preface my speech in this way is that my task in contributing to the debate is to make a straightforward constituency point about landfill tax and its implications for British Sugar, which operates in my constituency. It also operates in another eight major sites throughout the country, so I am presumably making the point on behalf of hon. Members on both sides of the Chamber.
Some 8 million to 9 million tonnes of sugar beet are delivered annually to those nine factories for processing. By definition, the sugar beet attracts fresh, uncontaminated soil. It is estimated that between half a million and 1 million tonnes of soil is attracted to that beet in the course of an annual operation. On-farm improvements have been made over the years, and we now have the lowest proportion of soil ever adhering to the beet, but that residual amount exists, and the Finance Bill creates a problem for British Sugar.
At present, the topsoil is conditioned and sold for a variety of uses, such as horticulture, recreational amenities and the improvement of agricultural land, but not all the soil can be used in that way. Avenues such as I have described have, of necessity, had to be found, because the topsoil cannot be returned to the farms whence the beet originated. That is due to the need to control rhizomania—the soil-borne root disease which my hon. Friend the Financial Secretary to the Treasury will know well—and the agreed pest control policy. The Ministry of Agriculture and the industry have agreed that the soil can no longer be returned to the beet-growing farms.
I therefore make a straightforward point. Until the markets that I have mentioned have been fully developed, more than half a million tonnes of soil—approximately—still has to go to British Sugar's nine landfill sites. Obviously, British Sugar is as effective and efficient as it can be, but the tax will increase its costs and hamper its efficiency. I have been told that the costs will be between £500,000 and £1 million annually if the Bill is enacted as drafted.
I therefore urge, for one or two simple reasons, that British Sugar should be excluded from the proposed tax. The soil is uncontaminated. It is merely fresh soil which has been removed from beet, and it is being returned to soil. It is not waste. If it were returned to the farm of origin, there could be no question of it being labelled as waste, and no question of it being taxed. The present practice is a plant 484 hygiene measure for the control of a disease, not an industrial practice that produces waste which requires disposal.
There must be something wrong with the proposed legislation if it gives rise to a taxable event when soil is placed in a landfill site owned and operated by the processor, and no public facility is used. That cannot have been the intention of the draftsman, and I look forward to hearing in the Minister's reply to the debate, or elsewhere, that it is not the intention of my right hon. and learned Friend the Chancellor. If am correct, I hope that those concerns will be heard, and that a suitable amendment to the Bill will be accepted in Committee.
§ Mr. Malcolm Chisholm (Edinburgh, Leith)
I am sorry that I was unable to hear many of the speeches in the debate, particularly the opening speeches, because the planes were delayed by fog, but I got here just in time to hear the speech by the right hon. Member for Wirral, West (Mr. Hunt). It was a significant speech that told us a great deal about the state of the Conservative party, if not a great deal about the economy.
The right hon. Gentleman was attempting to address the great internal battle within the Conservative party between the one-nation group and the other group, whatever they call themselves. His whole concern was really to reply to Baroness Thatcher's speech last week, and to score a point in that internal debate. That encapsulates the problem facing the country at the moment. Everything the Government do is driven by internal divisions within the Conservative party, and that is why they cannot address the real problems facing the country.
It was also interesting to hear what the right hon. Gentleman said about the Finance Bill. He attempted to put a one-nation slant on that and claim that it was a one-nation Finance Bill. It would be easy to demolish that argument.
One of the main features of the Finance Bill is that it is highly regressive. That is obvious when we consider its effect on different income levels. The Institute of Fiscal Studies has already done that. One of the appendices of the Select Committee report clearly shows how each income decile of the population is affected by the Budget measures in the Finance Bill. How does it affect the unemployed, for example? According to the Institute of Fiscal Studies, the income of those in the bottom two deciles will be reduced.
There are no measures in the Finance Bill to help the unemployed. The hon. Member for Stamford and Spalding (Mr. Davies) said that my hon. Friend the Member for Oxford, East (Mr. Smith) made a vacuous speech, but he presented policies to address unemployment. One of those key policies is mentioned in the Opposition amendment, which proposes a windfall tax to deal with the problem of youth unemployment.
The Conservative party derides windfall taxes, but Lord Howe, a previous Chancellor who has been involved in the internal debates within the Conservative party, advocated one on the banks in 1981, so there is no reason why the Conservative party should not support a windfall tax. What better purpose for a windfall tax could there be than dealing with unemployment? The Budget contains 485 no other measures to help the unemployed. The Government may claim that there will be more investment as a result of the Finance Bill, but it contains no measures to improve investment and deal with unemployment.
Nor does it help the low-paid. According to the tables produced by the Institute of Fiscal Studies, those in the first two deciles lose, those in the third decile gain by 5p a week, and those in the fourth decile gain by 35p a week as a result of the Budget. That is after all the punishment suffered by those sections of the population through increases in indirect taxes, such as VAT on fuel and increases in income tax.
Since 1992, low earners have been punished by many increases in income tax. Let us consider the position of a man on half average earnings. The proportion of his income that is paid in tax has increased by 33 per cent. since 1992, and now, according to the Institute of Fiscal Studies, he will gain only 35p a week. The widening of the 20p band helps no one earning under £7,000 a year. That is why the suggestion by the Labour party to introduce a 10p band starts to deal with the problem of those on very low pay, as do other measures that we propose, such as a minimum wage. There is nothing for those on low incomes in the Budget.
The middle income earners whom the Conservative party hopes to win back are not helped much, either. On average, the typical family has lost £800 since the last election. The Finance Bill may enable those families to recover about £130. That is why it was called the "7p up, 1p down" Budget.
The great mass of those on middle incomes have been punished since the election and throughout the period of Conservative Government. One of the great myths is that the Conservative party reduced the tax burden on those people, but it is clear from the total tax burden and the proportion of income that relates to tax and national insurance contributions that middle income earners are also paying more under the present Government.
It is important that we should not isolate the basic rate of tax. Of course, that is what the Government try to do. In the advert in the Sunday Times on the last day of last year, which set out all the supposedly wonderful achievements of the Government, the Prime Minister pointed to the basic rate of income tax, but there are many other ways of increasing income tax apart from raising the basic rate.
Since the general election, the married couple's allowance has been reduced, as has mortgage tax relief. Personal allowances were frozen twice in 1993, and the unfreezing now does not make up for that. The increase in national insurance contributions is the same as an increase in income tax from the point of view of the taxpayer. The great majority of middle income earners gain very little from the Budget. Only those at the top of the income scale gain anything significant. The Bill is highly regressive on income tax. Those higher up the income scale retain a bigger proportion of their earnings.
The Finance Bill also starts the process of getting rid of inheritance tax, which is still a Government objective. As I asked in the Budget debate, how can the Conservative party seriously say that it is better to spend £285 million a year on raising the inheritance tax 486 threshold way beyond the reach of inflation than to spend that money on reducing VAT on home heating, although a little more expenditure would be necessary to get that down to 5 per cent.?
The Minister has sent someone to check my figure of £285 million. I agree that it is slightly puzzling, because the Budget press release gave lower figures for the cost of inheritance tax next year, but the full year cost of that change is £285 million. I am told that the reason for the discrepancy between the two figures is that the tax is not collected until six months into the year. If there is a technical explanation, no doubt the Minister can give it, but how can that money possibly be justified in such a tight Budget situation?
The hon. Member for Coventry, South-West (Mr. Butcher) would like to get rid of capital gains tax, which is another Government objective. Those are the Government's priorities and they illustrate more than anything else the cruel and regressive nature of their tax regime.
Of course, it is not only the regressive nature of the Finance Bill that is significant; the other obvious fact is that the tax reduction is very small compared with the tax rises since the last election. That is because the economy has not improved to an extent that would allow genuine tax reductions. The £3 billion in tax reductions—it is not as much as we were led to believe—was achieved through cutting public expenditure; not one small tax reduction is due to the success of the economy.
The key problems in the Finance Bill are the high levels of borrowing and the low levels of growth. It is significant that, in the 14 economic points that the Prime Minister put to the nation in The Sunday Times on 31 December, he did not mention growth. How could he, when we have now plummeted to the second lowest level in the European Union? That is slightly better than our position since 1979, over which period we have been the lowest, but that is not something for the Government to boast about.
The relatively high growth record was a very transitory phenomenon and all predictions for next year are way below the 3 per cent. that the Chancellor has talked about. The Treasury Select Committee has thrown doubt on that figure, Goldman Sachs has said that it will be 1.75 per cent., Professor Minford has said 2 per cent., and others have said that it might be 2.5 per cent. All the growth predictions show a declining trend. The growth target has not been achieved, which is why revenue is in trouble this year and why that trend will continue next year.
There are other factors at work, to which the Treasury Select Committee refers in its report. I have had time only to flick through the report, in which the Committee addresses other questions. The disappointing growth figures do not account for all the shortfall in revenue, and there are other factors at work which we must investigate closely. For example, income tax revenue is much less than was expected. It is suspected that that is because people many in work are in low-paid and casual jobs. They are not paid high wages, and therefore cannot contribute to income tax. The Government must be aware of that.
Value added tax receipts are also down. Income tax has decreased by £4 billion-plus, and VAT is down by £5 billion-plus, on the Government's predictions. That is related to the very poor performance of consumer 487 spending in the past year—which is not surprising when we consider the job insecurity and the low rates of pay that are endemic in our economy.
The Prime Minister did not focus on growth and borrowing; instead, he tried to present what he regarded as the successful features of the economy. Next year, we shall see the Government adopt two basic strategies—if Government Members can stop squabbling among themselves long enough to carry them out. The first will be to reduce the basic rate of income tax by some method, irrespective of whether it is in the economic interests of the country. That must be achieved, and the Government hope that people will be deceived by a reduction in the basic rate of income tax and forget the rise in national insurance contributions and other allowance changes that have taken place. That is one strategy.
Another strategy will involve the presentation of very selective economic facts as exemplified by The Sunday Times advertisement. They will be quarter truths or, in many cases, 1 per cent, truths. For example, the Prime Minister stated that Britain has the lowest unemployment of any major European country. In saying that, he insulted Sweden, Norway, Denmark, Portugal, Switzerland, Austria and the Netherlands, to name but a few. All those countries have lower unemployment than Britain, but obviously the Prime Minister does not regard them as major European countries.
There is another example of the kind of selective presentation we shall see from the Government. In the advertisement I mentioned, the Prime Minister referred to how Britain exports more cars and televisions than any other European country. I have not checked that; I hope it is true. However, we know about Britain's general trade performance.
To be charitable to the Prime Minister, the figures showing the plummet in British exports of about £1 billion between October and November were not released at that stage, but we knew that we had the biggest trade deficit in three years, and we knew that our share of world trade was at its lowest ever level. It has declined steadily since the Government came to power.
Finally, the Prime Minister boasted about inward investment. My hon. Friend the Member for Oxford, East (Mr. Smith) said that inward investment is falling, and that it is still less than outward investment. However, the level of inward investment has not been too bad—thank goodness we have had some investment.
Of course, the Prime Minister failed to mention the dismal failure of investment in the economy as a whole. It is only 1 per cent. this year, in spite of the Government's prediction last year of 6 per cent. That is in line with what has happened for the past 17 years, and we are 22nd out of the 24 OECD countries in terms of investment. That is the underlying problem upon which all the other problems of low growth and poor public finances are based. Unless the Government address the investment problem in the way that the Labour party is prepared to do, there will be no solution to the economic problems confronting this country.
