Budget Resolutions and Economic Situation

Part of Orders of the Day — Ways and Means – in the House of Commons at 8:17 pm on 22nd March 1993.

Alert me about debates like this

Photo of Peter Bottomley Peter Bottomley , Eltham 8:17 pm, 22nd March 1993

Before discussing taxation and spending, I want to refer to what happened in Warrington on the weekend.

We have our debates and our arguments; other people use bombs and bleeding, bullets and maiming as a substitute for political argument. I believe that the House would want the message to go out that we prefer debate and rational argument.

If people want to put a point of view on Irish nationalism, they should get elected and come here, or get more than 2 per cent. of the votes for the Dail and speak in the Irish Parliament. They should not destroy children and crucify three-year-olds in pursuit of political argument.

The Government should be praised for giving so much information to the House and to the country. In the autumn statement, they provided "Public Expenditure Analyses"—Cm. 2219—and gave most of the hints and clues on tax expenditure in appendix D, pages 135 to 138. In effect, they stated the options that they would be considering for reducing some of the gap between spending and taxation.

In terms of extra duty on motor fuels, the Government were right. There are also strong arguments for their proposal to impose value added tax on domestic fuel. I criticise those hon. Members and commentators who take it for granted that some of the factors that increase fuel costs cannot easily be changed. Sixty per cent. of pensioners live in homes that have inadequate heating systems. That should be tackled under a five-year programme that would create worthwhile work for those who need it most—in the same way that we tackled roofing problems some time ago during an earlier period of high unemployment.

This coming week, we shall see the end of the coal obligation on generating companies—the requirement for them to pay an extra £1,000 million for the higher price of coal. The cost of burning coal to generate electricity and the extra profit margin involved probably have the same effect as VAT on domestic fuel. That obligation was accepted because it was felt that keeping more people under ground was a good thing, even though the cost must be met by electricity consumers. We have already heard that a higher proportion of that cost will be paid by those on low incomes, or the cost will account for a higher proportion of the incomes of those who are not earning. We should be realistic about both.

In the same way, I suspect that some hon. Members and people outside the House would have regarded it as better if the cost of domestic gas had remained as high as in 1986, when British Gas was privatised, to avoid the 17·5 per cent. VAT imposition over the next two years, even if that made people worse off. After privatisation and competition, the real price of gas has become 20 per cent. lower than it has been, so even a 17·5 per cent. increase on that reduced index would have left users better off. We must be rational.

As to reducing unemployment levels, I have a horror of not just the way that the coal communities appeared to have been disregarded but of the way that the debate has developed. If last autumn's argument was for an extra £100 million of spending a month to maintain an extra 25,000 jobs in mining communities, that represents £4,000 per miner job per month, or £48,000 a year.

On the fringes of my constituency in south-east London, seven miles from this place, is the Woolwich Arsenal site. Over the past 70 years, it has lost 73,000 jobs—the equivalent of a colliery closing every single year for 70 years. The last 1,000 jobs go this year. Unemployment is running at 60 per cent. in the Arsenal ward of the hon. Member for Woolwich (Mr. Austin-Walker). That affects many of my constituents as well.

A city challenge application asked for £12 million a year over five years—a total of £60 million—to generate between 2,000 and 4,000 jobs, with much private sector money coming in as well. It would have involved a development on derelict land seven miles from Westminster.

We should ask whether the Government can rationally decide expenditure over and above the level of their taxation revenue, and whether the subsidy provided by the consumer or taxpayer to help transition in the mining industry could not be partly diverted to meet some of the city challenge applications that could not be approved by the Department of Environment. Both the economic and employment effects would be substantially better—in the same way that an extra £500 million of capital investment in British Rail and London Underground would have a better economic and employment effect than transition being delayed too long for too many pits.

Getting the framework of taxation right does not get proper attention. If I had longer to speak, I might question whether there should not be the same VAT arrangements in respect of greyhounds as those made for horses. Why should not the sport of kings' arrangement work for those of us who are going to the dogs?

I praise the Government for acknowledging that they have lost £500 million a year in revenue on whisky—with or without an "e". We find that, because of fashion, recession and strangling the golden goose, whisky sales have been declining. In leaving whisky out of the count, and reducing the duty on that and other spirits, there may be a rebalance and people will be able to make a choice—especially when they are not driving.

We should also examine the properness of tax expenditure. I have argued for most of my 17 years in the House that mortgage interest relief is counter-productive. I repeat also my comments on previous occasions about personal allowances. It is back to the Grey Book, which details the large sums of tax forgone by permitting personal allowances—and I refer not just to the married man's personal allowance. I welcome its reduction to 20 per cent. I would reduce the personal allowance to 20 per cent. and do the same in many other areas, so that help is concentrated where people need it.

I remind of the House for the reason for the child benefit scheme, which was not mentioned in the Budget because it is dealt with relatively automatically. Child benefit is not a form of income support. I suspect that the Treasury would do better to wrap up the Department of Social Security and make its functions an adjunct to the Treasury, in the same way that the Inland Revenue and Customs and Excise are.

There are further important measures to be taken in respect of income support. Child benefit should not be part of that. What is the justification for a cash child allowance? Looking at the family life cycle in social and economic policies, when people have children their taxable capacity is reduced and their needs increase. That is the justification for the allowance. It should not be a tax allowance that gives most help to people in the 40 per cent. tax hand, about the same help to those in the 20 per cent. or 25 per cent. band, and no help to those below the tax threshold. Would it be better to have a flat cash allowance? The answer is yes.

My right hon. and noble Friend Lady Thatcher understood that, which is why in 1983 and after what I call the Lawson fallacy on child benefit, she made sure that the Chief Secretary to the Treasury and the Secretary of State for Social Security increased it. She understood, but we often forget. Every three or four years, it is worth making the argument again out in the open.

If I had time to make a longer speech, I would talk about the effects of the Budget on trade. It is right, too, to encourage small business.

We should ask when we will be willing to give up tax benefits at some stage or in some circumstances so that others—or people like ourselves in different circumstances—can gain more benefit either from tax expenditure, real benefits, or the chance of employment.

It is not a question of from whom we will take and to whom we will give. It is in each person's life cycle. When will they be willing to give up what they have, so that they and others can gain it when they need it?

Matching needs and resources better requires a debate that goes beyond the scope of a Budget debate. I hope that is something that Labour's social justice commission will examine and that the Tory party will find a way of making that match. I hope that some of those issues will be considered across the Floor of the House, so that the Budget deficit will be reduced, people's well-being will be increased, and avoidable disadvantage, stress and handicap are minimised.