Lloyd's Underwriters: Special Reserve Funds

Part of Orders of the Day — Finance (No. 2) Bill – in the House of Commons at 8:47 pm on 13th July 1993.

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Photo of Alex Salmond Alex Salmond Leader, Scottish National Party 8:47 pm, 13th July 1993

As several hon. Members who have sat through the debate want to participate, I shall be brief. The magic carpet that mysteriously transports Conservative Members into the Chamber has some time to operate.

As I listened to the Chief Secretary's speech, I had a strange feeling of déjà vu. I was trying to place the quotation that the right hon. Gentleman used at the climax of his address—the one about governing and choosing and choosing to govern. I knew that it was from a resignation speech, but we have had so many of those over the past few years that I could not quite place the valedictory address that was the source. Then it came to me. The speech was that of the noble Lord Lawson addressing the House as Chancellor. As on this occasion the idea came from the Government Front Bench, I thought that it must mark the rehabilitation—or at least the reconstruction and development—of Lord Lawson's position in the Conservative party. That must be very refreshing for the noble Lord after so many years of having the finger pointed at him for all the ills that have befallen the economy. However, it will be some time before the latest fallen Chancellor—who at half-past seven appeared like Banquo's ghost and took a long look at the Government Front Bench—reaches the stage of rehabilitation. I do not know which Minister would play the part of Macbeth, but I would not recommend an overnight stay in the house of any of them.

In an intervention during the speech of the Chief Secretary, I referred to growth in the economy. The Red Book forecast is 2·5 per cent.—exceptionally modest indeed. A growth rate of 2·5 per cent., on average, over the next few years is not just exceptionally disappointing—it will come nowhere near closing the fiscal deficit in the economy. Thus the Government's hard choices between tax increases and spending reductions will be very severe indeed. It also means that the structural weakness in the United Kingdom economy has been laid bare for all to see.

We have experienced the longest recession in living memory. Yet the recovery from recession is not so much a bounce back as a clawback. We are not engaged in a dash for growth; if anything, it is a crawl for growth, and the so-called economic miracle of the 1980s has been exposed for what it was—if, of course, the Government's forecasts for growth over the next few years are accurate.

If I were a member of the Government Front Bench, I would be worried not only about the £1 billion per week deficit in the public sector borrowing requirement but in particular about the £1 billion per week deficit on the balance of payments because, as sure as eggs are eggs, that deficit will ensure that the faltering recovery is aborted in a balance of payments crisis sooner rather than later.

It was interesting that, apart from a brief mention of the success of exports in recent months, at no point did the Chief Secretary show any appreciation of the extent and inevitability of the enduring problem of the balance of payments, especially when oil forms less of a protection for the United Kingdom's balance of payments. I should have liked the Bill to contain a realisation of the key underlying problem of the economy.

With the Budget, the Government visited a double whammy on the people of Scotland. The first blow was the changes to petroleum revenue tax. For the sake of completeness, I shall read into the record an internal memo distributed to Shell staff in Scotland. It gives what may be called the private company view of the effect of the oil tax changes as opposed to the public view which was hastily cobbled together when the private view was unfortunately released to the newspapers. The internal memo reads: Doubtless you are aware … some very significant changes in Petroleum Revenue Tax regulations will be implemented this year by the Government…The main effect that this will have on exploration is that our net costs will go up by a factor of four. It will be clear that, under these circumstances, our exploration programme will have to be reassessed carefully.Strong reductions in this activity will force us into corresponding reductions in staff. In total we are looking at a reduction in manpower of approximately 20–30 per cent. of the present workforce in exploration between now and the end of 1994. It is clear and unambiguous that the internal company view, at least of the exploration side of the business, is that the PRT changes will mean the loss of fairly massive numbers of jobs. Let us remember that that is the view of one of the handful of oil companies which were in favour of the PRT changes; one can only imagine what the consequences will be for the vast majority of oil-related companies which were strongly against the PRT changes.

We should be grateful to the hon. Member for Slough (Mr. Watts) for trying to enlighten us about the process which ended in something like a farce yesterday when the out-of-order amendments tabled by Conservative Back Benchers were not selected for debate. The hon. Gentleman probably left us none the wiser about the tactics of that group of Conservative Back Benchers, and I should have thought that in-order amendments tabled on an all-party basis may have had a better chance of selection than out-of-order amendments signed only by Conservative Back Benchers.

My constituents were this morning treated to the sight of the right hon. Member for Woking (Sir C. Onslow), on the front page of The Press and Journal, holding a copy of the newspaper and saying that he would fight on against the PRT changes and would be trying to speak in the debate tonight. It must be especially disappointing to them that that particular knight in shining armour has been notable by his absence.

I do not know if there is still a backroom, back-stair strategy to try to get a concession from the Government to mitigate what will otherwise be a calamity for jobs in the oil industry, a calamity running into the loss of thousands of jobs. To judge from his current demeanour, I do not think that the Financial Secretary is going to enlighten us. It was a great mistake that the issue could not be forced to a vote yesterday because there is clearly all-party concern about the impact of the PRT changes, just when the oil industry is in a cyclical downturn. It is probably one of the most significant matters in the Budget in terms of an immediate effect on jobs.

The second aspect of the double whammy is the well-ventilated increase in fuel tax. I and my colleagues have for many years campaigned for a cold climate allowance, a recognition within the social security structure of the fact that there are different climatic conditions in various parts of the United Kingdom. Often, especially when there are only faltering changes to the current social security provision, we despaired of getting any reasonable concession but never in our wildest imaginings did we think that we would end up with a cold climate surcharge through the imposition of value added tax on fuel. People who pay 30 per cent., 40 per cent. or 50 per cent. more a year on fuel than the United Kingdom average will be infinitely worse off. Let us be clear: the imposition of VAT on domestic fuel will not save the world from environmental damage, but it will sacrifice pensioners and low-income families, especially those in areas with poor climatic conditions.

In summary, this Budget was introduced by a failed Chancellor and it is being ushered by a failed Treasury team.