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Amendments made: No. 20, in page 214, line 17, at end insert—
|"(5A) Annuity business of insurance companies|
|Chapter||Short title||Extent of repeal|
|1988 c. 1.||The Income and Corporation Taxes Act 1988.||In section 76(2A)(b), sub-paragraph (iv) and the wore "and" immediately preceding it. Section 434B(2).|
|In section 490(2). the words from "but if onwards.|
|1991 c. 31.||The Finance Act 1991.||In Schedule 7. paragraph 16(3) and (4).|
|1995 c. 4.||The Finance Act 1995.||In Schedule 8, paragraph 21(1).|
|1996 c. 8.||The Finance Act 1996.||Section 165(3).|
I wish briefly to remind the House that the Liberal Democrats and some other parties voted against the Bill's Second Reading. Nothing that has happened during its passage has convinced us that it is the right Finance Bill for the country. One or two things that happened outside the House between Second Reading and Third Reading have sharpened our reasons for opposing it.
It is interesting that only this week the Confederation of British Industry said that it was concerned that the Government's fiscal stance was not tight enough, that inflationary pressures were building up and that it would prefer an increase in taxes to a rise in interest rates. The Bill cuts taxes and gives the lie to the Chancellor's previously firmer commitment to getting inflation down and keeping it down. He is using the excuse of the rise in the exchange rate, and its deflationary effect, to justify his inaction on domestic inflation. He knows that he should address the domestic pressures, but he is not for reasons that we all know: we are about to have a general election and he does not want to do anything that might damage the Government's re-election prospects, bleak as they appear.
In the past couple of weeks, the Halifax building society's vote for conversion, or demutualisation, has revealed a more substantial pool of cash than was expected. It is extraordinary that it has to give that money away rather than reinvesting it. That, too, is building up inflationary pressures.
Perhaps most important of all, we believe that, whereas the Government have cut taxes, they should have put the money into education. Improving the quality of education is not just a matter of resources, but it is not possible to expand nursery education, reduce class sizes and equip our schools effectively using existing resources. We remain convinced that we were correct to vote against the penny reduction in income tax. Indeed, we are committed to reversing that cut and putting the money where it is needed. The Liberal Democrats will vote against the Bill.
It is customary on Third Reading for a Back Bencher to pay tribute to the Standing Committee for all its hard work. It has been customary for a year or two for me to pay that tribute. It is also customary for me to talk about capital taxation and, once again, to express disappointment that the Budget does not abolish capital gains tax and inheritance tax. I have often pointed out that capital is the lubricant of a capitalist economy. It is wrong that we should continue capital taxes.
In the current year, capital gains tax will raise £900 million for the Treasury, after reliefs and allowances, which cost the Treasury £600 million. A tax with the potential to raise £1.5 billion has raised only £900 million. That is without counting the cost of the time and energy of the experts who have been involved in guiding people who wish to save tax on this account through the minefield of the legislation. I submit again that too many of our best brains are employed in trying to find ways around capital taxes, and that they could be better employed in creating more wealth in the economy. I hope that Ministers will look again at the question of capital taxation, which is repeatedly instanced by the wealth-creating sector of our economy as a brake on the effectiveness of that sector and should be abolished.
I greatly welcome the reduction in the standard rate of tax to 23p in the pound. That means that, in April this year, it will be a whole 10p less in the pound than it was under the Labour Government in 1979.
I too represent a party that opposed the Bill on Second Reading; we also opposed certain aspects of it, such as the penny off income tax. I am quite certain, both on specifics and on generalities, that this is incompetent legislation.
Like many other hon. Members, I was engaged with the concerns expressed by people in industry about the changes to the structure of VAT—in particular, reclaimability. It struck me that all the experts who were consulted were worried that the Bill was being rushed through without enough scrutiny. Many of its flaws, and the possibility of legal challenge, will emerge over the coming months and years. Perhaps Treasury Ministers do not believe that they will be in the firing line when those legal challenges are made. Perhaps not; still, there are good reasons for thinking, particularly with respect to the VAT provisions, that the Bill will run into trouble in domestic and European courts.
