3 ) Bill-- [Lords]
Read the Third time and passed, with amendments.
(No. 2) Bill-- (By Order) Order read for resuming adjourned debate on Question proposed [26 February],
That the Bill be now considered.
Debate further adjourned till Thursday 3 May.
2 ) Bill-- [Lords] (By Order) Order for Second Reading read.
To be read a Second time on Thursday 3 May at Seven o'clock.
[Lords] (By Order)
Orders for Second Reading read.
To be read a Second time on Thursday 3 May.
Order read for resuming adjourned debate on Question [26 February], That the Bill be now read a Second time.
Debate further adjourned till Thursday 3 May.
[Lords] (By Order)
[Lords](By Order) Orders for Second Reading read.
To be read a Second time on Thursday 3 May.
The Chief Secretary to the Treasury (Mr. Norman Lamont) : The fall in the United Kingdom's invisibles surplus in 1989 reflected a number of factors, including unusually high net contributions to the EC budget and high insurance payments following disasters in the United States.
Mr. McKay : Is not it clear to everyone that the trade in invisibles fell into deficit in the last quarter of 1989 due to the massive trade deficit and the need to keep interest rates high to finance that with hot money? Do the Government still believe that our manufacturing industry and the trade deficit hardly matter?
Mr. Lamont : The hon. Gentleman's question was about the invisibles deficit, not about manufacturing, which does not come into it. We had an invisibles surplus of £2.8 billion last year. It is true that they moved into deficit in the last quarter, for the reasons that I gave, but we are projecting a surplus on invisibles of £1.5 billion this year. I am pleased that at long last the Labour party is beginning to recognise the importance of invisibles and the service industries.
Sir William Clark : Does my right hon. Friend agree that our international security, particularly with overseas assets, is at an all- time high, giving confidence to overseas investors in Britain, in addition to which we have high reserves and can easily withstand any pressures on the pound?
Mr. Lamont : My hon. Friend is absolutely right. Our overseas investments are larger, as a proportion of GDP, than in any other country and last year our overseas assets appreciated in value by some £30 billion. That is a measure of Britain's financial strength and it greatly dwarfs all the points made by the Labour party about the deficit on the current account or on invisibles.
Mr. John Smith : As the Chief Secretary seeks solace in international comparisons, will he reflect that not only do we have the worst balance of payments deficit of any of the Group of Seven countries, but we have the highest rate of inflation and the highest interest rates? Does that show that Government policy is working?
Mr. Lamont : If the right hon. and learned Gentleman wants to make international comparisons, why does not he also point out that in the 1980s we had the highest growth of any major country in the EC, that we have the highest rate of investment of any country in the EC, that our manufacturing productivity has grown faster than that in any other major industrialised country and that our unemployment rate is two thirds of the EC average? The right hon. and learned Gentleman is a friend of every country but his own.
The Economic Secretary to the Treasury (Mr. Richard Ryder) : The proposal responds to representations from the British Bankers Association and a number of individual deposit takers. It has been widely welcomed.
Mr. Wood : Has my hon. Friend been encouraged by the general response to my right hon. Friend's savings initiative? Does he believe that the biggest disincentive to savings is the fear of many potential savers that some future Government might devalue their savings, as happened under the previous Labour Government, all too disastrously for them?
Mr. Ryder : That is precisely what happened under the previous Labour Government, when we had negative real rates of interest. Small savers, particularly those nearing retirement age and the elderly, lost a great deal of money.
Mr. Cryer : Will the Minister respond to the Committee by doing something that the Treasury has so far failed to do, and assist Third world debt, which in the major indebted countries is running at over $500 billion, by revoking the £1.9 billion tax concessions, using taxpayers' money, given to British bankers to service debts? As the Minister knows, that money goes not to the starving poor of the Third world, but into the pockets of shareholders of the big banks. When will he end this scandal?
Mr. Lilley : The hon. Gentleman may have noted the changes made in the Budget, which increased the relative attraction for banks to return debt to the indebted countries. I am sure that he will welcome that. He is wrong to say that the Government have done nothing to help with the debt problem of underdeveloped countries. Far from it. My right hon. Friend the Member for Blaby (Mr. Lawson) launched the sub-Saharan debt initiative, we have forgiven £1 billion of debt to the 27 poorest countries and the abolition of exchange controls ensures that more direct investment goes from the United Kingdom to underdeveloped countries than from all the other EC countries put together.
