§ Amendments made: No. 11, in page 416, line 14, leave out 'Section 21 (2)(b).'.
§ No. 67, in page 431, line 9, at end insert—
|`(22A) LIFE ASSURANCE BUSINESS LOSSES|
|Chapter||Short title||Extent of repeal|
|1988 c. 1.||The Income and Corporation Taxes Act 1988||Section 436(3)(aa). Section 439B(3)(b). Section 441(4)(aa).|
|1995 c. 4.||The Finance Act 1995.||In Schedule 8, paragraph 16(4) and (5).|
§ These repeals have effect in accordance with paragraph 10(2) of Schedule (Life assurance business losses) to this Act.'.
§ No. 64, in page 433, line 34, at end insert—
|`( ) CAPITAL ALLOWANCES: ROLL-OVER RELIEF IN RESPECT OF SHIPS|
|Chapter||Short title||Extent of repeal|
|1990 c. 1.||The Capital Allowances Act 1990.||In section 33C(2), the words "to be", in the first place where they occur.|
§ No. 61, in page 434, line 36, column 3, leave out '"or (c)" and'.
§ No. 62, in page 434, line 40, column 3, leave out from '8' to end of line 47 and insert
§ `, paragraphs 5 to 7.'.—[Mr. Jack.]
§ Order for Third Reading read.1213 5.19 pm
§ The Chief Secretary to the Treasury (Mr. William Waldegrave)
I beg to move, That the Bill be now read the Third time.
It seems quite a long time since the Budget and it is worth reminding ourselves of the important and interesting matters in the Bill. No doubt, everything that we discussed in Committee and on Report was important, but some matters are rather spectacular. The Bill increases personal allowances by £100 more than indexation. It widens the lower rate tax bands by £700, which is £500 more than indexation. It reduces income tax on savings income to 20 per cent. for basic rate taxpayers and cuts the basic rate of tax to 24 per cent.
The elite little band of my hon. Friends who are here for Third Reading outnumber the two faithful souls on the Opposition Back Benches, and they are wholly outnumbered by the right hon. Member for Lagan Valley (Sir J. Molyneaux). It is never a surprise to see the right hon. Gentleman in his place and contributing to our debates.
This important Bill makes significant reductions in capital gains tax and inheritance tax, the threshold of which will he increased by £40,000 more than indexation up to £200,000. That means that the number of estates paying that tax will be reduced by a third. The leader of the party to which the right hon. Member for Lagan Valley belongs, the hon. Member for Upper Bann (Mr. Trimble), has come to reinforce him, and that makes the proportionate representation even more spectacular.
The Bill's income tax changes will benefit 26 million taxpayers and 14 million savers. Some 220,000 people—low earners and pensioners—will be taken out of tax altogether and more than 6 million people—a quarter of all taxpayers—will pay tax at 20 per cent. The income tax bill of a family on average earnings will be cut by about £235 a year. Those changes will start to appear in pay packets the week after next at the start of the new tax year.
As the experts on the Committee know, the Bill is not just about personal tax reductions. It modernises— hesitate to say simplifies—the tax system in several important respects and contributes to the Government's aim of a low-tax economy for business as well as for individuals. which is making Britain the enterprise centre of Europe. I shall give one or two quick examples, which will be familiar to hon. Members who are in the Chamber. The Bill legislates for the new landfill tax which, as the Chancellor memorably said, puts a tax on rubbish to enable the tax on people to be lifted a little. That is obviously an environmentally and economically sensible tax.
The Bill completely updates the arrangements for handling corporate loan relationships. Some members of the Committee will be dreaming about that subject, or perhaps singing about it, in the months ahead. I cannot claim that that is a simple subject but it is now better legislated for.
There are new measures to encourage participation in employee share ownership schemes, especially for lower-paid staff. That builds on our achievement of helping employees to acquire a true stake in their companies by owning shares in them. The members of the Committee put in a great deal of work and have improved the Bill. Hon. Members from all parties contributed to that but I pay tribute to my hon. Friends in 1214 particular. Those who are in the Chamber tabled, and had accepted, amendments that improve the Bill in various ways. Some of those amendments were tabled on Report.
I shall mention a few of the improvements that the Committee made to the Bill. My hon. Friends, supported by some Opposition Members, made representations about the landfill tax. There were amendments to exempt dredgings from inland waterways and harbours, an issue that we debated yesterday, and to exempt naturally occurring waste from mining and quarrying operations. There were a number of other changes on definitions and on the coverage of that tax, and members of the Committee are to be congratulated on all those improvements.
I am a leading member of the House of Commons classic car club—I think that I may be the only member apart from its chairman—and I certainly pay a high subscription. Of special interest to me were the representations by Lord Montague of Beaulieu and by others. Lord Montague has pressed us more on this part of our heritage than anyone else, and made representations about historical lorries, fire engines, road rollers and other types of traction engines to which we have extended the Chancellor's exemption. That will bring a great deal of pleasure to many people and will help to conserve an important part of our national heritage.
