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one will object. I do not object to some of the points--who could?--but the overall aim of the Budget is to reinforce this rotten, lousy, capitalist society. The quicker we get that message across, and the sooner we have a Labour Government, who will begin to transform society into something better, the better it will be for the people of this country.

7.30 pm

Mr. John Greenway (Ryedale) : It is appropriate that my right hon. Friend the Chancellor of the Duchy opened the debate, because his departmental responsibility is for the investment and savings industry. Hon. Members will know of the problems that the Financial Services Act 1986 has created for that industry. My right hon. Friend's Budget brought some welcome relief from the difficulties that the industry has been facing in recent months.

During the past few months, there has been a growing chorus of advice to my right hon. Friend the Chancellor to introduce measures to boost personal savings and investment. We have heard much about that during the debate. I hope that my right hon. Friend and my hon. Friend the Economic Secretary found my forceful baritone contribution nonetheless sympathetic. It is certainly the case that the choristers have inspired my right hon. Friend to produce another virtuoso performance in the Budget measures. That is especially so for personal savings and investment. As the House knows, I have an interest to declare in these matters--as do a number of other hon. Members--because of my career in the insurance industry.

The argument in favour of increased savings is often thought to rest on the perceived fall in the savings ratio. I believe that there is some reason to treat such perceptions with caution. I know that my right hon. Friend the Member for Guildford (Mr. Howell) quoted recent statistics, but there is reason to doubt the accuracy of some of them. It is clear that the increased prosperity in our country has created a whole new generation of low income and lower middle income families who, many for the first time, have the capacity to save and to invest. Until now, their savings habits have largely been to keep their money on deposit in banks, building societies and the Post Office. We must persuade them to undertake real investments beyond home ownership.

My right hon. Friend the Member for Guildford appeared critical of institutional savings, but to move from the building society or Post Office account to owning a portfolio of shares requires a quantum leap of philosophy and attitude. That the personal savings ratio is so low is clear evidence that we still need to encourage the many millions of people, who have the ability to invest, to take those first steps into equity investments, unit trusts and the more sophisticated insurance plans.

We on the Government side of the House support the concept of individual choice--tax people less and leave them free to spend their money as they choose. However, one must question whether the people of Britain are utilising their new-found and increased wealth in the way that the Government would like and the nation needs. That is especially so in respect of the priority given to higher borrowing as against personal savings.

We must never lose sight of the value to any society of financial independence of individuals and their families. That demands setting aside part of today's income for tomorrow's need and not simply relying on the ability to

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borrow to get out of difficulty. The Government are taking the lead in reducing the national debt which, in the dark days of the 1970s, threatened to overwhelm our children's generation. We must encourage the same attitude and response among the greater population, so that our children's generation will be better able to achieve the economic and personal success that they desire in the increasingly competitive world of tomorrow.

It is for that reason that I greatly welcome the improved range and choice of savings opportunities that were outlined in my right hon. Friend's Budget statement.

The proposed changes to the taxation of life assurance are entirely right. My hon. Friend the Economic Secretary will know that there is some relief in the insurance industry that its worst fears were ill-founded. The Association of British Insurers has accepted that there were anomalies and abuses that needed to be dealt with. I believe that it has been welcomed that there will be no more stamp duty with life assurance policies and that my right hon. Friend has taken the bold and imaginative step of bringing the rate of corporation tax paid on life assurance funds and on unit trusts down to the basic rate of income tax. I would ask my hon. Friend the Economic Secretary to place on record the commitment that, as the basic rate of income tax comes down in the future, so too will the corporation tax rate on life assurance and unit trusts.

I was glad to hear from the Chancellor that, when he considered the life assurance industry's representations on the proposals for tax reform, he took full account of the prospects for increased competition within the European Community after 1992. At the risk of appearing greedy, I would ask that the Treasury and the Inland Revenue have the completion of the internal market similarly at the forefront of their minds as they consider the taxation of general insurance business. At present, the overall tax burden on general insurance is not out of line with that of other member states, but the incidence is markedly different and enables continental insurers to build up reserves, on a deferred tax basis, to cover those large industrial and commercial risks that will be opened up to competition under freedom of services before 1992. It would be unfortunate if the industry's position in the European Community was weakened by the imposition of American practices, such as the discounting of claims provision in computing profits liable to tax.

It is greatly to be welcomed that the opportunity for enhanced provision of personal pensions, especially by older age groups, has been included in the Budget. However, I believe that one political point needs to be made. The closure of over-exploitation to high income earners gives the lie to the constant accusation that the Chancellor is the friend of the better-off. The alternative step that he has taken is for those on middle and low incomes, especially small business men, to have an even better opportunity to make proper provision for their retirements. Many small business men in the early days of their businesses do not have the profits from which they can put aside money for their pensions. When they are older, they often have that chance, and it is entirely right that we should allow them to contribute as much as they can afford and within much wider bands of eligibility.