It is interesting that the hon. Member for Coventry, South-West said that he wants to get rid of capital gains tax. Would it not be far more constructive and creative to use capital gains tax to encourage investment, so that those who have held shares in a company for a long time have a low rate of capital gains tax, while those who sold 488 their shares quickly have a high tax rate? Let us use the tax system to encourage investment. An increase in first-year capital allowances is another obvious way of doing that.
The Finance Bill meets the needs of very few people in this country, and it certainly does not address Britain's underlying economic problems. We shall want to examine many details in Committee. There are a few welcome developments. The change in executive share options obviously resulted from the Labour party's campaign and the proposed new clause that we tabled last year. We hope that the Government will also adopt some of the proposed new clauses and amendments that we have tabled this year.
The economy is clearly the key battleground in the run-up to the election. We know what to expect, and our main task is to tell the people of this country the truth about the economic situation. However, at the end of the day they will know the truth, because they know what has happened to their standard of living since the last election. They know that their standard of living declined in real terms for the whole second half of last year. Therefore, it will be much easier for Labour Members to put across our economic arguments, because our analysis and our explanations chime with people's experiences.
I look forward to the debates on the Finance Bill, and will listen with interest to the Minister when he replies.
§ Mr. Bernard Jenkin (Colchester, North)
It is, perhaps, hard to remind ourselves that in this debate we are engaged in the most important function of the House of Commons. We are, through the Bill, providing the Government with their supply. We are voting to raise the revenue that the Government will dispense in the coming 12 months, starting on 6 April.
It is, if I may echo the words of my hon. Friend the Member for Newark (Mr. Alexander), who is not in his place, a rather sad testament of the times that the debate has been rather sparsely attended. I apologise to you, Mr. Deputy Speaker, and to other right hon. and hon. Members, for not being present for all of the debate. I heard the opening speeches but will not pretend that I was watching it on the monitor. When we hear people say, "I wasn't in the Chamber, but I was watching it on the monitor," I fear that there is a half-truth in what they are saying, and that people are not paying enough heed to the exchanges in the Chamber.
On such an important Bill, I share the sentiments of my hon. Friend the Member for Milton Keynes, South-West (Mr. Legg), whose constituency is not pronounced the same way as Keynes, the economist, and we should remember that.
§ Mr. Jenkin
Milton as in Friedman, certainly. That is an accolade that my hon. Friend would accept.
The importance of the debate should not be underestimated, and it is sad that more hon. Members are not here. Perhaps one reason why so few attend is the sort of speech that we have just heard from the hon. Member for Edinburgh, Leith (Mr. Chisholm). He apologised for arriving late for the debate and said that it was because he was stuck in the fog, but his arguments, logic and policies are still stuck in the fog.
489 As we enter the pre-election period and begin to hear more, apparently, from Her Majesty's official Opposition—we heard the clarion call for a so-called "stakeholder economy" from Singapore, from the Leader of the Opposition—it has been a great disappointment that we heard nothing at all from the hon. Member for Oxford, East (Mr. Smith) when he was questioned on specific items of economic policy. When asked whether he thought that the level of Government expenditure was about right, too high or too low, he answered with a slogan. When asked about recent moves in interest rates—whether they were appropriate—he had no view whatever. In fact, he said that the Labour party would have, if I am quoting him correctly, lower long-term interest rates than the Conservative party has achieved in office. That is like saying that we will organise that there will be no droughts.
The only way in which one can organise lower long-term interest rates is to practise the art and mystery of economic management day in and day out; to know what level of public expenditure will be appropriate; to know what the proportion of national income should be set at to run the economy; and to set out the objectives, because the markets, which govern so much of what we do in the modern world, look to the people who make the decisions, and look for credibility. The debate is about nothing if it is not about maintaining the credibility of the Government's overall stance in the international markets.
Opposition Front Benchers have exposed the fact that they have no thoughts at all. I congratulate them. They are becoming past masters at the process of opposition, where one must say as little as possible that could ever be hostage to fortune at some time during the election campaign. They know that what they are promising by gesture day in and day out are substantial increases in public expenditure, but any hint of figures is excised from the utterances of Opposition Front Benchers, so that it is harder for us to pin anything on them, as we have in the past. But they are not likely to escape when we come to the crunch.
§ Mr. Bayley
It is a question of credibility. The proportion of our GDP that was taken in tax last year by the Conservative Government was higher than that taken by the previous Labour Government. Does the hon. Gentleman think that the proportion of GDP that is taken by the Conservatives in tax is too high, too low or about right?
§ Mr. Jenkin
Now we have another policy from the Opposition—when the country goes into recession, rather than allowing borrowing and increased taxation to continue to support the level of public services, the Opposition would cut. They have a good record of cutting public expenditure. They cut the health service in the 1970s when they lost control of the economy, and they cut the old age pension by changing the uprating system. That is the kind of mess that we can expect the Labour party to get us into again. When we study what the party has actually said, we find that it has not changed.
§ Mr. Bayley
The hon. Gentleman is most kind.
490 The hon. Gentleman argues that the proportion of gross domestic product taken in tax is higher under the Conservatives than it was under the last Labour Government because we have just gone through a recession, but the proportion has been higher under the Conservatives for 15 of the 16 years during which they have been in office. Surely the hon. Gentleman is not arguing that the economy was in recession under the Conservatives for all those years.
§ Mr. Jenkin
The hon. Gentleman is leading himself up a cul de sac. The Conservatives are looking at other economies—such as that of Singapore—whose public expenditure as a proportion of the national income is substantially lower than ours, while their growth rate is substantially higher. If we look around the world for examples of economies that are run better than ours, we must take account not only of the slogans but of the real facts. If we want to engender a higher growth rate in the years ahead so that our economy ceases to decline in relation to others throughout the world, we must emulate the faster growing economies in as many ways as we can.
§ Mr. Jenkin
I shall come to the hon. Gentleman in a minute.
The hon. Member for Edinburgh, Leith (Mr. Chisholm) wanted to raise extra taxation, supposedly to help the unemployed. There is no evidence that extra spending and taxation either make a Government popular or help the unemployed in the long term. The hon. Gentleman denigrated the Government's objectives to remove inheritance and capital gains tax. Let me ask him a question. If it could be demonstrated that a Government could create a framework in which more jobs were created, more investment attracted and more output and growth generated through the abolition of those taxes, would such action be wrong? Or is the Labour party—as the hon. Gentleman suggested—so trapped in the ideology of equality that it would continue to apply policies that apply equality come what may, however damaging such taxes may be to the overall growth rate of the economy?
How much capital gains tax does Singapore levy? I asked that question on a recent visit. Singapore starts to apply capital gains tax when individual gains reach several million Singapore dollars, at a rate of 3 per cent. Next time the Leader of the Opposition visits Singapore, perhaps he should examine its taxation system. That system is something to emulate—as well as the enormous corporate control that exists there, to which I shall refer later. [Interruption.] I shall deal with the speech of the hon. Member for Rotherham (Mr. MacShane) in a minute. It was more interesting than he might have imagined.
The real test of the Government, and of the conduct of the Opposition, is fitness to govern. The absence of clear answers from the hon. Member for Oxford, East—whom I am pleased to see in his place—demonstrates that the Labour party is simply not fit to govern. The real message from the Second Reading of the Bill, which I can send to my constituents as we enter the pre-election phase, is that we have set taxation on a downward trend again. That is what voters want. It is not simply an electoral bribe; it is necessary to improve incentives and the operation of the economy.
It is not possible for increased Government expenditure and increased taxation to accelerate the wealth-creating process. Examples from all around the world prove that 491 the less the Government suck out of the wealth-creating economy and put into non-wealth-creating activities, the more that can be left to fructify in the pockets of the people—[Interruption.] I am sorry that the hon. Member for York (Mr. Bayley) is not familiar with the sayings of Winston Churchill. As I was saying, the more that can be left to fructify in the pockets of the people, the more active and dynamic the economy will be.
Perhaps the most depressing aspect of the conduct of the Government's economic policy over the past 17 years—I accept the mild admonition of the hon. Member for York—is our failure more effectively to reduce the share of national income taken up by Government spending. The reason why we increased it—[Interruption.] I am drawing the hon. Gentleman's attention to the most depressing figure in this year's Red Book.
If we are to create a dynamic economy, there is one big problem that we must tackle. The biggest increase in our spending programme, despite all that we are attempting to do to reform it, is in the social security budget, as shown on page 141 of the Red Book. The Red Book shows £1.2 billion added to the plans for next year as compared to the plans drawn up for this year; another £1 billion is planned for the following year and another £550 million for the year after that.
Do we need more proof of the fact that the Labour party is not fit to govern? Goodness knows what the figures would show had we not tackled the growth in social security spending. We have managed to flatten the upward trend in social security spending. Social security spending is now growing at a rate below that of economic growth whereas it was growing substantially faster.
The Labour party, however, has opposed every measure that Ministers have put to the House to bring social security spending under control. It is at it now. It still thinks that bogus asylum seekers—people who have been in this country on different pretexts for considerable periods and who are seeking to avoid deportation by making bogus asylum claims—should have a prior claim on the resources of the welfare state, before the taxpayers. The Labour party is demonstrating its irresponsibility and unfitness to govern.
We need to achieve a steadily falling rate of spending and a steadily falling rate of taxation as a proportion of national income, and we also need greater incentives to encourage people to save. I agree with my hon. Friend the Member for Carshalton and Wallington (Mr. Forman) who talked about restructuring savings incentives in the tax system. I believe that incentives for saving are too dispersed. We encourage people to save in too many different types of pension, in personal equity plans and TESSAs, for varying terms. That means that too much of taxpayers' money—ordinary people's money—is sucked into savings mechanisms that are too impersonal. Corporate and collective pension schemes do not give people the same sense of ownership as personal pension schemes. The national insurance system is, of course, not a savings scheme at all; it is simply a way of buying a Government promise on a wing and a prayer, a promise that might be delivered some time in the future.
A stakeholder economy is not a slogan to be lifted from the far east. As my hon. Friend the Member for Milton Keynes, South-West said, the stakeholding economy described by the Opposition is more of a stateholding 492 economy which will result in the state promoting its own vested interests instead of giving individuals and families a genuine stake in society. What we really want is the property-owning, share-owning and capital-owning democracy that the Conservatives have been promoting for some time.
Like my hon. Friend the Member for Milton Keynes, South-West, I have been delving in the pages of The Daily Telegraph, and I am reminded of an article written by the late Lord Joseph, which was published only on Friday although it was written shortly before he died in 1994. When I heard the Leader of the Opposition talk about a stakeholding economy, I thought that he might mean giving everyone more choices and more incentives to save, because we need to encourage people to do that at the same time as we reduce the burden of taxation. Lord Joseph made an important point in his article:Welfare is now by far our biggest industry. It is mostly of benefit to the middle classes. It is they who staff it, and enjoy a large proportion of its avalanche of salaries and pensions. Mitigating poverty is not what it achieves. It makes serfs of too many of its recipients.If we are to introduce proper savings in place of the bogus savings scheme called national insurance that we now have, they must be a substitute. We do not want additional compulsory pensions loaded on top of all the social security costs, as is proposed by the Labour party.
