I beg to move, That the Bill be now read a Second time.
It is now nearly three weeks since the House approved the resolutions on which the Bill is based. On that occasion, I said that the debate that underlay the Bill was a continuation of the debate which decided the general election. It is not simply a debate which was relevant to the general election—it is a debate about the decisive issue in the general election.
The issue that was at stake and was decided on 9 April is as clear as it is simple. The question was whether the electorate supported the tax policy set out with great clarity by the Government, or a tax policy espoused by one of the Opposition parties. The electorate gave a clear and unambiguous answer, and I clearly think that their answer was right.
The Government believe that tax policy should be driven by two primary considerations. First, we believe that, in a free society, the first call on the fruits of wealth creation rests with those who are responsible for that wealth creation process. We firmly believe that, if somebody takes a risk, makes an investment, commits extra effort, and finds a better solution to an economic problem and thereby creates wealth, that person has a right to the lion's share of the economic benefits that those actions create.
The fruit of economic activity is not owned collectively but owned by the individual or company that creates the wealth. That is not to say that wealth creators have no responsibility to others in society. We all acknowledge that we have wider responsibilities. Overwhelmingly, people who are responsible for wealth creation recognise those responsibilities. Tax policy must recognise that the first call on the wealth created by the people who work in our economy falls with the people who are responsible for that creation process.
We believe also that tax policies must recognise another and parallel principle—that the limiting of the tax burden, particularly the marginal incidence rate, is right not only in principle but in practice, for a severely utilitarian reason. Any economy relies for success on people taking risks, making investments, committing extra effort, and solving economic problems. That is the engine that drives the wealth-creation process. It is powerfully in the interests of the whole community to maximise incentives, encourage people to engage in that process, make those activities worth while, encourage people to undertake them, and —most important of all—reward those who do so successfully.
I am seeking to set out clearly why it is important to limit the tax burden and marginal rates of tax. I am not making a call to arms in defence of privilege. My comments reflect clear recognition that we have a common interest in rewarding success. The individuals responsible for wealth-creating activity benefit, as they have every right to do. More importantly, the whole community benefits if, as a result of that more incentive-oriented approach, the economy becomes more successful.
We have the clearest possible illustration of that principle in the take home pay since 1979 of the man on average earnings. I am talking not about someone on a fancy City commission but about a man on average earnings. Between 1974 and 1979, his average take-home pay rose 1 per cent. in real terms. Since 1979, that same man has seen his take-home pay rise 39 per cent. in real terms—£78 a week in today's terms. That is a measure of the effectiveness of a more successful economy driven by the incentive approach that this Government adopt.
Virtually all the Opposition parties fail to grasp that common interest in rewarding success. In the Ways and Means debate three weeks ago, the hon. Member for Gordon (Mr. Bruce) illustrated the extent to which the Liberal Democrats do not understand that essential principle. He asked what he thought was a rhetorical question—what good it was to a man on disability allowance to talk about tax cuts. It does not seem to occur to the hon. Member for Gordon, any more than to his party, that the money that pays for disability allowances is generated by a successful economy driven by effective rewards and incentives.
Surely the Financial Secretary will concede that, if the wages at the top of the scale rise by substantially more than inflation, that will pull up the average. Will the hon. Gentleman remind me what the average male weekly wage now is? I suspect that many of my constituents receive nothing like that amount.
Average male earnings are now just under £400 a week. That in itself reflects the increase in earnings brought about by the more successful economic policies introduced in the 1980s. Failure to understand the critical importance of the incentives that lie at the heart of a free economy explains the choice with which the electorate were presented on 9 April.
Would it not be a more accurate analysis to say that, in the general election, the majority voted for parties that believed that, in the current economic circumstances, there was some scope for greater investment rather than tax cuts? Would not even more have done so if they had not taken fright at the last moment, seeing the possibility that Labour's ambitions for tax increases were far greater?
No, I think that what frightened them was the prospect of Labour and the hon. Gentleman's party entering into a cosy pact that would deliver proportional representation.
What the electorate saw on offer from Labour during the general election campaign was a programme that would add £7 billion to the tax burden, and would bring back 59 per cent. marginal tax rates for wealth creators. For the Liberal Democrats—the party of the hon. Member for Berwick-upon-Tweed (Mr. Beith)—even that was not enough; according to them, an across-the-board tax increase was needed to pay for the party's social programmes. The electorate saw the choice with which they were faced, understood its implications clearly and chose the Government's vision. I believe that they were absolutely right to do so.
The Financial Secretary has referred to incentives. He has also mentioned 59 per cent. tax rates, which—obviously—he rejects. Does he accept, however, that many people at the bottom of the scale—those on housing and poll tax benefits—may face effective tax rates of up to 98 per cent. if they have a chance to go out and earn money? Benefits are withdrawn, and tax comes in. The Government's council tax proposals increase the disincentives and the effective tax rates for such people.
I was about to observe that one of the changes introduced by the Government in earlier years ensured that no one had to pay marginal tax, combined with benefit withdrawal, of more than 100 per cent. That system operated before the Government started to reform the taxation of income.
In particular, on 9 April, the electorate chose the Budget delivered by my right hon. Friend the Chancellor of the Exchequer on 10 March rather than the shadow Budget delivered with such ceremony by the leader-inwaiting of the Labour party. Our Budget continued the process of reform and reduction of taxes that has been the hallmark of 13 years of Conservative government. My right hon. Friend cut income tax to 20p on the first £2,000 of everyone's taxable income, and 20p is now the marginal rate for nearly 4 million people. In doing so, he reaffirmed his pledge to move towards a 20p basic rate for all taxpayers as soon it was prudent to do so.
My right hon. Friend's Budget was not a quick election gimmick; it built on earlier reforms, one of which the hon. Member for Sheffield, Attercliffe (Mr. Betts) has just drawn to our attention. The Social Security Act 1986 ended the anomaly of marginal withdrawal rates of over 100 per cent., and the national insurance reform of 1989 ended the notorious national insurance "steps". The Budget follows the reduction in the basic rate of income tax from 33 per cent. to 25 per cent. in a number of steps, every one of which was opposed by the Opposition—although they asked the electorate to believe on 9 April that, having voted against it, they now considered that 20 per cent. was the right income tax rate.
The Budget also follows measures that we have taken at the higher end of the income scale to improve incentives. We have reduced the top rate of income tax from 83 per cent. to 40 per cent.; we have abolished the investment income surcharge of 15 per cent.; and we have reduced the top rate of inheritance tax from 75 per cent. to 40 per cent. Those changes are all of a piece, and they represent the Government's continuing commitment to reducing the tax burden, sharpening incentives and, above all, rewarding success.
Tax cuts, however, cannot be had for nothing. Only a Government who are committed to controlling public expenditure will have the capacity to cut tax. The history of the 1960s and 1970s is one of unrelenting growth in the proportion of gross domestic product represented by public expenditure. In 1964, the outgoing Conservative Government bequeathed a public expenditure share of GDP of 36·75 per cent. By the mid-1970s, that share had risen to only a fraction under 50 per cent.: half the total national income was being spent by the Government.
It was at that point that Dr. Witteveen—my hon. Friends will remember him—arrived to bail out a bankrupt Government. Under his tutelage, Labour imposed the only real-terms cut in NHS expenditure in recent history—yet, despite the U-turn imposed by its bankers, public expenditure still stood at 44 per cent. of GDP when Labour left office in 1979.
The present Government have brought firmly under control the share of national income accounted for by public expenditure. At the top of the economic cycle, the share was some 4 per cent. lower than it had been at the peak of the previous cycle: in the current recession, the share is likely to peak at 43 per cent., compared with a peak of 47 per cent. in the early 1980s and—as I have said —one of a fraction under 50 per cent. in the mid-1970s.
I have stressed the emphasis that we place on controlling the tax burden. Disciplined control of public expenditure is the inevitable and inescapable corollary of that commitment. One change announced by my right hon. Friend the Chancellor in his Budget will serve further to underline the critical importance of the umbilical cord that should connect tax and expenditure decisions. Next year will be the last year in which a Finance Bill debate is held in the summer: in December 1993, we shall switch to an annual Budget statement that will cover both revenue and expenditure.
That change will improve decision-making in government. It will mean that decisions on spending and decisions on tax can be made alongside each other, that all the Government's activities can be viewed in the round and that it can be decided properly whether a given objective would be better met by means of the public-expenditure or the tax route.
Obviously, we all welcome what the Financial Secretary has just said. Will he tell us, however, just how definite the figures produced in December will be in terms of the actual Budget? Will what is announced then be just a plan, or will a decision be made at that time?
My right hon. Friend made the position clear in his Budget statement. The December Budget, as its name implies, is intended to bring together expenditure and revenue in a firm Budget statement.
The change will also improve accountability. The presentation of the Government's plans will be easier to understand. Parliament and the public will be able to look at both sides of the account, to see what the Government plan to spend and how they propose to pay for their spending. Parliament and the public will be able to debate the choices that the Government have made. The new system will make crystal clear what the voters recognised on 9 April: that only a Government with the will and desire to control public expenditure can genuinely offer the prospect of lower taxation.
There are other benefits too, not least for employers. They are responsible for operating the PAYE system, and it falls to them to ensure that Budget changes in income tax rates and allowances are passed on to their employees. The current Budget timetable means that the Inland Revenue must update employees' tax codes for the new tax year in two stages, in order to put the benefit of tax reductions into pay packets as soon as possible after the start of the tax year. That often means that an employee's tax code is changed twice in a year, causing extra work for the employer and, in an annual cycle, correspondence for Members of Parliament.
With a December Budget, the Revenue's two annual coding exercises will be combined. The recoding will take place in one exercise before the tax year starts. Inevitably, there will be some transitional costs for employers in switching to the new system, but when it is in place it will mean less work for them and for the Inland Revenue. For taxpayers, it will mean that tax cuts will normally be in pay packets immediately after the start of the tax year instead of late in May, as at present.
The Bill picks up those measures that did not need to be on the statute book before the election. With two exceptions, they will take effect from the dates announced in the Budget. The exceptions are the measures to reduce the minimum limit for charitable donations qualifying for tax relief under the gift aid scheme and the relaxation of the rules for some charitable convenants. As my right hon. Friend the Paymaster General announced to the House on 7 May, we now propose to bring forward the starting date for these measures from 1 July to 7 May. That will be of considerable benefit to both charities and donors.
On 6 April, the threshold for inheritance tax was raised from £140,000 to £147,000, in line with indexation. The Bill implements the over-indexation to £150,000 announced in the Budget. That starts the process that we promised in our manifesto of lessening the burden of inheritance tax on families whose principal asset is the family home. But the Budget contained a measure of wider significance, a measure that has been widely welcomed.
Those who build up their own firm are often fearful of the threat that inheritance tax poses to the long-term future of their business. They are concerned that their heirs will face a large inheritance tax bill and that, to pay the bill, those heirs will have to take funds out of the business that could be better used to make the business grow. Worse still, they may have to sell up, as a result of which the business would no longer be a family business.
We do not believe in a one-generation enterprise society. We believe that people are right to want to pass on the results of their efforts to the next generation. If Parliament approves the Bill, the threat of inheritance tax to family firms will be removed.
The inheritance tax change was one element of a wider series of measures designed to benefit business. The changes to value added tax penalties were enacted in the Act that the House passed just before the election. The changes to the business rate in England and Wales will be implemented through the Bill that the House is to debate later today. Adjusted rates bills will be issued for 650,000 English and Welsh properties later this summer, whereas 250,000 properties in Scotland and Northern Ireland, where no legislation was needed, have already received their bills. We are introducing rules for hearing tax appeals, which include powers to award costs and publish decisions.
The amount that we can or should do through the tax system to help businesses is, however, necessarily limited. What matters most to all businesses is the overall economic condition of the country and the availability of opportunities for trading at a profit. The 1990s promise to be a decade of increasing opportunity for business. It will certainly be our purpose to ensure that that is so.
The 1990s will be the first decade of the European single market. It is perhaps fitting that a substantial part of the Bill is taken up with the measures needed to administer the tax system once fiscal controls at frontiers are abolished on 1 January 1993.
The Minister keeps on talking about opportunities, tax gains and the rest of it. Will he take this opportunity to refer to a subject that was not referred to in the Queen's Speech: unemployment? What opportunities will there be for unemployed people? The unemployment figures increase month by month. Many people fear that they will never work again. When will unemployment be at anywhere near the same level as it was when the hon. Member for Orpington (Mr. Horam), then a junior Labour Minister, was in office?
Has it not occurred to the hon. Gentleman that the building of a successful and expanding economy is the necessary precondition for the delivery of a reduction in unemployment? The hon. Gentleman ought to concentrate for one second on the success we achieved in job creation and reducing unemployment throughout the 1980s. In that decade, more than half of all the jobs created in Europe were created in this country. The abolition of unnecessary frontier controls represents a major advance towards the Government's objective of a free and competitive market of 350 million consumers in Europe. That in itself provides an opportunity to create the jobs that the hon. Gentleman very properly wants to see created but for whose creation he makes no proposals.
The scale of the internal market in Europe should not be underestimated. It is worth reflecting that the European Community will be further advanced in the removal of internal barriers to trade than some federations. For example, the Canadian Prime Minister, a mere 125 years after the foundation of the Canadian federation, has set himself the objective of reducing the current interprovincial barriers to trade so as to create an internal market in Canada that will parallel the market that we are seeking to build in Europe. The completion of the internal market in Europe represents a substantial achievement for the Community, as well as a major trading opportunity for British business.
In contemplating the opportunities presented by the single market, we should also reflect on how far we have come since we joined the European Community roughly 20 years ago. In those days, there was a fear that opening up the European market could spell economic destruction for a weak and fragile economy. Who, after all, we were asked, would want to invest in an economy that was inflation-prone, strike-bound, with a name for poor productivity and poor quality, where enterprise and initiative were throttled by a penal tax system?
In the 1970s, the British economy looked destined to falter. The prospect of freer markets was a threat, not an opportunity—a threat to those who feared that it would spell the end to a cocooned and mollycoddled existence. The fact that Britain is now the investment location of choice for those who want to take full advantage of the single market is one of the most concrete testimonies to the achievements of the last 13 years. The United Kingdom has recently been attracting half of all American investment—
The Minister has talked about the opportunities presented to the British economy by the European single market, but is it not the case that the Government's unrelenting opposition to the social chapter means that the opportunity offered to the British economy is for it to become the sweatshop of Europe?
No. It is the opportunity described by Mr. Delors—of becoming the most attractive investment opportunity for business in Europe. That is the choice that business is making.
As I was saying, half of all American investment coming into the Community and just under half of all Japanese investment in the Community now comes to Britain. Britain offers a low tax environment, with corporation tax in the current year at 33 per cent. and with a top rate of income tax at 40 per cent. This country offers good labour relations and stability.
On 9 April, the British people were offered a choice. They chose the policies of low taxation that give individuals freedom to chose how they spend their own money, that give businessess an environment in which they can grow and invest. They rejected the prospect of a wealth-destroying, high-tax economy and of an environment hostile to enterprise, investment and growth. They realised, as we realise, that that offers no future to Britain. I commend the Bill to the House.
I must confess that I never recognised either myself or my party during the speech to which the Financial Secretary treated the House. However, I agree with him that what matters to business is the overall economic condition of the country.
The House will want to consider the Bill in the context of the present state of the British economy, in particular in the context of the budgetary stance that these measures are supposed to underpin. For example, there is nothing in the Bill that will have a significant impact on Britain's trade deficit, yet the position is both serious and deteriorating. April's deficit was an alarming £1·061 billion. In the last three months, the volume of imports has risen by 6 per cent., but the volume of exports has risen by only 2 per cent. The manufacturing deficit for the last three months is nearly twice what it was in the same period in the previous year. Before 1983, Britain never had a manufacturing deficit. Since then, we have never had a surplus.
I know that there are some in the Conservative party who argue that those things do not matter, that they are all private sector arrangements that can be left to find their own level. That view is not universally held within the Conservative party. Let me treat the House to an extract from a speech made to the Conservative party conference in 1989, not by the man who is now our Prime Minister, but by the man who is now our President. He said:
I beg our party not to argue that a deficit in overseas trade is of incidental importance, self-correcting, easily financed. I don't believe a word of it.
I bet he delivered this speech better than me. He went on:
We would never have let the Labour Party get away with such an argument.
He certainly delivered that better than me.
