Lloyd's Underwriters: Special Reserve Funds

Part of Orders of the Day — Finance (No. 2) Bill – in the House of Commons at 8:19 pm on 13th July 1993.

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Photo of Alan Milburn Alan Milburn , Darlington 8:19 pm, 13th July 1993

If business investment has been so successful, the Minister might like to explain to the House why, even in the middle of a recession, British companies still cannot meet even weakened consumer demand, and hence the massive increase in Britain's imports bill. I notice that the Chief Secretary to the Treasury, when he spoke earlier, lauded Britain's export performance, but he totally failed to mention the dreadful state of our imports bill. I am afraid that, once again, the Government's priorities and, indeed, their double dealing on economic statistics have been laid bare before the House and the country.

The parlous state to which our manufacturing base has been reduced by the Government requires more than rhetoric from the Prime Minister; it requires action, and it certainly requires more than a one-year, one-off, headline-grabbing investment incentive. British industry now receives less financial support from the Government than its competitors in any other European country. We are even falling behind the newly industrialising countries of the Pacific rim in terms of investment, training, and research and development.

The Finance Bill could have represented a turning point in the Government's approach. Instead, it is business as usual: it is free market, hands off, non-interventionist. The short-termism that has so characterised the last 14 years of Conservative economic policy has rarely been made more explicit. It will be the whole country that, in the medium term, will pay the price. The writing is already on the wall. The fact that the imports bill continues to boom in the middle of a recession is a sure sign that British manufacturing has been seriously weakened by the Government's performance. Whole sectors have simply been wiped out, so that even a modest recovery will precipitate a balance of payments crisis far worse than that envisaged by the former Chancellor when he delivered the Budget. The real results of the Government's economic mismanagement will be realised only when and if recovery finally arrives. It is then that their failures will be most clearly exposed.

Quite simply, the Finance Bill does nothing to tackle the economic mess created by the Conservatives. Instead, it asks the country to foot the bill for the Government's failures. Inevitably, it will be the people on low and middle incomes who will be asked to pay the price. They have been betrayed and let down by a Government who promised the earth—recovery, tax cuts and a new boom—and delivered precisely the reverse. The Finance Bill means the biggest rise in British history.

The Chief Secretary to the Treasury outlined the figures—some £17 billion to £18 billion in just two years. The Bill makes a mockery of Tory claims from the last general election, but it is at least consistent in one respect: 14 years of Tory tax policy have increased, not cut, the tax burden, and it has weighed most heavily on those least able to pay. Meanwhile, the wealthiest people.in society, representing a fraction of all taxpayers, have had the benefit of a veritable tax bonanza, paid for by the rest of us. The regressive nature of the tax rises, the imposition of value added tax on fuel, the freezing of personal allowances and, of course, the increase in national insurance contributions affect every taxpayer, but they particularly affect the low-paid.

The Finance Bill, interestingly, also hits those on middle incomes. In a parliamentary answer dated 22 April, the Financial Secretary admitted that, as a result of the freeze on personal allowances, there would be 120,000 more higher rate taxpayers. Similarly, restricting the married couple's allowance to 20 per cent., as proposed for the next financial year, would increase the number by a further 210,000. Like the poorest people in society, people on middle incomes are being asked to dig deeper to pay for the massive tax handouts to the very rich over the past few years.

I remind the House that top-rate tax cuts have earned the wealthiest more than £10 billion since 1988, when Lord Lawson, as he now is, introduced his tax-cutting Budget. They have done very well out of the Government, and they continue to do so. The Government's failure to tackle tax evasion and abuse earns the wealthiest people in society a pretty penny. Why should a person earning, say, £20,000 a year have to pay tax on his income, while a person who receives a bequest of, say, £100,000 pays nothing because he can afford to pay tax advisers and thereby avoid his inheritance tax liabilities?

The Government could have done something about that in the Finance Bill, but they refused to do so. The result is that we have a financial scandal on our hands. The nation's coffers are being plugged by increases in national insurance contributions and income tax and, of course, by the VAT extension. By contrast, the very wealthiest are getting off scot free.

The Bill continues to give inherited wealth an enormous tax break. The very richest are subsidised while the very poorest are penalised. So much for the Prime Minister's classless society. This Finance Bill is a con. It aids the wealthiest by affording enormous tax loopholes to them. It stings the poorest and those on middling incomes with swingeing tax rises. It does nothing to promote lasting recovery because it fails to promote investment in jobs or in industry. That is why the Bill deserves to be rejected by the House.