I also commend this comment of Lord Joseph's to my right hon. and hon. Friends on the Front Bench:My own favourite strategy to give every home a stake in the economy"—this was written in 1994, not in the aftermath of the publicity foray by the Leader of the Opposition—is to allow friendly societies to recover much of the role they have relinquished over this century.I also commend a report, published by the Adam Smith Institute in December, called "The Fortune Account". It proposes to give all citizens a personal savings account to fund their pensions and long-term care and perhaps, as the scheme develops, meet other needs. This proposal is inspired by Singapore and Chile and would create the savings environment that has encouraged the tiger economies to grow as much as they have.
The objective of the Finance Bill is to create the right climate for continued investment, continued growth and continued economic success. Our objective must be gradually to change the behaviour of the British economy so that it behaves more like the tiger economies, and to increase the growth rate. I commend the Bill to the House.
§ Mr. Alistair Darling (Edinburgh, Central)
I shall not follow the hon. Member for Colchester, North (Mr. Jenkin) too far. Although he missed the debate, he said how terrible it was. He did an injustice to hon. Members on both sides of the House. Relatively few spoke, but their speeches were quite interesting. This has been the most interesting economic debate we have had for some time, perhaps because hon. Members have had to talk about wider matters than the Finance Bill, which can be dry stuff.
At least the hon. Member for Colchester, North was better than the nationalists, of whom there was neither sight nor sound during the entire debate. That is surprising, because it might have been thought that the conduct of economic policy would be of interest to them.
493 The Chief Secretary has made something of a tradition of opening all economic debates with some knockabout stuff. He now seems to be introducing a tradition of making unfounded allegations against my hon. Friend the Member for Bristol, South (Ms Primarolo), from which he then departs under cross-examination.
Not surprisingly, the Chief Secretary attacked high taxation, high borrowing and high spending, as well he might. The Government have imposed high taxation because of economic failure. They have imposed 21 tax increases—the equivalent of 7p in the pound in income tax—and record levels of borrowing because of economic failure. The Treasury Committee report, published today, drew attention to the fact that the Government's targets for the public sector borrowing requirement are slipping yet again.
The Government are also a Government of high spending. The hon. Member for Colchester, North was critical of that. The share of spending has not changed very much in the past 16 years. When Conservative Members ask us what is the right spending figure, they might reflect on that fact.
Of course the amount of money that a Government spend is important, and public spending must be kept under tight control, but equally important is what the money is spent on. As many hon. Members have said, Singapore and the far east appear to be the places to be for hon. Members on both sides of the House. What is interesting about the Asian economies is their high level of intensive investment and specific investment in education as opposed to high levels of spending caused by the dead weight of unemployment, which is so damaging socially and economically.
The Chief Secretary lauded the Government's success, but he might have referred more to the Treasury Committee's report. I have already mentioned that that Select Committee, which is Tory controlled after all, was critical about the fact that the Government's target on PSBR appears to slip each and every year. We are now told that the PSBR is not forecast to go into surplus until 2000. I suspect that, next year, the figure will be revised again.
Many of us remember Lord Lawson's speech when he was Chancellor of the Exchequer in 1988. He told us that the economy was in excellent shape and that we were on the verge of going into a new economic era, in which the country would enjoy unparalleled success. Today, all those years later, after the deepest recession since the second world war, we are still being told that the Government's conduct of economic policy is such that we are on the verge of the breakthrough that has eluded the country for many, many years.
As my hon. Friend the Member for Edinburgh, Leith (Mr. Chisholm) said, doubts have been expressed about the growth rate that the Chancellor has claimed; he has set an ambitious growth rate that many commentators do not agree with him about.
No doubt the Chief Secretary had a hand in drafting the advertisement which appeared in The Mail on Sunday and, perhaps, other newspapers on the last day of last year which was signed by the Prime Minister himself. It asked:Which country…has the lowest mortgage rate for 30 years"?494 The right hon. Gentleman might have added which country has had some of the highest mortgage rates for many of the 16 years in which the Conservatives have held office. The hon. Member for Newark (Mr. Alexander) asked what our constituents would have thought if we had told them that they would be paying low mortgage rates just now, but he might also ask himself what his constituents would have said had he told them in 1992 that, rather than tax cuts year on year, tax rises would be imposed the like of which have never been seen in peacetime Britain.
The advertisement also posed the question:Which country…has the lowest unemployment of any major European country"?That ignores the fact that one in five non-pensioner households now has someone who is not working. That is something that we should all reflect on, given the damage it is doing to our country's fabric economically and socially.
The advertisement also boasted about the country having the longest period of low inflation, but we have also had high inflation at times during the past 16 years. It said that the Government had invested more in pensions. It is funny that it did not mention the mis-selling of pensions that was exposed two years ago. Many people were led to believe that the very act of going private and opting out would be enriching. We know that many people lost money as a result. The Government must bear some responsibility for that because they created the climate in which that mis-selling was made possible.
The Chief Secretary attacked us, as he is quite entitled to do, and I am happy to deal with those attacks. He might like to reflect on the fact that, in the late 1970s, Lord Howe, who was then shadow Chancellor of the Exchequer, said only two things: that the then Government taxed too much and borrowed too much. The Chief Secretary might like reflect on the fact that, a generation later, the present Conservative Government are taxing too much and borrowing too much, because, after 16 years of economic failure, we are in the same position as we were in the late 1970s. The country is subject to high levels of taxation, and the Government have piled on taxes year on year since the election in 1992. They are spending broadly the same amount as was spent in 1979. When Conservative Members ask us for the right spending figures, they should look at their own record because that is what the voters will do at the next election.
§ Mr. Forman
The hon. Gentleman seeks to direct some ridicule at my noble Friend Lord Howe for the brevity of his comment about the then Labour Government, but does the hon. Gentleman realise that that statement had a clarity and a lack of ambiguity that are worlds away from the Opposition Front-Bench team, which cannot and will not say anything?
§ Mr. Darling
I am bound to admit that the themes are short. What I am saying is that, after 16 years, if Lord Howe were sitting on this side of the Chamber, he might just as well be saying the same things. People will judge the Government on their record and not on what they said then or what they are saying now.
There have been a number of common themes. One was on the need to simplify tax legislation. Again, I think that that will be an annual event. My right hon. Friend the Member for Llanelli (Mr. Davies) made that point. This, 495 I suppose, is the first Finance Bill that is part of the private finance initiative. There are some privatised clauses in it, although I have not been able to spot all of them yet. I look forward to the annual report that we shall receive on how to simplify the tax system, which is the result of the amendment moved by the hon. Member for Beaconsfield (Mr. Smith) last year.
The second common theme, which arose time and again and struck Labour Members, was the Conservative party's internal divisions, which are now spilling out on to the Floor of the House. The Chief Secretary to the Treasury said that there were no internal divisions and that the Tory party was united, but, in the first speech from the Back Benches, his former Cabinet colleague, the right hon. Member for Wirral, West (M. Hunt), said unashamedly that he was a one-nation Conservative. He nailed his colours to the mast, as did the right hon. Member for Worthing (Sir T. Higgins) and the hon. Member for Stamford and Spalding (Mr. Davies).
The news clearly got out because, by the end of the debate, the right-wing had fought back, as we heard from the hon. Member for Colchester, North. The internal divisions were there for all to see.
§ Mr. Darling
Not just now.
The right hon. Member for Wirral, West has a difficulty. He quoted Disraeli's "Sybil" and believes that he is a one-nation Conservative—and I think that we are all aware of his record—but he has now left Government. The hon. Member for Stamford and Spalding—and I hope that I do not offend him—will probably not be included in the Government, at least in this generation, and the right hon. Member for Worthing is, I think, leaving the House. The new, dominant generation of the Conservative party is unashamedly Thatcherite. It is not a one-nation party.
Conservative Members must square what they say about one-nation Conservatism with the fact nearly every one of them voted for the poll tax, for example. If ever there was an example of a divisive policy that was at odds with the tradition of one-nation policy, that is it.
My right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon), who made, as ever, a thoughtful speech said that one-nation politics should be the politics of all parties that have an interest in governing this country because it is obvious to anyone who cares to see that one cannot win an election or govern the country without occupying the centre ground. That is one of the Conservative party's problems because it knows that it has moved to the right. It has had defections and it has difficulties and divisions that we all saw tonight. Nothing that Conservative Members say will get away from that. As I said, within even an hour or two, the right-wing were fighting back. Clearly, news travels fast in this place.
The third strand to this debate is the attack on our policy and, in particular, on the concept of stakeholding. Again, there were divisions in the Conservative party. Some Conservative Members said that they did not know what stakeholding was, but, just in case there was any doubt about it, they attacked it. Following the tendency and the example set by the Deputy Prime Minister in his almost daily broadcast to the nation and the Conservative party chairman in his ever more ridiculous claims about our party, others say that they do not know what the policy is, so they fantasise about what it might be and try to reinvent 496 all the straw men that they have enjoyed shooting down for all these years. The hon. Member for Carshalton and Wallington (Mr. Forman) followed that line, I think inadvertently, because normally his speeches are intelligent and have some basis in fact—but not tonight.
Stakeholding—the concept of individuals having a stake in their country—is surely a matter of common sense. The object is to establish a Government who will enable every individual to have a stake in their country, to succeed and to better themselves and their families. It is no wonder that Conservative Members do not understand what stakeholding is all about: over the past 16 years, their policies have been based on division, prejudice and scapegoating. The whole concept of people having a stake in their country so that they feel motivated and have an incentive to work together for a common purpose is something with which Conservative Members cannot come to terms.
We make it clear in our amendment that investment is the key to this country's future. We shall not get the investment that we need unless we can promote quality and unless we can compete on excellence. We are already doing that in many places, but we need to do it far more. Conservative and Opposition Members have made the point that this country has to deal with a damaging legacy—the damage done to our economic capacity, especially in the 1980s. Unless we expand and enhance the quality of our economic capacity, we shall not be able to compete in the global economy.
In the context of the Bill, the whole concept of stakeholding must be to recognise that there is a mutual purpose for which we all work together as individuals. [HON. MEMBERS: "Mutual?"] Hon. Members howl the word mutual as though there was something wrong with it. Some Conservative Members say that they are one-nation Conservatives. Surely the essence of one-nation Conservatism or the politics of one nation must be that we are concerned about what happens to our neighbour in economic and social terms. If Conservative Members want to make that a difference between us and them at the next election, let them do so. This country's mood is to end the divisions and the prejudice which have been the hallmark of so many Conservative Members in the past few years. I am surprised that some Ministers here this evening are prepared to throw their hat into that ring.
One-nation politics is not an expression of sentiment or of justifiable concern for the less well-off. It is active politics. It means the Government putting into practice the policies that enable individuals to achieve their potential, to get into work, to achieve education and to get the reskilling they need so that they can make their own contribution and improve their own economic circumstances.
§ Mr. Yeo
If the stakeholder economy is so much a matter of common sense, can the hon. Gentleman now tell us whether the policies that are needed to introduce the stakeholder economy involve a higher level of public expenditure or a lower level? Do they involve an inflation target higher or lower than the present one? Do they involve higher interest rates or lower ones? If it is a matter of common sense, let us have the answers that the hon. Member for Oxford, East (Mr. Smith) steadfastly refused to give when he opened the debate.
§ Mr. Darling
I wonder whether the hon. Gentleman has been listening for the past 10 minutes. From looking 497 at the Government's record and their spending patterns, I have been pointing out they have got it wrong. We have made it clear time and again that the reason why public spending is so high here is economic failure. That is why we suggested, during our debates on the previous Budget, measures to get people off unemployment and back into work. That would enable them to make a contribution and would cut public spending. If the hon. Member for South Suffolk (Mr. Yeo) does not understand that, it is no wonder that he is in his present position.