Tell the small shopkeeper that he can trade at a loss and he'll recognise the sound of socialist naivety. Ask any housewife how long she can feed the family on tick.
There was a time when it was unnecessary to say to Conservative party audiences, even rhetorically, that they should "ask any housewife", because they would have been all too acutely aware of the views of one specific housewife.
Britain's second most famous housewife made clear her views on trade deficits:
Imports have penetrated our home market deeper than we could ever have imagined … the Conservatives are on your side. We are going to let you who know the job get on with it … so that once again the products stream from our factories and workshops while customers of the world scramble over each other to buy them.
That was in April 1979. Far from having customers from all over the world scrambling to buy the products streaming from our factories and workshops, we have maintained a constant manufacturing deficit since 1983. Britain is now the only EC country where manufacturing investment is lower than in 1979.
Those issues would be important at any time, but to have such a weak balance of payments position at this stage of the economic cycle suggests that something is deeply and fundamentally wrong with the management of the British economy. The disgraceful truth is that there is nothing in the Bill to have any impact on the problem.
What of inflation? In 1987, in the Conservative party manifesto, which was supposed to set the tone for the last Parliament, the Conservatives attacked inflation in the only way they know how—by using extravagant language:
Inflation is an evil … as with all cancers, it needs to be completely eradicated. To this end, we shall endeavour to achieve zero inflation.
To put that hysteria into context, the manifesto goes on:
"We shall maintain strict control of public expenditure and borrowing"—
The Conservatives' method of bearing down on inflation when they periodically feel obliged to do so, is to create a recession and put others out of work. Inflation was running at 10·9 per cent. in September 1990. Our country, under the management of the Conservative party, has sustained seven successive quarters of negative economic growth and 25 consecutive months of rising unemployment. At the end of all that pain and misery, the underlying rate of inflation—that is the Conservative party's preferred measurement—is still 5·7 per cent.
The Budget and the Finance Bill are predicated on optimistic Government forecasts of economic growth. No one else seems to share the Government's optimism. In a devastating survey of informed opinion, the Financial Times told us last Thursday that
Economists predict growth will remain weak.
It goes on:
Economic growth in the UK will continue to crawl along at a weak level for the rest of this year and next, according to the latest Financial Times survey of forecasts on the UK economy … Economists expect gross domestic product to grow 0·8 per cent. this year. Even next year, GDP growth will not quite recover to the so-called 'trend' rate of about 2·5 per cent … The consensus from economists at 22 universities, intergovernmental institutions, independent think-tanks and City investment houses is that unemployment will continue to grow over the next two years, rising to 2·75 million by the end of this year and to just under 3 million by the end of next … Projections for output this year are particularly gloomy …
Investment is forecast to fall substantially this year … Forecasters do not expect inflation to wither greatly from present levels … The United Kingdom's trade deficit remains a big concern. Nearly all the economists surveyed predict a worse current account balance this year than the £6·5 billion deficit projected by the Treasury in the March budget—the consensus is for a deficit of £8·4 billion—but their forecasts might be too benign … The average forecasts do not suggest that Britain will be able to cut its interest rates below German rates.
That is a devastating indictment of the Government's management of the economy. It leaves us with sluggish economic growth, grotesquely optimistic medium-term Government economic forecasts, a weakened tax base and a public sector borrowing requirement that has more to do with political expediency than prudent economic management.
The Government have set out their objectives as reducing the share of national income taken by the public sector, balancing the budget over the medium term and reducing taxes when it is prudent to do so. In the present circumstances, any significant tax reduction seems unobtainable, even in the medium term. Even the objective of a balanced budget over the cycle is receding as the Government's growth forecasts look ever more ridiculous.
It seems logical to conclude that, with considerations of electoral expediency out of the way, the Government's Treasury team will be looking at two main and not mutually exclusive options. First, this year's public spending round will be draconian, and what has already been promised is probably even now being clawed back. Secondly—it is here that Finance Bill Committee members will need to be particularly vigilant—the Government will be looking for ways of getting the total tax take from the British economy back up to around 38 per cent.
I am prepared to give way to the Financial Secretary if he wishes to repudiate that. The Government will want to use indirect taxation as the mechanism. The Financial Secretary almost confirmed as much during our last debate on these matters. The option of broadening the scope of value added tax and blaming the European Community sounds par for the course, given the Government's recidivist record on tax matters. The Committee will need to be alert to that.
The state of public finances underpinning the Finance Bill is worse than it appears, since the Government have had the accumulated advantage of £109 billion of North sea oil revenues, £40 billion of privatisation receipts and a further £25 billion from the sale of council houses.
Moving from one sorry state of affairs to the next, there is nothing in the Finance Bill to underpin the classless society to which the Prime Minister said that he is committed. When asked on "Election Call" about the widening income gap between the rich and poor, the Chancellor simply said,
I don't believe it has.
Yet, in its family expenditure survey, a survey of real families, the Institute for Fiscal Studies found that the poorest 10 per cent. of the population lost £52 a year on average as a result of Conservative tax and benefit policies from 1979 to 1992. One of the explanations it gives for that is that
VAT increases have hit the poor, who have not been compensated by cuts in direct taxes because they do not pay them.
Over the same period, the richest 10 per cent. of the population gained £4,524 a year on average, yet the
Chancellor said that he does not believe that the income gap has widened, as if these were matters of faith rather than statistical fact.
One of the ways in which the unfairness of the tax burden could be addressed is through the mechanism of inheritance tax. In its latest survey of Britain's 300 wealthiest people, The Sunday Times said that 155 of the 300 surveyed inherited what it called "serious money". We are told that most of Britain's dukes and earls somehow manage to hang on to their wealth through boom and bust. How can it be fair or just for one young man of 28 to be worth £67 million because of the success of an ancestor eight generations ago in the 18th century?
I believe that it is right that a successful person who has built up money for himself should be able to hand that on to his children and to his children's children, but should it be untouched by the tax system for eight generations? When does the tax system take its cut?
For how many generations does the Financial Secretary think it right for these great fortunes to go from father to son, or perhaps occasionally to daughter, without the tax system taking its cut? Does he think that that is right or morally justifiable?
I thought that I had made it clear that it is more important for society to encourage successful businesses and to give them the wherewithal to continue to invest in expansion and in the job creation process that the hon. Member for Walsall, North (Mr. Winnick) was worried about.
I am not quarrelling with the Financial Secretary about setting the parameters for successful businesses: I am talking about the tax take from inherited wealth, which is different. The young gentleman I am referring to is not a successful business man, and nor, no doubt, was his father. They were the beneficiaries of a substantial sum of money that they inherited from an ancestor who was successful in the economic conditions of the 18th century.
We are discussing two different things. I have not stated a view on the Bill's clauses, which we shall trawl in detail in Committee. I am talking about the principle of inheritance tax as a mechanism whereby the taxpayer can take a bite from the great accumulated fortunes that seem to be able to drift almost in perpetuity from generation to generation of this country's wealthiest families.
The position is made all the more stark by the fact that the poorest 10 per cent. of households have an annual income of £4,081, of which they must pay 45 per cent. in different taxes. Income tax accounts for only £40—not because they are rich, are professionally advised or are related to the royal family and do not pay tax but because they are too poor to fall into the income tax system. All, almost all, of that 45 per cent. is spent on indirect taxes.
How can we place an effective tax burden of 45 per cent. on the poorest, whereas the wealthiest seem to be able to keep great fortunes rolling through the generations without paying tax, let alone a tax take of 45 per cent.? It cannot be morally right that the tax system should deal so harshly with the very poorest yet so generously with the very rich. A Government who believed in a classless society would favour redistributing the burden. Needless to say, that is not the thrust of the Bill's inheritance tax proposals.
The victims of the Government's recession are the unemployed, who are not spread evenly throughout Britain. The Government justify their neglect of the disadvantaged by claiming the growth in the level of take-home earnings as a big achievement—the Tory party's "big idea". That argument was trawled in our debate on 14 May, and the Financial Secretary returned to it today. As it is one of the issues that divides the two main parties, we shall return to it again.
In the debate on 14 May, the Financial Secretary emphasised the importance that the Government attached to what he called
an effective system of rewards for those who take risks and commit themselves to extra effort".—[O? cial Report, 14 May 1992; Vol. 207, c. 810.]
That was the tenor of his remarks this afternoon. He cited figures showing the growth in real take-home pay for the person on average earnings. If it is the Conservative's big idea that the take-home pay of those on average earnings grows rapidly under Conservative Governments, the Financial Secretary will be disappointed to learn that his big idea has stalled.
In 1991, there was a 0·5 per cent. fall in real disposable incomes, due largely to the recession. No doubt the Financial Secretary will have his plans for the Government's big idea, but they will not fit happily with the other parameters for the management of the economy, in particular the Government's difficulties with the tax take. The victims of the recession are not the employed but the unemployed. It is not employed people who are carrying the burden of the famous price worth paying.
With unemployment standing at 2,695,000—9·5 per cent. of the work force—with 23 unemployed people chasing every vacancy, with 1·5 million more of our fellow citizens unemployed now than when Labour left office, and with the number of people unemployed for more than a year standing at 841,000—a shameful increase of 94,000 in the first quarter of this year—the truth is that the Government not only do not care but, on the evidence of the Bill, no longer feel obliged to pretend to care.
The Conservative party, its owners and its newspapers will tell any story to save jobs—not the jobs of their fellow citizens and not the employment base of the country that they are supposed to be governing, but the only jobs that Conservative politicians care about: their own and those of their friends.
The debate was initiated with a spirited speech from my hon. Friend the Financial Secretary, who argued the virtues of reducing income tax in such robust terms that it reminded me of Gladstone's dictum about eschewing taxation and, rather, allowing money to fructify in the pockets of the people. My hon. Friend gave a formidable performance and has moved some way from the Tory Reform Group. That shows what a short time in the Treasury does, even to a good man.
I give my warmest support to the Bill, which seeks to raise the minimum revenue that is needed for the conduct of our affairs over the next 12 months. Treasury Ministers are engaged in an exercise that is bound to cause increasing difficulty as they try to reconcile their fiscal, public spending and monetary objectives. I shall try to explain why—but briefly.
I accept that the Bill raises the minimum revenue that is required, but it sits alongside substantial public spending. I see my right hon. Friend the Chief Secretary in his place, and I wish him well in the formidable task, which is well within his capabilities, of disciplining all the spending Departments in the coming weeks; but I do not believe that the level of public spending more than incidentally reflects the swing of the recession.
Of course the swing of the recession is an element in that public spending, but underlying the present levels of public spending is the continuous thrust for more money on health, on social services and education. I do not believe that those imperatives will be reversed merely because there has been a general election. We must reconcile ourselves to high public spending for the immediate future. Even if there is recovery in the economy, I suspect that unemployment will be the last element to show a fall. Therefore, when we are talking about its fiscal consequences, I still believe that the economy can recover while public spending is high.
However, many hon. Members will reflect from anecdotal experiences in their constituencies that the revival in the economy is, in most generous terms, tentative. More fledgling swallows have flown in to proclaim the recovery since the general election but have now reversed direction and gone to Italy. I do not regard that as a condemnation of Government policy. I do not feel any enthusiasm about a speedy and accelerating rate of recovery. There is much to be said for the recovery being well based and progressive in that sense.
All the anecdotal evidence I have been given is of an economy still in a state of uncertainty and unease. In those circumstances, I should have expected just a bit of imagination and some attempt to deal with interest rates. It is perfectly true that, since the historic occasion when we entered the Lubyanka of the exchange rate mechanism, interest rates have fallen, but the rates of inflation have fallen faster. In real terms, interest rates today are at an extraordinary level, especially when one traces our general state of economic activity.
I am not going to make forecasts, as the hon. Member for Newcastle upon Tyne, East (Mr. Brown) did so persuasively with the aid of The Sunday Times—Murdoch and the Labour party, a dream ticket. However, I do not believe that we can sensibly have a balanced, interrelated economic policy without a reduction in interest rates.
At the weekend, commentators were saying that the exchange rate mechanism was the nearest we had to the gold standard of the inter-war years, and that my right hon. Friend the Chancellor of the Exchequer was almost like Montagu Norman in lederhosen. The immediate prospect does not appeal. It is perfectly possible to reduce interest rates without causing disaster within membership of the exchange rate mechanism, although I grant at once that there is more than one opinion about such a relationship.
It is just possible that, as a result of a movement of interest rates, the present exchange rate could not be maintained. Would it be a national disaster if there was some adjustment in the present exchange rate? I do not know what the correct rate is. I am a market person by instinct and by prejudice, and I prefer a free exchange rate to a politically fixed one. Do my hon. Friends agree with my right hon. Friend the President of the Board of Trade that when, month after month and quarter after quarter, there is a deficit of the recent recorded magnitude on the current trade account, it tells us that all is well with the world? Or does it tell us that the exchange rate and all that it represents is possibly being balanced round a slightly suspect figure? I do not know. I do know that one cannot carry out a policy with the three major economic components in their present relationship.
I have an affection for the Treasury, although I know that it is full of the most lofty and intellectually well equipped individuals, who never stray too far into the real world. I have a little friendly advice. My right hon. Friends the Chancellor and the Chief Secretary or my hon. Friend the Financial Secretary should take those individuals to one side over a fraternal lunch. They should explain to them the old seaside business of the three-card trick, because they have probably never played anything with cards except bridge.
It would be helpful to explain the three-card trick to show that, if one is conducting economic policy, one cannot have a fiscal policy, a spending policy and a borrowing policy, with all that relates to a monetary policy, unless there is a pos flexible interrelationships. Once one freezes one of them, there are deleterious consequences across the board. That is the position I see emerging. I say to my hon. Friends that, if one has such a difficulty, one addresses it in year one of a Parliament—because the longer one goes on, the more difficult it becomes.
As always, it is a pleasure to follow the right hon. Member for Shropshire, North (Mr. Biffen). It was he who correctly predicted a number of years ago, when the Government's economic policy was first revealed to us, that we faced three years of unparalleled austerity. Those three years were somewhat similar to the present. I had hoped that other Conservative Members would have pointed out what was fairly obvious to us all.
The levels of interest rates and the determination to keep inflation down, which the right hon. Member for Shropshire, North correctly mentioned, overhang the Bill. The Chancellor of the Exchequer has said that the central economic aim is to get inflation down and to keep it down. Yet the Government said that 13 years ago, and we suffered for three years to bring that about. We now hear the same hopes and aspirations which were produced so long ago.
The Chancellor of the Exchequer now talks about 2 per cent. inflation, and there is even the odd mention of zero inflation in the years to come. Who in the present Government will be straightforward, as the right hon. Member for Shropshire, North was, and point out the consequences of those unrealistic aims? We face the problem of real interest rates being ridiculously high and damaging our industry. We face levels of inflation which will damage industry as well, and we face a balance of payments deficit with its consequent problems if we do nothing about our exchange rate.
The true level of inflation is 5·7 per cent, the underlying rate, yet we must get that down to 2 per cent. We shall not be able to compete with the Germans indefinitely, because we need to achieve levels of inflation lower than those in Germany to make our exchange rate realistic. It has taken the French a number of years to achieve that, yet people still do not have the confidence in the French franc which they have in the deutschmark, so one must maintain the unrealistic policy for even longer than the French have.
In 1979, the Government were confident that they had the right solution. They believed that sterling M3 would produce the recovery and they reduced public expenditure a great deal. Once again, the right hon. Member for Shropshire, North was quite right. Public expenditure will not be reduced as heavily now because they are more or less at the minimum. We should consider the level of public provision in this country, the way in which we are still living off our capital and the fact that our standard of roads and of housing is still declining.
Some 13 years ago, I lost 30 per cent. of the firms in my constituency which went to the wall as a result of the Government's severe actions. We are losing many firms today although it is too early to know exactly how many we shall lose. Is the goal of reducing inflation to 2 per cent. realistic? To achieve that, we shall need a further level of deflation, with unemployment rising indefinitely into the future, with investment falling and with increasing misery as the Government pursue the one goal in which they believe.
We all know that it is easy to reduce inflation, and to deflate the economy by high interest rates and, for good measure, by high exchange rates. That reduces consumption and destroys companies, the good as well as the bad, indiscriminately. Exports are hard to get with a high exchange rate and imports take advantage of the position to compete with our industries. Inflation then comes down. High interest rates restrict spending, although not all forms of spending. Individuals with high levels of saving profit from such a situation.
