Finance Bill

– in the House of Commons at 11:23 am on 13th March 1992.

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Order for Second Reading read.

Photo of Mr David Mellor Mr David Mellor , Putney 11:41 am, 13th March 1992

I beg to move, That the Bill be now read a Second time.

This short Bill contains those Budget measures that the Government consider it essential to pass into law before Parliament is dissolved and they put the Budget changes implemented on Budget day beyond legal doubt. I shall set out for the House what each of the clauses contain and then say something about the principal point of controversy, the reduction in the rate of income tax to 20p for the first £2,000 of income.

Clauses 1, 2, 3 and 4 confirm changes to excise duties implemented on Budget day. Clause I confirms the indexation of duties on alcohol—the rise of 4½ per cent. that my right hon. Friend the Chancellor announced. Clause 2 confirms the increase in duties on tobacco by about indexation on pipe tobacco and by 10 per cent. on cigarettes and other tobacco products. Clause 3 covers duty on petrol, diesel and other oils and confirms the indexation of duty on petrol and unleaded petrol and the rise in duty on leaded petrol by 7½ per cent. All those changes, as is normal with excise duties, came into force at 6 o'clock on Budget day. In addition, at midnight on Budget day, vehicle excise duties on cars went up to £110; clause 4 confirms that change. It also reduces the duty on small tricycles from £50 to £15—a small but welcome change to the users of those tricycles.

Clause 8, which reduces car tax from 10 to 5 per cent.—we know that that has already had a beneficial effect on the retail sales of motor cars—falls into the same category. So, too, does clause 7, which cuts the rate of VAT serious misdeclaration penalty and default surcharge. The lower rate of serious misdeclaration penalty has effect from Budget day. The lower maximum for default surcharge has effect from 1 April because this penalty is linked to monthly accounting periods.

The House gave provisional statutory effect to these changes on Budget day, but, under the Provisional Collection of Taxes Act 1968, they must be confirmed by a Finance Bill before Parliament is dissolved. If not, Customs and Excise would be obliged to repay the extra tax that it had collected.

Clause 5 concerns another excise duty, betting duty. The reduction from 8 to 7 per cent. will have effect from 1 April, which is a convenient date for bookmakers who pay tax monthly.

Clause 6 deals with monthly payments on account for the largest VAT traders. I should perhaps say a word or two of further detail about that. I am sure that the hon. Member for Brent, South (Mr. Boateng), having recovered from his exertions earlier this morning, is interested in this.

Photo of Mr David Mellor Mr David Mellor , Putney

If the hon. Gentleman is looking for a joke, I will show him a mirror. That is just to show that I am awake and not entirely reliant on my brief.

Last autumn, my right hon. Friend the Chancellor announced that, with the completion of the single market, some 90,000 businesses which bring goods and services into the United Kingdom from the rest of the EC would benefit from changes to VAT accounting procedures, but the reintroduction of the system known as postponed accounting carries a once-off cash-flow cost. So as not to increase the public sector borrowing requirement in 1992–93, my right hon. Friend announced that the largest VAT payers would be required both to account for and pay VAT monthly from the autumn of 1992.

A number of companies have suggested that the requirement to make monthly returns as well as monthly payments imposes a needless burden, so my right hon. Friend the Chancellor acknowledged in the Budget that there was something in this point and agreed to drop the requirement to make monthly returns. Therefore, companies will now be asked only to make monthly payments on account. In the meantime, some companies have raised questions, as they are fully entitled to do, about the Government's powers in this area and have instituted proceedings for judicial review. With some six months to go until monthly payments are to be introduced, it is important to end uncertainty. Businesses require a clear basis on which to plan and that is provided for in clause 6, which puts beyond doubt the Government's powers to require some traders to make monthly payments on account.

The two remaining substantive clauses deal with income tax. Income tax must be renewed each year and, if that is not done, no income tax can be collected. The tax has to be renewed by 5 May every year. There would not be time to be sure of doing this after the election, so clause 10 reimposes income tax for 1992–93. Nearly 25 million people pay income tax and most never see an income tax return. They pay all their tax through PAYE and each year the Budget requires the Inland Revenue and employers to undertake a major recoding exercise for everyone on PAYE.

If the Government had renewed income tax before the election and done nothing else, all the income tax allowances and the basic rate limit would have been raised under the statutory indexation provisions. The Revenue would have had to undertake one recoding exercise to implement those changes and a second after the election to implement any changes contained in the second post-election Finance Bill which would be necessary. That would have been wasteful for the Inland Revenue and employers and confusing for taxpayers. That is why the Government have concluded that it is right to ask Parliament to confirm all the major income tax changes in the Budget and that is why clause 9 provides for the introduction of a lower rate of income tax, chargeable on the first £2,000 of taxable income. It also gives us a chance to establish a serious difference of view on this matter between the Conservative party and Opposition parties.

Photo of Alan Beith Alan Beith Shadow Spokesperson (Treasury)

In discussing the effect on the Inland Revenue, will the Chief Secretary confirm or qualify the report in the Financial Times this morning that the Inland Revenue will need 800 additional staff to deal with all the pensioners who, in order to obtain the lower rate band for their savings, will have to put in a claim for the difference between the standard rate and the new lower rate? Is the figure of 800 initial jobs in the Inland Revenue correct or will it be a lower figure? If so, can the right hon. and learned Gentleman say what it will be?

Photo of Mr David Mellor Mr David Mellor , Putney

The figure is not correct. I do not have the exact figure, but it will be a great deal lower.

Photo of Mr Robert Sheldon Mr Robert Sheldon Chair, Public Accounts Committee, Chair, Public Accounts Committee

It is astonishing that the Chief Secretary does not know that figure, as the additional staff required is one of the strongest arguments against the proposal for a lower rate band. I am in favour of lower rate bands, but I accept that that costs a considerable amount in payments for additional staff. The number of civil servants in the Inland Revenue has been reduced. I do not know how they will cope unless there is a large increase in numbers to deal with the large number of inquiries from those who have paid tax at 25 per cent. on dividends, interest or whatever. Even with quite small sums, they will want to reclaim the difference between the 25 per cent. and the new 20 per cent. band. Inland Revenue officials could be dealing with sums as small as £5, £10 or £20, which are out of line with the amount of time that such claims will take to process.

Photo of Mr David Mellor Mr David Mellor , Putney

I understand that the Inland Revenue anticipates a need for up to 300 additional staff in the first year and possibly more in subsequent years, depending on the take-up rate. The right hon. Gentleman's intervention makes clear the Labour party's extraordinary intellectual contortions. On the one hand, he says that he favours a reduction in the tax rate, but, on the other, he made a lengthy intervention putting the case against that. The fact that he is here shows that he is willing, ready and able to vote against the proposal. I find his position unconvincing. Indeed, my respect for him would be enhanced if I thought that he also found that unconvincing. I am sure that he does in his innermost thoughts, but I leave it to him.

Photo of Mr Tim Smith Mr Tim Smith , Beaconsfield

Was not the right hon. Member for Ashton-under-Lyne (Mr. Sheldon) Financial Secretary to the Treasury when the Labour Government reduced the rate of income tax? He knows that the Inland Revenue can cope with that. Is not the real point the fact that, whereas under his Labour Government the standard rate was 30p and the reduced rate 25p, now the standard rate is 25p and the reduced rate 20p?

Photo of Mr David Mellor Mr David Mellor , Putney

As I have reminded the House before, the right hon. Member for Ashton-under-Lyne was a Treasury Minister throughout the chaos and confusion of Labour's last period in office.

As well as renewing tax, clause 10 sets the lower rate at 20 per cent. and overrides indexation for the basic rate limit and the married couple's allowance for those under 65. The other allowances—personal and age-related allowances—are indexed under the statutory provisions.

Photo of Mr John Fraser Mr John Fraser , Norwood

I wish to raise a matter of some urgency as Easter is the traditional time for weddings. When double taxation relief was abolished on 31 August 1988, the consequence was that if a couple living together subsequently decided to marry, the tax cost to one or other of them on a £30,000 mortgage would be about £750. Does the Chief Secretary think that the Bill should include a minor change to enable such people to be married without being penalised? There is currently an adverse tax consequence in legitimising one's children.

Photo of Mr David Mellor Mr David Mellor , Putney

I am not aware that couples are penalised in the way that the hon. Gentleman suggests. However, he makes a perfectly fair point and I shall have it investigated. I hope that my hon. Friend the Financial Secretary will be able to deal with it when he replies to the debate.