I will illustrate again the concept of stakeholding by reference to the Bill. We see the role of Government as doing those things that individuals by themselves cannot do. The national health service and the transport infrastructure are classic examples. It is not surprising that the Conservatives do not understand that. Surely a high-quality education service must be one of the prerequisites of this country competing successfully.
I give another example, by reference to employee shareholding. Here we have a classic example of the difference between Labour and Conservative Members. The Government have created a climate in which a few who sit on the boards of the privatised utilities have made substantial gains through share options, not because of anything that they have done, but simply because of the way in which the companies were privatised. We believe that share options and incentives should be available to all the people in an enterprise, whether they are in the board room or on the shop floor. We believe that reward should follow success and that it should not be the other way round.
Everybody needs incentives and everybody needs a stake in the company, no matter where he or she is in it. The good companies already recognise that and many companies are putting into place the practices that we would like to see spread throughout British industry. Shareholding should also encourage people to save, a point to which I want to return.
§ Mr. Darling
As the hon. Gentleman has been shouting for some time, I will give way for one final time. I then want to come to my conclusion.
§ Mr. Jenkin
The hon. Gentleman has used the word "should" a lot in his recent sentences. He says that companies should do this and should do that. Is he proposing a new range of corporate compulsions or is it just music for Opposition ears?
§ Mr. Darling
I hate to disappoint the hon. Gentleman. Nothing would please him more than if he were able to claim with any justification a whole battery of new rules and regulations. I suggest—I believe the service is available from the House of Commons Library—that he gets the transcript of my right hon. Friend the Leader of the Opposition's interview with David Frost yesterday in which he made the position absolutely clear. [Interruption.] Hon. Members clearly did not see that interview and are relying solely on handouts from Conservative central office, which is a very unreliable source of information.
We are talking about a change of culture. Many successful companies, and indeed many successful investors in industry are changing their culture. We are 498 talking about ownership and not speculation of the sort that the Government fostered throughout much of the 1980s, which is the hallmark of Conservative philosophy.
On the questions of stakeholding and employment, to which hon. Members on both sides of the House have referred, from the one-nation Conservatives to Opposition Members, surely the Government should have done something in the Budget and the Finance Bill to get those who have been out of work for more than a year back into employment. That problem is socially debilitating as well as economically inefficient. We have a second generation of people who are out of work, which is causing huge strains in society. Any Government ought to be concerned with that. Given everything that the right hon. Member for Wirral, West said, he might reflect that that is what the Government, who he has supported, have done for the past 16 years.
Surely creating and sustaining a high level of employment must be a major objective of Government policy. Again, that is a difference between Labour Members and Conservative Members. Conservative Members seem to be quite happy to pursue the policy of every man for himself and devil take the hindmost.
The hon. Member for Coventry, South-West (Mr. Butcher) came up with the interesting concept of a virtual company—which I understood him to condemn—whereby there is a core company and everything else is contracted out and people are employed on short-term contracts. Unless I misunderstood him, he seemed to suggest that there was a future in this country having virtual government, or in a virtual country in which a core was required but what was on the periphery was not but could be called into use as and when it was required. I do not think that rather simplistic analysis can be translated into a philosophy of government. If I misunderstood him, I shall by all means give way.
§ Mr. Butcher
The hon. Gentleman has comprehensively misunderstood me. I was saying that, under a virtual economy, practised on a large scale, like virtual companies, the economy would create more jobs, and the insecurity with which we are all concerned would be alleviated by the rate of job creation. I likened that to an economy in which jobs are safeguarded at any cost, but which removes 20, 30 and 35 per cent. of the population from the job market. I was arguing in exactly the opposite way. The so-called virtual economy and virtual company gives more security through more job creation.
§ Mr. Darling
I shall study the hon. Gentleman's remarks tomorrow if I have time, and if we have another debate I shall no doubt refer to them.
I want to refer to two or three other points. I shall mention briefly the private finance initiative because it was mentioned be a number of Members. As we have said often enough, we support the general principle. Indeed, I sometimes think that one of the problems with the PFI is that it appears to have run into the ground because it has all-party support. Perhaps if we had opposed it, someone might have put a little more effort into getting it off the ground.
The fundamental problem with the PFI is that the Government will not prioritise the projects. There are 1,400 projects marked A or B, but other than that there is no particular priority. That means that the private sector 499 spends a considerable period of time and therefore a great deal of money trying to work out the Government's priorities. For that reason, very few projects have got off the ground. There are problems. One is in comparing the true cost of the PFI against projects funded by a conventional means. We, however, support the principle and we shall just have to hope that, in the next year, the Government give the initiative a much-needed kick along the way.
Before I leave the subject, may I submit a request to the Financial Secretary on the channel tunnel? Many of us will have read the increasingly strident tones of Sir Alastair Morton, which appear to be designed to secure a Government handout to bail out the channel tunnel. If the Government change their policy, I hope that they will make a full statement and that they will not attempt to do anything in a back door, underhand way, especially when it comes to announcing what is to be done about the channel tunnel link. We know the Government and we shall be watching them carefully.
Other points raised included self-assessment. We support the principle behind self-assessment, but we remind Conservative Members that they told us that there was nothing to worry about with the poll tax and its administration. Perhaps the current Defence Secretary will now reflect on his comment that the poll tax would be the most popular measure ever. Before Conservative Members say too much about self-assessment, they should realise that there is a real risk that some people will end up paying more tax than they should, while others will manage to evade paying it. That would be undesirable.
Much has been said today about savings and we will return to the subject in Committee. Suffice it to say that we welcome what the Government have done so far. However, hon. Members on both sides of the House know that much more must be done to encourage people to save in the long term, not just the short term.
The Financial Secretary will no doubt refer to the advertisements placed in newspapers by the Prime Minister at the beginning of this year. He may wish to reflect on questions that have been asked often enough, but bear repetition because we have had no answers. Why has Britain fallen from 13th to 18th in the world prosperity league? Why is Britain's share of world trade now the lowest this century? We know that our questions are hitting home because the Government have no answers. Why are one in three children in Britain in poverty, compared with only one in 10 in 1979? Why has Britain, under the Tories, had the biggest tax rise in peacetime history—despite the fact that they promised the opposite in 1992? Why, after 16 years of Conservative government and after all the protests this evening about one-nation Conservatism, is our country so divided?
Those are the questions that the Government must answer. Because we know that the Government cannot answer them, we feel fully justified in voting against the Bill's Second Reading tonight.
§ The Financial Secretary to the Treasury (Mr. Michael Jack)
The hon. Member for Edinburgh, Central (Mr. Darling) must have taken his speech from the St. Peter's school of political debate, because thrice he will deny his own party before the cock crows. He wants to deny that his party opposed our pioneering sales 500 of council houses, thereby giving people a real stake in home ownership. He wants to deny that his party opposed giving people a big stake in privatisation. His comments on education were beyond belief because the Budget makes an additional £775 million available to schools.
§ Dame Elaine Kellett-Bowman (Lancaster)
Will my hon. Friend join me in hoping that county councils such as Lancashire pass on that additional money to schools, as they should?
§ Mr. Jack
Conservative Members of Parliament in Lancashire flushed out the Labour party's attempt to take money away from Lancashire schools. The council has now had to recant and make that money available. I am glad that my hon. Friend raised that point.
Conservative Members made some very good speeches tonight and I shall deal with them first. I welcome the remarks by my hon. Friend the Member for Colchester, North (Mr. Jenkin). He had to wait for some time to be called, but what he had to say was important. In particular, he pointed out that we have started on a downward trend in taxation. My right hon. and learned Friend the Chancellor has not been prepared to play fast and loose with Britain's economy; instead, he waited until we gained control over public spending to begin to reduce taxes. [Laughter.] Those were difficult policies, even if they attract derision from the Opposition. It shows that the Conservative party can take difficult decisions while effectively suffering those who criticise us for doing so.
My right hon. Friend the Member for Worthing (Sir T. Higgins) has had a long-standing interest in Finance Bill debates. He mentioned publishing draft clauses and I welcome his support for that. A great deal of consultation has been undertaken to try to improve the quality of our legislation and I welcome his words on that. I shall draw his comments about a European currency to the attention of my right hon. and learned Friend the Chancellor.
My hon. Friend the Member for Beaconsfield (Mr. Smith), another hon Member who has taken much interest in these matters, made some important points. I was pleased to hear his comments on self-assessment, on which I shall have more to say later. I am grateful for his praise for the way in which the Inland Revenue is working, using consultation, an advisory committee formed from all sections of business and individual representations on self-assessment.
My hon. Friend the Member for Beaconsfield commented on the improvements achieved by the reforms, and he will know that the decision to change the way in which the Inland Revenue operates was not taken lightly. The subject was debated twice in the House and was welcomed in principle by hon. Members. It is now being tested on some 5,000 taxpayers in Leicester, and the experiment is proving to be a success.
My hon. Friend the Member for Newark (Mr. Alexander) said that the measures incorporated in the Budget, and hence in the Bill, have been widely welcomed. I was reminded that Sir Ronald Hampel, the chairman of ICI, commented:The Budget should enable the economy to grow at a healthy rate over the next two years.That comment was made by a leading multinational and international business man and should be respected.
501 I noted my hon. Friend's comments on British Sugar and the problems that it faces with soil disposal and rhizomania. I understand the seriousness of the issue, and I undertake to draw his comments to the attention of my hon. Friend the Paymaster General. I extend that undertaking to hon. Members who asked about the Manchester ship canal.
§ Mr. Jack
Will the hon. Gentleman wait a minute?
My hon. Friend the Member for Milton Keynes, South-West (Mr. Legg) put his finger on an important omission in Opposition Members' speeches. I aim to show that they are not only incapable of answering simple questions about their economic policies but are remarkably silent on some of the ideas that they claim are unique, election-winning and even are their own. My hon. Friend cited the so-called 10p tax soundbite as one such claim. Where is it? There is no mention of it in the Opposition amendment.
If they had any pride in their policies, the Opposition would be prepared to test them out in the House, but clearly they have none. We took the trouble to cost their lop tax proposal, and we discovered that it would cost £8 billion. When I raised that matter on "Any Questions", the hon. Member for Glasgow, Garscadden (Mr. Dewar) suddenly withdrew and suggested that the 10p band might not cover the same range as our 20p band. Realising that he was broadcasting to the nation, the hon. Gentleman immediately shut up and that was the last we heard of the 10p band. I am grateful to my hon. Friend for flushing the Opposition out on that point.
§ Mr. Jack
I do not think I will, as the hon. Member for Edinburgh, Central took away some of my time. If I have time, I shall give way to the hon. Gentleman.
I am grateful to my hon. Friend the Member for Milton Keynes, South-West for his endorsement of the Treasury and Civil Service Select Committee's broad welcome for the Budget and, in due course, the Treasury will officially reply to the points that he made.
My hon. Friend the Member for Coventry, South-West (Mr. Butcher) made a very perceptive speech. Opposition Members chided the Government about the number of people in employment. If they had listened to my hon. Friend's sage remarks, they would understand that structural change has inevitably influenced the number of jobs that can be created in the economy. My hon. Friend remarked that our supply side changes are helping to create an opportunity to respond to technical change and added that more jobs are being created than ever before, hence the fact that 730,000 fewer people are on the unemployment register than when the recession was at its peak. My hon. Friend made some telling and important points.