The question that must worry us is what happens eventually when there is an upturn. What happens then to our balance of payments? We expect a £9 billion deficit, at an annual rate, for the first half of next year. That may continue throughout next year, with high unemployment and with a bad level of investment, and possibly throughout the year after.
Where are the exports coming from? The manufacturers have been badly damaged by the Government who give them little consideration and less assistance. The problem is compounded. Many on the Treasury Bench said a couple of years ago that the boom was investment-led; it was not—it was a consumption-led boom. The boom was in finance, credit and consumption, and that did not help our long-term trading performance. The trouble with relying on interest rates is that some people gain and some people lose.
It is harder to control the economy through interest rates alone now that so many people have such a large amount of collateral in their homes. A further problem is that the Government created the conditions in which the home was seen as an investment. Trading up to bigger and better homes was considered to be the best investment of all. However, housing is not an investment. It is a consumption and it is a necessary consumption with regard to modest homes, although it is an extravagant consumption in certain other cases.
It is quite reasonable, sensible and right to help people to achieve modest levels of housing. We should provide incentives for that. However, to subsidise through mortgage tax relief, the abolition of schedule A, capital gains tax and capital transfer tax and to spend £8 billion on that, is profligacy of a massive order.
Although there is no question that all Governments are to blame, this Tory Government are the worst. After 13 years, the people of this country have learnt to penny-pinch in everything else, but to be spendthrifts in housing. We are now paying the penalty for having such a level of home ownership fuelled and ignited by the former Prime Minister's dedication to absurdly lavish incentives to home ownership. The country has paid a terrible price for reducing inflation by a means that caused great uneccessary damage to our economy.
We must look to the future. Many people saw the difference between providing advantages for the City of London and providing advantages to manufacturing industry. The trouble is that the Government did not see that important distinction. Of course we benefit from the City of London and its financial operations. However, we do not benefit from it anything like as much as we can benefit from manufacturing industry which produces exports.
So many people are only dimly beginning to perceive that financial centres follow wealth creation which comes mainly from manufacturing. London became a financial centre because of our industry in the last century. New York became a financial centre because of United States industry. Similarly, Tokyo is becoming a financial centre as a result of Japanese industry, and Frankfurt is becoming a financial centre because of West German industry.
While 10 or 20 years ago it was inconceivable that a European financial centre could be anywhere but in London, as time passes it becomes harder to be certain that such a financial centre will be located in our capital city. Our financial centre rose on the banks of Manchester cotton and Birmingham metal industries. However, it now relies on the expertise of people in financial institutions. That expertise is tradeable. It can be acquired and removed. Those people can travel abroad and establish similar institutions in other countries.
The lesson is that manufacturing industry is the principal begetter of financial institutions. Therefore, we shall have to return to manufacturing industry. There was an opportunity in the Finance Bill to make capital allowances helpful to manufacturing industry instead of the reverse—as is so often the case.
I repeat what I have said on several occasions. A manufacturing company might buy a machine tool for £1,000. However, at the end of one year, that is written down to only £750. The £250 difference may very often be the salesman's commission. The machine tool could not be sold for £750. That is not depreciation. In effect, there is a tax on that machine tool because the true depreciation suffered by the purchaser will not be allowed back to him. That must be nonsense. Sooner or later I hope that the Inland Revenue and the Government will see sense and restore capital allowances to something more approaching their true value.
The hon. Member for Newcastle upon Tyne, East (Mr. Brown) was correct when he said that this autumn's public spending round was going to be tough. My right hon. Friend the Chief Secretary to the Treasury should be aware that there will be much support on the Back Benches for curbing high spending Ministries. It is vital this year that public sector pay should set an example and is not settled at rates higher than in the private sector.
It is significant that the first Finance Bill of this Parliament continues the radical reform of our tax system started by Mrs. Thatcher's Government and which was aimed at creating an enterprise culture in Britain. In that respect, clause 59 is the most important clause in the Bill.
In the 1970s, this country had one of the smallest small business sectors in Europe. The reason for that was obvious. During the 1970s, socialist Governments did not like private enterprise. Clause 4, massive nationalisation, enormous burdens of bureaucracy and high taxation were heaped on small businesses. Profit was a dirty word. Any business that survived, prospered and expanded faced the prospect that once it grew beyond a certain size, it was unlikely to be passed on to the younger generation because of the burden of estate duties. The nonsense was that the more successful the business the more it was likely to be sold to pay those penal taxes.
Quite naturally, owners tried to avoid that tax by giving away their shares to the next generation while they were still alive. The Labour party decided to stop that. Labour did away with estate duty and introduced capital transfer tax. That was economic madness for our country. We 'were killing off our industrial and commercial seedcorn. Some of yesterday's smaller firms are today's medium-sized firms and some of today's medium-sized firms will be tomorrow's industrial giants. The new tax also had a devastating effect on our regions.
Estate duty and capital transfer tax saw the end of many of our great northern firms which were controlled by northern families. When they sold out, they inevitably sold to national or international companies. The head offices were moved from the provincial city to London, and with them often went the finance, sales and research and development departments. That left the provincial cities more and more as branch factory land.
There are numerous examples of that in Hull in my constituency. Our leading departmental store, which was run by the Powell family for years, had to be sold to pay estate duties. Who benefited from that? The town did not benefit, because the profits were spent and invested in Hull when that department store was a private company. The customers did not benefit because they no longer received the service or choice that they received before. They had to have what head office in London said that the store should sell. The employees did not benefit. If there was a problem, they could no longer walk through the door of the boss's office to discuss it. They now worked for a faceless management in London.
The result of that policy had a broader effect on provincial society which I am sure the socialist ideologues who imposed the policy did not foresee. The family owners and directors nearly always provided the leadership in the community. They headed local charities and supported and financed sports clubs. They served as councillors and justices of the peace. As the family firms disappeared, the owners and directors disappeared as well. Even if the burden of capital transfer tax was not sufficient to force those businesses to sell out, it reduced the amount of cash available for investment and expansion.
In 1979, the Conservative Government realised that, if our economic decline was to be reversed, we needed to recreate the enterprise culture. We cannot create big firms. They are like oaks. One has to start with an acorn, and the acorns were the small businesses.
The great achievement of the Thatcher years was the enormous expansion in the establishment of small businesses and self-employment, helped by a much more supportive tax regime and lots of Government encouragement. Acorns grow into saplings before they become oaks. We defeat the object if half the saplings are cut down before they can grow into mature trees, and CTT was cutting them down.
The Government replaced CTT with inheritance tax. That was important because, once more, business men could give away their assets before they died, but that was not the solution. None of us knows when we will die. People die out of turn. It is dangerous to give away shares to the next generation—[Interruption.] Yes, we give them away, and people die out of turn and we get clobbered with tax. It is dangerous to give shares to the younger generation too soon because one is never sure which member of a family will go into a business. If money and power are given to young people too soon, it can cause family and social problems.
I am delighted that the Government have seen the validity of the arguments that have been put forward by the small business associations for some time and that clause 59 will now allow family businesses to be handed over free of tax to the next generation. This is an historic moment for small businesses. It will ensure their survival and expansion. It will be good for Britain, and it will be especially good for our regions and industry.
We hear much criticism of British industry having a short-term outlook. People say that industry is too worried about keeping the City happy and is reluctant to invest in the long term. Private family businesses do not have that problem. They can take a long view. They do not have to worry about the share price today or the price-earnings ratio tomorrow. They invest for the long term. The clause will be successful and will ensure that, over the next 15 years, we will have another harvest of great firms such as Marks and Spencer, Rolls-Royce and Sainsbury, which all started as family businesses.
As a Member who represents a large rural area, I am delighted that family farms will also benefit from the clause. In recent years, agriculture has been under increasing pressure, and the last thing that a farmer needs is the additional worry of how he will be able to hand over the family farm and ensure that his son can continue farming and pay his tax. If a farmer who has lost his father is struggling to survive, the last thing he wants is to have to sell vital fields to pay taxes.
My right hon. Friend the Chancellor has faced significant criticism over the past two years. I am sure that, as a result of clause 59, history will look kindly upon him. Without doubt, family farms and family firms will be ever grateful. I support the Bill with more enthusiasm than I have supported any Finance Bill since I have been in the House.
The hon. Member for Bridlington (Mr. Townend) seemed to describe a small business and farming world quite different from the one that is out there at the moment. Clause 59 is undoubtedly welcomed by small business, and the related clauses are undoubtedly welcomed by farmers. However, far more of the small business men and farmers whom I meet these days are in no position to hand on substantial amounts of money: they have no great worries on that score. Their problem is to stay out of bankruptcy to keep their businesses afloat in what are proving to be very hostile economic times.
Many farmers are saying to their sons, "I am not sure whether you will be able to stay on the farm. I am not sure that there will be a living for you on the farm, even if I can hand it on to you." The hon. Gentleman should recognise that the world of small business is currently facing a number of more pressing problems than the one to which he referred, which undoubtedly affected business over many years in the way that he described.
We all accept that there are not large amounts of cash in small businesses, but surely the hon. Gentleman will accept that even a hard-pressed farm of 300 acres faces a serious inheritance tax problem which will be solved by the Government.
I agree. I supported the clauses and said, at the time of the Budget and since, that I would continue to do so. In the current climate, many farmers are saying to their sons, "You will have to think carefully before you even decide to keep the farm going, because I am not sure whether there is an income for the family now." But for the possession of a farmhouse and the ability to run a vehicle on the farm and so on, many farmers would be in a far better financial position if they gave up farming and went down the road to find a relatively poorly paid job, if one was available. It is as bad as that in many sectors of agriculture. It is not an argument against the new clauses: it is a point about the general climate.
The Financial Secretary was right to point out that the election featured the tax issue in a very significant way, but he drew rather strange conclusions from the figures. Perhaps because he was carried away by the fact that he is occupying an important position in the Government, he seemed to ignore the fact that, whereas 14 million people voted Conservative and therefore must be presumed to support the Budget, 11·5 million people voted Labour and 6 million voted Liberal Democrat. It is impossible to conclude from those figures that the majority of people weighed up the Budget and decided that what they wanted was the Budget presented by the Chancellor.
The Government won, by the rules of the system, enough seats to form a majority in the House and, under our system, that entitles them to be the Government. However, that does not suggest that the majority of people are convinced by the argument that, in the current circumstances, tax reduction is better than investment. Indeed, the figures suggest that the large majority of people voted for parties which, in different degrees, saw grounds for greater taxation in the current circumstances. We argued, for example, that depending on income tax to address the urgent problems of education was desirable. We found wide support for that argument.
It is also true that, in the latter days of the election campaign, fear arose among many people about what the real implications of the Labour party in government would be and what the real extent of its tax ambitions would be. That undoubtedly influenced voters at the later stages. It did not alter the basic figures or the fact that the majority of people voted against the Government, but it is clearly something that the Labour party will need to address.
I remain convinced that there is a substantial body of opinion—the majority, as reflected by the figures—which did not accept the Government's argument that they could go on attempting to reduce taxation even at the expense of essential public investment. The right hon. Member for Shropshire, North (Mr. Biffen) hinted at that argument. There is a widespread feeling that there are key matters of investment with which we should get ahead now and which, if we do not get ahead with them, will hamper our economic growth.
If it makes sense, as the Secretary of State for the Environment said, to get into Canary Wharf while it is enormously good value, it must make sense to make some of the essential investments involving the construction industry while the construction industry can offer the most favourable terms while prices are at their lowest. Canary Wharf will remain pretty cheap for quite a long time to come. In the construction industry, prices may go up if we see some signs of recovery. At the moment, we think that it is extremely good value for that industry, and will put people back to work by doing some of the repairs, building and transport construction which is of real value for the future of our industry and economy.
It was part of our argument in the election that the Budget represented the wrong policy mix for accelerating the end of recession and was a missed opportunity to make some key public investments for which there is wide support. It was also part of our argument, and it is relevant to the Bill, that the Government's choice of tax-cutting measures was not going to address poverty in any significant way or put into people's hands sums of money that would make a significant difference to their purchasing power. One hundred pounds in the hands of an individual, as against £2 billion of public investment, seemed to be an odd choice to make at this stage of the economic cycle and unlikely to bring about serious improvement.
All the indicators have confirmed the impression, which was echoed on both sides of the House, of continuing recession problems—that is, our continuing output decline, unemployment continuing to rise, house prices and housing turnover continuing to fall, and gloomy reports from several companies. The chairman of Sainsbury said:
I do not see any concrete signs of recovery.
The chairman of Marks and Spencer said that he saw
no upturn in UK consumer spending.
Repossessions appear to be likely to continue, with the Government's scheme still not even off the ground, and the international environment is less favourable than ever to recovery because of the problems that we know exist in the German and Japanese economies. It would have made sense to move not to tax cuts but to investment.
This is a Bill of missed opportunities. For example, the Government have introduced no new provisions for tax relief on child care. Clearly, there is widespread public demand for such measures. Numerous Conservative Back-Bench Members keep talking about them. They did so in advance of the Budget, as if they were privy to secret information that the Budget would include great new provisions on child care. Year by year, those expectations are disappointed. We shall seek to raise the issue again in the context of this Finance Bill.
There is no sign in the Bill that the Government see the value of the tax system as something which can be used to support environmental objectives. Although the cut in car tax was welcome, the Government have missed the opportunity to use the tax system to promote environmental ends in relation to motor cars. The Bill does not vary car tax according to engine size or fuel efficiency. Nor does it do the same with other forms of vehicle taxation. Many other fiscal incentives could be used for environmental purposes. For example, corporation tax allowance could be made available for research and development into replacing CFCs. Changes in vehicle excise duty could also be used. There are several ways in which the system could be used for environmental purposes.
The Bill is also a missed opportunity to deal with poverty. There is no sign in the Bill of any move towards drawing together tax and benefits so that the low take-up of means-tested benefits ceases to contribute to poverty. The Government's tax changes are by no means the most efficient use of resources to help people on low incomes. If the Government are serious about targeting help on the poorest, they should drop the policy of concentrating spare resources on tax cuts via the expansion of the 20p band. Lifting the bottom of the tax band—lifting allowances—helps poorer people than those who are helped by lifting the top of the tax band. Simply expanding the 20p band will not be as effective as lifting the basic tax threshold.
The Government's particular choice of measures has brought with it considerable administrative costs. The cost of the extra staff required to administer the claims from people who had income taxed at source at the 25p rate but were liable to only the 20p rate will be considerable.
Before the election, I pressed the then Chief Secretary to the Treasury on the job implications. The Financial Times estimated that 800 new jobs would be required to administer the tax change. The then Chief Secretary said that he did not believe that the number of jobs required would be all that great. He gave a revised estimate later in the debate. He said:
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." —[O? cial Report, 13 March 1992; Vol. 205, c. 1134.]
In other words, "If people do not claim the tax rebate to which they are entitled, we might get away with not having to employ so many people." That is an odd way of dealing with the entitlements of the taxpayer. The change clearly involves considerable administrative costs, and I shall be interested to know whether the exact cost is now clearer.
Several measures could have been taken to reduce the bureaucratic burden on small businesses. For example, the continued separation of national insurance from income tax adds considerably to the administrative burden on small businesses. Small businesses have to contend with not merely the pay-as-you-earn system but national insurance contributions. If the two were integrated into a single system, there would be a considerable saving in costs to small businesses, as well as a saving on the £1·2 billion that the Government spend on administering the present system.
In Committee, we shall have to address increasing anxiety about the way in which small businesses are treated by the Inland Revenue. The Sunday Times has highlighted some of the interviews that take place in which taxpayers—especially small business taxpayers—are not fully advised of their rights and interviewed about their tax obligations but find that ignorance of their rights is presumed upon. Tax inspectors, often pressured by their training and the promotion system to take a rigorous attitude, put a great deal of pressure on taxpayers and give the impression that taxpayers are presumed to be guilty, when in law they must be presumed to be innocent.
There is an increasing file of cases, many of which have been brought to my attention, in which interviews seem to have been conducted in a hostile and unpleasant manner. In Committee, we shall need to inquire what is happening on that front and whether, for example, more details could be made public about the advice and training given to inspectors who carry out the work. They seem to be put under increasing pressure to achieve results by questionable means.
A measure which might have been included in the Bill, and which I was surprised not to find, was included in the Conservative manifesto. It is the proposal to exclude home owners from paying tax on the rent of rooms in their home. It is a good scheme, which closely echoes something in our manifesto at the previous election. It is a piece of borrowing that I would encourage and welcome.
