Orders of the Day — Finance Bill

Part of the debate – in the House of Commons at 5:37 pm on 25 January 1994.

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Photo of Mr Terence Higgins Mr Terence Higgins , Worthing 5:37, 25 January 1994

No, I am not. I accepted your ruling, Mr. Deputy Speaker, that the amendment had been moved.

The fact is that the hon. Lady could not bring herself to utter the words, "I beg to move the amendment in the name of my right hon. and learned Friend" and so on. There is a good reason why she might not wish to move that amendment, because linked to VAT on fuel are the compensatory arrangements that my right hon. and learned Friend the Chancellor has made. The reality is that the tax will fall across the population, but nearly half of the revenue will be redistributed to just 15 million people. It is, to a great extent, what one might fairly describe as a socialist measure.

If the Opposition amendment was carried this evening, many of my constituents, particularly pensioners, would find that they suffered considerably, because those compensatory payments would be lost. That is an interesting point.

In one sense, the Bill can be described literally as a monster. We have never had a two-volume Finance Bill. It is twice the size of the average Finance Bill and, in terms of the number of pages, three times the size of many previous ones. That gives considerable cause for concern. Whatever the Opposition's attitude, it will be difficult for the Bill's many clauses to be properly considered in Committee.

A Procedure Committee that I chaired about 12 years ago made a recommendation that has been repeated by successive Procedure Committees—that there is an overwhelming case for isolating the main political measures in the Budget, and then presenting a separate taxes management Bill.

When the Procedure Committee suggested that to the Leader of the House, he had three objections. First, he said that it was not a simple matter to separate the technical details from substantive tax changes. But it would not be difficult to remove from this massive document a large percentage of purely technical items that could reasonably be included in a separate Bill that would not be subject to timetable restraints.

Secondly, the Leader of the House said that two Bills would need extra time for Second Reading and consideration. But that is not a great time constraint. Thirdly, he said that a taxes management Bill might not be given sufficient priority. If sufficient priority could not be given to it, there is a good case for not having it anyway. The Leader's three objections were not valid, and there is a strong case for splitting future Finance Bills. There might even be a case for dividing the present Bill, even at this late stage. I shall say more about procedure later.

It is clear that the recovery is under way. I congratulate the all-party Select Committee on the Treasury and Civil Service, which analysed the Budget in considerable detail. I have great doubts about the timing of the Budget measures. The recovery is at an early stage, and we cannot yet say that demand should be reined back by tax increases.

There are two worrying matters. First, the previous Chancellor and the present one have developed a tendency to announce tax changes in advance, anticipating tax increases at some time in the future. We all know perfectly well that forecasting in the Treasury and elsewhere is so bad that no one can tell what the situation will be at the point in the future for which we are now seeking to legislate tax changes.

While the changes may be good in themselves, the timing is certainly doubtful. It is also true that the Chancellor would have been much better placed next spring to judge the situation and decide what needed to be done than he was at the time of the unified Budget at the end of last year.

The tax increases will inevitably put some brake on the recovery, although they may not stop it. Perhaps it will accelerate again, but it is difficult to see the case for a recovery, slow-down, recovery scenario. The problems arising from that should be considered.

However, some factors will be stimulating the recovery as the tax increases are being introduced. The fact that the Government are not fully funding the borrowing requirement should stimulate the recovery, although the passage in paragraph 10 in the report from the Select Committee on the Treasury and Civil Service on the issue of funding is obscure.

Perhaps the Financial Secretary will tell us whether, on the true definition of funding—that is to say, the deficit that is being financed from the non-bank public—the Government are proposing to overfund or underfund, because that is not at all clear. I hope that at this stage we are somewhat underfunding, and producing an additional stimulus.

All forecasters, Government or otherwise, tend to underestimate turning points in the economy—whether it is going up or down. At every successive cycle, the error has been greater. Therefore, as we have now passed a turning point, there is every reason to suppose that the recovery will be stronger than expectations. That has happened even since the Budget. There is now a general feeling that the recovery is faster than it was then. In view of those two factors, I am hopeful that the recovery will accelerate.

As the recovery proceeds, pay restraint will come to the fore. It was in the headlines this morning and on the 1 o'clock news. In "The World at One", Mr. James Naughtie came up with the old question, "Why aren't Members of Parliament setting an example?" The press grossly misrepresented what happened after the debate on Members' pay a short time ago. Over the period 1992–95, our pay has not gone up faster than inflation, although the press have represented the increase at about three times the rate of inflation.

It is said that we should set an example, but an interesting statistic arises from the long-term view. I have been in the House for a long time, for about 30 years, and throughout that time, in real terms, Members' pay has been below what it was when I first came here. It is now approaching that level, following the recent decision of the House.

In real terms, we are now in almost exactly the position that we were in 30 years ago. Meanwhile, average earnings for the population as a whole have gone up 19 times in cash terms and 90 per cent. in real terms. That gives some idea of the extent to which Members of Parliament have set an example. I hope that, when Mr. Naughtie and others in the media deal with this matter, they will remember that, although I do not expect the example that we have set to be followed.