On Report, the House debated loan relationships, which is not a subject that one enters into unadvisedly because it is complex and important. We listened to those who mentioned some flaws in the provisions and to more general comments that the anti-avoidance provisions went too far, We made some helpful changes in that area. We made further improvements in the self-assessment measures and adopted the suggestion by my hon. Friend the Member for Carshalton and Wallington (Mr. Forman) on friendly societies to allow them wider access to life insurance policies.
I have given a selection of the improvements that were made in Committee. We were ably led by my hon. Friends the Financial Secretary and the Economic Secretary and my right hon. Friend the Paymaster General, all of whom worked very hard.
The United Kingdom economy has been growing steadily for nearly four years, and the recovery over that period has been the most robust of any major European economy. Far from slipping down the world prosperity league, as the Labour party likes to claim, the United Kingdom has closed the gap on many of its competitors. Over the last European cycle, which is the proper measure, United Kingdom income per head grew as fast as that of Germany and faster than those of France, Italy or the European Union average.
The fundamentals for strong and continuous growth with low inflation remain in place. We are enjoying the longest sustained period of low inflation for almost 50 years and, of course, in the period before that statutory controls and all kinds of wartime controls were in place. The Bank of England's latest inflation forecast shows that underlying inflation in the United Kingdom is more likely than not to be somewhat below 2.5 per cent. in two years' time, which is our target.
Company profits and the health of corporate Britain have rarely been better. Profits, which are already high, rose by another 6 per cent. in 1995. Investment in plant and machinery manufacturing had a further year of strong 1215 growth, and that is very satisfactory. Research that was commissioned by the Treasury shows that our better performance in manufactured exports in the 1990s is likely to come from better quality as well as from price.
That is an encouraging trend and it is reinforced by the further good news that, although there has not been much investment in new buildings, Britain is doing well in investment in the latest manufacturing machinery. There is a good article in today's edition of the Financial Times about the British machine tool industry, which is a good indicator that firms are investing in the latest machinery. That is good for the future.
Labour's response to all that is a little confused, because, for an Opposition, it is always pleasant to have bad news to point to so that they can blame their opponents. It is genuinely difficult to argue that there is much wrong with the British economy now or that there will be in the foreseeable future. That was confirmed recently by Lord Desai, professor of economics at the London school of economics. He had an enjoyable exchange by remote control with the hon. Member for Oxford, East (Mr. Smith), in which Lord Desai said:I have talked to people and they are beginning to feel a reduction in the mortgage payment already and what happened today"—the latest interest rate reduction—is going to increase that. We just have to be aware, in the Labour party, that these things are happening and it's no good denying them.For greater clarification, he concluded:All I am saying is the economy is going to look very good.That is not the place from which to attack one's opposition.
The response of the hon. Member for Oxford, East to that was a little ungracious. He did not try to attack Lord Desai's economics—he would have been unwise to do so: Lord Desai is a Labour party member who is an extremely distinguished man—so the hon. Gentleman accused him of being a peer, and said that he is "an academic economist". Using the word "academic" as an insult is not becoming for someone who represents part of my former university town, but worse than that, the hon. Gentleman said that Lord Desai is a peer, so we need not pay any attention to him.
The trouble is that it is not Lord Desai's fault that he is a peer; it is the Labour party's fault. It made him a peer, so it is jolly bad luck on the hon. Gentleman to say of Lord Desai, "Well, he's an old fogey. He's not only an academic, but he's a peer. Terrible fellow—you can't pay any attention to him." Lord Desai, not for the first time, has inconvenienced Opposition Front-Bench Members by saying something that is absolutely on the button, which is that the British economy is strong and looks as though it will remain strong and that it is unwise of the Labour party to attack it.
With its strategy of bringing tax responsibly and steadily down as it can be afforded, improving the tax system, bringing more people into the lower rate tax bands, taking many householders out of the fear of inheritance tax and simplifying and lifting capital gains tax for many people who have built small companies and want to pass them on to their family, the Bill carries forward my right hon. and learned Friend's extremely successful economic strategy, and it does so with the support of the House.
1216 Throughout, the Labour party has taken a strong position: it has abstained. I forget who it was, but, in the middle ages, someone once refused the office of the papacy and became known as the great refuser. This year, the Labour party is the great abstainer. On almost any issue we can think of, after grave and careful thought, it abstains. That has been its position before, and probably will be again today. That is a curious position for a party represented by people such as the hon. Member for Bristol, South (Ms Primarolo), who, in my experience, likes not to abstain from things, but to fight at the front of the barricades and who has, for the time being, been suppressed.
§ Mr. Andrew Smith (Oxford, East)
No speech from the Chief Secretary to the Treasury is complete without the mandatory attack on my hon. Friend the Member for Bristol, South (Ms Primarolo). He just managed to get it in at the end. He did not, of course, give the complete story of my indirect interchange via the remote screens on "Newsnight" with Lord Desai. The point which I was making was that I had come fresh from talking to my constituents in the Blackbird Leys community centre and that I had much more confidence in what they had to say about the economy and about their being in touch with the realities of job insecurity and downward mobility under this Government than Lord Desai, in what he was quoted as saying.