If people have surplus capacity in their home, it seems a good idea to encourage them to make it available. It would be particularly helpful to young people with housing problems to relieve them of a tax burden. Often it is not only the tax burden that causes the problem. The problem is that people have to become involved in the tax system simply because they rent one room in their house for perhaps a limited period of a few years when they do not need it for their own family. It is a good idea to relieve them of that problem, and I would like to know from the Government what progress they intend to make on it.
The Government could also say more about stamp duty. When the stamp duty relief was announced, we all predicted that it would expire at just the time when signs of recovery in the housing market were too few to make it sensible to impose an additional burden at that point. Sure enough, that seems to be what has happened.
If there is one particularly unwelcome measure in the Bill, it is the third piece of retrospective legislation in respect of certain building societies. The Leeds building society has already been subjected to retrospective legislation. The retrospective proposals in the Bill appear to be designed to frustrate a court action that has already been entered into the lists. They thereby contravene a principle set out by the Economic Secretary last year, when he said that it would have been wrong to try to change the law during a court case. He said that the Committee would have been rightly shocked if the Government had sought to change the law between appeals, and that that would not have been right. Yet here we are engaged on a third piece of retrospective legislation on building societies precisely to prevent a court case from settling the matter. All Governments should be stopped in their tracks when they consider engaging on retrospective legislation, yet here we have it for a third time on this matter.
A further proposal for retrospective legislation is not in the Bill but the Government have announced that it will be introduced by an amendment. It involves life insurance companies. We shall examine it with particular care as the Government engage in their habitual recourse to retrospection in almost every Finance Bill.
I welcome some features of the Bill. Clause 59 increases the rates of relief against inheritance tax, as has already been mentioned. I also welcome the farmland exemptions. In the case of farmland, it is important to get the balance right so that we do not open a door which invites investment solely for the purpose of securing a tax exemption. That would damage agriculture. So far as those engaged in the industry have been able to assess, the clause seems to get the balance about right. It is a point that the Government must watch carefully.
The objective is obviously to help to keep farmland in families who have farmed it as a viable business proposition: it is not to open up a new door to people looking for a tax shelter who, in the process of doing so, inflate land prices to the general detriment of agriculture. We must be sure that that balance is carefully kept.
The provisions on the married couple's allowance are welcome. Again, they are provisions which we have sought for some time. In the past, the Government resisted them on the grounds of administrative cost. I also welcome what the Government have done on gift aid, which again follows an amendment that we moved last year. We wanted to go further, but at least the Government have made a move, and we welcome it.
The Bill is far from the most exciting Finance Bill that has come before the House. I hope that its Committee stage will not drag on too long. It will allow for the exploration of several points that I have mentioned this afternoon. There will be many other occasions on which the general failings of economic policy which have rather dominated today's debates can be explored.
As you will be aware, Madam Deputy Speaker, this is not a maiden speech, but speaking for the first time as the Member for Orpington it would be remiss of me if I did not pay tribute to my predecessor, Mr. Ivor Stanbrook, who had been the Member for Orpington for 22 years. Those who remember Ivor will recall his trenchant views on many subjects, from the family to Northern Ireland, and his willingness to express them both inside and outside the House with strength and vigour. In that sense he was a true parliamentarian and was highly regarded as such. He was also highly regarded by the people of Orpington.
Historically, Orpington was a part of the county of Kent, but due to some ill-advised local government changes by a previous Conservative Government, for the past 25 years it has been part of the London borough of Bromley. For the most part, my constituents earn their living by commuting into central London and in particular to the City. Their first concern, therefore, is the health of the British economy, which is why I thought it appropriate to make my re-entry speech on the Finance Bill.
My constituents are equally concerned about British Rail's performance when they make their journey into central London, but that is a topic for another occasion.
The Government rightly gave high priority in the Queen's Speech to reducing inflation further, but they, and we, will not forget that this recession began in mid-1990, and we have not seen the end of it yet. In their natural concern to reduce inflation further, I hope that they will not push it to the point where the recession is prolonged unnecessarily. Any Government's economic policy must maintain a balance between inflationary dangers and deflationary problems. While we concede that we went too far in pushing growth and inflation in the late 1980s, I do not want the Government to make the equal and opposite mistake and to persist too long with deflationary policies, given the present state of the economy.
I agree with my right hon. Friend the Member for Shropshire, North (Mr. Biffen), who said that we have an opportunity to lower interest rates and that we should press it. I shall not follow him down the path of Lubyanka and lederhosen, but will simply make the straightforward political point that, while we understood that, for economic and political reasons, the Government could not take risks before the general election, they have forced themselves out of that trap by their skill, and are in a much stronger position. They can take risks, and they should pursue every legitimate opportunity to lower interest rates. I do not believe that we will for ever be bound by the German view of what is right for Europe, and that is becoming the more rational appreciation in the markets and among economists
My second point relates to public expenditure, on which my view is simple: public expenditure has risen, is rising and should be diminished. As my hon. Friend said in his opening remarks, while the Government reduced the share of GDP taken by general Government expenditure during their period in office from 45 per cent. to a low point of about 40 per cent., it is now creeping back towards 43 per cent. That is too high. One argument is that the increase results partly from the recession. Unemployment benefit has increased and as a result public expenditure has increased, but, ineluctably, it will automatically reduce as we emerge from recession.
As the prospects of coming out of recession recede—GNP is already being revised downwards for this year—the problem will remain with us. There again, the Government have an interest in striking the right balance between restarting growth and dealing with public expenditure.
No doubt the Government would also say that part of the public expenditure total was engineered deliberately to flatten out the recession—if public expenditure had not been as high, the recession would certainly have been worse. That argument is all very well at that point in time, but when one begins to emerge from recession the position looks different.
Present fiscal policy is too lax and monetary policy too tight. That is what is wrong with the balance of Government policy. They need to adjust the balance as soon as they can, in the interests of sensible growth.
The Government have achieved a low-income-tax, low-corporation-tax economy. Our continental competitors take far more of their GNP in taxation than we do. We have opened a gap between us and them. That is one reason among many—others are a stable Government, an open trade policy and access to the Community—why we are making this country a superb place in which to do business. That opportunity is open to us and should be pursued.
However, even if we reduce general Government expenditure to 40 per cent. of GNP, other countries are still below us, such as Japan, where it is 32 per cent., and the United States of America, where it is 37 per cent. America still has a good economy despite all the rubbish which is written about it. They will continue to open the gap, as will many other Asian countries. We have to press further in that direction.
The Chief Secretary wrote a pamphlet not long ago describing his vision of an ultra-low-tax economy, and I share that vision. That is the way forward. It can create the virtuous circle—with lower taxation, one will achieve growth, and although public expenditure declines as a proportion of GDP, absolute expenditure rises in real terms, as my hon. Friend the Financial Secretary said. Although past Conservative Governments have increased the standard of living of the average family by a monumental proportion, in comparison with Labour Governments, they have also kept public expenditure rising at a rate not far short of expenditure under Labour Governments. They have done the two-card trick.
That is the course that I recommend to my right hon. Friend. The Government will know when they have reached the point of success because, precisely at that moment, 365 academic economists will undoubtedly write to The Times to say that their policy is wrong and will never come right, and that the economy can make no progress with that approach. Perhaps that will not happen this time. The academics may have learnt their lesson. However, I am afraid that academics do not usually learn their lesson and are too arrogant to keep quiet.
Perhaps this time, 365 distinguished members of the public sector will condemn the Government, led by the governors of the BBC, the British Medical Association and others, no doubt after a reflective lunch at the Luckham Park or some other watering place. I hope that, when that moment comes, the Government will have seen the success of those policies and will stick to their guns.
I am grateful that you have called me, Madam Deputy Speaker, and, in rising for the first time in the House, I congratulate you on your new position. As you would expect, I extend those congratulations to my fellow west midlander, the new Speaker. In Wolverhampton, North-East many people were delighted at the appointment of Miss Betty Boothroyd to the Speaker's Chair and felt that it brought honour to the west midlands.
I know that it is customary to pay regard to one's predecessors and it gives me considerable pleasure to remind the House of John Baird, who finished serving as a Member in 1964. I recall him visiting my boyhood home during his constituency duties. Later, when I was a young and active trade unionist, I remember the great pleasure of listening to John Baird on his public engagements. He was a great and considerable advocate of equality. I recall reading that, when asked about the honours list, he said, somewhat pithily:
I joined the Labour party to make workers of Lords and not Lords of workers.
That was a considerable statement at the time.
Following John Baird came Renée Short, who had a distinguished parliamentary career, not least as Chair of the Select Committee on Social Services, which produced a number of important reports. One report, with a touch of déjá vu, dealt with the hours of junior doctors, and another seminal one covered maternity services in this country. That report is still widely quoted and much respected, and Renée's work on it will be long remembered.
My immediate predecessor, Mrs. Hicks, will be recalled more for what happened to the people of Wolverhampton, North-East during her term in the House than for what she did. However, I know that she had a sincere understanding of her constituents' needs and that she worked hard during her time in the House to ensure that those needs were met However, it is for what happened during her tenure, particularly the unremitting increase in the number of unemployed in Wolverhampton, North-East, for which Mrs. Hicks will be recalled. On average, 30 people were chasing every vacancy. In the past two years in Wolverhampton, between 50 and 60 unemployed folk have been chasing every vacancy.
In the same period, the social security system was changed. It is no coincidence that there was a tremendous increase in the crime rate at the same time as the young, long-term unemployed experienced such difficulties in finding remunerative work. Those factors are connected, although other considerations must be taken into account.
In the context of changes in the benefit system, many people may share my concern that there has been a poor take-up among elderly people of the benefits available to them. Many of them fear that, if they go to the benefit office for support or for a grant, they will end up with a loan that they cannot possibly repay. I ask hon. Members to recognise that that particular aspect of the benefit system is bound to fail because it does not take into account the great fears that many pensioners have. They share similar fears to their parents who, in the 1930s, were worried about the workhouse and the debtors' gaol. Pensioners still hold such fears, and if the benefit system does not take proper account of them it is no surprise if the take-up of benefit by elderly people is not particularly high.
In my constituency, great distress was caused to a partially sighted man of 70 years who lost what little money he had to take him through a particular week, and faced a weekend with no food in his flat. He attempted to sell bits and pieces of his belongings to make ends meet before his next benefit cheque arrived, but failed to do so. He went to the local benefit office and was offered a loan of £10, but he refused to accept it because he felt that he would be unable to pay it back as his income for the following week would be exactly the same and there was never anything left to spare. We do not want such cases to arise in Great Britain and I urge that benefit officers should be told that grants rather than loans should be given to pensioners in almost every case when an emergency occurs.
The period in which my predecessor, Mrs. Hicks, was in the House was marked by a local authority housing waiting list which grew to its highest level for 25 years. Of course, there are some social reasons for that—such as the unfortunate breakdown of marriages and the number of young people pursuing tenancies in their own right. However, at the heart of the growing waiting list problem lies the fact that local authorities have not been able to build for need. When that is combined with the fact that many young people starting out fear unemployment and do not take the plunge into buying a house, it has led to considerable housing difficulties in Wolverhampton and elsewhere in the country. Those difficulties are rooted in the fact that local authorities are unable to build for general needs.
Many couples face frustration in their hunt for decent housing. I do not want to witness the tragedy of little children spending their formative years in high-rise flats and five-storey walk-ups. Councils should be able to build for general need so that every young couple has an opportunity to rent or buy property at a price that they can afford and children have an opportunity to play in gardens, as is their absolute right.
It has been my intention that the thread running through my speech should be related to employment—the wealth that it creates and the misery that the lack of it causes. One of the growth areas for employment in recent years has been the worker co-operative movement, in which I have been proud to play some part. At the same time, mainline co-operative societies have faced strong competition, but they have met it by merging and growing. Unfortunately, the tax position of those societies has worsened since 1984 so that the growth in their profits has been overtaken by the growth in their tax burden.
I am sure that that was not the intention, but as the societies have grown and amalgamated to face the competition, they have lost the benefit of the small firms remission of corporation tax. I urge the Government to consider that with some sympathy because the first priority of co-operative societies is not profit maximisation: they depend on retained profits and borrowing to expand and to meet the needs of the shopping public. I believe that they should be encouraged, rather than discouraged as they have been by the loss of the remission.
The reasons that remission was given to co-operative societies are still valid today as co-operatives have an important part to play in the development of employment in our communities. Statistics show that, in 1990–91, such societies paid a much greater rate in tax than they earned in profits. That matter should be addressed by the House.
I am obliged to you, Madam Deputy Speaker, for giving me the opportunity to utter my first words in the House.
I am pleased to speak in the same debate as my right hon. Friend the Member for Shropshire, North (Mr. Biffen), whom I have watched for many years with great respect. Even though he has momentarily left the Chamber, I am also glad to follow my constituency neighbour, the Financial Secretary to the Treasury, who I am pleased to see so happily installed in his new job. I congratulate the hon. Member for Wolverhampton, North-East (Mr. Purchase) on his maiden speech, and I look forward to sparring with him across the Chamber on many future occasions.
Rutland and Melton is an oasis of traditional England between the M1 and the A1. It is surrounded by towns such as Leicester, Nottingham, Grantham—perhaps not so much a town as a shrine—Stamford and Corby. The agricultural interest remains important and, although it may not please some hon. Members, hunting remains not only popular, but a living force for the interests of conservation.
The constituency also has light industry. Indeed, if one owns a pet, the chances are that one will have fed it with a brand name from Europe's largest canning factory in Melton Mowbray. The constituency also includes Syston and Thurmaston on the edge of Leicester, and the spectacular vale of Belvoir.
Perhaps the constituency is best known for containing the valiant county of Rutland. I took a look at the history books, one of which says:
although Rutland had a distinct status in the Anglo-Saxon period, its rise to the status of shire and the dignity of a sheriff was the product of a confused process in the twelfth century".
That same book states that the 1974 local reforms
removed elements of disorder on the map, such as the foolish county of Rutland.
I say of that author, the more fool him.
Those local government reforms created a hateful mix of the urban and the rural. They trampled over traditional boundaries and ignored community identities. Feeling in Rutland still runs very high indeed and most people want the return of unitary status for the county. And why not? If the cost is not punitive, they should be entitled to the status for which they are asking. I am pleased to say that, thanks to legislation passed by my party, including the Local Government Act 1992, and with the Royal Commission just starting its work, Rutland is given a chance. I implore hon. Members to take Rutland's case seriously and not to dismiss it as a quixotic campaign or to disqualify Rutland simply on the grounds of its size.
I take up the cudgels for Rutland and Melton behind a line of distinguished parlimentarians. For a long time, Rutland was represented by Sir Kenneth Lewis. He still lives in the constituency, and I sometimes think that he has as many friends as there are people in the county. He is a popular figure, always ready with some fatherly advice and a good yarn to tell.
But for 18 years Melton, and then Rutland and Melton, were served by Michael Latham. From a personal point of view, I could not have been more fortunate in the person I shadowed for two years as prospective candidate. All in the area talk of the diligent and conscientious manner in which Michael Latham handled constituency problems. He entered the House with a particular expertise in housing, and Ministers came to value his advice. He developed a reputation for being independent-minded. He was not one to seek office at all costs.
His religious views, and his opinions on the state of Israel particularly, are well known, and it is appropriate that he should have moved on from here to run the Council of Christians and Jews. Contrary to reports, I do not believe that he intends to take holy orders. I hope that that will mean that Michael will not be entirely lost to politics in the years ahead. I am sure that hon. Members join me in wishing him and his wife Caroline every good fortune.
My purpose in speaking today is to welcome the measures in the Finance Bill. The measure marks the continuation of the economic progress that we have made since 1979. Indeed, the determination to tackle economic collapse spurred me above all to enter political activity in the first place.
Particularly welcome are the inheritance tax proposals. They are based on the belief that the successful accumulation of wealth should be allowed to be passed on. Why—as it appears many Opposition Members would have it—should every generation be required to go back to square one, based on some misplaced understanding of what equality of 'opportunity involves? The Bill will benefit family farms and family businesses, and I welcome the measures so well defended by my hon. Friend the Member for Bridlington (Mr. Townend).
