Life Assurance Business: I Minus E Basic

Part of Clause 64 – in the House of Commons at 10:21 pm on 8th July 1992.

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Photo of Clive Betts Clive Betts , Sheffield, Attercliffe 10:21 pm, 8th July 1992

I did not want to disappoint the Financial Secretary by failing, in our final deliberations on the Bill, to persuade him of the path of truth.

I judge the Finance Bill by reflecting on what it offers my constituents and how it meets their needs. What will it do for them? Indeed, what have Finance Bills in the past 13 years done for them? I shall not go as far back as that because I can draw some themes from the Bill. What will it do for the problems of unemployment and housing? Having listened attentively to everything that Ministers have said, I conclude that the Bill does not address the needs of my constituents.

Themes have been apparent in much of the legislation which are consistent with the Government's simplistic view of the private sector and its workings and benefits. Often, the Government have seemed ashamed to admit public subsidies. Some of the examples of management incompetence have been breathtaking. They have generally been followed by a shambolic withdrawal of proposals with little apology or embarrassment for the mess that the Government have created, leaving the real problems facing so many constituents untouched and unaddressed.

There is a real problem with the growth and development of small businesses—a problem of survival through the recession at a time of high interest rates. Everyone accepted that small businesses are important to our future economic development. Despite the Government's overall commitment to a simplistic view of the free market and a philosophy of trying to get British industry lean and competitive—in too many cases, it has become skeletal and redundant for many firms in my constituency—when they introduced the business expansion scheme in the early 1980s there was probably some recognition of the positive role that they could play in helping firms start and grow in the early stages which would ultimately be of great benefit to the firms and to the people whom they could employ. A not inconsiderable amount of public expenditure was involved. I understand that in the past four years about £1 billion of investment was generated through that source, but in the past few years the implementation of what could have been a good scheme has been shambolic and a waste of taxpayers' money.

My constituents want jobs, but not many will get employment in collecting rare wines, not many will get employment in accumulating agricultural holdings, and not many will get employment in owning race horses. Yet money from the business expansion scheme has been spent on all those follies and ventures. The Government have steadily had to legislate for a scheme which they got wrong in the first place. A few people may have been employed in wine bars and restaurants, but those are not the type of businesses that we expected to expand when the scheme was set up, and they are certainly not the sort of businesses that we should now seek to support with public money.

What happened? There have been reforms to try to close some of the loopholes. Following that, there were measures to develop—and now measures in the Bill to develop further—the scheme to encourage housing provision. I do not deny that housing provision is important. Certainly, my constituents would benefit from an increase in the number of houses being built for them to rent. That would be important, but our argument is clear: the business expansion scheme was the wrong way to stimulate housing provision. The release of capital receipts for local authorities to spend would have been the right way.

I shall not repeat the lecture that I gave the Minister at 5 o'clock one morning about the failure of the Government's housing policy—[HON. MEMBERS: "Go on."] I could be tempted, but it might be a waste of time. After all, the Government's failures are there for all to see. They can be seen in the homeless young people on the streets of our cities. These are the 1990s, but a supposedly civilised and wealthy country is unable to care for people and put a roof over their heads. That is a failure of the Government's housing policy with which the business expansion scheme failed to deal, even though 90 per cent. of the expenditure under the scheme in the past two years has gone into housing and providing easy money for people with up to £40,000 to spend instead of dealing with the real issues facing small businesses.

What does the Bill do? Ultimately, it withdraws the scheme to help small businesses and leaves them in the position they were in before the Government introduced the scheme in the early 1980s. In the middle of a recession, with a lack of venture capital, with small companies searching for support and under pressure from their banks, what do the Government do? They walk away. That is the truth of the situation. Many Conservative Members who are concerned about and understand small businesses should start to worry about the lack of attention shown by the Government—their Government —to the needs of small businesses.

What other schemes have there been? There have been enterprise zones, and we have had some interesting discussions about provisions in the Bill for such zones. In this instance, the Government have made no concessions in terms of their absolute belief in the free market. They believe that if they remove tax obligations, blame the bureaucracy of local councils and remove that too, everything will be all right. There will be a free-for-all and a thousand flowers will bloom. We can take them around enterprise zones—it is not flowers that are blooming but weeds growing out of the rubble that remains.

A free-for-all? Well, there is some freedom from taxation for the businesses involved, but it is not a free-for-all because the taxpayer has paid. As I said in Committee, I believe that Sheffield was right to refuse an enterprise zone because, although we cannot get proper information from the Government about precisely how the money is being spent and what the effect of enterprise zones has been, it is fairly clear that they have not been an enormous success.