Photo of Mr Michael Grylls Mr Michael Grylls , Surrey North West

I note that the Bill includes no reference to the important and progressive changes in inheritance tax for independent family businesses, which were proposed by my right hon. Friend the Chancellor. His proposal was well received throughout the small business community. It is important that businesses are passed down to the next generation so that they can grow under that and subsequent generations. The current levels of taxation, although better than previously, are still quite heavy. What is happening with that proposal? Has my right hon. and learned Friend any idea of the Opposition's views? The small business community will want to know Labour's thinking. Will it support the Government's important proposals?

Photo of Mr David Mellor Mr David Mellor , Putney

My hon. Friend speaks with authority on these matters and I well understand his point. After the election, we will have to introduce another Finance Bill, with at least 75 pages dealing with a range of issues, including the important one mentioned by my hon. Friend. On the question of what the Opposition might think—or what their view is this morning, because it changes so often—I am sure that the hon. Member for Derby, South (Mrs. Beckett) will be only too happy to deal with that in her speech.

Clause 10 also sets the limit on mortgage interest relief at £30,000. The limit must be set each year, but it is no increase on what has prevailed for some time.

I want to say a few words about the principal matter of controversy, which is the 20p tax band. There has been an astonishing volte face by the Labour party on that matter. As recently as 25 February, the shadow Chancellor, the right hon. and learned Gentleman for Monklands, East (Mr. Smith), was reported as saying that we should have a lower starting rate because that would be fairer to people at the bottom. Within a matter of a few days, he and his party have been prepared to eat their words and vote against the proposal—as they have already done once. So that people are not mistaken, they are poised to do so again. They are ready to sacrifice the least well-off on the altar of a false and superficial commitment to fiscal probity.

During our debates on the Budget, the Opposition have failed to tell us why they are taking that view. No doubt, one reason is that they are probably too busy thinking up new taxes to levy. They have failed to give a proper account of why they are behaving in that way. Instead, an alleged commitment to and concern about the public sector borrowing requirement has emerged. I am sure that the right hon. Member for Ashton-under-Lyne (Mr. Sheldon), who served in the Treasury for all those years, can confirm that under the last Labour Government there was never a time when there was not a PSBR. If the Labour party believes that there should not be tax cuts while there is a PSBR, we can be absolutely sure that there will never be a tax reduction under a Labour Government. The only issue is by how much taxes will rise.

Photo of Mr David Mellor Mr David Mellor , Putney

The hon. Gentleman should be cautious, because that is certainly what the Opposition have said. Rather like some of the clients that the hon. Gentleman used to defend in his days in court, they want to change their story before they give evidence the next time. We shall be only too interested to hear today's story.

Photo of Mr David Mellor Mr David Mellor , Putney

Perhaps the hon. Gentleman would allow me the courtesy of giving way to him before he speaks—

Photo of Mr David Mellor Mr David Mellor , Putney

The hon. Gentleman should resume his seat. If he asks me nicely, I will give way.

Photo of Mr Paul Boateng Mr Paul Boateng Shadow Minister (Business, Innovation and Skills), Shadow Minister (Lord Chancellor's Department)

I need no lessons from that colossus of the petty sessions on how to defend an indefensible case. The right hon. and learned Gentleman has done that every single day of this Parliament's life.

Photo of Mr David Mellor Mr David Mellor , Putney

That was not much of a political intervention, but it was a fine bid for the Sir Donald Wolfit acting award.

In so far as the Labour party has a case on this issue, its entire basis is that the PSBR should not be increased to reduce taxation. If that is not Labour's argument, it is hard to see what shadow of an argument it has. Happily, we will hear the Opposition's view in due course, but it is already clear that under the last Labour Government the PSBR was higher on average than it has ever been under this Government, and it only temporarily fell to 3½ per cent. in 1977–78 following International Monetary Fund intervention.

In an astonishing move that destroyed whatever claim the Opposition make to being qualified to pass judgment on such matters, the PSBR was then permitted—notwithstanding that the economic cycle was moving upwards, at a time when a prudent Government would have put further pressure on the PSBR to bring it down into balance, as we succeeded in doing in the 1980s—to increase from 3½ to 5½ per cent. once the IMF's back was turned, so that the Labour Government could increase public expenditure and finance substantial tax cuts. There was a 2p cut in income tax and reductions in value added tax.

The shadow Chancellor was a member of that Labour Cabinet and was perfectly happy with that action, whereas the Leader of the Opposition—then a Back Bencher—was ranting, in opposition to his own Government, about the reckless nature of the proposals that they were carrying into effect. We should not hear too much more about fiscal probity from Labour Members.

Photo of Mr David Nicholson Mr David Nicholson , Taunton

Does my right hon. and learned Friend agree that if, by some strange development, Labour's concern about the PSBR were to be genuine and if the Liberal Democrats were also serious about it—I believe that their I p on income tax is hypothecated to education—does not that cast considerable doubt on Labour and Liberal Democrat pledges in respect of pensions, child benefit and various other benefits? Would both parties keep faith with the electorate?

Photo of Mr David Mellor Mr David Mellor , Putney

Labour needs to answer several questions, and the fact that it chose not to produce its shadow Budget until after Parliament has been dissolved—[Interruption.] The hon. Member for Newcastle upon Tyne, East (Mr. Brown) is here again with that laugh of his, which he must practise in the bathroom every morning. It is about as fake as the canned laughter that one must endure on those awful television comedy shows. The funny thing is not that I have misspoken but that the Opposition think that it is funny that we appreciate that even when Labour did not know that Parliament was to be dissolved, it nevertheless timed the publication of its shadow Budget for the day after the end of the Budget debate. What is the point of Parliament? The Opposition are always complaining that Ministers make announcements before bringing them to the House.

The Opposition did that in the belief that their Budget would escape scrutiny. As always, they were overoptimistic. They are right only to be properly pessimistic about the ability of their proposals to withstand scrutiny. It is a reflection of the chaos and confusion into which Labour has sunk that it feels compelled to produce a shadow Budget at all. The hon. Member for Copeland (Dr. Cunningham) said earlier—

Photo of Miss Betty Boothroyd Miss Betty Boothroyd Deputy Speaker (Second Deputy Chairman of Ways and Means)

Order. I ask the Serjeant at Arms to investigate a report which I have just received of a burning smell that seems to be coming from one of the Government Benches. Meanwhile, the Chief Secretary may continue.

Photo of Mr David Mellor Mr David Mellor , Putney

I will continue even as the flames lick around my ankles, Madam Deputy Speaker, and I shall direct a little cold air on them, in the hope that they will die down. I have been interrupted by many things in the House, but never before by an outbreak of fire. That is going a bit far. Obviously there are no lengths to which Opposition Members will not go to prevent democracy working properly.

Photo of Mr David Mellor Mr David Mellor , Putney

We shall find out whoever was responsible. My only fear is that you are about to be asphyxiated, Madam Deputy Speaker.

In September, the hon. Member for Copeland said that Labour would not produce a shadow Budget, but it has done so—not because Labour feels any need to be more candid with the electorate but because Labour has been driven to it by the number of holes punched in its proposals over the past eight weeks.

My hon. Friend the Member for Taunton (Mr. Nicholson) asked about the PSBR. Among the muddles that Labour needs to clear up—[Interruption.] I wish that I could have the attention of Labour Members for a moment. Are they worried that they will get burnt to death?

Photo of Nick Brown Nick Brown Shadow Deputy Leader of the House of Commons

I was just discussing my insurance policy.

Photo of Mr David Mellor Mr David Mellor , Putney

I shall keep a sepulchral silence on that.

Photo of Mr David Mellor Mr David Mellor , Putney

Indeed. It would be helpful if the hon. Member for Derby, South will clarify Labour's view on the PSBR when she addresses the House. The PSBR has reached its present level because of a fall in receipts occasioned by the present economic downturn and by necessary public expenditure commitments which the Government feel it is their duty to sustain over the cycle but which the Opposition—erroneously—have always condemned as derisory.

The shadow Chancellor admitted in his article in The Mail on Sunday two weeks ago that the PSBR would rise under Labour—but it would be for virtuous spending. Labour would take a convenient chunk of expenditure, dub it virtuous and say that it would then be all right to borrow for that purpose. However, on "Newsnight" this week, the hon. Member for Derby, South said that Labour had no plans to increase the PSBR. A lot turns on that —all the commitments that Labour has made to interest groups throughout the country to spend more money on this, that and the other. They will be rendered nugatory if Labour stick with the PSBR as it now is, unless the party is prepared to increase taxes.

We know that Labour is prepared to increase taxes to a significant degree, but the question remains: how significant—or are Opposition spokesmen merely hoping to con the electorate into voting for Labour, knowing full well that Labour does not have the slightest intention of undertaking any of the expenditure that it has pledged? That is a real case for the Labour party to answer. The hon. Member for Brent, South should do what he did when he practised law—get a barrister to answer. We look forward to hearing the shadow Chancellor give his account.

