Orders of the Day — Finance Bill

Part of the debate – in the House of Commons at 8:17 pm on 25th April 1989.

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Photo of John Battle John Battle , Leeds West 8:17 pm, 25th April 1989

I will deal precisely with that point later.

In this article there was a portrait not of the hon. Gentleman but of Mr. Ian McGlinn, a Sussex garage owner who, at joint 158th place in the league of the 200 richest people, proves that hard work and an eye for the main chance can catapult ANYONE into the jet set. Did he do it by building up his car business? Sadly, he did not. The article says that in 1976 he dabbled in shares. He put £5,000 in Anita Roddick's fledgling Body Shop firm—now that it has been floated on the stock exchange he's worth £40 million. That view—that share and equity ownership is the key to personal wealth in Britain today—was emphasised today by the Chief Secretary to the Treasury.

To return to the question put to me by the hon. Member for Dover (Mr. Shaw), The Sunday Times put an entirely different interpretation on the wealth story. It said: The very limited success of the Thatcher revolution in transforming British society is graphically and grimly illustrated by the league table of wealth published in The Sunday Times Magazine today. Of the 200 richest people in the country we have identified, old Britain still looms large: more than half the list is made up of inherited money. Some 57 of the 200 are landowners, 55 went to one school … and 25 even served in the same regiment … No wonder Japan, America and West Germany continue to beat the pants off us in the league table of economic performance. In these countries people have grown rich through industry; in Britain the rich still come disproportionately from those who have managed to hold on to their ancestors' land and property … The bias towards old money is not just bad for the balance of payments. A country in which people can grow rich through industry is also a country which creates jobs. But there are precious few jobs in simply passing wealth on from one generation to another and the only industry involved is in avoiding the taxman. There is another flaw in the tabloid approach that is often adopted by Conservative Members. Those in poverty do not have the choice whether to be rich or poor. They do not have £5,000 to put down on a shares gamble. That is not an option for the 15 million people who are living in poverty. It is not true that anybody can make himself a millionaire. He cannot.

The trickle-down theory has run dry. Real incomes have increased on average by 6 per cent. in the last 10 years, but the poorest 20 per cent. have seen their share of household income fall from 6·1 per cent. to 5·6 per cent. How does that contrast with the richest 20 per cent.? Their share has risen from 40 per cent. to 43 per cent. The trickle-down theory is not working; nor is the myth of the average wage that is peddled by those who sit on the Conservative Benches. Their view is that if the average wage increases, everybody will get that increase. However, those on the lowest incomes do not find that their incomes increase if the average wage rises. The average wage may rise as a result of those at the top end getting even more.

The Government are involved in all kinds of contortions in an attempt to present their economic efforts as a success. Yesterday they claimed that they were celebrating a rising average wage. However, all their noises about the need to keep down inflation mean that they have to insist on wages being kept under control. I make no apology for returning to the British Institute of Management and Remuneration Economics survey of wages that was published in the Financial Times on 23 April 1989. It said: Britain's directors last year received their biggest increase in take-home pay for 16 years … The survey found that the reduction in the top rate of taxation in the 1988 budget had helped to increase directors' take-home pay by 26 per cent. Their gross earnings, before tax and national insurance contributions increased by 13·9 per cent. The Government's tax policies are manufacturing tax inflation. Emerging wage inflation is the product of last year's economic mismanagement when the rich were given back so much.

If the Government's economic policies have led to an illusory sleight of hand in the management of taxes and wages, the same is true of the Government's previous claim that the National Health Service is safe in their hands. The introduction of tax relief for private health care represents a serious breach in the principles of the National Health Service. The Government are clearly going down the road of tax subsidies in the Finance Bill. Its provisions are the first steps down the road towards tax subsidies. They will lead to tax relief on direct payments for health care, to special tax-free savings for private health care and eventually to tax relief on all such schemes, regardless of age, need or type of operation.

An article in The Independent on 15 April was headed Clarke urged to extend tax relief to over-60s. The article spelt out how key advisers to the Government, when formulating their White Paper proposals—such as Dr. Michael Goldsmith, the medical director of Medisure, the medical insurance advisers, and David Willetts, the director of the Centre for Policy Studies—are urging the Government to go even further. According to the article, Mr. Willetts said: I hope that tax relief will not cover just insurance, and that it will cover any direct payment mechanism. It is time that the Government made absolutely plain what their attitude is to private health care. It is no use the Secretary of State for Health and the Minister of State saying, in an aside, that they believe that the changes in the Finance Bill are minor, interesting details. They may undermine the principles of the National Health Service.

If there is to be a tax break on private health care, it will lead to an erosion of the tax base, to a loss of income to the Exchequer and in turn to a reduction in the funds available to the National Health Service.

In July 1988 the Select Committee on Social Services reported: In our judgment the creation of a new tax subsidy on all private health insurance cannot be demonstrated to extend the total availability of health care. The Finance Bill will undermine the National Health Service. It reinforces the Government's past policies and demonstrates that the Government are undermining their own stated intentions.