My hon. Friend the Member for Carshalton and Wallington (Mr. Forman) focused, as always, on savings and shares, and I am grateful for his support for the measures in the Bill that deal with those subjects. He also made a telling contribution in identifying one of the Bill's 502 most important proposals—the three further steps towards achieving a standard tax rate of 20p. That policy is evident for all to see. Its analysis is clear, unlike Opposition Members' approach to tax.
The three steps are a penny off the basic rate to 24p—which is a penny nearer 20p—a widening by £700 of the 20p band and, most importantly, the taxation of savings at a rate of 20p. There are real gains that I hope all hon. Members will support in the coming Finance Bill debates.
I also welcome the support of my hon. Friend the Member for Carshalton and Wallington on the subject of further share ownership. If one listened to the Opposition, one would think that they had invented the concept of wider share ownership. Our enhancements of schemes such as save-as-you-earn and profit-sharing have already enabled 2 million people to have a real stake in the companies they work for. I expect that those programmes will expand and I expect the Opposition to show their support for them.
My hon. Friend the Member for Carshalton and Wallington also promoted his own agenda on the subject of what he called a PIP—a personal investment plan. I am sure that my right hon. and learned Friend the Chancellor of the Exchequer will be interested to hear what he has to say about it.
My hon. Friend the Member for Stamford and Spalding (Mr. Davies) let his views on the Budget be known in no uncertain terms. I was grateful for his support, particularly his underscoring of the fact that the Budget and the Finance Bill address the question of sound money in this country. He properly drew our attention to the reduction in national insurance charges—another important measure in the Budget which will put some £500 million back into the pockets of industry and help it in its quest to create jobs.
My hon. Friend the Member for Stamford and Spalding rightly drew the attention of the House to my right hon. and learned Friend's improvement in plans to reduce public spending, which now amount to some £44 billion.
My hon. Friend the Member for South Suffolk (Mr. Yeo) chose to concentrate his remarks on the subject of capital gains tax, as did my hon. Friends the Members for Coventry, South-West (Mr. Butcher) and for Milton Keynes, South-West. I hope that they will accept that the Government have a clear, long-term commitment to the ultimate abolition of capital gains tax.
I hope that the hon. Member for South Suffolk will remember that there are many ways in which companies and individuals can mitigate the effects of that tax. Unincorporated businesses can set trading losses against capital tax, and rollover relief is available. In this Budget we have expanded the retirement relief in relation to the age limit of 50, which means that the first £250,000 of gains are exempt. The role of venture capital trusts should not be underestimated in that respect.
My hon. Friend also drew our attention to some of the exchanges which have occurred on the subject of a stakeholder economy. I was taken by the comments of the hon. Member for Brent, East (Mr. Livingstone) on the stakeholder economy. He lifted the veil on what the stakeholder economy meant for the Labour party when he said in The Times of 15 January that the Opposition leader's vision meant a fresh lease of life for union barons.
503 The hon. Member for Gordon (Mr. Bruce), whom I am pleased to see has returned to his place, discussed the private finance initiative, as did the hon. Member for Edinburgh, Central. I assure them that we take some of criticisms that have been made about the PFI extremely seriously. At the beginning of the year, we published "Private Opportunity, Public Benefit" precisely to send a clear signal that we intend to tackle some of those issues.
The hon. Member for Edinburgh, Central was perhaps confused in some of his remarks. Private finance is a new way of procuring services to give overall better value for money. We are dedicated to seeing that through and to achieving our objectives. He mentioned the problem of people who may have orders for 2,300 litres of oil for domestic heating purposes and so are subject to the higher rate of VAT. If it can be amply demonstrated that the oil is for domestic use, I assure him that it is possible to have the VAT charged at the lower rate. If I may, I shall write to him on that point more fully.
The right hon. Member for Ashton-under-Lyne (Mr. Sheldon) chastised us on the subject of investment, as did a number of Opposition Members. It is remarkable that they do not wish to know what is happening in the economy. It is forecast that business investment will grow by 9 per cent. in 1996 and by a further 6.75 per cent. in 1997 and beyond. It is forecast that manufacturing investment will grow by 10 per cent. in 1995 and 1996. Since 1979, investment in our economy has grown faster than in any major European Union country and six times faster than it grew under the previous Government. That is the investment reality.
The hon. Member for York (Mr. Bayley) tried to entertain us because he and the hon. Member for Edinburgh, Central have managed to get their name in The Guardian today, arguing that we were deficient regarding our tax burden. Do not Opposition Members realise that when in government, they got away with an artificially low tax take as a percentage of GDP only because their borrowing was so great? Their borrowing averaged 7 per cent. of GDP; under the present Government, borrowing has been 3 per cent. If the Labour Government had sustained their position, there would have been an increase of about 10p in the standard rate of tax. Let us have a fair comparison of taxes, not an improper one.
If the Labour Government's policies had remained in place, under their tax regime another 1 million people would now pay tax. By contrast, the Budget has taken about 220,000 people out of tax. Let us talk the facts about tax.
§ Mr. Andrew Smith
While the Minister is speaking about tax, will he tell the House why the share of national income going in taxation will be greater next year than it was last year, and why, under the present Government, tax is planned to increase every year, as a share of national income, until the end of the century? Is not that the price of the Government's social and economic failure?
§ Mr. Jack
How can the hon. Gentleman have the cant and hypocrisy to ask me that question after the analysis that I have given him? I drew attention to the fact that the Labour figures were distorted because Labour Governments were leaving their IOUs for succeeding generations. Another 10p on standard rate and another million people paying tax would have been the product of your borrowing requirements. Those are the facts.
504 I tried hard to discover the way in which the Labour party dreamed up its policies, and I found the answer in Robert Peston's column in the Financial Times on 11 January 1996. He said that Labour's approach is the virtual reality approach to economy. They put on the headset, look into the goggles and see the world that they want to see, forgetting the fact that they must return to the reality of the economy as it is.
With that virtual reality approach, I ask the Opposition some questions. They obviously are incapable of taking an A-level in economics, but let us pitch the questions at the level of a GCSE in economics. My right hon. and hon. Friends have asked important questions earlier, so let us ask them again.
Do you have a target for inflation? No; you do not. Do you have a target for interest rates? No; you do not. Will you ensure that public spending is reduced to zero by the end of the decade, as my right hon. and learned Friend the Chancellor said in the Red Book? I expect that you do not have an answer to that. [HON. MEMBERS: "You?"] Do you even agree with our concept of a 20p tax band? I will give way if you can answer any of those questions. I would give way if you would answer any of these questions.
I think the Minister has been getting rather carried away in the last few minutes. Perhaps he will refer to the Speaker, as he is referring to "you". He should be speaking through the Chair.
§ Mr. Jack
I am sorry if my enthusiasm to tease from the Opposition their true economic policies led me to show any discourtesy to the Chair. It certainly was not my objective.