There are bound to be some who will argue that the £60,000 limit for company schemes will inhibit mobility at the higher executive level. Two years ago, similar fears

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were expressed when other changes in pensions were introduced. However, I am not aware that those have proved justified. It is also right to point out that the new provision for higher pensions, but without tax relief, is entirely welcome and answers the point that I have made. Once again, that prevents over-exploitation of the tax system by the top earners. It is entirely right that, with a 40 per cent. top income tax rate, and a 35 per cent. top corporation tax rate, the amount of tax relief should be limited. The benefits of buying those rates should lie not in tax avoidance but in pension provision.

But it is in the changes in personal equity plans that my right hon. Friend the Chancellor has been most imaginative. Fiscal neutrality always seems to be interpreted as bringing to an end tax concessions. That is not true. What my right hon. Friend has done, as I called for some months ago, is to create a superstructure for modest concessions which are available across the savings industry. For example, institutions such as building societies, banks, life assurance companies and unit and investment trusts will be able to operate and run personal equity plans through the unit trust vehicle. The prospect of investors being able to put £200 per month into a tax- exempt fund, with no commitment to do so beyond 12 months, is imaginative and will bring a much-needed shake-out in the marketing of investment plans in the investment industry. It is thanks to my right hon. Friend's imagination that that is possible.

It has been said that the low-paid will not benefit from the reductions in national insurance. I do not believe that to be true. For example, a single person earning £75 a week will save 87p in income tax as a result of the inflation proofing of the personal allowance. Had that been increased by, say, 10 per cent. the further tax saving would have been 38p. Alternatively, a 2p cut in the basic rate of income tax to 23p would have saved only 43p a week. Under the national insurance reductions, that worker will save a further £1.51 per week, making a combined tax and national insurance saving of £2.38. Therefore, it is clear that reducing national insurance in the way that my right hon. Friend has done benefits the low-paid far more than had we had the kind of tax reductions which many of the teenage scribblers, as they are often referred to, were recommending. I greatly welcome the enhanced age allowance, bringing it down from 80 to 75. When I first spoke on financial matters in the House two years ago when the 80 age limit was introduced, I asked my hon. Friend to consider that reduction and I am delighted that we are taking this action now. The scrapping of the earnings rule is a long overdue reform and I am sure that for many pensioners throughout Britain 1 October cannot come soon enough.

In conclusion, the greatest threat posed to the economy is the upward trend in inflation. My right hon. Friend's strategy is the right one to bring inflation down and I hope that the House and the nation will support him in his actions.

7.43 pm

Mr. Archy Kirkwood (Roxburgh and Berwickshire) : I want to use my brief contribution to this evening's debate to try to counter the impression that the Budget gives the

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elderly a substantial financial advantage. In doing so I will be supporting many of the arguments made earlier by the hon. Member for Stalybridge and Hyde (Mr. Pendry).

Some aspects of the Budget will be welcomed by many pensioners, marked out by the fact that as a group they are in receipt of either income or occupational pensions or have savings in addition to their pensions. To them, the abolition of the earnings rule, the relaxation of the rate of withdrawal of the age allowance on incomes and the extension of the higher allowance to people aged between 75 and 80 are all both beneficial and welcome, as they are to hon. Members on both sides of the House, as the hon. Member for Ryedale (Mr. Greenway) said. But that good news does nothing for the other two thirds of pensioners who are too poor to pay income tax. The House must bear their plight in mind when considering the Budget's impact on the nation.

I wish that Treasury Ministers would stop using average figures when they calculate pensioner incomes. As was shown clearly in an article in Economic Trends in December 1988, the top 20 per cent. of pensioners enjoy a level of income which substantially skews the average figure for the remaining 80 per cent. Between 1979 and 1986, there was an increase in the average incomes of pensioners of some 24 per cent. But the top 20 per cent. of pensioners with relatively high incomes make such an impact on that figure that it is dangerous to draw conclusions from average incomes.

I have talked to a number of pensioners since the Budget was unveiled. Their main cause for concern is that since 1980 they have lost the benefit of the linkage between the state pension and the level of earnings. They make the powerful point, which the House should consider, that in April 1989, under the current system of indexation, a single person will receive £43.60, but if the link with earnings had been maintained he would have received £53.30. A pensioner couple who will receive £69.80 this April would have received £82.25 had the earnings link been maintained. That is a substantial reduction in the spending capacity of the vast majority of our pensioners.