Something of the casual attitude towards the structure of the Bill was summed up by the Financial Secretary's blithe assertion a couple of seconds ago that the United Kingdom had the most favourable corporate tax regime in the world. Perhaps I will arrange for the Library to give him a list of the countries with lower corporate tax regimes than the United Kingdom. Can the Minister be unaware of the fact that, just off the west coast of the UK, there is a country that offers a 10 per cent. corporation tax regime across a range of provisions to inward investors? That rate, offered by the Republic of Ireland, is one reason—
But that is rather important. Admittedly, we have much less manufacturing industry than we used to, but some countries think that inward investment in manufacturing industry is rather important—which is why the Republic of Ireland accounts for about 40 per cent. of inward investment in software from the United States of America. That sort of taxation regime favours research and development and capital-intensive projects, as opposed to the electronic fabrication plants that have gone to Wales, Scotland and the north of England.
The Bill has been incompetently presented and incompetently scrutinised by Ministers and Labour Front Benchers, all of them far more interested in the election campaign than in the Finance Bill. That is perhaps understandable, but the shadow Treasury team has been engaged throughout not in scrutinising the Bill but in shadowing Treasury Ministers. That can result only in failed legislation.
Labour Front Benchers imprisoned themselves by their refusal to vote against the penny reduction in income tax. There can be various reasons for voting against a financial measure. The Liberal Democrats wanted to restore the income tax cut; we wanted to raise the ceiling on national insurance contributions; both our parties at least were committed to progressive taxation. It is unbelievable to find that Labour Front Benchers want tax and spending policies identical to those of the Government across the full range of major legislation. That is a very unhealthy process, both for Labour and for democracy. It allows Bills to pass without scrutiny and without debate on their implications.
Tonight, we witnessed the farce of the leader of the Ulster Unionist party declaring that an opportunity to defeat the Government on the Finance Bill had been missed, only to hear cat calls and cries of "Untrue!" from the Labour Front Bench. On the issue of airport tax, the Ulster Unionists were so far committed to opposing the relevant part of the Bill that they would certainly not have declined the opportunity to defeat the Government on it. For the Labour party not to believe that an opportunity was there to attack the Government on the Finance Bill and to defeat this discredited Government on part of their legislation is simply incredible.
We were told by the hon. Member for Edinburgh, Central (Mr. Darling) that he did not like the amendment proposed by the Ulster Unionists; he did not like the amendment proposed by the Scottish National party; he did not like the amendment that would have been proposed by the Liberal Democrats, had they the opportunity to do so; but what was absent from the amendment paper was an opportunity offered by a Labour amendment that could potentially have united all the diverse Opposition parties and inflicted a richly deserved defeat on the Government. That opportunity—wasted and neglected this evening—will reverberate through the election campaign, as will the Labour party's foolish decision to shadow the Government's tax-and-spend policies and to imprison itself in the policies of a failed Government. That will be an issue of which the Labour party will hear a great deal throughout the election campaign.
The hon. Member for Banff and Buchan (Mr. Salmond) has again demonstrated his opportunism. On the one hand, he says that we should have voted against the Finance Bill because it does not increase taxes; on the other hand, an hour ago, he voted for an amendment that would have removed £400 million from the Budget. No one listening to him could fail to realise that, however he approaches the Bill and whatever he does, he is motivated purely by opportunism. Perhaps he should have paid closer attention to what his hon. Friend the hon. Member for Moray (Mrs. Ewing) said in the Scottish Grand Committee some weeks ago: having conceded that the nationalists would not win the next election, she then went on to say that, if there were a separate Scottish state, the Scottish currency would shadow the English and Welsh pound sterling. If ever there was an example of how the nationalists are prepared to hitch their wagon to another currency, without any control or influence over the economic policies governing it, that is it.
