Orders of the Day — Budget Resolutions and Economic Situation

Part of the debate – in the House of Commons at 5:01 pm on 20 March 1991.

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Photo of Mr David Mellor Mr David Mellor , Putney 5:01, 20 March 1991

That is absolutely right. That is why my right hon. Friend the Chancellor introduced those measures.

We have heard a great deal from the Opposition about training. It is a good thing if there is a commitment to training on both sides of the House, but it is a bit rich for our record to be criticised given that our expenditure on training this year is £2·7 billion—two and a half times in real terms what the Labour Government were spending, even though unemployment more than doubled under Labour. Under the Labour Government, when did the unemployed have the opportunity of job clubs, employment training, the advice that is given at regular intervals and the job guarantee scheme?

We must also take into account the fact that some people wish to take responsibility for their own training needs. That is why we have recognised that we have a role in supporting employees who wish to help themselves, and the tax system should not stand in their way. That is why my right hon. Friend announced a new tax relief for people enterprising enough to get training for themselves. That was warmly welcomed by the training and enterprise councils and the business community and is a further major contribution to supply side reform.

Let me say something about the changes to the community charge. In recent weeks, there has been much talk about fair taxes—particularly in relation to the community charge and the level of local taxation. My right hon. Friend the Chancellor tackled both issues head on. The package that he announced yesterday brought the community charge throughout the country down to what the Government regard as a fair and tolerable level. Indeed, in some of the best-run councils in the country there will now be no charge to pay at all.

Opposition Members have already started to say that the proposal for an across-the-board reduction in the community charge by £140 is not fair. The switch to VAT is fair, sensible and fully in line with the Government's wider tax objectives. VAT is a pay-as-you-buy tax. The more you buy, the more you pay. The essentials of life—food, housing, domestic fuel, power and even public transport—are all zero rated, so these goods bear none of the burden of reducing the community charge. For lower income groups, zero-rated expenditures account for a higher proportion of total spending than they do for the better-off. As a result, VAT accounts for a larger proportion of household expenditure the higher the income of the household.

Opposition Members are, as usual, facing all ways at once. On the one hand, they want higher investment and higher savings; on the other, they seem to be opposed to switching from a tax on income to a tax on spending. On the one hand, they shout from the steeples that the community charge hits the poor; on the other hand, when we reduce the community charge they tell us that too, hits the poor. [HON. MEMBERS: "Abolish it."] Are the Opposition proposing to abolish local government and local government services? Labour councils have contributed to the overspending that has led to unacceptably high community charges. Perhaps only Scotsmen on the Conservative Benches believe that "You canna spend what you have nae got." If a Labour Government—if there ever is one—wants to sustain Labour councils, they would have to find a way to resource their extravagances. By reducing the community charge, we have proved that there is no free lunch. If the reduction has to be made through local taxes, the only honourable and principled thing to do is to impose them on national taxes while continuing to press local authorities to improve efficiency.