Another cause of anxiety among pensioners is the substantial loss that they suffer from the current upratings which where announced in the autumn but will not be paid until April. The RPI is now 7.5 per cent. and rising, but pensions will be increased by only 5.9 per cent. in the spring. That means that married pensioners will be £1.05 worse off and a single pensioner will be 65p worse off than if their pensions were uprated at the real current rate of inflation. Inadequate state pensions require a great number of our pensioners to rely on means-tested state benefits than would otherwise be the case. I remind the House that, even on the Government's own figures, 1,777,000 pensiners claim income support and 3,465,000 claim housing benefit. That is a substantial number of people in some degree of poverty, some of them in abject poverty. Moreover, those figures ignore the fact that in 1985--the last year for which figures are available--34 per cent. of pensioners did not claim supplementary benefit and 19 per cent. did not claim housing benefit.

The situation for those pensioners is dire and the impression given after the Budget that they would be better off was substantially wrong. Indeed, the reverse is the case. Pensioners have been hardest hit by recent cuts in

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housing benefit, and more will lose benefit when the existing transitional protection is withdrawn in the spring of this year. The Budget has dismally failed the two thirds of our pensioners who, for the greater part, still rely on state pensions and other benefits. More than anything else, a higher state pension is essential to enable that group of our citizens to catch up with the growing prosperity of other sections of the community. Insult has been added to injury by the £40 million concession in respect of tax relief on private health insurance premiums. That will not touch the real needs of sufferers from conditions such as arthritis, rheumatism and senile dementia. It will merely raise expectations for a few and create a two-tier health system for the elderly. The Daily Telegraph leader for 16 January anticipated those proposals and described them as being

"a most undesirable and mistaken precedent."

If The Daily Telegraph takes that view, it is a matter to which the Government should pay some attention.

The decision not to raise excise duty on cigarettes and alcohol has the potential of having a disastrous effect on the health of millions of younger citizens. Every day, 270 people are prematurely killed by cigarette smoking--100,000 a year, or one every five minutes. I believe that smoking is the largest single cause of death in middle age in Britain. The Government's position veers between complete abdication of responsibility and paying lip service to public information campaigns.

The Prime Minister launched a £6 million campaign to halt the rise in teenage smoking, which is the crucial age group one needs to influence if young people are to be prevented from getting the smoking habit. Had tobacco tax been valorised even by the same percentage rise as the retail prices index, the £137 million it generated could have been sensibly deployed in establishing much larger public information campaigns. The message from that part of the Budget is clear. The failure of the Government's economic policy of restraining and bearing down on inflation will seriously damage one's health by increasing tobacco sales.

The failure to increase duty on alcohol was an equally bad decision. There is widespread public anxiety about the impact of the 18 per cent. increase in one year in public drunkenness offences, and the fact that one out of five Health Service beds is currently occupied by someone suffering from an alcohol-related illness or an alcohol-related accident. The Chancellor did not even need to increase alcohol excise duty, although that would have been the right course. He could alternatively have taken non-inflationary action by drastically reducing excise tax on low-alcohol drinks--but he did not do even that.

The Budget is deeply damaging also to the nation's environment. The reduction in duty on unleaded petrol is welcome, but a truly green Chancellor would have used fiscal and other interventionist measures to protect the environment. I shall give two examples. First, it would be possible and beneficial to introduce a reduced green rate of VAT for environmentally friendly products such as energy-efficient electrical goods. Secondly, the Chancellor could have introduced tax incentives to encourage the conversion of houses to the use of energy-efficient techniques, particularly in relation to private sector landlords. There is a long list of measures that could be taken, but the Chancellor adopted none of them.

The Government's lack of action and their disregard for the environment shown in the Budget demonstrates once more that being green is basically incompatible with

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the free market philosophy and hands-off practices that they favour. The Budget is a feeble attempt to rectify the economic mistakes of the past few years. It does nothing for pensioners in financial need, damages the health of the nation, increases the costs of the NHS, and does little or nothing to meet public demand to improve the environment.

7.53 pm

Mr. Matthew Carrington (Fulham) : Most of my right hon. and hon. Friends will agree that the biggest problem facing the Government and the country is inflation. I welcome the tight fiscal stance that my right hon. Friend's Budget adopts. Perhaps it is not as tight a stance as some commentators may wish, but it is a tightening to the extent of £4 billion to £5 billion.

I share some of the concerns of my right hon. Friend the Member for Guildford (Mr. Howell), who doubts whether a tight fiscal stance will have a major short-term impact on inflation. However, if the Chancellor's tight fiscal stance is coupled with high interest rates at the level now being employed to tighten money supply, the effect should be to bear down heavily on inflation in the short term. It is possible that that stance will produce a psychological change that will in itself be very beneficial.

I wish to comment in particular on two measures of importance in the Budget, because they both address the major problem of poverty. Before doing so, I make it clear that, in my view, there is no possibility of the Budget being able to address all aspects of poverty. However, if it can alleviate two causes of distress among the less well-off in society, that in itself is a worthwhile objective.

Yesterday, the hon. Member for Leeds, West (Mr. Battle) argued that the effect of the Budget's national insurance changes will not be to remove the poverty traps encountered by low paid workers. He gave as an example the national insurance threshold of £43. Although that argument is to some extent true, the poverty trap is caused not by national insurance contributions but by the way in which the social security system operates.