Mr. Paice : In terms of international debt, is not it also important for Britain not to continue to incur debt itself? Is not the reduction of our debt, to the extent that we are paying £2.5 billion less in interest, an effective move?
Mr. Lilley : My hon. Friend is right. The Labour Government left us with vast overseas debts and were the first Government of any major country to have to call in the International Monetary Fund, which should be helping poor countries in need. We shall ensure that that will be the case.
Column 469Mr. Chris Smith : Would not it be sensible to use the tax system not only to encourage the banks to make provision in their own accounts against Third world debt but to forgive debts to Third world countries? Even after the Budget changes, does not the present system provide an easy ride for the commercial banks but offer no real help to the struggling peoples and economies of the Third world?
Mr. Lilley : The hon. Gentleman is wrong. As I pointed out, and he half-acknowledged, the Budget has increased the relative attractions for banks to give back debt to debtor countries. If he or the Opposition have proposals retrospectively to withdraw relief that banks have been expecting, as all other commercial entities do, I am sure that the House would be interested to hear them.
Mr. Oppenheim : Does it strike my hon. Friend as strange and even inconsistent that Labour Members spend so much time complaining about the burden of debt in the Third world, when in the next breath they encourage the Government and the EC to erect yet more trade barriers, such as the multi-fibre arrangement, against Third world products? Such barriers prevent Third world countries from improving their living standards by selling us the products that they can best make.
Mr. Cryer : On a point of order, Mr. Speaker. In view of the pathetically inadequate response to my question, I beg to give notice that I shall seek to raise this matter on the Adjournment at the earliest opportunity.
Mr. Bennett : That answer will disappoint at least one of my constituents. Are not there substantial numbers of people who either bought war loans or whose parents bought war loans that they have inherited and who believe that they have had a poor deal? Will the Government consider a scheme by which such people could redeem war loans rather than having to sell them at discounted prices?
Mr. Lamont : I am afraid that I cannot hold out hope for the hon. Gentleman. I stated what has been the policy of successive Governments. To redeem stocks now at par would cost a substantial amount of money and would lead to demands for redemption of other undated stocks. In most cases it would simply lead to windfall gains for those who purchased the stocks not at the original point of issue but after the price had fallen. I know that the hon. Gentlemen has been working hard on behalf of his constituents and has put forward ideas for distinguishing between some holders and others, but I am afraid that that would not be possible administratively.
Column 470coupon gilt ever, popularly known as "Healeys", and that it would be more sensible to repay those stocks which have a date and a high coupon rather than undated stock with a low coupon such as war loans? When did a Government last repay the national debt for three years in a row?
Mr. Lamont : My hon. Friend is right. I am not sure about his remarks about "Healeys", but he is certainly right in his general point about undated stocks, and I have given the hon. Member for Denton and Reddish (Mr. Bennett) the reasons why it is impossible to repay them.
Mr. Beith : As the Government make a virtue of repaying the public debt, why do not they give some attention to those who lend money in the particular circumstances of war and have held the stocks continually ever since? As those names must have been recorded, why is it impossible to repay those people?
Mr. Lamont : As I explained, large numbers of holders of war loans are not people who bought at the original price. As the hon. Gentleman knows, the stock lies at well below par. We would be giving a substantial capital gain, in particular to higher rate taxpayers and not to those who originally bought the stock. It is impossible to distinguish between those who bought the stock originally and those who hold it now.
Mr. Howarth : Does my hon. Friend agree that the abolition of stamp duty will be most advantageous to the 11 million shareholders in this country because it will reduce dealing costs to them, it is likely to extend wider share ownership in a way that Opposition Members fail to understand, and it will further enhance the City's leading role as the financial centre of Europe?
Mr. Lilley : My hon. Friend is right. It will benefit the 11 million direct shareholders--to the obvious disappointment of the Opposition--and all those people who are members of pension funds and have personal pensions or life assurance policies. They will benefit greatly, as will people who work in that much-expanding industry.