As we are on the subject of people who have been appointed to their respective positions by parties on both sides of the House and as the Chief Secretary quotes Lord Desai, I will simply respond by referring to Patrick Minford, who has been appointed not as a peer but as an independent adviser to the Chancellor of the Exchequer. Mr. Minford is not simply criticising. He is saying that the Chancellor should be sacked; he is saying that the Chancellor must go. Ministers should therefore he very careful about quoting Lord Desai at us. One never knows what Patrick Minford will say next.
As for the Chief Secretary's claims about the Government's economic record, the fact is that Britain has gone from 13th to 18th in the world prosperity league. Under this Government, we have the worst record on job generation in Europe, our share of total European investment has gone down and growth has averaged just 1.9 per cent.—1.7 per cent., if we exclude oil. During the Conservative party's term in office, we have had a worse record on inflation than any country in Europe bar Italy, so we will take no lectures from the right hon. Gentleman and his friends about relative performance compared with Europe. They have nothing to be proud of and they should be apologising to this country's people for their record. not boasting about it.
On Second Reading, I said that the Bill was profoundly disappointing, even if the sins of omission were greater than those of commission. I said that it had all the hallmarks of a tired and frightened Government who have no new ideas to revitalise a sluggish economy and no vision to bring together a divided society or to embark on the training and investment revolution that Britain needs.
During the Bill's progress through the House and Committee, we have exposed the fact that this is not a Bill for jobs, investment or fairness. It does nothing to advance the opportunity for everyone to make the most 1217 of his or her potential with a true stake in society. It does nothing to build a strong economy or a fair society, still less to recognise how the one depends on the other. As I said, however, those are sins of omission rather than of commission.
If we judge the Bill for what it contains, we apply a number of categories. There are the things that we welcomed, including the 1 p tax cut, increased personal allowances, the lower savings rate and the introduction of housing investment trusts. There are the things that we supported in principle and sought, with some success, to improve in practice, including the landfill levy and the reform of loan relationships. There are the things about which we remain concerned, including the burdens of self-assessment, especially on the self-employed and small businesses. There are the things that we opposed, such as the extension of personal allowances to residents of the European Economic Area.
There were also victories. A notable victory was the Government's commitment—the Chief Secretary should not laugh at this; we were pleased that they gave this concession—to uprate in future years the blind person's allowance in line with inflation. That is a long overdue and welcome measure.
Taking it all together, it would be both contrived and churlish to pretend that there is not a good deal more in the Bill that we support than we oppose. On that basis, we shall possibly disappoint some Conservative Members and certainly disappoint their colleagues in Conservative central office, by not voting against the Bill.
Under this Government, there have been two significant developments in relation to the Bill's proceedings, aside from its contents, which give us cause for concern. We have, first, the phenomenon of the shrinking Chief Secretary. I have been considering the statistics of Chief Secretaries' contributions to Finance Bill Standing Committees. I find that, for the first decade of Conservative Government, it was normal for a Chief Secretary to notch up more than 20 contributions during those proceedings.
Peter Rees comes top in terms of contributions, with 31 during the proceedings in 1983 and 1984. When Chief Secretary, the Prime Minister managed 28 contributions in 1987–88, and the right hon. Member for Kingston upon Thames (Mr. Lamont) managed 21 in 1989–90. But since then, a decline has set in. The right hon. Member for Enfield, Southgate (Mr. Portillo) managed 13 in 1992–93 and 18 in 1993–94, but what happened then? Last year, the right hon. Member for South Thanet (Mr. Aitken) managed only seven and, this year, the present Chief Secretary made just three contributions. Perhaps he had other things on his mind.
§ Mr. Smith
It is interesting to note that, even as Chief Secretaries' contributions to Finance Bills' proceedings become smaller and smaller, so the Finance Bills become bigger and bigger.
That is the second serious cause for concern. Parliament has added more than 1,300 pages of primary legislation to taxes Acts in the past five years, and this evening we shall be adding a further 400 pages. It is incumbent on us all in the House—it is a genuine cross-party concern— 1218 to find ways in which the process can be simplified, legislation can be made more purposive, perhaps better expressed, and the processes of scrutiny can be improved. As taxes legislation is rewritten, as has been agreed, we will have to consider ways in which hon. Members and the public can contribute to the process.
What will the Finance Bill be remembered for? Will we remember the first cut in the basic rate of income tax for seven years? I think not. That memory will be tarnished by the Government's imposition of the equivalent—as the Chancellor of the Exchequer admitted—of a 7p rise in the basic rate, and more than 20 increases in taxation since the general election.
Will the Finance Bill be remembered as a Bill for business? After all, in his Budget speech, the Chancellor engaged in a little theatrics, trailing the income tax cut with the cut in the small companies' rate of corporation tax. Considering how much difference the cut makes to companies and given that they have realised that the VAT threshold has not been uprated in line with inflation and business rates have risen by 5 per cent. more than inflation, I do not think that the Bill will be remembered as great for business.
