HC Deb 20 November 1996 vol 285 cc962-4
3. Lady Olga Maitland

To ask the Secretary of State for Scotland what representations he has received from the business community about the effect of the level of taxation on Scottish industry. [3461]

Mr. Michael Forsyth

The Scottish business community is opposed to Labour's tartan tax and to its proposals to introduce a new trade tax by abolishing the uniform business rate.

Lady Olga Maitland

Does my right hon. Friend agree that the proposals to allow local authorities to set the business rate would sink businesses without trace? They would be faced with enormous tax burdens. That would mean that jobs would be lost and businesses would go under. It would add to the burdens of Labour's proposals for a tartan tax increase of 3p in the pound and for an income tax increase of 9p in the pound. Does he agree that there is only one thing for businesses to do: stay with the Conservatives because we shall keep jobs for all?

Mr. Forsyth

I agree with my hon. Friend and commend to her the document "New Labour's Public Expenditure Plans", which was published by my right hon. Friend the Chief Secretary today and which shows that, in addition to the 9p on income tax, we would have to pay 3p in tartan tax and of course the trade tax, which would be levied as a result of abolition of the uniform business rate. The news of consolation from the hon. Member for Hamilton (Mr. Robertson) is that the business rate increases would be limited to increases imposed by Labour councils on the council tax payer, so, in Glasgow last year, business rates would have increased by 19 per cent. That is meant to be the consolation.

Mr. McKelvey

Does the Secretary of State not know that we all know his expertise in taxation? Will he tell the truth and say that, by placing VAT on fuel—a move to which he was a party, and for which he voted—the Government created the most devastating tax that Scotland has had to face since the infamous poll tax? How will he advise old-age pensioners on the issue of whether they should eat or heat?

Madam Speaker

Order. The question deals with the level of taxation on Scottish industry. I hope that the hon. Gentleman will make his question pertinent to it.

Mr. McKelvey

You are absolutely right, Madam Speaker; I got carried away. Is the Secretary of State aware that the business rate paid by industry is only one of the injuries that it has received, and that, this winter, many businesses will lose staff who have to take time off because they have caught colds, because the VAT placed on their rates has created a cold climate in an even colder climate?

Mr. Forsyth

That is the first time that the Government have been blamed for the cold climate. On the hon. Gentleman's concern about the effect of taxation on energy prices, he might like to have a word with his own Front Benchers about the windfall tax, which will do precisely what he is complaining about. As for his point on businesses and jobs, we are currently committing about half a billion pounds a year to maintaining the uniform business rate. Labour would throw away the rate and the competitive advantage that it provides for Scottish business, and fund the extravagant proposals made by Labour-controlled local government, which, in the current year, amount almost to an extra half a billion pounds of expenditure.

Mr. Stewart

Does my right hon. Friend agree that Scottish industry should be extremely concerned about the prospect of a Scottish Parliament that would have unlimited powers to pass legislation on the level of business rates in Scotland? Does he agree that Scottish industry should, as a matter of the highest priority, endeavour to establish precisely the Labour party's policies on those matters by consulting the hon. Member for Hartlepool (Mr. Mandelson)?

Mr. Forsyth

I agree with my hon. Friend on where policy appears to be made, and on the need for concern about the effects of a tax-raising Parliament on the business community in Scotland. Not only would we have to pay a tartan tax, which would mean a 15 per cent. increase in the starting rate of income tax, but funding for our vital services would be put at risk, with all the consequences that that would have for Scottish industry. Furthermore, we would have increases in the business rate, which would destroy jobs, investment and prosperity in Scotland.

Sir David Steel

Is the Secretary of State aware that, following the death of the General Franco, there was, in 1977, an exactly similar debate in Spain? Many Spanish businesses doubted the wisdom of setting up the Catalan Parliament, and the "poncho peseta" phrase stood in for the "tartan tax". Is he aware that, if he were now to go to Barcelona, he would not find anyone against the Catalan Parliament, because it has been such a success politically, economically and culturally? Why does he think that Edinburgh would do less well?

Mr. Forsyth

I am surprised at the right hon. Gentleman. If he has made a study of the Catalan Parliament—which may explain why we do not see so much of him here—he will know that the Catalan Parliament is a net contributor to Spain, and that the Catalan economy contributes to the rest of Spain. The situation is the other way round in Scotland. That is why a Scottish Parliament risks our vital public services and why I am surprised that the right hon. Gentleman is still supporting the Constitutional Convention—whereas Lord Ewing, a former Labour Minister, at least had the dignity to resign in disgust at the shambles created by the hon. Member for Hamilton.

Mr. John Marshall

Does my right hon. Friend agree that, if there were to be an independent Scotland or a Scottish Parliament with tax-raising powers, Scottish industry would have a much higher burden of taxation, which would destroy jobs and inward investment, and the unemployment rate in Scotland would reach the level that it is in Spain—as recommended by the former leader of the Liberal party?

Mr. Forsyth

If we had an independent Scotland, we would have a budget deficit problem of about £8.1 billion, and the future of Scottish industry would be an academic consideration.

Mr. George Robertson

Is there not something of a brazen, brass-neck cheek about the inventor of the poll tax accusing anybody else on the subject of taxation? At the last election, the Secretary of State's party told Scotland, including Scottish industrialists, that it would reduce taxation year on year, but it has put up taxes 22 times—the equivalent of 7p on the standard rate of income tax—since then. His party has put VAT on heating. The cold and windy days in Scotland make that the Tory heating tax, and it is felt deeply by everybody. The Government cannot tell the truth about their own tax plans, so why should they expect anybody to believe the lies that they tell about Labour's tax plans?

Mr. Forsyth

There was a moment's frisson when I saw the right hon. Member for Glasgow, Garscadden (Mr. Dewar) sitting in the hon. Gentleman's place and I thought that we might be in for some serious opposition. If the hon. Gentleman finds what we have to say about Labour's tax plans incredible, perhaps he would like to look at a document that has been produced by my right hon. Friend the Chief Secretary, "New Labour's Public Expenditure Plans"—

Mr. Hood

It is lies.

Mr. Forsyth

The hon. Gentleman says that it is lies, yet all of it is in the words of Opposition spokesmen.