Looking back on these times, none will seriously credit that we tolerated the pensions earning limit as long as we did. It will be thought ridiculous that someone who earned as little as £79 faced 100 per cent. marginal tax rates. The removal of that rule is greatly to be welcomed. That measure enables pensioners who want to work to do so without being heavily penalised by the tax system. Many pensioners aged 60 or 65 are hale and hearty and keen to carry on working. Their reasons for doing so are not always financial, although that may be of pressing importance in some cases. People's reasons for carrying on working are often social, or to do with prestige in their own community. It is not unreasonable for them to wish to defer the time when they make the change from a working life to a state in which they may see themselves as less useful to society.

That change in the earnings rule is to be welcomed for other reasons. This country will soon face severe problems of recruitment resulting from demographic changes and the decline in the number of young people available to take jobs. For those reasons, we must make it easier for people to prolong their working lives. Inner London, for example, is facing a major skills shortage. If people who have skills that cannot easily be replaced are allowed to continue working, that will be very beneficial. The major benefit will

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be for pensioners who, until now, have been forced to live on their old-age pension without supplementing it with a part-time job or with low earnings from working in the retail trade, for example. The other change on which I shall comment is that affecting national insurance. I have believed for a long time that the system is unfair. I am glad that major changes have been made, including the removal of the steps that it embodied, which were the most outrageous element of the system as it existed. The contributory element of the national insurance system is important. There must be a connection in people's perception so that they believe that they are actually paying for the non- means-tested benefits which they will receive. However, over the years, the connection between contribution and benefit has been severely weakened.

I believe that it was in 1960 that the national contribution was first made earnings-related--it was its first weakening. Then, as bands were introduced into the national insurance system, that further weakened it to the point that we have reached today, when there is a large element in the national insurance contribution which is, effectively, the same as any other tax on income. That causes severe problems.

When future Budgets provide the opportunity, we need further to reform the national insurance system. That should not be carried to the point of a total meshing of the national insurance and income tax--the two should be kept distinct. However, there should be a change in the balance between the two in the ways in which they raise revenue.

I shall give one example that concerns me. Below the upper limit for national insurance contributions, the effective tax rate on income is 25 per cent. If we add on the 9 per cent. for national insurance contributions, the marginal tax rate becomes 34 per cent., which is a very high rate. That marginal tax rate is a major disincentive to people to work because it is too high.

There are two ways of tackling this problem. We could reduce the 25 per cent. marginal tax rate of the basic rate of income tax or we could reduce the 9 per cent. on the national insurance contribution. I should like the 9 per cent. to be reduced, while at the same time we head towards a 20p in the pound basic rate of income tax. I am not sure what the appropriate level of national insurance contributions should be, but it should be considerably below 9 per cent.--perhaps as low as 5 per cent.

Another problem of the national insurance contribution is that, beyond the upper limit of national insurance contribution, the marginal tax rate drops to the basic rate income tax of 25 per cent. There is a strong--although much more complicated--argument for ensuring that we do not end up with a period in earnings when marginal tax rates are reduced the more we earn. That could be interpreted as an argument for increasing the upper limit on national insurance--which causes problems with SERPS contributions and non- means-tested entitlement--but the limit would have to be increased to a level where the 40 per cent. income tax band started to bite. That in turn raises difficulties about the way in which the national insurance contribution and income tax bandings are

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calculated, which is much more complicated. A certain amount can be done to simplify that calculation and to smooth out the dip in the marginal tax rate that it causes.

I am much less concerned about the employers' contributions. It has been said that, due to the high level of employers' contributions to national insurance, employers will still be reluctant to employ people who earn just above the national insurance contribution level of £43. I find that hard to justify, because most employers will have to employ somebody for whom they must pay national insurance contributions. The extra administrative work needed to move somebody from the £42 to the £44 bracket would not be a disincentive. It would be of great benefit to remove the disincentive for the employee. The Budget was justifiably cautious, at a time when we face high inflation--the reduction of which must be our first priority. It was also a fair Budget, and I was glad that the Chancellor left himself with opportunities to adjust some of the tax rates in the future, when he may have the opportunity to relax the current very tight fiscal stance.

8.7 pm

Mr. John Cummings (Easington) : I am extremely grateful for this opportunity to draw to the attention of the House, the anger, anxiety and frustration of the people whom I represent in my constituency at what they term a non-Budget and non-event.

Much has been said this evening by Conservative Members about savings, equity plans, credit booms and credit cards. I intend to direct my remarks- -short though they may be--to support those people who cannot afford to save, will never be able to afford to enter an equity plan, have never seen or owned a credit card and do not participate in the credit boom.