Could the Finance Bill be remembered as somehow, in the fantasies of Conservative Members, echoing Lord Lawson's tradition of omitting one tax every Budget? Unfortunately, it cannot, because the Government have introduced a new tax on average in almost every Budget, and certainly in every other Budget. Four new taxes have been introduced in five Finance Acts since the general election, along with 23 tax increases—from the Government who at the election promised to cut taxes year on year. The Bill will not be remembered for tax cutting. Nor will it be remembered, as I have said, as a simplifying Finance Bill.
The Finance Bill might be remembered for the fact that we have had the third or the fourth attempt at getting self-assessment right. We still have a great deal of concern, however, that self-assessment will not work in the straightforward, simple and unburdensome way that Conservative Members seem to think it will. If the Government will not, even at this late stage, reconsider our arguments for the delay of the introduction of self-assessment for a year, I would at the very least urge them to redouble their provision of advice and support, especially for the self-employed—and small businesses—who will find the introduction of new scheme very onerous, along with, according to the Red Book, the extra £850 million that they will have to pay, which we have debated before.
I suppose that the Bill might be remembered for the extensive debate on loan relationships. We believe that it was entirely desirable that that complicated area of legislation was reviewed, made consistent and codified. The way in which the matter was handled—there was late consultation, a whole flood of very late and significant amendments without the Opposition or interested parties outside the House being given the opportunity to comment properly—was wholly unsatisfactory. The experience of the House time and again is that, if we legislate in haste, we have to repair the damage later. I will be very surprised if we do not have to revisit the issues of loan relationships and—for the fourth or fifth time—self-assessment, in future Finance Bills.
1219 The Finance Bill gives Conservative Members nothing to boast about. It has indeed been a dull and drab Bill, perhaps enlivened only by the number of Conservative Members on the Committee who, as we heard from the Chief Secretary, are members of the classic car club, which left a certain mark on the Bill. The Bill has not, and the Government have not, addressed the issues of substance that affect the wealth, unity, fairness and quality of life of our nation. The Bill is characteristic of the Government who produced it.
We shall not oppose Third Reading, not because the Bill is what we would have wanted but because its contents include the measures I mentioned earlier, which we support. We do not oppose for the sake of it and we shall not vote tonight. We and the country look forward to the day when we have the chance to introduce a Bill that the country really needs—the Finance Bill of a Labour Government.
§ Mr. David Hunt (Wirral, West)
I congratulate my right hon. and learned Friend the Chancellor of the Exchequer on his Budget and the Bill. I applaud the leadership of my right hon. Friend the Chief Secretary in Committee, and I praise the speeches of my hon. Friend the Economic Secretary, my right hon. Friend the Paymaster General. and in particular, my hon. Friend the Financial Secretary. Committee proceedings, Report and Third Reading have been very good. The Finance Bill is impressive and will do much to sustain a non-inflationary period of growth that will underpin the creation of jobs by businesses and our reputation as the enterprise centre of Europe, which I applaud.
I thought that the speech of the hon. Member for Oxford, East (Mr. Smith) was very inadequate. I realise that he has so little to say. Indeed, in Committee we waited time after time to hear the Opposition's policies. We waited for an inflation target, a growth prediction, some form of alternative economic policy, but came there none. They have therefore been a rather irrelevant Opposition. but happy, smiling, very nice and courteous. I suppose that I cannot criticise them for their personalities and character, but really in politics one has to have a little more. The cosmetics are starting to crumbling and the make-up on new Labour and the Leader of the Opposition is melting.
I do not know whether, Mr. Deputy Speaker, you have had the chance to see the headline in today's edition of the Evening Standard. It says "Blair Hit by Two Revolts". The article says that the Leader of the Oppositionwas dealt a wounding double blow today when 50 backbench MPs defied him over a single currency and unions branded his flagship training scheme a `nonsense'.We can add a great deal to that. The Opposition are beginning to learn that they cannot just keep opposing and opposing. They have to have some alternative strategy. The Bill represents an agenda for the future creation of jobs.
When I stepped down from the Cabinet last year, I said that my prime objective was more and better jobs in my area of Wirral. Indeed, unemployment in my constituency fell from 3,215 in February 1993 to 2,947 this time last year, and the latest figures show a further fall to 2,776. 1220 Over the last year, unemployment has fallen by 6 per cent. and over the past three years by 14 per cent., but it is still unacceptably high. The Finance Bill will create the right conditions for a continuing fall in unemployment.
One thing which was said in Committee was wholly wrong—that the social protocol does not apply to small businesses. I am afraid that I shouted from a sedentary position, "Nonsense!" I should have liked to quote verbatim from the protocol. If it had any affect on the Bill's provisions, it would do much to destroy jobs in the small and medium-sized business sector. It would destroy jobs generally, as would a statutory minimum wage. Therefore the only real policies that we have had from the Opposition would destroy jobs. That is why I shall continue strongly to defend my right hon. and learned Friend's Budget, which will do much to restore employment in my constituency.
§ Mr. Malcolm Bruce (Gordon)
I apologise to the Chief Secretary for not having been here at the start of the debate. The House will understand when I say that I was detained by dealing with the crisis in the beef industry which deeply affects my constituency. The right hon. Member for Wirral, West (Mr. Hunt) says that he wants to promote jobs. I have lost 100 jobs today and I have hundreds more hanging by a thread. Although I believe that we urgently need some definite policies from the Government, I shall not detain the House on that matter now.
