Hypothecated Taxation

HC Deb 10 December 1998 vol 322 cc461-2

1. Mr. Norman Baker (Lewes)

If he will make a statement on his policy in respect of hypothecated taxation. [61745]

The Economic Secretary to the Treasury (Ms Patricia Hewitt)

In general, the Government determine their expenditure according to need rather than the source of the revenue, but we will continue to look at each case on its merits.

Mr. Baker

Does the Minister agree that the recent Marshall report on energy taxation represents a good example of what an hypothecated tax might provide? Will she then explain why the Chancellor's advisers have been briefing that that has been kicked into the long grass—into the very long grass? Will she give an undertaking that the Marshall proposals will be implemented in this Parliament, or is the Treasury still stuck in the 1950s?

Ms Hewitt

The Marshall report is extremely welcome. It has moved forward significantly the debate on a possible tax on business use of energy. We are now looking in detail at the complex technical issues that the Marshall report raises. He recommended further work on the subject. We are continuing to carry that out and to consult on the matter.

Mr. Harry Barnes (North-East Derbyshire)

Has the Minister heard of the Tobin tax, an internationally co-ordinated tax directed against currency speculators? That money could then be used for third-world debt and for international development. As Labour is good at reviews, might it not be a good idea to have a look at that idea and to feed it into the international community

Ms Hewitt

I am sure that my hon. Friend will be aware of and welcome the work that my right hon. Friend the Chancellor of the Exchequer has done in pursuing proposals for reform of the global financial architecture. No doubt the Tobin tax proposals will be debated within that context.

Mr. Shaun Woodward (Witney)

Given the statement by the Chancellor in the pre-Budget statement that there would be a cut in vehicle excise duty for small cars, and the thinking of the Chancellor and the Treasury about hypothecated taxes, is it the Minister's view that any surplus revenue brought about by changes to vehicle excise duty should form an hypothecated tax to be used for the environment?

Ms Hewitt

As I have already said, it remains our view that, in general, expenditure should be determined according to need rather than the source of the revenue. I am sure that the hon. Gentleman will be aware of the problems that can arise when revenue is inappropriately hypothecated to particular expenditure goals. As I said, we will continue to look at each case on its merits.

Mr. Ian Davidson (Glasgow, Pollok)

Does the Minister accept that, although there is a general reluctance among the public to pay increased taxes when they believe that the money may go simply into a bottomless pit of Government expenditure, there would be a willingness to pay hypothecated taxation because people would then be clear that the money was being spent on education and health. Perhaps it would give some political parties, not least my own, the courage to go to people and say that, if they want improved services, they have to pay for them.

Ms Hewitt

I am sure that my hon. Friend and, indeed, all hon. Members will welcome the additional £40 billion that the Government have committed to schools and to hospitals. [Interruption.] I am sorry that the official Opposition have apparently decided to oppose that additional expenditure. As I said, we will continue to look at each case on its merits, but I draw my hon. Friend's attention to the announcement by the Deputy Prime Minister earlier this week that, where a local authority decides to carry out a pilot programme of congestion charging on the roads, it will be allowed to put up to 100 per cent. of that revenue into worthwhile transport-related projects.

Mr. William Ross (East Londonderry)

Is it not the case that, originally, the road fund taxation was supposed to be an hypothecated tax to build roads? If my memory serves me well, income tax in the 1890s was set up to build battleships. Does the fate of those two taxes not show the folly of any hypothecated tax? Will the Minister stick firmly to principles that she has enunciated to the House?

Ms Hewitt

I am grateful to the hon. Gentleman for that interesting excursion into the history of taxes. The Inland Revenue has recently opened an exhibition on the history of income tax. I think that income tax was originally introduced to pay for the Napoleonic wars, but the point that the hon. Gentleman makes is extremely valid. In general, expenditure should be decided according to need rather than the source of the revenue. Any proposals for exceptions to that should be considered as we consider them: on their merits.