Let us consider the money involved. For instance, £2·5 billion has been spent on Canary wharf. That is a disgrace. The Government are now scrambling around to justify their folly and the monument that they have built to Thatcherism. That compares with only £50 million over five years for the development corporation in Sheffield, where there are real problems to address and real opportunities, if only the Government were prepared to work with the local authority and private business.

I was doing some sums on that £2·5 billion of expenditure. It is more money than the Government have allocated in rate support grant and revenue support grant to Sheffield city council over 13 years to provide for education, social services, environmental health, leisure, highways, refuse collection and all the other services that local authorities provide. It is an obscenity that cities such as Sheffield should be starved of resources when the Government are prepared to waste £2·5 billion on that folly of their own making at Canary wharf in order to justify their policies on enterprise zones.

We understand, although the House has not been told formally, that it may not: be a matter of moving civil servants down the road and of a leasing arrangement but that the Government may be considering buying Canary wharf. That may be the only way out of their problems. They will have to buy Canary wharf and spend a further £1·5 billion on the Jubilee line.

Few jobs have been created by the Canary wharf project, but lots of cash has been spent. The jobs that have been created have often been moved from nearby. The move from Marsham street is a classic example. Some jobs would have been created anyway. Many jobs are short-term, low-paid jobs which will not exist once the Government end the enterprise zone concessions. It is another shambolic mess of administration. The Government are not continuing enterprise zones because even the Government recognise that they have been a failure.

All the constituencies in which enterprise zones have been created—indeed, all constituencies in urban areas —have the same problems. They are the problems of dereliction, problems which need proper development plan and partnership arrangements between local councils and the private sector. Certainly Labour councils are willing to enter into those arrangements, and the private sector is mostly willing, but meaningful Government support is needed to make such arrangements work.

The rent-a-room scheme is based on the idea that somehow the private sector will solve our housing problems, just as it would solve our industrial problems. Incredibly, in the Standing Committee we heard comments from Conservative Members to the effect that the Labour party was somehow to blame for the failures of the private rented sector. Perhaps they failed to notice that their party had been in Government for the past 13 years.

I accepted many of the comments made by the hon. Member for Buckingham (Mr. Walden). He expressed reservations about the Government's housing policy. He spelled it out. Mortgage tax relief is a difficult issue, but the private rented sector in Britain will never prosper while the Government subsidise owner-occupation through mortgage tax relief. It is quite simple: the Government can fiddle around with schemes as much as they like, but they will not create a viable rented sector.

Now the Government are introducing tax relief for the rent-a-room scheme. In Committee we pressed the Minister at some length about how much the scheme would cost. He was just about awake in that debate early in the morning. He said that it would cost £2 million to £3 million. I will not quibble about the amount of money because in a different debate today we argued that £2 million was not a lot of money. It amounts to a small attempt to tackle an enormous problem. The £2 million to £3 million tax relief will go not only on newly rented rooms but on rooms which are already rented out. The addition to the amount of housing space available for homeless people is minuscule.. Perhaps the Government will eventually admit that that scheme was a failure, too, but it is already a failure in that it is no solution to the real housing crisis affecting our major cities. It offers no hope to homeless young people, and does not provide better accommodation for people living in deplorable conditions in the private rented sector or for young people with children who are living in high-rise accommodation and want to move to low-rise properties.

The Finance Bill follows the same track record—an over-reliance on the private sector and a failure to recognise the contribution that the public sector can make, balanced by hidden public subsidies, a lack of open government right the way through, and appalling managerial incompetence on behalf of the Government.

The Finance Bill fails to tackle the real problems of urban areas—the problems of homelessness and the lack of sufficient housing. It fails to tackle the problems of the lack of industrial investment, and offers no coherent approach to small businesses struggling to grow or to survive in the middle of the longest recession since the war, which was also created by the Government's actions.

In the midst of recession, the Finance Bill offers no solutions to unemployment, and no stimulus to economic activity, despite the fact that the Government should admit that their projections of gross domestic product as my hon. Friend said, ought to have changed since the Budget, because all the financial commentators have changed theirs.

By all reasonable tests, the Finance Bill is a failure. The Government may have won the election, but they are not winning the battle against the long-term economic decline of this country. They are not even fighting that battle and, ultimately, the electorate will find them out.