The right hon. Member for Wirral, West said that, if one wished to oppose, one had to have an alternative strategy. The Liberal Democrats do not agree fundamentally with everything that the Government have done—quite the reverse. There are aspects of Government policy that we broadly support, but we have areas of disagreement. We have spelt them out and have said that we would prefer to promote a different strategy.
I point out, especially to the Chancellor of the Exchequer, that this Third Reading debate comes at a time when the strategy on which the Bill and the Budget are based has moved fundamentally against him. The situation is not as happy as the one that he set out at the time of the Budget. It appears, for example, that the borrowing outturn will be even higher and even more adverse than was originally forecast; the forecast itself was a big upsurge compared with the original forecast. Some of us had little belief that a policy based on a growth outturn of 3 per cent. was likely to deliver 3 per cent., and that likelihood is even less today.
It was interesting that the hon. Member for Oxford, East (Mr. Smith) said that the Labour party supported the 1 p cut in income tax. I thought that Labour Members abstained on the issue; they now apparently wish that they had voted in favour of the cut. I remind the House that the Liberal Democrats voted against the cut and we do not apologise for having done so.
§ Mr. Bruce
We did not because we had made our position clear on Second Reading. To have repeated votes when one knows the outcome wastes the time of Committees and of the House. The hon. Gentleman's intervention is rather silly.
1221 We believed that money should be invested in education, and we were prepared to say what our priorities were; there was a perfectly legitimate political difference there. The Government have a different view and they have pursued a different strategy. Nevertheless, the simple economic justification for the 1p income tax cut looks even weaker now than we believed it was when it was introduced.
The Chancellor knows that much of my argument with him is a result of my belief that we need to get borrowing under control and that, if we have alternative priorities, we must put them within that framework. Even on the Government's economic analysis, a 1p cut in income tax was not justified at the time of the Budget and was driven by political and not economic reasons. I at least appreciate the fact that the Chancellor resisted deeper cuts, which would have left his Government more exposed and more embarrassed now.
The current crisis in the beef industry adds a further dimension which alters yet again the implications for borrowing and taxation. I do not blame the Government for not anticipating the crisis at the time of the Budget, but I hope that they will recognise that, if a revision of the Budget strategy is required in the national interest, both to ensure that consumers get the encouragement and reassurance they need and to ensure that the industry survives, a substantial amount will be needed to achieve that objective.
The Prime Minister said during Question Time today that the beef industry employs 650,000 people and has a turnover of £5 billion a year. Every day the Government delay getting the industry moving again, jobs are at risk. I said that I had lost 100 jobs today in my constituency. The companies have said that some of those jobs will not be re-created, but that some of them are lay-offs. However, hundreds more jobs hang by a thread, and that situation is repeated across the country. It is very important that the Government come up with a clear confidence-building package. If there are serious implications for the financial calculations on which the Budget has been based, the Government must be honest enough to say so; they will get support from the Liberal Democrats.
I hope that the Government will not stand firm for tax cuts at all costs, regardless of the requirements not only of education but of consumer safety and reconstruction of an industry. Governments can often be knocked off course. If this Government put tax cuts ahead of the deeper and wider national interest, they will reap the consequences, because people recognise that the crisis requires some definite action.
The Liberal Democrats have set out an alternative strategy. In Committee, we identified a number of concerns, especially the future of our whisky industry, the impact of the tax cuts on charities and problems for the disabled and small businesses. Regrettably, we did not get the reaction from Government that we would have wished, but at least the issues were aired. Those who looked at the voting record will see that we took a completely independent line and made our judgment on the individual issues. On a number of occasions, we voted with the Government, and on others we voted with the Labour party, on the merits of the argument.
I do not believe that on Third Reading the Bill has been improved by the background circumstances. I do not suggest that we should vote against it and I believe that 1222 there is a lot in it that needs to be done. We have supported the Government, particularly in their wish to go ahead with self-assessment. I do not doubt for a minute that the Labour party thinks that it is on to something that is an alternative to the poll tax. A major change is bound to cause concern, disruption and confusion.
However, having embarked on the change and having got people prepared for it, it would not be in anybody's interest to abandon it at this late stage. Although I have no doubt that political mileage can be made out of having tried to delay or oppose the change, I believe that, once such a decision has been made, it is better to get the new system into place, to sort out the problems and to get it working. We have supported the change, in principle, from the outset.
The Government may well have to announce to the House substantial revision of their Budget strategy in the coming weeks and months. We will not oppose the Bill, but we place on record our criticism of the fundamental basis of the Government's analysis and economic policy, as it is our right to do.
§ Mr. Christopher Gill (Ludlow)
In view of the importance of the next debate and in deference to the Government Whips, I shall make but a brief contribution on Third Reading. It is customary on these occasions for a Back Bencher to pay a tribute of thanks to the members of the Finance Bill Committee for their hard work and diligence in bringing the Bill to the House for Report and Third Reading.