If it is impossible for the Opposition to answer those simple questions, why was it possible yesterday, on "Breakfast with Frost", for the right hon. Member for Sedgefield (Mr. Blair), in a moment, to tell the interviewer that he did not have a plan for a 50p tax rate? If he could be certain in that moment, why are Opposition Members so uncertain about every other aspect of their economic policies?
Much has been said about league tables today. The policies contained in the Finance Bill will lead us to the top of the economic achievement league in Europe. The Government's policies will help to kindle further growth in the economy and I urge all hon. Members to support the Bill tonight.
§ Question put, That the amendment be made:—
§ The House divided: Ayes 251, Noes 309508
|Division No. 21]||[10.00 pm|
|Abbott, Ms Diane||Armstrong, Hilary|
|Adams, Mrs Irene||Ashton, Joe|
|Anger, Nick||Austin-Walker, John|
|Ainsworth, Robert (Cov'try NE)||Banks, Tony (Newham NW)|
|Allen, Graham||Battle, John|
|Anderson, Donald (Swansea E)||Bayley, Hugh|
|Anderson, Ms Janet (Ros'dale)||Beckett, Rt Hon Margaret|
|Bell, Stuart||Graham, Thomas|
|Benn, Rt Hon Tony||Grant, Bernie (Tottenham)|
|Bennett, Andrew F||Griffiths, Nigel (Edinburgh S)|
|Bermingham, Gerald||Griffiths, Win (Bridgend)|
|Berry, Roger||Grocott, Bruce|
|Betts, Clive||Hain, Peter|
|Blair, Rt Hon Tony||Hall, Mike|
|Blunkett, David||Hanson, David|
|Boateng, Paul||Hardy, Peter|
|Bradley, Keith||Harman, Ms Harriet|
|Bray, Dr Jeremy||Hattersley, Rt Hon Roy|
|Brown, N (N'c'tle upon Tyne E)||Henderson, Doug|
|Burden, Richard||Heppell, John|
|Byers, Stephen||Hill, Keith (Streatham)|
|Callaghan, Jim||Hinchliffe, David|
|Campbell, Mrs Anne (C'bridge)||Hodge, Margaret|
|Campbell, Ronnie (Blyth V)||Hoey, Kate|
|Campbell-Savours, D N||Home Robertson, John|
|Canavan, Dennis||Hood, Jimmy|
|Cann, Jamie||Hoon, Geoffrey|
|Chisholm, Malcolm||Howarth, Alan (Strat'rd-on-A)|
|Church, Judith||Howarth, George(Knowsley North)|
|Clapham, Michael||Howells, Dr Kim (Pontypridd)|
|Clark, Dr David (South Shields)||Hoyle, Doug|
|Clarke, Tom (Monklands W)||Hughes, Kevin (Doncaster N)|
|Clelland, David||Hughes, Robert (Aberdeen N)|
|Clwyd, Mrs Ann||Hughes, Roy (Newport E)|
|Coffey, Ann||Hutton, John|
|Cohen, Harry||Illsley, Eric|
|Cook, Frank (Stockton N)||Ingram, Adam|
|Corbett, Robin||Jackson, Glenda (H'stead)|
|Corbyn, Jeremy||Jackson, Helen (Shef'ld, H)|
|Corston, Jean||Jamieson, David|
|Cousins, Jim||Janner, Greville|
|Cummings, John||Jones, Barry (Alyn and D'side)|
|Cunliffe, Lawrence||Jones, Jon Owen (Cardiff C)|
|Cunningham, Jim (Covy SE)||Jones, Lynne (B'ham S O)|
|Cunningham, Rt Hon Dr John||Jones, Martyn (Clwyd, SW)|
|Dafis, Cynog||Jowell, Tessa|
|Dalyell, Tam||Kaufman, Rt Hon Gerald|
|Darling, Alistair||Keen, Alan|
|Davidson, Ian||Kennedy, Jane (L'pool Br'dg'n)|
|Davies, Bryan (Oldham C'tral)||Khabra, Piara S|
|Davies, Rt Hon Denzil (Llanelli)||Kilfoyle, Peter|
|Davies, Ron (Caerphilly)||Lestor, Joan (Eccles)|
|Davis, Terry (B'ham, H'dge H'l)||Liddell, Mrs Helen|
|Denham, John||Litherland, Robert|
|Dewar, Donald||Livingstone, Ken|
|Dixon, Don||Lloyd, Tony (Stretford)|
|Dobson, Frank||Llwyd, Elfyn|
|Donohoe, Brian H||Loyden, Eddie|
|Dowd, Jim||McAllion, John|
|Dunwoody, Mrs Gwyneth||McAvoy, Thomas|
|Eagle, Ms Angela||McCartney, Ian|
|Eastem, Ken||Macdonald, Calum|
|Etherington, Bill||McFall, John|
|Evans, John (St Helens N)||McKelvey, William|
|Ewing, Mrs Margaret||Mackinlay, Andrew|
|Fatchett, Derek||McLeish, Henry|
|Faulds, Andrew||McMaster, Gordon|
|Field, Frank (Birkenhead)||McNamara, Kevin|
|Fisher, Mark||MacShane, Denis|
|Flynn, Paul||McWilliam, John|
|Foster, Rt Hon Derek||Madden, Max|
|Foulkes, George||Mahon, Alice|
|Fyfe, Maria||Mendelson, Peter|
|Galbraith Sam||Marshall, David (Shettleston)|
|Galloway, George||Marshall, Jim (Leicester, S)|
|Gapes, Mike||Martin, Michael J (Springburn)|
|Garrett, John||Martlew, Eric|
|George, Bruce||Maxton, John|
|Gerrard, Neil||Meacher, Michael|
|Gilbert, Rt Hon Dr John||Meale, Alan|
|Godman, Dr Norman A||Michael, Alun|
|Godsiff, Roger||Michie, Bill (Sheffield Heeley)|
|Golding, Mrs Llin||Milburn, Alan|
|Miller, Andrew||Sheerman, Barry|
|Mitchell, Austin (Gt Grimsby)||Sheldon, Rt Hon Robert|
|Morley, Elliot||Shore, Rt Hon Peter|
|Morris, Rt Hon Alfred (Wy'nshawe)||Short, Clare|
|Morris, Estelle (B'ham Yardley)||Simpson, Alan|
|Morris, Rt Hon John (Aberavon)||Skinner, Dennis|
|Mowlam, Marjorie||Smith, Andrew (Oxford E)|
|Mudie, George||Smith, Llew (Blaenau Gwent)|
|Mullin, Chris||Snape, Peter|
|Murphy, Paul||Spearing, Nigel|
|Oakes, Rt Hon Gordon||Speller, John|
|O'Brien, Mike (N W'kshire)||Squire, Rachel (Dunfermline W)|
|O'Brien, William (Normanton)||Steinberg, Gerry|
|O'Hara, Edward||Stevenson, George|
|Olner, Bill||Stott, Roger|
|O'Neill, Martin||Strang, Dr. Gavin|
|Orme, Rt Hon Stanley||Straw, Jack|
|Parry, Robert||Sutcliffe, Gerry|
|Pearson, Ian||Taylor, Mrs Ann (Dewsbury)|
|Pendry, Tom||Thompson, Jack (Wansbeck)|
|Pickthall, Colin||Timms, Stephen|
|Pike, Peter L||Tipping, Paddy|
|Pope, Greg||Touhig, Don|
|Powell, Ray (Ogmore)||Turner, Dennis|
|Prentice, Bridget (Lew'm E)||Vaz, Keith|
|Prentice, Gordon (Pendle)||Walker, Rt Hon Sir Harold|
|Prescott, Rt Hon John||Walley, Joan|
|Primarolo, Dawn||Wardell, Gareth (Gower)|
|Purchase, Ken||Wareing, Robert N|
|Quin, Ms Joyce||Watson, Mike|
|Radice, Giles||Welsh, Andrew|
|Randall, Stuart||Wicks, Malcolm|
|Raynsford, Nick||Wigley, Dafydd|
|Reid, Dr John||Williams, Rt Hon Alan (Sw'n W)|
|Robertson, George (Hamilton)||Williams, Alan W (Carmarthen)|
|Robinson, Geoffrey (Co'try NW)||Wilson, Brian|
|Roche, Mrs Barbara||Winnick, David|
|Rogers, Allan||Worthington, Tony|
|Rooker, Jeff||Wray, Jimmy|
|Ross, Ernie (Dundee W)||Wright, Dr Tony|
|Rowlands, Ted||Young, David (Bolton SE)|
|Ruddock, Joan||Tellers for the Ayes:|
|Salmond, Alex||Mr. Joe Benton and|
|Sedgemore, Brian||Mr. Eric Clarke.|
|Ainsworth, Peter (East Surrey)||Bottomley, Rt Hon Virginia|
|Aitken, Rt Hon Jonathan||Bowden, Sir Andrew|
|Alexander, Richard||Bowis, John|
|Alison, Rt Hon Michael (Selby)||Boyson, Rt Hon Sir Rhodes|
|Allason, Rupert (Torbay)||Brandreth, Gyles|
|Amess, David||Brazier, Julian|
|Ancram, Rt Hon Michael||Bright, Sir Graham|
|Arbuthnot, James||Brooke, Rt Hon Peter|
|Arnold, Jacques (Gravesham)||Brown, M (Brigg & Cl'thorpes)|
|Arnold, Sir Thomas (Hazel Grv)||Browning, Mrs Angela|
|Ashby, David||Bruce, Ian (Dorset)|
|Atkins, Rt Hon Robert||Burns, Simon|
|Atkinson, David (Bour'mouth E)||Burt, Alistair|
|Atkinson, Peter (Hexham)||Butcher, John|
|Baker, Rt Hon Kenneth (Mole V)||Butler, Peter|
|Baker, Nicholas (North Dorset)||Butterfill, John|
|Baldry, Tony||Carlisle, John (Luton North)|
|Banks, Matthew (Southport)||Carlisle, Sir Kenneth (Lincoln)|
|Banks, Robert (Harrogate)||Carrington, Matthew|
|Bates, Michael||Carttiss, Michael|
|Batiste, Spencer||Cash, William|
|Bellingham, Henry||Channon, Rt Hon Paul|
|Bendall, Vivian||Chapman, Sir Sydney|
|Beresford, Sir Paul||Churchill, Mr|
|Biffen, Rt Hon John||Clappison, James|
|Bonsor, Sir Nicholas||Clark, Dr Michael (Rochford)|
|Booth, Hartley||Clarke, Rt Hon Kenneth (Ru'clif)|
|Boswell, Tim||Clifton-Brown, Geoffrey|
|Bottomley, Peter (Eltham)||Coe, Sebastian|
|Congdon, David||Hendry, Charles|
|Coombs, Anthony (Wyre For'st)||Heseltine, Rt Hon Michael|
|Coombs, Simon (Swindon)||Hicks, Robert|
|Cope, Rt Hon Sir John||Higgins, Rt Hon Sir Terence|
|Cormack, Sir Patrick||Hogg, Rt Hon Douglas (G'tham)|
|Couchman, James||Horam, John|
|Cran, James||Hordern, Rt Hon Sir Peter|
|Currie, Mrs Edwina (S D'by'ire)||Howard, Rt Hon Michael|
|Curry, David (Skipton & Ripon)||Howell, Rt Hon David (G'dford)|
|Davies, Quentin (Stamford)||Howell, Sir Ralph (N Norfolk)|
|Davis, David (Boothferry)||Hughes, Robert G (Harrow W)|
|Day, Stephen||Hunt, Rt Hon David (Wirral W)|
|Deva, Nirj Joseph||Hunt, Sir John (Ravensbourne)|
|Devlin, Tim||Hunter, Andrew|
|Dicks, Terry||Hurd, Rt Hon Douglas|
|Dorrell, Rt Hon Stephen||Jack, Michael|
|Douglas-Hamilton, Lord James||Jackson, Robert (Wantage)|
|Dover, Den||Jenkin, Bernard|
|Duncan, Alan||Jessel, Toby|
|Duncan-Smith, Iain||Johnson Smith, Sir Geoffrey|
|Dunn, Bob||Jones, Gwilym (Cardiff N)|
|Durant, Sir Anthony||Jones, Robert B (W Hertfdshr)|
|Dykes, Hugh||Jopling, Rt Hon Michael|
|Eggar, Rt Hon Tim||Kellett-Bowman, Dame Elaine|
|Elletson, Harold||Key, Robert|
|Emery, Rt Hon Sir Peter||King, Rt Hon Tom|
|Evans, David (Welwyn Hatfield)||Kirkhope, Timothy|
|Evans, Jonathan (Brecon)||Knapman, Roger|