Why has Labour decided to oppose the 20p tax band? It stems from an urgent and overwhelming desire to spend, which we know about, but also from Labour's desire to hide a number of its other spending pledges behind the notional availability of revenue—if Labour really is prepared to penalise those whose taxable incomes begin as low as £3,500 per year, by increasing their marginal rate of tax by 25 per cent.—so that it will then be able to peg on to that a large number of public spending commitments. They include, most ludicrous of all, the cost of implementing Labour's minimum wage proposals, which are meant to benefit the very people from whom Labour would raise taxes to pay for them.

I am sure that all the graduates on the Labour Benches of the Robert Maxwell school of creative accounting will be only too ready to ensure that money is spent not once, not twice, but many more times. I believe that Thames area water is consumed seven times before it reaches us here. Similarly, Labour's taxes will be spent time and time again in the election campaign, as promise is overlaid by promise.

Labour's original proposal was to soak the rich. Its definition of rich began with a person having an income of £20,400—which includes police sergeants, deputy head teachers and middle management, and that is pretty well the average wage for people working in my constituency and those of my hon. Friends the Members for Surbiton (Mr. Tracey) and for Chichester (Mr. Nelson) and others in the south.

The shadow Chancellor has been criticised over that policy and I suspect that one of the reasons for his shadow Budget is to give him the opportunity to respond to criticisms of Labour's proposed national insurance hike and 50 per cent. rate. I wonder whether the Labour party is proposing to move away from some of those policies. A climbdown would involve it in soaking the poor to save the rich. Is that why the Labour party requires money from those on £3,500, £4,000, £5,000 or £6,000 a year? Does it want to have a few more resources to allow it to cover its tracks on national insurance contributions or the 50 per cent. taxation proposal? That demonstrates the ludicrous situation into which it has put itself.

The Labour party's attitude to what people might do with the extra money that they will have in their pockets as a result of the change in taxation is an interesting one. What is its attitude to our belief that people have a right to keep more of their money? The Leader of the Opposition talked about borrowing for a day at the races, as if putting more money into the pockets of those who are at the bottom of the income scale is giving them money for a day at the races. I was enchanted. The more that we see of the right hon. Gentleman during the election, the better.

When I returned home last night I wished quietly as a consenting adult to turn on BBC2 to get my nightly dose of Jeremy Paxman. It is something that I cannot go to bed without. I found that "Newsnight" had disinterred the right hon. Member for Leeds, East (Mr. Healey). I hope that the right hon. Gentleman appears a great deal during the election, too. No one more typifies the abject failure of the Labour Government than he. He was asked about the 20p rate and he said, from the position of the quite comfortable old age that I dare say he is now enjoying, that he was against it because it would be spent on imports. He then said that it might not be spent at all.

What do the Opposition think that they will gain by making these offensive and patronising remarks about ordinary people making normal spending decisions? Those people are entitled to have a little more money in their pockets. If they work hard, they are entitled to earn money and to spend it in ways that they choose to enhance their lives. They are not to be patronised by failed retired Labour politicians because they might choose to buy a radio made somewhere other than in the United Kingdom rather than, according to the Labour party, pursuing some allegedly socially more desirable objective. It reminds me of the old attitude, "Don't give them a bath because they will put coal in it." It seems that the Labour party is saying, "Don't let people keep money in their pocket because they might do something with it that we do not approve of." That is astonishing. It is the attitude of an aristocratic elite. The Labour party is the "people's party". Labour Members are the people whose sole purpose in this place is, allegedly, to represent the interests of the very people whose faces they propose to grind down by increasing the marginal rate of taxation by 25 per cent.

I support the tax changes because they represent a further step on a road that has brought about so many benefits to our country in the past decade or longer. That can be summed up with one statistic; the average family, even when we knock out the effect of the ravages of inflation, is £70 a week better off—it has £70 more spending power in its pockets—than it was in 1979. We know that that same family's living standards barely grew between 1974 and 1979. Money wages may have increased by 100 per cent., but the tide of rising prices meant that there was no real benefit at the end.

What has this meant in terms of the enlargement of the lives of those in all sections of our community? I am thinking about the way in which wealth has been created throughout society. There are now 10 million shareholders, 65 per cent. of whom are not in the professional and managerial classes. That is a real revolution in popular capitalism. Nearly 70 per cent. of the public are now home-owners. In this decade 4 million families have become home owners. This has come about because of the Conservative party's instinctive understanding of the basic beliefs of the British people. How many people go to the surgeries of my hon. Friends and say, "My great ambition for me and my children is to be a tenant"? If we had not rescued council tenants from perpetual tenanthood under the Labour party, that would have been their prospect.

We know that 76 per cent. of homes have central heating, that 90 per cent. have colour televisions and that two thirds, from a standing start in 1979, when the technology was barely known, have videos. The number of people taking foreign holidays has doubled since—

Photo of Mr David Mellor Mr David Mellor , Putney

I shall carry on for a while.

The number of people taking foreign holidays has doubled since 1981. That is the revolution in which my right hon. and hon. Friends and I will have so much confidence during the next three weeks. Whatever the ups and downs of the economic cycle, people realise that we have managed to improve the wealth and prosperity of the nation. We have done so by running a successful and dynamic economy. That has been achieved partly by—[Interruption.] I have now emptied the Strangers Gallery. It is one of those days when I should have stayed in bed. I was sorely tempted to do so. Perhaps it would have been the best decision. Usually it is necessary for the doors of the Strangers Gallery to be locked when I am speaking.

Photo of Miss Betty Boothroyd Miss Betty Boothroyd Deputy Speaker (Second Deputy Chairman of Ways and Means)

Order. I have been told by the Serjeant at Arms that fumes in the area of the Strangers Gallery are causing discomfort and that the Gallery has been evacuated for the time being.

Photo of Mr David Mellor Mr David Mellor , Putney

Would that that opportunity had been offered to us on the Floor of the House. The least that I can do at this stage is to give way to the hon. Member for Walsall, North (Mr. Winnick).

Photo of David Winnick David Winnick , Walsall North

A short time ago, the Minister said that no one tells his Member that he wishes to be a tenant. Perhaps the right hon. and learned Gentleman's surgeries are different from mine and those of my right hon. and hon. Friends. In most instances, people come to see us because they have housing problems. At my surgeries and in correspondence, 70 per cent. of the matters with which I am asked to deal are housing problems. The people who come to see me cannot afford to buy. They would be unable to do so even if interest rates were lower. They are desperate for somewhere to live. These are single people and families with one child or even two children. They have to wait years because since 1979 there has been a sharp decline in the number of council dwellings. If it is right to sell council dwellings—we are not in dispute about that—why should not those dwellings be replaced so that the people whom I have been describing are not punished and can be housed?

Photo of Mr David Mellor Mr David Mellor , Putney

I am glad that the hon. Gentleman made that point. He has allowed me to make it clear that no one comes to my advice centre—I suspect that this is true of his —saying that his ambition is to be a tenant. I accept entirely, however, that there are people who will be tenants. I accept also that there is a need for tenanted accommodation. There is an argument about how that should be produced.

The conversion of the hon. Gentleman to accepting the selling of council houses would not have occurred, I think, if it had not been for the success of the Government's policy. He would certainly not have thought of the idea.

The atmosphere in the Chamber, Madam Deputy Speaker, is pretty awful. I am finding the fumes irritating. I know that I should be the last one to want to resume my seat, but—

Photo of Miss Betty Boothroyd Miss Betty Boothroyd Deputy Speaker (Second Deputy Chairman of Ways and Means)

Order. On that basis, I shall suspend the sitting for 10 minutes.

Sitting suspended.

On resuming

Photo of Mr David Mellor Mr David Mellor , Putney

As I was saying, Madam Deputy Speaker, the tremendous increase in prosperity throughout society during the past 13 years was due in part to the fruits of a successful, dynamic economy during the 1980s. It was also due to the Government's constant attention to reductions in the direct rate of tax: 3p off in the first Parliament, 3p off in the second Parliament and 2p off plus the 20 per cent. band in the third Parliament. If we go back to that typical family which is £70 a week better off, more than £20 a week of that is accounted for by the tax that it no longer has to pay but which it would have had to pay if the rates of taxation that prevailed under the Labour party had been continued.

The debate provides us with the chance to make clear a great difference between ourselves and the Opposition. They proceed under a fundamentally false assumption. Taxation is a takeaway, and a reluctance to tax is not a giveaway or a bribe. We cannot emphasise that point too much.

The Opposition say that public services are underfunded, but, in deference to the time problems, I shall not deal with that issue in detail. I merely point out, as I did during the Budget debate, that the health service and all other substantial public services have gained enormously from increased public expenditure, the better direction of that expenditure and the more effective management that has been possible under the Government.