Any Bill designed to alter the rules of taxation inevitably provokes a litany of special pleading, and it is the unenviable task of the Chancellor and his team to distinguish naked self-interest from a good case. In his original Budget statement, the Chancellor referred to surplus advanced corporation tax—to some, perhaps, a rather abtruse matter. Some companies are taxed in the United Kingdom on estimates of their earnings overseas. Indeed, they are overtaxed, but they are stuck with the position.
The effect is to reduce the research and development that such companies would carry out in this country, and it works against their wishing to set up their headquarters in the United Kingdom. That was not intended to flow from the imputation tax system that developed in the 1970s, and I hope that the Chancellor will reconsider in the years ahead the effects of the measure.
The Bill contains many welcome measures affecting the operation of VAT, especially the removal of fiscal frontier controls. But there remain some simple, practical difficulties in the administration of VAT that should be addressed particularly as no cost would be involved.
I could cite the example of a haulage contractor based in Melton Mowbray who pays VAT on his fuel purchases in other EC member countries. As a business, he is entitled to reclaim it, but he does not get it back, as least not for months and sometimes even years. We decent Brits repay overseas claimants quickly, but that efficiency is not reciprocated. So again, our comparative sense of fair play works more to the benefit of our competitors than to that of our exporting businesses. I urge the Revenue to take a good look at the fair working of the refunding of VAT elsewhere in the Community.
I hope that the Finance Bill is but a prelude to our addressing certain long-term objectives for the economy. Some of the nastier consequences of the recession flow from the extent to which the fortunes of businesses and individuals are critically affected by changes in interest rates. We have a structural problem, in part a cultural one. Far too much of our investment funding in based on debt rather than on equity. It should become one of the major challenges of this Parliament to address the question of how to shift investment from debt to equity, because part of the problem arises from the simple fact that debt servicing is tax-deductible, while the cost of equity servicing is not.
Hand in hand with that is the objective of overseeing recovery without massive house price inflation. As many of my hon. Friends know, wary though I am of taking further steps towards monetary union, I believe that the ERM might yet prove a blessing, in that its effect will be to iron out the peaks and troughs which in the past have been damagingly extreme.
I am all for people owning their homes, but we do better to persuade them not to look on their houses as a tax-free source of easy riches on which they can regularly draw. I would rather we promoted a savings culture in which individuals increasingly had a genuine stake in the economy, and the key to that is pensions.
At present, our pensions rules are unfathomable. A personal pension attaching unequivocally to the person who has invested in it will lead to private capital accumulation in areas other than housing. Why cannot employees in the public sector pay their contributions into private schemes? We should take a long-term view, for the time has come when people should be allowed to do that.
By tackling such structural deficiencies in the economy, we could provoke a major change in the economic fortunes of individuals. I share the Chancellor's vision of a capital-owning democracy. I hope that we can see an economy in which individuals increasingly build their own stake in it. I hope that we can promote a savings culture out of which dependency on the state will be reduced and self-reliance increased. If, to set the tone, a strict settlement of our public expenditure commitments is demanded, the Chancellor and his team will have vigorous support in their efforts from this quarter.
I congratulate the hon. Member for Rutland and Melton (Mr. Duncan) on a witty and thought-provoking speech. Listening to him, I felt that my constituency in the inner city of Leeds was worlds away from his. I agree that we should be addressing the long-term structural problems facing our economy but, unlike the hon. Gentleman, I do not believe that the Finance Bill even starts to do that. We are faced with the leftovers of the pre-election tax-cutting bribe of a Budget that was rushed through the House in March.
In response to the Finance Secretary's speech, I would point out that, on 9 April, the people of Leeds, West delivered their verdict on the Budget and the Finance Bill: they overwhelmingly rejected them because they felt that they do not address their problems. Like the recent Queen's Speech, there is nothing in the Bill to tackle the rising unemployment that so many of my constituents face. According to the Government's last April figures, unemployment in my constituency is running at 10·7 per cent. That is a 17 per cent. increase on April last year. However, there are no practical measures in the Budget to tackle long-term unemployment, which is becoming a primary cause of poverty, particularly when financial assistance to the unemployed is so inadequate.
In his former life, before he converted to Treasury ways, the Financial Secretary voted against Government moves to cut unemployment benefit. I hope that he continues in that strategy, but I suspect from his speech that we shall not see him defending unemployment benefit.
There are no measures in the Bill to address the problems of the change in the labour market. There is now a fracture between what might be described as the primary restricted market, offering relatively secure, well-paid employment, and an expanding secondary labour market in which employment is temporary, irregular or part-time and often badly paid.
There is not much in the Finance Bill for the homeless and those in my constituency who desperately need a decent, adequate home at a rent that they can afford. There is not even a clause to enable local authorities to use their accumulated capital receipts from the sale of council houses. There is no extension of last year's moratorium on stamp duty. Despite the fact that, in 1991, 75,500 homes were repossessed because people could not keep up mortgage repayments, all that the Bill offers, in clause 36, is a tinkering with the business expansion scheme.
In other words, the Bill is characterised by its omissions. It is remarkable for its silences on matters that affect thousands of our constituents who want something to address their real economic circumstances. The Bill is part of the Government's strategy of simply sustaining the impression that there are no economic problems left since the general election. The Government are putting across the impression that unemployment has not escalated; that, in the first three months of 1992, 14,900 firms did not go bust; that homelessness on our streets and in the doorways of our major cities is an illusion; that low and lowering pay is not a reality for many people.
The President of the Board of Trade, speaking recently at a conference organised by The Sunday Times, called for pay restraint. Rather than addressing the average unit labour cost, he would have done better to address the board of directors' rake offs, which have been running at 9·3 per cent. Most of my constituents earn nowhere near the average wage of nearly £400 a week for the male earner, and many women earn even less.
In the debate on the last Finance Bill, the then Chief Secretary said:
It is always difficult to forecast a turning point, but there is now accumulating evidence of one.
He referred to
a marked increase in optimism and output expectations
and spoke of the "recovery in confidence". He said:
We are confident that it will lead to an increase in activity … We must remember how far we have come from a stagnant economy.
Later, he said:
perception is lagging behind reality."—[O? official Report, 30 April 1991; Vol. 190, c. 178–80.]
We have not come very far from that "stagnant economy". The Government have still not yet caught up with the reality behind their perceptions. The number of people unemployed for over a year is now 841,000—an increase by 94,000 in the first quarter of this year. Unemployment has now risen for 25 consecutive months. Last month alone, 42,600 people lost their jobs. The National Institute of Economic and Social Research forecasts that unemployment will remain at almost 3 million for the next five years. That is the prospect that we face despite the Government's assurance a year ago that we had come out of a "stagnant economy".
The public sector borrowing requirement is projected at a staggering £34 billion for this financial year, and the Government are saying that they cannot get it down without swingeing cuts in public expenditure. I predict that, despite protestations in the Chamber and in the papers, the Government will come to the House before too long to announce that they have abolished zero rating of VAT so as to tackle the size of the PSBR. The only other way to tackle it is to increase personal taxation, and the Government are committed to go in the other direction.
Manufacturing investment fell by 11 per cent. to the first quarter of 1992 and is 27 per cent. lower than at its peak in the first quarter of 1990. In constituencies such as mine, which is dependent on the engineering, textile and printing industries, that means that work in manufacturing has gone and will not come back because the Government will not commit resources to investment in manufacturing.
Interestingly, yesterday in Rio, the Secretary of State for the Environment told the world that the major nations were
in the middle of a very, very bad recession.
When we come to the House to protest about high levels of unemployment, we are told by Ministers that the country is coming out of the recession. That is the line for consumption at home, but abroad they say that we are in the depths of a recession.
Yesterday, my local newspaper, the Yorkshire Evening Post had a report on the struggle of students to find jobs over the summer break. Young people bear the brunt of unemployment, and young people in further education, who cannot claim benefit during the holidays and who cannot get grants, have to find work somewhere to make ends meet. The report says:
The annual hunt for summer jobs looks set to be tougher than ever with recession still taking its toll on traditional employers of casual workers.
According to the Department of Employment in Leeds, the amount of casual work on offer is down on last year. The total number of temporary jobs for the summer available in the city last week was 39, including vacancies for bar staff, cleaners and secretaries. There are not too many signs of recovery there, when even casual labour has almost totally dried up.
The Finance Bill could make improvements. Why do not the Government use clause 53 and schedule 11, which make tax changes for insolvent companies, to tackle a loophole in insolvency law which means that the occupational pensions of hundreds of people are in jeopardy from the Maxwell collapse? I suspect that that is merely the tip of a pension crash iceberg. The Government should change the rules and protect pensions.
The hon. Member for Rutland and Melton said that the pension rules were unfathomable. What is more than obvious in recent weeks is that occupational pensions are unprotected because the Government have not enacted sufficient protection measures for those pensions. Why cannot the Bill be used for that?
On a more positive note, why cannot the Government amend clause 48 and schedule 9 in order to foster and encourage the formation and growth of local community credit unions? That would be a practical and positive way in which to take people out of personal consumer debt and help those who are often left in the hands of the loan sharks. That would be better than raising inheritance tax thresholds simply to make it easier for owners of farms and family companies to pass on land and shares to their descendants. Clauses 58 and 59 and schedule 13 effectively take some 3,000 private estates in Britain out of inheritance tax altogether. That is hardly the hallmark of the classless society that the Prime Minister claims to be creating.
Clause 60 and schedule 14 deal with petrol tax. In this week of all weeks, with the Earth summit, would it not have been better for the Government to fund a complete review of the privatisation of public transport, particularly the bus sector, and then ensure that there is investment in public transport so that it becomes a positive economic alternative to cars?
The Government suggest that they cannot do anything, that they have no power, but they have just been elected to power. They cannot pretend, like a sympathetic, hand-wringing bystander, that they can do nothing. People will not allow the Government to hide behind paper charters while secretly manipulating the country's resources and pretending that there is nothing that can be done about the economy.
There is insufficient in the Finance Bill to address the fundamental problems that have been referred to of the need to provide employment and training and investment in our manufacturing base. The Bill simply shows that the Government are still prepared to give away twice as much money in personal tax cuts—about £1·8 billion—as they are prepared to give to industry, commerce and training to fight the recession—a mere £800 million.
I conclude with just a few observations from an essay by J. K. Galbraith, based on his latest book, "The Culture of Contentment". In that book, he spells out how an "underclass" is an integral part of a larger economic process serving the living standards and the comfort of the more favoured community, and how the economically fortunate are dependent on the presence of that "underclass". That "underclass" is increasingly denied any generational upward economic movement in our society and so becomes semi-permanent, frustrated and discontented.
It is an occasion for wonder that the discontent and its more violent and aggressive manifestations are not greater than they are.
Nothing in the age of contentment has contributed so strongly to income inequality as the reduction of taxes on the rich.
Life in the great cities in general could be improved, and only will be improved, by public action—by better schools with better-paid teachers, by strong, well-financed welfare services, by counselling on drug addiction, by employment training, by public investment in the housing that in no industrial country is provided for the poor by private enterprise, by adequately supported recreational facilities, libraries and police. The question once again, much accommodating rhetoric to the contrary, is not what can be done but what will be paid.
Sadly, that is a question that the Finance Bill does not address.
—and gloomy predictions, despite the fact that we in the south-east of England also have quite severe problems resulting from unemployment and recession. However, the economic signs are rather brighter than the hon. Gentleman would suggest, and the Finance Bill will contribute significantly to the economic recovery that is on its way, albeit too slowly for most hon. Members.
I agree with the hon. Gentleman, however, in the tribute that he paid to my hon. Friend the Member for Rutland and Melton (Mr. Duncan). My hon. Friend made what I think we all thought was a most eloquent, amusing and powerful speech and I appreciated his generous tribute to his predecessor, Michael Latham.
I also take this opportunity to say how much I enjoyed the powerful speech made by my hon. Friend the Member for Orpington (Mr. Horam). In his previous incarnation, he was one of the most courteous, responsive and helpful Ministers, and if I did not say so at the time, he will understand that the circumstances were rather different.
The introduction of the new 20 per cent. tax band in the Budget was a most skilful and welcome proposition which was a key factor in the general election. It was a skilful use of limited resources which demonstrated the contrast between the Conservative party's belief in lower taxation and the Liberal and Labour parties' declared belief in higher taxation. The electorate understood that there were only limited resources and that the band could only be small at this stage, but that the measure was a pointer of hope for the future and a sign of how we intend to progress in years to come.
That aspect of the Budget was crucial. It was a skilful use of resources on which the electorate passed judgment —despite the view of the hon. Member for Berwick-upon-Tweed (Mr. Beith), who seemed to suggest that the election proved that there was a vote for increases in taxation. The hon. Gentleman can convince himself of anything.
I want to address one particular point on which other hon. Members have touched. It is a specific point and I make no apologies for raising it because I suspect that this is the last serious chance that we shall have to persuade the Government to change their mind. I refer to something that is not in the Finance Bill, should he in the Finance Bill and perhaps—is it too much to hope?—will be in the Finance Bill by Third Reading. That is, the elimination of stamp duty on house purchase.
We all know that an exemption was introduced last autumn to try to stimulate the housing market. Can anyone deny that the housing market is still in need of stimulation? It is hardly logical that we should now be proposing to reintroduce stamp duty in August this year when the housing market is in such difficulties. I urge my right hon. and hon. Friends to reconsider the position now and to use this opportunity to think again about making permanent not just exemption from but—I go further—the elimination of stamp duty.
For years, many of us have argued that stamp duty on house purchase is an unjust and unfair tax. I think that all hon. Members believe in home ownership, despite different emphases, so it is illogical to have a tax on home ownership, particularly a tax which impinges when people are struggling hardest to buy their own home. We are almost getting rid of the tax. Exemption from it exists until August this year. Is it not ironic that, having come so close to eliminating the tax from the statute book, we are proposing to bring it back?
We are told that the revenue implications of the exemption from stamp duty would be too serious. I hope that my right hon. and hon. Friends will answer this point specifically. I cannot see how that can be correct. We were told at the time of the exemption that it could be afforded because the £1 billion that it would cost would not be required until 1993 as a result of the introduction of the TAURUS system on the stock exchange. Therefore, at the very least, we can afford further tax relief on housing for the rest of this year and into next year. The same argument applies.
A pick-up in the housing market may make the cost to the Exchequer even greater, but such a sign of economic activity would mean that we could afford to make tax relief on stamp duty permanent. That change would be welcomed. Last year, we were told that the cost of suspending stamp duty would be £400 million in a full 12 months. I do not believe that that is the measure of relief, because the housing market has not been that buoyant. We ought to be given facts and figures as to the real cost of the temporary relief, which I argue strongly should be made permanent.
In what other area of taxation does a zero rate operate, on a permanent basis, up to a figure of £30,000, and then a full rate on the whole amount? At present, there is stamp duty exemption up to £249,000, after which 1 per cent. is payable on the whole transaction. It is a most unjust and unfair tax, and few people could justify it except on the ground of revenue need.
The current need is to take action that will stimulate the housing market. I urge my hon. Friend the Economic Secretary not to allow stamp duty relief to be discontinued on 19 August. That is an arbitrary and unreasonable proposition. Instead, he should take the opportunity provided by the Bill to offer some help to home owners and to the housing market.
During the general election campaign, the Government said that, if they were re-elected, there would be movement in the economy. Despite all the talk, Britain is still in recession. The Government say that business wants to be certain of the economy's overall condition. That is perhaps the only sentiment expressed by Ministers with which I can agree. Business does want to know with certainty what is the state of the economy.
Gross domestic product fell again in the first quarter of this year, as did manufacturing investment. Even the slight improvement in retail sales was counterbalanced by the appalling surge in our trade deficit, which seriously puts in question any sustained recovery. Unemployment continues to climb month after month, hitting individuals and their families and sapping morale. Behind every statistic there are human tragedies.
The recession has hit every region hard, but nowhere harder than London and the south-east. Unemployment in London, as in the rest of the United Kingdom, remains high and is rising, and many Londoners are finding it difficult to pay their way out of the highly geared situation in which they find themselves. That makes it unlikely that London's economy will be able to spend its way to recovery.
In Hornsey and Wood Green, more than 100 people chase every job vacancy. They are desperate; they look for work every day but are unable to find it. A similar picture is to be found throughout London, with the percentage of employees working in the service sector declining, and the construction sector facing the acute problems of the housing and office markets.
The sad debacle of the docklands—vaunted in the 1980s as the Conservatives' dream city, but now lying idle —tells its own story. The Prime Minister still considers the docklands
one of the most remarkable projects one will find anywhere in the world.