I am indebted to the hon. Member for Ludlow (Mr. Gill)—I had no idea that it was a tradition that he spoke on Third Reading. I have missed that feature for the past 10 years, but I am grateful to him for having taken this opportunity to remind the House and the country that it is the Conservatives' policy to abolish capital gains tax and inheritance tax, at a cost of £4.5 billion. They do not tell us where that money will come from, but half the gain will go to 5,000 people in this country. In contrast, we believe that, if that money was available, it would be far better to spend it on reducing the barriers that face people who are on benefit and on getting them back into work, because that will bring far greater economic and social benefits to this country. Perhaps that highlights some of the differences between the Labour party and the Tories.
This is the last Budget of this Parliament. The tradition that the Conservatives have set, never mind for the past 10 years, but in every Budget since the 1992 election, is that the Finance Bill increases taxes. There were 22 tax increases before this Budget, and there are seven new tax increases now—each one breaking an express promise made by the Tories at the last election.
On the eve of Third Reading, we should all be indebted to The Grocer magazine, in which the Chancellor—yet again—reminds us that he has a strong personal commitment to transferring taxes from income to spending. Those of us who listened to his interview from Beijing on the "Today" programme noticed that he did not deny having said to the lady from The Grocer that the challenge was to increase VAT on fuel back up to 17 per cent. His main complaint was that The Grocer had not made that the main story, instead of the Tory threat to put VAT on food. The Chancellor and the Chief Secretary to the Treasury, who is here tonight, have made no secret of the fact that the Conservatives intend to transfer the burden of taxation from tax on income to tax on spending. If the Conservatives were to win another term of office, we should not, therefore, be surprised if they increased VAT on fuel to the full rate of 17 per cent., or if they imposed VAT on other items.
The Bill has left other problems, which have been referred to both in Committee and tonight. We shall have to return to those items in future. The evidence is clear: increasingly, people do not trust the Conservatives on their management of the economy and they do not believe a word they say on tax, on economic policy, or on anything else. This is the last Budget that the Conservative Government are likely to present, because people will look for a Government who are committed to a different outlook, a Government who have different priorities and will make different choices, a Government who will create a stable platform on which we can build for the future, a Government who are committed to education and to improving the health service, and a Government who will equip this country for the future and the next millennium.
This is the last Finance Bill of this Parliament, but it is fitting because it crowns five years of achievement on the economy. I am grateful to my hon. Friend the Member for Ludlow (Mr. Gill) for his kind words. I might add some of my own, if I may, for my colleagues the Economic Secretary and the Exchequer Secretary, who have ably piloted their sections of the Bill to a successful conclusion.
The Bill is very much in the shape in which it started, which is a testament to the excellence of the original drafting. It is a Budget that confirms those who currently sit on Government Benches and the Conservative party as those who are committed to cutting taxes. We cut the basic rate of income tax to 23p in the pound, the lowest basic rate for nearly 60 years, and it signalled the continuing rise in living standards that has been the hallmark of my right hon. and learned Friend the Chancellor of the Exchequer.
We have taken steps in the Bill to protect the tax base; the 14 separate measures on closing tax loopholes alone will yield more than £1 billion. They have secured public finances that are very solid indeed. Our public sector borrowing requirement to gross domestic product ratio throughout our tenure of office—2½ per cent.—was not equalled by the best that the official Opposition could do when they were in government. It is not something that even they could dream about.