The Chancellor of the Exchequer (Mr. John Major) : Following the Budget statement, officials met the Football Trust and the Pools Promoters Association to discuss implementation of the proposed reduction in the rate of pool betting duty. Both organisations welcome that and I am confident that they will meet the conditions for reducing the duty. Negotiations are proceeding to that end.
Column 471Mr. Kirkhope : Although I welcome the progress, will the requirements to distribute the funds according to the differing needs of clubs be met through the Football Trust? For example, at the moment Leeds United is storming back into the first division, where it belongs, but other smaller clubs such as Halifax, Huddersfield and even Stockport County may have different requirements which have to be met.
Mr. Major : I congratulate my hon. Friend on the success of Leeds United, and I look forward to seeing them lose at Stamford Bridge next year. The Football Trust is committed to a fair distribution of benefit and duty reductions according to the differing needs of clubs. It has also undertaken to account separately for the moneys received and distributed.
Mr. Tredinnick : I am most grateful to my right hon. Friend for his reply. We welcome that in Leicestershire and in particular in Bosworth. Will he give an undertaking that Leicestershire will be considered most carefully under those proposals?
Mr. Tony Banks : As the Chancellor of the Exchequer is Chelsea football club's second best-known supporter, will he guarantee that he will declare an interest as Stamford Bridge could do with some of that additional money, and he and I could enjoy the additional facilities that would be provided?
Mr. Skinner : The Chancellor said that the reduction in duty will be granted to those in need on the basis of ability to pay. If he can do that for the football pools, why cannot his right hon. Friends do it for the poll tax? As some of those football clubs are owned by very wealthy people, will he make sure that the Government are not bailing out people such as Robert Maxwell and his friends?
Mr. Major : There are some temptations that even I can resist. The hon. Gentleman's ingenuity stretches matters a little far when he refers to the community charge. But the Football Trust made it clear that it is entirely committed to a fair distribution of benefit and duty reductions and I am confident that that will be achieved.
Dr. Marek : The Chancellor will be aware that the Government have designated as international grounds Wembley, Roker Park and a ground in Belfast. Those grounds will require extra money because they have extra commitments. Why have not the Government designated any ground in Wales for international status?
Mr. Greenway : The explosion of credit in recent years has not been matched by a similar growth in personal savings. Does my right hon. Friend agree that tax concessions can play an important role in encouraging individual savers, and that is why the TESSA scheme and the abolition of the composite rate have been so warmly welcomed? Does he agree that it is important to promote that new scheme next year to people who do not save now so that there will be a growth in savings and not simply a replacement of other deposits to take advantage of that valuable tax concession?
Mr. Major : My hon. Friend makes an important point. There will certainly be an element of dead weight cost in the new scheme, as I acknowledged from the outset, but I hope that it will be widely promoted to encourage people who at present do not save to do so. That would be wise economically and socially.
Mr. Boateng : Will the Chancellor step back for a moment from the paean of self-congratulation on TESSAs and reflect on their impact on the competitive position of friendly societies, which have made such a considerable contribution over the years to encouraging the very small savers whom we want brought into savings schemes? Will he consider raising the exempt limit on deposits for friendly societies, and will he legislate at an early date and bring into force the recommendations in the Green Paper? We do not want Green Papers alone, we want action.
Mr. Morris : Will the Chancellor explain to people who run small businesses how a rise of over 100 per cent. in the number of firms going into receivership caused, they say, largely by the Government's policies of high interest rates and the uniform business rate, helps Britain prepare for the challenge of 1992? If a doubling in the number of firms going bust was not the purpose of those policies, will he now at least urgently address himself to their undoubted effects?
Mr. Major : The most crucial element of all for 1992 is to make sure that by then we have a competitive economy and much lower inflation than at present. That is the purpose of the Government's present monetary policy. The right hon. Gentleman quotes the number of companies going into receivership ; he might equally have quoted the net number of new companies which is running at a record level of 1,300 each week.
Column 473from business, he will not consider reducing interest rates until it is clear that inflationary and monetary pressures are at last abating?