On health, we know that the Labour party would have to spend £1 billion extra on the minimum wage and on getting rid of charges and competitive tendering before a penny could be spent on patient care. That, of course, explodes the myth that the Labour party would spend wisely the money that it would get back out of tax cuts.

I had a good illustration of that this morning as I was coming from my home in Putney through the borough of Lambeth to Westminster. Wandsworth has a nil community charge under Conservative-controlled council. Lambeth has a community charge of £449.

Photo of Mr David Mellor Mr David Mellor , Putney

The hon. Gentleman, with charm, says, "Pillock" but the pillocks are the members of Lambeth council, not us. I wonder when he will be prepared to do something about it. Is he embarrassed by the fact that Lambeth has a community charge of £449? He is now tight lipped—not even the word "pillock" escapes his poetic lips. If he is not embarrassed, he should be, because I have the 1992–93 figures of Government assistance per head to those two London boroughs. Wandsworth, which has a nil community charge, gets £1,424 per head from the Government. Lambeth, with a community charge of £449, gets £1,628 per head from the Government.

We know that far from spending wisely the money that it is not prepared to let the public keep, Labour will scatter it around as it is scattered in Lambeth, Haringey, Hackney and various other boroughs. People said that the pathetic fallacy was believing that animals think like human beings. The truly pathetic fallacy is that people could believe that the Labour party would spend more wisely than they could spend it themselves.

To sum up, we have established the real difference between the parties. The Labour party began by believing that the rich began at £20,400. No one below that, it said, was to be inconvenienced by its tax proposals. We now learn that a single wage earner is rich, starting at £3,500 a year. That is the point at which the Labour party proposes to increase the marginal rate of tax by 25 per cent. It is a rake's progress as the Labour party moves from Robin Hood to Robbin' Everybody.

Photo of Mr David Mellor Mr David Mellor , Putney

The hon. Gentleman has come alive again, like something out of the Hammer films that used to delight me as a child. Truth, not originality, is the name of the game. Originality is what the hon. Gentleman makes up. In any event—and certainly in political terms—it is not a compliment. The hon. Gentleman is a past master at it. He owes his facts to his imagination and his jokes to his memory.

If the Labour party is prepared to increase the marginal rate for the least well-off, what does that tell us about what it might be prepared to do about the 25 per cent. rate? After all, Labour opposed the reduction from 33p to 25p every step of the way. We must now ask ourselves, what other tax plans is Labour concealing up its sleeve to satisfy the restless desire of each and every member of the Labour Front Bench to spend.

Photo of Mr David Mellor Mr David Mellor , Putney

I am just about to finish.

I welcome the opportunity for the Labour party to confirm its complete addiction to the taxation of each and every person in the community. No one is safe, and we shall prove that this afternoon.

Photo of Margaret Beckett Margaret Beckett Shadow Chief Secretary to the Treasury 12:34 pm, 13th March 1992

We can be under no illusion today that those of us who have been fortunate enough to catch your eye, Mr. Deputy Speaker, are speaking for the benefit of anyone except those present in the Chamber, for Hansard and for posterity. None of us will nurture any illusions about what the media will report of today's debate.

Nevertheless, in the Finance Bill, the Conservative party is offering a "buy now, pay later" Budget for a "buy now, pay later" election. It shows that one cannot teach an old Government new tricks. It is, after all, the same stunt that they pulled in 1983, when they cut taxes a month before the election and spending a month after. It is the same stunt that they pulled in 1987, when they cut taxes before the election and the spending promised at election time never materialised.

As a Second Reading of a Finance Bill, this must be one of the oddest in history—odd even before we had the fire, and heaven only knows why that happened. Four hours for all the stages of a Finance Bill from start to finish—including a debate on the guillotine motion—is certainly a most extraordinary precedent, even for this Government. It is an extraordinary precedent and an extraordinary procedure, due not to accident or misfortune but to the sheer incompetence and mismanagement of the Government, who cannot get right even the timing of the election.

On Second Reading, the House weighs legislation, considers the circumstances with which it is designed to deal and its fitness for the purpose. One only has to consider this cursory Bill to realise that the circumstances with which it is designed to deal are the problems that the Government face in getting from here to 9 April. It is visibly designed to deal not with the country's circumstances but with the narrow purposes of the Conservative party.

In many ways, the Bill characterises the Government's approach. The Secretary of State for Employment said that this Budget would be a Budget for jobs. It is not. The Chancellor said that it was a Budget for recovery. It is not. The Bill contains some measures that will be of help to business, and we welcome them, but the problems with which they are designed to deal were created by the Government. Some of the measures, such as those for car tax, will alleviate the strains of the recession that the Government have caused. However, it is only under this Government that the overall burden of taxation on cars and on people has become so high that the measure is needed. The weight of the car tax plus the value added tax that they have more than doubled in their 13 years in office have made taxes on cars so high.

The Bill contains other measures, such as the easing of the business rate. The Government introduced the business rate, ignored the cries of small business and then, miraculously, on election eve they listen at last. Then they expect credit for easing problems that they, and they alone, created.

There are no other measures of any weight to promote recovery. Why? The answer can be found in the Red Book. Yet again, the Government tell us that recovery has already begun and will accelerate from the end of this month. We certainly hope that they are right, but, of course, that is what they told us last March, last April, last May, last June, last July, last August, last September, last October, last November, last December, last January and last February.

What is holding up the recovery? The Government are. It is held up by the uncertainty of waiting and waiting while they have tried and failed to find a favourable time to go to the country, by the damage caused by their prolonged use of high interest rates to squeeze out inflation which they fuelled for so long, and by the fear of the unemployment that they have fostered and to which they remain supremely indifferent.

In their private briefings, Conservative Members and Ministers still tell the press, "Unemployment didn't lose us the election in 1983 or 1987, and it won't lose us the election this time," as if that were all that mattered. Of course it is all that matters—to them. Never mind the costs to the country directly or indirectly—such as the £8,000 per person unemployed. Never mind the devastation to millions of individuals and millions of families. There is nothing in the Bill that begins to tackle the problems of unemployment, nothing to stimulate the construction industry and nothing to deal with skill shortages, which are damaging in themselves as well as damaging to the prospects for inflation. There is nothing to build for the longer term and nothing directly even for families with children—although there is what I can describe only as a sop for some pensioners.

Seventy-five per cent. of pensioners do not pay income tax—they do not have big enough pensions—so they cannot benefit from the lower band. The Government have given an increase in a means-tested benefit, but they must know that the poorest pensioners of all are the million or so who will not claim means-tested benefits because they were raised in a generation which regards such benefits as charity, so they live below the poverty line. The Budget does nothing for them.

The main measure in the Budget—as the Chief Secretary implied at the end of his speech, it is the only measure that the Government care about—is the tax cut, which, we are told, has been carefully targeted. Ministers, including the Prime Minister, who sat smirking on the Front Bench as the Chancellor revealed the mechanism of the tax cut, are so thrilled with their own cleverness that they have given the game away. The tax cut is carefully targeted not on the poor, but, as Ministers told Lobby journalists, on trying to embarrass the Labour party. Well, it does not.

What a revealing glimpse those comments give us into the minds of the men who govern us. Here we are in the depths of recession, with, high unemployment, negative growth—with, at best, the prospect of a return to low growth—record bankruptcies and record home repossessions. What weighs on Ministers' minds? What keeps them awake at night? They ask themselves not, "What can we do to solve the problems of the country?" but, "How can we dish our opponents?" Where is the vision? Where is the foresight? Where, even, is the responsibility? Plainly, those qualities are not to be found in the Cabinet. And the Government have the gall to say that we are not fit to govern.

The Government have had 13 years of unbroken and secure rule. They have had more than £100 billion from the North sea, where we made the investment and they have reaped the returns. They have made billions of pounds from selling the family silver. Three times they have doubled inflation between elections. Three times they have raised interest rates between elections. This is the third time that they have cut taxes before an election, and three times they have broken their promises after elections.

Photo of Mr Tim Smith Mr Tim Smith , Beaconsfield

The hon. Lady says that the Government have no vision, yet, for a long time now, the Government have been committed to achieving a 20 per cent. basic rate of income tax. What does the hon. Lady think would be the best way of doing that—to cut the standard rate or to introduce a lower band for low-paid workers?

Photo of Margaret Beckett Margaret Beckett Shadow Chief Secretary to the Treasury

I am so glad that I gave way to the hon. Gentleman. His intervention speaks for itself. I mention vision, and what comes into his mind is money.