This afternoon, I asked the Prime Minister about the £14 billion on which the Chancellor of the Exchequer is sitting. I asked why a small amount of that £14 billion could not be directed towards the relief of the hardship and anxiety of the pre-1973 war widows. The right hon. Lady did not even give one word in response. I am sure that this diminishing band of gallant ladies who have suffered, and still suffer, deprivation, will take to heart the Prime Minister's off-hand arrogance, and I am confident that the Prime Minister has not heard the last of that incident. Those women want some of the £14 billion to enable them to live a decent life and not have to eke out an existence on the widow's mite.

I intend to be parochial in my remarks this evening and to speak on behalf of those people--pensioners and retired mineworkers--in my area who, after a lifetime of service to the industry and the nation by providing energy and heat for the country by their hewing, are now denied their cash-in-lieu benefits. That sum of money was made available to them through their lifetime's work in the mining industry but is now set against housing benefit. That is a national disgrace when Mr. Chancellor is sitting on £14 billion worth of taxpayers', ratepayers', pensioners'--indeed, our --money.

Much has been said about the earnings rule tonight. Perhaps I can give it a cautious welcome but what does the Chancellor say to my father, who, after 51 years of work in the mining industry, has been invalided out, cannot work and has to rely on state pension and a small supplementary payment from the mineworkers' pension scheme? What does the Chancellor of the Exchequer say to

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the retired steelworkers and those in heavy industry who, after a lifetime of service, now find themselves chronically sick and disabled, and unable to work? It would be interesting to hear what the Chancellor has to say to that band of people. Out of the £14 billion, is it not possible for the Chancellor to direct his attention to supporting pensioners by abolishing standing charges on telephone, electricity and water bills? The people who made this country great are entitled to some of the huge bonanza on which the Chancellor is sitting.

I come from an area where the unemployment level is more than 20 per cent. That disguises figures as high as 35 per cent. in some villages where collieries have closed. What does the Chancellor of the Exchequer have to say to the unemployed in my area, who may have no hope of finding a job ever again?

I want to see some of the £14 billion accumulated from the taxpayer directed back into my local economy--for instance, to provide more housing for the disabled and more special-purpose accommodation. As our population decreases, we are left with increasing numbers of aging and chronically sick people. We need funds to assist areas suffering from the deprivation caused by colliery closures, redundancies and people moving away, leaving vast areas of derelict properties.

Owner-occupiers who have bought their properties from the council or from the Peterlee development corporation have subsequently found structural and design defects, some caused by past corrupt practices in the building trade. They cannot obtain a second mortgage to repair faults, as no financial institution will help them. The Government are not prepared to do anything other than reducing the HIP allowance year after year. What does the Chancellor say to people who desperately need assistance and cannot receive it from the money markets?

Aging people in Easington who have given a lifetime's service also need NHS resources for the increased services that they so richly deserve. Has the Chancellor any idea of the indignity suffered by geriatric patients? What price privatisation--what price is put on service--when we must see an elderly person lying in a soiled nightdress because of NHS cuts? After 51 years as a working man and a taxpayer, my father must wait three years to have a cataract removed. Why should he have to become virtually blind in the 78th year of his life? That is the cause of the anxiety, frustration and anger expressed throughout my constituency.

In South Hetton, a mining village where a colliery has closed--which means virtually the death of a village--money is needed for the protection, enhancement and possible rebuilding of the local school. I look to the Chancellor's £14 billion to provide the necessary resources.

This really is a humbug of a Budget.

8.13 pm

Mr. Ian Taylor (Esher) : We have just heard a moving speech from the hon. Member for Easington (Mr. Cummings). We share his worries about the plight of some of his constituents--I wish him to know that--although we may differ on the appropriate remedies.

Many of yesterday's headlines purported to give the gist of the Budget, but the only one that struck me as accurate

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was "Cautious but clever". That is what I think the Budget has been, but many journalists appeared to overlook many significant factors included in it.

In my view, the most significant change is the alteration in national insurance, to which several of my hon. Friends have already referred. This year the cost to the Exchequer of the proposed changes will be £1.9 billion, and in a full year it will be about £2.8 billion. That is roughly equivalent to 2p off the basic rate. If that had been the way in which my right hon. Friend had announced the injection of such a sum into the economy, the press would probably have sat up and paid attention. The problem is that few outside observers seem to appreciate the full impact of national insurance. It is, in a sense, the forgotten tax, which goes by the more favourable epithet of a contribution.

My hon. Friend the Member for Fulham (Mr. Carrington) made some telling points about the way in which the national insurance changes are targeted towards the lower paid. I urge Treasury Ministers to ensure that, in future years, when considering reducing standard and higher rates of income tax, they ensure that parallel changes are made in the way national insurance is levied. It should be borne in mind that national insurance contributions raise a sum 70 to 75 per cent. as high as that raised by income tax. Nevertheless, I welcome what the Budget has done to help the lower-paid.