It is also customary on Third Reading for the hon. Member for Ludlow to say a few words about capital taxation. I thought that this year, we would make a little more progress than we have done. I am grateful for the progress that has been made, but when I heard my right hon. Friend the Prime Minister say, last July, that he intended to abolish inheritance tax and capital gains tax, my heart leaped. On so many occasions in the past, I have said that there is absolutely no justification for those two taxes in a capitalist society and that they should not be perpetuated by a Government comprised of Conservative Members who believe that the reduction and abolition of taxes stimulate wealth creation and lead to greater revenue for the Exchequer in the long run.
I draw the attention of the House, as is my wont, to the figures for capital gains tax and inheritance tax. For 1994–95, the most recent full tax year, capital gains tax was worth £900 million to the Treasury, a figure exceeded only by the cost of the reliefs and allowances against capital gains tax, which totalled £965 million. Similarly, inheritance tax raised £1.4 billion for the Treasury, after allowing for reliefs and allowances of £365 million.
The effect of the Government's tax cutting in the past has always been to stimulate additional revenue. What I deplore about the continuation of capital taxes is the enormous amount of time, effort and resource deployed by some of the best brains in the country to try to avoid those taxes and get round them. I also greatly resent the way in which capital taxes tie up financial decisions that would otherwise be made on purely commercial and economic grounds.
The House would be surprised if I sat down without pointing out that, were it not for the massive contribution that this country makes to the European Community, we 1223 could abolish not only capital gains tax and inheritance tax but air passenger duty, insurance premium tax, landfill tax and even stamp duty, too. Would not that be something to sing about as we face an election in the coming year?
§ 6 pm
§ Mr. Paddy Tipping (Sherwood)
This is the first year in which I have had a real involvement with the passage of the Finance Bill. I spoke in the Budget debate, I was on the Standing Committee and I am here to the end. This is virgin territory for me—although I had better be careful how I say that.
Let me give the House an impression of how I found the experience. First, I was astounded by the length of the Bill. Secondly, although I am well educated and relatively articulate, I found working through that Bill extremely hard. I believe that the whole process needs to be simplified. It could be made easier if amendments were not tabled at a very late stage. I appreciate that that is sometimes necessary, but it has certainly made life more difficult. Moreover, legislation passed in haste often has to be revisited. I am already conscious of a whole range of outstanding issues that need to be revisited through amendments to the law, and of many matters that Ministers will consider at a later date.
Having said that, I thank my hon. Friends on the Front Bench for their tolerance and for helping to educate me. By the way, that does not amount to a promise that I shall ever do it all again—I am getting my retaliation in first.
One result of my time on the Standing Committee is that I have begun to take a real interest in bingo, and have visited several bingo halls. I have not yet become an addict, but I have come to appreciate what an important role bingo plays. The whole face of gambling has been changed by the national lottery. The Finance Bill accepts that fact, and there have been changes in the football pools and in the duty on betting on racing, but nothing has been done for bingo. Bingo is a populist subject, and I know that future Finance Bills will have to deal with it.
For the benefit of my Front-Bench colleagues, I simply add that for bingo callers, No. 10 is now "Blair's lair".
§ 6.3 pm
§ Mr. Tim Smith
The hon. Member for Oxford, East (Mr. Smith) rattled off a series of criticisms of the Government's economic achievements. Indeed, he rattled them off so quickly so that it was impossible to intervene, so I now want to pick up one point from his speech. He complained about the Government's record on job creation.
If there is one measure by which people judge the success or otherwise of a Government's economic policy, it is probably job creation. The Department for Education and Employment has published an excellent book called simply "Jobs".
§ Mr. Smith
I am glad to hear that. If the hon. Gentleman has read the book, he will know that this country has a larger proportion of the adult population in 1224 work than any other member of the European Union. He will also know that we have lower unemployment than the average—indeed, we have the lowest unemployment of any of the major members of the EU. In fact, we are on a par with Germany, but the difference between the two countries is the fact that our unemployment is falling while Germany's is rising.
Why is that happening? If the hon. Gentleman looks at another table in the book, he will see what the on-costs are for every £100 of the direct costs of employing someone, such as wages and salaries. The on-costs are £18 in the United Kingdom, £36 in France and £44 in Germany. Yet the Labour party wants to add even more to payroll costs, directly through the minimum wage and indirectly by introducing the social chapter.
It is easy to complain about the Finance Bill on the ground that it does not somehow encapsulate a great strategy. However, what it does is add to what has already been done. The process is incremental. For example, the rate of corporation tax is a significant factor when people are deciding whether to invest in the United Kingdom. What was the rate in 1979? It was 52 per cent. What is it today? It is 33 per cent. What was the standard rate of income tax 17 years ago? It was 33 per cent. What is that rate today? It is 24 per cent., with a target of 20 per cent.
I welcome the fact that the Bill contains incremental changes that have led to substantial reductions in direct taxation. It also contains many other measures that I think were welcome. We had a good Committee stage, and I shall finish by thanking my hon. Friends the Treasury Ministers.