The Bill represents the way in which the Government will end—not with a bang but with a whimper of a Finance Bill. That whimper is not loud enough to drown the cries from outside the Chamber, such as the cries of youngsters with no job, no home, no security, no prospects and no hope. There are the cries of the pensioners who are slipping further and further behind the standard of living of people in work, and the cries of the sick, who cannot make themselves heard above the racket of Ministers boasting about their record on the health service. There are the cries of the victims of crime, which is at record levels—those are the people who have been exposed to the full consequences of the creed that the Conservatives have preached for 13 years—"Look after yourself, and the devil take the hindmost."

One of the few things that the Chief Secretary said with which I could agree is that the Bill throws into relief the nature of the choice before the British people. The Government say, "We shall take less from you in taxation, and that will leave you free to make your own choices." They mean choices such as what kind of health care to buy, and how much, and what kind of education to buy, and how much—choices such as how much pension to buy, and what kind of transport to use. "Make your own choices," the Government say to the people of this country, "because you are on your own."

For most people, even for those in work, those are choices which they cannot exercise on their own. In the days before we contributed to fund a national health service, a national education service and nationally guaranteed pensions—the good old days when income tax was only a few pence in the pound; the days to which Conservative Members tell us that it is their vision to return us—harsh experience taught our forebears—at least, the Opposition's forebears—the limits of the freedom that today's Conservative party extols.

Our forebears found that to survive, and certainly to prosper, they had to work together. They set up their own schemes to which each contributed a little when he or she could, so as to help one another when that was needed. That worked, so we, as a country, made it the basis of so much that people take for granted today, such as the health service, the education service and so on.

The tax system is the structure for that pooling of resources. We neither want nor propose a harsh tax system. We want a tax system that is fair and seeks, as nearly as possible, to treat people in the same circumstances in the same way. We shall make proposals and lay them before the country in the next few days, and we want everyone to see them. The structure of taxes that we propose will be designed not to fuel the politics of envy, but to fund the ethics of community.

This is not the right Finance Bill for this time. It is time for a different Finance Bill; it is time for a Labour Government.

Photo of Mr Anthony Nelson Mr Anthony Nelson , Chichester 12:47 pm, 13th March 1992

The speech of the hon. Member for Derby, South (Mrs. Beckett) was both depressing and patronising. That might not be so exceptional in itself, were it not intended to perpetrate yet another fraud on the British taxpayer and on the electorate. The hon. Lady sought to criticise a wholly welcome measure which reduces taxes, but she did not spell out her alternative. She sold the pass by not delivering the secret Labour Budget which is apparently to be declared after Parliament has prorogued. What sort of choice has anyone listening to the debate here or outside the House if we are not to be privy to Labour's formula for success? What are the Labour party's credentials for criticising the Government?

I believe that the Budget was a winning Budget for taxpayers and for business, and that the Finance Bill— the provisions of which are wholly welcome—should have been nodded through the House. I was dismayed and shocked that the Labour party and other Opposition parties could find fault with and question a Bill which will bring relief to businesses and individuals throughout the country. I certainly welcome the Bill wholeheartedly, as I welcome the whole strategy underlying my right hon. Friend the Chancellor's Budget. I should tell my right hon. and hon. Friends the Treasury Ministers that I especially welcome the intention behind the Bill—to ensure that central to our economic policy is a determination to reduce the rate of inflation and keep it low.

I know that you, Mr. Deputy Speaker, will be interested to know that this week, for the first time in nearly 30 years, the latest figures announced show that our rate of inflation is lower than that of Germany. Britain is now leading the way in the European Community with policies determined to pursue sound currency, low inflation and low interest rates. Those who seek to pursue policies of higher taxation, of redistribution towards the centre and of the devaluation of currency will find that the inevitable consequence will be higher interest rates borne by individuals, by mortgage payers and by businesses throughout the land. Only by making our centrepiece a determination to restore sound money and to keep down the rate of inflation can we regenerate sustainable growth, the prosperity that it brings and the jobs that will be derived from it.

Photo of Mr Derek Enright Mr Derek Enright , Hemsworth

I wish that the hon. Gentleman had not repeated the slur on Germany. Does he not find it remarkable that the German economy is as strong as ours despite having taken on a decrepit country and welded it into its own economy, while this Government have made our economy into a decrepit economy?

Photo of Mr Anthony Nelson Mr Anthony Nelson , Chichester

The new Germany may be held back in its progress by the socialist domination of part of it in the past. I was not knocking Germany—my point was that we now have a lower inflation rate than Germany has, and people should know that because it is very good news. All that we heard from the hon. Member for Derby, South was the carping, the criticism, the self-effacement and the deprecation for which the Labour party has made its name and which is so injurious to public and international confidence.

I especially welcome the introduction of the 20 per cent. band. I hope that, even in the short time left, we shall have an opportunity to vote on the clause which implements it. The proposal will be the litmus test for the public to see where the Labour party really stands. The logic of Labour's position must be to vote against the proposal. Labour will then have to go to the public and argue that the return of a Labour Government would not result in a significant increase in taxation. That would perpetrate yet another fraud on the public and it is right that we should decry it.

The Bill follows a Budget which brought one measure of relief on which I especially congratulate the Government. Those of us who represent constituencies in the south of England, where the recession has been hard and deep, are conscious of the impact of the recession on the cash flow of many businesses, especially small businesses. Even with the transitional arrangements, the impact was especially marked when the uniform business rate was introduced.

With Conservative colleagues in Kent, Hampshire, East Sussex and West Sussex, I wrote to my right hon. Friend the Chancellor, went to see him and approached the Prime Minister and others. We urged the case for freezing the transitional element of the UBR so that an additional burden was not placed on such businesses in the forthcoming year. My right hon. Friend the Chancellor has announced such a measure, which is wholly welcome in my constituency and elsewhere and shows yet again that the Government listen to people. The Government respond to representations made to them. The Government are not unbending. The Conservative party heeds the voices of those who express concern and it adjusts its policies. That worked for my constituents and the representations were listened to. I thank and congratulate my right hon. Friend the Chancellor.

I should appreciate an answer from my hon. Friend the Financial Secretary on one narrow point. The relief brought with the reduction in the car tax will be of immeasurable help to the car industry, to employment and to the national economy. However, one aspect has aroused concern among many dealers who have already bought cars in stock and among many finance houses that have bought cars for sale through dealerships. They have had to pay the full rate of car tax, although people who buy those cars after the Budget date will expect to pay only the 5 per cent. rather than the 10 per cent. rate of car tax. With the large stock of cars currently held by dealers and by leasing and finance houses, there will be some perverse results if there is not a change. Just as my right hon. Friend the Chancellor was good enough to listen to the reasonable concerns expressed by business about the UBR, I hope that in the limited time that, rightly, we have to debate the matter, some further relief can be announced or some clarification given about the car tax on vehicles that have not yet been sold to buyers but are held in stock by finance houses and dealers. If the Government do that, it would help to get the economy moving even faster than the Budget and the Bill will.

The Bill is a winning Bill for my constituents, for businesses in my area and for the economy as a whole. It follows the Conservative policies that we have set from the beginning of this Parliament. It is wholly prudent, it reduces taxation and it draws out the fundamental differences and the choice for the electorate at the election. The Bill is worth supporting and it goes to the heart of what we in the Conservative party stand for.

Photo of Alan Beith Alan Beith Shadow Spokesperson (Treasury) 12:55 pm, 13th March 1992

The hon. Member for Chichester (Mr. Nelson) advanced the astonishing proposition that the Bill should go through on the nod without any debate. He then proceeded to give two clear reasons why it should not. First, he made a perfectly legitimate inquiry about the detailed application of the car tax provisions, on which he hopes to get a useful answer which might be of some assistance to his constituents. Secondly, he talked about provisions for small business and about the uniform business rate. He was obviously ignorant of the fact that such provisions are not included in the Bill. One purpose of this debate is to discover what the Bill actually contains.

My first question to the Financial Secretary is: why are provisions on the uniform business rate not in the Bill? Does he doubt whether the Labour party, if in office, would implement the provisions? They are important provisions. If he entertained any doubt, that was all the more reason why such provisions should have been included in the Bill because there would then have been no doubt that they would be enacted.

The Financial Secretary may argue that the provisions are complicated. One of the ways in which he could have got round part of that difficulty would have been to accept our proposal—which is similar to his, but a little greater in cost—to freeze the 4·1 per cent. increase in the UBR. That could have been achieved with fewer legislative complications than the arrangements he described. I agree that the transitional provisions should be extended and we welcome that part of the Budget. However, it would have been far better for that provision to be included in the Bill and I hope that the Financial Secretary will tell us why it is not.

It is important that business should get that relief. It will not be a massive stimulus to the economy, but it will save some small businesses from going to the wall and it will relieve the cash flow problems in others. I welcome the fact that something on an equivalent scale to what we asked for is being done.