I also welcome the incentives for the elderly. Many people in my constituency who felt that the earnings rule was unfair will be delighted to learn of its removal. I am also pleased about the repayment of the national debt. Not only is this a prudent policy but, as my right hon. Friend the Member for Westmorland and Lonsdale (Mr. Jopling) pointed out, it will in a sense relieve the burden on future generations. Nevertheless, I ask the Treasury Ministers, in the autumn public expenditure review, to consider allocating the £1.75 billion per annum saved through the debt servicing cost reductions to further public expenditure. Many of my hon. Friends are keen for more to be spent particularly on transport infrastructure and other such supply side measures.

My main concern this evening, however, is the impact of the Budget on individual shareholders. The increase in the number of such shareholders under the present Administration has been startling : it has risen from 3 million to 9 million, representing about 20 per cent. of the adult population. Many of those new shareholders have invested as a result of privatisation issues. Lest Opposition Members believe that only the rich in the south-east buy shares in such issues, let me say that figures announced today suggest that nearly two thirds of individual shareholders live outside the south-east. Encouraging though the figures are, there is no doubt that most of those shareholders own few shares. Moreover, the proportion of shares owned by individuals has fallen since the war, as was pointed out by my right hon. Friend the Member for Guildford (Mr. Howell). The Budget has attempted to broaden individual share ownership in some important ways. Personal equity plans have been discussed by my hon. Friend the Member for Ryedale (Mr. Greenway) and I do not wish to go into great detail about them, except to say that I welcome the Chancellor's announcement. I expect a major advance in both their adoption by the City and their attractiveness to individual investors, and consider the use of privatisation share issues as a PEP investment a particularly significant development.

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But the area of outstanding development in the Budget is that of employee shareholding, where there has been a real breakthrough. There are already 1.75 million employees benefiting through the allowances given under the 1978 and 1980 Finance Act schemes, and we are pleased with that number. But the increased allowances under the improved all employee share scheme and the share option scheme announced in the Budget will go a long way to making sure that that number increases.

I am particularly delighted with the announcement about employee share ownership plans--ESOPs--for which I and many others have campaigned since the last Finance Act. As a result of the announcements made in the Budget, ESOPs are on the map. The announcements in the Budget on tax deductibility, the improved clearance procedure and the removal of the material interest clause will satisfy the majority of the worries of those of us who felt that the Treasury had not gone far enough in the past.

We are pleased with those changes, and I pay tribute to the Financial Secretary for the hard job he had in making sure that they reached the Budget speech and did not get lost somewhere between the Treasury and the Inland Revenue. I noted his remarks yesterday, reported in column 500 onwards of Hansard, where he referred to those measures, and I know how great has been his personal involvement.

ESOPs have distinct advantages, and, although they can take advantage themselves of the 1978 and 1980 schemes to which I referred, they have many other features. They may borrow to acquire the shares that they hold, rather than rely entirely on funds provided by the company. They may need to hold shares for a longer period--for example, while repaying borrowings- -than is possible for 1978 scheme trusts. In the case of unquoted companies, they may wish to provide a market in the company's shares for the benefit of employees and they may wish to distribute larger amounts of shares to employees than is possible under 1978 schemes.

The proposed Finance Bill legislation is designed to encourage companies wishing to set up trusts of this type for the benefit of their employees by removing the uncertainty which previously surrounded the tax deductibility of contributions by companies, thereby extending the entitlement to corporation tax relief. I welcome this and I have noted the conditions which are applied ; I do not think many professional advisers will find those insurmountable. ESOPs are extremely important. In the United States they now cover 10 million workers, and the Avis company, which has benefited from the scheme, has a new slogan. Instead of "We try harder", it is "Owners try harder". That is indicative of that firm's return to profitability since the ESOP scheme was announced.

It is the traditional lack of access to capital, and the income which it provides, that has left working people hard up compared with the owners of capital. Conservative Members who are aware of this problem do not see the solution in programmes of state aid or wealth transfer through the tax system, but much more look to an answer in the widening of access to capital. Employee share ownership broadens the ownership of capital without invading the property of existing owners. It is a form of populism without Robin Hood.

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By the transfers available under the 1978 scheme, employees in effect get their shares free. They do not pay cash. They are therefore receiving capital from the fruits of their labour, an important and significant development in the extension of the property- owning democracy.

We on these Benches have promoted schemes such as this, in contrast, it is sad to say, to Opposition Members, many of whom, in the words of the hon. Member for Dagenham (Mr. Gould), often feel, as soon as they hear the word "shares", that the person uttering it is a raging capitalist. That is a dismissive attitude to an important social revolution which, slowly but surely, some of their trade union colleagues are beginning to endorse. I pay tribute to the work of Unity Trust bank, which has trade union shareholders, for the way in which it has made a specialist activity out of promoting employee share ownership plans.

