Orders of the Day — Budget Resolutions and Economic Situation

Part of the debate – in the House of Commons at 4:57 pm on 5th December 1994.

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Photo of Mr Peter Pike Mr Peter Pike , Burnley 4:57 pm, 5th December 1994

I am happy to be able to take part in this debate. First, I must comment on a meeting that I had last Friday in my constituency with the North West Society of Chartered Accountants. Unlike the right hon. Member for Sutton Coldfield (Sir N. Fowler), the society was not convinced that we are seeing positive signs of an economic recovery that is here to last. Its members spelt out two messages that they wanted me to convey to the Government and to Eddie George at the Bank of England.

First, the society thought that an increase in interest rates would destroy any economic recovery that was beginning to start. Its members said that it would clearly be a great folly for the Government to move in that direction. The society also believes that the Government and the Bank of England have failed to recognise the importance of small industries. The Government will say that that is not true, but the society believes that the Government have failed to have proper consultations with people such as chartered accountants on the changes that they are making and on the implications of those changes.

The problem with the Government is that they always say that they are going to have consultations, but they take note only of those that yield the result that they want. If people do not come forward with the conclusions that the Government want, they just disregard them. They take note only of those people who respond to consultations along the lines that the Government want to underline, and they do not have anything like a genuine consultation at all.

One of the points that I made in an intervention to the Secretary of State was about the proceeds from the sale of nationalised industries, proceeds that, since 1979, have totalled £77 billion. I accept what the right hon. Gentleman said about all of that being shown in the Red Book, but those proceeds have nearly always been used for revenue expenditure, not capital expenditure. We have disposed of assets to prop up the accounts of the nation.

The Government originally estimated that the total proceeds from the sale of nationalised industries this year would be £5.5 billion, but that figure has increased to £6.3 billion. The original Government forecast for next year was £1 billion, but the total will now be £3 billion. What will happen when they have no more assets to sell? There can be only two conclusions—the Government will have either to put up taxes to replace the income from the sale of nationalised industries or to reduce expenditure. The Government are caught in a cleft stick in the matter, as the number of assets left to sell reduces year by year. I am totally opposed to that policy, but that is the policy with which they are proceeding and it will get more difficult for them every year.

Since the former Chancellor—the right hon. Member for Kingston upon Thames (Mr. Lamont)—introduced VAT on fuel, concern about that has been the item that has featured most consistently in my mail, week after week. One must recognise that it is a problem, whatever the Government may say about the compensation that they have given to the most vulnerable and to the poor. The fact is that the compensation is not sufficient.

The Government must take into account the fact that their use of an average amount means that there will be some losers and some gainers. I do not believe that the compensation is sufficient, but if one accepted that on average it was sufficient, some people would still lose. My constituency, which goes into the Pennines, is colder than average, and it will certainly lose.

My hon. Friend the Member for Islington, South and Finsbury (Mr. Smith) referred to the people whom this tax would hit hardest—the people who must decide at what time they put on their heating or when they can have a gas fire. People in my constituency must decide whether they are going to have a hot meal every day or have the heating on. That is the stage we have reached after 15 years of Conservative rule.

In its briefing, Shelter deplores the measure, which it says can only lead to increased fuel poverty for everyone on a low income—poor households spend a greater share of their budget on fuel. That is absolutely true, and the briefing goes on to say: increased benefit rates will not compensate people on low incomes for the losses this will cause". I hope that those Conservative Members who are expressing concern about the issue will choose not to abstain tomorrow, but will seize the opportunity that has been given by the Opposition to vote to have a rethink on the issue and to axe the next phase of the VAT increase.

My constituents who have written about the issue feel that, at this juncture, it is particularly obscene that the chairman of British Gas has received a pay increase of over 70 per cent. We all know that many of the chairmen of privatised industries have, through pay increases and share options, done extremely well out of privatisation, but that does not go well with the Government saying that it is not a matter for them and that they will not intervene in the matter. The Government must show concern, because such pay increases are not acceptable, and they do not go well with those on low pay. Since the abolition of wage councils, levels of pay have fallen and the number of people on low pay has increased. What a scandal it is that, in 1994, we see people on low pay.

The Budget imposes a 14 per cent. cut in training and in help in finding the unemployed jobs. The right hon. Member for Sutton Coldfield referred to the extension of family credit to those without children, but that will help only about 20,000 people. I do not begrudge those people who have children and who are getting help through family credit, nor do I decry those people who will get help as a result of the new move, but the fact is that family credit will be paid for, not only by income tax payers, but by industries which are already giving their workers fair pay. It is nonsense that we should ask them to subsidise those industries which are low payers. There is no doubt that low pay is not an incentive for people to work well and to produce well. Therefore, it is time that we had a national minimum wage and did away with the scandal of low pay and poverty pay.

The Budget also imposes a £1 billion cut in housing for next year, half of which will come in housing investment. At the same time, local authorities are once again not allowed to use their capital receipts. What a welcome there would have been if the Chancellor had provided another year—as was done in 1992—in which capital receipts could be used. Local authorities are not able to build any houses, and they cannot even meet their statutory commitments for mandatory grants. The Financial Secretary to the Treasury, who is sitting on the Front Bench, is a former housing Minister, and he knows that many councils now have a queuing system for people waiting for grants because they do not have the money available.

The Chancellor said that he was going to cap housing benefit for the private rented sector. It has been said many times that the private rented sector would, if left to market forces, collapse and wither away. It would obviously not die, but the sector is underpinned by the benefit system, because it depends on the benefits which enable people to go into the sector.

People do not choose to go into high-rent homes—they go because they have no alternative. As a result of the Government's policies since 1979, we do not build council housing. It is true—in Burnley, in every other local authority in Lancashire and throughout most of the country—that, if council houses were available and councils were able to build houses, people would go into council housing. The Government would therefore not even have to contemplate capping housing benefit, a move that will solve no problems and will create additional problems for them.

I have mentioned using capital receipts. What nonsense it is that the Government will not allow councils to use their capital receipts when doing so would not only help to solve the housing crisis which exists throughout the country but would help to get people back to work and to improve the economy. Not only would the building industry improve but, as people who move home buy carpets and curtains, other markets would be encouraged.