The three speeches/headings immediately before

1. 1 earlier: Robert Syms

   It is a very sad thing; 20 or 30 years ago our tax rates were so high that people spent an awful lot of time trying to avoid paying tax rather than running their businesses. If we are not careful, we will return to people finding sophisticated ways of avoiding tax. That will mean a more draconian tax system and people will not focus on getting a fair reward and on running businesses efficiently. As we have heard, including national insurance the highest tax rate is 61 per cent., which is very high. What is the point of that if the revenue will not be collected, other than to make a debating point?

   Given that we are probably not talking about a vast section of the electorate, it has surprised me how many ordinary people who have no hope of paying that level of tax have taken exception to the fact that the Government have broken a key promise. It says something about us as a nation if we start to mess about with high tax rates and change the overwhelming philosophy that has been in place for the past 20-odd years.

   I am not as pessimistic as some, but there will be some tough decisions to make. I know that my party is not saying very much at the moment about higher rates of tax, but I think that we would like to reduce them, subject to the books. A clear indication from an incoming Government of where they are going on this issue may well determine how much tax is raised, because otherwise we will lose people. The Sir Michael Caine point is relevant, because people who are mobile can use various ways of leaving the country, which will reduce the overall amount raised.

   As my hon. Friend the Member for Runnymede and Weybridge (Mr. Hammond) said, half of all the tax-raising measures in this Budget affect people earning more than £19,000 a year. As a nation, we collect quite a lot of tax at the lower end of the various bands. We tax at too low a rate and then try to make up for it by giving tax credits. It would be better if we got out of the tax credits system and upped the basic rate so that people's personal finances were in a much better shape.

2. 2 earlier: Colin Breed

   Is the hon. Gentleman aware that Treasury officials gave evidence to the Treasury Committee indicating that their figures estimate that they will receive only 31 per cent. of the potential total tax take from the raising of the top band from 40 to 50 per cent.? In other words, 69 per cent. will go elsewhere or be avoided.

3. 3 earlier: Robert Syms

   I declare my interest in the Register of Members' Interests as a director of a family business.

   We are having a very interesting debate that is tending to wander a little bit off tax measures and on to debt, which is the big item on the agenda today. Over a long period, under Labour and Conservative Governments, our debt has tended to be about 40 per cent. of GDP, although we go through brief periods of growth and higher tax revenues. In the mid-1980s, Mrs. Thatcher's Government paid off some debt, and that happened again in the early years of the Labour Government of 1997, with Conservative spending plans plus the sale of the spectrum. Commentators briefly get excited about that and say that if we carry on we will eventually get rid of our debt completely, but that never quite happens—in this case, the Government were determined to have more public spending. We now have a very large, ballooning public sector deficit, but that always happens in a recession. There are two very large figures, and when one goes up because people lose their jobs and businesses start to get into difficulty, the other goes down because tax revenue is less buoyant and the deficit opens up like a vast chasm. That tends to make people a little pessimistic.

   Many commentators have talked about a brave new world and a change in our economy. Much of today's debate could be determined by whether the debt is cyclical or structural. One's view on that depends on whether one thinks that in a few years we will see a resurgent City of London with banks making big profits and the housing market booming, or that the world is going to change and we will not rely on the City of London but suddenly find new ways to make a living in the world. It would not surprise me if in six years' time bankers were making big bonuses, profits were going up, and tax revenue was being generated. The problem is that because we are running a large deficit and do not know at what rate we will recover, we are more vulnerable to turbulence in the world economy. As the right hon. Member for Birkenhead (Mr. Field) asked, what is plan B? If the recession is deeper and the recovery slower than expected and unemployment goes over 3 million, we could have a real problem in financing our deficit. We might have to pay a premium, there might have to be more quantitative easing and sterling might come under pressure.

   I am old enough to remember 1976, when the noble Lord Healey had to turn around at the airport because the IMF came in, and we are running rather larger figures than we did in '76. The other interesting thing about 1976 is that the projected figures turned out to be rather benevolent and not as bad as had been thought. Governments can sometimes get projections wrong and predicate policy on them.

   Britain seems to survive and prosper because, at root, we have good people who work hard and a pretty good economy. I am sure that we will get through our current problems, but that requires leadership. One thing that has come out in the debate is that we as politicians have to be honest with people about the fact that there are going to be some very tough decisions to be taken, irrespective of who wins the general election next year or, God help us, if we have a hung Parliament. We will have to take tough decisions on the scale of the state and public spending, and indeed on tax.

   If we are honest, the only way to raise an awful lot of tax revenue is to raise tax on ordinary working people, not on a particular section of people. High tax rates might make a debating point, but the reality of the Government's policy of raising the higher tax rates, restricting allowances and restricting what people can do with pensions is that people will look for others ways to recompense themselves. They might forgo salary in the short term or look for other ways, such as capitalising their salary. That is why I said in my intervention on the shadow Chief Secretary that if the Government continue down this path, the next item to come up will be capital gains tax.