Mr. Radice : Has the Chancellor noted the Treasury and Civil Service Select Committee report that was published today, in which we say that the level of interest rates has a major impact on the timing and level of investment? Is not there a case for the Government not to rely so exclusively on interest rates in managing the economy?
Mr. Major : The hon. Gentleman will also be aware that interest rates are a powerful counter-inflationary weapon. It is precisely for that purpose that we believe that monetary policy is so important. I must echo to the hon. Gentleman what I affirmed to my right hon. Friend the Member for Hertfordshire, North (Mr. Stewart) : interest rates will have to remain high until I am confident that inflation is on a downward trend.
Mr. Burt : Does my right hon. Friend recognise the damaging connection between high public expenditure and interest rates? In particular, does he share my concern about the impact of high local authority expenditure on public expenditure generally? I am sure that he will have noticed that the high-spending authorities are Labour controlled. Does he share my worry about the impact on interest rates in the future if a party that is committed to high local expenditure should again get its hands on the Treasury?
Mr. Major : I entirely share my hon. Friend's view. That matter will be watched carefully in the coming months. It is essential that we retain firm control of public expenditure which we intend to do.
Mrs. Beckett : Does the Chancellor recognise that the danger that most people, particularly in small businesses, fear is not that he will prematurely lower interest rates but that he will shortly raise them again? Will he reconsider the use of increased interest rates as the sole instrument of policy, particularly in the light of the recent Bundesbank report which showed that across the major economies of the world credit controls play a useful, if minor, role as a direct alternative to the use of interest rates alone? Will he assure the House that he is not waiting until 4 May to increase interest rates?
Mr. Major : I am not entirely sure that the hon. Lady carried all her hon. Friends with her in every aspect of her question, which she founded on a misconception. Monetary policy is backed by fiscal policy, and must remain so.
Column 474all those 14 million people are small savers, the change will be welcomed by many people other than the immediate beneficiaries.
Mr. Lilley : I am grateful for my hon. Friend's opening remarks. His representations, along with those of others, played a part. Some 5 million women, 4 million pensioners, 2 million other adults and 2 million children will benefit from the removal of that unfair form of taxation on small savers.
Mr. Ryder : About 1,150,000 businesses should be helped by the proposed new scheme for relief from VAT on bad debts, and most of the 250,000 or so businesses that register each year could benefit from the simplified VAT registration requirements.
Mr. Pawsey : I thank my hon. Friend for that helpful response. As a former managing director, I know only too well-- [Hon. Members :-- "Hear, hear."] Those were the days when I was gainfully employed. Bad debts are bad news ; they go straight to the bottom line and adversely affect the balance sheet. I therefore welcome unreservedly my right hon. Friend's Budget changes, which will substantially help companies. I wonder whether I might pursue one matter with my hon. Friend-- [Hon. Members :- - "No."]
Mr. Pawsey : I have not actually asked the question yet, Mr. Speaker. I should like to ask my hon. Friend to elaborate on the figures that he announced at the end of his answer. Did I hear him say that there were 250,000 new registrations each year?
Mr. Ryder : I thank my hon. Friend for his kind remarks about my right hon. Friend the Chancellor's Budget. My hon. Friend is right also to give thanks to the imaginative set of Budget proposals to help small and growing businesses which my right hon. Friend introduced on 20 March. My hon. Friend is looking for a figure. Under this Government, more than 1,300 small businesses start up each week. In the last year of the Labour Government, there was a loss of 100 per week. I do not think that the hon. Member for Bradford, South (Mr. Cryer) was the Minister with responsibility for small businesses at the time because he had resigned. Nevertheless, there was a net loss of 100 a week.
Column 475that the Government's position with regard to VAT has been set out on countless occasions from the Treasury Bench. There is no change whatever in those views.
Mr. John Townend : The small business lobby is grateful to the Government for the changes made by the Budget, but will my hon. Friend go a little further in respect of bad debts? Bad debts are bad debts when they become bad debts. No small business man writes off debts that are not bad. It seems an onerous requirement for a small business man to have to wait two years to get relief from VAT. Will my hon. Friend promise to reduce that period?