Much has been said about the lower rate band at 20 per cent. The truth is that the lower rate band is abolished by Conservative Governments when they come into office and reintroduced on the eve of their departure. That has happened in this case. The lower rate band was abolished by the right hon. and learned Member for Surrey, East (Sir G. Howe). Conservative Members should remember that he said: The case for the lower rate band was never at all clear. The 25 per cent. rate was not the effective marginal rate for more than a small number of full-time adult workers. For those on lower incomes an increase in the personal allowance would always have been more valuable than the lower rate band, and the existence of this lower rate band added significantly to the complexity of the tax system. He mentioned another advantage of abolishing the lower rate band. He said: there will be a valuable staff saving of 1,300 persons."— [Official Report, 26 March 1980; Vol. 981, c. 1475.] When I challenged the Chief Secretary this morning on the point, he could not tell us how many extra staff would now be required simply to enable pensioners to reclaim their lower rate. Now that the composite rate has thankfully been abolished—it is right that it was—pensioners who want to take advantage of the lower rate band on their savings to get the £100 will have to apply to the Inland Revenue for it at the end of the tax year. Those applications will have to be processed, so to dispense the £100 or less, the Financial Times estimates that 800 additional jobs will be required. The Chief Secretary said that the increase would be 300 jobs in the first year and perhaps more in the second. No doubt, we shall get a precise figure later. It is probably the greatest job creation element in the Budget. That does not seem to me to be the most productive area in which to engender jobs. I would much rather we were engendering jobs in more productive sectors of the economy.

Photo of Mr David Nicholson Mr David Nicholson , Taunton

The hon. Gentleman is being unfair. A few weeks ago when we were debating the impact of the business rate, he and I made the same recommendation. My right hon. Friend the Chancellor has done exactly what he and I recommended and that will help jobs.

Photo of Alan Beith Alan Beith Shadow Spokesperson (Treasury)

The hon. Gentleman must have missed the first paragraph of my speech. I welcomed what the Chancellor had said he would do and pointed out that it was not in the Bill and that it would have been very much better if it had been. The hon. Gentleman should not intervene in speeches that he has not heard or has not listened to.

The best demolition of the lower rate band appears in this morning's editorial in the Financial Times. The point is made clearly: If the Government wishes to offer the flattery of imitation, it should restrict itself to Labour's good ideas and not its bad ones. In a Budget dictated mainly by the priorities of partisan politics, the Government have selected the least effective means of targeting help to the low paid because it happens to have been espoused by the Labour party. It would be hard to imagine a more ludicrous basis on which to make Finance Bill and Budget decisions.

We are talking about £100 for those whose income carries them right through the lower rate band. That is everyone in the Chamber you, Mr. Deputy Speaker, our Clerks and our Serjeant at Arms. Many low-paid people earn less than that income band and therefore will not get tax relief on the full amount. They will not get £100 and some people who do get it will have some of it deducted from their family credit. For many of them, the benefit will be much less than £100.

Spent in investment measures, that money would have brought more help to those people. That money spent on measures that would give some of them better-paid jobs would have been a great help. That money would have been spent more effectively providing employment for their children and families in the construction industry and in the trades and professions that can gain from an advance in the construction industry.

The Government have revealed in their Budget a PSBR of £28 billion and have sought to criticise those of us who argue for an even higher figure. I have argued that, if we are to secure investment, we need a combination of revenue-raising measures and a PSBR of £30 billion. The Government had better not launch an attack on our £30 billion proposal, because their PSBR proposal for next year is £32 billion and our proposed £30 billion includes money for measures that would give us a return in future years.

The truth about the Budget is that it offers no hope of getting Britain out of recession, no hope of reversing the pattern of decline in manufacturing industry and no hope of providing what is needed to make industry prosperous and competitive in future. It is a political gamble. It is not a measure of economic commitment and progress at all.

Photo of Mr Paul Dean Mr Paul Dean , Woodspring

The Front-Bench spokesmen intend to restrict their winding-up speeches to five minutes each. If those hon. Members who have been rising would do likewise, it should be possible for me to call them all

Photo of Mr Peter Rost Mr Peter Rost , Erewash 1:03 pm, 13th March 1992

Even though this will be my last speech in the House after 23 years here—not for the first time, to a Chamber that is nearly empty—I shall not detain the House by adding my praise for an excellent Budget which will help those most in need and boost our economic recovery.

I should like merely to express a reservation about clauses 3 and 4 which deal with fuel taxes and car tax. Although I warmly welcome the wider differential between lead-free and leaded petrol, I should have liked a similar differential in respect of diesel fuel. Such a measure is much needed and would have provided a stronger market signal to consumers to use an environmentally more acceptable and desirable fuel.

Other countries have provided such encouragement. In a number of reports on the threat of global greenhouse warming and energy efficiency, the Select Committee on Energy has made such recommendations. In making proposals for tackling the difficult question of energy and transport, the Government's own White Paper, "Our Common Inheritance", makes similar suggestions. Moreover, the European Community has been advocating from Brussels that member states promote diesel rather than petrol. A slightly wider differential in the tax regime would have triggered a stronger signal.

We are all aware that energy and the environment are increasingly matters of great international concern. We also know that energy use in the transport sector is the fastest growing, the most difficult to tackle and the most polluting. Had we introduced such a measure this year, we should have provided the right signal to consumers. I hope that my right hon. Friend the Chancellor will consider introducing one after the election. I hope that he will seriously consider giving this important environmental boost through the Budget and the fiscal system and encouraging more use of diesel for the sake of reducing global greenhouse warming emissions and other emissions.

Photo of Paul Flynn Paul Flynn , Newport West 1:05 pm, 13th March 1992

It is claimed that this is a Budget for recovery, but mocking that claim is the news from my constituency this morning that the INMOS company is definitely to close its operation there and move its production to Agreti in Sicily and Roullet in France. The Finance Bill contains many measures which will affect my constituents—on car tax and income tax, for example. The very cars that are the subject of that tax—intelligent cars—have at their heart a thing called a transputer, as will colour fax machines and the miraculous virtual reality high-definition computers that will be selling in vast numbers over the next decade. Where in the Finance Bill is the commitment to British industry to allow a product that is British invented, British designed and the result of investment by a Labour Government to continue to be manufactured here? The transputer is about to take off internationally, but it will be manufactured outside Britain. This is not a Budget for recovery but a Budget for the Conservative party.

Following this morning's announcement, redundancies will be announced immediately and will continue to be announced for a long time. Already, 400 jobs have been lost and 450 more are to go. Although that is a devastating blow for Newport, it is also a mortal blow for the sunrise high-tech industries in Britain generally, because the transputer—the miracle computer on a chip—is going. We shall become the customers—the buyers of the transputer and its applications throughout the world. That British invention will be manufactured in Texas, Malta, Singapore, Sicily and France. It is an utter disgrace.

This morning, the Chief Secretary did not tell jokes as he did last time. Last time, he told one parrot joke and one haggis joke. I can understand his not wanting to tell a parrot joke because of the sensitivities about Polly Peck. The right hon. and learned Gentleman also accused the Labour party of being anthropomorphic and said that we attributed to animals the feelings of human beings. It struck me forcefully this morning that, when he leaves Parliament in a month's time, the Chief Secretary can get an alternative job delivering gorillagrams without the aid of a monkey suit. It also struck me, when our sitting had to be suspended because of a fire elsewhere in the Palace that the event was reminiscent of what happened many years ago when a repressive Government burnt the Reichstag and made van der Lubbe the fall guy. When the Government collapse in burning ruins in a month's time, the fall guy will be the present Prime Minister.

Photo of Mr David Shaw Mr David Shaw , Dover 1:08 pm, 13th March 1992

This is a sensible and prudent Budget. It is such a prudent Budget that it has upset Labour Members. The Budget is being implemented when we do not have the crisis that Labour had in 1976 and 1978. We have not had to cut the hospital building programme as Labour did in 1976. We do not have the situation which occurred in 1978, when taxes were so high under the Labour Government that they led to massive strikes and inflation. Surely, the point about the Budget is that income tax reductions and job creation go side by side.

The Budget will produce a further £2 million of disposable income in my constituency. That money will be welcome. Such money helps the Dover ferry industry. Every tax reduction under the present Government has resulted, two years later, in significant increases in passengers and freight carried by the Dover ferry industry. I have every confidence that this tax reduction will result in more freight and passengers using the Dover ferry industry.

I also commend to the House the reduction in the uniform business rate, which has been achieved by freezing the transitional element. That will be good for small businesses and the many shopkeepers in my constituency.