To Londoners, it is a symbol of failed Conservatism—an unbending ideological commitment to the market, whatever the human cost. The Evening Standard is seldom thought of as a newspaper that is sympathetic to the Labour party, but on Friday it described London as "Ghost City, 1992", where,
as the To Let sign becomes the dominant feature of London's cityscape … great swathes of London could become a kind of European Brasilia—all architectural style and little content, the silence broken only by the footsteps of the security guards.
That is a devastating forecast for those of us who represent London constituencies and who love the capital.
The Government's refusal to invest in the Jubilee line extension, which is so badly needed if south-east and east London are to be rejuvenated, is symptomatic of another of London's problems: the continuing trend among top companies to relocate outside London. Who can blame them, when one considers London's transport infrastructure? Last April's survey by the Association of London Authorities of commuter fares in Europe showed that London had the highest fares in the Community.
The tragic human face of recession can be glimpsed in repossession figures for London and the United Kingdom as a whole. My hon. Friend the Member for Leeds, West (Mr. Battle) referred to the 75,000 families who lost their homes in 1991—the highest figure on record, and an increase of 72 per cent. on 1990. Mortgage levels show a similar sad tale, with one in 12 mortgage payers two months or more in arrears—another record level.
One of the most frightening statistics of all is that more than I million families in south-east England have a mortgage debt that exceeds the value of their homes. They are unable to sell or to move, because they would immediately become insolvent.
I am sure that right hon. and hon. Members in all parts of the House are visited in their surgeries by constituents who have problems with mortgage arrears.
Londoners deserve better. London should once again be a world-class capital, but unfortunately the Bill contributes nothing to that. London needs investment in training, education, research, and development. I urge the Government to think again and to do something for London. When we do something for London, we shall be doing something for Britain as a whole, and for our economic future.
In judging the effectiveness of the Finance Bill, we ought to ascertain whether it will assist in the growth of our national resources, and in their distribution between our citizens. My constituents want to know what the Bill will achieve in terms of employment. Those who have a job want to know whether they are more likely to keep it. Those who are unemployed want to know whether they are more likely to get a job. My constituents want to know what the Bill will do not only to their take-home pay but to their quality of life, in terms of the public services upon which they and their families rely.
Earlier, the Financial Secretary spoke of the Budget's contribution to the Government's victory in the general election. That victory was secured not only on the Government's record but on their promises, and now the Government must fulfil their promises. Their fulfilment may prove a good deal more difficult than their making.
The Government are responsible for the recession that dominates our economic life at present. The brakes were slammed on following the Lawson boom, but during the election campaign the Government tried to gloss over that fact with frequent references to the international aspects of recession, claiming that Britain was merely one of a number of countries suffering from the same problems. The Chancellor mentioned the recession in Germany in his Budget speech. It is interesting that he should have singled out that country. Last year, Germany was the only other European Community country in recession. The rest of Europe experienced a growth in output of 1·4 per cent., while this country suffered from recession throughout the same period.
In the Finance Bill, we should be looking for ways of emerging from recession and assisting recovery. It is interesting to note that the Government have almost stopped talking about what the Bill will do to assist recovery; now, they almost take pride in saying that they are doing nothing—that they are simply sitting back and waiting for recovery to happen.
Significantly, there are no discernible signs of recovery in any of the daily or weekly indicators. That is especially true of those that have appeared since the general election. The Government, however, should not worry only about the fact that there are no signs of recovery at present; they should ask how long such a recovery will last—if, indeed, it comes at all —and how strong it will be. There are no signs of recovery in the manufacturing industry in my Sheffield constituency, and no signs of job creation. No investment is taking place. The suggestion that manufacturing industry would be willing to invest as soon as the result of the election was known has simply not been borne out.
All that my constituents see is the prospect of unemployment not only remaining high, but rising further. All that the small businesses in my constituency see is a worsening prospect of being put out of business, rather than the hope of future recovery. As for the retail industry, we all see in our towns and cities not the prospect of recovery, but the reality of shops being boarded up daily and weekly.
Is housing supposed to get us out of recession? There is little evidence of recovery in the private sector. Throughout the debate, Conservative Members have referred to the proposal to reinstate stamp duty, the temporary abolition of which represents the one small effort that the Government have made to bring about recovery in housing. As for their public-sector housing record, it continues to be deplorable in every way. Indeed, an Audit Commission report produced the other day condemned the Government on both economic and social grounds.
The Government could have included in the Bill a measure to stimulate economic recovery by putting people to work in the construction industry, at the same time providing homes for those who are currently homeless. That would not have cost them a penny. Sheffield city council has £21 million in capital receipts this year: it has this money in its coffers, which it could spend tomorrow if the Government would only remove the restrictions on such spending. That is the kind of assistance that they could give if they chose to do so.
All that we have heard from Conservative Members about public-sector help is a request for the Government to get tough with spending Departments in the coming financial round. When Conservative Members talk about getting tough with spending Departments, they really mean getting tough with the homeless, the sick, children and the elderly, for those are the people who rely on large spending Departments to deliver the services that they want.
Ours is not simply a short-term problem. The Government should concentrate not only on recovery in the short term; major failings can be seen in the medium and long term as well, and the Bill does not address them. Let us examine the Government's claimed achievements. Apparently, all the heartache of unemployment and all the problems of recession are necessary simply to lower inflation to a reasonable level. It seems to me that the Government's one achievement—their one claimed achievement, even—is the lowering of inflation. In any event, in historical terms 5·7 per cent. is not particularly low.
Achieving that level of inflation has necessitated a further rise in unemployment. The last set of figures showed not merely an increase, but a rising rate of increase. The level has risen from a record level in boom conditions. Meanwhile, there is no growth in the economy. As the right hon. Member for Shropshire, North (Mr. Biffen) pointed out an hour or so ago, although the Government claim credit for interest rate reductions, reductions in interest rates are themselves not real, but only apparent. Because of the fall in inflation that took place at the same time, real interest rates have risen during the period in which the Government have presided over the longest recession in post-war Britain. As yet, the Government have given us no answers to explain that major contradiction.
The right hon. Member for Shropshire, North drew some interesting comparisons between indicators. The Government face real problems, and they must deal with those problems. At a time of record recession and record rises in unemployment, why does our balance of payments show not merely a deficit, but a deficit that is beginning to grow? A public sector borrowing requirement of £28 billion is forecast. That figure is camouflaged by receipts from privatisations; moreover, according to all the current estimates, the PSBR is likely to increase to £40 billion by the end of the year. Surely we are seeing a very special kind of economic mismanagement when a Government preside over a rapidly rising balance of payments deficit and a rapidly rising PSBR at the same time. The Government must resolve that problem, and the problem of conflicting indicators.
The root of these problems is the Government's long-term mismanagement of the economy. They have failed to invest in infrastructure in both the public and the private sector. Our economy needs more than a way of emerging from a short-term recession. It is not just a matter of addressing the medium-term issues; a proper, sustained and planned long-term economic approach is required. We need a long-term plan for public-sector investment if we are to secure the infrastructure that other European Community countries have.
Let us consider the Government's record. The issue of Canary Wharf and docklands has been raised this afternoon; alongside that is the question of the rail link with the channel tunnel. The channel tunnel is supposed to be one of the great efforts at investment in infrastructure to benefit our economy as a result of growing ties with Europe, but there is still considerable uncertainty about where—and, indeed, whether—the rail link will be built. It is disgraceful that we are not constructing that link now, but are arguing about where it should be built, and whether it should be built at all.
In terms of benefit to Sheffield, there has been no meaningful discussion, let alone any real investment, in connection with a link not between the tunnel and London but on to the north, so that that area too can gain long-term economic benefits from trade with Europe, and from being part of the European Community. Where is the Government's plan for that, and where will the investment come from?
Where are the plans and investment to deal with the way in which we move people around in our cities? What are the Government's proposals? Bus deregulation in 1986 has beent their only offering in that regard, and it has proved disastrous for the economic and social life of our major cities. The Government are now investing in a light rail system, but we should compare Sheffield with its twin city, Bochum in Germany. Bochum's bus service has not been deregulated. It has an efficient tramway and light rail system and a regional rail network, and it has invested in inter-city rail services. Its economy is far more advanced than ours.
We have also failed to invest in education and training, the personal as well as the physical infrastructure. We lack, therefore, the ingredients for long-term competitiveness.
As for the way that we are treating small businesses during the recession—the seedcorn of our future economic growth—as the chair of the south Yorkshire pensions authority, I have witnessed during the recession small firms applying in their hundreds for venture capital investment. No other financial institutions were willing to invest in them. The Finance Bill does not address the fundamental question of how to channel finance from the financial institutions into manufacturing and other industries, so that wealth can be created in order to sustain long-term growth and recovery.
Conservative Members ought to be asking why the Government are not putting forward proposals to sustain and develop small firms. That key issue must be addressed. The Finance Bill fails to provide assistance towards short-term economic recovery. Moreover, the Bill does not deal with medium-term problems, including the conflict between the balance of payments deficit on the one hand and record levels of unemployment and record low levels of growth on the other. It fails also to address long-term investment issues, including improvements to the infrastructure. Furthermore, it includes nothing that would assist the development and growth of small firms.
Tonight we are debating the Finance Bill, some two months after the general election when the Conservative party obtained roughly the same share as it did last time and the time before—42·8 per cent. of the poll. Under the present electoral system, that is once again being translated into a Conservative overall majority in the House of Commons, but this time the Government have only 336 seats. Nevertheless, that represents 51·6 per cent. of the total number of seats.
The Chancellor of the Exchequer regards that as a ringing endorsement of the Government. In the debate on the Queen's Speech, he said:
the British people have given a ringing endorsement of the Government's economic policies, and decisively rejected the tired shop-worn policies of the right hon. and learned Gentleman and his colleagues."—[O? official Report, 13 May 1992; Vol. 207, c. 628.]
He was, of course, referring to my right hon. and learned Friend the Member for Monklands, East (Mr. Smith). What he failed, however, to grapple with was the arithmetic. Any ringing endorsement would have demanded, I should have thought, at least 50 per cent., and 42·6 per cent. is considerably short of that. This Chancellor of the Exchequer, who is in charge of the nation's finances, is incapable of moderating his language and his adjectives.
Furthermore, at the Conservative party conference on 11 October 1990, the Chief Secretary said of the poll tax:
Let us go out from this hall together and proclaim its advantages. The community charge makes local government accountable. The community charge revives local democracy. The community charge puts power into the hands of local people. That, ladies and gentlemen, is an achievement to be proud of.
However, the Chief Secretary's achievement has been to squander £19 billion of taxpayers' money. That sum would have gone a considerable way towards wiping out the forthcoming public sector borrowing requirement. That man, translated from the Department of the Environment to the Treasury, is now in charge of the nation's economy. I fear that that is a bad omen for the next three or four years.
Reasonable people—I do not regard the Chief Secretary or the Chancellor of the Exchequer as reasonable in this respect—might have thought that the Government's new majority, which is very much smaller than the Conservative party obtained for the last Parliament, would at least have led to some measures of a more consensual nature, which the majority of electors who voted against the Conservatives would have recognised as necessary and beneficial for the country.
A foreign journalist might have been tempted to write a piece saying that the Tories had had a major reverse, that they had lost 40 seats and that they needed to rethink their policies on such matters as how to get out of the recession and how to stop hospital waiting lists from growing to all-time highs. The waiting lists are higher now than they were during the winter of discontent. That is an utter condemnation of the Conservative party.
It is not wrong. I have the statistics here. I shall pass them to the Financial Secretary so that he can educate himself.
The Tory party could also, according to the foreign journalist, have thought about how to cut the burden of taxation. It is much higher now that it was under Labour in the 1970s. The Tory party might also, according to the foreign journalist's piece, have thought about how to regulate the seamy side of the City and, above all, about how to get people back to work and provide enough homes for every family to live in. But not a bit of it.
This second Finance Bill simply puts into effect measures that were announced in the March Budget that were not included in the Finance Bill introduced before the election. Any foreign journalist, and many hon. Members on this side of the House reading the Bill, could remark only upon its inconsequentiality when it comes to the great economic issues that face the country.
Despite that lack of substance, we have had a good debate. A number of Members have made some very good points. As usual, my right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) made a succinct and clear critique of the Bill.
I wish to refer to the maiden speech, or perhaps it was a quasi-maiden speech, of the hon. Member for Orpington (Mr. Horam). Certain parts of his speech were clearly not pure Thatcher, especially when he urged the House not to treat inflation as the judge and jury of Government policies and when he asked the Government to get us out of recession and not to worry too much about inflation. I thought that I saw a few of his hon. Friends looking into the distance when he made his speech. Nevertheless, it was very interesting and I was pleased to hear it.
My hon. Friend the Member for Wolverhampton, North-East (Mr. Purchase) made a telling maiden speech. He spoke from the heart about the problems faced by his constituents when it came to the benefits for which they have to apply when out of work. His statement about making workers out of lords and not lords out of workers is one about which I shall have to think for a little longer before I come to a decision as to its validity. It may need just a few qualifications. Nevertheless, I was glad to hear my hon. Friend.
I suspect that the result of the maiden speech of the hon. Member for Rutland and Melton (Mr. Duncan) will be that we shall hear more of Rutland in this Chamber. If his speech is anything to go by, the hon. Gentleman will pay great regard to the needs of his constituents. He referred to the fact that Finance Bills involve special pleading. I have to say to him in a nice way, since it was a maiden speech —though I had to choke back an intervention when he made the point—that special pleading usually comes when 40 or 50 new clauses are tabled by his hon. Friends for the Committee stage of a Finance Bill. I hope, therefore, that he will be a member of the Committee, when I shall ask him to monitor the special pleading with me and my hon. Friends.
My hon. Friend the Member for Leeds, West (Mr. Battle) made his usual speech—[Interruption.] His points were valid and well put. My hon. Friend the Member for Hornsey and Wood Green (Mrs. Roche), speaking for the second time, spoke about London. She is right to say that London has one of the most decrepit transport systems. Something must be done. Hon. Members have only to go to any other capital city in western Europe to see that my hon. Friend is right.
My hon. Friend the Member for Sheffield, Attercliffe (Mr. Betts) spoke well. It was not a maiden speech, and I am sure that we will hear many more contributions from him about the difficulties facing Sheffield in the recession.
We charge that the Government are smug and self-satisfied. They know that they need not be in a hurry, as there is some time before they have to face the electorate again. They are prepared to see our present economic troubles continue with a substantial minority of people living in poverty. Since the election, it has become clear that the Chancellor's estimate of a £28 billion public sector borrowing requirement for 1992–93 was either incompetent or mischievous. In spite of 13 years of Tory rule, public finances are in a desperate state.
It is widely believed that the Treasury now thinks that the deficit will be over £30 billion, as opposed to the £28 billion forecast at the time of the Budget, and that next year it will be about £40 billion. That represents 6 per cent. of GDP. Hon. Members will note that that is double the suggested maximum in the Maastricht treaty. The Government have some way to go before achieving what the Maastricht treaty says should be achieved in the United Kingdom.
In addition, last month's trade figures showed that the current account was above £1 billion again, so I doubt whether the Treasury's forecast of 3 per cent. growth for the years 1993–94 and onwards can be achieved without an early balance of payments crisis. At least in previous Tory-inspired recessions—1974–75 and 1980–81—we had a balance of payments surplus. Not this time—we are in a hole. When a Conservative Government get the country's economy into a mess, the Labour party is usually called upon by the electors to form a Government and get us out of trouble. This time, 42·8 per cent. of the electorate have inflicted another Conservative Government on the country, and it is up to that Government to do something about the recession.
I search in vain in the Finance Bill for any new Government action. It was once said that economic management is like trying to drive a fast car with the aid of only a rear view mirror. The Government are driving the economy in precisely that way, with the aid of a road map called the free market. They are blind as to where the car is going. The car is sliding dangerously on mud at the roadside while the Government continue to behave as if nothing is happening. They are unbearably complacent. If they were to shake themselves out of that complacency, they would do something about manufacturing industry.
In the first quarter of 1992, GDP has fallen yet again by 0·6 per cent. The Treasury said that GDP would recover by 2 per cent. in this financial year. However, the latest figures show GDP coming back by only 1 per cent. at the very best.