There are at present about 15 specific employee share ownership plans, covering about 20,000 employees. It is interesting to note that the average percentage of the companies held by those trusts for the benefit of their workers is 25 per cent. Under the 1978 scheme, most of the companies involved have put aside only 5 per cent. of their shares, and most of the schemes under the 1978 Act are in public companies or subsidiaries of public companies rather than in private companies. Yet more than half the employees in this country are employed in private companies.

I do not have time to go in detail into all the benefits, but there is no doubt that the economy will benefit from the introduction of ESOPs through better productivity, better output, improved financial performance and-- this will interest Opposition Members--increased regional regeneration if companies are taken into employee hands when the current owners wish to sell rather than into the hands of a publicly quoted company, perhaps based out of the area.

The employee benefits because he has a much greater sense of purpose in the company, and the company benefits because there is a unity of interest within it, and that is in its very success. It could also have a beneficial and important impact on reducing inflationary wage claims.

There is still much to be done. I note with pleasure that in the other place there has been a sympathetic response to proposed amendments to the Companies Bill, a point to which the Financial Secretary referred last night in the House. But the financial assistance provisions in the Companies Act 1985 must be looked at closely because at present they restrict a company's ability to provide financial assistance and guarantees to ESOPs.

I shall be looking carefully at the detailed proposals in the Finance Bill. We were sad that there was no capital gains tax roll-over relief for sales to ESOPs, and we were concerned that there were not further changes to provide an inheritance tax concession for sales to ESOPs. But, on the whole, those are details. Most important has been the tremendous advance achieved for ESOPs by including a clear statutory recognition and corporate tax deductibility in the Budget. It would therefore be churlish of me to be critical. I urge the professional investors' organisations to be more generous in their attitudes to the dilution problems which could come if companies issue more shares to their employees. The position is often misunderstood by many in the City, who believe that only the Government can improve the situation in areas such as ESOPs. That is not

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the case. I have praised the Financial Secretary. I also praise my hon. Friend the Member for Carshalton and Wallington (Mr. Forman) who, before his enforced silence as PPS to the Chancellor, had an active role in the House in encouraging advances in employee share ownership.

I make the rallying cry that every future privatisation should have an ESOP. I want to make sure that every Department now takes the lead from the Treasury. We want ESOPs in the electricity industry, in the future privatisation of coal, in British Rail--in all of them ; and I noted, in respect of the water industry, an announcement by the Minister yesterday about discounted shares as well as free shares. By itself that is not enough. We must have an employee share ownership structure through an ESOP.

It is not sufficient to have a one-off benefit to employees through share distributions at the time of privatisations. We must set up a trust which will ensure continuity of employee interest, not only for those who are in the firm now but for the benefit of future employees. That is what an ESOP enables us to do and why it is so important. In this Budget we have had the next stage of the Conservative capitalist revolution, which opens up capital-owning to the nation's working population. We must follow it through. 8.30 pm

Ms. Marjorie Mowlam (Redcar) : In the last 12 months since the previous Budget we have seen a radical transformation in the image of the Chancellor. I am sure that many hon. Members will remember the banner headlines in the newspapers after the last Budget. The Daily Mail was a good example : its headline was "Lawson the ladies' man". I must admit that when I saw that I thought it was a matter of taste, because he had not done much to help women. There is no doubt that after this Budget I and many other women will know that although people may say "Lawson the ladies' man", it is all promise and no delivery. The majority of low-paid people, single parents, pensioners and carers are women, and we have to ask ourselves what there is in this Budget for them.

I have sat throughout the debate this evening and the most stunning comment was one made by the right hon. Member for Westmorland and Lonsdale (Mr. Jopling), who described the Budget as "something for everyone". I wish that he was here now so that he could explain what he meant, because for many women in the categories I have just listed the Budget holds very little. In particular, it holds very little for pensioners. Sixty-six per cent. of all pensioners are women and I can guarantee that they will take no comfort at all from the Budget. The changes in the earnings limit and the age allowance will help only a very small minority of pensioners. The elderly will now be able to work without penalty, which, as many Members of the Opposition have said, we welcome. But it has to be said that the meagre size of the state pension will mean that many women and men pensioners will have to work if they are just on a state pension, because they will not be able to live on it. The Budget is worth nothing to those pensioners, the many who survive just on a state pension. We all know why. It is because the pension has fallen behind what it would have been if the policy of increasing it in line with prices or earnings, whichever were higher, had continued to be followed since 1979. We all know that since 1979 the single pensioner is £10 worse off and pensioner couples are £15 worse off.

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Hon. Members must realise, however, that it is not just the loss of money that is causing worry to pensioners now. Many pensioners are equally concerned about inflation. They know that their pensions and benefits will go up by 5.9 per cent. in April, and they know, because the Chancellor has told them, that inflation will go up to 8 per cent. This, for the two thirds of pensioners who survive on a state pension, will make life very difficult.

