I start by apologising to the House for inadvertently making a misleading statement last Monday week. I was standing in this very spot, and I said to the House:
I rather like Budgets, because they are just about the only Government announcements that are made to the House before they are made to the media."—[Official Report, 1 March 1999; Vol. 326, c. 834.]
An hon. Friend of mine said, "Just wait and see." I have to say that my hon. Friend was right and I was wrong. I got it wrong because the headline-grabbing measures announced by the Chancellor yesterday—the decision to abolish MIRAS and the married couples tax allowance, the increase in child benefit, the creation of partnership shares and the l0p starting rate for income tax—were all trailed in the weekend press.
The Observer had the proposals for a minimum guaranteed weekly income for the over-50s. The Sunday Telegraph had the tax break for research and development plus cuts in corporation tax for small firms. I can cite many further examples, but the basic point is clear. Before coming to the House, the Government leaked the details of the Budget on a selective basis so that each newspaper could have its mini-exclusive. It shows the Government's hypocrisy that, a couple of weeks ago, the Home Secretary went to the courts as a "matter of principle" to prevent the press leaking details of a report submitted to it before it was submitted to the House. Yet, when we have the Treasury leaking like a sieve about the Budget, even without the support of Charlie Whelan, we hear nothing about that principle, as it would compromise Labour's manipulation of the media. Spin today is, indeed, everything.
I genuinely congratulate the Chancellor on his performance. It was a superb presentation. I take nothing away from him. If I were an ice-skating judge, I would give him 5.9 out of six for performance.
However, the marks for content would be considerably lower. I have been in the House long enough to know that the mood created by a Budget, with much waving of Order Papers from the Government side on a Tuesday, more often than not turns decidedly sour in the weeks that follow. In that one hour, five minutes and 40 seconds—I am told that that was the Chancellor's presentation time— we heard nothing but a flood of facts, figures, details and projections. Not a single financial stone was untouched.
I thank the Chancellor for his consistent praise for the previous Conservative Government. He again made much of the present strength of the economy, speaking about the deficits reducing and, in the same breath, repeating Labour's manifesto commitment, saying:
We said in our manifesto we would work within the existing spending plans for our first two years
That means working within the figures of the previous Conservative Government.
We have seen the success that has flowed from that, because the Government inherited a golden legacy. However, the two years are up and the Government are starting to fly blind. For me and many in the media, a sober analysis of the Budget shows that millions of taxpayers will be out of pocket within two years, particularly thanks to the changes to the upper earnings limit for national insurance, which The Daily Telegraph has described as the "forgotten tax". It will rise by 18 per cent., cutting take-home pay over the next two years. The measure will be particularly damaging for constituencies with a profile similar to that of South-West Hertfordshire.
The Government have started to gamble and they have got themselves into a box because of their actions in their first Budget. I admit that there was a potential for an increase in inflation. I understand that they were reluctant to use their powers to reduce consumer expenditure. Instead, through interest rate hikes and bashing industry at the start, they have ensured that our exports have been hit by a high pound. The recent reductions in interest rates have merely been following world figures. The effect of our strong pound continues to damage our industry, in addition to the extra taxes that the president of the CBI has eloquently referred to. If rates are reduced further, the price of British goods might become more attractive, but inflation would become a threat. If it is held, unemployment looks set to rise.
That is what the Government are planning. The National Audit Office today endorsed the predictions of several financial bodies that a further 400,000 will become unemployed over the next two years. With falling output, the Secretary of State's call for increased efficiency will result in an increase in unemployment.
Of the measures in the Budget, particularly those affecting small businesses, I support the continuation of the 40 per cent. write-off allowance against investment for small business. The idea was blocked by the previous Government, but I have always supported it. I have made my views clear several times. However, it is not extra money, but merely a continuation of the allowance. I would like a higher percentage that was more closely focused on the means of production rather than being spread all over. In other countries, particularly Japan, the idea has been used as a specific generator.
I welcome the l0p starting rate for tax on profit for small business, but, again, I must record my admiration for the Chancellor's careful choice of words. He said:
Every company making a profit of up to £50,000 will benefit.
On closer examination, that 10 per cent. applies only to the first £10,000, after which a taper comes in. For a company earning £50,000 profit, the measure will be tax neutral.
I am slightly concerned about the various arrangements to help small business. The Chancellor referred to the
one-stop open-door service…to offer loan guarantees, to support innovation, to advise on electronic commerce and deliver, for the first time, an automated payroll service".—[Official Report, 9 March 1999; Vol. 327, c. 175–79.]
I wonder whether that will cause confusion, because I understood that business links was the one-stop shop. I do not know whether the new service will be through business links, or separate from it.
I am sorry that the Budget contained no mention of the threat that the country will face from the amount of business that will be done through the internet, where the collection of tax will become so much more difficult. In horse-race betting, for example, people who bet abroad through the internet completely avoid paying any tax. That trend will spread through sectors of the service economy.
Behind the Budget are a large number of narrow, targeted measures, and the Budget must appeal to as wide a range of interest groups as possible. Everyone is in favour of the general economy and particular expenditure that Sir Anthony Eden talked about in the 1950s. George Bernard Shaw said that Governments who rob Peter to pay Paul can always rely upon the support of Paul. The trouble with this Budget is that it is built on that foundation, and you cannot fool all the people all the time.