Ministers blithely assert that, as exports had increased in volume terms by 3 per cent., the trade figures could be largely discounted and, indeed, were something of a success. Unfortunately, that is not so. With the pound locked into the ERM, what will the Government do if, at the slightest hint of an upturn, it becomes painfully clear that imports will be sucked in to such a catastrophic extent? It is the balance of payments that matters and no amount of ministerial spin-doctoring on the radio will get around that awkward fact.
The Government must extend their economic management. Trading off unemployment against inflation without making use of other economic powers that the Chancellor has at his disposal simply does not work, and, even worse, it creates two nations. The latest unemployment figures show an increase of 42,600 in April. The Government calculated total stands at 2·6 million—9·5 per cent. of the work force. Many others, particularly women, are looking for work and do not appear in the figures. If unemployment were judged in a fairer and more moral way, we would say that it was now 3·8 million.
Is low unemployment in any way a target of Government economic policy or is it simply traded off against inflation with other economic and fiscal policies lying idle and not being used to cut unemployment and inflation at one and the same time? That is what a Labour Government would be doing now.
In a nutshell, we have a high PSBR of at least £30 billion this year, rising to about £40 billion, which will represent 6 per cent. of GDP—twice the maximum level in the Maastricht treaty; we have a contracting GDP, which is 0·6 per cent. down this quarter, the seventh quarter in succession in which it has gone down, making this one of the worst recessions ever; we have a serious balance of payments problem, and we cannot get out of it by devaluation; and imports outstrip exports at the slightest hint of an upturn.
There is no doubt that a major cause of the present lamentable or, as my hon. Friend the Member for Newcastle upon Tyne, East (Mr. Brown) would say, "Lamontable," situation is the Government's neglect of industry. One of the most depressing facts is that the United Kingdom is the only EC country where manufacturing investment is lower now than it was in 1979. But, there we are, the Government must take responsibility and answer to the people. They cannot continue to do nothing or scramble about trying to get another 0·5 per cent. cut in interest rates. That will not be enough. Unless the Government act now, our position will continue to worsen when compared with other EC countries.
It is possible that we could get out of these problems by strong world economic growth. However, that will not happen. Only yesterday the Centre for Economic Forecasting said that world growth "will be slight". If the Government do not act, unemployment will continue to rise to even higher, morally unacceptable levels. There will no doubt be painful cuts in the public expenditure round in the autumn and £19 billion will suddenly become a great sum. Our housing crisis will continue to worsen, training programmes will continue to be underfunded, school classes will be too large, the NHS will continue to lose beds and British Rail, the most crowded and least punctual service in western Europe, will continue to be badly funded. All that will continue with taxation higher now than it was in 1979.
The comparison with Canary Wharf is instructive. The building is about 42·8 per cent. full, and Olympia and York has too great a borrowing requirement, with the result that work on the project has stopped. That is what is likely to happen to the economy, and it is certainly similar to driving a car using only a rear mirror. Blind faith in Thatcherite policies has led to the present sorry mess at Canary Wharf. It is an ugly and intrusive building that nobody wants in an area that nobody can get to. It is a development hungry for more public money.
The Opposition believe that, although the scheme should now succeed, public money should have been better spent. Industry needs to be looked after to produce goods made in this country. Unemployment is a social evil and should not be traded off against keeping inflation down when there are other policies available that would keep both down. We believe that our infrastructure needs public finance and should be as good as elsewhere in the Community. We need a society in which those who need help get it from those who can give it for the benefit of the community as a whole.
The Finance Bill does none of those things. Hon. Members can look in vain for the slightest iota of something to help the economy, help us get out of recession, help the unemployed, those who do not have a house in which to live and those whose children are being educated in over-large classes. They will find nothing on any of those matters and it is for that reason that I urge my hon. Friends to vote against the Bill.
As the hon. Member for Wrexham (Dr. Marek) said, this has been a short but interesting debate, notable not only for the range of subjects discussed within the curtilage of a Finance Bill but for three outstanding maiden speeches, to which I shall refer.
I hope that, in the short time that I intend to take winding up the debate, the House will permit me to start by paying my tribute to my predecessor, John Maples, who was widely recognised on both sides of the House as an affable man of great professional expertise and competence. From my short time in office, I know that he will be an extremely hard act to follow. I hope that his absence from the House is only an interlude and that he will be back with us soon.
I hope, if I am going to be tail-end Charlie in such debates, that I will do what Ministers replying to debates do not do enough—mention hon. Members who have spoken rather than making a further Second Reading speech. That, inevitably, will make my speech shorter than that of the hon. Member for Wrexham.
I pay tribute to my hon. Friend the Member for Rutland and Melton (Mr. Duncan), who broke the tradition of a non-controversial maiden speech by announcing that he was pro-hunting. It seemed that he was challenging my hon. Friend the Member for Basildon (Mr. Amess) in trying to create an identity for his constituency, and I wish him well in calling for a return to Rutland's unitary status.
My hon. Friend the Member for Rutland and Melton rightly paid tribute to our friend, Michael Latham—a man of the highest integrity and a devout man of extremely good nature. Our deliberations will be poorer for his absence.
My hon. Friend made an extremely impressive speech and will make valuable contributions to our financial debates. I noted his remarks about inheritance tax, advanced corporation tax and the refunding rules on VAT, and he made some interesting remarks about the high debt-equity ratios of British companies. Although the Government's influence is limited,' that is an interesting point for us to bear in mind in the wider formation of fiscal and monetary policy.
My hon. Friend the Member for Orpington (Mr. Horam), in his second maiden speech on returning to the House, asked us not to prolong the recession. I hope that we shall do nothing to prolong it. In this short Parliament, we have reduced interest rates, and my hon. Friend called for further reductions. Our policies are designed to achieve low inflation and low interest rates. I note what he said about a low-tax economy attracting foreign investment. One of the good aspects of our economic performance is the extent to which we are a haven for foreign investment. I am sure that that is welcomed by all hon. Members.
I congratulate the hon. Member for Wolverhampton, North-East (Mr. Purchase) on an outstanding maiden speech, in the great traditions of the House. He spoke about his predecessors, to which I add a personal word about Maureen Hicks, whom many Conservative Members regarded as an outstanding Member. We shall miss her, but we wish the hon. Gentleman well.
The hon. Member for Wolverhampton, North-East made a compassionate and compelling speech. He spoke about the plight of pensioners and the infirm, and I note what he said about loans rather than grants from the Department of Social Security. He expressed concern about the restraints on local authorities' housing plans, and spoke with passion about the employment and unemployment problems of some of his constituents. We look forward to hearing further from him.
The hon. Member for Newcastle upon Tyne, East (Mr. Brown), responding to my hon. Friend the Financial Secretary, made particular reference to the size of the trade deficit, and dwelt on inheritance tax. Of course it is of concern that the current account and trade deficit is substantial, but we should not lose sight of the fact that exports have grown strongly, which deserves a welcome. Nor should we forget that the size of the deficit is containable.
The hon. Member's comments on inheritance tax showed more concern for the Labour party's old-fashioned attitudes to the accumulation and maintenance of large amounts of wealth than for the equity of the inheritance tax rules. The Government have received a public mandate and have taken early action significantly to offer relief on inheritance tax, which is extremely welcome, at least among Conservative Members.
My right hon. Friend the Member for Shropshire, North (Mr. Biffen) made a speech that had a familiar refrain for me, and perhaps we shall hear it again. He rightly emphasised the importance of controlling public expenditure—a theme emphasised by my hon. Friend the Member for Bridlington (Mr. Townend).
I wish to assure my right hon. Friend and other Conservative Members that the Government intend to take the tightest control of public expenditure. It is absolutely essential if we are to deliver the prospects of economic regeneration and the electoral promises that we made at the general election that we contain public expenditure this year and in years to come. It is right that my right hon. Friend the Chief Secretary to the Treasury be given the support that was evident among Conservative Members tonight in the discussions that he is having on spending policies.
My hon. Friend the Member for Bridlington welcomed the Bill because its provisions on inheritance tax enable family firms and farms to be passed from one generation to another.
The right hon. Member for Ashton-under-Lyne (Mr. Sheldon) was concerned that further moves to low inflation might mean deflation. I do not think that that necessarily follows. In the past, certainly in the early 1980s, inflation fell while the economy grew. The projections for reducing the underlying rate of inflation will not necessarily impair our prospects for growth. He emphasised the importance that he attaches to manufacturing industry, which I understand.
The hon. Member for Berwick-upon-Tweed (Mr. Beith) complained that this was not a Budget for investment and that he would have preferred an increase in allowances rather than the introduction of the 20p band. That was a central plank of the Chancellor's Budget, which had considerable appeal to people who are within the tax net but are relatively low-paid, and it will bring valuable relief to many people. We have a public mandate for it, and we intend to press ahead with it.
The hon. Member for Berwick-upon-Tweed expressed concern about the Leeds case and about life assurance companies, which both involve, as he put it, aspects of retrospection. That is a contentious matter, to which we shall return in Committee, but we do not take the same line as him. We have a good relationship with the life assurance companies and hope to be able to discuss the content of the Bill's measures, but it is quite proper, given the size of the yield cost of some of the issues at stake, that we take legislative opportunities to put matters beyond question. Confirming past tax regimes is different from the retrospection that visits increased tax rates retrospectively.
The hon. Member for Leeds, West (Mr. Battle) spoke of omissions from the Budget and the Finance Bill, of the housing problems that he perceives in his constituency and of the severity of unemployment. We contest that, because we believe that the Budget and the Bill form part of an overall economic strategy that will create jobs, sustainable growth and sound monetary policies. The evidence, the outlook and surveys of confidence suggest that that is already happening, and we believe that the Bill will encourage it still further.
My hon. Friend the Member for Faversham (Mr. Moate) mentioned stamp duty, which was mentioned at Prime Minister's Question Time earlier today. I am aware that many hon. Members of all parties have been pressing either for an extension of the concession or for it to be continued permanently. At this maiden appearance at the Dispatch Box, I am afraid that I must tell them all firmly that that will not be possible. I have today answered a question from my right hon. Friend the Member for Gloucester (Mr. French) making it clear that the Government will reintroduce the stamp duty rates in August this year.
The yield costs are considerable, and we cannot afford to ignore the impact on the borrowing requirements of Government. The cost of the concession alone is £400 million until August, and the cost of extending that concession for the rest of the financial year would be another £470 million. The cost of the concession for a whole financial year amounts to about £700 million. The total yield from stamp duty on houses amounts to almost £1·4 billion per year. We simply cannot ignore such money in the current equations on public expenditure.
If we wish to meet the public expenditure priorities we have set, we must also consider the fiscal as well as the borrowing side. That is why the temporary stamp duty relief must come to an end. I hope that the certainty that it will come to an end will act as a further boost in the intervening period to encouraging the purchases and transactions in properties up to the value of £250,000.
The hon. Member for Hornsey and Wood Green (Mrs. Roche) spoke about transport, housing and employment problems in London. I am delighted that my hon. Friend the Minister for Transport in London will home in especially on the problems of transport in London. It is now known that there is a Cabinet sub-committee on London, and for better or worse, I am the Treasury man on it. I will do my bit, short of coming up with substantial sums that it proposes to spend, to try to ensure that there are some useful ideas to try to get better value for money, more efficiency in public expenditure and higher-quality public services in transport, housing and employment for all the people in London.
The hon. Member for Sheffield, Attercliffe (Mr. Betts) said that there were no signs of recovery, and called for a major increase in public investment. There is often a misconception about public investment. Investment means one person spending the money instead of another person spending it. If the Government spend that money, they have to take it from somebody who might be investing it better. The argument that must be deployed—to the House or to the public—for public expenditure, whether one raises it by borrowing or by tax, is that Government will spend it more effectively than those who would otherwise spend and save it.
Conservatives do not take that view. We believe in the plurality and judgment of the private sector. We believe in leaving more resources with people and with companies so that they can set their own priorities. In the words of my right hon. Friend the Chancellor, the Budget and the Finance Bill
mark a step in our constant drive to leave individuals and families with more of what they earn."—[Official Report, 10 March 1992; Vol. 205, c. 761.]
That is our intention, and we will stick to it. It is a pledge that gave us the support of the electorate. It is a Budget for recovery, and the Bill follows it through. I commend the Bill to the House.
