Orders of the Day — Finance Bill

Part of the debate – in the House of Commons at 8:57 pm on 15 January 1996.

Alert me about debates like this

Photo of Bernard Jenkin Bernard Jenkin , Colchester North 8:57, 15 January 1996

I shall come to the hon. Gentleman in a minute.

The hon. Member for Edinburgh, Leith (Mr. Chisholm) wanted to raise extra taxation, supposedly to help the unemployed. There is no evidence that extra spending and taxation either make a Government popular or help the unemployed in the long term. The hon. Gentleman denigrated the Government's objectives to remove inheritance and capital gains tax. Let me ask him a question. If it could be demonstrated that a Government could create a framework in which more jobs were created, more investment attracted and more output and growth generated through the abolition of those taxes, would such action be wrong? Or is the Labour party—as the hon. Gentleman suggested—so trapped in the ideology of equality that it would continue to apply policies that apply equality come what may, however damaging such taxes may be to the overall growth rate of the economy?

How much capital gains tax does Singapore levy? I asked that question on a recent visit. Singapore starts to apply capital gains tax when individual gains reach several million Singapore dollars, at a rate of 3 per cent. Next time the Leader of the Opposition visits Singapore, perhaps he should examine its taxation system. That system is something to emulate—as well as the enormous corporate control that exists there, to which I shall refer later. [Interruption.] I shall deal with the speech of the hon. Member for Rotherham (Mr. MacShane) in a minute. It was more interesting than he might have imagined.

The real test of the Government, and of the conduct of the Opposition, is fitness to govern. The absence of clear answers from the hon. Member for Oxford, East—whom I am pleased to see in his place—demonstrates that the Labour party is simply not fit to govern. The real message from the Second Reading of the Bill, which I can send to my constituents as we enter the pre-election phase, is that we have set taxation on a downward trend again. That is what voters want. It is not simply an electoral bribe; it is necessary to improve incentives and the operation of the economy.

It is not possible for increased Government expenditure and increased taxation to accelerate the wealth-creating process. Examples from all around the world prove that the less the Government suck out of the wealth-creating economy and put into non-wealth-creating activities, the more that can be left to fructify in the pockets of the people—[Interruption.] I am sorry that the hon. Member for York (Mr. Bayley) is not familiar with the sayings of Winston Churchill. As I was saying, the more that can be left to fructify in the pockets of the people, the more active and dynamic the economy will be.

Perhaps the most depressing aspect of the conduct of the Government's economic policy over the past 17 years—I accept the mild admonition of the hon. Member for York—is our failure more effectively to reduce the share of national income taken up by Government spending. The reason why we increased it—[Interruption.] I am drawing the hon. Gentleman's attention to the most depressing figure in this year's Red Book.

If we are to create a dynamic economy, there is one big problem that we must tackle. The biggest increase in our spending programme, despite all that we are attempting to do to reform it, is in the social security budget, as shown on page 141 of the Red Book. The Red Book shows £1.2 billion added to the plans for next year as compared to the plans drawn up for this year; another £1 billion is planned for the following year and another £550 million for the year after that.

Do we need more proof of the fact that the Labour party is not fit to govern? Goodness knows what the figures would show had we not tackled the growth in social security spending. We have managed to flatten the upward trend in social security spending. Social security spending is now growing at a rate below that of economic growth whereas it was growing substantially faster.

The Labour party, however, has opposed every measure that Ministers have put to the House to bring social security spending under control. It is at it now. It still thinks that bogus asylum seekers—people who have been in this country on different pretexts for considerable periods and who are seeking to avoid deportation by making bogus asylum claims—should have a prior claim on the resources of the welfare state, before the taxpayers. The Labour party is demonstrating its irresponsibility and unfitness to govern.

We need to achieve a steadily falling rate of spending and a steadily falling rate of taxation as a proportion of national income, and we also need greater incentives to encourage people to save. I agree with my hon. Friend the Member for Carshalton and Wallington (Mr. Forman) who talked about restructuring savings incentives in the tax system. I believe that incentives for saving are too dispersed. We encourage people to save in too many different types of pension, in personal equity plans and TESSAs, for varying terms. That means that too much of taxpayers' money—ordinary people's money—is sucked into savings mechanisms that are too impersonal. Corporate and collective pension schemes do not give people the same sense of ownership as personal pension schemes. The national insurance system is, of course, not a savings scheme at all; it is simply a way of buying a Government promise on a wing and a prayer, a promise that might be delivered some time in the future.

A stakeholder economy is not a slogan to be lifted from the far east. As my hon. Friend the Member for Milton Keynes, South-West said, the stakeholding economy described by the Opposition is more of a stateholding economy which will result in the state promoting its own vested interests instead of giving individuals and families a genuine stake in society. What we really want is the property-owning, share-owning and capital-owning democracy that the Conservatives have been promoting for some time.

Like my hon. Friend the Member for Milton Keynes, South-West, I have been delving in the pages of The Daily Telegraph, and I am reminded of an article written by the late Lord Joseph, which was published only on Friday although it was written shortly before he died in 1994. When I heard the Leader of the Opposition talk about a stakeholding economy, I thought that he might mean giving everyone more choices and more incentives to save, because we need to encourage people to do that at the same time as we reduce the burden of taxation. Lord Joseph made an important point in his article: Welfare is now by far our biggest industry. It is mostly of benefit to the middle classes. It is they who staff it, and enjoy a large proportion of its avalanche of salaries and pensions. Mitigating poverty is not what it achieves. It makes serfs of too many of its recipients. If we are to introduce proper savings in place of the bogus savings scheme called national insurance that we now have, they must be a substitute. We do not want additional compulsory pensions loaded on top of all the social security costs, as is proposed by the Labour party.

I also commend this comment of Lord Joseph's to my right hon. and hon. Friends on the Front Bench: My own favourite strategy to give every home a stake in the economy"— this was written in 1994, not in the aftermath of the publicity foray by the Leader of the Opposition— is to allow friendly societies to recover much of the role they have relinquished over this century. I also commend a report, published by the Adam Smith Institute in December, called "The Fortune Account". It proposes to give all citizens a personal savings account to fund their pensions and long-term care and perhaps, as the scheme develops, meet other needs. This proposal is inspired by Singapore and Chile and would create the savings environment that has encouraged the tiger economies to grow as much as they have.

The objective of the Finance Bill is to create the right climate for continued investment, continued growth and continued economic success. Our objective must be gradually to change the behaviour of the British economy so that it behaves more like the tiger economies, and to increase the growth rate. I commend the Bill to the House.