The state of our public finances is strong; our tax-cutting agenda has been resumed; the tax base has been secured. I commend the Bill to the House.
|Division No. 95]||[10.31 pm|
|Ainsworth, Peter (E Surrey)||Arbuthnot, James|
|Alexander, Richard||Arnold, Jacques (Gravesham)|
|Alison, Rt Hon Michael (Selby)||Ashby, David|
|Allason, Rupert (Torbay)||Atkins, Rt Hon Robert|
|Amess, David||Atkinson, Peter (Hexham)|
|Baldry, Tony||Fry, Sir Peter|
|Banks, Matthew (Southport)||Gallie, Phil|
|Bates, Michael||Garnier, Edward|
|Beggs, Roy||Gill, Christopher|
|Bellingham, Henry||Goodlad, Rt Hon Alastair|
|Bendall, Vivian||Goodson—Wickes, Dr Charles|
|Beresford, Sir Paul||Greenway, John (Ryedale)|
|Biffen, Rt Hon John||Griffiths, Peter (Portsmouth N)|
|Bonsor, Sir Nicholas||Hague, Rt Hon William|
|Booth, Hartley||Hamilton, Rt Hon Sir Archibald|
|Boswell, Tim||Hanley, Rt Hon Jeremy|
|Bowden, Sir Andrew||Hannam, Sir John|
|Bowis, John||Hargreaves, Andrew|
|Boyson, Rt Hon Sir Rhodes||Harris, David|
|Brandreth, Gyles||Hawkins, Nick|
|Brazier, Julian||Hawksley, Warren|
|Bright, Sir Graham||Heald, Oliver|
|Brooke, Rt Hon Peter||Heathcoat—Amory, Rt Hon David|
|Brown, Michael (Brigg Cl'thorpes)||Hendry, Charles|
|Browning, Mrs Angela||Hicks, Sir Robert|
|Burt, Alistair||Howell, Rt Hon David (Guildf'd)|
|Butler, Peter||Hughes, Robert G (Harrow W)|
|Carlisle, John (Luton N)||Hunt, Sir John (Ravensb'ne)|
|Carlisle, Sir Kenneth (Linc'n)||Hunter, Andrew|
|Carrington, Matthew||Jack, Rt Hon Michael|
|Cash, William||Jackson, Robert (Wantage)|
|Channon, Rt Hon Paul||Jenkin, Bernard (Colchester N)|
|Chapman, Sir Sydney||Johnson Smith,|
|Churchill, Mr||Rt Hon Sir Geoffrey|
|Clappison, James||Jones, Gwilym (Cardiff N)|
|Clark, Dr Michael (Rochf'd)||Jones, Robert B (W Herts)|
|Clarke, Rt Hon Kenneth||Key, Robert|
|(Rushdiffe)||King, Rt Hon Tom|
|Clifton—Brown, Geoffrey||Knapman, Roger|
|Coe, Sebastian||Knight, Mrs Angela (Erewash)|
|Congdon, David||Knight, Rt Hon Greg (Derby N)|
|Conway, Derek||Knight, Dame Jill (Edgbaston)|
|Coombs, Simon (Swindon)||Knox, Sir David|
|Cope, Rt Hon Sir John||Kynoch, George|
|Couchman, James||Lait, Mrs Jacqui|
|Davis, Rt Hon David (Boothferry)||Legg, Barry|
|Day, Stephen||Leigh, Edward|
|Douglas-Hamilton,||Lennox—Boyd, Sir Mark|
|Rt Hon Lord James||Lester, Sir Jim (Broxtowe)|
|Dover, Den||Lidington, David|
|Duncan, Alan||Lilley, Rt Hon Peter|
|Dunn, Bob||Lord, Michael|
|Eggar, Rt Hon Tim||Luff, Peter|
|Evans, Jonathan (Brecon)||Lyell, Rt Hon Sir Nicholas|
|Evans, Nigel (Ribble V)||MacGregor, Rt Hon John|
|Evans, Roger (Monmouth)||MacKay, Andrew|