It has to be remembered that, for the 300,000 pensioners who are on transitional payments, the loss will be even greater. I hope that the Financial Secretary this evening will have something to say to those pensioners who are on transitional payments. They are expecting an increase in April, and they will not get it. They come to see me in my surgery, as a couple did last week, and ask how they are expected to manage without it. They telephone the office in Glasgow and they write letters because they think that there is some confusion or mistake. They do not understand that that money is to be denied them.

There is absolute bewilderment on the part of many pensioners as to why that has happened. If one bears in mind the fact that they will have lost their transitional payment, their pensions will not go up in line with inflation, they have the increase in water and electricity prices, they have the continuing problem of the TV licence and they have rent and rate rises before the benefit goes up, one begins to understand why so many pensioners are concerned. It is all very well for Government Members to say the Budget has helped some pensioners. We readily acknowledge that, but I would like to hear what the Financial Secretary would say to two women pensioners who came to see me in my surgery last Saturday from Dormanstown and said that they could no longer manage. They are not extravagant or silly, but they seriously doubt their ability to manage. The poll tax looms in the future for them and they do not know what to do. There is an air of frustration, desperation and bewilderment of which hon. Gentlemen must take note because, even though the Budget will help some pensioners, it will not help the two thirds who are on state pension.

A second group of women who will not benefit from this Budget are the 55,000 war widows who lost their husbands before 1973. My hon. Friend the Member for Easington (Mr. Cummings) pointed out in his contribution to the debate that he asked the Prime Minister about this specifically this afternoon. She avoided the question. What she cannot avoid is the letter that she wrote as Leader of the Opposition in the 1970s, when she made that commitment to those war widows. We did not hear that this afternoon. She ignored that part of the question. That commitment was there and she ought to go back and look at what she said in the 1970s and not try to fob people off and ignore them.

If the Chancellor is serious about helping the low-paid, two thirds of whom are women, he could do so by increasing child benefit. It has been said by hon. Members in all parts of the House that the one clear, easy way to help those women would be to restore child benefit in line with inflation. My hon. Friend the Member for Livingston (Mr. Cook) made the point quite clearly that child benefit is now 13 per cent. down in real terms as compared with 1983. The Minister should think about what that freezing of child benefit means in terms of this Budget, when something could have been done. It means that 1,000 to 2,000 more families will become dependent on income

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support ; 2,000 to 3,000 more families will become reliant on housing benefit ; and 20,000 to 25,000 more families will claim family credit. That is the impact of freezing child benefit. I should be very interested to hear whether the Minister, in his closing remarks, can explain how that helps low-paid people, particularly the majority of them who are women.

There are other problems for women workers, whether they be low-paid, part- time or even in full-time employment because of the wages they receive. This Budget will not touch them. More than 50 per cent. of all adult women full-time workers, including nearly 90 per cent. of all manual workers, earn less than the Council of Europe's decency threshold. That is the impact of low pay in this industry. The hon. Member for Esher (Mr. Taylor) said that he understands and sympathises with the points made by Opposition Members. I am afraid there comes a point where sympathy is appreciated but in the end it means very little to people living on those wages.

Taking together the 1988 and 1989 Budgets--this has to be done with the social security changes in the last two years because the two have to be run in unison--the impact on a single women with two children earning £74 a week is that she has lost £4.42 by this stage of this Budget. If we look at specific cases we begin to realise the effect of this Budget on women who are low-paid, single parents or pensioners. Those are the examples that we have to look at. One problem that the Budget does not address is the one which many women face in looking after a family and earning a living--the problem of the care of children. The Chancellor failed to abolish the tax on workplace nurseries. That shows his genuine failure to understand what would really help many women. We have to ask ourselves why the Chancellor did not do this. In what conditions would the Chancellor consider abolishing this tax? The Chancellor himself has not said much on this, but a number of his colleagues have. His hon. Friend the Member for Oxford, West and Abingdon (Mr. Patten), who, ironically, chairs the Tory ministerial group on women's issues--I wonder how that choice was made--in an interview in The Guardian at the beginning of this year, said :

"I don't think the state should step in to help the working mother unless her life has collapsed."

Those are the conditions in which the hon. Member for Oxford, West and Abingdon considers that working mothers should be given a hand. We also have to look at the comments made by the Financial Secretary to the Treasury yesterday when he was asked this question about the burden of taxation of workplace nurseries by my hon. Friend the Member for Glasgow, Maryhill (Mrs. Fyfe). He said :

"I understand the sensitivity of that issue but it is predominantly a matter for employers, not for the tax system. We look to employers and employees to make these arrangements."-- [Official Report, 15 March 1989 ; Vol. 149, c. 433.]

That is a complete and absolute abdication of responsibility. Workplace nurseries are the subject of taxation and that is clearly the responsibility of the Treasury. I wonder what the right hon. Gentleman does at the Treasury all day if he does not consider that part of his responsibility.

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