First, I thank my hon. Friend the Economic Secretary, who dealt so conscientiously with the complex area of loan relationships. Then I thank my right hon. Friend the Paymaster General, who piloted through a completely new tax, the landfill tax. I believe that we now have that about right. My hon. Friend the Financial Secretary dealt with a wide range of income tax matters, and looked with an open mind on several proposals made by hon. Members on both sides of the Committee. I also thank my good friend the doctor—the Lord Commissioner to the Treasury, my hon. Friend the Member for Woodspring (Dr. Fox)—who kept us all in order. I thank all of them for their efforts; the Bill has been improved as a consequence.
§ 6.6 pm
§ Ms Primarolo
The hon. Member for Beaconsfield (Mr. Smith) admitted that he agreed with us that the Budget did not have a strategy. I shall return to that subject, but first I thank my hon. Friend the Member for Sherwood (Mr. Tipping), and agree with him about the length and complexity of the Bill. I think that at times all members of the Committee struggled to get to grips with the intention of many of its clauses. Indeed, the Economic Secretary to the Treasury agreed to allow Opposition Front-Bench spokesmen additional briefings with the civil servants to try to ensure that everything was correct. I am grateful for that.
We greatly valued the contributions by my hon. Friend the Member for Sherwood. We are pleased that he is so interested in bingo, and hope that he will maintain his interest in Finance Bills, so that he will be an active Member on our side when we are in government, pushing forward Labour's proposals.
1225 The right hon. Member for Wirral, West (Mr. Hunt) said that the Budget was about further job creation. I should remind him of the Government's record in that respect: 1.2 million fewer people are in work today than when the Prime Minister took office; 8 million people have had at least one spell of unemployment since the general election. Unemployment under the present Government has doubled, and male unemployment in the United Kingdom is higher than the European average. According to labour market trends, fewer people are in work now than at the time of the general election.
When we consider the Government's claims to have created new jobs, we see that the facts do not live up to the rhetoric. Among major European countries, since 1979 the UK has had the worst record on job creation. If we consider the situation elsewhere, we see that employment in Japan has grown 18 times faster than it has in the United Kingdom; it has grown 21 times faster in the United States than here.
On the Government's figures, the annual financial cost of unemployment to the taxpayer is more than £20 billion, and that figure does not include the human misery and insecurity that are attached to it. This Budget does nothing to address those facts. On an interest that the Chief Secretary shares with me, he will note that the Bank of England has today added to the continuing insecurity by announcing the closure of its regional branches in Bristol, Manchester, Newcastle and Birmingham. That means that 150 jobs will go. The Bank of England said in its letter to its employees in those cities:I understand that you will be disappointed wit.. our decision.The Chief Secretary referred to the landfill tax. We welcome that tax, but we made it clear in Committee that it needs a great deal of improvement. He referred to the 1 p tax cut. What he forgot to mention is that, since the Conservatives were returned to office in the 1992 general election, there has been the equivalent of a '7p increase in tax. So taxes are 7p up and 1p down, and they expect to be congratulated.
The Chief Secretary, worse still, forgot to mention the forced rise—an average of 8 per cent.—in council taxes. In the city that he and I represent, the increase has been 12.5 per cent. He forgot to mention increased charges in prescriptions, bus fares and public services. He forgot to mention that, at the most recent Treasury Question Time, he admitted that living standards in this country had fallen in the previous 12 months, yet the Budget does nothing to address that fact.
The right hon. Gentleman forgot to mention cuts in the energy conservation programme, and that 200,000 homes that would have had insulation and greater energy efficiency will not be insulated. The Government cut the budget for that programme by £30 million. He forgot to mention—as the Government are apparently interested in job creation—that they cut the community action programme, cutting 40,000 jobs for vulnerable, unemployed people desperately seeking work.
The Finance Bill fails to match up to the challenges facing this country: jobs, investment and fairness. It does nothing for long-term investment. It does nothing to address the central problem: we still have 2.2 million people unemployed, and others suffering huge insecurity at work, which is having a detrimental effect on the housing market.
1226 When the Chief Secretary mentioned inheritance tax, he did not mention the 25,000 housing repossessions in the first half of 1995 or the 1.7 million home owners trapped in negative equity. He did not mention that personal debt is still three times higher than it was in 1979 or that, in 1994, we had the lowest inward investment for eight years. He did not mention that Britain is bottom of the league for investment as a share of GDP, and that it has the worst balance of trade figures for more than three years and the lowest share of world trade in a century.
Britain is 14th in the European Union in balance of trade figures. The Financial Secretary will not mention, because he does not like the facts, that Britain has fallen from 13th to 18th in the world prosperity league.
We judge the Government on what they have done for jobs, investment opportunities and fairness, and they have failed on each account. The statistics blow apart their pathetic claim to be making Britain the enterprise centre of Europe. They need to be reminded that one in five non-pensionable households have no one in work—trapped in isolation, without hope and without a job. This Budget does nothing for those people.
Britain needs a strategy to increase productivity, and profitable long-term investment to secure sustainable growth, rising living standards and a quality of life and public services for the future. There is no such investment in the Bill.