|Evans, Nigel (Ribble Valley)||Knight, Mrs Angela (Erewash)|
|Evans, Roger (Monmouth)||Knight, Rt Hon Greg (Derby N)|
|Evennett, David||Knight, Dame Jill (Bir'm E'st'n)|
|Faber, David||Knox, Sir David|
|Fabricant, Michael||Kynoch, George (Kincardine)|
|Fenner, Dame Peggy||Lait, Mrs Jacqui|
|Field, Barry (Isle of Wight)||Lamont, Rt Hon Norman|
|Fishburn, Dudley||Lang, Rt Hon Ian|
|Forman, Nigel||Lawrence, Sir Ivan|
|Forsyth, Rt Hon Michael (Stirling)||Legg, Barry|
|Forth, Eric||Leigh, Edward|
|Fowler, Rt Hon Sir Norman||Lester, Sir James (Broxtowe)|
|Fox, Dr Liam (Woodspring)||Lidington, David|
|Fox, Rt Hon Sir Marcus (Shipley)||Lilley, Rt Hon Peter|
|Freeman, Rt Hon Roger||Lloyd, Rt Hon Sir Peter (Fareham)|
|French, Douglas||Lord, Michael|
|Gale, Roger||Luff, Peter|
|Gallie, Phil||Lyell, Rt Hon Sir Nicholas|
|Gardiner, Sir George||MacGregor, Rt Hon John|
|Garel-Jones, Rt Hon Tristan||MacKay, Andrew|
|Garnier, Edward||Maclean, Rt Hon David|
|Gill, Christopher||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||Major, Rt Hon John|
|Gorst, Sir John||Malone, Gerald|
|Grant, Sir A (SW Cambs)||Mans, Keith|
|Greenway, Harry (Ealing N)||Marland, Paul|
|Greenway, John (Ryedale)||Marlow, Tony|
|Griffiths, Peter (Portsmouth, N)||Marshall, John (Hendon S)|
|Grylls, Sir Michael||Martin, David (Portsmouth S)|
|Gummer, Rt Hon John Selwyn||Mawhinney, Rt Hon Dr Brian|
|Hague, Rt Hon William||Mellor, Rt Hon David|
|Hamilton, Rt Hon Sir Archibald||Merchant, Piers|
|Hamilton, Neil (Tatton)||Mills, Iain|
|Hampson, Dr Keith||Mitchell, Andrew (Gedling)|
|Hanley, Rt Hon Jeremy||Mitchell, Sir David (NW Hants)|
|Hannam, Sir John||Moate, Sir Roger|
|Hargreaves, Andrew||Molyneaux, Rt Hon Sir James|
|Harris, David||Monro, Rt Hon Sir Hector|
|Haselhurst, Sir Alan||Montgomery, Sir Fergus|
|Hawkins, Nick||Moss, Malcolm|
|Hawksley, Warren||Needham, Rt Hon Richard|
|Hayes, Jerry||Neubert, Sir Michael|
|Heald, Oliver||Newton, Rt Hon Tony|
|Heath, Rt Hon Sir Edward||Nicholls, Patrick|
|Heathcoat-Amory, Rt Hon David||Nicholson, David (Taunton)|
|Norris, Steve||Steen, Anthony|
|Onslow, Rt Hon Sir Cranley||Stephen, Michael|
|Oppenheim, Phillip||Stewart, Allan|
|Ottaway, Richard||Streeter, Gary|
|Page, Richard||Sumberg, David|
|Paice, James||Sweeney, Walter|
|Patnick, Sir Irvine||Sykes, John|
|Patten, Rt Hon John||Tapsell, Sir Peter|
|Pattie, Rt Hon Sir Geoffrey||Taylor, Ian (Esher)|
|Pawsey, James||Taylor, John M (Solihull)|
|Peacock, Mrs Elizabeth||Taylor, Sir Teddy (Southend, E)|
|Pickles, Eric||Temple-Morris, Peter|
|Porter, Barry (Wirral S)||Thomason, Roy|
|Porter, David (Waveney)||Thompson, Sir Donald (C'er V)|
|Portillo, Rt Hon Michael||Thompson, Patrick (Norwich N)|
|Powell, William (Corby)||Thornton, Sir Malcolm|
|Rathbone, Tim||Thurnham, Peter|
|Redwood, Rt Hon John||Townend, John (Bridlington)|
|Renton, Rt Hon Tim||Tracey, Richard|
|Richards, Rod||Tredinnick, David|
|Riddick, Graham||Trend, Michael|
|Robathan, Andrew||Trimble, David|
|Roberts, Rt Hon Sir Wyn||Trotter, Neville|
|Robertson, Raymond (Ab'd'n S)||Twinn, Dr Ian|
|Robinson, Mark (Somerton)||Vaughan, Sir Gerard|
|Roe, Mrs Marion (Broxbourne)||Viggers, Peter|
|Rowe, Andrew (Mid Kent)||Waldegrave, Rt Hon William|
|Rumbold, Rt Hon Dame Angela||Walden, George|
|Ryder, Rt Hon Richard||Walker, Bill (N Tayside)|
|Sackville, Tom||Waller, Gary|
|Sainsbury, Rt Hon Sir Timothy||Ward, John|
|Scott Rt Hon Sir Nicholas||Wardle, Charles (Bexhill)|
|Shaw, David (Dover)||Waterson, Nigel|
|Shaw, Sir Giles (Pudsey)||Watts, John|
|Shephard, Rt Hon Gillian||Wells, Bowen|
|Shepherd, Sir Colin (Hereford)||Wheeler, Rt Hon Sir John|
|Shepherd, Richard (Aldridge)||Whitney, Ray|
|Shersby, Sir Michael||Whittingdale, John|
|Sims, Roger||Widdecombe, Ann|
|Skeet, Sir Trevor||Wiggin, Sir Jerry|
|Smith, Sir Dudley (Warwick)||Wilkinson, John|
|Smith, Tim (Beaconsfield)||Willetts, David|
|Soames, Nicholas||Wilshire, David|
|Speed, Sir Keith||Winterton, Mrs Ann (Congleton)|
|Spencer, Sir Derek||Winterton, Nicholas (Macc'fld)|
|Spicer, Sir James (W Dorset)||Wolfson, Mark|
|Spicer, Sir Michael (S Worcs)||Yeo, Tim|
|Spink, Dr Robert||Young, Rt Hon Sir George|
|Spring, Richard||Tellers for the Noes:|
|Sproat, Iain||Mr. Timothy Wood and|
|Stanley, Rt Hon Sir John||Mr. Derek Conway.|
§ Question accordingly negatived
§ Main Question put forthwith, pursuant to Standing Order No. 60 (Amendment on Second or Third Reading):—
§ The House divided: Ayes 309, Noes 274512
|Division No. 22]||[10.16 pm|
|Ainsworth, Peter (East Surrey)||Baker, Rt Hon Kenneth (Mole V)|
|Aitken, Rt Hon Jonathan||Baker, Nicholas (North Dorset)|
|Alexander, Richard||Baldry, Tony|
|Alison, Rt Hon Michael (Selby)||Banks, Matthew (Southport)|
|Allason, Rupert (Torbay)||Banks, Robert (Harrogate)|
|Amess, David||Bates, Michael|
|Ancram, Rt Hon Michael||Batiste, Spencer|
|Arbuthnot, James||Bellingham, Henry|
|Arnold, Jacques (Gravesham)||Bendall, Vivian|
|Arriold, Sir Thomas (Hazel Grv)||Beresford, Sir Paul|
|Ashby, David||Biffen, Rt Hon John|
|Atkins, Rt Hon Robert||Bonsor, Sir Nicholas|
|Atkinson, David (Bour'mouth E)||Booth, Hartley|
|Atkinson, Peter (Hexham)||Boswell, Tim|
|Bottomley, Peter (Eltham)||Gardiner, Sir George|
|Bottomley, Rt Hon Virginia||Garel-Jones, Rt Hon Tristan|
|Bowden, Sir Andrew||Garnier, Edward|
|Bowis, John||Gill, Christopher|
|Boyson, Rt Hon Sir Rhodes||Gillan, Cheryl|
|Brandreth, Gyles||Goodlad, Rt Hon Alastair|
|Brazier, Julian||Goodson-Wickes, Dr Charles|
|Bright, Sir Graham||Gorman, Mrs Teresa|
|Brooke, Rt Hon Peter||Gorst, Sir John|
|Brown, M (Brigg & Cl'thorpes)||Grant, Sir A (SW Cambs)|
|Browning, Mrs Angela||Greenway, Harry (Ealing N)|
|Bruce, Ian (Dorset)||Greenway, John (Ryedale)|
|Burns, Simon||Griffiths, Peter (Portsmouth, N)|
|Burt, Alistair||Grylls, Sir Michael|
|Butcher, John||Gummer, Rt Hon John Selwyn|
|Butler, Peter||Hague, Rt Hon William|
|Butterfill, John||Hamilton, Rt Hon Sir Archibald|
|Carlisle, John (Luton North)||Hamilton, Neil (Tatton)|
|Carlisle, Sir Kenneth (Lincoln)||Hampson, Dr Keith|
|Carrington, Matthew||Hanley, Rt Hon Jeremy|
|Carttiss, Michael||Hannam, Sir John|
|Cash, William||Hargreaves, Andrew|
|Channon, Rt Hon Paul||Harris, David|
|Chapman, Sir Sydney||Haselhurst, Sir Alan|
|Churchill, Mr||Hawkins, Nick|
|Clappison, James||Hawksley, Warren|
|Clark, Dr Michael (Rochford)||Hayes, Jerry|
|Clarke, Rt Hon Kenneth (Ru'clif)||Heald, Oliver|
|Clifton-Brown, Geoffrey||Heath, Rt Hon Sir Edward|
|Coe, Sebastian||Heathcoat-Amory, Rt Hon David|
|Congdon, David||Hendry, Charles|
|Coombs, Anthony (Wyre For'st)||Heseltine, Rt Hon Michael|
|Coombs, Simon (Swindon)||Hicks, Robert|
|Cope, Rt Hon Sir John||Higgins, Rt Hon Sir Terence|
|Cormack, Sir Patrick||Hogg, Rt Hon Douglas (G'tham)|
|Couchman, James||Horam, John|
|Cran, James||Hordem, Rt Hon Sir Peter|
|Currie, Mrs Edwina (S D'by'ire)||Howard, Rt Hon Michael|
|Curry, David (Skipton & Ripon)||Howell, Rt Hon David (G'dford)|
|Davies, Quentin (Stamford)||Howell, Sir Ralph (N Norfolk)|
|Davis, David (Boothferry)||Hughes, Robert G (Harrow W)|
|Day, Stephen||Hunt, Rt Hon David (Wirral W)|
|Deva, Nirj Joseph||Hunt, Sir John (Ravensbourne)|
|Devlin, Tim||Hunter, Andrew|
|Dicks, Terry||Hurd, Rt Hon Douglas|
|Dorrell, Rt Hon Stephen||Jack, Michael|
|Douglas-Hamilton, Lord James||Jackson, Robert (Wantage)|
|Dover, Den||Jenkin, Bernard|
|Duncan, Alan||Jessel, Toby|
|Duncan-Smith, Iain||Johnson Smith, Sir Geoffrey|
|Dunn, Bob||Jones, Gwilym (Cardiff N)|
|Durant, Sir Anthony||Jones, Robert B (W Hertfdshr)|
|Dykes, Hugh||Jopling, Rt Hon Michael|
|Eggar, Rt Hon Tim||Kellett-Bowman, Darne Elaine|
|Elletson, Harold||Key, Robert|
|Emery, Rt Hon Sir Peter||King, Rt Hon Tom|
|Evans, David (Welwyn Hatfield)||Kirkhope, Timothy|
|Evans, Jonathan (Brecon)||Knapman, Roger|
|Evans, Nigel (Ribble Valley)||Knight, Mrs Angela (Erewash)|
|Evans, Roger (Monmouth)||Knight Rt Hon Greg (Derby N)|
|Evennett, David||Knight, Dame Jill (Bir'm E'st'n)|
|Faber, David||Knox, Sir David|
|Fabricant, Michael||Kynoch, George (Kincardine)|
|Fenner, Dame Peggy||Lait, Mrs Jacqui|
|Field, Barry (Isle of Wight)||Lamont, Rt Hon Norman|
|Fishburn, Dudley||Lang, Rt Hon Ian|
|Forman, Nigel||Lawrence, Sir Ivan|
|Forsyth, Rt Hon Michael (Stirling)||Legg, Barry|
|Forth, Eric||Leigh, Edward|
|Fowler, Rt Hon Sir Norman||Lester, Sir James (Broxtowe)|
|Fox, Dr Liam (Woodspring)||Lidington, David|
|Fox, Rt Hon Sir Marcus (Shipley)||Lilley, Rt Hon Peter|
|Freeman, Rt Hon Roger||Lloyd, Rt Hon Sir Peter (Fareham)|
|French, Douglas||Lord, Michael|
|Gale, Roger||Luff, Peter|
|Gallie, Phil||Lyell, Rt Hon Sir Nicholas|