|Division No. 20]||[7.43 pm|
|Adley, Robert||Bellingham, Henry|
|Ainsworth, Peter (East Surrey)||Bendall, Vivian|
|Aitken, Jonathan||Beresford, Sir Paul|
|Alexander, Richard||Biffen, Rt Hon John|
|Alison, Rt Hon Michael (Selby)||Blackburn, Dr John G.|
|Allason, Rupert (Torbay)||Body, Sir Richard|
|Amess, David||Bonsor, Sir Nicholas|
|Ancram, Michael||Booth, Hartley|
|Arbuthnot, James||Boswell, Tim|
|Arnold, Jacques (Gravesham)||Bottomley, Peter (Eltham)|
|Arnold, Sir Thomas (Hazel Grv)||Bottomley, Rt Hon Virginia|
|Ashby, David||Bowis, John|
|Aspinwall, Jack||Boyson, Rt Hon Sir Rhodes|
|Atkinson, Peter (Hexham)||Brandreth, Gyles|
|Baker, Rt Hon K. (Mole Valley)||Brazier, Julian|
|Baker, Nicholas (Dorset North)||Bright, Graham|
|Baldry, Tony||Brooke, Rt Hon Peter|
|Banks, Matthew (Southport)||Brown, M. (Brigg & Cl'thorpes)|
|Banks, Robert (Harrogate)||Browning, Mrs. Angela|
|Bates, Michael||Bruce, Ian (S Dorset)|
|Batiste, Spencer||Budgen, Nicholas|
|Burns, Simon||Hampson, Dr Keith|
|Burt, Alistair||Hannam, Sir John|
|Butler, Peter||Hargreaves, Andrew|
|Butterfill, John||Harris, David|
|Carlisle, John (Luton North)||Haselhurst, Alan|
|Carlisle, Kenneth (Lincoln)||Hawkins, Nicholas|
|Carrington, Matthew||Hawksley, Warren|
|Carttiss, Michael||Hayes, Jerry|
|Cash, William||Heald, Oliver|
|Chaplin, Mrs Judith||Heath, Rt Hon Sir Edward|
|Clappison, James||Heathcoat-Amory, David|
|Clark, Dr Michael (Rochford)||Hendry, Charles|
|Clarke, Rt Hon Kenneth (Ruclif)||Heseltine, Rt Hon Michael|
|Clifton-Brown, Geoffrey||Hicks, Robert|
|Coe, Sebastian||Higgins, Rt Hon Terence L.|
|Congdon, David||Hill, James (Southampton Test)|
|Conway, Derek||Hogg, Rt Hon Douglas (G'tham)|
|Coombs, Anthony (Wyre For'st)||Horam, John|
|Coombs, Simon (Swindon)||Hordern, Sir Peter|
|Cope, Rt Hon Sir John||Howard, Rt Hon Michael|
|Cormack, Patrick||Howarth, Alan (Strat'rd-on-A)|
|Couchman, James||Howell, Ralph (North Norfolk)|
|Cran, James||Hughes Robert G. (Harrow W)|
|Currie, Mrs Edwina (S D'by'ire)||Hunt, Rt Hon David (Wirral W)|
|Curry, David (Skipton & Ripon)||Hunter, Andrew|
|Davies, Quentin (Stamford)||Hurd, Rt Hon Douglas|
|Davis, David (Boothferry)||Jack, Michael|
|Day, Stephen||Jackson, Robert (Wantage)|
|Deva, Niranjan||Jenkin, Bernard|
|Devlin, Tim||Jessel, Toby|
|Dickens, Geoffrey||Johnson Smith, Sir Geoffrey|
|Dicks, Terry||Jones, Gwilym (Cardiff N)|
|Dorrell, Stephen||Jones, Robert B. (W H'f'rdshire)|
|Douglas-Hamilton, Lord James||Jopling, Rt Hon Michael|
|Dover, Den||Kellett-Bowman, Dame Elaine|
|Duncan, Alan||Key, Robert|
|Duncan-Smith, Iain||Kilfedder, James|
|Dunn, Bob||King, Rt Hon Tom|
|Durant, Sir Anthony||Kirkhope, Timothy|
|Dykes, Hugh||Knapman, Roger|
|Eggar, Tim||Knight, Mrs Angela (Erewash)|
|Elletson, Harold||Knight, Greg (Derby N)|
|Emery, Sir Peter||Knight, Dame Jill (Bir'm E'st'n)|
|Evans, David (Welwyn Hatfield)||Knox, David|
|Evans, Jonathan (Brecon)||Kynoch, George (Kincardine)|
|Evans, Nigel (Ribble Valley)||Lait, Ms Jacqui|
|Evans, Roger (Monmouth)||Lamont, Rt Hon Norman|
|Evennett, David||Lang, Rt Hon Ian|
|Faber, David||Lawrence, Ivan|
|Fabricant, Michael||Legg, Barry|
|Fairbairn, Sir Nicholas||Leigh, Edward|
|Field, Barry (Isle of Wight)||Lennox-Boyd, Hon Mark|
|Fishburn, John Dudley||Lester, Jim (Broxtowe)|
|Forsyth, Michael (Stirling)||Lidington, David|
|Forth, Eric||Lilley, Rt Hon Peter|
|Fowler, Rt Hon Sir Norman||Lloyd, Peter (Fareham)|
|Fox, Dr Liam (Woodspring)||Lord, Michael|
|Fox, Sir Marcus (Shipley)||Luff, Peter|
|Freeman, Roger||MacGregor, Rt Hon John|
|French, Douglas||MacKay, Andrew|
|Fry, Peter||McLoughlin, Patrick|
|Gale, Roger||McNair-Wilson, Sir Patrick|
|Gallie, Philip||Madel, David|
|Gardiner, Sir George||Maitland, Lady Olga|
|Garel-Jones, Rt Hon Tristan||Malone, Gerald|
|Garnier, Edward||Mans, Keith|
|Gill, Christopher||Marland, Paul|
|Gillan, Ms Cheryl||Marlow, Tony|
|Goodlad, Rt Hon Alastair||Marshall, John (Hendon S)|
|Goodson-Wickes, Dr Charles||Marshall, Sir Michael (Arundel)|
|Gorman, Mrs Teresa||Martin, David (Portsmouth S)|
|Gorst, John||Mates, Michael|
|Greenway, Harry (Ealing N)||Mawhinney, Dr Brian|
|Greenway, John (Ryedale)||Mellor, Rt Hon David|
|Griffiths, Peter (Portsmouth, N)||Merchant, Piers|
|Grylls, Sir Michael||Milligan, Stephen|
|Gummer, Rt Hon John Selwyn||Mills, Iain|
|Hague, William||Mitchell, Andrew (Gedling)|
|Hamilton, Rt Hon Archie||Mitchell, Sir David (Hants NW)|
|Hamilton, Neil (Tatton)||Moate, Roger|
|Molyneaux, Rt Hon James||Spicer, Michael (S Worcs)|
|Monro, Sir Hector||Spink, Dr Robert|
|Montgomery, Sir Fergus||Spring, Richard|
|Moss, Malcolm||Sproat, Iain|
|Nelson, Anthony||Stanley, Rt Hon Sir John|
|Neubert, Sir Michael||Steen, Anthony|
|Newton, Rt Hon Tony||Stephen, Michael|
|Nicholls, Patrick||Stern, Michael|
|Nicholson, David (Taunton)||Stewart, Allan|
|Nicholson, Emma (Devon West)||Streeter, Gary|
|Norris, Steve||Sumberg, David|
|Onslow, Rt Hon Cranley||Sweeney, Walter|
|Oppenheim, Phillip||Sykes, John|
|Ottaway, Richard||Tapsell, Sir Peter|
|Page, Richard||Taylor, Ian (Esher)|
|Paice, James||Taylor, John M. (Solihull)|
|Patnick, Irvine||Taylor, Sir Teddy (Southend, E)|
|Patten, Rt Hon John||Temple-Morris, Peter|
|Pattie, Rt Hon Sir Geoffrey||Thomason, Roy|
|Pawsey, James||Thompson, Patrick (Norwich N)|
|Peacock, Mrs Elizabeth||Thornton, Malcolm|
|Pickles, Eric||Thurnham, Peter|
|Porter, Barry (Wirral S)||Townend, John (Bridlington)|
|Porter, David (Waveney)||Townsend, Cyril D. (Bexl'yh'th)|
|Portillo, Rt Hon Michael||Tracey, Richard|
|Powell, William (Corby)||Tredinnick, David|
|Redwood, John||Trend, Michael|
|Renton, Rt Hon Tim||Trimble, David|
|Richards, Rod||Trotter, Neville|
|Riddick, Graham||Twinn, Dr Ian|
|Rifkind, Rt Hon. Malcolm||Vaughan, Sir Gerard|
|Robathan, Andrew||Viggers, Peter|
|Roberts, Rt Hon Sir Wyn||Waldegrave, Rt Hon William|
|Robertson, Raymond (Ab'd'n S)||Walden, George|
|Robinson, Mark (Somerton)||Walker, Bill (N Tayside)|
|Roe, Mrs Marion (Broxbourne)||Waller, Gary|
|Rowe, Andrew (Mid Kent)||Wardle, Charles (Bexhiil)|
|Rumbold, Rt Hon Dame Angela||Watts, John|
|Ryder, Rt Hon Richard||Wells, Bowen|
|Sackville, Tom||Wheeler, Sir John|
|Sainsbury, Rt Hon Tim||Whitney, Ray|
|Scott, Rt Hon Nicholas||Whittingdale, John|
|Shaw, David (Dover)||Widdecombe, Ann|
|Shaw, Sir Giles (Pudsey)||Willetts, David|
|Shephard, Rt Hon Gillian||Wilshire, David|
|Shepherd, Colin (Hereford)||Winterton, Mrs Ann (Congleton)|
|Shepherd, Richard (Aldridge)||Winterton, Nicholas (Macc'f'ld)|
|Sims, Roger||Wolfson, Mark|
|Skeet, Sir Trevor||Wood, Timothy|
|Smith, Tim (Beaconsfield)||Yeo, Tim|
|Smyth, Rev Martin (Belfast S)||Young, Sir George (Acton)|
|Speed, Keith||Tellers for the Ayes:|
|Spencer, Sir Derek||Mr. David Lightbown and|
|Spicer, Sir James (W Dorset)||Mr. Sydney Chapman.|
|Abbott, Ms Diane||Boateng, Paul|
|Adams, Mrs Irene||Boyce, Jimmy|
|Ainger, Nicholas||Bradley, Keith|
|Ainsworth, Robert (Cov'try NE)||Brazier, Julian|
|Alton, David||Brown, Gordon (Dunfermline E)|
|Anderson, Donald (Swansea E)||Brown, N. (N'c'tle upon Tyne E)|
|Anderson, Ms Janet (Ros'dale)||Bruce, Malcolm (Gordon)|
|Armstrong, Hilary||Burden, Richard|
|Ashton, Joe||Byers, Stephen|
|Austin-Walker, John||Caborn, Richard|
|Barnes, Harry||Callaghan, Jim|
|Battle, John||Campbell, Ms Anne (C'bridge)|
|Bayley, Hugh||Campbell, Menzies (Fife NE)|
|Beckett, Margaret||Campbell, Ronald (Blyth V)|
|Beith, A. J.||Campbell-Savours, D. N|
|Bell, Stuart||Canavan, Dennis|
|Benn, Rt Hon Tony||Cann, James|
|Bennett, Andrew F.||Chisholm, Malcolm|
|Benton, Joe||Clapham, Michael|
|Bermingham, Gerald||Clark, Dr David (South Shields)|
|Berry, Roger||Clarke, Eric (Midlothian)|
|Betts, Clive||Clarke, Tom (Monklands W)|
|Blair, Tony||Clelland, David|
|Clwyd, Mrs Ann||Ingram, Adam|
|Coffey, Ms Ann||Jackson, Ms Glenda (H'stead)|
|Cohen, Harry||Jackson, Ms Helen (Shef'ld, H)|
|Connarty, Michael||Jamieson, David|
|Cook, Frank (Stockton N)||Janner, Greville|
|Cook, Robin (Livingston)||Jones, Barry (Alyn and D'side)|
|Corbyn, Jeremy||Jones, Ieuan (Ynys Môn)|
|Corston, Ms Jean||Jones, Jon Owen (Cardiff C)|
|Cousins, Jim||Jones, Ms Lynne (B'ham S O)|
|Cryer, Bob||Jones, Martyn (Clwyd, SW)|
|Cummings, John||Jones, Nigel (Cheltenham)|
|Cunliffe, Lawrence||Jowell, Ms Tessa|
|Cunningham, Jim (Covy SE)||Kaufman, Rt Hon Gerald|
|Cunningham, Dr John (C'p'l'nd)||Keen, Alan|
|Dalyell, Tam||Kennedy, Charles (Ross, C & S)|
|Darling, Alistair||Kennedy, Ms Jane (L'p'l Br'g'n)|
|Davidson, Ian||Khabra, Piara|
|Davies, Bryan (Oldham C'tral)||Kilfoyle, Peter|
|Davies, Rt Hon Denzil (Llanelli)||Kirkwood, Archy|
|Davies, Ron (Caerphilly)||Leighton, Ron|
|Davis, Terry (B'ham, H'dge H'I)||Lestor, Joan (Eccles)|
|Denham, John||Lewis, Terry|
|Dewar, Donald||Livingstone, Ken|
|Dixon, Don||Lloyd, Tony (Stretford)|
|Dobson, Frank||Llwyd, Elfyn|
|Donohoe, Brian||Loyden, Eddie|
|Dowd, Jim||Lynne, Ms Liz|
|Dunnachie, Jimmy||McAllion, John|
|Dunwoody, Mrs Gwyneth||McAvoy, Thomas|
|Eagle, Ms Angela||McCartney, Ian|
|Enright, Derek||MacDonald, Calum|
|Etherington, William||McFall, John|
|Evans, John (St Helens N)||McKelvey, William|
|Fatchett, Derek||Mackinlay, Andrew|
|Field, Frank (Birkenhead)||McLeish, Henry|
|Fisher, Mark||Maclennan, Robert|
|Flynn, Paul||McMaster, Gordon|
|Foster, Derek (B'p Auckland)||McNamara, Kevin|
|Foster, Donald (Bath)||Madden, Max|
|Foulkes, George||Mahon, Alice|
|Fraser, John||Mandelson, Peter|
|Fyfe, Maria||Marek, Dr John|
|Galbraith, Sam||Marshall, David (Shettleston)|
|Galloway, George||Marshall, Jim (Leicester, S)|
|Gapes, Michael||Martlew, Eric|
|Garrett, John||Meacher, Michael|
|George, Bruce||Michael, Alun|
|Gerrard, Neil||Michie, Bill (Sheffield Heeley)|
|Gilbert, Rt Hon Dr John||Michie, Mrs Ray (Argyll Bute)|
|Godman, Dr Norman A.||Milburn, Alan|
|Godsiff, Roger||Miller, Andrew|
|Golding, Mrs Llin||Mitchell, Austin (Gt Grimsby)|
|Gordon, Mildred||Moonie, Dr Lewis|
|Grant, Bernie (Tottenham)||Morgan, Rhodri|
|Griffiths, Nigel (Edinburgh S)||Morley, Elliot|
|Griffiths, Win (Bridgend)||Morris, Rt Hon A. (Wy'nshawe)|
|Grocott, Bruce||Morris, Estelle (B'ham Yardley)|
|Gunnell, John||Morris, Rt Hon J. (Aberavon)|
|Hain, Peter||Mowlam, Marjorie|
|Hall, Mike||Mudie, George|
|Hanson, David||Murphy, Paul|
|Harman, Ms Harriet||Oakes, Rt Hon Gordon|
|Harvey, Nick||O'Brien, Michael (N W'kshire)|
|Hattersley, Rt Hon Roy||O'Brien, William (Normanton)|
|Henderson, Doug||O'Hara, Edward|
|Hepple, John||Olner, William|
|Hill, Keith (Streatham)||Orme, Rt Hon Stanley|
|Hinchliffe, David||Patchett, Terry|
|Hoey, Kate||Pickthall, Colin|
|Hogg, Norman (Cumbernauld)||Pike, Peter L.|
|Home Robertson, John||Pope, Greg|
|Hood, Jimmy||Powell, Ray (Ogmore)|
|Hoon, Geoff||Prentice, Ms Bridget (Lew'm E)|
|Howarth, George (Knowsley N)||Prentice, Gordon (Pendle)|
|Howells, Dr. Kim (Pontypridd)||Primarolo, Dawn|
|Hoyle, Doug||Purchase, Ken|
|Hughes, Kevin (Doncaster N)||Quin, Ms Joyce|
|Hughes, Robert (Aberdeen N)||Radice, Giles|
|Hughes, Roy (Newport E)||Randall, Stuart|
|Hutton, John||Raynsford, Nick|
|Reid, Dr John||Stevenson, George|
|Richardson, Jo||Stott, Roger|
|Robertson, George (Hamilton)||Strang, Gavin|
|Robinson, Geoffrey (Co'try NW)||Straw, Jack|
|Roche, Ms Barbara||Tipping, Paddy|
|Rogers, Allan||Turner, Dennis|
|Rooker, Jeff||Tyler, Paul|
|Rooney, Terry||Walker, Rt Hon Harold (Don' C)|
|Ross, Ernie (Dundee W)||Walley, Joan|
|Rowlands, Ted||Warden, Gareth (Gower)|
|Salmond, Alex||Wareing, Robert N|
|Sedgemore, Brian||Watson, Mike|
|Sheerman, Barry||Welsh, Andrew|
|Sheldon, Rt Hon Robert||Wicks, Malcolm|
|Shore, Rt Hon Peter||Williams, Rt Hon Alan (Sw'n W)|
|Simpson, Alan||Williams, Alan W (Carmarthen)|
|Skinner, Dennis||Wilson, Brian|
|Smith, Andrew (Oxford E)||Winnick, David|
|Smith, C. (Isl'ton S & F'sbury)||Wise, Audrey|
|Smith, Rt Hon John (M'kl'ds E)||Worthington, Tony|
|Smith, Llew (Blaenau Gwent)||Wray, Jimmy|
|Snape, Peter||Wright, Tony|
|Soley, Clive||Young, David (Bolton SE)|
|Spellar, John||Tellers for the Noes:|
|Squire, Rachel (Dunfermline W)||Mr. Ken Eastham and|
|Steel, Rt Hon Sir David||Mr. Eric Illsley.|
That Clauses 19 and 20 be committed to a Committee of the whole House;
That the remainder of the Bill be committed to a Standing Committee;
That, when the provisions of the Bill considered, respectively, by the Committee of the whole House and by the Standing Committee have been reported to the House, the Bill be proceeded with as if the Bill had been reported as a whole to the House from the Standing Committee.—[Mr. Dorrell.]
I rise briefly to put the arguments against the detail in the motion. For clauses 19 and 20 to be the only clauses to be considered on the Floor of the House rather diminishes the role that this House should have in full Committee on the Floor when considering the details of clause 52.
I will not make a speech about the merits of the issue. The House very infrequently goes in for retroactive legislation. As Front-Bench Members have said, that is normally done for the benefit of taxpayers. In this case, the proposals in clause 52 would mean that, whatever the courts decided in a judicial review case, Parliament would have to do what the Government say that it should have done two or three times before.
We should have a debate on clause 52 on the Floor of the House of Commons. If I do not succeed in blocking this committal motion by shaking my head vigorously when the Question is put, I hope that there will be a full debate on Report. I cannot rely on the Committee going any further than it did a year or so ago, when the issue was last considered.
Parliament should not believe that the Government have got away with it. In effect, they are going for hybridity, although the way in which the clause has been drawn would probably avoid it being technically hybrid. The issue will certainly arise when a building society takes the issue to the European courts, something that it can do only when all the domestic remedies have been exhausted.
As the House will recall, in this case the domestic remedies include the Government three times reversing the law as determined by the courts: twice after the courts determined that the Inland Revenue had got it wrong and once in advance of a likely decision.
The justification for the sledgehammer of clause 52 is that building societies paid £15,000 million in taxation over four years. I agree with my hon. Friend the Financial Secretary to the Treasury that £15,000 million is too much to have hanging at risk.
As the Government consider their stance for Standing Committee and for the Committee of the whole House, I hope that they will find a way to limit the affect of clause 52 so that it deals with only 99 per cent. of £15,000 million and leaves the claim to £57 million including interest to be determined either by the courts in a judicial review or by negotiations with the Government. I ask the House to support my contention that, one way or another, clause 52 should be aired in a full debate on the Floor of the House.