Of particular interest to me is what the Budget does for pensioners. Less well-off pensioners will receive benefits through the income support mechanism. Under Labour, not only was the inflation calculation fiddled in 1976 so that pensioners lost out, but inflation destroyed every pension increase that the Labour Government gave between 1974 and 1979. Pension increases and promises of pension increases in election campaigns arc not worth the paper they are not printed on unless they are real pension increases and inflation rates are low. That is the only way to give pension increases. That will be achieved by the Finance Bill because this is a prudent and sensible Budget. The measures are recognised by the City of London and the outside world community as prudent and sensible.

Photo of Mr Tony Banks Mr Tony Banks Shadow Spokesperson (Business, Innovation and Skills), Shadow Spokesperson (Business, Innovation and Skills), Shadow Spokesperson, Shadow Spokesperson 1:11 pm, 13th March 1992

I do not know how Conservative Members were able so easily to convince themselves that the Budget is enormously popular. There were no street parties in Newham and no dancing on Stratford High road when the Budget was announced. The Budget means very little to the people I represent in the east end of London. What will the Budget do for jobs? What will it do for people who find that what little has been given to them will be reclaimed through the withdrawal of means-tested benefit? That is the whole point. The Budget means nothing for the real problems of people in my area.

Since 1979, unemployment in the London borough of Newham has gone up by about 326 per cent. We have seen an 84 per cent. decline in job vacancies. We have an unemployment rate of 18 per cent. in the London borough of Newham. We have lost about 40 per cent. of manufacturing jobs. The Budget will do nothing whatever to address those real problems.

The day after the Budget, a cordial gentleman stopped me on the street, as they often do in my area, and said, "Give 'em a good kicking, Tone." Those were his precise words. Obviously, I cannot endorse the proposed action, but I sympathise with the sentiment. The people of the east end have been kicked around by the Government for 13 years. They want an opportunity to give the Tories a good kicking, and on 9 April that is exactly what they will do.

Photo of Mr Tim Smith Mr Tim Smith , Beaconsfield 1:13 pm, 13th March 1992

The hon. Member for Newham, North-West (Mr. Banks) says that the lower rate band means nothing. If it means nothing, why was it Labour policy until a few days ago? We knew that Labour wanted to tax the higher paid. We now know that Labour wants to tax the lower paid as well. That should come as no surprise to anyone who remembers the record of the last Labour Government, because that is the best indication of what a future Labour Government are likely to do.

In 1974, only a few days after the general election, the standard rate of income tax was increased from 30 to 33 per cent. In the Budget of 1975, it was increased again from 33 to 35 per cent. By 1976, public sector borrowing had reached 9 per cent. of GDP. It was so huge that the then Chancellor of the Exchequer, the right hon. Member for Leeds, East (Mr. Healey), had to go to the International Monetary Fund and Britain had to be bailed out. It was only when the IMF imposed some discipline on the Labour Government that things started to return to a more sensible arrangement.

It was in the following Budget, in 1977, that the standard rate of income tax was cut from 35 to 33 per cent. As a result, public sector borrowing went up once again. If it was right to do that in 1977, why was it wrong to do it in 1992? We have not been told. If it was right, at the end of the previous Labour Government, to have a lower rate band of 25 per cent., why is it wrong to have a lower rate band of 20 per cent. now? We have not been told.

The hon. Member for Derby, South (Mrs. Beckett) complained that I mentioned money during proceedings on the Finance Bill. I found that rather strange. The Government are committed to reducing the standard rate of income tax to 20p in the pound, and that is a very welcome target. Opposition Members do not seem to understand that it is not their money—it is taxpayers' money—and we need to keep to a minimum the amount that we tax people in order to pay for decent public services. That is the object of the Budget. The Budget is a step on that road, and I welcome the Finance Bill.

Photo of David Winnick David Winnick , Walsall North 1:15 pm, 13th March 1992

It is not surprising that the country's reaction to the Budget has been negative. The country knows what every hon. Member knows—that the Budget was determined not by the country's needs but by the needs of the Conservative party and the Government's wish to be re-elected. It is a negative Budget, and that is why it has been rejected by the country.

Let us consider, for instance, the small increase that was given to pensioners on income support. Any help for pensioners is to be welcomed, but that increase, which has been given to a relatively small number of pensioners, is derisory compared with what pensioners have lost as a result of the decision in 1980 that pensions would no longer be increased in line with earnings.

What have pensioners lost? For a single pensioner, it is £17 a week—I emphasise "a week"—and for married pensioners it is £26 a week. That is how pensioners have been cheated by the Government. Of course, there were also the changes in housing benefit in 1988. That is the year, incidentally, when the top rate for income tax was reduced from 50 to 40 per cent. At the same time, many people on relatively low incomes found that, as a result of the changes in housing benefit, they had to pay far more in rent and poll tax.

Pensioners—admittedly single pensioners—in my constituency receive about £60 a week, but they must pay £10 in rent and poll tax. That is totally unfair. Even the increase announced in the Budget will be subject to means testing. Not all pensioners on income support will get that £2 or £3, because they will pay more in rent and poll tax.

My region, the west midlands, has been devastated as a result of Government policies. There have been two major recessions. We lost many jobs in the early 1980s. In the first recession, in the early 1980s, 280,000 manufacturing jobs were lost in the west midlands. In the black country, 70,000 jobs were lost.

Far too many people in my part of the world find that they cannot get jobs. If they have reached a certain age group, their chances of getting work are remote. In the metropolitan part of the west midlands—Birmingham, Walsall, Coventry, Dudley, Sandwell, Wolverhampton and Solihull, the very heart of the west midlands—more than 40 people chase each vacancy. There is no sign that there will be a significant change as a result of present policies.

Of course, there has been no help for the construction industry. Eighty-one per cent. of building firms in the west midlands expect less work in the next 12 months and 78 per cent. of such companies expect to employ fewer people. That is the dismal scene. That is why we are so concerned. That is why we wanted a Budget for the country's future and not the future of the Conservative party.

Photo of Barry Sheerman Barry Sheerman Shadow Spokesperson (Home Affairs)

Does my hon. Friend agree that perhaps even in Beaconsfield, the constituency which the hon. Member who spoke before my hon. Friend represents but will not represent for much longer, there are many people who hated or disliked the Budget? The hon. Gentleman has been disregarding them for years, but on 9 April he will get the message about the Budget loud and clear.

Photo of David Winnick David Winnick , Walsall North

One thing is absolutely clear: the Government will get the message on 9 April. We have been waiting for the election for some time. When the Prime Minister succeeded the right hon. Member for Finchley (Mrs. Thatcher), he did not have the courage to go to the country. He did not have the courage to go to the country last June or in the autumn. Now, with only three months before he is forced to go to the country, he has screwed up enough courage to call the election. We welcome the election. I notice that, after the Budget, the latest opinion poll shows a 3 per cent. Labour lead.

The past 13 years have been a nightmare for Britain and its people and certainly for those who have suffered most such as the unemployed, the low-paid and pensioners. Time and again, in every Budget up to now, they have seen how a Tory Government have benefited the rich and penalised the poor. So we welcome the election. On 9 April, the people of Britain will decide.

When people ask me whether I am optimistic, I immediately go back to 1983 and 1987. Frankly, I do not deny, and my colleagues would not deny, that we knew that we stood no chance in those two elections. When we left the House of Commons, we knew only too well that the opinion polls were right and that, unfortunately, we would see the return of a Tory Government. But the people have now decided. That has been shown in by-elections and local elections. They want a change. They will vote Labour in millions more than they did in 1983 and 1987.

The Government are a dying Government. They will end their life on 9 April. We shall .have a Labour Government to determine the progressive policies to rebuild our country.

Photo of Nick Brown Nick Brown Shadow Deputy Leader of the House of Commons 1:21 pm, 13th March 1992

In proceedings on the previous four Finance Bills on which I and my hon. Friends have served, we were able to tackle clause by clause and issue by issue the case that the Government made. We were able to table amendments. Through reasoned argument rather than weight of numbers, we secured change in those measures.

This occasion deprives us of the opportunity to secure any change in the measures before us. Indeed, it deprives us of the opportunity even to table amendments so that we can discuss the changes that we would like to see. That is a fundamentally undemocratic way to proceed. It is made much worse by the intervention by the hon. Member for Chichester (Mr. Nelson), who is not in his place. He said that we should not discuss these matters and that the Finance Bill should be put through on the nod. That shows a complete contempt for the democratic process.

It was not surprising to me that, as the Chief Secretary to the Treasury tried to justify these things, we could smell the flames of sulphur coming up around him. So confident is the Conservative party of the strength of its argument that it is bullying through a Bill of 11 clauses containing all the major tax changes, without allowing any opportunity to discuss amendments. It is putting the Bill through on a guillotine with only two hours of debate. That is not evidence that the Conservative party has great confidence in its arguments.