|Faber, David||Maclean, Rt Hon David|
|Fabricant, Michael||McLoughlin, Patrick|
|Fenner, Dame Peggy||Mans, Keith|
|Forman, Nigel||Marlow, Tony|
|Forsyth, Rt Hon Michael (Stilling)||Marshall, John (Hendon S)|
|Forth, Rt Hon Eric||Marshall, Sir Michael (Arundel)|
|Freeman, Rt Hon Roger||Martin, David (Portsmouth S)|
|French, Douglas||Merchant, Piers|
|Mitchell, Andrew (Gedling)||Stanley, Rt Hon Sir John|
|Mitchell, Sir David (NW Hants)||Stephen, Michael|
|Moate, Sir Roger||Stern, Michael|
|Monro, Rt Hon Sir Hector||Stewart, Allan|
|Neubert, Sir Michael||Streeter, Gary|
|Newton, Rt Hon Tony||Sweeney, Walter|
|Nicholson, David (Taunton)||Sykes, John|
|Onslow, Rt Hon Sir Cranley||Taylor, Ian (Esher)|
|Oppenheim, Phillip||Taylor, John M (Solihull)|
|Page, Richard||Taylor, Sir Teddy|
|Paice, James||Thomason, Roy|
|Patnick, Sir Irvine||Thompson, Sir Donald (Calder V)|
|Patten, Rt Hon John||Thompson, Patrick (Norwich N)|
|Pattie, Rt Hon Sir Geoffrey||Thornton, Sir Malcolm|
|Pawsey, James||Townsend, Sir Cyril (Bexl'yh'th)|
|Peacock, Mrs Elizabeth||Tracey, Richard|
|Pickles, Eric||Tredinnick, David|
|Porter, David||Trend, Michael|
|Portillo, Rt Hon Michael||Trotter, Neville|
|Powell, William (Corby)||Twinn, Dr Ian|
|Renton, Rt Hon Tim||Viggers, Peter|
|Richards, Rod||Waldegrave, Rt Hon William|
|Roberts, Rt Hon Sir Wyn||Walden, George|
|Robertson, Raymond S (Ab'cfn S)||Waterson, Nigel|
|Robinson, Mark (Somerton)||Watts, John|
|Roe, Mrs Marion||Wells, Bowen|
|Rowe, Andrew||Whitney, Sir Raymond|
|Ryder, Rt Hon Richard||Whittingdale, John|
|Scott, Rt Hon Sir Nicholas||Widdecombe, Rt Hon Miss Ann|
|Shaw, David (Dover)||Wiggin, Sir Jerry|
|Shaw, Sir Giles (Pudsey)||Willetts, David|
|Shepherd, Sir Colin (Heref'd)||Wilshire, David|
|Shersby, Sir Michael||Winterton, Mrs Ann (Congleton)|
|Smith, Tim (Beaconsf'ld)||Winterton, Nicholas (Macclesf'ld)|
|Spencer, Sir Derek||Wolfson, Mark|
|Spicer, Sir Michael (S Worcs)||Wood, Timothy|
|Spink, Dr Robert||Young, Rt Hon Sir George|
|Spring, Richard||Tellers for the Ayes:|
|Sproat, lain||Mr. Richard Ottaway and Mr. Anthony Coombs.|
|Squire, Robin (Hornchurch)|
|Berth, Rt Hon A J||Maddock, Mrs Diana|
|Bruce, Malcolm (Gordon)||Nicholson, Miss Emma (W Devon)|
|Campbell, Menzies (Fife NE)||Rendel, David|
|Cariile, Alex (Montgomery)||Salmond, Alex|
|Chidgey, David||Skinner, Dennis|
|Davies, Chris (Littleborough)||Taylor, Matthew (Truro)|
|Foster, Don (Bath)||Thurnham, Peter|
|Harvey, Nick||Tyler, Paul|
|Johnston, Sir Russell||Wallace, James|
|Jones, Nigel (Cheltenham)||Tellers for the Noes:|
|Kennedy, Charles (Ross C&S)||Mr. Archy Kirkwood and Ms Liz Lynne.|