The Government are stumbling from one crisis to another. Their only function is to survive. They are treating this country as if they were a company holding a closing-down sale, in which they are trying to sell off everything in sight. They are bankrupt of ideas, they are incompetent, and it is time that they gave the country the chance to judge them on their record. Their record means that they will be thrown out of office, and that the next Finance Bill will be a Labour Finance Bill.
§ Mr. Jack
The speech of the hon. Member for Bristol, South (Ms Primarolo) was a tired speech, frot.. fired Opposition. We ran Opposition Members hard in this Finance Bill, and they are now staggering exhausted from the Chamber because of the excellence of our arguments.
I thank my hon. Friends the Members for Ludlow (Mr. Gill) and for Beaconsfield (Mr. Smith) and my right hon. Friend the Member for Wirral, West (Mr. Hunt) for their kind words and felicitations to my right hon. and hon. Friends and myself on how we dealt with the Bill. We enjoyed working with them on it. We also enjoyed the speech of the hon. Member for Sherwood (Mr. Tipping), who has taken such an interest in bingo, except that my bingo hall's call for No. 10 is "Major's there", and they all shout, "And he's going to stay there for a long time."
The hon. Member for Bristol, South concluded the proceedings for the Opposition by chastising us on jobs. I am sorry that she has not, while preparing her lengthy oration today, had an opportunity to read my remarks of yesterday in more detail, when I put on record the excellence of what we have done in the sphere of job creation and work, and how our policies in the Finance Bill will deliver even more.
I have posted a copy of "The UK at Work: Key Facts" to the hon. Member for Oxford, East (Mr. Smith), and I shall do the same for the hon. Member for Bristol, South. To save her a little reading time, however, I shall remind her that 1227Workforce in employment has increased by 2.0 million since March 1983.1.3 million more self-employed than in 1979.UK unemployment is lower than EC average … Spain (22.2 per cent.), Ireland (14.67 per cent.), France (11.6 per cent.) and Italy (12.6 per cent.)I am glad that we are down towards the bottom of the European unemployment league. That is a proud record of fact that the Government will stand on and defend in any court that the hon. Lady chooses.
If we are as bad as the hon. Lady said, how does she account for the fact that we are No. 1 for inward investment in Europe? That investment is still growing, and it will be sustained by this Finance Bill. The Bill makes into law a Budget for confident growth, for the long-term prosperity of this country.
My right hon. Friend the Member for Wirral, West pointed out one of the missing facts about Labour in relation to the Finance Bill. Its performance was lamentable. One year ago, my right hon. Friend the then Financial Secretary asked Labour Members these questions:Will they spend more or less than a Conservative Government? Will they tax more or less than a Conservative Government? Will they borrow more or less than a Conservative Government?"—[Official Report, 4 April 1995; Vol. 257, c. 1616.]Labour Members have had a year to think of answers to those questions, and they have failed so to do. We teased that fact out in the debate on this Finance Bill.
I thought that we might soon be able to get those answers, because the right hon. Member for Sedgefield (Mr. Blair) is to hold a ballot on his party's manifesto. As a result, 365,000 party members will be consulted on all the Labour party policies, but when it comes to tax and spending, what will those members decide on? Nothing, because those facts and figures will be missing, just as they were during the Opposition's deliberations on the Finance Bill.
The Opposition's policy on the Finance Bill was, "When in doubt, ask the Government for a report. We don't have any ideas, but we'd love to have some assistance from the quality side of the House with the facts." They proposed reports on Customs and Excise simplification, lower taxation of savings vehicles, charitable events, the environment, shipping and employment. They were all a substitute for any ideas of their own. Their paucity of contribution was lamentable.
When the Opposition did contribute, what did they do with their time? They did not scrutinise any of the Bill's content on stamp duty. No, they saved their allocation of time to spend well over an hour and a quarter arguing about a simple and beneficial change to keep Britain's motoring heritage on our roads. Such were the Opposition's priorities in Committee. Instead of putting to the test of debate their proposals for a 10p tax and a windfall tax, they evaporated against the searing heat of debate from my right hon. and hon. Friends. I am delighted that the Opposition have now seen the error of their ways.
The Finance Bill dealt adequately with self-assessment and revealed the depth of our preparations for it. On fairness, the Bill took three more steps towards the introduction of the 20p tax. The Bill's efforts to improve 1228 investment are borne out by the most recent survey conducted by the Confederation of British Industry, which showed investment intentions up 9 per cent. in January. We have more than adequately justified our record on jobs.
As for the Opposition's false accusation about the tax decrease being equivalent to 1 p down and 7p up, let us remember the dishonesty of the Opposition when they published their previous borrowing policies. They disguised tax increases to the tune of lop on the basic rate. The Opposition failed to address that policy proposal. We have addressed the issue of the £850 million in the Red Book. There will be no double tax hit as a result of self-assessment, which will be well administered when it is introduced.
The Opposition failed in all their attempts to convince the Government of any of their ideas—in fact, they put few ideas before us.
The Finance Bill takes forward the long-term strategy of my right hon. and learned Friend the Chancellor for the prosperity and growth of the country. The country will be well rewarded when the House passes the Bill into law tonight.
§ Question put and agreed to.
§ Bill accordingly read the Third time, and passed.