|MacGregor, Rt Hon John||Shepherd, Richard (Aldridge)|
|MacKay, Andrew||Shersby, Sir Michael|
|Maclean, Rt Hon David||Sims, Roger|
|McLoughlin, Patrick||Skeet, Sir Trevor|
|McNair-Wilson, Sir Patrick||Smith, Sir Dudley (Warwick)|
|Madel, Sir David||Smith, Tim (Beaconsfield)|
|Maitland, Lady Olga||Soames, Nicholas|
|Major, Rt Hon John||Speed, Sir Keith|
|Malone, Gerald||Spencer, Sir Derek|
|Mans, Keith||Spicer, Sir James (W Dorset)|
|Marland, Paul||Spicer, Sir Michael (S Worcs)|
|Marlow, Tony||Spink, Dr Robert|
|Marshall, John (Hendon S)||Spring, Richard|
|Martin, David (Portsmouth S)||Sproat, Iain|
|Mawhinney, Rt Hon Dr Brian||Stanley, Rt Hon Sir John|
|Mellor, Rt Hon David||Steen, Anthony|
|Merchant, Piers||Stephen, Michael|
|Mills, Iain||Stewart, Allan|
|Mitchell, Andrew (Gedling)||Streeter, Gary|
|Mitchell, Sir David (NW Hants)||Sumberg, David|
|Moate, Sir Roger||Sweeney, Walter|
|Molyneaux, Rt Hon Sir James||Sykes, John|
|Monro, Rt Hon Sir Hector||Tapsell, Sir Peter|
|Montgomery, Sir Fergus||Taylor, Ian (Esher)|
|Moss, Malcolm||Taylor, John M (Solihull)|
|Needham, Rt Hon Richard||Taylor, Sir Teddy (Southend, E)|
|Neubert, Sir Michael||Temple-Morris, Peter|
|Newton, Rt Hon Tony||Thomason, Roy|
|Nicholls, Patrick||Thompson, Sir Donald (C'er V)|
|Nicholson, David (Taunton)||Thompson, Patrick (Norwich N)|
|Norris, Steve||Thornton, Sir Malcolm|
|Onslow, Rt Hon Sir Cranley||Thurnham, Peter|
|Oppenheim, Phillip||Townend, John (Bridlington)|
|Ottaway, Richard||Tracey, Richard|
|Page, Richard||Tredinnick, David|
|Paice, James||Trend, Michael|
|Patnick, Sir Irvine||Trimble, David|
|Patten, Rt Hon John||Trotter, Neville|
|Pattie, Rt Hon Sir Geoffrey||Twinn, Dr Ian|
|Pawsey, James||Vaughan, Sir Gerard|
|Peacock, Mrs Elizabeth||Viggers, Peter|
|Pickles, Eric||Waldegrave, Rt Hon William|
|Porter, Barry (Wirral S)||Walden, George|
|Porter, David (Waveney)||Walker, Bill (N Tayside)|
|Portillo, Rt Hon Michael||Waller, Gary|
|Powell, William (Corby)||Ward, John|
|Rathbone, Tim||Wade, Charles (Bexhill)|
|Redwood, Rt Hon John||Waterson, Nigel|
|Renton, Rt Hon Tim||Watts, John|
|Richards, Rod||Wells, Bowen|
|Riddick, Graham||Wheeler, Rt Hon Sir John|
|Robathan, Andrew||Whitney, Ray|
|Roberts, Rt Hon Sir Wyn||Whittingdale, John|
|Robertson, Raymond S (Ab'd'n S)||Widdecombe, Ann|
|Robinson, Mark (Somerton)||Wiggin, Sir Jerry|
|Roe, Mrs Marion (Broxbourne)||Wilkinson, John|
|Rowe, Andrew (Mid Kent)||Willetts, David|
|Rumbold, Rt Hon Dame Angela||Wilshire, David|
|Ryder, Rt Hon Richard||Winterton, Mrs Ann (Congleton)|
|Sackville, Tom||Winterton, Nicholas (Macc'fld)|
|Sainsbury, Rt Hon Sir Timothy||Wolfson, Mark|
|Scott, Rt Hon Sir Nicholas||Yeo, Tim|
|Shaw, David (Dover)||Young, Rt Hon Sir George|
|Shaw, Sir Giles (Pudsey)||Tellers for the Ayes:|
|Shephard, Rt Hon Gillian||Mr. Timothy Wood and|
|Shepherd, Sir Colin (Hereford)||Mr. Derek Conway.|
|Abbott, Ms Diane||Anderson, Ms Janet (Ros'dale)|
|Adams, Mrs Irene||Armstrong, Hilary|
|Anger, Nick||Ashdown, Rt Hon Paddy|
|Ainsworth, Robert (Cov'try NE)||Ashton, Joe|
|Allen, Graham||Austin-Walker, John|
|Alton, David||Banks, Tony (Newham NW)|
|Anderson, Donald (Swansea E)||Battle, John|
|Beckett, Rt Hon Margaret||Gapes, Mike|
|Beith, Rt Hon A J||Garrett, John|
|Bell, Stuart||George, Bruce|
|Benn, Rt Hon Tony||Gerrard, Neil|
|Bennett, Andrew F||Gilbert, Rt Hon Dr John|
|Bermingham, Gerald||Godman, Dr Norman A|
|Berry, Roger||Godsiff, Roger|
|Betts, Clive||Golding, Mrs Llin|
|Blair, Rt Hon Tony||Graham, Thomas|
|Blunkett, David||Grant, Bernie (Tottenham)|
|Boateng, Paul||Griffiths, Nigel (Edinburgh S)|
|Bradley, Keith||Griffiths, Win (Bridgend)|
|Bray, Dr Jeremy||Grocott, Bruce|
|Brown, N (N'c'tle upon Tyne E)||Hain, Peter|
|Bruce, Malcolm (Gordon)||Hall, Mike|
|Burden, Richard||Hanson, David|
|Byers, Stephen||Hardy, Peter|
|Callaghan, Jim||Harman, Ms Harriet|
|Campbell, Mrs Anne (C'bridge)||Harvey, Nick|
|Campbell, Menzies (Fife NE)||Hattersley, Rt Hon Roy|
|Campbell, Ronnie||Henderson, Doug|
|Campbell-Savours, D N||Heppell, John|
|Canavan, Dennis||Hill, Keith (Streatham)|
|Cann, Jamie||Hinchliffe, David|
|Carlile, Alexander (Montgomery)||Hodge, Margaret|
|Chidgey, David||Hoey, Kate|
|Chisholm, Malcolm||Horne Robertson, John|
|Church, Judith||Hood, Jimmy|
|Clapham, Michael||Hoon, Geoffrey|
|Clark, Dr David (South Shields)||Howarth, Alan (Strat'rd-on-A)|
|Clarke, Tom (Monklands W)||Howarth, George (Knowsley North)|
|Clelland, David||Howells, Dr Kim (Pontypridd)|
|Clwyd, Mrs Ann||Hoyle, Doug|
|Coffey, Ann||Hughes, Kevin (Doncaster N)|
|Cohen, Harry||Hughes, Robert (Aberdeen N)|
|Cook, Frank (Stockton N)||Hughes, Roy (Newport E)|
|Corbett, Robin||Hughes, Simon (Southwark)|
|Corbyn, Jeremy||Hutton, John|
|Corston, Jean||Illsley, Eric|
|Cousins, Jim||Ingram, Adam|
|Cummings, John||Jackson, Glenda (H'stead)|
|Cunliffe, Lawrence||Jackson, Helen (Shef'ld, H)|
|Cunningham, Jim (Covy SE)||Jamieson, David|
|Cunningham, Rt Hon Dr John||Janner, Greville|
|Dafis, Cynog||Johnston, Sir Russell|
|Dalyell, Tam||Jones, Barry (Alyn and D'side)|
|Darling, Alistair||Jones, Jon Owen (Cardiff C)|
|Davidson, Ian||Jones, Lynne (B'ham S O)|
|Davies, Bryan (Oldham C'tral)||Jones, Martyn (Clwyd, SW)|
|Davies, Chris (L'Boro & S'worth)||Jowell, Tessa|
|Davies, Rt Hon Denzil (Llanelli)||Kaufman, Rt Hon Gerald|
|Davies, Ron (Caerphilly)||Keen, Alan|
|Davis, Terry (B'ham, H'dge H'l)||Kennedy, Charles (Ross,C&S)|
|Denham, John||Kennedy, Jane (L'pool Br'dg'n)|
|Dewar, Donald||Khabra, Piara S|
|Dixon, Don||Kilfoyle, Peter|
|Dobson, Frank||Kirkwood, Archy|
|Donohoe, Brian H||Lestor, Joan (Eccles)|
|Dowd, Jim||Liddell, Mrs Helen|
|Dunwoody, Mrs Gwyneth||Litherland, Robert|
|Eagle, Ms Angela||Livingstone, Ken|
|Eastham, Ken||Lloyd, Tony (Stretford)|
|Etherington, Bill||Llwyd, Elfyn|
|Evans, John (St Helens N)||Loyden, Eddie|
|Ewing, Mrs Margaret||Lynne, Ms Liz|
|Fatchett, Derek||McAllion, John|
|Faulds, Andrew||McAvoy, Thomas|
|Field, Frank (Birkenhead)||McCartney, Ian|
|Fisher, Mark||Macdonald, Calum|
|Flynn, Paul||McFall, John|
|Foster, Rt Hon Derek||McKelvey, William|
|Foster, Don (Bath)||Mackinlay, Andrew|
|Foulkes, George||McLeish, Henry|
|Fyfe, Maria||Maclennan, Robert|
|Galbraith, Sam||McMaster, Gordon|
|Galloway, George||McNamara, Kevin|
|MacShane, Denis||Rogers, Allan|
|McWilliam, John||Rooker, Jeff|
|Madden, Max||Ross, Ernie (Dundee W)|
|Maddock, Diana||Rowlands, Ted|
|Mahon, Alice||Ruddock, Joan|
|Mandelson, Peter||Salmond, Alex|
|Marshall, David (Shettleston)||Sedgemore, Brian|
|Marshall, Jim (Leicester, S)||Sheerman, Barry|
|Martin, Michael J (Springburn)||Sheldon, Rt Hon Robert|
|Martlew, Eric||Shore, Rt Hon Peter|
|Maxton, John||Short, Clare|
|Meacher, Michael||Simpson, Alan|
|Meale, Alan||Skinner, Dennis|
|Michael, Alun||Smith, Andrew (Oxford E)|
|Michie, Bill (Sheffield Heeley)||Smith, Llew (Blaenau Gwent)|
|Milburn, Alan||Snape, Peter|
|Miller, Andrew||Spearing, Nigel|
|Mitchell, Austin (Gt Grimsby)||Spellar, John|
|Morley, Elliot||Squire, Rachel (Dunfermline W)|
|Morris, Rt Hon Alfred (Wy'nshawe)||Steel, Rt Hon Sir David|
|Morris, Estelle (B'ham Yardley)||Steinberg, Gerry|
|Morris, Rt Hon John (Aberavon)||Stevenson, George|
|Mowlam, Marjorie||Stott, Roger|
|Mudie, George||Strang, Dr. Gavin|
|Mullin, Chris||Straw, Jack|
|Murphy, Paul||Sutcliffe, Gerry|
|Nicholson, Emma (Devon West)||Taylor, Mrs Ann (Dewsbury)|
|Oakes, Rt Hon Gordon||Taylor, Matthew (Truro)|
|O'Brien, Mike (N W'kshire)||Thompson, Jack (Wansbeck)|
|O'Brien, William (Normanton)||Timms, Stephen|
|O'Hara, Edward||Tipping, Paddy|
|Olner, Bill||Touhig, Don|
|O'Neill, Martin||Turner, Dennis|
|Orme, Rt Hon Stanley||Tyler, Paul|
|Parry, Robert||Vaz, Keith|
|Pearson, Ian||Walker, Rt Hon Sir Harold|
|Pendry, Tom||Wallace, James|
|Pickthall, Colin||Walley, Joan|
|Pike, Peter L||Wardell, Gareth (Gower)|
|Pope, Greg||Wareing, Robert N|
|Powell, Ray (Ogmore)||Watson, Mike|
|Prentice, Bridget (Lew'm E)||Welsh, Andrew|
|Prentice, Gordon (Pendle)||Wicks, Malcolm|
|Prescott, Rt Hon John||Wigley, Dafydd|
|Primarolo, Dawn||Williams, Rt Hon Alan (Sw'n W)|
|Purchase, Ken||Wiliams, Alan W (Carmarthen)|
|Quin, Ms Joyce||Wilson, Brian|
|Radice, Giles||Winnick, David|
|Randall, Stuart||Worthington, Tony|
|Raynsford, Nick||Wray, Jimmy|
|Reid, Dr John||Wright, Dr Tony|
|Rendel, David||Young, David (Bolton SE)|
|Robertson, George (Hamilton)||Tellers for the Noes:|
|Robinson, Geoffrey (Co'try NW)||Mr. Joe Benton and|
|Roche, Mrs Barbara||Mr. Eric Clarke.|
§ Question accordingly agreed to.
§ Bill read a Second time.
§ Committee tomorrow.