I should like to deal with several issues which arise from various clauses, but I cannot, so I shall concentrate on the main question, which is, of course, the lower rate tax band. The hon. Member for Beaconsfield (Mr. Smith) asked why, if the Labour party believed in a lower rate tax band in the past and had a policy proposal to introduce one for the future, it intended to vote against such a proposal now. In asking the question, as he probably most certainly knows, he answers it.

The reason why we oppose the lower rate tax band is not because we are against it in principle. We are not. It is because we are against it now. We are saying that resources should not be borrowed, thereby effectively increasing the public sector borrowing requirement, to fund a tax giveaway. That is effectively what the Government are doing.

Photo of Mr Tim Smith Mr Tim Smith , Beaconsfield

Will the hon. Gentleman give way?

Photo of Nick Brown Nick Brown Shadow Deputy Leader of the House of Commons

No, I shall not give way, because time is short.

The Government argue that somehow the lower rate tax band can be afforded and will be repaid over the cycle. I return to the argument that I put to the Chancellor yesterday. The argument is set out in the Government's Red Book. The Government clearly say that there will be a public sector borrowing requirement for the forecastable future. In other words, there will be a PSBR over the cycle. On the Government's own evidence, the Budget will not be balanced over the cycle. An on-going, and in my view unhealthy, deficit is forecast for the future.

The Chief Secretary to the Treasury had the cheek to say that we had changed our minds. [HON. MEMBERS: "What minds?"] I am talking about the minds. The hon. Gentlemen must keep quiet. What about the minds of Conservative Members? They always opposed the lower rate tax band on the grounds of cost and efficiency. They said that it would be too expensive. They opposed it because they said that they would prefer a streamlined tax system and did not agree with extra bands. They admired the elegance of the two rates, which in time they said they hoped to see reduced to one.

The hon. Member for Beaconsfield argued previously against an extra tax band. He said that the eventual objective of the Conservative party—although one would not think it from reading the Red Book—was a 20 per cent. basic rate. He used to use that as an argument against lower rate bands. He now stands that argument on its head and uses it—as, of course, he has to—as an argument for lower rate bands.

The Conservative party always advances the argument that the tax rate for everyone should come down to 20 per cent. It does not argue for a special lower rate band. Indeed, the right hon. and learned Member for Surrey, East (Sir G. Howe) said when he abolished it that the case for the lower rate band was never clear. However, solely for reasons of expediency, it seems that the case is becoming clear to Conservative Members.

It is reasonable to ask why the Government are introducing the lower rate band. Are they doing it to help the poor? Does anyone really believe that the inventors of the poll tax are doing it to help the poor? There are much more tax-efficient ways of helping the poor. The Conservative party has not adopted those methods.

The Chancellor has claimed that every average single-earner family will gain £2·64 per week as a result of the Budget, but 72p of that is as a result of the annual indexation of allowances in line with inflation. Again, the quarter of a million people in tax-paying families on family credit gain less. They lose 70p in benefit for every £1 that they gain in tax cuts. Moreover, the increases in excise duties which we are voting through without amendment or any real chance of discussion will cost such people an extra £1·56 per week on average. So the result is a net loss for the low-paid of 76p per week.

In those circumstances, it is the most grotesque hypocrisy for the Conservative party to say that the lower rate band is intended to advantage the poor. It is clearly nothing of the kind. It is not intended to be anything of the kind. It is being introduced for one reason only—to confuse the debate about taxation in the run-up to the general election. It is intended specifically to confuse the debate about the Labour party's tax policies.

The Chief Secretary said that he wanted to hear the Labour party's Budget proposals. Of course, after the general election, the House will have an opportunity to discuss the Labour party's Budget. It will be formally presented to the House, with a proper Finance Bill. The measures will be discussed in detail, not bullied through on a guillotine. My only regret—I have to say that it is not an overwhelming regret—is that the Chief Secretary and the Financial Secretary will not be present to hear our Budget.

Photo of Francis Maude Francis Maude The Financial Secretary to the Treasury 1:28 pm, 13th March 1992

The hon. Member for Berwick-upon-Tweed (Mr. Beith) asked why the important provisions on the unified business rate are not contained within the Bill. They relate to a tax introduced under the Local Government Finance Act 1988 and not under an ordinary Finance Act. They would have to be amended by a separate Act, which we propose to introduce after we are re-elected.

On excise duties, and especially the question raised by my hon. Friend the Member for Erewash (Mr. Rost) in his valedictory remarks to the House, we have increased the differential between leaded and unleaded petrol. We have also increased, in cash terms, the differential between unleaded petrol and diesel. I hope that he finds that a welcome development.

My hon. Friend the Member for Chichester (Mr. Nelson) mentioned car tax. He was right to do so, and I may be able to give some comfort. The reduction in car tax has been widely welcomed and I am happy to say that it has already given a substantial boost to the motor industry. In a few cases, as my hon. Friend pointed out, tax had already been paid by manufacturers and importers at the higher rate before the Budget. Some traders would therefore stand to lose.

I am pleased to be able to tell the House that Customs and Excise have introduced an extra-statutory class concession to enable refunds of car tax to be made in respect of chargeable vehicles held by dealers as 10 per cent. tax-paid stock and unsold to final consumers on 10 March 1992. Those refunds will ensure that such vehicles will bear an effective car tax rate of 5 per cent., and will bring consistency of treatment to manufacturers and importers, who opt to deal on a tax-paid rather than a tax-free, sale or return, basis. I hope that that announcement is welcome to the House, as I am sure it will be to the industry.

Much of the debate has focused on income tax. It is right that it should, and we have been treated to some remarkably dishonest speeches and some contempt by Opposition Members.

The Labour party asks us to believe that it now reckons that 25 per cent. is right for the basic rate of income tax. Labour Members tell us, hand on heart, that a Labour Government would not increase the basic rate of income tax. They say that 25 per cent. is just about right and that they will not put it up, adding, "There is no need to do so. We wouldn't want to do anything like that."

In that case, when we reduced the basic rate of income tax from 33p to 30p, why did Labour Members vote against it? Do they now admit that they were wrong to oppose that reduction? When we reduced the rate from 30p in the pound to 29p, why did they oppose it? Do they now admit that they were wrong? When we reduced the tax from 29p to 27p, they opposed it. Do they now admit that they were wrong and that we were right?

Photo of Francis Maude Francis Maude The Financial Secretary to the Treasury

If the hon. Lady is prepared to stand up and admit that, every time that we reduced the basic rate of tax, they were wrong to oppose it, and to apologise to the House and to the country for what the Opposition have done, we will happily accept their apology.

Photo of Margaret Beckett Margaret Beckett Shadow Chief Secretary to the Treasury

Sadly, the Financial Secretary will not have the opportunity to repeat these remarks, but I recommend that he reads the book by the Chancellor of the Duchy of Lancaster, who is now chairman of the Conservative party, in which he says that the case for further tax cuts has been much over-egged and that there should not be further tax cuts. At that stage, the top rate of income tax was 60p in the pound and the standard rate was 30p.

Photo of Francis Maude Francis Maude The Financial Secretary to the Treasury

If that is the best that the hon. Lady can do by way of an apology to the nation, she has some further learning to do. Every time that the Government have properly reduced the basic rate of tax, Labour has opposed it. Now Labour Members say that they have changed and that they do not want to increase the basic rate. Why, then, did they oppose it? They owe the House and the country an apology, but the House and the country will not believe them. They know that a future Labour Government, like every other Labour Government in history, would increase the basic rate of income tax. We know that because they are giving a signal of it today. We are introducing a lower rate for the lower paid, as an important first step towards a 20 per cent. basic rate for everyone. What does the Labour party do? Labour Members say that they will increase the rate, despite the fact that it has been their stated policy to move towards it. They are saying that, although they believe that it is a good idea, they will oppose it because they want to increase the tax on the lower-paid.

As every Labour Government increased the basic rate of tax for everyone, a future Labour Government would do the same, because they do not know any other way. They would increase the basic rate of tax for the lower paid, the middle paid and the higher paid—for everyone —because they believe that the money that people work hard to earn does not belong to the people. They believe that it belongs to the Government.

Every time a tax is reduced, the Opposition think that it is a giveaway. I have news for them, and the British people who work hard for their money have news for the Labour party: they believe that it is their money, and they want to decide how to spend it and what to do with it. That is what they are telling the Labour party.

It being four hours after the commencement of proceedings on the motion relating to the Finance Bill and Further and Higher Education (Scotland) Bill (allocation of time), MR. DEPUTY SPEAKER. put the Question already proposed from the Chair, pursuant to Order this day.

Question agreed to.

Bill accordingly read a Second time.

Bill committed to a Committee of the whole House.—[Mr. Greg Knight.]

Bill immediately considered in Committee.

Clauses 1 to 9 ordered to stand part of the Bill.