HL Deb 17 December 2001 vol 630 cc4-6

2.39 p.m.

Lord Northbrook asked Her Majesty's Government:

By how much tax revenues have declined as a result of the economic slowdown; and how this shortfall will be met.

Lord McIntosh of Haringey

My Lords, tables B8 and 2.4 of the Pre-Budget Report set out the changes to the projections for receipts since Budget 2001, including those that result from changes in GDP. The Government remain on track to meet both fiscal rules over the economic cycle, including in the cautious case.

Lord Northbrook

My Lords, I thank the Minister for his reply. Does he agree that the Government would raise more revenue overall by lowering the rate of corporation tax—thus encouraging inward investment—than by increasing the rate of national insurance contributions that make this country less competitive, and if not, why not?

Lord McIntosh of Haringey

My Lords, that is a peculiarly complex hypothetical question. We do not believe that it is necessary for taxes to rise. We are meeting the firm fiscal rules—the golden rule and the sustainable development rule.

Lord Saatchi

My Lords, the Minister may remember that a few weeks ago the Treasury was planning to save taxpayers' money by selling f 100,000 worth of its silver and to give the proceeds to the NHS. How does the Minister consider that people will now react when they discover that since then the Treasury has spent 500 times that amount (£50 million) on one item—lawyers' and accountants' fees for the liquidation of Railtrack?

Lord McIntosh of Haringey

My Lords, the Treasury was not planning to save £100,000 by selling what is called the "Treasury silver" for the benefit of the NHS. The Treasury has a rule, as do all departments, that non-performing assets should be disposed of unless there are good reasons to the contrary. None of the proceeds from those asset sales, and certainly not from Treasury asset sales, are hypothecated to any particular purpose. There is a history of payments of lawyers' and accountants' fees. Some of the most extreme examples took place during the privatisation programme of the previous government. Some noble Lords feel that the size of them is regrettable.

Lord Skelmersdale

My Lords, I am sure that the Minister's Answer to my noble friend Lord Northbrook was factually correct. Unfortunately, it was totally meaningless to most noble Lords and certainly to myself. Can he tell the House what is in table 2.4, for example?

Lord McIntosh of Haringey

No, my Lords. It is a complex table with five columns and seven rows. It is not possible to answer that kind of question in reply to a Starred Question.

Lord Newby

My Lords, does the Minister accept that the greater challenge facing the Government this year is not so much under-receipt in terms of tax revenue, but underspend in terms of government expenditure programmes, bearing in mind the £0.7 billion underspend next year? Can he tell the House what steps the Government are taking to ensure that the underspend this year will be less?

Lord McIntosh of Haringey

Yes, my Lords, I agree in large part with the noble Lord, Lord Newby. Underspend is a serious problem, particularly when it follows many years of underfunding. For a long time the need has been well recognised, but this particular tanker takes time to turn. All the spending departments in the Government have been given firm targets and encouragement to overcome that problem as soon as possible.

Lord Blackwell

My Lords, as a result of the economic slow-down or otherwise, recently the Government have suggested that tax levels will have to rise. Can the Minister confirm that national insurance contributions are regarded by the Government as part of their overall pledge on tax levels? I refer particularly to their pledge not to increase taxation for higher level taxpayers.

Lord McIntosh of Haringey

My Lords, the Government have not said, explicitly or implicitly, that taxes will rise. Quite clearly we have said that in the period of the current spending review there is no need for taxes to rise. We are meeting both of the fiscal rules to which I referred earlier and the money that is available from existing taxes—in the next financial year a surplus of £10 billion is forecast—is sufficient to provide resources for the needed investment in health, education and transport. Therefore, the second part of the question posed by the noble Lord, Lord Blackwell, does not apply.

Lord Northbrook

My Lords, does the Minister agree that by lowering the rate of corporation tax, the total revenue will increase, so creating a virtuous circle?

Lord McIntosh of Haringey

My Lords, some economists say that. At times that may be true. I do not particularly want to commit the Government to saying that it is true now.

Baroness Sharp of Guildford

My Lords, does the Minister agree that the question put to him by the noble Lord, Lord Northbrook, is ill conceived because the rate of corporation tax in Britain is lower than in any other country in Europe?

Lord McIntosh of Haringey

My Lords, I am grateful to the noble Baroness, Lady Sharp. However, under certain circumstances it still could be true—it is true of all taxes—that if the rate is lowered, receipts are encouraged. That was why I was not quite as dismissive to the noble Lord, Lord Northbrook, as the noble Baroness indicates that I perhaps should have been.